# Voya Financial, Inc. (VOYA) FY 2022 MD&A Verbatim Item 7 Management's Discussion and Analysis from Voya Financial, Inc.'s 10-K for fiscal year 2022. SEC filing source: https://www.sec.gov/Archives/edgar/data/1535929/000153592923000019/voya-20221231.htm Accession: 0001535929-23-000019 Filing date: 2023-02-24 Report date: 2022-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/VOYA/ All MD&A years: /company/VOYA/mda/ Previous year: /company/VOYA/mda/fy2021/ (FY 2021) Next year: /company/VOYA/mda/fy2023/ (FY 2023) Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations For the purposes of the discussion in this Annual Report on Form 10-K, the term Voya Financial, Inc. refers to Voya Financial, Inc. and the terms "Company," "we," "our," and "us" refer to Voya Financial, Inc. and its subsidiaries. The following discussion and analysis presents a review of our results of operations for the years ended December 31, 2022 and 2021, and financial condition as of December 31, 2022 and 2021. This item should be read in its entirety and in conjunction with the Consolidated Financial Statements and related notes contained in Part II, Item 8. of this Annual Report on Form 10-K. For discussion and analysis of our results of operations for the years ended December 31, 2021 and 2020, refer to our 2021 Annual Report on Form 10-K filed with the SEC on February 22, 2022. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Actual results may differ materially from those discussed in the forward-looking statements as a result of various factors. See the "Note Concerning Forward-Looking Statements." Overview We provide workplace savings and benefits products, solutions, and technologies, along with investment management services, that enable a better financial future for our clients, their employees and plan participants. Serving the needs of approximately 14.7 million customers, workplace participants and institutional clients as of December 31, 2022, our approximately 6,100 employees (as of December 31, 2022) are focused on executing our mission to make a secure financial future possible—one person, one family and one institution at a time. Voya’s scale, business mix, risk profile, and strong free cash flow generation are competitive differentiators and we have a clear path to Adjusted Operating Earnings Per Share growth via net revenue growth, margin expansion, and disciplined capital management. We provide our products and services principally through our Workplace Solutions business, which encompasses both our Wealth Solutions and Health Solutions business segments, and through our Investment Management segment. We are well positioned to drive growth with new revenue streams from expanding technology and innovation, we will create new opportunities to drive margin expansion while investing in the business, and our high free-cash flow businesses will enable further return of capital to our shareholders with a disciplined approach to other capital deployment opportunities. Wealth Solutions Our Wealth Solutions segment provides retirement plan products and administration and investment services alongside a robust suite of financial wellness offerings to serve employees and plan participants. Furthermore, we provide individual retirement accounts and financial guidance and advisory services through our Retail Wealth Management business that enables us to deepen relationships with our retirement plan participants. Our Wealth Solutions segment earns revenue from a diverse and complementary business mix, primarily fee income from asset and participant-based recordkeeping and advisory fees as well as investment income on our general account assets and other funds. Because our fee income is generally tied to account values, our profitability is determined in part by the amount of assets we have under management, administration or advisement, which in turn depends on sales volumes to new and existing clients, net deposits from retirement plan participants, and changes in the market value of account assets. Our profitability also depends on the difference between the investment income we earn on our general account assets, or our portfolio yield, and crediting rates on client accounts. Health Solutions Our Health Solutions segment provides worksite employee benefits, decision support, financial wellness, and administrative products and services to mid-size and large corporate employers and professional associations. In addition, our Health Solutions segment provides stop-loss coverage to employer plan sponsors that self-fund their pharmaceutical and medical benefits. Our Health Solutions segment generates revenue from premiums, investment income, mortality and morbidity income and policy and other charges. Profits are driven by the difference between premiums collected and benefits and expenses paid for group life, stop loss and voluntary health benefits, along with the spread between investment income and credited rates to policyholders on voluntary universal life and whole life products. Our Health Solutions segment offers attractive growth opportunities. For example, we believe that there are significant opportunities for growth through expansion in the voluntary benefits market and Health Account Solutions as employers [[GREPCENT_TABLE]] [["","50"]] [[/GREPCENT_TABLE]] Table of Contents increasingly seek to have employees bear a greater proportion of the cost of medical coverage. While expanding these lines, we also intend to continue to focus on profitability in our well-established group life and stop loss product lines, by adding profitable new business to our in-force block, improving our persistency by retaining more of our best performing groups, and managing our overall loss ratios. Investment Management Our Investment Management segment serves both individual and institutional customers, offering them domestic and international fixed income, equity, multi-asset and alternative investment products and solutions across a range of geographies, investment styles and capitalization spectrums. We are committed to investing responsibly and delivering research-driven, risk-adjusted, client-oriented investment strategies and solutions and advisory services. Investment Management manages public and private fixed income, equities, multi-asset solutions and alternative strategies for institutions, financial intermediaries and individual investors, drawing on a 50-year legacy of active investing and the expertise of over 400 investment professionals. Our Investment Management segment generates revenue through the collection of management fees on the assets we manage. These fees are typically based upon a percentage of asset under management (which is equivalent to the money clients are investing). In certain investment management fee arrangements, we may also receive performance-based incentive fees when the return on assets under management exceeds certain benchmark returns or other performance hurdles. In addition, and to a lesser extent, Investment Management collects administrative fees on outside managed assets that are administered by our mutual fund platform and distributed primarily by our Wealth Solutions segment. Investment Management also receives fees as the primary investment manager of our general account, which is managed on a market-based pricing basis. Finally, Investment Management generates revenues from a portfolio of seed capital investments. Our Investment Management segment is well positioned to capture the growth opportunities of the asset global asset management industry. With the most recent acquisitions and transactions and the conclusion of a strategic distribution and product partnership the Investment Management segment has significantly enhanced its international footprint and further strengthened its domestic client base. Simultaneously, we have added highly-recognized and well-established investment strategy competences in both the traditional asset classes and the privates and alternatives business which will allow us to provide clients a well-diversified product offering across the entire market cycle. Furthermore, the addition of additional business will help to generate scale benefits and to improve profitability of the firm. Business Update On January 24, 2023, we completed the acquisition of Benefitfocus, an industry-leading benefits administration technology company that serves employers, health plans and brokers. The purchase price in the acquisition was approximately $570 million in cash consideration which includes the outstanding debt and preferred shares of Benefitfocus. The acquisition will expand the Company’s capacity to meet the growing demand for comprehensive benefits and savings solutions and increase its ability to deliver innovative solutions for employers and health plans. On November 1, 2022, Voya Investment Management Alternative Assets, LLC (“VIMAA”), a subsidiary of Voya Investment Management LLC ("Voya IM"), acquired all of the issued and outstanding equity interests of Czech Asset Management, L.P., a private credit asset manager dedicated to the U.S. middle market. The acquisition was executed for cash consideration and expands VIMAA’s private and leveraged credit business. On July 25, 2022, we completed a series of transactions pursuant to a Combination Agreement dated as of June 13, 2022 (the “AllianzGI Agreement”) with Voya IM and VIM Holdings LLC ("VIM Holdings"), both our indirect subsidiaries, Allianz SE (“Allianz”) and Allianz Global Investors U.S. LLC ("AllianzGI"), an indirect subsidiary of Allianz, pursuant to which the parties have combined Voya IM with assets and teams comprising specified strategies previously managed by AllianzGI. The acquisition increases the international scale and distribution of the Company’s investment products and provides us with new capabilities that diversify our investment strategies and help us meet the needs of a larger and more global client base. In connection with the acquisition, we have incurred $67 million of transaction and integration expenses in the year ended December 31, 2022 and expect to incur additional integration expenses in future periods. These expenses include consulting, legal and business integration expenses and are recorded in Operating expenses in our Consolidated Statements of Operations in the period they are incurred, but excluded from Adjusted operating earnings before income taxes. These expenses are classified as a component of Other adjustments to Income (loss) from continuing operations before income taxes and consequently are not included in the adjusted operating results of our segments. [[GREPCENT_TABLE]] [["","51"]] [[/GREPCENT_TABLE]] Table of Contents Under the terms of the AllianzGI Agreement, AllianzGI transferred to VIM Holdings the rights to certain assets and liabilities related to specified investment teams and strategies and the associated assets under management (the “AllianzGI Transferred Business”). We transferred all of the limited liability company interests in Voya IM to VIM Holdings and in exchange, received a 76% economic stake in VIM Holdings. Pursuant to the Amended and Restated Limited Liability Company Agreement VIM Holdings entered into at the closing date (“A&R VIM Holdings Operating Agreement”), we now hold, indirectly, a 76% economic stake in VIM Holdings and Allianz holds, indirectly, a 24% economic stake in VIM Holdings. Furthermore, VIM Holdings holds all of the limited liability company interests in Voya IM and certain assets and liabilities transferred from AllianzGI related to specified investment teams and strategies and the associated assets under management. In accordance with the A&R VIM Holdings Operating Agreement, we have full operational control of VIM Holdings, Voya IM and the transferred assets and investment teams. The AllianzGI Agreement was executed for noncash consideration and accounted for under the acquisition method of accounting. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of the transaction. The 24% economic stake in VIM Holdings shares is reflected on the Consolidated Balance Sheets under Redeemable noncontrolling interests within Mezzanine equity. On June 9, 2021, we completed the sale of the independent financial planning channel of Voya Financial Advisors (“VFA”) to Cetera Financial Group, Inc. (“Cetera”), one of the nation's largest networks of independently managed broker-dealers. In connection with this transaction, we transferred more than 800 independent financial professionals serving retail customers with approximately $38 billion in assets under advisement to Cetera, while retaining approximately 500 field and phone-based financial professionals who support our Wealth Solutions business. In addition, the sale resulted in a pre-tax gain of $274 million, net of transaction costs, which was recorded in Other revenue in the accompanying Consolidated Statements of Operations for the year ended December 31, 2021. Discontinued Operations The Individual Life Transaction On January 4, 2021, we completed a series of transactions pursuant to a Master Transaction Agreement (the “Resolution MTA”) entered into on December 18, 2019, with Resolution Life U.S. Holdings Inc. (“Resolution Life US”), pursuant to which Resolution Life US acquired several of its subsidiaries including Security Life of Denver Company ("SLD"). We determined that the entities disposed of met the criteria to be classified as discontinued operations and that the sale represented a strategic shift that had a major effect on the Company’s operations. Income (loss) from discontinued operations, net of tax, for the year ended December 31, 2021 included a reduction to loss on sale, net of tax of $12 million associated with the transaction. The final loss on sale, net of tax as of December 31, 2021 was $1,454 million. For more information related to this transaction, refer to the Discontinued Operations Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. Trends and Uncertainties Throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), we discuss a number of trends and uncertainties that we believe may materially affect our future liquidity, financial condition or results of operations. Where these trends or uncertainties are specific to a particular aspect of our business, we often include such a discussion under the relevant caption of this MD&A, as part of our broader analysis of that area of our business. In addition, the following factors represent some of the key general trends and uncertainties that have influenced the development of our business and our historical financial performance and that we believe will continue to influence our continuing business operations and financial performance in the future. COVID-19 Since the first quarter of 2020, the COVID-19 pandemic has had a significant adverse effect on the global economy and financial markets. Longer-term, the economic outlook is uncertain, but may depend in significant part on progress with respect to effective vaccines and therapies to treat COVID-19 or any actions taken to contain or address the pandemic. For further information regarding risks associated with COVID-19, see The occurrence of natural or man-made disasters, including the COVID-19 pandemic, may adversely affect our results of operations and financial condition in Risk Factors in Part I, Item 1A. of this Annual Report on Form 10-K. [[GREPCENT_TABLE]] [["","52"]] [[/GREPCENT_TABLE]] Table of Contents We continue to monitor developments relating to the COVID-19 pandemic and assess its impact on our business. Predicting with accuracy the future consequences of COVID-19 on our results of operations or financial condition is impossible. Absent a further significant and prolonged market shock, however, we do not anticipate a material effect on our results of operations, balance sheet, statutory capital, or liquidity. See Results of Operations in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7. of this Annual Report on Form 10-K for further information regarding the effect of the COVID-19 pandemic on our business. Market Conditions Extraordinary monetary accommodation to support a global economy negatively impacted by the pandemic is being unwound. Inflationary pressures related to easy monetary and fiscal policies, and the stagflationary impacts of the Russia-Ukraine war and global supply chain frictions, are being addressed by sharply tighter monetary policy. As the impact of sharply tighter global monetary policy works through the real economy, an increase in market volatility could affect our business, including through effects on the rate and spread component of yields we earn on invested assets, changes in required reserves and capital, and fluctuations in the value of our assets under management ("AUM"), administration or advisement ("AUA"). These effects could be exacerbated by uncertainty about future fiscal policy, changes in tax policy, the scope of potential deregulation, levels of global trade, and geopolitical risk. In the short- to medium-term, the potential for increased volatility and slowing economic growth can pressure sales and reduce demand as consumers hesitate to make financial decisions. Financial performance can be adversely affected by market volatility as fees driven by AUM fluctuate, hedging costs increase and revenue declines due to reduced sales and increased outflows. As a company with strong retirement, investment management and insurance capabilities, however, we believe the market conditions noted above may, over the long term, enhance the attractiveness of our broad portfolio of products and services. We will need to continue to monitor the behavior of our customers and other factors, including mortality rates, morbidity rates, and lapse rates, which adjust in response to changes in market conditions in order to ensure that our products and services remain attractive as well as profitable. For additional information on our sensitivity to interest rates and equity market prices, see Quantitative and Qualitative Disclosures About Market Risk in Part II, Item 7A. of this Annual Report on Form 10-K. Interest Rate Environment We believe the interest rate environment will continue to influence our business and financial performance in the future for several reasons, including the following: •Our general account investment portfolio, which was approximately $39 billion as of December 31, 2022, consists predominantly of fixed income investments and had an annualized earned yield of approximately 5.1% in the fourth quarter of 2022. In prior years during the prolonged low interest rate environment, the yield we earned on new investments has been lower than the yields earned on maturing investments, which were generally purchased in environments where interest rates were higher than current levels. We currently anticipate that proceeds that are reinvested in fixed income investments in the near term will earn an average yield higher than the prevailing portfolio yield. However, heightened market volatility implies greater uncertainly around the path of interest rates and the outlook for new money investments going forward. New purchases made at current market levels would be higher than the yield of maturing assets. In addition, movements in prevailing interest rates also influence the prices of fixed income investments that we sell on the secondary market rather than holding until maturity or repayment with rising interest rates generally leading to lower prices in the secondary market and falling interest rates generally leading to higher prices. •     We actively manage our investment portfolio and offer competitive product rates in the market. Several of our products pay guaranteed minimum rates such as fixed accounts and a portion of the stable value accounts included within defined contribution retirement plans. We are required to pay these guaranteed minimum rates even if earnings on our investment portfolio decline, with the resulting investment margin compression negatively impacting earnings. In addition, we expect more policyholders to hold policies (lower lapses) with comparatively high guaranteed rates longer in a low interest rate environment. Conversely, a rise in average yield on our investment portfolio will positively impact earnings if the average interest rate we pay on our products does not rise correspondingly. Similarly, we expect policyholders may be less likely to hold policies (higher lapses) with existing guarantees as interest rates rise. For additional information on the impact of the interest rate environment, see The level of interest rates may adversely affect our profitability, particularly in the event of a continuation of the current low interest rate environment or a period of rapidly increasing interest rates in Risk Factors in Part I, Item 1A. of this Annual Report on Form 10-K. Also, for additional information on our sensitivity to interest rates, see Quantitative and Qualitative Disclosures About Market Risk in Part II, Item 7A. of this Annual Report on Form 10-K. [[GREPCENT_TABLE]] [["","53"]] [[/GREPCENT_TABLE]] Table of Contents Seasonality and Other Matters Our business results can vary from quarter to quarter as a result of seasonal factors. For all of our segments, the first quarter of each year typically has elevated operating expenses, reflecting higher payroll taxes, equity compensation grants, and certain other expenses that tend to be concentrated in the first quarters. Additionally, alternative investment income tends to be lower in the first quarters. Other seasonal factors that affect our business include: Wealth Solutions •The first quarters tend to have the highest level of recurring deposits in Corporate Markets, due to the increase in participant contributions from the receipt of annual bonus award payments or annual lump sum matches and profit sharing contributions made by many employers. Corporate Market withdrawals also tend to increase in the first quarters as departing sponsors change providers at the start of a new year. •In the third quarters, education tax-exempt markets typically have the lowest recurring deposits, due to the timing of vacation schedules in the academic calendar. •The fourth quarters tend to have the highest level of single/transfer deposits due to new Corporate Market plan sales as sponsors transfer from other providers when contracts expire at the fiscal or calendar year-end. Recurring deposits in the Corporate Market may be lower in the fourth quarters as higher paid participants scale back or halt their contributions upon reaching the annual maximums allowed for the year. Finally, Corporate Market withdrawals tend to increase in the fourth quarters, as in the first quarters, due to departing sponsors. Health Solutions •The first quarters tend to have the highest Group Life loss ratio. Sales for Group