Voya Financial, Inc. - Quarter Report: 2019 September (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

——————————————————————

FORM 10-Q



(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019



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

For the transition period from to

Commission File Number: 001-35897______________________________________

Voya Financial, Inc.

(Exact name of registrant as specified in its charter)



Delaware	52-1222820
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)



230 Park Avenue
New York	New York	10169
(Address of principal executive offices)		(Zip Code)

(212) 309-8200

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	VOYA	New York Stock Exchange
Depositary Shares, each representing a 1/40^th	VOYAPrB	New York Stock Exchange
interest in a share of 5.35% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series B, $0.01 par value	VOYAPrB	New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 1, 2019, 134,799,167 shares of Common Stock, $0.01 par value, were outstanding.



	1

Voya Financial, Inc.

Form 10-Q for the period ended September 30, 2019

INDEX

		PAGE
PART I.	FINANCIAL INFORMATION (UNAUDITED)

Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Income	7
	Condensed Consolidated Statements of Changes in Shareholders' Equity	8
	Condensed Consolidated Statements of Cash Flows	12
	Notes to Condensed Consolidated Financial Statements:	13
	1. Business, Basis of Presentation and Significant Accounting Policies	13
	2. Discontinued Operations	20
	3. Investments (excluding Consolidated Investment Entities)	21
	4. Derivative Financial Instruments	35
	5. Fair Value Measurements (excluding Consolidated Investment Entities)	41
	6. Deferred Policy Acquisition Costs and Value of Business Acquired	52
	7. Share-based Incentive Compensation Plans	53
	8. Shareholders' Equity	55
	9. Earnings per Common Share	58
	10. Accumulated Other Comprehensive Income (Loss)	59
	11. Income Taxes	63
	12. Financing Agreements	64
	13. Commitments and Contingencies	65
	14. Consolidated Investment Entities	68
	15. Restructuring	75
	16. Segments	77
	17. Condensed Consolidating Financial Information	83

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	98

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	147

Item 4.	Controls and Procedures	147

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	148

Item 1A.	Risk Factors	148

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	148

Item 5.	Other Information	148

Item 6.	Exhibits	150

Exhibit Index		151

Signature		152



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Table of Contents

For the purposes of the discussion in this Quarterly Report on Form 10-Q, 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.

NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including "Risk Factors," and "Management’s Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements relating to future developments in our business or expectations for our future financial performance and any statement not involving a historical fact. Forward-looking statements use words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. Actual results, performance or events may differ materially from those projected in any forward-looking statement due to, among other things, (i) general economic conditions, particularly economic conditions in our core markets, (ii) performance of financial markets, including emerging markets, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels, (v) persistency and lapse levels, (vi) interest rates, (vii) currency exchange rates, (viii) general competitive factors, (ix) changes in laws and regulations, (x) changes in the policies of governments and/or regulatory authorities, and (xi) our ability to successfully manage the separation of the fixed and variable annuities businesses that we sold to VA Capital Company LLC on June 1, 2018, including the transition services on the expected timeline and economic terms. Factors that may cause actual results to differ from those in any forward-looking statement also include those described under "Risk Factors," "Management’s Discussion and Analysis of Financial Condition and Results of Operations-Trends and Uncertainties" in the Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 001-35897) (the "Annual Report on Form 10-K").

The risks included here are not exhaustive. Current reports on Form 8-K and other documents filed with the Securities and Exchange Commission ("SEC") include additional factors that could affect our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.



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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Voya Financial, Inc.

Condensed Consolidated Balance Sheets

September 30, 2019 (Unaudited) and December 31, 2018

(In millions, except share and per share data)



	September 30, 2019		December 31, 2018
Assets:
Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost of $45,468 as of 2019 and $45,241 as of 2018)	$	51,114	$	46,298
Fixed maturities, at fair value using the fair value option	3,461		2,956
Equity securities, at fair value (cost of $337 as of 2019 and $255 as of 2018)	373		273
Short-term investments	145		168
Mortgage loans on real estate, net of valuation allowance of $1 as of 2019 and $2 as of 2018	8,319		8,676
Policy loans	1,796		1,833
Limited partnerships/corporations	1,486		1,158
Derivatives	575		247
Other investments	104		90
Securities pledged (amortized cost of $1,590 as of 2019 and $1,824 as of 2018)	1,804		1,867
Total investments	69,177		63,566
Cash and cash equivalents	1,376		1,538
Short-term investments under securities loan agreements, including collateral delivered	1,833		1,684
Accrued investment income	679		650
Premium receivable and reinsurance recoverable	6,780		6,860
Deferred policy acquisition costs and Value of business acquired	2,771		4,116
Current income taxes	118		237
Deferred income taxes	401		1,157
Other assets	1,392		1,336
Assets related to consolidated investment entities:
Limited partnerships/corporations, at fair value	1,565		1,421
Cash and cash equivalents	74		331
Corporate loans, at fair value using the fair value option	544		542
Other assets	6		16
Assets held in separate accounts	80,134		71,228
Total assets	$	166,850	$	154,682



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

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Voya Financial, Inc.

Condensed Consolidated Balance Sheets

September 30, 2019 (Unaudited) and December 31, 2018

(In millions, except share and per share data)



	September 30, 2019			December 31, 2018
Liabilities and Shareholders' Equity:
Future policy benefits	$	15,284		$	14,488
Contract owner account balances	50,953			51,001
Payables under securities loan and repurchase agreements, including collateral held	1,915			1,821
Short-term debt	1			1
Long-term debt	3,041			3,136
Derivatives	517			139
Pension and other postretirement provisions	409			551
Other liabilities	2,173			2,148
Liabilities related to consolidated investment entities:
Collateralized loan obligations notes, at fair value using the fair value option	503			540
Other liabilities	709			688
Liabilities related to separate accounts	80,134			71,228
Total liabilities	155,639			145,741

Commitments and Contingencies (Note 13)

Shareholders' equity:
Preferred stock ($0.01 par value per share; $625 and $325 aggregate liquidation preference as of 2019 and 2018, respectively)	—			—
Common stock ($0.01 par value per share; 900,000,000 shares authorized; 275,382,038 and 272,431,745 shares issued as of 2019 and 2018, respectively; 134,775,320 and 150,978,184 shares outstanding as of 2019 and 2018, respectively)	3			3
Treasury stock (at cost; 140,606,718 and 121,453,561 shares as of 2019 and 2018, respectively)	(5,955		)	(4,981		)
Additional paid-in capital	24,671			24,316
Accumulated other comprehensive income (loss)	3,497			607
Retained earnings (deficit):
Appropriated-consolidated investment entities	—			—
Unappropriated	(11,665		)	(11,732		)
Total Voya Financial, Inc. shareholders' equity	10,551			8,213
Noncontrolling interest	660			728
Total shareholders' equity	11,211			8,941
Total liabilities and shareholders' equity	$	166,850		$	154,682



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

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Voya Financial, Inc.

Condensed Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)

(In millions, except per share data)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Net investment income	$	853		$	855		$	2,548		$	2,491
Fee income	692			704			2,019			2,040
Premiums	571			550			1,738			1,622
Net realized capital gains (losses):
Total other-than-temporary impairments	(3		)	(7		)	(39		)	(21		)
Less: Portion of other-than-temporary impairments recognized in Other comprehensive income (loss)	—			—			—			1
Net other-than-temporary impairments recognized in earnings	(3		)	(7		)	(39		)	(22		)
Other net realized capital gains (losses)	(12		)	(39		)	91			(325		)
Total net realized capital gains (losses)	(15		)	(46		)	52			(347		)
Other revenue	93			127			308			327
Income (loss) related to consolidated investment entities:
Net investment income	43			62			115			199
Total revenues	2,237			2,252			6,780			6,332
Benefits and expenses:
Policyholder benefits	874			876			2,541			2,290
Interest credited to contract owner account balances	385			392			1,136			1,156
Operating expenses	641			656			2,030			2,001
Net amortization of Deferred policy acquisition costs and Value of business acquired	134			86			286			260
Interest expense	51			47			135			142
Operating expenses related to consolidated investment entities:
Interest expense	8			8			29			30
Other expense	1			1			5			5
Total benefits and expenses	2,094			2,066			6,162			5,884
Income (loss) from continuing operations before income taxes	143			186			618			448
Income tax expense (benefit)	4			21			73			70
Income (loss) from continuing operations	139			165			545			378
Income (loss) from discontinued operations, net of tax	—			—			(82		)	457
Net income (loss)	139			165			463			835
Less: Net income (loss) attributable to noncontrolling interest	19			23			43			81
Net income (loss) available to Voya Financial, Inc.	120			142			420			754
Less: Preferred stock dividends	14			—			24			—
Net income (loss) available to Voya Financial, Inc.'s common shareholders	$	106		$	142		$	396		$	754

Net income (loss) per common share:
Basic
Income (loss) from continuing operations available to Voya Financial, Inc.'s common shareholders	$	0.77		$	0.89		$	3.34		$	1.79
Income (loss) available to Voya Financial, Inc.'s common shareholders	$	0.77		$	0.89		$	2.77		$	4.54

Diluted
Income (loss) from continuing operations available to Voya Financial, Inc.'s common shareholders	$	0.74		$	0.87		$	3.22		$	1.73
Income (loss) available to Voya Financial, Inc.'s common shareholders	$	0.74		$	0.87		$	2.67		$	4.39



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

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Voya Financial, Inc.

Condensed Consolidated Statements of Comprehensive Income

For the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)

(In millions)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net income (loss)	$	139		$	165		$	463		$	835
Other comprehensive income (loss), before tax:
Unrealized gains (losses) on securities	798			(206		)	3,223			(2,596		)
Other-than-temporary impairments	—			—			2			30
Pension and other postretirement benefits liability	(1		)	(4		)	(3		)	(10		)
Other comprehensive income (loss), before tax	797			(210		)	3,222			(2,576		)
Income tax expense (benefit) related to items of other comprehensive income (loss)	167			(44		)	675			(650		)
Other comprehensive income (loss), after tax	630			(166		)	2,547			(1,926		)
Comprehensive income (loss)	769			(1		)	3,010			(1,091		)
Less: Comprehensive income (loss) attributable to noncontrolling interest	19			23			43			81
Comprehensive income (loss) attributable to Voya Financial, Inc.	$	750		$	(24	)	$	2,967		$	(1,172	)



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

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Voya Financial, Inc.

Condensed Consolidated Statements of Changes in Shareholders' Equity

For the Three Months Ended September 30, 2019 (Unaudited)

(In millions)



	Preferred Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Deficit)					Total Voya Financial, Inc. Shareholders' Equity			Noncontrolling Interest			Total Shareholders' Equity
	Preferred Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Appropriated		Unappropriated			Total Voya Financial, Inc. Shareholders' Equity			Noncontrolling Interest			Total Shareholders' Equity
Balance as of July 1, 2019	$	—	$	3	$	(5,663	)	$	24,642		$	2,867	$	—	$	(11,785	)	$	10,064		$	675		$	10,739
Adoption of ASU 2018-02	—		—		—			—			—		—		—			—			—			—
Comprehensive income (loss):
Net income (loss)	—		—		—			—			—		—		120			120			19			139
Other comprehensive income (loss), after tax	—		—		—			—			630		—		—			630			—			630
Total comprehensive income (loss)																		750			19			769
Preferred stock issuance	—		—		—			—			—		—		—			—			—			—
Common stock issuance	—		—		—			1			—		—		—			1			—			1
Common stock acquired - Share repurchase	—		—		(290		)	40			—		—		—			(250		)	—			(250		)
Dividends on preferred stock	—		—		—			(14		)	—		—		—			(14		)	—			(14		)
Dividends on common stock	—		—		—			(20		)	—		—		—			(20		)	—			(20		)
Share-based compensation	—		—		(2		)	22			—		—		—			20			—			20
Contributions from (Distributions to) noncontrolling interest, net	—		—		—			—			—		—		—			—			(34		)	(34		)
Balance as of September 30, 2019	$	—	$	3	$	(5,955	)	$	24,671		$	3,497	$	—	$	(11,665	)	$	10,551		$	660		$	11,211



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

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Voya Financial, Inc. Condensed Consolidated Statements of Changes in Shareholders' Equity For the Nine Months Ended September 30, 2019 (Unaudited) (In millions)

	Preferred Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Deficit)					Total Voya Financial, Inc. Shareholders' Equity			Noncontrolling Interest			Total Shareholders' Equity
	Preferred Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Appropriated		Unappropriated			Total Voya Financial, Inc. Shareholders' Equity			Noncontrolling Interest			Total Shareholders' Equity
Balance as of January 1, 2019	$	—	$	3	$	(4,981	)	$	24,316		$	607	$	—	$	(11,732	)	$	8,213		$	728		$	8,941
Adoption of ASU 2018-02	—		—		—			—			343		—		(343		)	—			—			—
Comprehensive income (loss):
Net income (loss)	—		—		—			—			—		—		420			420			43			463
Other comprehensive income (loss), after tax	—		—		—			—			2,547		—		—			2,547			—			2,547
Total comprehensive income (loss)																		2,967			43			3,010
Preferred stock issuance	—		—		—			293			—		—		—			293			—			293
Common stock issuance	—		—		—			3			—		—		—			3			—			3
Common stock acquired - Share repurchase	—		—		(936		)	—			—		—		—			(936		)	—			(936		)
Dividends on preferred stock	—		—		—			(14		)	—		—		(10		)	(24		)	—			(24		)
Dividends on common stock	—		—		—			(23		)	—		—		—			(23		)	—			(23		)
Share-based compensation	—		—		(38		)	96			—		—		—			58			—			58
Contributions from (Distributions to) noncontrolling interest, net	—		—		—			—			—		—		—			—			(111		)	(111		)
Balance as of September 30, 2019	$	—	$	3	$	(5,955	)	$	24,671		$	3,497	$	—	$	(11,665	)	$	10,551		$	660		$	11,211



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

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Voya Financial, Inc.

