Tony Camp
Voya Financial
TMStable Value Products
Registered Representative of Voya Financial Partners, LLC Member SIPC
September 22, 2014
City of San Jose
Stable Value Market - 2007 to 2013
2007 to 2009
Mortgage crisis spurns 2008 capital market meltdown
Large positive flows to stable value funds
Banks and some insurers exit stable value wrapper market
Stable Value Managers dependent upon outside wrappers cannot fully invest
Two very large Pooled Collective Trust Funds liquidate
– SSGA, Merrill Lynch
– Wrap capacity for pooled funds is impaired
QDIA – DOL selects Target Date Funds, Balanced Funds and Managed Accounts as QDIAs for ERISA plans
2012 to 2013
Goldman Sachs purchases Dwight and Deutsche stable value books of business
Low interest rates persist – stable value crediting rates remain superior to cash
De-risking of stable value funds/strategies
– Movement from core to intermediate core
Shorter duration/caps
– Reduction/elimination of below investment grade securities
– Smaller caps on sectors/issuer exposure
Dodd/Frank Issue
Stable Value Market - 2014
2014
Most portfolios have recovered nicely from problems in 2008, focus is now protecting portfolios from long anticipated rise in rates
– How can I protect my stable value fund from a rise in rates and still credit a competitive yield?
Cash flows – most plans net zero or negative – caused in part by hot equity market in 2013/2014
Wrap capacity update:
– Some new entrants with tougher contract terms
– Banks continue exiting market
– Insurance companies are now primary issuers of wraps
Low interest rates persists - crediting rates lower but still provide a good spread to cash
De-risking stable value funds/strategies started in 2009 – majority of market has been de-risked
Regulatory issues add some uncertainty, but market is generally optimistic that Stable Value offered through insurance companies will be exempted
NAIC Regulation
– NAIC Sub-Group looking into changing the reserve model for Separate Account and Synthetic GICs
Separate Account Insulation
– NAIC looking at viability of separate account insulation for insurance products – NAIC has just closed comment period – ACLI, CAI and AAA all commented in favor of retaining insulation
GAO
– The GAO is researching the effectiveness and usage of QDIA alternatives (since 2007 DOL ruling), the addition of Stable Value as the fourth QDIA may be considered
Voya
TM
Stable Value Strategy - Selective Growth
Product Breadth
– Voya has multiple Stable Value Products shelf ready in all markets to fund various size mandates (401/457/403b)
– All products designed to comply with FASB requirements for book value accounting and are in compliance with CT 38a-459/NY Reg. 128 (S-GIC and SA-GIC Regulations)
– Products available “Investment Only” or with Plan Administration
Voya’s Stable Value Wrap Capacity
– Voya continues to issue stable value wrap contracts
– Voya can deploy wrap capability when needed – not dependent upon external firms for capacity
Stable Value Asset Management
– Investment management expertise in stable value/long term track record
– 20+ years in several strategies
– Focus on growing AUM
Underwriting Discipline
– Demographic and cashflow profile of plan and stable value investors
– Investment guidelines
– Market to book ratio
Selective Growth of Book
– Bid on mandates that fit company risk profile
Voya Retirement Insurance and Annuity Company
Stable Value Product Suite
General Account
Guaranteed credited rates provided by ILIAC Credited rate announced in advanceFixed Account
$25.6B2Synthetic GIC
Off-balance sheet product ILIAC provides the guarantee or “wrap” Assets are primarily managed by “outside” fund manager
MCA
$29.4B1
Separate Account GIC
Separate Account “insulation”
ING provides wrap and investment management
Stabilizer
$8.2B1
Our Financial Strength
Key Facts and Figures Financial Strength Ratings4 for Voya’s Life Companies As of March 2014: A- Outlook Positive As of July 2014: A Outlook Positive As of March 2014: A- Outlook Positive As of May 2014: A3 Outlook Positive
Shareholder’s Equity of $14,818 million
Top 10 in public life insurance company statutory capital1
Estimated combined RBC ratio of 501%; above target of 425%2
Approximately $90 billion of assets in the investment portfolio
Debt to Capital ratio of 23.2%3
1. Based on U.S. life insurance total adjusted capital as of December 31, 2013; Ranking based on publicly-traded insurers; Source: SNL
2. Estimated combined RBC ratio primarily for our four principal U.S. insurance subsidiaries; pro-forma for the effects of upstreaming $722 million in ordinary dividends to the holding company in 2Q’14, estimated combined RBC ratio would be approximately 552% (this does not take into account any related impacts to deferred tax assets) 3. Refer to the 2Q'14 supplement for financial leverage reconciliation
4. Insurance financial strength ratings for ING Life Insurance and Annuity Company, ING USA Annuity & Life Insurance Company, ReliaStar Life Insurance Company, ReliaStar Life Insurance Company of New York, and Security Life of Denver Insurance Company; for all insurance financial strength ratings, refer to the 1Q'14 supplement at investors.voya.com
Standard
& Poor’s
Fitch
Ratings
A.M. Best
Moody’s
As of June 30, 2014, unless otherwise noted-10,000,000.00
-5,000,000.00
0.00
5,000,000.00
10,000,000.00
15,000,000.00
20,000,000.00
City of San Jose
City of San Jose
Historical Crediting Rates
Period Floor Rate Participant Net Credited Rate Period Floor Rate Participant Net Credited Rate 10/06/2006 – 12/31/2007 5.80% 5.80% 07/01/2012 – 09/30/2012 1.00% 1.75% 01/01/2008 – 12/31/2008 5.00% 5.00% 10/01/2012 – 12/31/2012 0.00% 2.01% 01/01/2009 – 09/30/2010 3.00% 3.00% 01/01/2013 – 03/31/2013 0.00% 2.25% 10/01/2010 – 12/31/2010 2.75% 2.75% 04/01/2013 – 06/30/2013 0.00% 2.38% 01/01/2011 – 03/31/2011 2.50% 2.50% 07/01/2013 – 09/30/2013 0.00% 2.46% 04/01/2011 – 06/30/2011 2.25% 2.38% 10/01/2013 – 12/31/2013 0.00% 1.78% 07/01/2011 – 09/30/2011 2.00% 2.45% 01/01/2014 – 03/31/2014 0.00% 1.97% 10/01/2011 – 12/31/2011 1.75% 1.84% 04/01/2014 – 06/30/2014 0.00% 1.97% 01/01/2012 – 03/31/2012 1.50% 2.00% 07/01/2014 – 09/30/2014 0.00% 2.13% 04/01/2012 – 06/30/2012 1.25% 2.00%
City of San Jose
Position as of August 31, 2014
Plan
Market Value
(MV)
Book Value
(BV)
MV – BV
MV/BV
Deferred Compensation
$200,369,548
$198,701,752
$1,667,796
100.8%
PTC Deferred Compensation
$15,653,731
$15,407,163
$246,568
101.6%
Lifestyle
$31,563,211
$31,198,347
$364,864
101.2%
Total
$247,586,490
$245,307,262
$2,279,228
100.9%
Participant Blended Net Crediting Rate: 2.13%
City of San Jose Portfolio
–
Yield: 2.60%
City of San Jose
Historical Crediting Rate vs U.S. Treasury Rates
(1)
0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 03/14 06/14 07/14 2 Year Treasury 5 Year Treasury 10 Year Treasury Blended Gross Crediting Rate Blended Net Crediting Rate
(1) Annualized month end market yield on U.S. Treasury securities at 2, 5, and 10-year constant maturity, quoted on investment