Life, Stop Loss, and Voluntary Benefits also tend to be the highest in the first quarters, as most of our contracts have January start dates in alignment with the start of our clients' fiscal years. •The third quarters tend to have the second highest Group Life, Stop Loss, and Voluntary Benefits sales, as a large number of our contracts have July start dates in alignment with the start of our clients' fiscal years. Investment Management •In the fourth quarters, performance fees are typically higher due to certain performance fees being associated with calendar-year performance against established benchmarks and hurdle rates. In addition to these seasonal factors, our results are impacted by the annual review of assumptions related to future policy benefits and deferred policy acquisition costs ("DAC"), value of business acquired ("VOBA") (collectively, "DAC/VOBA") and unearned revenue reserves ("URR"), which we generally complete in the third quarter of each year, and annual remeasurement related to our employee benefit plans, which we generally complete in the fourth quarter of each year. See Critical Accounting Judgments and Estimates in Part II, Item 7. of this Annual Report on Form 10-K for further information. Stranded Costs As a result of the Individual Life Transaction, the historical revenues and certain expenses of the divested businesses have been classified as discontinued operations. Historical revenues and certain expenses of the businesses that have been divested via reinsurance at closing of the Individual Life Transaction (including an insignificant amount of Individual Life and non-Wealth Solutions annuities that are not part of the transaction) are reported within continuing operations, but are excluded from adjusted operating earnings before income taxes as businesses exited or to be exited through reinsurance or divestment. Expenses classified within discontinued operations and businesses exited or to be exited through reinsurance include only direct operating expenses incurred by these businesses and then only to the extent that the nature of such expenses was such that we ceased to incur such expenses upon the close of the Individual Life Transaction. Certain other direct costs of these businesses, including those relating to activities for which we provide transitional services and for which we are reimbursed under transition services agreements (“TSAs”) are reported within continuing operations along with the associated revenues from the TSAs. Additionally, indirect costs, such as those related to corporate and shared service functions that were previously allocated to the businesses sold or divested via reinsurance, are reported within continuing operations. These costs ("Stranded Costs") and the associated revenues from the TSAs are reported within continuing operations in Corporate, since we do not believe that they are representative of the future run-rate of revenues and expenses of the continuing operations of our business segments. We have implemented a cost reduction strategy to address Stranded Costs and completed the removal of Stranded Costs during the third quarter of 2022. Some transformation initiatives related to TSAs will continue beyond the third quarter of 2022, however, they are not expected to result in any net Stranded Costs. [[GREPCENT_TABLE]] [["","54"]] [[/GREPCENT_TABLE]] Table of Contents Results of Operations Operating Measures In this MD&A, we discuss Adjusted operating earnings before income taxes and Adjusted operating revenues, each of which is a measure used by management to evaluate segment performance. For additional information on each measure, see Segments Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. AUM and AUA A substantial portion of our fees, other charges and margins are based on AUM. AUM represents on-balance sheet assets supporting customer account values/liabilities and surplus as well as off-balance sheet institutional/mutual funds. Customer account values reflect the amount of policyholder equity that has accumulated within retirement, annuity and universal-life type products. AUM includes general account assets managed by our Investment Management segment in which we bear the investment risk, separate account assets in which the contract owner bears the investment risk and institutional/mutual funds, which are excluded from our balance sheets. AUM-based revenues increase or decrease with a rise or fall in the amount of AUM, whether caused by changes in capital markets or by net flows. AUM is principally affected by net deposits (i.e., new deposits, less surrenders and other outflows) and investment performance (i.e., interest credited to contract owner accounts for assets that earn a fixed return or market performance for assets that earn a variable return). Separate account AUM and institutional/mutual fund AUM include assets managed by our Investment Management segment, as well as assets managed by third-party investment managers. Our Investment Management segment reflects the revenues earned for managing affiliated assets for our other segments as well as assets managed for third parties. AUA represents accumulated assets on contracts pursuant to which we either provide administrative, advisement services, or distribution coverage, relationship management and client servicing or product guarantees for assets managed by third parties. These contracts are not insurance contracts and the assets are excluded from the Consolidated Financial Statements. Fees earned on AUA are generally based on the number of participants, asset levels and/or the level of services or product guarantees that are provided. Our consolidated AUM/AUA includes eliminations of AUM/AUA managed by our Investment Management segment that is also reflected in other segments’ AUM/AUA and adjustments for AUM not reflected in any segments. The following table presents AUM and AUA as of the dates indicated: [[GREPCENT_TABLE]] [["","As of December 31,"],["($ in millions)","2022","","2021"],["AUM and AUA:"],["Wealth Solutions","$","474,277","","","$","536,246"],["Health Solutions","1,880","","","1,887"],["Investment Management","376,963","","","323,656"],["Eliminations/Other","(111,893)","","","(122,754)"],["Total AUM and AUA(1)","$","741,227","","","$","739,035"],["AUM","$","438,964","","","$","405,285"],["AUA","302,264","","","333,749"],["Total AUM and AUA(1)","$","741,227","","","$","739,035"]] [[/GREPCENT_TABLE]] (1) Includes AUM and AUA related to the divested businesses, for which a substantial portion of the assets continue to be managed by our Investment Management segment. [[GREPCENT_TABLE]] [["","55"]] [[/GREPCENT_TABLE]] Table of Contents Terminology Definitions Sales Statistics In our discussion of our segment results under Results of Operations—Segment by Segment, we sometimes refer to sales activity for various products. The term "sales" is used differently for different products, as described more fully below. These sales statistics do not correspond to revenues under U.S. GAAP and are used by us as operating statistics underlying our financial performance. Net flows are deposits less redemptions (including benefits and other product charges). Sales for Health Solutions products are based on a calculation of annual premiums, which represent regular premiums on new policies, plus a portion of new single premiums. Total gross premiums and deposits are defined as premium revenue and deposits for policies written and assumed. This measure provides information as to growth and persistency trends related to premium and deposits. Other Measures Total annualized in-force premiums are defined as a full year of premium at the rate in effect at the end of the period. This measure provides information as to the growth and persistency trends in premium revenue. Interest adjusted loss ratios are defined as the ratio of benefits expense to premium revenue exclusive of the discount component in the change in benefit reserve. This measure reports the loss ratio related to mortality on life products and morbidity on health products. Net gains (losses), Net investment gains (losses) and related charges and adjustments and Net guaranteed benefit losses and related charges and adjustments include changes in the fair value of derivatives. Increases in the fair value of derivative assets or decreases in the fair value of derivative liabilities result in "gains." Decreases in the fair value of derivative assets or increases in the fair value of derivative liabilities result in "losses." In addition, we have certain products that contain guarantees that are embedded derivatives related to guaranteed benefits and index-crediting features, while other products contain such guarantees that are considered derivatives (collectively "guaranteed benefit derivatives"). [[GREPCENT_TABLE]] [["","56"]] [[/GREPCENT_TABLE]] Table of Contents Results of Operations - Company Consolidated The following table presents our Consolidated Statements of Operations for the periods indicated: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["($ in millions)","2022","","2021","","","","Change"],["Revenues:"],["Net investment income","$","2,281","","","$","2,774","","","","","$","(493)"],["Fee income","1,731","","","1,827","","","","","(96)"],["Premiums","2,425","","","(3,354)","","","","","5,779"],["Net gains (losses)","(685)","","","1,423","","","","","(2,108)"],["Other revenue","148","","","579","","","","","(431)"],["Income (loss) related to consolidated investment entities","22","","","981","","","","","(959)"],["Total revenues","5,922","","","4,230","","","","","1,692"],["Benefits and expenses:"],["Interest credited and other benefits to contract owners/policyholders","2,573","","","(2,163)","","","","","4,736"],["Operating expenses","2,542","","","2,586","","","","","(44)"],["Net amortization of Deferred policy acquisition costs and Value of business acquired","187","","","795","","","","","(608)"],["Interest expense","134","","","186","","","","","(52)"],["Operating expenses related to consolidated investment entities","58","","","49","","","","","9"],["Total benefits and expenses","5,494","","","1,453","","","","","4,041"],["Income (loss) from continuing operations before income taxes","428","","","2,777","","","","","(2,349)"],["Income tax expense (benefit)","(5)","","","(98)","","","","","93"],["Income (loss) from continuing operations","433","","","2,875","","","","","(2,442)"],["Income (loss) from discontinued operations, net of tax","\u2014","","","12","","","","","(12)"],["Net Income (loss)","433","","","2,887","","","","","(2,454)"],["Less: Net income (loss) attributable to noncontrolling interest and redeemable noncontrolling interest","(77)","","","761","","","","","(838)"],["Less: Preferred stock dividends","36","","","36","","","","","\u2014"],["Net income (loss) available to our common shareholders","$","474","","","$","2,090","","","","","$","(1,616)"]] [[/GREPCENT_TABLE]] For additional information on reconciliations of Income (loss) from continuing operations before income taxes to Adjusted operating earnings before income taxes and Total revenues to Adjusted operating revenues, and their relative contributions of each segment, see Segments Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. Consolidated - Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Total Revenues Total Revenues increased $1,692 million from $4,230 million to $5,922 million. The following items contributed to the overall increase. Net investment income decreased $493 million from $2,774 million to $2,281 million primarily due to: •lower alternative investment and prepayment fee income primarily driven by the impact of equity market performance. Fee income decreased $96 million from $1,827 million to $1,731 million primarily due to: •lower fee income in Wealth Solutions primarily driven by lower average equity markets and a lower earned rate; and [[GREPCENT_TABLE]] [["","57"]] [[/GREPCENT_TABLE]] Table of Contents •amortization of unearned revenue in the prior year driven by the realized gains on the transfer of assets to a comfort trust pursuant to reinsurance agreements entered into concurrent with the close of the Individual Life Transaction.     The decrease was partially offset by: •higher fee income in Investment Management primarily due to the addition of the AllianzGI business, partially offset by lower average equity markets and higher interest rates. Premiums increased $5,779 million from $(3,354) million to $2,425 million primarily due to: •the close of the Individual Life Transaction in the prior year, at which point RLI, VRIAC, and RLNY ceded substantially all of their individual life and non-retirement annuity businesses to SLD, which are fully offset by a corresponding amount in Interest credited and other benefits to contract owners/policyholders; and •higher premiums driven by growth across all blocks of business in our Health Solutions segment. Net gains (losses) changed $2,108 million from a gain of $1,423 million to a loss of $685 million primarily due to: •higher realized gains in the prior year due to the transfer of assets to a comfort trust pursuant to reinsurance agreements entered into concurrent with the close of the Individual Life Transaction; •losses from market value changes associated with our reinsured businesses, which are fully offset by a corresponding amount in Interest credited and other benefits to contract owners/policyholders; •a gain driven by the sale of our stake in a limited partnership interest in the prior year; •a favorable change in the allowance for losses on commercial mortgage loans in the prior year; and •higher unfavorable mark-to-market adjustments on securities subject to fair value option accounting due to interest rate movements. The change was partially offset by: •net favorable changes in derivative valuations due to interest rate movements. Other revenue decreased $431 million from $579 million to $148 million primarily due to: •a net gain in the prior year related to the sale of the independent financial planning channel of VFA; •lower revenues driven by the sale of the independent financial planning channel of VFA during the prior year; and •lower revenue from transition services agreements.     The decrease was partially offset by: •favorable market value adjustments driven by rising interest rates. Income related to consolidated investment entities decreased $959 million from $981 million to $22 million primarily due to: •equity market impacts to limited partnership valuations. Total Benefits and Expenses Total benefits and expenses increased by $4,041 million from $1,453 million to $5,494 million. The following items contributed to the overall increase. Interest credited and other benefits to contract owners/policyholders increased $4,736 million from $(2,163) million to $2,573 million primarily due to: •the close of the Individual Life Transaction in the prior year, at which point, RLI, VRIAC, and RLNY ceded substantially all of their individual life and non-retirement annuity businesses to SLD, which are fully offset by a corresponding amount in Premiums; [[GREPCENT_TABLE]] [["","58"]] [[/GREPCENT_TABLE]] Table of Contents •higher benefits incurred in Health Solutions primarily due to an increase in in-force business and non-COVID-19 Group Life impacts, partially offset by lower COVID-19 impacts and a reserve release driven by third quarter annual assumption updates; and •a litigation reserve in the current year. The increase was partially offset by: •amortization and loss recognition in the prior year driven by the realized gains on the transfer of assets to a comfort trust pursuant to reinsurance agreements entered into concurrent with the close of the Individual Life Transaction as well as other activities associated with the close which did not repeat; and •a change in the value of an embedded derivative associated with businesses reinsured due to an increase in interest rates, which is fully offset by a corresponding amount in Net gains (losses). Operating expenses decreased $44 million from $2,586 million to $2,542 million primarily due to: •lower expenses driven by the sale of the independent financial planning channel of VFA; •lower incentive compensation in Corporate and Investment Management segments primarily due to lower earnings in the current year; •lower restructuring costs in the current year; •lower stranded costs due to increased benefits from cost savings; and •a prior year legal accrual in Wealth Solutions. The decrease was partially offset by: •a ceding commission paid in the prior year as part of the close of the Individual Life Transaction at which point RLI, VRIAC and RLNY ceded substantially all of the Individual Life and Non-retirement annuity businesses to SLD; •transaction and integration costs primarily driven by the addition of the AllianzGI business; •an impairment to the fair value of a wholly owned office building; •an increase in growth-based expenses in Wealth Solutions and Health Solutions and higher expenses in Investment Management driven by the addition of the AllianzGI business, partially offset by lower commissions in Wealth Solutions driven by equity market declines; and •an unfavorable change in pension costs. See the Employee Benefit Arrangements Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for further information. Net amortization of DAC/VOBA decreased $608 million from $795 million to $187 million primarily due to: •amortization and loss recognition in the prior year driven by the realized gains on the transfer of assets to a comfort trust pursuant to reinsurance agreements entered into concurrent with the close of the Individual Life Transaction; •a write-down of DAC and VOBA in the prior year related to businesses exited driven by third quarter annual assumption updates; and •higher favorable DAC unlocking in Wealth Solutions primarily due to third quarter annual assumption updates in the current year, partially offset by an unfavorable change in DAC unlocking primarily due to equity market performance in the current year. The decrease was partially offset by: •unfavorable unlocking in business exited during the current year driven by interest rate movements. Interest expense decreased $52 million from $186 million to $134 million primarily due to: •lower loss related to early extinguishment of debt in the current period compared to the prior period; and •lower interest expense as a result of cumulative debt extinguishment. [[GREPCENT_TABLE]] [["","59"]] [[/GREPCENT_TABLE]] Table of Contents Income Tax Benefit Income tax benefit decreased $93 million from $98 million to $5 million primarily due to: •the release of the tax valuation allowance in 2021 that did not reoccur in 2022; and •a change in noncontrolling interest. The decrease was partially offset by: •a decrease in income before income taxes; •tax credits claimed in 2022 related to tax years 2012 - 2017; and •an increase in the dividends received deduction. Loss from Discontinued Operations, net of Tax Income (loss) from discontinued operations, net of tax decreased $12 million from $12 million to $0 million primarily due to: •unfavorable adjustments to the Individual Life Transaction loss on sale, net of tax excluding costs to sell made in the prior year. Adjustments from Income (Loss) from Continuing Operations before Income Taxes to Adjusted Operating Earnings before Income Taxes For additional information on the reconciliation adjustments listed below, see the Segments Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. Net investment gains (losses) and related charges and adjustments increased $141 million from a loss of $20 million to a loss of $161 million primarily due to: •a gain driven by the sale of our stake in a limited partnership interest in the prior year; •a favorable change in the allowance for losses on commercial mortgage loans in the prior year; and •higher unfavorable mark-to-market adjustments on securities subject to fair value option accounting in the current year due to interest rate movements. The increase was partially offset by: •net favorable changes in derivative valuations due to interest rate movements. Net guaranteed benefit gains (losses) and related charges and adjustments increased $22 million from a loss of $1 million to a loss of $23 million primarily due to: •unfavorable changes in derivative valuations due to interest rate movements. Gain (loss) related to businesses exited through reinsurance or divestment changed $953 million from a gain of $812 million to a loss of $141 million primarily due to: •the close of the Individual Life Transaction in the prior year at which point the transfer of assets to a comfort trust pursuant to the reinsurance agreements resulted in realized gains which were partially offset by intangibles amortization, loss recognition and other activities which did not repeat; •a gain in the prior year related to the sale of the independent financial planning channel of VFA net of transaction-related costs to sell; •unfavorable unlocking in the current year driven by interest rate movements; and •a litigation reserve in the current year. The change was partially offset by: •prior year annual assumption updates which resulted in a write-down of DAC and VOBA related to our businesses ceded to SLD at the close of the Individual Life Transaction; and [[GREPCENT_TABLE]] [["","60"]] [[/GREPCENT_TABLE]] Table of Contents •lower amortization related to our businesses exited. Income (loss) related to early extinguishment of debt decreased $28 million from a loss of $31 million to a loss of $3 million primarily due to: •lower losses in connection with debt extinguishments completed during the current year. See the Financing Agreements Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for further information. Immediate recognition of net actuarial gains related to pension and other postretirement benefit obligations and gains from plan adjustments and curtailments decreased $28 million from $33 million to $5 million. See Critical Accounting Judgments and Estimates - Employee Benefits Plans in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7. of this Annual Report on Form 10-K for further information. Other adjustments increased $46 million from a loss of $105 million to a loss of $151 million primarily due to: •transaction and integration costs driven by the addition of the AllianzGI business; and •an impairment to the fair value of a wholly owned office building. The increase was partially offset by: •lower costs related to restructuring. Results of Operations - Segment by Segment Adjusted operating earnings before income taxes is the measure of segment profit or loss management uses to evaluate segment performance. Adjusted operating earnings before income taxes should not be viewed as a substitute for GAAP pretax income. We believe the