Condensed Consolidated Statements of Changes in Shareholders' Equity

For the Three Months Ended September 30, 2018 (Unaudited)

(In millions)



	Preferred Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings (Deficit)					Total Voya Financial, Inc. Shareholders' Equity			Noncontrolling Interest			Total Shareholders' Equity
	Preferred Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Appropriated		Unappropriated			Total Voya Financial, Inc. Shareholders' Equity			Noncontrolling Interest			Total Shareholders' Equity
Balance as of July 1, 2018	$	—	$	3	$	(4,442	)	$	23,951		$	943		$	—	$	(11,995	)	$	8,460		$	782		$	9,242
Comprehensive income (loss):
Net income (loss)	—		—		—			—			—			—		142			142			23			165
Reversal of Other Comprehensive Income (Loss) due to Sale of Annuity and CBVA	—		—		—			—			—			—		—			—			—			—
Other comprehensive income (loss), after tax	—		—		—			—			(166		)	—		—			(166		)	—			(166		)
Total comprehensive income (loss)																			(24		)	23			(1		)
Effect of transaction for entities under common control	—		—		—			—			—			—		—			—			—			—
Net consolidations (deconsolidations) of consolidated investment entities	—		—		—			—			—			—		—			—			—			—
Preferred stock issuance	—		—		—			319			—			—		—			319			—			319
Common stock issuance	—		—		—			2			—			—		—			2			—			2
Common stock acquired - Share repurchase	—		—		(250		)	—			—			—		—			(250		)	—			(250		)
Dividends on preferred stock	—		—		—			—			—			—		—			—			—			—
Dividends on common stock	—		—		—			(2		)	—			—		—			(2		)	—			(2		)
Share-based compensation	—		—		(13		)	31			—			—		—			18			—			18
Contributions from (Distributions to) noncontrolling interest, net	—		—		—			—			—			—		—			—			(128		)	(128		)
Balance as of September 30, 2018	$	—	$	3	$	(4,705	)	$	24,301		$	777		$	—	$	(11,853	)	$	8,523		$	677		$	9,200



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

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Voya Financial, Inc. Condensed Consolidated Statements of Changes in Shareholders' Equity For the Nine Months Ended September 30, 2018 (Unaudited) (In millions)

	Preferred Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings (Deficit)					Total Voya Financial, Inc. Shareholders' Equity			Noncontrolling Interest			Total Shareholders' Equity
														Appropriated		Unappropriated
Balance as of January 1, 2018	$	—	$	3	$	(3,827	)	$	23,821		$	2,731		$	—	$	(12,719	)	$	10,009		$	1,030		$	11,039
Cumulative effect of changes in accounting:
Adjustment for adoption of ASU 2014-09	—		—		—			—			—			—		84			84			—			84
Adjustment for adoption of ASU 2016-01	—		—		—			—			(28		)	—		28			—			—			—
Balance as of January 1, 2018 - As adjusted	—		3		(3,827		)	23,821			2,703			—		(12,607		)	10,093			1,030			11,123
Comprehensive income (loss):
Net income (loss)	—		—		—			—			—			—		754			754			81			835
Reversal of Other Comprehensive Income (Loss) due to Sale of Annuity and CBVA	—		—		—			—			(79		)	—		—			(79		)	—			(79		)
Other comprehensive income (loss), after tax	—		—		—			—			(1,847		)	—		—			(1,847		)	—			(1,847		)
Total comprehensive income (loss)																			(1,172		)	81			(1,091		)
Effect of transaction for entities under common control	—		—		—			(31		)	—			—		—			(31		)	—			(31		)
Net consolidations (deconsolidations) of consolidated investment entities	—		—		—			—			—			—		—			—			(33		)	(33		)
Preferred stock issuance	—		—		—			319			—			—		—			319			—			319
Common stock issuance	—		—		—			3			—			—		—			3			—			3
Common stock acquired - Share repurchase	—		—		(850		)	100			—			—		—			(750		)	—			(750		)
Dividends on preferred stock	—		—		—			—			—			—		—			—			—			—
Dividends on common stock	—		—		—			(5		)	—			—		—			(5		)	—			(5		)
Share-based compensation	—		—		(28		)	94			—			—		—			66			—			66
Contributions from (Distributions to) noncontrolling interest, net	—		—		—			—			—			—		—			—			(401		)	(401		)
Balance as of September 30, 2018	$	—	$	3	$	(4,705	)	$	24,301		$	777		$	—	$	(11,853	)	$	8,523		$	677		$	9,200



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

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Voya Financial, Inc.

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2019 and 2018 (Unaudited)

(In millions)



	Nine Months Ended September 30,
	2019			2018
Cash Flows from Operating Activities:
Net cash provided by operating activities - continuing operations	$	851		$	172
Net cash provided by operating activities - discontinued operations	—			1,462
Net cash provided by operating activities	851			1,634
Cash Flows from Investing Activities:
Proceeds from the sale, maturity, disposal or redemption of:
Fixed maturities	5,999			5,845
Equity securities	20			93
Mortgage loans on real estate	858			700
Limited partnerships/corporations	181			245
Acquisition of:
Fixed maturities	(6,232		)	(6,515		)
Equity securities	(30		)	(26		)
Mortgage loans on real estate	(508		)	(761		)
Limited partnerships/corporations	(371		)	(270		)
Short-term investments, net	23			419
Derivatives, net	35			61
Sales from consolidated investment entities	484			888
Purchases within consolidated investment entities	(1,120		)	(740		)
Collateral (delivered) received, net	(55		)	76
Other, net	(37		)	2
Net cash (used in) provided by investing activities - discontinued operations	(128		)	34
Net cash (used in) provided by investing activities	(881		)	51
Cash Flows from Financing Activities:
Deposits received for investment contracts	4,686			4,327
Maturities and withdrawals from investment contracts	(4,724		)	(4,197		)
Settlements on deposit contracts	(6		)	—
Proceeds from issuance of debt with maturities of more than three months	—			350
Repayment of debt with maturities of more than three months	(106		)	(350		)
Debt issuance costs	—			(6		)
Borrowings of consolidated investment entities	853			588
Repayments of borrowings of consolidated investment entities	(726		)	(543		)
Contributions from (distributions to) participants in consolidated investment entities, net	598			(126		)
Proceeds from issuance of common stock, net	3			3
Proceeds from issuance of preferred stock, net	293			319
Share-based compensation	(17		)	(13		)
Common stock acquired - Share repurchase	(936		)	(750		)
Dividends paid on common stock	(23		)	(5		)
Dividends paid on preferred stock	(24		)	—
Principal payments for financing leases	(3		)	—
Net cash used in financing activities - discontinued operations	—			(1,209		)
Net cash used in financing activities	(132		)	(1,612		)
Net (decrease) increase in cash and cash equivalents	(162		)	73
Cash and cash equivalents, beginning of period	1,538			1,716
Cash and cash equivalents, end of period	$	1,376		$	1,789
Non-cash investing and financing activities:
Initial recognition of operating leases upon adoption of ASU 2016-02	$	146		$	—
Leased assets in exchange for finance lease liabilities	68			—



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

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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

1. Business, Basis of Presentation and Significant Accounting Policies

Business

Voya Financial, Inc. and its subsidiaries (collectively the "Company") is a financial services organization in the United States that offers a broad range of retirement services, investment management services, mutual funds, group insurance and supplemental health products.

The Company provides its principal products and services through four segments: Retirement, Investment Management, Employee Benefits and Individual Life. In addition, the Company includes in Corporate activities not directly related to its segments, results of the Retained Business (defined in the Discontinued Operations Note to these Condensed Consolidated Financial Statements) and certain run-off activities that are not meaningful to the Company's business strategy. See the Segments Note to these Condensed Consolidated Financial Statements.

After conducting a strategic review of the Individual Life business, in October 2018, the Company announced that it would retain the in-force block of individual life policies and cease new individual life insurance sales, effective December 31, 2018. Applications for individual life insurance policies were accepted through the end of 2018, resulting in some placement of policies in early 2019. The Company will continue to manage its existing in-force Individual Life business as a separate segment, with results included in the Company's Adjusted operating earnings before income taxes.

Prior to May 2013, the Company was an indirect, wholly-owned subsidiary of ING Groep N.V. ("ING Group" or "ING"), a global financial services holding company based in The Netherlands. In May 2013, Voya Financial Inc. completed its initial public offering of common stock, including the issuance and sale of common stock by Voya Financial, Inc. and the sale of shares of common stock owned indirectly by ING Group. Between October 2013 and March 2015, ING Group completed the sale of its remaining shares of common stock of Voya Financial, Inc. in a series of registered public offerings.

Basis of Presentation

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

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

The accompanying Condensed Consolidated Financial Statements reflect adjustments (including normal, recurring adjustments) necessary to present fairly the financial position of the Company as of September 30, 2019, its results of operations, comprehensive income and changes in shareholders' equity for the three and nine months ended September 30, 2019 and 2018, and its statements of cash flows for the nine months ended September 30, 2019 and 2018, in conformity with U.S. GAAP. Interim results are not necessarily indicative of full year performance.

The December 31, 2018 Consolidated Balance Sheet is from the audited Consolidated Financial Statements included in the Company's Annual Report on Form 10-K, filed with the SEC. Therefore, these unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company's Annual Report on Form 10-K.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Adoption of New Pronouncements

The following table provides a description of the Company's adoption of new Accounting Standard Updates ("ASUs") issued by the Financial Accounting Standards Board ("FASB") and the impact of the adoption on the Company's financial statements.



Standard	Description of Requirements	Effective Date and Method of Adoption	Effect on the Financial Statements or Other Significant Matters
ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income	This standard, issued in February 2018, permits a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 ("Tax Reform"). Stranded tax effects arise because U.S. GAAP requires that the impact of a change in tax laws or rates on deferred tax liabilities and assets be reported in net income, even if related to items recognized within accumulated other comprehensive income. The amount of the reclassification would be based on the difference between the historical corporate income tax rate and the newly enacted 21% corporate income tax rate, applied to deferred tax liabilities and assets reported within accumulated other comprehensive income.	January 1, 2019, with the change reported in the period of adoption.	The impact to the January 1, 2019 Condensed Consolidated Balance Sheet was an increase to AOCI of $343, with a corresponding decrease to Retained earnings. The ASU did not have a material impact on the Company's results of operations, cash flows, or disclosures.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



Standard	Description of Requirements	Effective Date and Method of Adoption	Effect on the Financial Statements or Other Significant Matters
ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities	This standard, issued in August 2017, enables entities to better portray risk management activities in their financial statements, as follows: • Expands an entity's ability to hedge nonfinancial and financial risk components and reduces complexity in accounting for fair value hedges of interest rate risk, • Eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item, and • Eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness, and modifies required disclosures. In October 2018, the FASB issued an amendment which expands the list of U.S. benchmark interest rates permitted in the application of hedge accounting.	January 1, 2019, using the modified retrospective method, with the exception of the presentation and disclosure requirements which were adopted prospectively.	The adoption had no effect on the Company's financial condition, results of operations, or cash flows. The adoption resulted in a change to the Company's significant accounting policy with respect to Derivatives, as follows: Fair Value Hedge: For derivative instruments that are designated and qualify as a fair value hedge, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in the same line item in the Condensed Consolidated Statements of Operations as impacted by the hedged item. Cash Flow Hedge: For derivative instruments that are designated and qualify as a cash flow hedge, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is reported as a component of AOCI. Those amounts are subsequently reclassified to earnings when the hedged item affects earnings, and are reported in the same line item in the Condensed Consolidated Statements of Operations as impacted by the hedged item. Other required disclosure changes have been included in Note 4, Derivative Financial Instruments.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



Standard	Description of Requirements	Effective Date and Method of Adoption	Effect on the Financial Statements or Other Significant Matters
ASU 2016-02, Leases	This standard, issued in February 2016, requires lessees to recognize a right-of-use asset and a lease liability for all leases with terms of more than 12 months. The lease liability will be measured as the present value of the lease payments, and the asset will be based on the liability. For income statement purposes, expense recognition will depend on the lessee's classification of the lease as either finance, with a front-loaded amortization expense pattern similar to current capital leases, or operating, with a straight-line expense pattern similar to current operating leases. Lessor accounting will be similar to the current model, and lessors will be required to classify leases as operating, direct financing, or sales-type. ASU 2016-02 also replaces the sale-leaseback guidance to align with the new revenue recognition standard, addresses statement of operation and statement of cash flow classification, and requires additional disclosures for all leases. In addition, the FASB issued various amendments during 2018 to clarify and simplify the provisions and implementation guidance of ASU 2016-02.	January 1, 2019 using the modified retrospective method.	Adoption of the ASU resulted in the establishment of a $146 lease liability for operating leases and a corresponding right-of-use asset, which are included in Other liabilities and Other assets, respectively. The Company elected the practical expedients at transition. The ASU did not impact the Company's Shareholders’ equity or results of operations, and did not materially impact cash flows or disclosures.

Future Adoption of Accounting Pronouncements

Long-Duration Contracts

In August 2018, the FASB issued ASU 2018-12, "Financial Services - Insurance (Topic 944) Targeted Improvements to the Accounting for Long-Duration Contracts" ("ASU 2018-12"), which changes the measurement and disclosures of insurance liabilities and deferred acquisition costs ("DAC") for long-duration contracts issued by insurers. In October 2019, the FASB voted to amend the effective date of ASU 2018-12 for public business entities that are required to file with the SEC to fiscal years beginning after December 15, 2021, including interim periods, with early adoption permitted. The Company is currently in the process of evaluating the provisions of ASU 2018-12. While it is not possible to estimate the expected impact of adoption at this time, the Company believes there is a reasonable possibility that implementation of ASU 2018-12 may result in a significant impact on Shareholders’ equity and future earnings patterns.

In addition to requiring significantly expanded interim and annual disclosures regarding long-duration insurance contract assets and liabilities, ASU 2018-12's provisions include modifications to the accounting for such contracts in the following areas:



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



ASU 2018-12 Subject Area	Description of Requirements	Transition Provisions	Effect on the Financial Statements or Other Significant Matters
Assumptions used to measure the liability for future policy benefits for nonparticipating traditional and limited payment insurance contracts	Requires insurers to review and, if necessary, update cash flow assumptions at least annually. The effect of updating cash flow assumptions will be measured on a retrospective catch-up basis and presented in the Statement of Operations in the period in which the update is made. The rate used to discount the liability for future policy benefits will be required to be updated quarterly, with related changes in the liability recorded in AOCI. The discount rate will be based on an upper-medium grade fixed-income corporate instrument yield reflecting the duration characteristics of the relevant liabilities.	Initial adoption is required to be reported using either a full retrospective or modified retrospective approach. Under either method, upon adoption the liability for future policy benefits will be remeasured using current discount rates as of the beginning of the earliest period presented with the impact recorded as a cumulative effect adjustment to AOCI.	The application of periodic assumption updates for nonparticipating traditional and limited payment insurance contracts is significantly different from the current accounting approach for such liabilities, which is based on assumptions that are locked in at contract inception unless a premium deficiency occurs. Under the current accounting guidance, the liability discount rate is based on expected yields on the underlying investment portfolio held by the insurer. The implications of these requirements, including transition options, and related potential financial statement impacts are currently being evaluated.
Measurement of market risk benefits	Creates a new category of benefit features called market risk benefits, defined as features that protect contract holders from capital market risk and expose the insurers to that risk. Market risk benefits will be required to be measured at fair value, with changes in fair value recognized in the Statement of Operations, except for changes in fair value attributable to changes in the instrument-specific credit risk, which will be recorded in AOCI.	Full retrospective application is required. Upon adoption, any difference between the fair value and pre-adoption carrying value of market risk benefits not currently measured at fair value will be recorded to retained earnings. In addition, the cumulative effect of changes in instrument-specific credit risk will be reclassified from retained earnings to AOCI.	Under the current accounting guidance, certain features that are expected to meet the definition of market risk benefits are accounted for as either insurance liabilities (for example, GMDB and GMIB) or embedded derivatives (for example, GMWBL and GMWB). The implications of these requirements and related potential financial statement impacts are currently being evaluated.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



ASU 2018-12 Subject Area	Description of Requirements	Transition Provisions	Effect on the Financial Statements or Other Significant Matters
Amortization of DAC and other balances	Requires DAC (and other balances that refer to the DAC model, such as deferred sales inducement costs and unearned revenue liabilities) for all long-duration contracts to be measured on a constant level basis over the expected life of the contract.	Initial adoption is required to be reported using either a full retrospective or modified retrospective approach. The method of transition applied for DAC and other balances must be consistent with the transition method selected for future policy benefit liabilities, as described above.	This approach is intended to approximate straight-line amortization and cannot be based on revenue or profits as it is under the current accounting model. Related amounts in AOCI will be eliminated upon adoption. ASU 2018-12 did not change the existing accounting guidance related to value of business acquired ("VOBA") and net cost of reinsurance, which allows, but does not require, insurers to amortize such balances on a basis consistent with DAC. The implications of these requirements, including transition options, and related potential financial statement impacts are currently being evaluated.

The following table provides a description of future adoptions of other new accounting standards that may have an impact on the Company's financial statements when adopted:



Standard	Description of Requirements	Effective date and transition provisions	Effect on the financial statements or other significant matters
ASU 2019-04, Codification Improvements to Financial Instruments	This standard, issued in April 2019, represents changes to clarify, correct errors in, and improve the financial instruments guidance in the following areas: • Topic 326, Financial Instruments-Credit Losses, • Topic 815, Derivatives and Hedging, and • Topic 825, Financial Instruments.	Generally January 1, 2020, including interim periods, with early adoption permitted. The effective dates and transition methods vary by provision.	The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2019-04.
ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract	This standard, issued in August 2018, requires a customer in a hosting arrangement that is a service contract to follow the guidance for internal-use software projects to determine which implementation costs to capitalize as an asset. Capitalized implementation costs are required to be expensed over the term of the hosting arrangement. In addition, a customer is required to apply the impairment and abandonment guidance for long-lived assets to the capitalized implementation costs. Balances related to capitalized implementation costs must be presented in the same financial statement line items as other hosting arrangement balances, and additional disclosures are required.	January 1, 2020 with early adoption permitted. Initial adoption of ASU 2018-15 may be reported either on a prospective or retrospective basis.	The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2018-15.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



Standard	Description of Requirements	Effective date and transition provisions	Effect on the financial statements or other significant matters
ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans	This standard, issued in August 2018, eliminates certain disclosure requirements that are no longer considered cost beneficial and requires new disclosures that are considered relevant.	January 1, 2021 with early adoption permitted. Initial adoption of ASU 2018-14 is required to be reported on a retrospective basis for all periods presented.	The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2018-14.
ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement	This standard, issued in August 2018, simplifies certain disclosure requirements for fair value measurement.	January 1, 2020, including interim periods, with early adoption permitted. The transition method varies by provision.	The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2018-13.
ASU 2016-13, Measurement of Credit Losses on Financial Instruments	This standard, issued in June 2016: • Introduces a new current expected credit loss ("CECL") model to measure impairment on certain types of financial instruments, • Requires an entity to estimate lifetime expected credit losses, under the new CECL model, based on relevant information about historical events, current conditions, and reasonable and supportable forecasts, • Modifies the impairment model for available-for-sale debt securities, and • Provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. In addition, the FASB issued various amendments during 2018 and 2019 to clarify the provisions of ASU 2016-13.	January 1, 2020, including interim periods, with early adoption permitted. Initial adoption of ASU 2016-13 is required to be reported on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption, except for certain provisions that are required to be applied prospectively.	The Company does not expect the adoption of this guidance to have a material impact on the Company’s financial condition, results of operations or cash flows; however, implementation efforts are ongoing. The CECL requirements apply to financial assets held at amortized cost, the most significant of which, for the Company, are mortgage loans and reinsurance recoverable balances. Implementation efforts currently in progress include the finalization of CECL models and continuing analysis of model output, as well as development of related processes, controls, and disclosures.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

2. Discontinued Operations

On June 1, 2018, the Company consummated a series of transactions (collectively, the "2018 Transaction") pursuant to a Master Transaction Agreement dated December 20, 2017 (the "MTA") with VA Capital Company LLC ("VA Capital") and Athene Holding Ltd. ("Athene"). As part of the 2018 Transaction, Venerable Holdings, Inc. ("Venerable"), a wholly owned subsidiary of VA Capital, acquired two of the Company's subsidiaries, Voya Insurance and Annuity Company ("VIAC") and Directed Services, LLC ("DSL"), and VIAC and other Voya subsidiaries reinsured to Athene substantially all of their fixed and fixed indexed annuities business. In connection with the 2018 Transaction, VIAC and another Voya subsidiary engaged in a series of reinsurance arrangements pursuant to which Voya and its subsidiaries other than VIAC retained VIAC’s businesses other than variable annuities and fixed and fixed indexed annuities. Pursuant to the terms of the 2018 Transaction, the Company has retained a small number of CBVA and Annuities policies that are not included in the disposed businesses described above as "Retained Business."

During the second quarter of 2019, the Company settled the outstanding purchase price true-up amounts with VA Capital. The Company does not anticipate further material charges in connection with the 2018 Transaction. Income(loss) from discontinued operations, net of tax for the nine months ended September 30, 2019 includes a $82 charge related to the purchase price true-up settlement in connection with the 2018 Transaction.

The following table summarizes the components of Income (loss) from discontinued operations, net of tax for the nine months ended September 30, 2019 and 2018:



	Nine Months Ended September 30,
	2019			2018
Revenues:
Net investment income	$	—		$	510
Fee income	—			295
Premiums	—			(50		)
Total net realized capital gains (losses)	—			(345		)
Other revenue	—			10
Total revenues	—			420
Benefits and expenses:
Interest credited and other benefits to contract owners/policyholders	—			442
Operating expenses	—			(14		)
Net amortization of Deferred policy acquisition costs and Value of business acquired	—			49
Interest expense	—			10
Total benefits and expenses	—			487
Income (loss) from discontinued operations before income taxes	—			(67		)
Income tax expense (benefit)	—			(19		)
Adjustment to loss on sale, net of tax	(82		)	505
Income (loss) from discontinued operations, net of tax	$	(82	)	$	457



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

3. Investments (excluding Consolidated Investment Entities)

Fixed Maturities

Available-for-sale and fair value option ("FVO") fixed maturities were as follows as of September 30, 2019:



	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Embedded Derivatives⁽²⁾		Fair Value		OTTI⁽³⁾⁽⁴⁾
Fixed maturities:
U.S. Treasuries	$	1,661	$	603	$	—	$	—	$	2,264	$	—
U.S. Government agencies and authorities	198		64		—		—		262		—
State, municipalities and political subdivisions	1,644		170		—		—		1,814		—
U.S. corporate public securities	18,281		2,933		54		—		21,160		—
U.S. corporate private securities	6,343		588		29		—		6,902		—
Foreign corporate public securities and foreign governments⁽¹⁾	5,224		662		24		—		5,862		—
Foreign corporate private securities⁽¹⁾	4,979		301		12		—		5,268		—
Residential mortgage-backed securities	5,563		297		23		33		5,870		9
Commercial mortgage-backed securities	3,983		338		1		—		4,320		—
Other asset-backed securities	2,643		49		35		—		2,657		2
Total fixed maturities, including securities pledged	50,519		6,005		178		33		56,379		11
Less: Securities pledged	1,590		230		16		—		1,804		—
Total fixed maturities	$	48,929	$	5,775	$	162	$	33	$	54,575	$	11

⁽¹⁾ Primarily U.S. dollar denominated.

⁽²⁾ Embedded derivatives within fixed maturity securities are reported with the host investment. The changes in fair value of embedded derivatives are reported in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.

⁽³⁾ Represents Other-than-Temporary-Impairments ("OTTI") reported as a component of Other comprehensive income (loss).

⁽⁴⁾ Amount excludes $458 of net unrealized gains on impaired available-for-sale securities.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Available-for-sale and FVO fixed maturities were as follows as of December 31, 2018:



	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Embedded Derivatives⁽²⁾		Fair Value		OTTI⁽³⁾⁽⁴⁾
Fixed maturities:
U.S. Treasuries	$	1,937	$	360	$	2	$	—	$	2,295	$	—
U.S. Government agencies and authorities	204		38		—		—		242		—
State, municipalities and political subdivisions	1,652		29		22		—		1,659		—
U.S. corporate public securities	19,210		1,053		415		—		19,848		—
U.S. corporate private securities	6,264		138		170		—		6,232		—
Foreign corporate public securities and foreign governments⁽¹⁾	5,429		193		167		—		5,455		—
Foreign corporate private securities⁽¹⁾	5,176		70		152		—		5,094		—
Residential mortgage-backed securities	4,616		214		53		26		4,803		11
Commercial mortgage-backed securities	3,438		33		55		—		3,416		—
Other asset-backed securities	2,095		30		48		—		2,077		2
Total fixed maturities, including securities pledged	50,021		2,158		1,084		26		51,121		13
Less: Securities pledged	1,824		107		64		—		1,867		—
Total fixed maturities	$	48,197	$	2,051	$	1,020	$	26	$	49,254	$	13

⁽¹⁾ Primarily U.S. dollar denominated.

⁽³⁾ Represents OTTI reported as a component of Other comprehensive income (loss).

⁽⁴⁾ Amount excludes $300 of net unrealized gains on impaired available-for-sale securities.

The amortized cost and fair value of fixed maturities, including securities pledged, as of September 30, 2019, are shown below by contractual maturity. Actual maturities may differ from contractual maturities as securities may be restructured, called or prepaid. Mortgage-backed securities ("MBS") and Other asset-backed securities ("ABS") are shown separately because they are not due at a single maturity date.



	Amortized Cost		Fair Value
Due to mature:
One year or less	$	1,045	$	1,056
After one year through five years	6,441		6,699
After five years through ten years	9,036		9,763
After ten years	21,808		26,014
Mortgage-backed securities	9,546		10,190
Other asset-backed securities	2,643		2,657
Fixed maturities, including securities pledged	$	50,519	$	56,379

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



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

As of September 30, 2019 and December 31, 2018, the Company did not have any investments in a single issuer, other than obligations of the U.S. Government and government agencies, with a carrying value in excess of 10% of the Company’s Total shareholders' equity.

The following tables present the composition of the U.S. and foreign corporate securities within the fixed maturity portfolio by industry category as of the dates indicated:



	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Fair Value
September 30, 2019
Communications	$	2,406	$	460	$	—	$	2,866
Financial	5,165		715		2		5,878
Industrial and other companies	14,828		1,725		41		16,512
Energy	3,778		535		61		4,252
Utilities	6,347		800		7		7,140
Transportation	1,477		167		3		1,641
Total	$	34,001	$	4,402	$	114	$	38,289

December 31, 2018
Communications	$	2,554	$	162	$	35	$	2,681
Financial	5,200		293		90		5,403
Industrial and other companies	15,591		487		422		15,656
Energy	4,034		194		143		4,085
Utilities	6,560		253		158		6,655
Transportation	1,281		47		32		1,296
Total	$	35,220	$	1,436	$	880	$	35,776

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

The Company invests in various categories of CMOs, including CMOs that are not agency-backed, that are subject to different degrees of risk from changes in interest rates and defaults. The principal risks inherent in holding CMOs are prepayment and extension risks related to significant decreases and increases in interest rates resulting in the prepayment of principal from the underlying mortgages, either earlier or later than originally anticipated. As of September 30, 2019 and December 31, 2018, approximately 39.7% and 41.6%, respectively, of the Company's CMO holdings, were invested in the above mentioned types of CMOs such as interest-only or principal-only strips, that are subject to more prepayment and extension risk than traditional CMOs.