presentation of segment Adjusted operating earnings before income taxes as we measure it for management purposes enhances the understanding of our business by reflecting the underlying performance of our core operations and facilitating a more meaningful trend analysis. Refer to the Segments Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for further information on the presentation of segment results and our definition of Adjusted operating earnings before income taxes. Wealth Solutions The following table presents Adjusted operating earnings before income taxes of our Wealth Solutions segment for the periods indicated: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["($ in millions)","2022","","2021"],["Adjusted operating revenues:"],["Net investment income and net gains (losses)","$","1,751","","","$","2,114"],["Fee income","953","","","1,056"],["Other revenue","68","","","68"],["Total adjusted operating revenues","2,772","","","3,238"],["Operating benefits and expenses:"],["Interest credited and other benefits to contract owners/policyholders","888","","","891"],["Operating expenses","1,100","","","1,146"],["Net amortization of DAC/VOBA","77","","","91"],["Total operating benefits and expenses","2,064","","","2,128"],["Adjusted operating earnings before income taxes(1)","$","707","","","$","1,110"]] [[/GREPCENT_TABLE]] (1) Includes unlocking related to annual review of the assumptions. See DAC/VOBA Unlocking in Part II, Item 7. of this Annual Report on Form 10-K for further information. [[GREPCENT_TABLE]] [["","61"]] [[/GREPCENT_TABLE]] Table of Contents The following tables present Total Client Assets, which comprise total AUM and AUA, for our Wealth Solutions segment as of the dates indicated: [[GREPCENT_TABLE]] [["","As of December 31,"],["($ in millions)","2022","","2021"],["Full Service","$","162,664","","","$","187,702"],["Recordkeeping","250,507","","","279,501"],["Total Defined Contribution","413,171","","","467,203"],["Investment-only Stable Value","38,148","","","40,246"],["Retail Client and Other Assets","22,958","","","28,796"],["Total Client Assets","$","474,277","","","$","536,246"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","As of December 31,"],["($ in millions)","2022","","2021"],["Fee-based","$","379,706","","","$","434,340"],["Spread-based","33,881","","","33,359"],["Investment-only Stable Value","38,148","","","40,246"],["Retail Client Assets","22,543","","","28,300"],["Total Client Assets","$","474,277","","","$","536,246"]] [[/GREPCENT_TABLE]] The following table presents Full Service, Recordkeeping, and Stable Value net flows for our Wealth Solutions segment for the periods indicated: [[GREPCENT_TABLE]] [["","As of December 31,"],["($ in millions)","2022","","2021"],["Full Service - Corporate markets:"],["Deposits","$","14,722","","","$","14,740"],["Surrenders, benefits and product charges","(11,910)","","","(13,709)"],["Net flows","2,812","","","1,031"],["Full Service - Tax-exempt markets:"],["Deposits","6,143","","","6,239"],["Surrenders, benefits and product charges","(6,002)","","","(6,694)"],["Net flows","141","","","(455)"],["Total Full Service Net Flows","$","2,953","","","$","576"],["Recordkeeping and Stable Value:"],["Recordkeeping Net Flows","$","766","","","$","(6,731)"],["Investment-only Stable Value Net Flows","$","1,215","","","$","(2,108)"]] [[/GREPCENT_TABLE]] Wealth Solutions - Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Adjusted operating earnings before income taxes decreased $403 million from $1,110 million to $707 million primarily due to: •lower alternative asset returns, partially offset by higher investment margin primarily driven by higher portfolio yield; and •lower fee income and other revenue resulting from lower average equity markets, the sale of the Financial Planning Channel, and a lower earned rate, partially offset by favorable market value adjustments. [[GREPCENT_TABLE]] [["","62"]] [[/GREPCENT_TABLE]] Table of Contents The decrease was partially offset by: •lower expenses primarily driven by the impact of the Financial Planning Channel sale, lower commissions as a result of equity market declines and a legal accrual in the prior year, partially offset by business growth; and •higher favorable DAC unlocking primarily due to third quarter annual assumption updates in the current year, partially offset by unfavorable DAC unlocking primarily due to equity market performance in the current year. We will adopt ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts, on January 1, 2023 with a transition date of January 1, 2021. The ultimate effects the standard will have on the financial statements are highly dependent on policyholder behavior, actuarial assumptions and macroeconomic conditions, particularly interest rates and spreads. However, we estimate that application of ASU 2018-12 will result in slightly higher Adjusted operating earnings before income taxes in the Wealth Solutions segment due to lower expected DAC amortization expense (excluding unlocking impacts, which will no longer be reported under the new guidance). See Future Adoption of Accounting Pronouncements in the Business, Basis of Presentation and Significant Accounting Policies Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for further information regarding ASU 2018-12. Health Solutions The following table presents Adjusted operating earnings before income taxes of the Health Solutions segment for the periods indicated: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["($ in millions)","2022","","2021"],["Adjusted operating revenues:"],["Net investment income and net gains (losses)","$","134","","","$","165"],["Fee income","76","","","69"],["Premiums","2,378","","","2,168"],["Other revenue","(6)","","","(7)"],["Total adjusted operating revenues","2,582","","","2,395"],["Operating benefits and expenses:"],["Interest credited and other benefits to contract owners/policyholders","1,691","","","1,674"],["Operating expenses","569","","","492"],["Net amortization of DAC/VOBA","30","","","25"],["Total operating benefits and expenses","2,291","","","2,191"],["Adjusted operating earnings before income taxes","$","291","","","$","204"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","63"]] [[/GREPCENT_TABLE]] Table of Contents The following table presents sales, gross premiums and in-force for our Health Solutions segment for the periods indicated: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["($ in millions)","2022","","2021"],["Sales by Product Line:"],["Group life and Disability","$","126","","","$","110"],["Stop loss","409","","","355"],["Total group products","535","","","465"],["Voluntary(1)","149","","","128"],["Total sales by product line","$","684","","","$","593"],["Total gross premiums and deposits","$","2,724","","","$","2,429"],["Group life and Disability","833","","","752"],["Stop loss","1,258","","","1,181"],["Voluntary(1)","689","","","576"],["Total annualized in-force premiums","$","2,780","","","$","2,510"],["Loss Ratios:"],["Group life (interest adjusted)(2)","89.8","%","","95.5","%"],["Stop loss","75.9","%","","77.3","%"],["Total Loss Ratio(2)(3)","69.4","%","","72.5","%"]] [[/GREPCENT_TABLE]] (1) Includes Health Account Solutions products. (2) The year ended December 31, 2022 loss ratio excludes $59 million of favorable reserve impact related to annual review of the assumptions. (3) Total Loss Ratio is presented on a trailing twelve month basis. Health Solutions- Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Adjusted operating earnings before income taxes increased $87 million from $204 million to $291 million primarily due to: •higher premiums driven by growth across all three lines of business. The increase was partially offset by: •higher expenses primarily driven by business growth; •lower alternative asset returns; and •higher benefits incurred due to an increase in in-force business and non-COVID-19 Group Life impacts, partially offset by lower COVID-19 impacts and a reserve release driven by third quarter annual assumption updates. [[GREPCENT_TABLE]] [["","64"]] [[/GREPCENT_TABLE]] Table of Contents Investment Management The following table presents Adjusted operating earnings before income taxes of our Investment Management segment for the periods indicated: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["($ in millions)","2022","","2021"],["Adjusted operating revenues:"],["Net investment income and net gains (losses)","$","3","","","$","103"],["Fee income","736","","","667"],["Other revenue","17","","","13"],["Total adjusted operating revenues","756","","","783"],["Operating benefits and expenses:"],["Operating expenses","570","","","544"],["Total operating benefits and expenses","570","","","544"],["Adjusted operating earnings before income taxes including Allianz noncontrolling interest","186","","","239"],["Less: Earnings (loss) attributable to Allianz noncontrolling interest","27","","","\u2014"],["Adjusted operating earnings before income taxes","$","158","","","$","239"]] [[/GREPCENT_TABLE]] Our Investment Management segment revenues include the following intersegment revenues, primarily consisting of asset-based management and administration fees. [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["($ in millions)","2022","","2021"],["Investment Management intersegment revenues","$","91","","","$","92"]] [[/GREPCENT_TABLE]] The following table presents AUM and AUA for our Investment Management segment as of the dates indicated: [[GREPCENT_TABLE]] [["","As of December 31,"],["($ in millions)","2022","","2021"],["AUM"],["External clients:"],["Institutional(1)","$","161,502","","","$","148,921"],["Retail(1)","121,833","","","76,908"],["Total external clients","283,335","","","225,829"],["General account","38,028","","","38,004"],["Total AUM(1)","321,363","","","263,832"],["AUA(2)","55,601","","","59,823"],["Total AUM and AUA(1)(2)","$","376,963","","","$","323,656"]] [[/GREPCENT_TABLE]] (1) Includes assets associated with the divested businesses. (2) Includes assets sourced by other segments and also reported as AUA or AUM by such other segments. Assets Under Advisement, presented in AUA, includes advisory assets, mutual fund, general account and stable value assets. [[GREPCENT_TABLE]] [["","65"]] [[/GREPCENT_TABLE]] Table of Contents The following table presents net flows for our Investment Management segment for the periods indicated: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["($ in millions)","2022","","2021"],["Net Flows:"],["Institutional(1)","$","3,675","","","$","9,075"],["Retail","(2,601)","","","(1,304)"],["Divested businesses","(2,156)","","","(2,974)"],["Total(1)","$","(1,082)","","","$","4,796"]] [[/GREPCENT_TABLE]] (1) Starting Q1 2021, amounts exclude liquidity related cash flow activities. Investment Management - Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Adjusted operating earnings before income taxes including Allianz noncontrolling interest decreased $53 million from $239 million to $186 million primarily due to: •lower investment capital returns primarily driven by higher prior year overall market performance; and •higher operating expenses primarily driven by the addition of the AllianzGI business, partially offset by lower variable compensation due to lower earnings. The decrease was partially offset by: •higher fee income and other revenue primarily due to the addition of the AllianzGI business, partially offset by lower average equity markets and higher interest rates. Corporate The following table presents Adjusted operating earnings before income taxes of Corporate for the periods indicated: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["($ in millions)","2022","","2021"],["Adjusted operating revenues:"],["Net investment income and net gains (losses)","$","8","","","$","4"],["Other revenue","59","","","96"],["Total adjusted operating revenues","67","","","100"],["Operating benefits and expenses:"],["Operating expenses(1)","105","","","160"],["Interest Expense(2)","177","","","201"],["Total operating benefits and expenses","282","","","361"],["Adjusted operating earnings before income taxes including Allianz noncontrolling interest","(215)","","","(261)"],["Less: Earnings (loss) attributable to Allianz noncontrolling interest","(2)","","","\u2014"],["Adjusted operating earnings before income taxes","$","(213)","","","$","(261)"]] [[/GREPCENT_TABLE]] (1) Includes expenses from corporate activities, and expenses not allocated to our segments. Years ended December 31, 2022 and 2021 primarily include stranded costs related to the divested businesses and amortization of intangibles. (2) Includes dividend payments made to preferred shareholders. Corporate - Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Adjusted operating earnings before income taxes including Allianz noncontrolling interest improved $46 million from a loss of $261 million to a loss of $215 million primarily due to: •lower incentive compensation expense in the current year driven by lower Adjusted operating earnings before income taxes; [[GREPCENT_TABLE]] [["","66"]] [[/GREPCENT_TABLE]] Table of Contents •lower stranded costs related to the Individual Life transaction due to increased benefits from cost saving initiatives; and •lower interest expense driven by cumulative debt extinguishments. The improvement was partially offset by: •lower revenue from transition services agreements associated with the Individual Life Transaction as agreements begin to roll off; and •lower pension benefit driven by pension plan asset de-risking. Alternative Investment Income Investment income on certain alternative investments can be volatile due to changes in market conditions. The following table presents the amount of investment income (loss) on certain alternative investments that is included in segment Adjusted operating earnings before income taxes and the average level of assets in each segment, prior to intercompany eliminations, which excludes alternative investments and income that are a component of Income (loss) related to businesses exited or to be exited through reinsurance or divestment and Income (loss) from discontinued operations, net of tax, respectively, and alternative investments and income in Corporate. These alternative investments are carried at fair value, which is estimated based on the net asset value ("NAV") of these funds. While investment income on these assets can be volatile, based on current plans, we expect to earn 9.0% on these assets over the long-term. The following table presents the investment income for the years ended December 31, 2022 and 2021, respectively, and the average assets of alternative investments as of the dates indicated: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["($ in millions)","2022","","2021"],["Wealth Solutions:"],["Alternative investment income","$","91","","","$","511"],["Average alternative investments","1,608","","","1,360"],["Health Solutions:"],["Alternative investment income","8","","","50"],["Average alternative investments","164","","","134"],["Investment Management:"],["Alternative investment income","1","","","104"],["Average alternative investments","337","","","309"]] [[/GREPCENT_TABLE]] DAC/VOBA Unlocking Changes in Adjusted operating earnings before income taxes and Net income (loss) are influenced by increases and decreases in amortization of DAC and VOBA. We amortize DAC/VOBA related to fixed and variable deferred annuity contracts over the estimated lives of the contracts in relation to the emergence of estimated gross profits. Assumptions as to mortality, persistency, interest crediting rates, returns associated with separate account performance, impact of hedge performance, expenses to administer the business and certain economic variables, such as inflation, are based on our experience and our overall short-term and long-term future expectations for returns available in the capital markets. At each valuation date, estimated gross profits are updated with actual gross profits and the assumptions underlying future estimated gross profits are evaluated for continued reasonableness. Adjustments to estimated gross profits require that amortization rates be revised retroactively to the date of the contract issuance, which is referred to as unlocking. As a result of this process, the cumulative balances of DAC/VOBA are adjusted with an offsetting benefit or charge to income to reflect changes in the period of the revision. An unlocking event that results in a benefit to income ("favorable unlocking") generally occurs as a result of actual experience or future expectations being favorable compared to previous estimates. Changes in DAC/VOBA due to contract changes or contract terminations higher than estimated are also included in "unlocking." At each valuation date, we evaluate these assumptions and, if actual experience or other evidence suggests that earlier assumptions should be revised, we adjust the reserve balance, with a related charge or credit [[GREPCENT_TABLE]] [["","67"]] [[/GREPCENT_TABLE]] Table of Contents to Policyholder benefits. These reserve adjustments are included in unlocking associated with Wealth Solutions and Health Solutions. An unlocking event that results in a charge to income ("unfavorable unlocking") generally occurs as a result of actual experience or future expectations being unfavorable compared to previous estimates. As a result of unlocking, the amortization schedules for future periods are also adjusted. The DAC/VOBA unlocking in the table below includes the net impact of the annual review of the assumptions. During the third quarter of 2022 and 2021, we completed our annual review of the assumptions, including projection model inputs, in each of our segments (except for Investment Management, for which assumption reviews are not relevant). As a result of this review, we have made a number of changes to our assumptions resulting in net favorable unlocking of $48 million and $10 million to Adjusted operating earnings before income taxes in 2022 and 2021, respectively. The favorable unlocking in third quarter 2022 was driven principally by higher interest rates. The favorable unlocking in third quarter 2021 was driven principally by changes in our asset return assumptions. The following table presents the amount of DAC/VOBA unlocking included in Adjusted operating earnings before income taxes for the periods indicated: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["($ in millions)","2022","","2021"],["Wealth Solutions","$","44","","","$","29"],["Total DAC/VOBA unlocking","$","44","","","$","29"]] [[/GREPCENT_TABLE]] We also review the estimated gross profits for each of our blocks of business to determine recoverability of DAC/VOBA each period. If these assets are deemed to be unrecoverable, a write-down is recorded that is referred to as loss recognition. During the third quarter of 2022 and 2021, our annual review did not result in material loss recognition or premium deficiency reserve that impacted Adjusted operating earnings before income taxes. See Critical Accounting Judgments and Estimates in Part II, Item 7. of this Annual Report on Form 10-K for more information. Liquidity and Capital Resources Liquidity refers to our ability to access sufficient sources of cash to meet the requirements of our operating, investing and financing activities. Capital refers to our long-term financial resources available to support business operations and future growth. Our ability to generate and maintain sufficient liquidity and capital depends on the profitability of the businesses, timing of cash flows on investments and products, general economic conditions and access to the capital markets and the other sources of liquidity and capital described herein. The following discussion presents a review of our sources and uses of liquidity and capital and should be read in its entirety and in conjunction with the Off-Balance Sheet Arrangements and Aggregate Contractual Obligations table included further below. Consolidated Sources and Uses of Liquidity and Capital Our principal available sources of liquidity are product charges, investment income, proceeds from the maturity and sale of investments, proceeds from debt issuance and borrowing facilities, equity securities issuance, repurchase agreements, contract deposits and securities lending. Primary uses of these funds are payments of policyholder benefits, commissions and operating expenses, interest credits, share repurchases, investment purchases, business acquisitions and contract maturities, withdrawals and surrenders. Parent Company Sources and Uses of Liquidity Voya Financial, Inc. is largely dependent on cash flows from its operating subsidiaries to meet its obligations. The principal sources of funds available to Voya Financial, Inc. include dividends and returns of capital from its operating subsidiaries, as well as cash and short-term investments, and proceeds from debt issuances, borrowing facilities and equity securities issuances. These sources of funds include the $500 million revolving credit sublimit of our Third Amended and Restated Credit Agreement and reciprocal borrowing facilities maintained with Voya Financial, Inc.'s subsidiaries as well as alternate sources of liquidity described below. [[GREPCENT_TABLE]] [["","68"]] [[/GREPCENT_TABLE]] Table of Contents We estimate that our excess capital (which we define as the amount of capital and surplus in our insurance subsidiaries above our 375% RBC target, plus the amount of holding company liquidity above our $200 million target) as of December 31, 2022 was approximately $937 million. Voya Financial, Inc.'s primary sources and uses of cash for the periods indicated are presented in the following table: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["($ in millions)","2022","","2021"],["Beginning cash and cash equivalents balance","$","202","","","$","212"],["Sources:"],["Proceeds from loans from subsidiaries, net of repayments(1)","34","","","12"],["Dividends and returns of capital from subsidiaries","1,210","","","1,633"],["Repayment of loans to subsidiaries, net of new issuances","65","","","\u2014"],["Proceeds from Resolution Sale","\u2014","","","672"],["Amounts received from subsidiaries under tax sharing agreements, net","47","","","\u2014"],["Collateral received, net","\u2014","","","10"],["Sale of Interest in Wholly Owned Subsidiary","\u2014","","","80"],["Settlement of amounts due from (to) subsidiaries and affiliates, net","60","","","\u2014"],["Discounts and fees received for debt extinguishment","2","","","\u2014"],["Asset maturities and investment income, net","26","","","215"],["Other, net","2","","","\u2014"],["Total sources","1,446","","","2,622"],["Uses:"],["Premium paid and other fees related to debt extinguishment","\u2014","","","28"],["Payment of interest expense","111","","","130"],["Capital provided to