Public corporate fixed maturity securities are distinguished from private corporate fixed maturity securities based upon the manner in which they are transacted. Public corporate fixed maturity securities are issued initially through market intermediaries on a registered basis or pursuant to Rule 144A under the Securities Act of 1933 (the "Securities Act") and are traded on the secondary market through brokers acting as principal. Private corporate fixed maturity securities are originally issued by borrowers directly to investors pursuant to Section 4(a)(2) of the Securities Act, and are traded in the secondary market directly with counterparties, either without the participation of a broker or in agency transactions.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Repurchase Agreements

As of September 30, 2019 and December 31, 2018, the Company did not have any securities pledged in dollar rolls or reverse repurchase agreements. As of September 30, 2019, the carrying value of securities pledged and obligation to repay loans related to repurchase agreement transaction was $65 and included in Securities pledged and Payables under securities loan and repurchase agreements, including collateral held on the Condensed Consolidated Balance Sheets. As of December 31, 2018, the carrying value of securities pledged and obligation to repay loans related to repurchase agreement transaction was $45 and $46, respectively. Securities pledged related to repurchase agreements are comprised of other asset-backed securities.

Securities Lending

The Company engages in securities lending whereby the initial collateral is required at a rate of 102% of the market value of the loaned securities. The lending agent retains the collateral and invests it in high quality liquid assets on behalf of the Company. The market value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the market value of the loaned securities fluctuates. The lending agent indemnifies the Company against losses resulting from the failure of a counterparty to return securities pledged where collateral is insufficient to cover the loss. As of September 30, 2019 and December 31, 2018, the fair value of loaned securities was $1,535 and $1,635, respectively, and is included in Securities pledged on the Condensed Consolidated Balance Sheets.

If cash is received as collateral, the lending agent retains the cash collateral and invests it in short-term liquid assets on behalf of the Company. As of September 30, 2019 and December 31, 2018, cash collateral retained by the lending agent and invested in short-term liquid assets on the Company's behalf was $1,329 and $1,581, respectively, and is recorded in Short-term investments under securities loan agreements, including collateral delivered on the Condensed Consolidated Balance Sheets. As of September 30, 2019 and December 31, 2018, liabilities to return collateral of $1,329 and $1,581, respectively, are included in Payables under securities loan and repurchase agreements, including collateral held on the Condensed Consolidated Balance Sheets.

The Company accepts non-cash collateral in the form of securities. The securities retained as collateral by the lending agent may not be sold or re-pledged, except in the event of default, and are not reflected on the Company’s Condensed Consolidated Balance Sheets. This collateral generally consists of U.S. Treasury, U.S. Government agency securities and MBS pools. As of September 30, 2019 and December 31, 2018, the fair value of securities retained as collateral by the lending agent on the Company’s behalf was $260 and $111, respectively.

The following table presents borrowings under securities lending transactions by asset class pledged as of the dates indicated:



	September 30, 2019 ⁽¹⁾⁽²⁾		December 31, 2018 ⁽¹⁾⁽²⁾
U.S. Treasuries	$	291	$	337
U.S. Government agencies and authorities	37		7
U.S. corporate public securities	869		992
Equity Securities	—		1
Short-term investments	51		—
Foreign corporate public securities and foreign governments	341		355
Payables under securities loan agreements	$	1,589	$	1,692

⁽¹⁾As of September 30, 2019 and December 31, 2018, borrowings under securities lending transactions include cash collateral of $1,329 and $1,581, respectively.

⁽²⁾As of September 30, 2019 and December 31, 2018, borrowings under securities lending transactions include non-cash collateral of $260 and $111, respectively.

The Company's securities lending activities are conducted on an overnight basis, and all securities loaned can be recalled at any time. The Company does not offset assets and liabilities associated with its securities lending program.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Unrealized Capital Losses

Unrealized capital losses (including noncredit impairments), along with the fair value of fixed maturity securities, including securities pledged, by market sector and duration were as follows as of September 30, 2019:



	Twelve Months or Less Below Amortized Cost					More Than Twelve Months Below Amortized Cost					Total
	Fair Value		Unrealized Capital Losses			Fair Value		Unrealized Capital Losses			Fair Value		Unrealized Capital Losses
U.S. Treasuries	$	4	$	—	*	$	49	$	—	*	$	53	$	—	*
State, municipalities and political subdivisions	—		—			1		—		*	1		—		*
U.S. corporate public securities	361		6			319		48			680		54
U.S. corporate private securities	244		4			164		25			408		29
Foreign corporate public securities and foreign governments	60		2			218		22			278		24
Foreign corporate private securities	128		3			237		9			365		12
Residential mortgage-backed	1,049		16			160		7			1,209		23
Commercial mortgage-backed	186		1			7		—		*	193		1
Other asset-backed	788		14			546		21			1,334		35
Total	$	2,820	$	46		$	1,701	$	132		$	4,521	$	178
Total number of securities in an unrealized loss position	405					344					749

*Less than $1.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



	Twelve Months or Less Below Amortized Cost					More Than Twelve Months Below Amortized Cost				Total
	Fair Value		Unrealized Capital Losses			Fair Value		Unrealized Capital Losses		Fair Value		Unrealized Capital Losses
U.S. Treasuries	$	24	$	—	*	$	94	$	2	$	118	$	2
State, municipalities and political subdivisions	523		10			241		12		764		22
U.S. corporate public securities	6,544		305			972		110		7,516		415
U.S. corporate private securities	2,348		68			888		102		3,236		170
Foreign corporate public securities and foreign governments	2,379		119			314		48		2,693		167
Foreign corporate private securities	2,130		113			403		39		2,533		152
Residential mortgage-backed	897		18			602		35		1,499		53
Commercial mortgage-backed	1,555		33			550		22		2,105		55
Other asset-backed	1,436		46			98		2		1,534		48
Total	$	17,836	$	712		$	4,162	$	372	$	21,998	$	1,084
Total number of securities in an unrealized loss position	2,338					751				3,089

*Less than $1.

Based on the Company's quarterly evaluation of its securities in a unrealized loss position, described below, the Company concluded that these securities were not other-than-temporarily impaired as of September 30, 2019. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases.

On a quarterly basis, the Company evaluates its available-for-sale investment portfolio to determine whether there has been an other-than-temporary decline in fair value below the amortized cost basis. All available-for-sale securities with fair values less than amortized cost are included in the Company’s evaluation. Generally, for non-structured securities, management considers the estimated fair value as the recovery value when available information does not indicate that another value is more appropriate. When information is identified that indicates a recovery value other than estimated fair value, management considers in the determination of recovery value the same consideration utilized in its overall impairment evaluation process, which incorporates available information and the Company’s best estimate of scenario based outcomes regarding the specific security and issuer. The Company also considers quality and amount of any credit enhancement; the security's position within the capital structure of the issuer; fundamentals of the industry and geographic area in which the security issuer operates; and the overall macroeconomic conditions. For structured securities, such as non-agency RMBS, CMBS, and ABS, the Company evaluates other-than-temporary impairments based on actual and projected cash flows, after considering the quality and updated loan-to-value ratios, reflecting current home prices of the underlying collateral, forecasted loss severity, the payment priority in the tranche and any credit enhancement within the structure. In assessing credit impairment, the Company performs discounted cash flow analysis comparing the current amortized cost of a security to the present value of the expected future cash flows, including estimated defaults, and prepayments. The discount rate is generally the effective interest rate of the fixed maturity prior to the impairment.

See the Business, Basis of Presentation and Significant Accounting Policies Note to our Consolidated Financial Statements in Part II, Item 8. in our Annual Report on Form 10-K for the policy used to evaluate whether the investments are other-than-temporarily impaired.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Gross unrealized capital losses on fixed maturities, including securities pledged, decreased $906 from $1,084 to $178 for the nine months ended September 30, 2019. The decrease in gross unrealized capital losses was primarily due to declining interest rates.

At September 30, 2019, $43 of the total $178 of gross unrealized losses were from 10 available-for-sale fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for 12 months or greater.

Evaluating Securities for Other-Than-Temporary Impairments

The Company performs a regular evaluation, on a security-by-security basis, of its available-for-sale securities holdings, including fixed maturity securities, in accordance with its impairment policy in order to evaluate whether such investments are other-than-temporarily impaired.

The following table identifies the Company's impairments included in the Condensed Consolidated Statements of Operations, excluding impairments included in Other comprehensive income (loss) by type for the periods indicated:



	Three Months Ended September 30,
	2019				2018
	Impairment			No. of Securities	Impairment			No. of Securities
U.S. corporate public securities	$	—		—	$	6		2
Foreign corporate public securities and foreign governments⁽¹⁾	—		*	2	—			—
Foreign corporate private securities⁽¹⁾	—		*	1	—			—
Residential mortgage-backed	3			20	1			18
Other asset-backed	—		*	2	—			—
Total	$	3		25	$	7		20
Credit Impairments	$	2			$	—	*
Intent Impairments	$	1			$	7
⁽¹⁾ Primarily U.S. dollar denominated.
*Less than $1
	Nine Months Ended September 30,
	2019				2018
	Impairment			No. of Securities	Impairment			No. of Securities
U.S. corporate public securities	$	—		—	$	6		2
Foreign corporate public securities and foreign governments⁽¹⁾	3			3	—			—
Foreign corporate private securities⁽¹⁾	30			4	14			1
Residential mortgage-backed	3			35	2			39
Other asset-backed	1			5	—			—
Total	$	37		47	$	22		42
Credit Impairments	$	33			$	15
Intent Impairments	$	4			$	7
⁽¹⁾Primarily U.S. dollar denominated.
*Less than $1

The Company may sell securities during the period in which fair value has declined below amortized cost for fixed maturities. In certain situations, new factors, including changes in the business environment, can change the Company’s previous intent to continue holding a security. Accordingly, these factors may lead the Company to record additional intent related capital losses.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table presents the amount of credit impairments on fixed maturities for which a portion of the OTTI loss was recognized in Other comprehensive income (loss) and the corresponding changes in such amounts for the periods indicated:



	Three Months Ended September 30,
	2019		2018
Balance at July 1	$	19	$	22
Additional credit impairments:
On securities previously impaired	—		3
Reductions:
Increase in cash flows	—		—
Securities sold, matured, prepaid or paid down	1		3
Balance at September 30	$	18	$	22

	Nine Months Ended September 30,
	2019		2018
Balance at January 1	$	22	$	40
Additional credit impairments:
On securities previously impaired	—		3
Reductions:
Increase in cash flows	1		—
Securities sold, matured, prepaid or paid down	3		21
Balance at September 30	$	18	$	22

Troubled Debt Restructuring

The Company invests in high quality, well performing portfolios of commercial mortgage loans and private placements. Under certain circumstances, modifications are granted to these contracts. Each modification is evaluated as to whether a troubled debt restructuring has occurred. A modification is a troubled debt restructuring when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the face amount or maturity amount of the debt as originally stated, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company considers the amount, timing and extent of the concession granted in determining any impairment or changes in the specific valuation allowance recorded in connection with the troubled debt restructuring. A valuation allowance may have been recorded prior to the quarter when the loan is modified in a troubled debt restructuring. Accordingly, the carrying value (net of the specific valuation allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment. For the three and nine months ended September 30, 2019, the Company had one new commercial mortgage loan troubled debt restructuring with a pre-modification and post-modification carrying value of $3. For the three months ended September 30, 2019, the Company did not have any new private placement troubled debt restructuring. For the nine months ended September 30, 2019, the Company had one new private placement troubled debt restructuring with a pre-modification cost basis of $124 and post-modification carrying value of $90. For the three and nine months ended September 30, 2018, the Company did not have any new commercial mortgage loan or private placement troubled debt restructuring.

For the three and nine months ended September 30, 2019 and September 30, 2018, the Company did not have any commercial mortgage loans or private placements modified in a troubled debt restructuring with a subsequent payment default.

Mortgage Loans on Real Estate

The Company diversifies its commercial mortgage loan portfolio by geographic region and property type to reduce concentration risk. The Company manages risk when originating commercial mortgage loans by generally lending only up to 75% of the estimated



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

fair value of the underlying real estate. Subsequently, the Company continuously evaluates mortgage loans based on relevant current information including a review of loan-specific credit quality, property characteristics and market trends. Loan performance is monitored on a loan specific basis through the review of submitted appraisals, operating statements, rent revenues and annual inspection reports, among other items. This review ensures properties are performing at a consistent and acceptable level to secure the debt. The components to evaluate debt service coverage are received and reviewed at least annually to determine the level of risk.

The following table summarizes the Company's investment in mortgage loans as of the dates indicated:



	September 30, 2019								December 31, 2018
	Impaired		Non Impaired			Total			Impaired		Non Impaired			Total
Commercial mortgage loans	$	4	$	8,316		$	8,320		$	4	$	8,674		$	8,678
Collective valuation allowance for losses	N/A		(1		)	(1		)	N/A		(2		)	(2		)
Total net commercial mortgage loans	$	4	$	8,315		$	8,319		$	4	$	8,672		$	8,676

N/A - Not Applicable

There were no impairments on the mortgage loan portfolio for the three months ended September 30, 2019. There was one impairment of $2 on the mortgage loan portfolio for the nine months ended September 30, 2019. There were no impairments on the mortgage loan portfolio for the three and nine months ended September 30, 2018.

The following table summarizes the activity in the allowance for losses for commercial mortgage loans for the periods indicated:



	September 30, 2019			December 31, 2018
Collective valuation allowance for losses, balance at January 1	$	2		$	3
Addition to (reduction of) allowance for losses	(1		)	(1		)
Collective valuation allowance for losses, end of period	$	1		$	2

The carrying values and unpaid principal balances of impaired mortgage loans were as follows as of the dates indicated:



	September 30, 2019		December 31, 2018
Impaired loans, gross	$	4	$	4
Less: Allowances for losses on impaired loans	—		—
Impaired loans, net	$	4	$	4
Unpaid principal balance of impaired loans	$	5	$	5

As of September 30, 2019 and December 31, 2018, the Company did not have any impaired loans with allowances for losses.

Commercial loans are placed on non-accrual status when 90 days in arrears if the Company has concerns regarding the collectability of future payments, or if a loan has matured without being paid off or extended.

As of September 30, 2019 and December 31, 2018, the Company had no loans greater than 60 days in arrears and there were no mortgage loans in the Company's portfolio in process of foreclosure. The Company foreclosed on one loan during the nine months ended September 30, 2019 with a carrying value of $5.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table presents information on the average investment during the period in impaired loans and interest income recognized on impaired and troubled debt restructured loans for the periods indicated:



	Three Months Ended September 30,
	2019		2018
Impaired loans, average investment during the period (amortized cost)⁽¹⁾	$	4	$	4
Interest income recognized on impaired loans, on an accrual basis⁽¹⁾	—		—
Interest income recognized on impaired loans, on a cash basis⁽¹⁾	—		—
Interest income recognized on troubled debt restructured loans, on an accrual basis	—		—
⁽¹⁾ Includes amounts for Troubled debt restructured loans.

	Nine Months Ended September 30,
	2019		2018
Impaired loans, average investment during the period (amortized cost)⁽¹⁾	$	6	$	4
Interest income recognized on impaired loans, on an accrual basis⁽¹⁾	—		—
Interest income recognized on impaired loans, on a cash basis⁽¹⁾	—		—
Interest income recognized on troubled debt restructured loans, on an accrual basis	—		—

⁽¹⁾ Includes amounts for Troubled debt restructured loans.

Loan-to-value ("LTV") and debt service coverage ("DSC") ratios are measures commonly used to assess the risk and quality of mortgage loans. The LTV ratio, calculated at time of origination, is expressed as a percentage of the amount of the loan relative to the value of the underlying property. A LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the underlying collateral. The DSC ratio, based upon the most recently received financial statements, is expressed as a percentage of the amount of a property’s net income to its debt service payments. A DSC ratio of less than 1.0 indicates that a property’s operations do not generate sufficient income to cover debt payments. These ratios are utilized as part of the review process described above.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table presents the LTV and DSC ratios as of the dates indicated:



				Recorded Investment
				Debt Service Coverage Ratios
				> 1.5x		>1.25x - 1.5x		>1.0x - 1.25x		< 1.0x		Commercial mortgage loans secured by land or construction loans		Total		% of Total
September 30, 2019⁽¹⁾
Loan-to-Value Ratios:
	0%	-	50%	$	708	$	51	$	12	$	2	$	—	$	773	9.3	%
>	50%	-	60%	1,827		58		70		40		—		1,995		24.0	%
>	60%	-	70%	3,457		629		394		201		—		4,681		56.3	%
>	70%	-	80%	362		217		84		126		13		802		9.6	%
>	80%	and above		31		30		1		7		—		69		0.8	%
Total				$	6,385	$	985	$	561	$	376	$	13	$	8,320	100.0	%

				Recorded Investment
				Debt Service Coverage Ratios
				> 1.5x		>1.25x - 1.5x		>1.0x - 1.25x		< 1.0x		Commercial mortgage loans secured by land or construction loans		Total		% of Total
December 31, 2018⁽¹⁾
Loan-to-Value Ratios:
	0%	-	50%	$	724	$	53	$	25	$	2	$	—	$	804	9.3	%
>	50%	-	60%	1,889		61		51		6		—		2,007		23.1	%
>	60%	-	70%	3,767		520		716		63		39		5,105		58.8	%
>	70%	-	80%	402		160		102		24		6		694		8.0	%
>	80%	and above		18		7		11		8		24		68		0.8	%
Total				$	6,800	$	801	$	905	$	103	$	69	$	8,678	100.0	%

⁽¹⁾Balances do not include collective valuation allowance for losses.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Properties collateralizing mortgage loans are geographically dispersed throughout the United States, as well as diversified by property type, as reflected in the following tables as of the dates indicated:



	September 30, 2019				December 31, 2018
	Gross Carrying Value		% of Total		Gross Carrying Value		% of Total
Commercial Mortgage Loans by U.S. Region:
Pacific	$	2,071	24.9	%	$	2,078	23.8	%
South Atlantic	1,668		20.1	%	1,771		20.4	%
Middle Atlantic	1,496		18.0	%	1,525		17.6	%
West South Central	857		10.3	%	952		11.0	%
Mountain	898		10.8	%	892		10.3	%
East North Central	733		8.8	%	833		9.6	%
New England	161		1.9	%	154		1.8	%
West North Central	336		4.0	%	390		4.5	%
East South Central	100		1.2	%	83		1.0	%
Total Commercial mortgage loans	$	8,320	100.0	%	$	8,678	100.0	%



	September 30, 2019				December 31, 2018
	Gross Carrying Value		% of Total		Gross Carrying Value		% of Total
Commercial Mortgage Loans by Property Type:
Retail	$	2,284	27.5	%	$	2,482	28.6	%
Industrial	1,992		23.9	%	2,074		23.9	%
Apartments	2,174		26.1	%	2,110		24.3	%
Office	1,162		14.0	%	1,316		15.2	%
Hotel/Motel	239		2.9	%	210		2.4	%
Other	395		4.7	%	411		4.7	%
Mixed Use	74		0.9	%	75		0.9	%
Total Commercial mortgage loans	$	8,320	100.0	%	$	8,678	100.0	%



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Net Investment Income

The following table summarizes Net investment income for the periods indicated:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Fixed maturities	$	689	$	676	$	2,064	$	2,024
Equity securities	4		4		11		10
Mortgage loans on real estate	95		102		289		298
Policy loans	21		24		68		75
Short-term investments and cash equivalents	3		3		10		12
Other	60		76		168		136
Gross investment income	872		885		2,610		2,555
Less: investment expenses	19		30		62		64
Net investment income	$	853	$	855	$	2,548	$	2,491

As of September 30, 2019 and December 31, 2018, the Company had $2 and $5, respectively, of investments in fixed maturities that did not produce net investment income. Fixed maturities are moved to a non-accrual status when the investment defaults.

Interest income on fixed maturities is recorded when earned using an effective yield method, giving effect to amortization of premiums and accretion of discounts. Such interest income is recorded in Net investment income in the Condensed Consolidated Statements of Operations.

Net Realized Capital Gains (Losses)

Net realized capital gains (losses) comprise the difference between the amortized cost of investments and proceeds from sale and redemption, as well as losses incurred due to the credit-related and intent-related other-than-temporary impairment of investments. Realized investment gains and losses are also primarily generated from changes in fair value of embedded derivatives within products and fixed maturities, changes in fair value of fixed maturities recorded at FVO and changes in fair value including accruals on derivative instruments, except for effective cash flow hedges. Net realized capital gains (losses) also include changes in fair value of equity securities. The cost of the investments on disposal is generally determined based on first-in-first-out ("FIFO") methodology.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Net realized capital gains (losses) were as follows for the periods indicated:



	Three Months Ended September 30,
	2019			2018
Fixed maturities, available-for-sale, including securities pledged	$	8		$	9
Fixed maturities, at fair value option	24			(107		)
Equity securities	4			(1		)
Derivatives	(17		)	55
Embedded derivatives - fixed maturities	4			(3		)
Guaranteed benefit derivatives	(40		)	1
Other investments	2			—
Net realized capital gains (losses)	$	(15	)	$	(46	)

	Nine Months Ended September 30,
	2019			2018
Fixed maturities, available-for-sale, including securities pledged	$	2		$	(31	)
Fixed maturities, at fair value option	230			(440		)
Equity securities	19			(3		)
Derivatives	(83		)	87
Embedded derivatives - fixed maturities	7			(15		)
Guaranteed benefit derivatives	(124		)	44
Other investments	1			11
Net realized capital gains (losses)	$	52		$	(347	)

For the three and nine months ended September 30, 2019, the change in the fair value of equity securities still held as of September 30, 2019 was $4 and $19, respectively. For the three and nine months ended September 30, 2018, the change in the fair value of equity securities still held as of September 30, 2018 was $(1) and $(3), respectively.

Proceeds from the sale of fixed maturities, available-for-sale, and equity securities and the related gross realized gains and losses, before tax, were as follows for the periods indicated:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Proceeds on sales	$	664	$	287	$	3,862	$	4,089
Gross gains	13		10		73		42
Gross losses	4		8		42		65



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

4. Derivative Financial Instruments

The Company enters into the following types of derivatives:

Interest rate caps and floors: The Company uses interest rate cap contracts to hedge the interest rate exposure arising from duration mismatches between assets and liabilities. Interest rate caps are also used to hedge interest rate exposure if rates rise above a specified level. The Company uses interest rate floor contracts to hedge interest rate exposure if rates decrease below a specified level. The Company pays an upfront premium to purchase these caps and floors. The Company utilizes these contracts in non-qualifying hedging relationships.

Interest rate swaps: Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and/or liabilities. Interest rate swaps are also used to hedge the interest rate risk associated with the value of assets it owns or in an anticipation of acquiring them. Using interest rate swaps, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest payments, calculated by reference to an agreed upon notional principal amount. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made to/from the counterparty at each due date. The Company utilizes these contracts in qualifying hedging relationships as well as non-qualifying hedging relationships.

Foreign exchange swaps: The Company uses foreign exchange or currency swaps to reduce the risk of change in the value, yield or cash flows associated with certain foreign denominated invested assets. Foreign exchange swaps represent contracts that require the exchange of foreign currency cash flows against U.S. dollar cash flows at regular periods, typically quarterly or semi-annually. The Company utilizes these contracts in qualifying hedging relationships as well as non-qualifying hedging relationships.

Credit default swaps: Credit default swaps are used to reduce credit loss exposure with respect to certain assets that the Company owns or to assume credit exposure on certain assets that the Company does not own. Payments are made to, or received from, the counterparty at specified intervals. In the event of a default on the underlying credit exposure, the Company will either receive a payment (purchased credit protection) or will be required to make a payment (sold credit protection) equal to the par minus recovery value of the swap contract. The Company utilizes these contracts in non-qualifying hedging relationships.

Total return swaps: The Company uses total return swaps as a hedge against a decrease in variable annuity account values, which are invested in certain indices. Using total return swaps, the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of assets or a market index and the London Interbank Offered Rates (LIBOR) rate, calculated by reference to an agreed upon notional principal amount. No cash is exchanged at the onset of the contracts. Cash is paid and received over the life of the contract based upon the terms of the swaps. The Company utilizes these contracts in non-qualifying hedging relationships.

Currency forwards: The Company utilizes currency forward contracts to hedge currency exposure related to its invested assets. The Company utilizes these contracts in non-qualifying hedging relationships.

Forwards: The Company uses forward contracts to hedge certain invested assets against movement in interest rates, particularly mortgage rates. The Company uses To Be Announced mortgage-backed securities as an economic hedge against rate movements. The Company utilizes forward contracts in non-qualifying hedging relationships.

Futures: Futures contracts are used to hedge against a decrease in certain equity indices. Such decreases may correlate to a decrease in variable annuity account values which would increase the possibility of the Company incurring an expense for guaranteed benefits in excess of account values. The Company also uses interest rate futures contracts to hedge its exposure to market risks due to changes in interest rates. The Company enters into exchange traded futures with regulated futures commissions that are members of the exchange. The Company also posts initial and variation margins, with the exchange, on a daily basis. The Company utilizes exchange-traded futures in non-qualifying hedging relationships. The Company may also use futures contracts as a hedge against an increase in certain equity indices.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Swaptions: A swaption is an option to enter into a swap with a forward starting effective date. The Company uses swaptions to hedge the interest rate exposure associated with the minimum crediting rate and book value guarantees embedded in the retirement products that the Company offers. Increases in interest rates will generate losses on assets that are backing such liabilities. In certain instances, the Company locks in the economic impact of existing purchased swaptions by entering into offsetting written swaptions. The Company pays a premium when it purchases the swaption. The Company utilizes these contracts in non-qualifying hedging relationships.

Options: The Company uses equity options to hedge against an increase in various equity indices. Such increases may result in increased payments to the holders of the FIA and IUL contracts. The Company pays an upfront premium to purchase these options. The Company utilizes these options in non-qualifying hedging relationships.

Currency Options: The Company uses currency option contracts to hedge currency exposure related to its invested assets. The Company utilizes these contracts in non-qualifying hedging relationships.

Managed custody guarantees ("MCGs"): The Company issues certain credited rate guarantees on variable fixed income portfolios that represent stand-alone derivatives. The market value is partially determined by, among other things, levels of or changes in interest rates, prepayment rates and credit ratings/spreads.

Embedded derivatives: The Company also invests in certain fixed maturity instruments and has issued certain products that contain embedded derivatives for which market value is at least partially determined by, among other things, levels of or changes in domestic and/or foreign interest rates (short-term or long-term), exchange rates, prepayment rates, equity rates or credit ratings/spreads. In addition, the Company has entered into coinsurance with funds withheld arrangements, which contain embedded derivatives.