subsidiaries","\u2014","","","49"],["Repayments of loans from subsidiaries, net of new issuances","\u2014","","","523"],["Debt repurchase","366","","","453"],["Amounts paid to subsidiaries under tax sharing arrangements, net","\u2014","","","141"],["Payment of income taxes, net","14","","","\u2014"],["Common stock acquired - Share repurchase","750","","","1,113"],["Share-based compensation","40","","","44"],["Dividends paid on preferred stock","36","","","36"],["Dividends paid on common stock","80","","","80"],["Collateral delivered, net","5","","","\u2014"],["Derivatives, net","37","","","\u2014"],["Other, net","\u2014","","","35"],["Total uses","1,439","","","2,632"],["Net increase (decrease) in cash and cash equivalents","7","","","(10)"],["Ending cash and cash equivalents balance","$","209","","","$","202"]] [[/GREPCENT_TABLE]] (1) Reflects netting of intercompany receivable from subsidiaries of $45 million in 2021. Liquidity We manage liquidity through access to substantial investment portfolios as well as a variety of other sources of liquidity including committed credit facilities, securities lending and repurchase agreements. Our asset-liability management ("ALM") process takes into account the expected maturity of investments and expected benefit payments as well as the specific nature and risk profile of the liabilities. As part of our liquidity management process, we model different scenarios to determine whether existing assets are adequate to meet projected cash flows. [[GREPCENT_TABLE]] [["","69"]] [[/GREPCENT_TABLE]] Table of Contents Capitalization The primary components of our capital structure consist of debt and equity securities. Our capital position is supported by cash flows within our operating subsidiaries, the availability of borrowed funds under liquidity facilities, and any additional capital we raise to invest in the growth of the business and for general corporate purposes. We manage our capital position based on a variety of factors including, but not limited to, our financial strength, the credit rating of Voya Financial, Inc. and of its insurance company subsidiaries and general macroeconomic conditions. See the Consolidated and Nonconsolidated Investment Entities Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for details over changes in noncontrolling interest during the year and impacting capitalization. Share Repurchase Program and Dividends to Shareholders See the Shareholders' Equity Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for information relating to authorizations by the Board of Directors to repurchase our shares and amounts of common stock repurchased pursuant to such authorizations for the years ended December 31, 2022 and 2021. As of December 31, 2022, we were authorized to repurchase shares up to an aggregate purchase price of $271 million. The following table provides a summary of common dividends and repurchases of common shares for the periods indicated: [[GREPCENT_TABLE]] [["($ in millions)","Year Ended December 31,"],["","2022","","2021"],["Dividends paid on common shares","$","80","","","$","80"],["Repurchases of common shares (at cost)","750","","","1,143"],["Total","$","830","","","$","1,223"]] [[/GREPCENT_TABLE]] Preferred Stock Our ability to declare or pay dividends on, or purchase, redeem or otherwise acquire, shares of our common stock will be substantially restricted in the event that we do not declare and pay (or set aside) dividends on the Series A and Series B preferred stock for the last preceding dividend period. During the year ended December 31, 2022, we declared and paid dividends of $20 million and $16 million on the Series A and Series B preferred stock, respectively. During the year ended December 31, 2021, we declared and paid dividends of $20 million and $16 million on the Series A and Series B preferred stock, respectively. As of December 31, 2022, there were no preferred stock dividends in arrears. See the Shareholders' Equity Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for further information on preferred stock issuances. Debt As of December 31, 2022, we had $141 million of short-term debt borrowings outstanding consisting entirely of the current portion of long-term debt. The following table summarizes our borrowing activities for the year ended December 31, 2022: [[GREPCENT_TABLE]] [["($ in millions)","Beginning Balance","","Issuance","","Maturities and Repayment","","Other Changes(1)","","Ending Balance"],["Total long-term debt","$","2,595","","","$","\u2014","","","$","(366)","","","$","(135)","","","$","2,094"]] [[/GREPCENT_TABLE]] (1) Other changes is primarily the reclassification of $140 million of debt maturing in 2023 from long-term debt to short-term debt. [[GREPCENT_TABLE]] [["","70"]] [[/GREPCENT_TABLE]] Table of Contents As of December 31, 2021, we had $1 million of short-term debt borrowings outstanding consisting entirely of the current portion of long-term debt. The following table summarizes our borrowing activities for the year ended December 31, 2021: [[GREPCENT_TABLE]] [["($ in millions)","Beginning Balance","","Issuance","","Maturities and Repayment","","Other Changes","","Ending Balance"],["Total long-term debt","$","3,044","","","$","\u2014","","","$","(453)","","","$","4","","","$","2,595"]] [[/GREPCENT_TABLE]] As of December 31, 2022, we were in compliance with our debt covenants. See the Financing Agreements Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for additional details over changes in debt during the year and impacting capitalization. Put Option Agreement for Senior Debt Issuance See the Financing Agreements Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for information on the senior unsecured credit facility. Senior Unsecured Credit Facility See the Financing Agreements Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for information on the senior unsecured credit facility. Other Credit Facilities We have historically used credit facilities to provide collateral for affiliated reinsurance transactions with captive insurance subsidiaries. These arrangements, which facilitated the financing of statutory reserve requirements, primarily related to our divested businesses. See the Financing Agreements Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for information on other credit facilities. Voya Financial, Inc. Credit Support of Subsidiaries Voya Financial, Inc. provides guarantees to certain of our subsidiaries to support various business requirements: •Voya Financial, Inc. guarantees the obligations of Voya Holdings under the $13 million principal amount 8.42% Series B Capital Securities due April 1, 2027, and provides a back-to-back guarantee to ING Group in respect of its guarantee of $358 million combined principal amount of Aetna Notes. •Voya Financial, Inc. and Voya Holdings provide a guarantee of payment of obligations to certain subsidiaries under certain surplus notes held by those subsidiaries. We did not recognize any asset or liability as of December 31, 2022 in relation to intercompany indemnifications, guarantees or support agreements. As of December 31, 2022, no guarantees existed in which we were required to currently perform under these arrangements. Securities Pledged We engage in securities lending whereby certain securities from our portfolio are loaned to other institutions for short periods of time. See Business, Basis of Presentation and Significant Accounting Policies and Investments (excluding Consolidated Investment Entities) Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for further information on our securities lending program. Repurchase Agreements We enter into reverse repurchase agreements and engage in dollar repurchase agreements with mortgage-backed securities ("dollar rolls") and repurchase agreements with other collateral types to increase our return on investments and improve liquidity. [[GREPCENT_TABLE]] [["","71"]] [[/GREPCENT_TABLE]] Table of Contents See Business, Basis of Presentation and Significant Accounting Policies and Investments (excluding Consolidated Investment Entities) Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for further information on repurchase agreements. FHLB We are currently a member of the FHLB of Boston and the FHLB of Des Moines and may engage in transactions with FHLB for investment income enhancement and/or liquidity purposes. We are required to maintain a collateral deposit to back any funding agreements issued by the FHLB. We have the ability to obtain funding from the FHLBs, in the form of non-putable funding agreements, based on a percentage of the value of our assets and subject to the availability of eligible collateral. The types of securities generally pledged include mortgage securities, commercial real estate and U.S. treasury securities. Our borrowing capacity is also limited by the lending value of our assets eligible to be pledged to the FHLB. As of December 31, 2022 and 2021, our available collateral lending value was approximately $2.4 billion for VRIAC and RLI. We had $1,279 million and $1,461 million in FHLB funding agreements as of December 31, 2022 and 2021, respectively, which are included in Contract owner account balances on the Consolidated Balance Sheets. As of December 31, 2022 and 2021, we had assets with a market value of approximately $1,791 million and $1,881 million, respectively, which collateralized the FHLB funding agreements. Borrowings from Subsidiaries We maintain revolving reciprocal loan agreements with a number of our life and non-life insurance subsidiaries that are used to fund short-term cash requirements that arise in the ordinary course of business. Under these agreements, either party may borrow up to the maximum allowable under the agreement for a term not more than 270 days. For life insurance subsidiaries, the amounts that either party may borrow under the agreement vary and are between 2% and 5% of the insurance subsidiary's statutory net admitted assets (excluding separate accounts) as of the previous year end depending on the state of domicile. As of December 31, 2022, the aggregate amount that may be borrowed or lent under agreements with life insurance subsidiaries was $1.3 billion. For non-life insurance subsidiaries, the maximum allowable under the agreement is based on the assets of the subsidiaries and their particular cash requirements. As of December 31, 2022, Voya Financial, Inc. had $195 million in outstanding borrowings from subsidiaries and had loaned $89 million to its subsidiaries. Collateral - Derivative Contracts See the Derivatives Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for information on collateral for derivatives. Ratings Our access to funding and our related cost of borrowing, collateral requirements for derivative instruments and the attractiveness of certain of our products to customers are affected by our credit ratings and insurance financial strength ratings, which are periodically reviewed by the rating agencies. Financial strength ratings and credit ratings are important factors affecting public confidence in an insurer and its competitive position in marketing products. Credit ratings are also important to our ability to raise capital through the issuance of debt and for the cost of such financing. A downgrade in our credit ratings or the credit or financial strength ratings of our rated subsidiaries could have a material adverse effect on our results of operations and financial condition. See A downgrade or a potential downgrade in our financial strength or credit ratings could result in a loss of business and adversely affect our results of operations and financial condition in Risk Factors in Part I, Item 1A. of this Annual Report on Form 10-K. Financial strength ratings represent the opinions of rating agencies regarding the financial ability of an insurance company to meet its obligations under an insurance policy. Credit ratings represent the opinions of rating agencies regarding an entity's ability to repay its indebtedness. These ratings are not a recommendation to buy or hold any of our securities and they may be revised or revoked at any time at the sole discretion of the rating organization. [[GREPCENT_TABLE]] [["","72"]] [[/GREPCENT_TABLE]] Table of Contents The financial strength and credit ratings of Voya Financial, Inc. and its principal subsidiaries as of the date of this Annual Report on Form 10-K are summarized in the following table. [[GREPCENT_TABLE]] [["","","Rating Agency"],["","","A.M. Best","","Fitch, Inc.","","Moody's Investors Service, Inc.","","Standard & Poor's"],["","","(\"A.M. Best\") (1)","","(\"Fitch\") (2)","","(\"Moody's\") (3)","","(\"S&P\") (4)"],["Long-term Issuer Credit Rating/Outlook:"],["Voya Financial, Inc.","","(5)","","BBB+/stable","","Baa2/stable","","BBB+/stable"],["Financial Strength Rating/Outlook:"],["Voya Retirement Insurance and Annuity Company","","(5)","","A/stable","","A2/stable","","A+/stable"],["ReliaStar Life Insurance Company","","A/stable","","A/stable","","A2/stable","","A+/stable"],["ReliaStar Life Insurance Company of New York","","A/stable","","A/stable","","A2/stable","","A+/stable"]] [[/GREPCENT_TABLE]] (1) A.M. Best's financial strength ratings for insurance companies range from "A++ (superior)" to "s (suspended)." Long-term credit ratings range from "aaa (exceptional)" to "s (suspended)." (2) Fitch's financial strength ratings for insurance companies range from "AAA (exceptionally strong)" to "C (distressed)." Long-term credit ratings range from "AAA (highest credit quality)," which denotes exceptionally strong capacity for timely payment of financial commitments, to "D (default)." (3) Moody’s financial strength ratings for insurance companies range from "Aaa (exceptional)" to "C (lowest)." Numeric modifiers are used to refer to the ranking within the group with 1 being the highest and 3 being the lowest. These modifiers are used to indicate relative strength within a category. Long-term credit ratings range from "Aaa (highest)" to "C (default)." (4) S&P's financial strength ratings for insurance companies range from "AAA (extremely strong)" to "D (default)." Long-term credit ratings range from "AAA (extremely strong)" to "D (default)." (5) Effective April 11, 2019, A.M. Best withdrew, at the Company’s request, its financial strength ratings with respect to Voya Financial, Inc. and Voya Retirement Insurance and Annuity Company. Rating agencies use an "outlook" statement for both industry sectors and individual companies. For an industry sector, a stable outlook generally implies that over the next 12 to 18 months the rating agency expects ratings to remain unchanged among companies in the sector. For a particular company, an outlook generally indicates a medium- or long-term trend in credit fundamentals, which if continued, may lead to a rating change. In December of 2022, Moody’s confirmed its outlook for the U.S. life insurance sector as stable. Also, in December of 2022, A.M. Best maintained a stable outlook on the U.S. life insurance sector. Additionally, Fitch continues to have a neutral outlook for the North American life insurance sector. Reinsurance We reinsure our business through a diversified group of well capitalized, highly rated reinsurers. However, we remain liable to the extent our reinsurers do not meet their obligations under the reinsurance agreements. We monitor trends in arbitration and any litigation outcomes with our reinsurers. Collectability of reinsurance balances are evaluated by monitoring ratings and evaluating the financial strength of our reinsurers. Large reinsurance recoverable balances with offshore or other non-accredited reinsurers are secured through various forms of collateral, including secured trusts, funds withheld accounts and irrevocable LOCs. The S&P financial strength rating of our reinsurers with our largest reinsurance recoverable balances are AA- rated or better. These reinsurers are (i) Security Life of Denver Insurance Company, a subsidiary of Resolution Life Group Holdings LP, (ii) Lincoln Life & Annuity Company of New York, a subsidiary of Lincoln National Corporation ("Lincoln"), and (iii) RGA Reinsurance Company, a subsidiary of Reinsurance Group of America Inc. Only those reinsurance recoverable balances where recovery is deemed probable are recognized as assets on our Consolidated Balance Sheets. In connection with the Individual Life Transaction on January 4, 2021, RLI, RLNY, and VRIAC entered into reinsurance agreements with SLD. Pursuant to these agreements, RLI and VRIAC reinsured to SLD a 100% quota share, and RLNY reinsured to SLD a 75% quota share, of their respective individual life insurance and annuities businesses. RLI, RLNY, and VRIAC remain subsidiaries of our Company. For additional information regarding our reinsurance recoverable balances, see Quantitative and Qualitative Disclosures About Market Risk in Part II, Item 7A. and the Reinsurance Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. [[GREPCENT_TABLE]] [["","73"]] [[/GREPCENT_TABLE]] Table of Contents Pension and Postretirement Plans When contributing to our qualified retirement plans we will take into consideration the minimum and maximum amounts required by ERISA, the attained funding target percentage of the plan, the variable-rate premiums that may be required by the Pension Benefit Guaranty Corporation ("PBGC") and any funding relief that might be enacted by Congress. Contributions to our non-qualified plans and other postretirement and post-employment plans are funded from general assets of the respective sponsoring subsidiary company as benefits are paid. For additional information on our pension and postretirement plan arrangements, see the Employee Benefit Arrangements Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. Restrictions on Dividends and Returns of Capital from Subsidiaries We depend on dividends and other distributions from our subsidiaries as the principal source of cash to meet our obligations. These subsidiaries include our principal subsidiaries listed in Our Organizational Structure in Part I, Item 1. of this Annual Report on Form 10-K as well as other direct and indirect subsidiaries. Our insurance companies are subject to limitations on the payment of dividends and other transfers of funds to Voya Financial and other affiliates under applicable insurance laws and regulations. These restrictions are based in part on the prior year’s statutory income and surplus. Generally, dividends up to specified levels are considered ordinary and may be paid without prior regulatory approval. Otherwise, dividends are considered extraordinary, and are subject to approval by the insurance department of the respective state of domicile of the insurance subsidiary requesting the dividend. For a summary of dividends permitted without approval, dividends paid, and extraordinary distributions paid and applicable laws and regulations governing dividends, see the Insurance Subsidiaries Dividend Restrictions section of the Insurance Subsidiaries Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. Other Subsidiaries - Dividends, Returns of Capital, and Capital Contributions We may receive dividends from or contribute capital to our wholly owned non-life insurance subsidiaries such as broker-dealers, investment management entities and intermediate holding companies. For the year ended December 31, 2022, dividends, net of capital contributions, received by Voya Financial, Inc. and Voya Holdings from non-life subsidiaries was $75 million. For the year ended December 31, 2021, dividends net of capital contributions received by Voya Financial, Inc. and Voya Holdings from non-life subsidiaries was $606 million, of which $112 million was a net non-cash contribution to the non-life subsidiaries. Statutory Capital and Risk-Based Capital of Principal Insurance Subsidiaries Each of our Principal Insurance subsidiaries is subject to minimum risk-based capital (“RBC”) requirements based upon the laws of its state of domicile. The RBC formula for life insurance companies establishes capital requirements relating to asset, insurance, interest rate and business risks. RBC ratios, expressed as Total Adjusted Capital (“TAC”) to Company Action Level (“CAL”), may increase or decrease depending on a variety of factors including income or losses generated by the insurance subsidiary, additional capital held to support business objectives, market conditions, as well as changes to the NAIC RBC framework. State insurance regulators use the RBC requirements to identify inadequately capitalized insurers. Not meeting the minimum amount of capital based upon RBC requirements may subject the insurer to varying levels of regulatory oversight. As of December 31, 2022, the Total Adjusted Capital of each of our insurance subsidiaries exceeded statutory minimum RBC levels. The following table summarizes the estimated ratio of TAC to CAL on a combined basis primarily for our Principal Insurance Subsidiaries adjusted for an intercompany loan of $121 million as of December 31, 2022, and adjusted for an intercompany loan of $130 million as of December 31, 2021. [[GREPCENT_TABLE]] [["","($ in millions)","","","","($ in millions)"],["","As of December 31, 2022","","As of December 31, 2021"],["","CAL","","TAC","","Ratio","","CAL","","TAC","","Ratio"],["","$","817","","","$","4,002","","","490","%","","$","834","","","$","4,584","","","550","%"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","74"]] [[/GREPCENT_TABLE]] Table of Contents For additional information regarding RBC, see Business-Regulation-Financial Regulation in Part I, Item 1. of this Annual Report on Form 10-K. For a summary of statutory capital and surplus of our Principal Insurance Subsidiaries, see the Insurance Subsidiaries Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. Financial Leverage Ratio The Financial Leverage Ratio is a measure that we use to monitor the level of our debt relative to our total capitalization. It is influenced by changes in the amount of our Financial obligations (numerator) and changes in our Adjusted capitalization excluding AOCI (denominator) which includes Total shareholders’ equity excluding AOCI. The following table presents the financial leverage ratio excluding AOCI for the periods indicated: [[GREPCENT_TABLE]] [["","As of December 31,"],["($ in millions)","2022","","2021"],["Financial Debt"],["Total financial debt","$","2,235","","","$","2,596"],["Other financial obligations(1)","265","","","300"],["Total financial obligations","2,500","","","2,896"],["Mezzanine equity"],["Allianz noncontrolling interest","166","","","\u2014"],["Equity"],["Preferred equity(2)","612","","","612"],["Common equity, excluding AOCI","5,651","","","5,541"],["Total equity, excluding AOCI","6,263","","","6,153"],["AOCI","(1,794)","","","2,100"],["Total Voya Financial, Inc. shareholders' equity","4,469","","","8,253"],["Noncontrolling