The Company's use of derivatives is limited mainly to economic hedging to reduce the Company's exposure to cash flow variability of assets and liabilities, interest rate risk, credit risk, exchange rate risk and equity market risk. It is the Company's policy not to offset amounts recognized for derivative instruments and amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral arising from derivative instruments executed with the same counterparty under a master netting arrangement, which provides the Company with the legal right of offset. However, in accordance with the Chicago Mercantile Exchange ("CME") rules related to the variation margin payments, the Company is required to adjust the derivative balances with the variation margin payments related to its cleared derivatives executed through CME.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The notional amounts and fair values of derivatives were as follows as of the dates indicated:



	September 30, 2019						December 31, 2018
	Notional Amount		Asset Fair Value		Liability Fair Value		Notional Amount		Asset Fair Value		Liability Fair Value
Derivatives: Qualifying for hedge accounting⁽¹⁾
Cash flow hedges:
Interest rate contracts	$	32	$	—	$	—	$	44	$	—	$	—
Foreign exchange contracts	790		40		4		744		14		23
Derivatives: Non-qualifying for hedge accounting⁽¹⁾
Interest rate contracts	22,813		342		494		24,085		140		109
Foreign exchange contracts	130		2		—		30		—		—
Equity contracts	1,946		191		17		1,756		93		4
Credit contracts	208		—		2		281		—		3
Embedded derivatives and Managed custody guarantees:
Within fixed maturity investments	N/A		33		—		N/A		26		—
Within products	N/A		—		258		N/A		—		126
Within reinsurance agreements	N/A		—		171		N/A		—		21
Managed custody guarantees	N/A		—		5		N/A		—		—
Total			$	608	$	951			$	273	$	286

⁽¹⁾Open derivative contracts are reported as Derivatives assets or liabilities on the Condensed Consolidated Balance Sheets at fair value.

N/A - Not Applicable

Based on the notional amounts, a substantial portion of the Company’s derivative positions was not designated or did not qualify for hedge accounting as part of a hedging relationship as of September 30, 2019 and December 31, 2018. The Company utilizes derivative contracts mainly to hedge exposure to variability in cash flows, interest rate risk, credit risk, foreign exchange risk and equity market risk. The majority of derivatives used by the Company are designated as product hedges, which hedge the exposure arising from insurance liabilities or guarantees embedded in the contracts the Company offers through various product lines. These derivatives do not qualify for hedge accounting as they do not meet the criteria of being "highly effective" as outlined in ASC Topic 815, but do provide an economic hedge, which is in line with the Company’s risk management objectives. The Company also uses derivatives contracts to hedge its exposure to various risks associated with the investment portfolio. The Company does not seek hedge accounting treatment for certain of these derivatives as they generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules outlined in ASC Topic 815. The Company also uses credit default swaps coupled with other investments in order to produce the investment characteristics of otherwise permissible investments that do not qualify as effective accounting hedges under ASC Topic 815.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Although the Company has not elected to net its derivative exposures, the notional amounts and fair values of Over-The-Counter ("OTC") and cleared derivatives excluding exchange traded contracts are presented in the tables below as of the dates indicated:



	September 30, 2019
	Notional Amount		Asset Fair Value			Liability Fair Value
Credit contracts	$	208	$	—		$	2
Equity contracts	1,827		191			17
Foreign exchange contracts	920		42			4
Interest rate contracts	21,028		342			494
			575			517
Counterparty netting⁽¹⁾			(342		)	(342		)
Cash collateral netting⁽¹⁾			(206		)	(175		)
Securities collateral netting⁽¹⁾			(15		)	—
Net receivables/payables			$	12		$	—

⁽¹⁾Represents the netting of receivable balances with payable balances, net of collateral, for the same counterparty under eligible netting agreements.



	December 31, 2018
	Notional Amount		Asset Fair Value			Liability Fair Value
Credit contracts	$	281	$	—		$	3
Equity contracts	1,616		93			3
Foreign exchange contracts	774		14			23
Interest rate contracts	21,575		140			109
			247			138
Counterparty netting⁽¹⁾			(113		)	(113		)
Cash collateral netting⁽¹⁾			(112		)	(9		)
Securities collateral netting⁽¹⁾			(11		)	(15		)
Net receivables/payables			$	11		$	1

⁽¹⁾Represents the netting of receivable balances with payable balances, net of collateral, for the same counterparty under eligible netting agreements.

Collateral

Under the terms of the OTC Derivative International Swaps and Derivatives Association, Inc. ("ISDA") agreements, the Company may receive from, or deliver to, counterparties collateral to assure that terms of the ISDA agreements will be met with regard to the Credit Support Annex ("CSA"). The terms of the CSA call for the Company to pay interest on any cash received equal to the Federal Funds rate. To the extent cash collateral is received and delivered, it is included in Payables under securities loan and repurchase agreements, including collateral held and Short-term investments under securities loan agreements, including collateral delivered, respectively, on the Condensed Consolidated Balance Sheets and is reinvested in short-term investments. Collateral held is used in accordance with the CSA to satisfy any obligations. Investment grade bonds owned by the Company are the source of noncash collateral posted, which is reported in Securities pledged on the Condensed Consolidated Balance Sheets. As of September 30, 2019, the Company held $184 and pledged $152 of net cash collateral related to OTC derivative contracts and cleared derivative contracts, respectively. As of December 31, 2018, the Company held $91 and $16 of net cash collateral related to OTC derivative contracts and cleared derivative contracts, respectively. In addition, as of September 30, 2019, the Company delivered $204 of securities and held $15 of securities as collateral. As of December 31, 2018, the Company delivered $187 of securities and held $11 of securities as collateral.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The location and effect of derivatives qualifying for hedge accounting on the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income are as follows for the periods indicated:



	Interest Rate Contracts		Foreign Exchange Contracts
Derivatives: Qualifying for hedge accounting
Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income	Net investment income		Net investment income
Three Months Ended September 30, 2019
Amount of Gain or (Loss) Recognized in Other Comprehensive Income	$	—	$	33
Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income	—		3
Nine Months Ended September 30, 2019
Amount of Gain or (Loss) Recognized in Other Comprehensive Income	2		43
Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income	—		9

The location and amount of gain (loss) recognized in the Condensed Consolidated Statements of Operations for derivatives qualifying for hedge accounting are as follows for the periods indicated:



	Three Months Ended September 30, 2019
	Net Investment Income		Other net realized capital gains/(losses)
Total amounts of line items presented in the statement of operations in which the effects of cash flow hedges are recorded	$	853	$	(12	)
Derivatives: Qualifying for hedge accounting
Cash flow hedges:
Foreign exchange contracts:
Gain (loss) reclassified from accumulated other comprehensive income into income	3		—

	Nine Months Ended September 30, 2019
	Net Investment Income		Other net realized capital gains/(losses)
Total amounts of line items presented in the statement of operations in which the effects of cash flow hedges are recorded	$	2,548	$	91
Derivatives: Qualifying for hedge accounting
Cash flow hedges:
Foreign exchange contracts:
Gain (loss) reclassified from accumulated other comprehensive income into income	9		—



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The location and effect of derivatives not designated as hedging instruments on the Condensed Consolidated Statements of Operations are as follows for the period indicated:



	Location of Gain or (Loss) Recognized in Income on Derivative	Three Months Ended September 30,
		2019			2018
Derivatives: Non-qualifying for hedge accounting
Interest rate contracts	Other net realized capital gains (losses)	$	(18	)	$	28
Foreign exchange contracts	Other net realized capital gains (losses)	4			1
Equity contracts	Other net realized capital gains (losses)	(3		)	20
Credit contracts	Other net realized capital gains (losses)	—			3
Embedded derivatives and Managed custody guarantees:
Within fixed maturity investments	Other net realized capital gains (losses)	4			(3		)
Within products	Other net realized capital gains (losses)	(36		)	1
Within reinsurance agreements	Policyholder benefits	(48		)	6
Managed custody guarantees	Other net realized capital gains (losses)	(4		)	—
Total		$	(101	)	$	56

	Location of Gain or (Loss) Recognized in Income on Derivative	Nine Months Ended September 30,
		2019			2018
Derivatives: Non-qualifying for hedge accounting
Interest rate contracts	Other net realized capital gains (losses)	$	(149	)	$	61
Foreign exchange contracts	Other net realized capital gains (losses)	8			4
Equity contracts	Other net realized capital gains (losses)	54			11
Credit contracts	Other net realized capital gains (losses)	4			4
Embedded derivatives and Managed custody guarantees:
Within fixed maturity investments	Other net realized capital gains (losses)	7			(15		)
Within products	Other net realized capital gains (losses)	(120		)	44
Within reinsurance agreements	Policyholder benefits	(170		)	94
Managed custody guarantees	Other net realized capital gains (losses)	(4		)	—
Total		$	(370	)	$	203



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

5. Fair Value Measurements (excluding Consolidated Investment Entities)

Fair Value Measurement

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of September 30, 2019:



	Level 1			Level 2			Level 3			Total
Assets:
Fixed maturities, including securities pledged:
U.S. Treasuries	$	1,629		$	635		$	—		$	2,264
U.S. Government agencies and authorities	—			262			—			262
State, municipalities and political subdivisions	—			1,814			—			1,814
U.S. corporate public securities	—			21,052			108			21,160
U.S. corporate private securities	—			5,171			1,731			6,902
Foreign corporate public securities and foreign governments⁽¹⁾	—			5,856			6			5,862
Foreign corporate private securities⁽¹⁾	—			4,885			383			5,268
Residential mortgage-backed securities	—			5,835			35			5,870
Commercial mortgage-backed securities	—			4,307			13			4,320
Other asset-backed securities	—			2,534			123			2,657
Total fixed maturities, including securities pledged	1,629			52,351			2,399			56,379
Equity securities	177			—			196			373
Derivatives:
Interest rate contracts	2			340			—			342
Foreign exchange contracts	—			42			—			42
Equity contracts	—			45			146			191
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	3,325			29			—			3,354
Assets held in separate accounts	74,217			5,817			100			80,134
Total assets	$	79,350		$	58,624		$	2,841		$	140,815
Percentage of Level to total	56		%	42		%	2		%	100		%
Liabilities:
Derivatives:
Guaranteed benefit derivatives:
IUL	$	—		$	—		$	161		$	161
Other⁽²⁾	—			—			102			102
Other derivatives:
Interest rate contracts	—			494			—			494
Foreign exchange contracts	—			4			—			4
Equity contracts	1			16			—			17
Credit contracts	—			2			—			2
Embedded derivative on reinsurance	—			171			—			171
Total liabilities	$	1		$	687		$	263		$	951

⁽¹⁾Primarily U.S. dollar denominated.

⁽²⁾Includes Guaranteed minimum withdrawal benefits with life payouts ("GMWBL"), Guaranteed minimum withdrawal benefits ("GMWB"), Fixed Indexed Annuities ("FIA"), Stabilizer and MCGs.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2018:



	Level 1			Level 2			Level 3			Total
Assets:
Fixed maturities, including securities pledged:
U.S. Treasuries	$	1,753		$	542		$	—		$	2,295
U.S. Government agencies and authorities	—			242			—			242
State, municipalities and political subdivisions	—			1,659			—			1,659
U.S. corporate public securities	—			19,804			44			19,848
U.S. corporate private securities	—			4,839			1,393			6,232
Foreign corporate public securities and foreign governments⁽¹⁾	—			5,444			11			5,455
Foreign corporate private securities⁽¹⁾	—			4,843			251			5,094
Residential mortgage-backed securities	—			4,775			28			4,803
Commercial mortgage-backed securities	—			3,402			14			3,416
Other asset-backed securities	—			1,939			138			2,077
Total fixed maturities, including securities pledged	1,753			47,489			1,879			51,121
Equity securities	144			—			129			273
Derivatives:
Interest rate contracts	—			140			—			140
Foreign exchange contracts	—			14			—			14
Equity contracts	—			10			83			93
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	3,362			28			—			3,390
Assets held in separate accounts	65,361			5,805			62			71,228
Total assets	$	70,620		$	53,486		$	2,153		$	126,259
Percentage of Level to total	56		%	42		%	2		%	100		%
Liabilities:
Derivatives:
Guaranteed benefit derivatives:
IUL	$	—		$	—		$	82		$	82
Other⁽²⁾	—			—			44			44
Other derivatives:
Interest rate contracts	—			109			—			109
Foreign exchange contracts	—			23			—			23
Equity contracts	1			3			—			4
Credit contracts	—			3			—			3
Embedded derivative on reinsurance	—			21			—			21
Total liabilities	$	1		$	159		$	126		$	286

⁽¹⁾Primarily U.S. dollar denominated.

⁽²⁾Includes GMWBL, GMWB, FIA, Stabilizer and MCGs.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Valuation of Financial Assets and Liabilities at Fair Value

Certain assets and liabilities are measured at estimated fair value on the Company’s Condensed Consolidated Balance Sheets. The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The exit price and the transaction (or entry) price will be the same at initial recognition in many circumstances. However, in certain cases, the transaction price may not represent fair value. The fair value of a liability is based on the amount that would be paid to transfer a liability to a third-party with an equal credit standing. Fair value is required to be a market-based measurement that is determined based on a hypothetical transaction at the measurement date, from a market participant’s perspective. The Company considers three broad valuation approaches when a quoted price is unavailable: (i) the market approach, (ii) the income approach and (iii) the cost approach. The Company determines the most appropriate valuation technique to use, given the instrument being measured and the availability of sufficient inputs. The Company prioritizes the inputs to fair valuation approaches and allows for the use of unobservable inputs to the extent that observable inputs are not available.