interest","1,482","","","1,568"],["Total shareholders' equity","$","5,951","","","$","9,821"],["Capital"],["Capitalization(3)","$","6,704","","","$","10,849"],["Adjusted capitalization(4)","$","8,617","","","$","12,717"],["Adjusted capitalization excluding AOCI(5)","$","10,411","","","$","10,617"],["Leverage Ratios"],["Debt-to-Capital(6)","33.3","%","","23.9","%"],["Financial Leverage(7)","36.1","%","","27.6","%"],["Financial Leverage excluding AOCI(8)","29.9","%","","33.0","%"]] [[/GREPCENT_TABLE]] (1) Includes operating leases, capital leases, and unfunded pension plan after-tax. (2) Includes preferred stock par value and additional paid-in-capital. (3) Includes Total financial debt and Total Voya Financial, Inc. shareholders' equity. (4) This measure is a Non-GAAP financial measure. Includes Total financial obligations, Mezzanine Equity, and Total shareholders' equity. (5) This measure is a Non-GAAP financial measure. Includes Total financial obligations, Mezzanine equity, and Total shareholders' equity excluding AOCI. (6) Total financial debt divided by Capitalization. (7) This measure is a Non-GAAP financial measure. Total financial obligations and Preferred equity divided by Adjusted capitalization. (8) This measure is a Non-GAAP financial measure. Total financial obligations and Preferred equity divided by Adjusted capitalization excluding AOCI. Our Financial Leverage Ratio excluding AOCI decreased 310 basis points from 33.0% at December 31, 2021 to 29.9% at December 31, 2022. This decrease was primarily driven by debt extinguishment, partially offset by a decrease in Adjusted capitalization excluding AOCI. The decrease in Adjusted capitalization excluding AOCI was primarily due to repurchases of common stock, debt extinguishment and a decrease in Noncontrolling interest, partially offset by Net income available to common shareholders, the interest in VIM Holdings LLC, and Mezzanine equity. For further details about the change in [[GREPCENT_TABLE]] [["","75"]] [[/GREPCENT_TABLE]] Table of Contents Noncontrolling interest, refer to the Consolidated and Nonconsolidated Investment Entities Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. Off-Balance Sheet Arrangements and Aggregate Contractual Obligations The following table presents our on- and off- balance sheet contractual obligations due in various periods as of December 31, 2022. The payments reflected in this table are based on our estimates and assumptions about these obligations and consequently the actual cash outflows in future periods will vary, possibly materially, from those presented in the table. [[GREPCENT_TABLE]] [["($ in millions)","Total","","Less than 1 Year","","1-3 Years","","3-5 Years","","More than 5 Years"],["Contractual Obligations:"],["Purchase obligations(1)","$","1,006","","","$","984","","","$","22","","","$","\u2014","","","$","\u2014"],["Reserves for insurance obligations(2)(3)","58,509","","","4,414","","","7,275","","","7,220","","","39,600"],["Retirement and other plans(4)","1,754","","","157","","","325","","","340","","","932"],["Short-term and long-term debt obligations(5)","5,337","","","292","","","304","","","867","","","3,874"],["Operating leases(6)","121","","","30","","","47","","","24","","","20"],["Finance leases(7)","19","","","19","","","\u2014","","","\u2014","","","\u2014"],["Securities lending, repurchase agreements and collateral held(8)","1,437","","","1,309","","","\u2014","","","\u2014","","","128"],["Total(9)","$","68,183","","","$","7,205","","","$","7,973","","","$","8,451","","","$","44,554"]] [[/GREPCENT_TABLE]] (1) Purchase obligations consist primarily of outstanding commitments under alternative investments that may occur any time within the terms of the partnership and private loans. The exact timing, however, of funding these commitments related to partnerships and private loans cannot be estimated. Therefore, the amount of the commitments related to partnerships and private loans is included in the category "Less than 1 Year." (2) Reserves for insurance obligations consist of amounts required to meet our future obligations for future policy benefits and contract owner account balances. Amounts presented in the table represent estimated cash payments under such contracts, including significant assumptions related to the receipt of future premiums, mortality, morbidity, lapse, renewal, retirement, disability and annuitization comparable with actual experience. These assumptions also include market growth and interest crediting consistent with assumptions used in amortizing DAC. Estimated cash payments are undiscounted for the time value of money. Accordingly, the sum of cash flows presented of $58.5 billion significantly exceeds the sum of Future policy benefits and Contract owner account balances of $52.6 billion recorded on our Consolidated Balance Sheets as of December 31, 2022. Estimated cash payments are also presented gross of reinsurance. Due to the significance of the assumptions used, the amounts presented could materially differ from actual results. (3) Contractual obligations related to certain closed blocks that were divested through reinsurance to third parties with reserves in the amount of $1.2 billion, have been excluded from the table. Although we are not relieved of legal liability to the contract holder for these closed blocks, third-party collateral of $1.3 billion has been provided for the payment of the related insurance obligations. The sufficiency of collateral held for any individual block may vary. (4) Includes estimated benefit payments under our qualified and non-qualified pension plans, estimated benefit payments under our other postretirement benefit plans, and estimated payments of deferred compensation based on participant elections and an average retirement age. (5) The estimated payments due by period for long-term debt reflects the contractual maturities of principal, as well as estimated future interest payments. The payment of principal and estimated future interest for short-term debt are reflected in estimated payments due in less than one year. See the Financing Agreements Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for additional information concerning the short-term and long-term debt obligations. (6) Operating leases consist primarily of outstanding commitments for office space, equipment and automobiles. (7) Finance lease obligation is associated with a service contract. (8) Securities loan, repurchase agreements, and collateral held represent the liability to return collateral received from counterparties under securities lending agreements, OTC derivative and cleared derivative contracts as well as the obligations related to borrowings under repurchase agreements. Securities lending agreements include provisions which permit us to call back securities with minimal notice and accordingly, the payable is classified as having a term of less than 1 year. Additionally, Securities lending agreements and collateral held include off-balance sheet non-cash collateral of $135 million and $117 million, respectively. (9) Unrecognized tax benefits are excluded from the table due to immateriality. In addition, in 2015 we entered into a put option agreement with a Delaware trust that gives Voya Financial, Inc. the right, at any time over a 10-year period, to issue up to $500 million of senior notes to the trust in return for principal and interest strips of U.S. Treasury securities that are held by the trust. See the Financing Agreements and Income Taxes Notes to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form10-K for more information on this agreement. Critical Accounting Judgments and Estimates General The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Critical estimates and assumptions are evaluated on an on-going basis based on historical developments, market conditions, industry trends and other information that is reasonable under the circumstances. There can be no assurance that actual results will conform to estimates and assumptions and that reported results of operations [[GREPCENT_TABLE]] [["","76"]] [[/GREPCENT_TABLE]] Table of Contents will not be materially affected by the need to make future accounting adjustments to reflect changes in these estimates and assumptions from time to time. The inputs into our estimates and assumptions consider the economic implications of COVID-19 on our critical and significant accounting estimates. Those estimates are inherently subject to change and actual results could differ from those estimates, and the differences may be material to the accompanying Consolidated Financial Statements. We have identified the following accounting judgments and estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability: •Reserves for future policy benefits; •Deferred policy acquisition costs ("DAC") and value of business acquired ("VOBA"); •Valuation of investments and derivatives; •Investment impairments; •Goodwill and other intangible assets; •Income taxes; •Contingencies; and •Employee benefit plans. In developing these accounting estimates, we make subjective and complex judgments that are inherently uncertain and subject to material changes as facts and circumstances develop. Although variability is inherent in these estimates, we believe the amounts provided are appropriate based on the facts available upon preparation of the Consolidated Financial Statements. The above critical accounting estimates are described in the Business, Basis of Presentation and Significant Accounting Policies Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. Reserves for Future Policy Benefits The determination of future policy benefit reserves is dependent on actuarial assumptions. The principal assumptions used to establish liabilities for future policy benefits are based on our experience and periodically reviewed against industry standards. These assumptions include mortality, morbidity, policy lapse, contract renewal, payment of subsequent premiums or deposits by the contract owner, retirement, investment returns, inflation, benefit utilization and expenses. The assumptions used require considerable judgments. Changes in, or deviations from, the assumptions used can significantly affect our reserve levels and related results of operations. •Mortality is the incidence of death among policyholders triggering the payment of underlying insurance coverage by the insurer. In addition, mortality also refers to the ceasing of payments on life-contingent annuities due to the death of the annuitant. We utilize a combination of actual and industry experience when setting our mortality assumptions. •A lapse rate is the percentage of in-force policies surrendered by the policyholder or canceled by us due to non-payment of premiums. See the Reserves for Future Policy Benefits and Contract Owner Account Balances Note and the Guaranteed Benefit Features Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for further information on our reserves for future policy benefits, contract owner account balances and product guarantees. Insurance and Other Reserves Reserves for traditional life insurance contracts (term insurance, participating and non-participating whole life insurance and traditional group life insurance) and accident and health insurance represent the present value of future benefits to be paid to or on behalf of contract owners and related expenses, less the present value of future net premiums. Assumptions, which are "locked-in" at inception of the contracts, include interest rates, mortality, expenses and persistency and are based on our estimates of anticipated experience at the period the policy is sold or acquired, including a provision for adverse deviation. Interest rates used to calculate the present value of these reserves ranged from 1.0% to 7.7%. Due to the locked-in assumptions, sensitivity associated with these contracts do not result in significant impacts to our results of operations. Reserves for payout contracts with life contingencies are equal to the present value of expected future payments. Assumptions, which are locked-in at inception of the contracts, include interest rates, mortality and expenses, and are based on our estimates of anticipated experience at the period the policy is sold or acquired, including a provision for adverse deviation. Such assumptions generally vary by annuity plan type, year of issue and policy duration. Interest rates used to calculate the present [[GREPCENT_TABLE]] [["","77"]] [[/GREPCENT_TABLE]] Table of Contents value of future benefits ranged from 2.3% to 5.5%. Due to the locked-in assumptions, sensitivity associated with these contracts do not result in significant impacts to our results of operations. Although assumptions are locked-in upon the issuance of traditional life insurance contracts, certain accident and health insurance contracts and payout contracts with life contingencies, significant changes in experience or assumptions may require us to provide for expected future losses on a product by establishing premium deficiency reserves. Premium deficiency reserves are determined based on best estimate assumptions that exist at the time the premium deficiency reserve is established and do not include a provision for adverse deviation. See Deferred Policy Acquisition Costs and Value of Business Acquired below for premium deficiency reserves established during 2022 and 2021. Product Guarantees and Index-crediting Features The assumptions used to establish the liabilities for our product guarantees require considerable judgment and are established as management's best estimate of future outcomes. We periodically review these assumptions and, if necessary, update them based on additional information that becomes available. Changes in, or deviations from, the assumptions used can significantly affect our reserve levels and related results of operations. Stabilizer and MCG: We issue stabilizer ("Stabilizer") contracts that contain embedded derivatives that are measured at estimated fair value separately from the host contracts. The managed custody guarantee product ("MCG") is a stand-alone derivative and is measured in its entirety at estimated fair value. The estimated fair value of the Stabilizer embedded derivative and MCG stand-alone derivative is determined based on the present value of projected future claims, minus the present value of future guaranteed premiums. At inception of the contract, we project a guaranteed premium to be equal to the present value of the projected future claims. The income associated with the contracts is projected using actuarial and capital market assumptions, including benefits and related contract charges, over the anticipated life of the related contracts. The cash flow estimates are projected under multiple capital market scenarios using observable risk-free rates and other best estimate assumptions. The liabilities for Stabilizer embedded derivatives and the MCG stand-alone derivative include a risk margin to capture uncertainties related to policyholder behavior assumptions. The margin represents additional compensation a market participant would require to assume these risks. The discount rate used to determine the fair value of the liabilities for our Stabilizer embedded derivatives and the MCG stand-alone derivative includes an adjustment to reflect the risk that these obligations will not be fulfilled ("nonperformance risk"). Our nonperformance risk adjustment is based on a blend of observable, similarly rated peer holding company credit spreads, adjusted to reflect the credit quality of our individual insurance subsidiary that issued the guarantee, as well as an adjustment to reflect the non-default spreads and the priority and recovery rates of policyholder claims. Universal and Variable Universal Life: We establish additional reserves on UL and variable universal life ("VUL") contracts, primarily related to secondary guarantees and paid-up guarantees, for the portion of contract assessments received in early years that will be used to compensate us for benefits provided in later years. These reserves are calculated by estimating the expected value of benefits payable and recognizing those benefits ratably over the accumulation period based on total expected assessments. Additional reserves for UL and VUL contracts are recorded in Future policy benefits on the Consolidated Balance Sheets. See Quantitative and Qualitative Disclosures About Market Risk in Part II, Item 7A. of this Annual Report on Form 10-K for additional information regarding specific hedging strategies we utilize to mitigate risk for the product guarantees, as well as sensitivities of the embedded derivative and stand-alone derivative liabilities to changes in certain capital markets assumptions. Deferred Policy Acquisition Costs and Value of Business Acquired DAC represents policy acquisition costs that have been capitalized and are subject to amortization and interest. VOBA represents the outstanding value of in-force business acquired and is subject to amortization and interest. [[GREPCENT_TABLE]] [["","78"]] [[/GREPCENT_TABLE]] Table of Contents Assumptions and Periodic Review Changes in assumptions can have a significant impact on DAC/VOBA balances, amortization rates, reserve levels, and results of operations. Assumptions are management's best estimates of future outcome. We periodically review these assumptions against actual experience and, based on additional information that becomes available, update our assumptions. Deviation of emerging experience from our assumptions could have a significant effect on our DAC/VOBA, reserves, and the related results of operations. •One significant assumption is the assumed return associated with the variable account performance. To reflect the volatility in the equity markets, this assumption involves a combination of near-term expectations and long-term assumptions regarding market performance. The overall return on the variable account is dependent on multiple factors, including the relative mix of the underlying sub-accounts among bond funds and equity funds, as well as equity sector weightings. We use a reversion to the mean approach, which assumes that the market returns over the entire mean reversion period are consistent with a long-term level of equity market appreciation. We monitor market events and only change the assumption when sustained deviations are expected. This methodology incorporates an 8% long-term equity return assumption, a 14% cap and a five-year look-forward period. •Assumptions related to interest rate spreads and credit losses also impact estimated gross profits for applicable products with credited rates. These assumptions are based on the current investment portfolio yields and credit quality, estimated future crediting rates, capital markets, and estimates of future interest rates and defaults. •Other significant assumptions include estimated policyholder behavior assumptions, such as surrender, lapse, and annuitization rates. We use a combination of actual and industry experience when setting and updating our policyholder behavior assumptions, and such assumptions require considerable judgment. Estimated gross revenues and gross profits for our variable annuity contracts are particularly sensitive to these assumptions. During the third quarter of 2022 and 2021, we conducted our annual review of assumptions, including projection model inputs and made a number of changes to our assumptions which impacted the results of our segments included in our Net income (loss). Changes in assumptions related to DAC/VOBA are reflected in Net amortization of Deferred policy acquisition costs and Value of business acquired, and the reserve impact is reflected in Policyholder benefits in the Consolidated Statements of Operations. The following are the impacts of assumption changes during 2022 and 2021. •For the third quarter of 2022, the impact of annual assumption updates on Adjusted Operating earnings before income taxes was $114 million favorable. This is comprised of favorable DAC/VOBA unlocking in our Wealth Solutions business of $48 million driven by higher interest rates and favorable reserve impact in our Health Solutions business of $66 million driven by mortality and morbidity assumption unlocking. The total favorable unlocking of $114 million is partially offset by $17 million unfavorable unlocking associated with our divested businesses and excluded from Adjusted operating earnings before income taxes. •For the third quarter of 2021, the impact of annual assumption changes on Adjusted operating earnings before income taxes was $10 million favorable DAC/VOBA unlocking associated with our continuing operations. This was fully offset by $15 million unfavorable DAC/VOBA unlocking associated with our divested businesses and excluded from Adjusted operating earnings before income taxes. The favorable DAC/VOBA unlocking in our continuing operations was primarily driven by changes in asset return assumptions. During the third quarter of 2021, and as a result of the annual review of assumptions, we recorded loss recognition of $136 million for DAC/VOBA and established premium deficiency reserves of $225 million, of which $217 million was ceded, These impacts are related to our divested businesses and excluded from Adjusted operating earnings before income taxes. Loss recognition related to DAC/VOBA and premium deficiency reserves were recorded in Net amortization of Deferred policy acquisition costs and Value of business acquired and Policyholder benefits, respectively. [[GREPCENT_TABLE]] [["","79"]] [[/GREPCENT_TABLE]] Table of Contents During the first quarter of 2021, and as a result of the close of the Individual Life transaction, we reviewed our blocks of business to determine recoverability of DAC/VOBA. This review resulted in the write down of DAC/VOBA and recording loss recognition of $302 million associated with DAC/VOBA and the establishment of premium deficiency reserves of $221 million in our divested businesses. The loss recognition and establishment of premium deficiency reserves were recorded in the Consolidated Statements of Operations and excluded from Adjusted operating earnings before income taxes. For further information, see the DAC/VOBA Unlocking section of the Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7. of this Annual Report on Form 10-K for further information. Sensitivity We perform sensitivity analyses to assess the impact that certain assumptions have on DAC/VOBA and certain reserves. The following table presents the estimated instantaneous net impact to income (loss) from continuing operations before income taxes of various assumption changes on our DAC/VOBA balances and the impact on related reserves for future policy benefits and reinsurance. The effects are not representative of the aggregate impacts that could result if a combination of such changes to equity markets, interest rates and other assumptions occurred. [[GREPCENT_TABLE]] [["($ in millions)","As of December 31, 2022"],["Decrease in long-term equity rate of return assumption by 100 basis points","$","(39)"],["A change to the long-term interest rate assumption of -50 basis points","(19)"],["A change to the long-term interest rate assumption of +50 basis points","16"]] [[/GREPCENT_TABLE]] Lower assumed equity rates of return and lower assumed interest rates, generally decrease DAC/VOBA and increase future policy benefits, thus decreasing income before income taxes. Higher assumed interest rates generally increase DAC/VOBA and decrease future policy benefits, thus increasing income before income taxes. Valuation of Investments and Derivatives Our investment portfolio includes certain investments recorded at fair value and consists of public and private fixed maturity securities, commercial mortgage and other loans, equity securities, short-term investments, other invested assets and derivative financial instruments. We enter into interest rate, equity market, credit default and currency contracts, including swaps, futures, forwards, caps, floors and options, to reduce and manage various risks associated with changes in value, yield, price, cash flow or exchange rates of assets or liabilities held or intended to be held, or to assume or reduce credit exposure associated with a referenced asset, index or pool. We also utilize options and futures on equity indices to reduce and manage risks associated with our universal-life type and annuity products. See the Investments (excluding Consolidated Investment Entities) Note and the Derivative Financial Instruments Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for further information. Investments We measure the fair value of our financial assets and liabilities based on assumptions used by market participants in pricing the asset or liability, which may include inherent risk, restrictions on the sale or use of an asset, or nonperformance risk, including our own credit risk. The estimate of fair value is the price that would be received to sell an asset or paid to transfer a liability ("exit price") in an orderly transaction between market participants in the principal market, or the most advantageous market in the absence of a principal market, for that asset or liability. We use a number of valuation sources to determine the fair values of our financial assets and liabilities, including quoted market prices, third-party commercial pricing services, third-party brokers, industry-standard, vendor-provided software that models the value based on market observable inputs, and other internal modeling techniques based on projected cash flows. We categorize our financial instruments into a three-level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. [[GREPCENT_TABLE]] [["","80"]] [[/GREPCENT_TABLE]] Table of Contents When available, the estimated fair value of securities is based on quoted prices in active markets that are readily and regularly obtainable. When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies, including discounted cash flows, matrix pricing or other similar techniques. Inputs to these methodologies include, but are not limited to, market observable inputs such as benchmark yields, credit quality, issuer spreads, bids, offers and cash flow characteristics of the security. For privately placed bonds, we also consider such factors as the net worth of the borrower, value of the collateral, the capital structure of the borrower, the presence of guarantees, and the borrower's ability to compete in its relevant market. Valuations are reviewed and validated monthly by an internal valuation committee using price variance reports, comparisons to internal pricing models, back testing of recent trades, and monitoring of trading volumes, as appropriate. The valuation of financial assets and liabilities involves considerable judgment, is subject to considerable variability, is established using management's best estimate, and is revised as additional information becomes available. As such, changes in, or deviations from, the assumptions used in such valuations can significantly affect our results of operations. Financial markets are subject to significant movements in valuation and liquidity, which can impact our ability to liquidate and the selling price that can be realized for our securities. Derivatives Derivatives are carried at fair value, which is determined by using observable key financial data, such as yield curves, exchange rates, S&P 500 prices, London Interbank Offered Rates ("LIBOR"), Overnight Index Swap Rates ("OIS") and Secured Overnight Financing Rates ("SOFR"), or through values established by third-party sources, such as brokers. Valuations for our futures contracts are based on unadjusted quoted prices from an active exchange. Counterparty credit risk is considered and incorporated in our valuation process through counterparty credit rating requirements and monitoring of overall exposure. Our own credit risk is also considered and incorporated in our valuation process. We have certain CDS and options that are priced by third party vendors or by using models that primarily use market observable inputs, but contain inputs that are not observable to market participants. We also have investments in certain fixed maturities and have issued certain universal life-type and annuity products that contain embedded derivatives for which fair value is at least partially determined by levels of or changes in domestic and/or foreign interest rates (short-term or long-term), exchange rates, prepayment rates, equity markets, or credit ratings/spreads. The fair values of these embedded derivatives are determined using prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. For additional information regarding the valuation of and significant assumptions associated with embedded derivatives and stand-alone derivatives associated with certain universal life-type and annuity contracts, see "Reserves for Future Policy Benefits" above. In addition, we have entered into coinsurance with funds withheld and modified coinsurance reinsurance arrangements that contain embedded derivatives. The fair value of the embedded derivatives is based on the change in the fair value of the underlying assets held in the trust using the valuation methods and assumptions described for our investments held. The valuation of derivatives involves considerable judgment, is subject to considerable variability, is established using management's best estimate and is revised as additional information becomes available. As such, changes in, or deviations from, these assumptions used in such valuations can have a significant effect on the results of operations. For additional information regarding the fair value of our investments and derivatives, see the Fair Value Measurements (excluding Consolidated Investment Entities) Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. For additional information regarding the sensitivities of interest rate risk and equity market price risk and impact on investments and derivatives, see Quantitative and Qualitative Disclosures About Market Risk in Part II, Item 7A. of this Annual Report on Form 10-K. Investment Impairments Fixed maturities, available-for-sale, and mortgage loans on real estate can be subject to credit impairment, which can have a significant effect on the results of operations. Refer to the Business, Basis of Presentation and Significant Accounting Policies Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for an understanding of our methodology and significant inputs considered within the allowance for credit losses and impairments. For additional information regarding the evaluation process for credit impairments, refer to the Investments (excluding Consolidated Investment Entities) Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. [[GREPCENT_TABLE]] [["","81"]] [[/GREPCENT_TABLE]] Table of Contents Goodwill and Other Intangible Assets Goodwill and other intangible assets are established based on estimates of fair value as of the date of acquisition in a business combination. Goodwill and other intangible assets with indefinite lives are not amortized. Intangibles with finite lives are amortized over their estimated useful lives. We assess goodwill and other intangible assets for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill Goodwill testing is performed at the reporting unit level and consists of qualitative or quantitative assessments. In the qualitative assessment, we consider relevant events and circumstances that could affect the significant inputs used to determine the fair value of the reporting unit. If, when reviewing the qualitative factors, it is determined it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, a quantitative impairment test is performed. The determination of fair value for our reporting units is primarily based on an income approach whereby we use discounted cash flows for each reporting unit. We apply significant judgment to our discounted cash flow models when determining the estimated fair value of our reporting units. The key inputs, judgments and assumptions necessary in determining estimated fair value of the reporting units include projected adjusted earnings, current book value, the level of economic capital required to support the mix of business, long-term growth rates, comparative market multiples, projections of new and renewed business, as well as margins on such business, interest rate levels, credit spreads, equity market levels, and the discount rate that we believe is appropriate for the respective reporting unit. As a result of goodwill testing, the Company concluded there was no requirement for goodwill impairment for the years ended December 31, 2022, 2021, and 2020. Other Intangible Assets The Company’s indefinite-lived intangible assets primarily relate to the right to manage client assets acquired in connection with the AllianzGI Transaction during 2022. The right to manage client assets intangible was not tested for impairment during 2022 due to the recent nature of the transaction and the lack of any significant identified impairment event since transaction closing. The approach to testing this and other indefinite-lived intangibles is similar to the impairment testing approach applied to goodwill, except that the testing is performed with reference to the carrying amount and fair value of the intangible asset. Finite-lived intangible assets include primarily management contract rights and customer relationship lists and are reviewed periodically for indicators of change in useful lives or impairment. If facts and circumstances suggest possible impairment, the sum of the estimated undiscounted future cash flows expected to result from the use of the asset is compared to the carrying value of the asset. If the carrying value of the asset exceeds the undiscounted cash flows, the asset is written down to its fair value determined using discounted cash flows. Significant estimates in the determination of fair value for this purpose include the projected net cash flow attributable to the intangible asset and the rate at which future net cash flows are discounted for purposes of estimating fair value, as applicable. The Company did not record any impairments of other intangible assets for the years ended December 31, 2022, 2021, and 2020. The fair valuation methodologies utilized in connection with testing goodwill and other intangible assets for impairment are subject to key judgments and assumptions that are sensitive to change. For further information about the Company’s goodwill and other intangible assets, see the Goodwill and Other Intangible Assets Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. Income Taxes Valuation Allowances We use certain assumptions and estimates in determining the income taxes payable or refundable for the current year, the deferred tax liabilities and assets for items recognized differently in our Consolidated Financial Statements from amounts shown on our income tax returns and the federal income tax expense. Determining these amounts requires analysis and interpretation of current tax laws and regulations, including the loss limitation rules associated with change in control. We exercise considerable judgment in evaluating the amount and timing of recognition of the resulting income tax liabilities and assets. These judgments are reevaluated on a periodic basis and as regulatory and business factors change. [[GREPCENT_TABLE]] [["","82"]] [[/GREPCENT_TABLE]] Table of Contents During the year, we had losses in Other comprehensive income of $4.9 billion, resulting in unrealized capital losses of $2.4 billion in Accumulated other comprehensive income as of December 31, 2022, which generated a deferred tax asset ("DTA"). This DTA was driven primarily by the impact of increasing interest rates on our available-for-sale portfolio. We expect this DTA to be utilized by our capital loss carryback capacity and hold to maturity tax planning strategy. Significant future increases to interest rates and/or the occurrence of other unexpected circumstances, such as changes in the economic environment, liquidity and investment strategy, could result in recording a related valuation allowance on our deferred tax assets in a future period. For additional understanding over the Company's valuation allowance, refer to the Business, Basis of Presentation and Significant Accounting Policies Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. In December 2014, we entered into an Issue Resolution Agreement ("IA") with the IRS relating to the Internal Revenue Code Section 382 calculation of the annual limitation on the use of certain of the Company’s federal tax attributes that will apply as a consequence of the Section 382 event experienced by the Company in March 2014. We do not expect the annual limitation to impact our ability to utilize the losses or credits. For further information on our income taxes, including information on the valuation allowance, see the Income Taxes Note to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Tax Contingencies We recognize the tax benefit from an uncertain tax position only if it is more likely than not to be sustained under examination by the applicable taxing authority. We also consider positions that have been reviewed and agreed to as part of an examination by the applicable taxing authority. For items that meet the more-likely-than-not recognition threshold, we measure the tax position as the largest amount of benefit that is more than 50% likely to be realized upon ultimate resolution with the applicable tax authority that has full knowledge of all relevant information. Tax positions that do not meet the more-likely-than-not standard are not recognized. Changes in Law Certain changes or future events, such as changes in tax legislation, geographic mix of earnings, completion of tax audits, planning opportunities and expectations about future outcomes could have an impact on our estimates of deferred taxes, valuation allowances, tax provisions and effective tax rates. In August 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA of 2022”), which includes a 15% book income alternative minimum tax (“CAMT”) on corporations and a 1% excise tax on the fair market value of stock that is repurchased by publicly traded U.S. corporations or their specified affiliates. The CAMT and the excise tax are effective in taxable years beginning after December 31, 2022. The Internal Revenue Service has only issued limited guidance on the CAMT, and uncertainty remains regarding the application of and potential adjustments to the CAMT. If the CAMT applies, we will be required to pay tax at the 15% CAMT rate despite our U.S. Federal net operating loss carryforwards. We do expect to be subject to the 1% excise tax but do not expect that it will have a material impact to our financial statements. Contingencies For information regarding our contingencies, see the Commitments and Contingencies Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. Employee Benefits Plans We sponsor both qualified and non-qualified defined benefit pension plans (the "Plans") and other postretirement benefit plans covering eligible employees, sales representatives and other individuals. For accounting policies and more information related to our employee benefit plans, see the Employee Benefit Arrangements Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. [[GREPCENT_TABLE]] [["","83"]] [[/GREPCENT_TABLE]] Table of Contents The Voya Retirement Plan (the "Retirement Plan") is a tax qualified defined benefit plan, the benefits of which are guaranteed (within certain specified legal limits) by the Pension Benefit Guaranty Corporation ("PBGC"). Beginning January 1, 2012, the Retirement Plan adopted a cash balance pension formula instead of a final average pay ("FAP") formula, allowing all eligible employees to participate in the Retirement Plan. Participants earn an annual credit equal to 4% of eligible compensation. Interest is credited monthly based on a 30-year U.S. Treasury securities bond rate published by the IRS in the preceding August of each year. The accrued vested cash pension balance benefit is portable; participants can take it if they leave us. The table below summarizes the components of the net actuarial (gains) losses related to the Plans' pension obligations recognized within Operating expenses in our Consolidated Statements of Operations for the periods indicated: [[GREPCENT_TABLE]] [["(Gain)/Loss Recognized ($ in millions)","2022","","2021"],["Discount Rate","$","(571)","","","$","(102)"],["Asset Returns","534","","","48"],["Mortality Table Assumptions","\u2014","","","7"],["Demographic Data and other","31","","","15"],["Total Net Actuarial (Gain)/Loss Recognized","$","(6)","","","$","(32)"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2022, we increased our Plans' discount rate by 2.47% resulting in a decrease in our benefit obligations and a corresponding actuarial gain of $571 million. This increase in the discount rate was driven by increase in the 30-year Treasury and corporate AA yields. For the year ended December 31, 2021, we increased our Plans' discount rate by 0.33% resulting in an decrease in our benefit obligations and a corresponding actuarial gain of $102 million. This increase in the discount rate was driven by increase in the 30-year Treasury and corporate AA yields. The asset returns are only applicable to the Retirement Plan as assets are not held by any of the other pension and other postretirement plans. Our expected long-term rate of return on our Retirement Plan assets was 4.85% and 5.60% for 2022 and 2021, respectively. Our expected return on Retirement Plan assets is calculated using 30-year forward looking assumptions based on the long-term target asset allocation. In 2022, the actual return on our Retirement Plan assets was approximately -19.1%, resulting in an actuarial loss of $534 million. In 2021, the actual return on our Retirement Plan assets was approximately 4.14%, resulting in an actuarial loss of $48 million. In October 2021, the Society of Actuaries ("SOA") released and we adopted new mortality improvement projection scales (MP-2021) that projected a higher rate of mortality improvement than what was issued in 2020. These mortality assumption changes increased our total benefit liability by less than 1% in 2021 and contributed $7 million to the net actuarial gain for the year ended December 31, 2021. Sensitivity The discount rate and expected rate of return assumptions relating to our defined benefit pension plans have historically had the most significant effect on our net periodic benefit costs and the projected and accumulated projected benefit obligations associated with these plans. The discount rate is based on current market information provided by plan actuaries. The discount rate modeling process involves selecting a portfolio of high quality, non-callable bonds that will match the cash flows of the defined benefit pension plans. The weighted average discount rate in 2022 for the net periodic benefit cost was 3.00% for the Plans. The discount rate as of December 31, 2022 for the benefit obligation of the Plans was 5.47%. [[GREPCENT_TABLE]] [["","84"]] [[/GREPCENT_TABLE]] Table of Contents As of December 31, 2022, the sensitivities of the effect of a change in the discount rate are as presented below. This represents the estimate of actuarial gains (losses) that would be recognized immediately through Operating expenses in our Consolidated Statements of Operations: [[GREPCENT_TABLE]] [["($ in millions)","Increase (Decrease) in Net Periodic Benefit Cost-Pension Plans"],["Increase in discount rate by 100 basis points","$","(167)"],["Decrease in discount rate by 100 basis points","200"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["($ in millions)","Increase (Decrease) in Pension Benefit Obligation"],["Increase in discount rate by 100 basis points","$","(167)"],["Decrease in discount rate by 100 basis points","200"]] [[/GREPCENT_TABLE]] The discount rate to be used to determine interest cost for 2023 is 5.47%. The estimated impact of this change as well as actuarial gain on discount rate experienced during 2022 is expected to increase our net periodic pension cost by approximately $30 million. The expected rate of return considers the asset allocation, historical returns on the types of assets held and current economic environment. Based on these factors, we expect that the assets will earn an average percentage per year over the long term. This estimation is based on an active return on a compound basis, with a reduction for administrative expenses and manager fees paid to non-affiliated companies from the assets. For estimation purposes, we assume the long-term asset mix will be consistent with the current mix. Changes in the asset mix could impact the amount of recorded pension income or expense, the funded status of the Retirement Plan and the need for future cash contributions. The expected rate of return for 2022 was 4.85%, net of expenses, for the Retirement Plan. As of December 31, 2022, the effect of a change in the actual rate of return on the net periodic benefit cost is presented in the table below. This represents the estimate of actuarial gains (losses) that would be recognized immediately through Operating expenses in our Consolidated Statements of Operations: [[GREPCENT_TABLE]] [["($ in millions)","Increase (Decrease) in Net Periodic Benefit Cost-Pension Plans"],["Increase in actual rate of return by 100 basis points","$","(22)"],["Decrease in actual rate of return by 100 basis points","22"]] [[/GREPCENT_TABLE]] The expected rate of return for 2023 is 5.82%, net of expenses, for