The Company utilizes a number of valuation methodologies to determine the fair values of its financial assets and liabilities in conformity with the concepts of exit price and the fair value hierarchy as prescribed in ASC Topic 820. Valuations are obtained from third-party commercial pricing services, brokers and industry-standard, vendor-provided software that models the value based on market observable inputs. The valuations obtained from third-party commercial pricing services are non-binding. The Company reviews the assumptions and inputs used by third-party commercial pricing services for each reporting period in order to determine an appropriate fair value hierarchy level. The documentation and analysis obtained from third-party commercial pricing services are reviewed by the Company, including in-depth validation procedures confirming the observability of inputs. The valuations are reviewed and validated monthly through the internal valuation committee price variance review, comparisons to internal pricing models, back testing to recent trades or monitoring of trading volumes.

The valuation approaches and key inputs for each category of assets or liabilities that are classified within Level 2 and Level 3 of the fair value hierarchy are presented below.

For fixed maturities classified as Level 2 assets, fair values are determined using a matrix-based market approach, based on prices obtained from third-party commercial pricing services and the Company’s matrix and analytics-based pricing models, which in each case incorporate a variety of market observable information as valuation inputs. The market observable inputs used for these fair value measurements, by fixed maturity asset class, are as follows:

U.S. Treasuries: Fair value is determined using third-party commercial pricing services, with the primary inputs being stripped interest and principal U.S. Treasury yield curves that represent a U.S. Treasury zero-coupon curve.

U.S. government agencies and authorities, State, municipalities and political subdivisions: Fair value is determined using third-party commercial pricing services, with the primary inputs being U.S. Treasury yield curves, trades of comparable securities, credit spreads off benchmark yields and issuer ratings.

U.S. corporate public securities, Foreign corporate public securities and foreign governments: Fair value is determined using third-party commercial pricing services, with the primary inputs being benchmark yields, trades of comparable securities, issuer ratings, bids and credit spreads off benchmark yields.

U.S. corporate private securities and Foreign corporate private securities: Fair values are determined using a matrix and analytics-based pricing model. The model incorporates the current level of risk-free interest rates, current corporate credit spreads, credit quality of the issuer and cash flow characteristics of the security. The model also considers a liquidity spread, the value of any collateral, the capital structure of the issuer, the presence of guarantees, and prices and quotes for comparably rated publicly traded securities.

RMBS, CMBS and ABS: Fair value is determined using third-party commercial pricing services, with the primary inputs being credit spreads off benchmark yields, prepayment speed assumptions, current and forecasted loss severity, debt service coverage ratios, collateral type, payment priority within tranche and the vintage of the loans underlying the security.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Generally, the Company does not obtain more than one vendor price from pricing services per instrument. The Company uses a hierarchy process in which prices are obtained from a primary vendor and, if that vendor is unable to provide the price, the next vendor in the hierarchy is contacted until a price is obtained or it is determined that a price cannot be obtained from a commercial pricing service. When a price cannot be obtained from a commercial pricing service, independent broker quotes are solicited. Securities priced using independent broker quotes are classified as Level 3.

Broker quotes and prices obtained from pricing services are reviewed and validated through an internal valuation committee price variance review, comparisons to internal pricing models, back testing to recent trades or monitoring of trading volumes.

Fair values of privately placed bonds are determined primarily using a matrix-based pricing model and are generally classified as Level 2 assets. The model considers the current level of risk-free interest rates, current corporate spreads, the credit quality of the issuer and cash flow characteristics of the security. Also considered are factors such as the net worth of the borrower, the value of collateral, the capital structure of the borrower, the presence of guarantees and the Company’s evaluation of the borrower’s ability to compete in its relevant market. Using this data, the model generates estimated market values, which the Company considers reflective of the fair value of each privately placed bond.

Equity securities: Level 2 and Level 3 equity securities, typically private equities or equity securities not traded on an exchange, are valued by other sources such as analytics or brokers.

Derivatives: Derivatives are carried at fair value, which is determined using the Company’s derivative accounting system in conjunction with observable key financial data from third-party sources, such as yield curves, exchange rates, S&P 500 Index prices, LIBOR and Overnight Index Swap ("OIS") rates. The Company uses OIS for valuations of collateralized interest rate derivatives, which are obtained from third-party sources. For those derivatives that are unable to be valued by the accounting system, the Company typically utilizes values established by third-party brokers. Counterparty credit risk is considered and incorporated in the Company’s valuation process through counterparty credit rating requirements and monitoring of overall exposure. It is the Company’s policy to transact only with investment grade counterparties with a credit rating of A- or better. The Company’s nonperformance risk is also considered and incorporated in the Company’s valuation process. The Company also has certain credit default swaps 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, which have been classified as Level 3. The remaining derivative instruments are valued based on market observable inputs and are classified as Level 2.

Guaranteed benefit derivatives: The Company records reserves for annuity contracts containing GMWBL and GMWB riders. The guarantee is an embedded derivative and is required to be accounted for separately from the host variable annuity contract. The fair value of the obligation is calculated based on actuarial and capital market assumptions related to the projected cash flows, including benefits and related contract charges, over the anticipated life of the related contracts. The cash flow estimates are produced by using stochastic techniques under a variety of market return scenarios and other market implied assumptions. These derivatives are classified as Level 3 liabilities in the fair value hierarchy.

The index-crediting feature in the Company's FIA and IUL contracts is an embedded derivative that is required to be accounted for separately from the host contract. The fair value of the obligation is calculated based on actuarial and capital market assumptions related to the projected cash flows, including benefits and related contract charges, over the anticipated life of the related contracts for FIAs and over the current indexed term for IULs. The cash flow estimates are produced by market implied assumptions. These derivatives are classified as Level 3 liabilities in the fair value hierarchy.

The Company records reserves for Stabilizer and MCG contracts containing guaranteed credited rates. The guarantee is treated as an embedded derivative or a stand-alone derivative (depending on the underlying product) and is required to be reported at fair value. The estimated fair value is determined based on the present value of projected future claims, minus the present value of future guaranteed premiums. At inception of the contract, the Company projects a guaranteed premium to be equal to the present value of the projected future claims. The income associated with the contracts is projected using relevant actuarial and capital market assumptions, including benefits and related contract charges, over the anticipated life of the related contracts. The cash flow estimates are produced by using stochastic techniques under a variety of risk neutral scenarios and other market implied assumptions. These derivatives are classified as Level 3 liabilities.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The discount rate used to determine the fair value of the Company's GMWBL, GMWB, FIA, IUL and Stabilizer embedded derivative liabilities and the stand-alone derivative for MCG includes an adjustment to reflect the risk that these obligations will not be fulfilled ("nonperformance risk"). The nonperformance risk adjustment incorporates a blend of observable, similarly rated peer holding company credit spreads, adjusted to reflect the credit quality of the 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.

The Company's valuation actuaries are responsible for the policies and procedures for valuing the embedded derivatives, reflecting the capital markets and actuarial valuation inputs and nonperformance risk in the estimate of the fair value of the embedded derivatives. The actuarial and capital market assumptions for each liability are approved by each product's Chief Risk Officer ("CRO"), including an independent annual review by the CRO. Models used to value the embedded derivatives must comply with the Company's governance policies.

Quarterly, an attribution analysis is performed to quantify changes in fair value measurements and a sensitivity analysis is used to analyze the changes. The changes in fair value measurements are also compared to corresponding movements in the hedge target to assess the validity of the attributions. The results of the attribution analysis are reviewed by the valuation actuaries, responsible CFOs, Controllers, CROs and/or others as nominated by management.

Embedded derivatives on reinsurance: The carrying value of embedded derivatives is estimated based upon the change in the fair value of the assets supporting the funds withheld payable under reinsurance agreements. The fair value of the embedded derivative is based on market observable inputs and is classified as Level 2.

Transfers in and out of Level 1 and 2

There were no securities transferred between Level 1 and Level 2 for the three and nine months ended September 30, 2019 and 2018. The Company's policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

Level 3 Financial Instruments

The fair values of certain assets and liabilities are determined using prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (i.e., Level 3 as defined by ASC Topic 820), including but not limited to liquidity spreads for investments within markets deemed not currently active. These valuations, whether derived internally or obtained from a third-party, use critical assumptions that are not widely available to estimate market participant expectations in valuing the asset or liability. In addition, the Company has determined, for certain financial instruments, an active market is such a significant input to determine fair value that the presence of an inactive market may lead to classification in Level 3. In light of the methodologies employed to obtain the fair values of financial assets and liabilities classified as Level 3, additional information is presented below.



	45

Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following tables summarize the change in fair value of the Company’s Level 3 assets and liabilities and transfers in and out of Level 3 for the periods indicated:



	Three Months Ended September 30, 2019
	Fair Value as of July 1			Total Realized/Unrealized Gains (Losses) Included in:						Purchases		Issuances			Sales			Settlements			Transfers into Level 3⁽³⁾		Transfers out of Level 3⁽³⁾			Fair Value as of September 30			Change In Unrealized Gains (Losses) Included in Earnings⁽⁴⁾
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. corporate public securities	$	99		$	—		$	6		$	5	$	—		$	—		$	(2	)	$	—	$	—		$	108		$	—
U.S. corporate private securities	1,582			1			41			161		—			—			(61		)	7		—			1,731			1
Foreign corporate public securities and foreign governments⁽¹⁾	8			—			(2		)	—		—			—			—			—		—			6			—
Foreign corporate private securities⁽¹⁾	370			—			6			7		—			—			—			—		—			383			—
Residential mortgage-backed securities	29			(3		)	—			16		—			—			—			—		(7		)	35			(3		)
Commercial mortgage-backed securities	—			—			—			13		—			—			—			—		—			13			—
Other asset-backed securities	100			—			—			45		—			—			(1		)	—		(21		)	123			—
Total fixed maturities, including securities pledged	2,188			(2		)	51			247		—			—			(64		)	7		(28		)	2,399			(2		)
Equity securities	192			4			—			—		—			—			—			—		—			196			4
Derivatives:
Guaranteed benefit derivatives:
IUL⁽²⁾	(160		)	3			—			—		(13		)	—			9			—		—			(161		)	—
Other⁽²⁾⁽⁶⁾	(57		)	(43		)	—			—		(3		)	—			1			—		—			(102		)	—
Other derivatives, net	149			(4		)	—			10		—			—			(9		)	—		—			146			(3		)
Assets held in separate accounts⁽⁵⁾	102			1			—			12		—			(1		)	—			—		(14		)	100			—

⁽¹⁾ Primarily U.S. dollar denominated.

⁽²⁾ All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by contract basis.

These amounts are included in Other net realized gains (losses) in the Condensed Consolidated Statements of Operations.

⁽³⁾ The Company's policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

⁽⁴⁾ For financial instruments still held as of September 30, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.

⁽⁵⁾ The investment income and realized gains (losses) and change in unrealized gains (losses) included in net income for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on Net income (loss) for the Company.

⁽⁶⁾ Includes GMWBL, GMWB, FIA, Stabilizer and MCGs.



	46

Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



	Nine Months Ended September 30, 2019
	Fair Value as of January 1			Total Realized/Unrealized Gains (Losses) Included in:						Purchases		Issuances			Sales			Settlements			Transfers into Level 3⁽³⁾		Transfers out of Level 3⁽³⁾			Fair Value as of September 30			Change In Unrealized Gains (Losses) Included in Earnings⁽⁴⁾
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. corporate public securities	$	44		$	—		$	8		$	5	$	—		$	—		$	(8	)	$	60	$	(1	)	$	108		$	—
U.S. corporate private securities	1,393			2			125			314		—			(13		)	(86		)	7		(11		)	1,731			1
Foreign corporate public securities and foreign governments⁽¹⁾	11			—			(5		)	—		—			—			—			—		—			6			—
Foreign corporate private securities⁽¹⁾	251			(29		)	53			201		—			(93		)	—			—		—			383			1
Residential mortgage-backed securities	28			(7		)	—			16		—			—			—			—		(2		)	35			(7		)
Commercial mortgage-backed securities	14			—			—			13		—			—			—			—		(14		)	13			—
Other asset-backed securities	138			—			1			47		—			—			(3		)	—		(60		)	123			—
Total fixed maturities, including securities pledged	1,879			(34		)	182			596		—			(106		)	(97		)	67		(88		)	2,399			(5		)
Equity securities	129			18			—			49		—			—			—			—		—			196			18
Derivatives:
Guaranteed benefit derivatives:
IUL⁽²⁾	(82		)	(73		)	—			—		(41		)	—			35			—		—			(161		)	—
Other ⁽²⁾⁽⁶⁾	(44		)	(51		)	—			—		(10		)	—			3			—		—			(102		)	—
Other derivatives, net	83			57			—			33		—			—			(27		)	—		—			146			63
Assets held in separate accounts⁽⁵⁾	62			4			—			51		—			(1		)	—			3		(19		)	100			—

⁽¹⁾ Primarily U.S. dollar denominated.

These amounts are included in Other net realized gains (losses) in the Condensed Consolidated Statements of Operations.

⁽³⁾ The Company's policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

⁽⁶⁾ Includes GMWBL, GMWB, FIA, Stabilizer and MCGs.