the Retirement Plan. The estimated impact of this change as well as the actuarial loss experienced on plan assets in 2022 is expected to increase our net periodic benefit cost by approximately $8 million. Impact of New Accounting Pronouncements For information regarding the impact of new accounting pronouncements, see the Business, Basis of Presentation and Significant Accounting Policies Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. Investments (excluding Consolidated Investment Entities) Investments for our general account are managed by our wholly owned asset manager, Voya Investment Management LLC, pursuant to investment advisory agreements with affiliates. In addition, our internal treasury group manages our holding company liquidity investments, primarily money market funds. Investment Strategy Our investment strategy seeks to achieve sustainable risk-adjusted returns by focusing on principal preservation, disciplined matching of asset characteristics with liability requirements and the diversification of risks. Investment activities are undertaken according to investment policy statements that contain internally established guidelines and risk tolerances and are required to comply with applicable laws and insurance regulations. Risk tolerances are established for credit risk, credit spread risk, market [[GREPCENT_TABLE]] [["","85"]] [[/GREPCENT_TABLE]] Table of Contents risk, liquidity risk and concentration risk across issuers, sectors and asset types that seek to mitigate the impact of cash flow variability arising from these risks. Segmented portfolios are established for groups of products with similar liability characteristics. Our investment portfolio consists largely of high quality fixed maturities and short-term investments, investments in commercial mortgage loans, alternative investments and other instruments, including a small amount of equity holdings. Fixed maturities include publicly issued corporate bonds, government bonds, privately placed notes and bonds, bonds issued by states and municipalities, ABS, traditional MBS and various CMO tranches managed in combination with financial derivatives as part of a proprietary strategy known as CMO-B. We use derivatives for hedging purposes to reduce our exposure to the cash flow variability of assets and liabilities, interest rate risk, credit risk and market risk. In addition, we use credit derivatives to replicate exposure to individual securities or pools of securities as a means of achieving credit exposure similar to bonds of the underlying issuer(s) more efficiently. See the Investments (excluding Consolidated Investment Entities) Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for more information on investments. Portfolio Composition The following table presents the investment portfolio as of the dates indicated: [[GREPCENT_TABLE]] [["","December 31, 2022","","December 31, 2021"],["($ in millions)","Carrying Value","","% of Total","","Carrying Value","","% of Total"],["Fixed maturities, available-for-sale, net of allowance","$","27,044","","","69.1","%","","$","33,699","","","73.9","%"],["Fixed maturities, at fair value option","2,151","","","5.5","%","","2,354","","","5.2","%"],["Equity securities, at fair value","336","","","0.9","%","","240","","","0.5","%"],["Short-term investments(1)","356","","","0.9","%","","97","","","0.2","%"],["Mortgage loans on real estate, net of allowance","5,427","","","13.9","%","","5,612","","","12.3","%"],["Policy loans","363","","","0.9","%","","392","","","0.9","%"],["Limited partnerships/corporations","1,781","","","4.6","%","","1,739","","","3.8","%"],["Derivatives","422","","","1.1","%","","171","","","0.4","%"],["Other investments","68","","","0.1","%","","79","","","0.2","%"],["Securities pledged","1,162","","","3.0","%","","1,198","","","2.6","%"],["Total investments","$","39,110","","","100.0","%","","$","45,581","","","100.0","%"]] [[/GREPCENT_TABLE]] (1) Short-term investments include investments with remaining maturities of one year or less, but greater than three months, at the time of purchase. [[GREPCENT_TABLE]] [["","86"]] [[/GREPCENT_TABLE]] Table of Contents Fixed Maturities The following tables present total fixed maturities, including securities pledged, by market sector, as of the dates indicated: [[GREPCENT_TABLE]] [["","December 31, 2022"],["($ in millions)","Amortized Cost","","% of Total","","Fair Value","","% of Total"],["Fixed maturities:"],["U.S. Treasuries","$","590","","","1.8","%","","$","581","","","1.9","%"],["U.S. Government agencies and authorities","58","","","0.2","%","","59","","","0.2","%"],["State, municipalities and political subdivisions","978","","","2.9","%","","845","","","2.8","%"],["U.S. corporate public securities","9,343","","","27.6","%","","8,201","","","27.0","%"],["U.S. corporate private securities","5,087","","","15.1","%","","4,692","","","15.5","%"],["Foreign corporate public securities and foreign governments(1)","3,343","","","9.9","%","","2,949","","","9.7","%"],["Foreign corporate private securities(1)","3,254","","","9.7","%","","3,034","","","10.0","%"],["Residential mortgage-backed securities","4,230","","","12.6","%","","3,977","","","13.1","%"],["Commercial mortgage-backed securities","4,466","","","13.3","%","","3,883","","","12.8","%"],["Other asset-backed securities","2,307","","","6.9","%","","2,136","","","7.0","%"],["Total fixed maturities, including securities pledged","$","33,656","","","100.0","%","","$","30,357","","","100.0","%"]] [[/GREPCENT_TABLE]] (1) Primarily U.S. dollar denominated. [[GREPCENT_TABLE]] [["","December 31, 2021"],["($ in millions)","Amortized Cost","","% of Total","","Fair Value","","% of Total"],["Fixed maturities:"],["U.S. Treasuries","$","764","","","2.2","%","","$","1,003","","","2.7","%"],["U.S. Government agencies and authorities","69","","","0.2","%","","81","","","0.2","%"],["State, municipalities and political subdivisions","1,000","","","2.9","%","","1,111","","","3.0","%"],["U.S. corporate public securities","10,402","","","30.5","%","","11,941","","","32.1","%"],["U.S. corporate private securities","4,889","","","14.3","%","","5,325","","","14.3","%"],["Foreign corporate public securities and foreign governments(1)","3,373","","","9.9","%","","3,723","","","10.0","%"],["Foreign corporate private securities(1)","3,320","","","9.7","%","","3,501","","","9.4","%"],["Residential mortgage-backed securities","4,183","","","12.3","%","","4,302","","","11.5","%"],["Commercial mortgage-backed securities","4,032","","","11.8","%","","4,183","","","11.2","%"],["Other asset-backed securities","2,069","","","6.2","%","","2,081","","","5.6","%"],["Total fixed maturities, including securities pledged","$","34,101","","","100.0","%","","$","37,251","","","100.0","%"]] [[/GREPCENT_TABLE]] (1) Primarily U.S. dollar denominated. As of December 31, 2022, the average duration of our fixed maturities portfolio, including securities pledged, is between 6.5 and 7.0 years. Fixed Maturities Credit Quality - Ratings The Securities Valuation Office ("SVO") of the NAIC evaluates the fixed maturity security investments of insurers for regulatory reporting and capital assessment purposes and assigns securities to one of six credit quality categories called "NAIC designations." An internally developed rating is used as permitted by the NAIC if no rating is available. These designations are generally similar to the credit quality designations of the NAIC acceptable rating organizations ("ARO") for marketable fixed maturity securities, called rating agency designations except for certain structured securities as described below. NAIC designations of "1," highest quality and "2," high quality, include fixed maturity securities generally considered investment grade by such rating organizations. NAIC designations 3 through 6 include fixed maturity securities generally considered below investment grade by such rating organizations. [[GREPCENT_TABLE]] [["","87"]] [[/GREPCENT_TABLE]] Table of Contents The NAIC designations for structured securities, including subprime and Alt-A RMBS, are based upon a comparison of the bond's amortized cost to the NAIC's loss expectation for each security. Securities where modeling results in no expected loss in each scenario are considered to have the highest designation of NAIC 1. A large percentage of our RMBS securities carry the NAIC 1 designation while the ARO rating indicates below investment grade. This is primarily due to the credit and intent impairments recorded by us that reduced the amortized cost on these securities to a level resulting in no expected loss in any scenario, which corresponds to the NAIC 1 designation. The methodology reduces regulatory reliance on rating agencies and allows for greater regulatory input into the assumptions used to estimate expected losses from such structured securities. In the tables below, we present the rating of structured securities based on ratings from the NAIC methodologies described above (which may not correspond to rating agency designations). NAIC designations (e.g., NAIC 1-6) are based on the NAIC methodologies. As a result of time lags between the funding of investments, the finalization of legal documents and the completion of the SVO filing process, the fixed maturity portfolio generally includes securities, that have not yet been rated by the SVO as of each balance sheet date, such as private placements. Pending receipt of SVO ratings, the categorization of these securities by NAIC designation is based on the expected ratings indicated by internal analysis. Information about certain of our fixed maturity securities holdings by the NAIC designation is set forth in the following tables. Corresponding rating agency designation does not directly translate into NAIC designation, but represents our best estimate of comparable ratings from rating agencies, including Moody's, S&P and Fitch. If no rating is available from a rating agency, then an internally developed rating is used. As of December 31, 2022 and 2021, the weighted average NAIC quality rating of our fixed maturities portfolio was 1.5. The following tables present credit quality of fixed maturities, including securities pledged, using NAIC designations as of the dates indicated:  [[GREPCENT_TABLE]] [["($ in millions)","December 31, 2022"],["NAIC Quality Designation","1","","2","","3","","4","","5","","6","","Total Fair Value"],["U.S. Treasuries","$","581","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","581"],["U.S. Government agencies and authorities","59","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","59"],["State, municipalities and political subdivisions","787","","","58","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","845"],["U.S. corporate public securities","2,485","","","5,357","","","307","","","36","","","\u2014","","","16","","","8,201"],["U.S. corporate private securities","1,684","","","2,677","","","234","","","89","","","8","","","\u2014","","","4,692"],["Foreign corporate public securities and foreign governments(1)","945","","","1,829","","","104","","","64","","","\u2014","","","7","","","2,949"],["Foreign corporate private securities(1)","367","","","2,531","","","99","","","26","","","11","","","\u2014","","","3,034"],["Residential mortgage-backed securities","3,919","","","34","","","4","","","1","","","10","","","9","","","3,977"],["Commercial mortgage-backed securities","3,258","","","521","","","85","","","12","","","5","","","2","","","3,883"],["Other asset-backed securities","1,767","","","325","","","7","","","10","","","6","","","21","","","2,136"],["Total fixed maturities","$","15,852","","","$","13,332","","","$","840","","","$","238","","","$","40","","","$","55","","","$","30,357"],["% of Fair Value","52.2%","","43.9%","","2.8%","","0.8%","","0.1%","","0.2%","","100.0%"]] [[/GREPCENT_TABLE]] (1) Primarily U.S. dollar denominated. [[GREPCENT_TABLE]] [["","88"]] [[/GREPCENT_TABLE]] Table of Contents [[GREPCENT_TABLE]] [["($ in millions)","December 31, 2021"],["NAIC Quality Designation","1","","2","","3","","4","","5","","6","","Total Fair Value"],["U.S. Treasuries","$","1,003","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","1,003"],["U.S. Government agencies and authorities","81","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","81"],["State, municipalities and political subdivisions","1,003","","","105","","","3","","","\u2014","","","\u2014","","","\u2014","","","1,111"],["U.S. corporate public securities","4,112","","","7,341","","","406","","","63","","","19","","","\u2014","","","11,941"],["U.S. corporate private securities","1,787","","","3,111","","","319","","","105","","","3","","","\u2014","","","5,325"],["Foreign corporate public securities and foreign governments(1)","1,151","","","2,389","","","160","","","23","","","\u2014","","","\u2014","","","3,723"],["Foreign corporate private securities(1)","310","","","2,850","","","185","","","82","","","\u2014","","","74","","","3,501"],["Residential mortgage-backed securities","4,227","","","37","","","1","","","2","","","17","","","18","","","4,302"],["Commercial mortgage-backed securities","3,553","","","487","","","114","","","29","","","\u2014","","","\u2014","","","4,183"],["Other asset-backed securities","1,685","","","330","","","10","","","13","","","30","","","13","","","2,081"],["Total fixed maturities","$","18,912","","","$","16,650","","","$","1,198","","","$","317","","","$","69","","","$","105","","","$","37,251"],["% of Fair Value","50.8%","","44.7%","","3.2%","","0.9%","","0.2%","","0.2%","","100.0%"]] [[/GREPCENT_TABLE]] (1) Primarily U.S. dollar denominated. The fixed maturities in our portfolio are generally rated by external rating agencies and, if not externally rated, are rated by us on a basis similar to that used by the rating agencies. As of December 31, 2022 and 2021, the weighted average quality rating of our fixed maturities portfolio was A. Ratings are derived from three ARO ratings and are applied as follows, based on the number of agency ratings received: • when three ratings are received then the middle rating is applied; • when two ratings are received then the lower rating is applied; • when a single rating is received, the ARO rating is applied; and • when ratings are unavailable then an internal rating is applied. [[GREPCENT_TABLE]] [["","89"]] [[/GREPCENT_TABLE]] Table of Contents The following tables present credit quality of fixed maturities, including securities pledged, using ARO ratings as of the dates indicated: [[GREPCENT_TABLE]] [["($ in millions)","December 31, 2022"],["ARO Quality Ratings","AAA","","AA","","A","","BBB","","BB and Below","","Total Fair Value"],["U.S. Treasuries","$","581","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","581"],["U.S. Government agencies and authorities","51","","","8","","","\u2014","","","\u2014","","","\u2014","","","59"],["State, municipalities and political subdivisions","48","","","503","","","236","","","58","","","\u2014","","","845"],["U.S. corporate public securities","29","","","408","","","2,320","","","5,063","","","381","","","8,201"],["U.S. corporate private securities","58","","","185","","","1,368","","","2,728","","","353","","","4,692"],["Foreign corporate public securities and foreign governments(1)","8","","","168","","","802","","","1,774","","","197","","","2,949"],["Foreign corporate private securities(1)","\u2014","","","42","","","297","","","2,541","","","154","","","3,034"],["Residential mortgage-backed securities","3,089","","","188","","","113","","","206","","","381","","","3,977"],["Commercial mortgage-backed securities","1,304","","","425","","","927","","","1,058","","","169","","","3,883"],["Other asset-backed securities","187","","","447","","","1,117","","","330","","","55","","","2,136"],["Total fixed maturities","$","5,355","","","$","2,374","","","$","7,180","","","$","13,758","","","$","1,690","","","$","30,357"],["% of Fair Value","17.6%","","7.8%","","23.7%","","45.3%","","5.6%","","100.0%"]] [[/GREPCENT_TABLE]] (1) Primarily U.S. dollar denominated. [[GREPCENT_TABLE]] [["($ in millions)","December 31, 2021"],["ARO Quality Ratings","AAA","","AA","","A","","BBB","","BB and Below","","Total Fair Value"],["U.S. Treasuries","$","1,003","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","1,003"],["U.S. Government agencies and authorities","70","","","\u2014","","","11","","","\u2014","","","\u2014","","","81"],["State, municipalities and political subdivisions","55","","","623","","","326","","","104","","","3","","","1,111"],["U.S. corporate public securities","66","","","728","","","3,727","","","6,954","","","466","","","11,941"],["U.S. corporate private securities","68","","","91","","","1,520","","","3,314","","","332","","","5,325"],["Foreign corporate public securities and foreign governments(1)","8","","","229","","","1,045","","","2,233","","","208","","","3,723"],["Foreign corporate private securities(1)","\u2014","","","48","","","259","","","2,938","","","256","","","3,501"],["Residential mortgage-backed securities","2,927","","","258","","","216","","","298","","","603","","","4,302"],["Commercial mortgage-backed securities","1,600","","","424","","","869","","","1,166","","","124","","","4,183"],["Other asset-backed securities","257","","","445","","","968","","","324","","","87","","","2,081"],["Total fixed maturities","$","6,054","","","$","2,846","","","$","8,941","","","$","17,331","","","$","2,079","","","$","37,251"],["% of Fair Value","16.3","%","","7.6","%","","24.0","%","","46.5","%","","5.6","%","","100.0","%"]] [[/GREPCENT_TABLE]] (1) Primarily U.S. dollar denominated. Fixed maturities rated BB and below may have speculative characteristics and changes in economic conditions or other circumstances that are more likely to lead to a weakened capacity of the issuer to make principal and interest payments than is the case with higher rated fixed maturities. Unrealized Capital Losses Gross unrealized capital losses on fixed maturities, including securities pledged, increased $3.3 billion from $149 million to $3.5 billion for the year ended December 31, 2022. The increase in gross unrealized capital losses was driven primarily by sharply higher interest rates across the yield curve and moderately wider credit spreads. See Overview-Trends and Uncertainties. [[GREPCENT_TABLE]] [["","90"]] [[/GREPCENT_TABLE]] Table of Contents As of December 31, 2022, we held ten fixed maturity securities with unrealized capital losses in excess of $10 million. The unrealized capital losses on the fixed maturity securities equaled $114 million, or 3.3% of the total unrealized losses. As of December 31, 2021, we held one fixed maturity with unrealized capital losses in excess of $10 million. The unrealized capital losses on this fixed maturity equaled $12 million, or 7.9% of the total unrealized losses. As of December 31, 2022, we held $1.9 billion of energy sector fixed maturity securities, constituting 6.1% of the total fixed maturities portfolio, with gross unrealized capital losses of $160 million, including one energy sector fixed maturity security with unrealized capital losses in excess of $10 million. The unrealized capital losses on this fixed maturity security equaled $11 million. As of December 31, 2022, our fixed maturity exposure to the energy sector is comprised of 88.0% investment grade securities. As of December 31, 2021, we held $2.2 billion of energy sector fixed maturity securities, constituting 5.9% of the total fixed maturities portfolio, with gross unrealized capital losses of $18 million including one energy sector fixed maturity security with unrealized capital losses in excess of $10 million. The unrealized capital losses on this fixed maturity security equaled $12 million. As of December 31, 2021, our fixed maturity exposure to the energy sector is comprised of 86.2% investment grade securities. The following table presents the U.S. and foreign corporate securities within our energy holdings by sector as of the dates indicated: [[GREPCENT_TABLE]] [["($ in millions)","","December 31, 2022","","December 31, 2021"],["Sector Type","","Amortized Cost","","Fair Value","","% Fair Value","","Amortized Cost","","Fair Value","","% Fair Value"],["Midstream","","$","1,027","","","$","957","","","51.5","%","","$","818","","","$","949","","","43.1","%"],["Integrated Energy","","290","","","271","","","14.6","%","","401","","","463","","","21.0","%"],["Independent Energy","","317","","","301","","","16.2","%","","328","","","379","","","17.2","%"],["Oil Field Services","","222","","","211","","","11.4","%","","207","","","223","","","10.1","%"],["Refining","","123","","","118","","","6.3","%","","153","","","189","","","8.6","%"],["Total","","$","1,979","","","$","1,858","","","100.0","%","","$","1,907","","","$","2,203","","","100.0","%"]] [[/GREPCENT_TABLE]] See the Investments (excluding Consolidated Investment Entities) Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for further information on unrealized capital losses. CMO-B Portfolio As part of our broadly diversified investment portfolio, we have a core holding in a proprietary mortgage derivatives strategy known as CMO-B, which invests in a variety of CMO securities in combination with interest rate derivatives in targeting a specific type of exposure to the U.S. residential mortgage market. Because of their relative complexity and generally small natural buyer base, we believe certain types of CMO securities are consistently priced below their intrinsic value, thereby providing a source of potential return for investors in this strategy. The CMO securities that are part of our CMO-B portfolio are either notional or principal securities, backed by the interest and principal components, respectively, of mortgages secured by single-family residential real estate. There are many variations of these two types of securities including interest only and principal only securities, as well as inverse-floating rate (principal) securities and inverse interest only securities, all of which are part of our CMO-B portfolio. This strategy has been in place for nearly two decades and thus far has been a significant source of investment income while exhibiting relatively low volatility and correlation compared to the other asset types in the investment portfolio, although we cannot predict whether favorable returns will continue in future periods. To protect against the potential for credit loss associated with financially troubled borrowers, investments in our CMO-B portfolio are primarily in CMO securities backed by one of the government sponsored entities: the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie Mac") or Government National Mortgage Association ("Ginnie Mae"). Because the timing of the receipt of the underlying cash flow is highly dependent on the level and direction of interest rates, our CMO-B portfolio also has exposure to both interest rate and convexity risk. The exposure to interest rate risk, the potential for changes in value that results from changes in the general level of interest rates, is managed to a defined target duration using [[GREPCENT_TABLE]] [["","91"]] [[/GREPCENT_TABLE]] Table of Contents interest rate swaps and interest rate futures. The exposure to convexity risk-the potential for changes in value that result from changes in duration caused by changes in interest rates-is dynamically hedged using interest rate swaps and at times, interest rate swaptions. Prepayment risk represents the potential for adverse changes in portfolio value resulting from changes in residential mortgage prepayment speed (actual and projected), which in turn depends on a number of factors, including conditions in both credit markets and housing markets. Changes in the prepayment behavior of homeowners represent both a risk and potential source of return for our CMO-B portfolio. As a result, we seek to invest in securities that are broadly diversified by collateral type to take advantage of the uncorrelated prepayment experiences of homeowners with unique characteristics that influence their ability or desire to prepay their mortgage. We choose collateral types and individual securities based on an in-depth quantitative analysis of prepayment incentives across available borrower types. The following table presents fixed maturities balances held in the CMO-B portfolio by NAIC quality rating as of the dates indicated: [[GREPCENT_TABLE]] [["($ in millions)","","December 31, 2022","","December 31, 2021"],["NAIC Quality Designation","","Amortized Cost","","Fair Value","","% Fair Value","","Amortized Cost","","Fair Value","","% Fair Value"],["1","","$","2,267","","","$","2,270","","","97.9","%","","$","2,621","","","$","2,700","","","97.4","%"],["2","","33","","","32","","","1.4","%","","34","","","35","","","1.3","%"],["3","","\u2014","","","\u2014","","","\u2014","%","","\u2014","","","\u2014","","","\u2014","%"],["4","","\u2014","","","\u2014","","","\u2014","%","","\u2014","","","\u2014","","","\u2014","%"],["5","","5","","","7","","","0.3","%","","9","","","16","","","0.6","%"],["6","","8","","","9","","","0.4","%","","15","","","18","","","0.7","%"],["Total","","$","2,313","","","$","2,318","","","100.0","%","","$","2,679","","","$","2,769","","","100.0","%"]] [[/GREPCENT_TABLE]] For CMO securities where we elected the FVO, amortized cost represents the market values. For details on the NAIC designation methodology, please see "Fixed Maturities Credit Quality-Ratings" above. The following table presents the notional amounts and fair values of interest rate derivatives used in our CMO-B portfolio as of the dates indicated: [[GREPCENT_TABLE]] [["","December 31, 2022","","December 31, 2021"],["($ in millions)","Notional Amount","","Asset Fair Value","","LiabilityFairValue","","Notional Amount","","Asset Fair Value","","Liability Fair Value"],["Derivatives non-qualifying for hedge accounting:"],["Interest Rate Contracts","$","12,414","","","$","215","","","$","350","","","$","9,770","","","$","80","","","$","146"]] [[/GREPCENT_TABLE]] The Company utilize interest rate futures and interest rate swaps as a part of the CMO-B portfolio to hedge interest rate risk. The following table presents our CMO-B fixed maturity securities balances and tranche type as of the dates indicated:   [[GREPCENT_TABLE]] [["($ in millions)","","December 31, 2022","","December 31, 2021"],["Tranche Type","","Amortized Cost","","Fair Value","","% Fair Value","","Amortized Cost","","Fair Value","","% Fair Value"],["Inverse Floater","","$","70","","","$","79","","","3.4","%","","$","85","","","$","127","","","4.6","%"],["Interest Only (IO)","","914","","","915","","","39.5","%","","459","","","460","","","16.6","%"],["Inverse IO","","527","","","528","","","22.8","%","","1,072","","","1,107","","","40.0","%"],["Principal Only (PO)","","77","","","79","","","3.4","%","","110","","","116","","","4.2","%"],["Floater","","6","","","6","","","0.3","%","","7","","","7","","","0.3","%"],["Agency Credit Risk Transfer","","645","","","638","","","27.5","%","","910","","","915","","","33.0","%"],["Other","","74","","","73","","","3.1","%","","36","","","37","","","1.3","%"],["Total","","$","2,313","","","$","2,318","","","100.0","%","","$","2,679","","","$","2,769","","","100.0","%"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","92"]] [[/GREPCENT_TABLE]] Table of Contents During the year ended December 31, 2022, the market value of our CMO-B securities portfolio declined as a result of lower valuations due to both higher rate and spread levels. The following table presents returns for our CMO-B portfolio for the periods indicated: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["($ in millions)","2022","","2021","","2020"],["Net investment income","$","489","","","$","599","","","$","667"],["Net gains (losses)(1)","(437)","","","(642)","","","(385)"],["Income (loss) from continuing operations before income taxes","$","52","","","$","(43)","","","$","282"]] [[/GREPCENT_TABLE]] (1) Net gains (losses) also include derivatives interest settlements, mark to market adjustments and realized gains (losses) on standalone derivatives contracts that are in the CMO-B portfolio. In defining the Adjusted operating earnings before income taxes for our CMO-B portfolio (including CMO-B portfolio income (loss) related to businesses to be exited through reinsurance or divestment) certain recharacterizations are recognized. The net coupon settlement on interest rate swaps hedging CMO-B securities that is included in Net gains (losses) is reflected. In addition, the premium amortization and change in fair value for securities designated under the FVO are included in Net gains (losses), whereas the coupon for these securities is included in Net investment income. In order to present the economics of these fair value securities in a similar manner to those of an available for sale security, the premium amortization is reclassified from Net gains (losses). After adjusting for the two items referenced immediately above, the following table presents a reconciliation of Income (loss) from operations before income taxes from our CMO-B portfolio to Adjusted operating earnings before income taxes from our CMO-B portfolio for the periods indicated: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["($ in millions)","2022","","2021","","2020"],["Income (loss) from continuing operations before income taxes","$","52","","","$","(43)","","","$","282"],["Realized gains/(losses) including impairment","17","","","(27)","","","8"],["Fair value adjustments","146","","","239","","","(112)"],["Total adjustments to income (loss) from continuing operations","163","","","212","","","(104)"],["Adjusted operating earnings before income taxes","$","215","","","$","169","","","$","178"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","93"]] [[/GREPCENT_TABLE]] Table of Contents Structured Securities Residential Mortgage-backed Securities The following tables present our residential mortgage-backed securities as of the dates indicated: [[GREPCENT_TABLE]] [["","December 31, 2022"],["($ in millions)","Amortized Cost","","Gross Unrealized Capital Gains","","Gross Unrealized Capital Losses","","Embedded Derivatives","","Fair Value"],["Prime Agency","$","1,957","","","$","19","","","$","50","","","$","1","","","$","1,927"],["Prime Non-Agency","2,194","","","10","","","238","","","\u2014","","","1,966"],["Alt-A","66","","","5","","","2","","","2","","","71"],["Sub-Prime(1)","30","","","1","","","1","","","\u2014","","","30"],["Total RMBS","$","4,247","","","$","35","","","$","291","","","$","3","","","$","3,994"],["(1) Includes subprime other asset backed securities."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","December 31, 2021"],["($ in millions)","Amortized Cost","","Gross Unrealized Capital Gains","","Gross Unrealized Capital Losses","","Embedded Derivatives","","Fair Value"],["Prime Agency","$","1,937","","","$","88","","","$","8","","","$","5","","","$","2,022"],["Prime Non-Agency","2,146","","","42","","","22","","","1","","","2,167"],["Alt-A","84","","","8","","","1","","","6","","","97"],["Sub-Prime(1)","38","","","4","","","\u2014","","","\u2014","","","42"],["Total RMBS","$","4,205","","","$","142","","","$","31","","","$","12","","","$","4,328"]] [[/GREPCENT_TABLE]] (1) Includes subprime other asset backed securities. [[GREPCENT_TABLE]] [["","94"]] [[/GREPCENT_TABLE]] Table of Contents Commercial Mortgage-backed Securities The following tables present our commercial mortgage-backed securities as of the dates indicated: [[GREPCENT_TABLE]] [["","December 31, 2022"],["($ in millions)","AAA","AA","A","BBB","BB and Below","Total"],["Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value"],["2016 and prior","$","755","","$","660","","$","209","","$","197","","$","275","","$","254","","$","246","","$","214","","$","66","","$","59","","$","1,551","","$","1,384"],["2017","80","","64","","19","","17","","70","","60","","74","","60","","43","","38","","286","","239"],["2018","110","","95","","20","","18","","96","","86","","40","","33","","19","","15","","285","","247"],["2019","169","","149","","38","","36","","130","","115","","297","","241","","8","","6","","642","","547"],["2020","74","","66","","31","","27","","74","","59","","155","","125","","\u2014","","\u2014","","334","","277"],["2021","238","","181","","86","","77","","213","","187","","324","","283","","8","","8","","869","","736"],["2022","105","","89","","58","","53","","178","","166","","115","","102","","43","","43","","499","","453"],["Total CMBS","$","1,531","","$","1,304","","$","461","","$","425","","$","1,036","","$","927","","$","1,251","","$","1,058","","$","187","","$","169","","$","4,466","","$","3,883"],["","December 31, 2021"],["($ in millions)","AAA","AA","A","BBB","BB and Below","Total"],["Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value"],["2016 and prior","$","779","","$","864","","$","214","","$","221","","$","261","","$","271","","$","261","","$","262","","$","80","","$","79","","$","1,595","","$","1,697"],["2017","85","","91","","23","","23","","66","","67","","69","","71","","33","","34","","276","","286"],["2018","99","","108","","20","","21","","94","","97","","58","","59","","3","","3","","274","","288"],["2019","184","","203","","36","","36","","139","","141","","296","","297","","8","","8","","663","","685"],["2020","92","","93","","31","","32","","73","","74","","164","","166","","\u2014","","\u2014","","360","","365"],["2021","240","","241","","92","","91","","220","","219","","312","","311","","\u2014","","\u2014","","864","","862"],["Total CMBS","$","1,479","","$","1,600","","$","416","","$","424","","$","853","","$","869","","$","1,160","","$","1,166","","$","124","","$","124","","$","4,032","","$","4,183"]] [[/GREPCENT_TABLE]] As of December 31, 2022, 83.7% and 13.6% of CMBS investments were designated as NAIC-1 and NAIC-2, respectively. As of December 31, 2021, 84.9% and 11.6% of CMBS investments were designated as NAIC-1 and NAIC-2, respectively. [[GREPCENT_TABLE]] [["","95"]] [[/GREPCENT_TABLE]] Table of Contents Other Asset-backed Securities The following tables present our other asset-backed securities as of the dates indicated: [[GREPCENT_TABLE]] [["","December 31, 2022"],["($ in millions)","AAA","AA","A","BBB","BB and Below","Total"],["Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value"],["Collateralized Obligation","$","135","","$","131","","$","375","","$","359","","$","1,064","","$","1,001","","$","121","","$","112","","$","60","","$","42","","$","1,755","","$","1,645"],["Auto-Loans","1","","1","","8","","7","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","9","","8"],["Student Loans","12","","12","","86","","77","","\u2014","","\u2014","","1","","\u2014","","\u2014","","\u2014","","99","","89"],["Credit Card loans","\u2014","","\u2014","","\u2014","","\u2014","","3","","2","","\u2014","","\u2014","","\u2014","","\u2014","","3","","2"],["Other Loans","52","","43","","3","","3","","129","","114","","240","","215","","\u2014","","\u2014","","424","","375"],["Total Other ABS(1)","$","200","","$","187","","$","472","","$","446","","$","1,196","","$","1,117","","$","362","","$","327","","$","60","","$","42","","$","2,290","","$","2,119"],["(1) Excludes subprime other asset backed securities."],["","December 31, 2021"],["($ in millions)","AAA","AA","A","BBB","BB and Below","Total"],["Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value","Amortized Cost","Fair Value"],["Collateralized Obligation","$","185","","$","186","","$","328","","$","328","","$","850","","$","848","","$","121","","$","120","","$","68","","$","64","","$","1,552","","$","1,546"],["Auto-Loans","2","","2","","\u2014","","1","","8","","8","","\u2014","","\u2014","","\u2014","","\u2014","","10","","11"],["Student Loans","17","","17","","108","","110","","9","","9","","1","","1","","\u2014","","\u2014","","135","","137"],["Credit Card loans","\u2014","","\u2014","","\u2014","","\u2014","","4","","4","","\u2014","","\u2014","","\u2014","","\u2014","","4","","4"],["Other Loans","48","","52","","4","","3","","96","","99","","198","","203","","\u2014","","\u2014","","346","","357"],["Total Other ABS(1)","$","252","","$","257","","$","440","","$","442","","$","967","","$","968","","$","320","","$","324","","$","68","","$","64","","$","2,047","","$","2,055"]] [[/GREPCENT_TABLE]] (1) Excludes subprime other asset backed securities. As of December 31, 2022, 82.9% and 15.4% of Other ABS investments were designated as NAIC-1 and NAIC-2, respectively. As of December 31, 2021, 80.7% and 16.1% of Other ABS investments were designated as NAIC-1 and NAIC-2, respectively. Mortgage Loans on Real Estate As of December 31, 2022 and 2021, our mortgage loans on real estate portfolio had a weighted average DSC of 1.91 times and 2.13 times, and a weighted average LTV ratio of 45.4% and 45.5%, respectively. See the Investments (excluding Consolidated Investment Entities) Note and Business, Basis of Presentation and Significant Accounting Policies Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for further information on mortgage loans on real estate. Impairments We evaluate available-for-sale fixed maturities for impairment on a regular basis. The assessment of whether impairments have occurred is based on a case-by-case evaluation of the underlying reasons for the decline in estimated fair value. See the Business, Basis of Presentation and Significant Accounting Policies Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for the policy used to evaluate whether the investments are impaired. Additionally, see the Investments (excluding Consolidated Investment Entities) Note in our Consolidated Financial Statements of Part II, Item 8. of this Annual Report on Form 10-K for further information on impairments. [[GREPCENT_TABLE]] [["","96"]] [[/GREPCENT_TABLE]] Table of Contents Equity Securities During the third quarter of 2022, the Company entered into an agreement with PenCal to fund the VIM Holdings LLC Deferred Compensation Plan of $75 million. The purchase of the underlying assets for the compensation plan related to mutual fund investments and is recorded in Equity securities in the Consolidated Balance Sheets in Part II, Item 8. of this Annual Report on Form 10-K Derivatives We use derivatives for a variety of hedging purposes. We also have embedded derivatives within fixed maturities instruments and certain product features. See the Business, Basis of Presentation and Significant Accounting Policies Note and Derivative Financial Instruments Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for further information. European Exposures We quantify and allocate our exposure to the region by attempting to identify aspects of the region or country risk to which we are exposed. Among the factors we consider are the nationality of the issuer, the nationality of the issuer's ultimate parent, the corporate and economic relationship between the issuer and its parent, as well as the political, legal and economic environment in which each functions. By undertaking this assessment, we believe that we develop a more accurate assessment of the actual geographic risk, with a more integrated understanding of contributing factors to the full risk profile of the issuer. In the normal course of our ongoing risk and portfolio management process, we closely monitor compliance with a credit limit hierarchy designed to minimize overly concentrated risk exposures by geography, sector and issuer. This framework takes into account various factors such as internal and external ratings, capital efficiency and liquidity and is overseen by a combination of Investment and Corporate Risk Management, as well as insurance portfolio managers focused specifically on managing the investment risk embedded in our portfolio. While economic conditions in Europe have broadly improved, geopolitical tensions emanating from the Russia-Ukraine conflict remain a notable tail risk. Despite signs of economic improvement in the region, we continue to closely monitor our exposure to the region. As of December 31, 2022, our total European exposure had an amortized cost and fair value of $3,077 million and $2,769 million, respectively. Some of the major country level exposures were in the United Kingdom of $1,264 million, in The Netherlands of $252 million, in France of $233 million, in Germany of $201 million, in Switzerland of $200 million, in Ireland of $152 million, and in Belgium of $59 million. Our direct exposure in Eastern Europe is comparatively small, with only $6 million of exposure in Russia and none in Ukraine or Belarus. Consolidated and Nonconsolidated Investment Entities We use many forms of entities to achieve our business objectives and we have participated in varying degrees in the design and formation of these entities. These entities are considered to be VIEs or VOEs (collectively, "Consolidated Investment Entities"), or nonconsolidated VIEs, and we evaluate our involvement with each entity to determine whether consolidation is required. We perform a quarterly consolidation analysis to assess if the consolidation of a fund is required. The consolidation process brings on the assets, liabilities, noncontrolling interest and operations of the VIE and/or VOE into our financial statements. If the fund no longer meets the criteria for consolidation, the assets, liabilities, noncontrolling interest and operations of the fund is removed from our financial statements. This process of consolidation/deconsolidation could have a material impact on total shareholders’ equity. See Consolidation and Noncontrolling Interests and Fair Value Measurement in the Business, Basis of Presentation and Significant Accounting Policies Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K. Additionally, see the Consolidated and Nonconsolidated Investment Entities Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for more information. [[GREPCENT_TABLE]] [["","97"]] [[/GREPCENT_TABLE]] Table of Contents Securitizations We invest in various tranches of securitization entities, including RMBS, CMBS and ABS. Refer to the Consolidated and Nonconsolidated Investment Entities Note and Fair Value Measurements (excluding Consolidated Investment Entities) Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for an understanding over the Company's Securitizations. Refer to the Investments (excluding Consolidated Investment Entities) Note to our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on Form 10-K for details regarding the carrying amounts and classifications of these assets. Guarantors and Issuers of Guaranteed Securities  Voya Financial, Inc. (the “Parent Issuer”) has issued certain notes pursuant to transactions registered under the Securities Act of 1933. Such securities consist of (i) the 5.7% senior notes due 2043, the 3.65% senior notes due 2026, and the 4.8% senior notes due 2046, with an aggregate principal amount of $1.1 billion as of December 31, 2022 (collectively, the “Senior Notes”) and (ii) the 5.65% fixed-to-floating rate junior subordinated notes due 2053 and the 4.7% fixed-to-floating junior subordinated notes due 2048, with an aggregate principal amount of $724 million as of December 31, 2022 (collectively, the “Junior Subordinated Notes” and, together with the Senior Notes, the “Registered Notes”). Voya Holdings (the “Subsidiary Guarantor”), a wholly owned subsidiary of the Parent Issuer, has guaranteed each of the Registered Notes on a full and unconditional basis. No other subsidiary of the Parent Issuer has guaranteed any of the Registered Notes. The Parent Issuer and the Subsidiary Guarantor are hereby referred to below as the “Obligor Group.” The full and unconditional guarantees require the Subsidiary Guarantor to satisfy the obligations of the guaranteed security immediately, if and when the Parent Issuer has failed to make a scheduled payment thereunder. If the Subsidiary Guarantor does not make such payment, any holder of the guaranteed security may immediately bring suit directly against the Subsidiary Guarantor for payment of amounts due and payable. Set forth below is summarized financial information of the Obligor Group, as presented on a combined basis. Inter-combination transactions and balances within the Obligor Group have been eliminated. In addition, financial information of any non-issuer or non-guarantor subsidiaries, which would normally be consolidated by either the Parent Issuer or the Subsidiary Guarantor under U.S. generally accepted accounting principles, has been excluded from such presentation.  [[GREPCENT_TABLE]] [["","98"]] [[/GREPCENT_TABLE]] Table of Contents Refer to the Summarized Financial Information of the Obligor Group for the periods indicated below: [[GREPCENT_TABLE]] [["","As of and for the year ended December 31,"],["($ in millions)","2022","","2021"],["Summarized Statement of Operations Information:"],["Total revenues","$","(21)","","","$","34"],["Total benefits and expenses","205","","","192"],["Income (loss) from continuing operations, net of tax","346","","","718"],["Net income (loss) before equity in earnings (losses) of unconsolidated affiliates","346","","","718"],["Net income (loss) available to Obligor Group","346","","","718"],["Summarized Balance Sheet Information:"],["Total investments","29","","","44"],["Cash and cash equivalents","210","","","205"],["Deferred income tax assets","909","","","908"],["Goodwill","94","","","\u2014"],["Loans to non-obligated subsidiaries","89","","","123"],["Due from non-obligated subsidiaries","15","","","61"],["Total assets","1,350","","","1,356"],["Short-term debt with non-obligated subsidiaries","262","","","130"],["Long-term debt","2,094","","","2,594"],["Total liabilities","$","2,547","","","$","2,836"]] [[/GREPCENT_TABLE]]