	47

Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



	Three Months Ended September 30, 2018
	Fair Value as of July 1			Total Realized/Unrealized Gains (Losses) Included in:						Purchases		Issuances			Sales		Settlements			Transfers into Level 3⁽³⁾		Transfers out of Level 3⁽³⁾			Fair Value as of September 30			Change In Unrealized Gains (Losses) Included in Earnings⁽⁴⁾
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. corporate public securities	$	44		$	—		$	—		$	—	$	—		$	—	$	—		$	—	$	—		$	44		$	—
U.S. corporate private securities	1,285			—			(8		)	168		—			—		(11		)	67		(11		)	1,490			—
Foreign corporate public securities and foreign governments ⁽¹⁾	12			—			—			15		—			—		—			—		—			27			—
Foreign corporate private securities ⁽¹⁾	234			—			(8		)	20		—			—		(21		)	13		—			238			—
Residential mortgage-backed securities	43			(3		)	—			31		—			—		—			—		(10		)	61			(3		)
Commercial mortgage-backed securities	26			—			—			27		—			—		—			—		(26		)	27			—
Other asset-backed securities	164			—			—			57		—			—		(1		)	—		(51		)	169			—
Total fixed maturities, including securities pledged	1,808			(3		)	(16		)	318		—			—		(33		)	80		(98		)	2,056			(3		)
Equity securities	105			—			—			—		—			—		—			—		—			105			—
Derivatives:
Guaranteed benefit derivatives:
IUL⁽²⁾	(142		)	(26		)	—			—		(12		)	—		20			—		—			(160		)	—
Other ⁽²⁾⁽⁶⁾	(103		)	27			—			—		(3		)	—		6			—		—			(73		)	—
Other derivatives, net	140			17			—			11		—			—		(14		)	—		—			154			14
Assets held in separate accounts⁽⁵⁾	38			—			—			23		—			—		—			—		(5		)	56			—

⁽¹⁾ Primarily U.S. dollar denominated.

These amounts are included in Other net realized gains (losses) in the Condensed Consolidated Statements of Operations.

⁽³⁾ The Company's policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

⁽⁶⁾ Includes GMWBL, GMWB, FIA, Stabilizer and MCGs.



	48

Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



	Nine Months Ended September 30, 2018
	Fair Value as of January 1			Total Realized/Unrealized Gains (Losses) Included in:						Purchases		Issuances			Sales			Settlements			Transfers into Level 3⁽³⁾		Transfers out of Level 3⁽³⁾			Fair Value as of September 30			Change In Unrealized Gains (Losses) Included in Earnings⁽⁴⁾
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. corporate public securities	$	57		$	—		$	(1	)	$	9	$	—		$	(13	)	$	—		$	—	$	(8	)	$	44		$	—
U.S. corporate private securities	1,127			6			(52		)	368		—			(7		)	(53		)	112		(11		)	1,490			—
Foreign corporate public securities and foreign governments⁽¹⁾	11			—			1			15		—			—			—			—		—			27			—
Foreign corporate private securities⁽¹⁾	169			(5		)	13			154		—			(71		)	(22		)	—		—			238			(13		)
Residential mortgage-backed securities	42			(8		)	(1		)	33		—			—			—			—		(5		)	61			(8		)
Commercial mortgage-backed securities	17			—			—			27		—			—			—			—		(17		)	27			—
Other asset-backed securities	92			—			(3		)	95		—			—			(4		)	35		(46		)	169			—
Total fixed maturities, including securities pledged	1,515			(7		)	(43		)	701		—			(91		)	(79		)	147		(87		)	2,056			(21		)
Equity securities, available-for-sale	102			(2		)	—			7		—			(2		)	—			—		—			105			(2		)
Derivatives:
Guaranteed benefit derivatives:
IUL⁽²⁾	(159		)	(19		)	—			—		(38		)	—			56			—		—			(160		)	—
Other ⁽²⁾⁽⁶⁾	(147		)	63			—			—		(3		)	—			14			—		—			(73		)	—
Other derivatives, net	159			9			—			31		—			—			(45		)	—		—			154			(5		)
Assets held in separate accounts⁽⁵⁾	11			—			—			50		—			—			—			—		(5		)	56			—

⁽¹⁾ Primarily U.S. dollar denominated.

These amounts are included in Other net realized gains (losses) in the Condensed Consolidated Statements of Operations.

⁽³⁾ The Company's policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

⁽⁶⁾ Includes GMWBL, GMWB, FIA, Stabilizer and MCGs.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

For the three and nine months ended September 30, 2019 and 2018, the transfers in and out of Level 3 for fixed maturities were due to the variation in inputs relied upon for valuation each quarter. Securities that are primarily valued using independent broker quotes when prices are not available from one of the commercial pricing services are reflected as transfers into Level 3. When securities are valued using more widely available information, the securities are transferred out of Level 3 and into Level 1 or 2, as appropriate.

Significant Unobservable Inputs

The Company's Level 3 fair value measurements of its fixed maturities, equity securities and equity and credit derivative contracts are primarily based on broker quotes for which the quantitative detail of the unobservable inputs is neither provided nor reasonably corroborated, thus negating the ability to perform a sensitivity analysis. The Company performs a review of broker quotes by performing a monthly price variance comparison and back tests broker quotes to recent trade prices.

Quantitative information about the significant unobservable inputs used in the Company's Level 3 fair value measurements of its guaranteed benefit derivatives is presented in the following sections and table.

Significant unobservable inputs used in the fair value measurements of IULs include nonperformance risk and policyholder behavior assumptions, such as lapses.

Following is a description of selected inputs:

Nonperformance Risk: For the estimate of the fair value of embedded derivatives associated with the Company's product guarantees, the Company uses a blend of observable, similarly rated peer holding company credit spreads, adjusted to reflect the credit quality of the individual insurance company 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.

Actuarial Assumptions: Management regularly reviews actuarial assumptions, which are based on the Company's experience and periodically reviewed against industry standards. Industry standards and Company experience may be limited on certain products.

The following table presents the unobservable inputs for IUL as of the dates indicated:



	Range⁽¹⁾
	September 30, 2019		December 31, 2018
Unobservable Input
Nonperformance risk	0.20% to 0.56%		0.38% to 0.84%
Actuarial Assumptions:
Lapses	2% to 10%		2% to 10%
Mortality	—	⁽²⁾	—	⁽²⁾


⁽¹⁾	Represents the range of reasonable assumptions that management has used in its fair value calculations.

⁽²⁾The mortality rate is derived based on similarly underwritten business.

Generally, the following will cause an increase (decrease) in the IUL embedded derivative fair value liabilities:


•	A decrease (increase) in nonperformance risk


•	A decrease (increase) in lapses

Other Financial Instruments

The following disclosures are made in accordance with the requirements of ASC Topic 825 which requires disclosure of fair value information about financial instruments, whether or not recognized at fair value on the Condensed Consolidated Balance Sheets.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

ASC Topic 825 excludes certain financial instruments, including insurance contracts and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The carrying values and estimated fair values of the Company’s financial instruments as of the dates indicated:



	September 30, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Fixed maturities, including securities pledged	$	56,379	$	56,379	$	51,121	$	51,121
Equity securities	373		373		273		273
Mortgage loans on real estate	8,319		8,783		8,676		8,811
Policy loans	1,796		1,796		1,833		1,833
Cash, cash equivalents, short-term investments and short-term investments under securities loan agreements	3,354		3,354		3,390		3,390
Derivatives	575		575		247		247
Other investments	104		106		90		92
Assets held in separate accounts	80,134		80,134		71,228		71,228
Liabilities:
Investment contract liabilities:
Funding agreements without fixed maturities and deferred annuities⁽¹⁾	33,980		41,543		34,053		37,052
Funding agreements with fixed maturities	1,669		1,664		1,209		1,197
Supplementary contracts, immediate annuities and other	925		974		976		960
Derivatives:
Guaranteed benefit derivatives:
IUL	161		161		82		82
Other ⁽²⁾	102		102		44		44
Other derivatives	517		517		139		139
Short-term debt	1		1		1		1
Long-term debt	3,041		3,376		3,136		3,112
Embedded derivative on reinsurance	171		171		21		21

⁽¹⁾ Certain amounts included in Funding agreements without fixed maturities and deferred annuities are also reflected within the Guaranteed benefit derivatives section of the table above.

⁽²⁾Includes GMWBL, GMWB, FIA, Stabilizer and MCG.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table presents the classifications of financial instruments which are not carried at fair value on the Condensed Consolidated Balance Sheets:



Financial Instrument	Classification
Mortgage loans on real estate	Level 3
Policy loans	Level 2
Other investments	Level 2
Funding agreements without fixed maturities and deferred annuities	Level 3
Funding agreements with fixed maturities	Level 2
Supplementary contracts and immediate annuities	Level 3
Short-term debt and Long-term debt	Level 2

6. Deferred Policy Acquisition Costs and Value of Business Acquired

The following tables present a rollforward of DAC and VOBA for the periods indicated:



	2019
	DAC			VOBA				Total
Balance as of January 1, 2019	$	3,298		$	818			$	4,116
Deferrals of commissions and expenses	147			6				153
Amortization:
Amortization, excluding unlocking	(330		)	(106		)		(436		)
Unlocking⁽¹⁾	(79		)	53				(26		)
Interest accrued	134			42			⁽²⁾	176
Net amortization included in Condensed Consolidated Statements of Operations	(275		)	(11		)		(286		)
Change due to unrealized capital gains/losses on available-for-sale securities	(843		)	(369		)		(1,212		)
Balance as of September 30, 2019	$	2,327		$	444			$	2,771

	2018
	DAC			VOBA				Total
Balance as of January 1, 2018	$	2,818		$	556			$	3,374
Deferrals of commissions and expenses	147			7				154
Amortization:
Amortization, excluding unlocking	(276		)	(77		)		(353		)
Unlocking⁽¹⁾	(92		)	4				(88		)
Interest accrued	137			44			⁽²⁾	181
Net amortization included in Condensed Consolidated Statements of Operations	(231		)	(29		)		(260		)
Change due to unrealized capital gains/losses on available-for-sale securities	515			278				793
Balance as of September 30, 2018	$	3,249		$	812			$	4,061

⁽¹⁾Includes the impacts of annual review of assumptions which typically occurs in the third quarter; and retrospective and prospective unlocking. Additionally, the 2018 amounts include unfavorable unlocking for DAC and VOBA of $25 and $26, respectively, associated with an update to assumptions related to customer consents of changes to guaranteed minimum interest rate provisions.

⁽²⁾ Interest accrued at the following rates for VOBA: 3.5% to 7.4% during 2019 and 2018.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

7. Share-based Incentive Compensation Plans

The Company has provided equity-based compensation awards to its employees under the ING U.S., Inc. 2013 Omnibus Employee Incentive Plan (the "2013 Omnibus Plan") and the Voya Financial, Inc. 2014 Omnibus Employee Incentive Plan (the "2014 Omnibus Plan") (together, the "Omnibus Plans"). As of September 30, 2019, common stock reserved and available for issuance under the 2013 Omnibus Plan and the 2014 Omnibus Plan was 347,663 and 3,619,703 shares, respectively.

On March 27, 2019, the Company's Board of Directors adopted, subject to shareholder approval, the Voya Financial, Inc. 2019 Omnibus Employee Incentive Plan (the "2019 Omnibus Plan"). Shareholder approval for the 2019 Omnibus Plan was subsequently obtained at the Annual Meeting of Shareholders held on May 23, 2019. The 2019 Omnibus Plan provides for 11,700,000 shares of common stock to be available for issuance as equity-based compensation awards. As of September 30, 2019, no awards were granted under the 2019 Omnibus Plan.

The Company offers equity-based awards to Voya Financial, Inc. non-employee directors under the Voya Financial, Inc. 2013 Omnibus Non-Employee Director Incentive Plan ("Director Plan").

Compensation Cost

The following table summarizes share-based compensation expense, which includes expenses related to awards granted under the Omnibus Plans and Director Plan for the periods indicated:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Restricted Stock Unit (RSU) awards	$	10	$	11	$	37	$	40
Performance Stock Unit (PSU) awards	9		9		34		36
Stock options	2		—		6		5
Total share-based compensation expense	21		20		77		81
Income tax benefit	4		4		24		19
After-tax share-based compensation expense	$	17	$	16	$	53	$	62

Awards Outstanding

The following table summarizes RSU and PSU awards activity under the Omnibus Plans and the Director Plan for the period indicated:



	RSU Awards				PSU Awards
_{(awards in millions)}	Number of Awards		Weighted Average Grant Date Fair Value		Number of Awards		Weighted Average Grant Date Fair Value
Outstanding as of January 1, 2019	2.4		$	43.36	2.5		$	40.21
Adjustment for PSU performance factor	N/A		N/A		0.3		31.35
Granted	0.8		50.09		0.7		51.64
Vested	(1.1	)	40.17		(1.2	)	29.14
Forfeited	(0.1	)	48.53		(0.1	)	48.79
Outstanding as of September 30, 2019	2.0		$	47.85	2.2		$	48.86



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table summarizes the number of options under the Omnibus Plans for the periods indicated:



	Stock Options
_{(awards in millions)}	Number of Awards			Weighted Average Exercise Price
Outstanding as of January 1, 2019	2.6			$	37.60
Granted	1.0			50.03
Exercised	(0.6	)		37.60
Forfeited	—		*	44.10
Outstanding as of September 30, 2019	3.0			$	41.68
Vested, exercisable, as of September 30, 2019	2.0			$	37.60

* Less than 0.1

In February 2019, the Company awarded contingent stock options under the 2014 Omnibus Plan with a per option grant date fair value of $13.78. These options are subject to vesting conditions based on the achievement of specified performance measures, and generally become exercisable one year following satisfaction of the relevant vesting condition. The options have a term of ten years from the grant date.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

8. Shareholders' Equity

Common Shares

The following table presents the rollforward of common shares used in calculating the weighted average shares utilized in the basic earnings per common share calculation for the periods indicated:



	Common Shares
_{(shares in millions)}	Issued	Held in Treasury	Outstanding
Balance, January 1, 2018	270.0	98.0	172.0
Common shares issued	—	—	—
Common shares acquired - share repurchase	—	22.8	(22.8	)
Share-based compensation	2.4	0.6	1.8
Balance, December 31, 2018	272.4	121.4	151.0
Common shares issued	0.1	—	0.1
Common shares acquired - share repurchase	—	18.5	(18.5	)
Share-based compensation	2.9	0.7	2.2
Balance, September 30, 2019	275.4	140.6	134.8

Dividends declared per share of Common Stock were as follows for the periods indicated:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Dividends declared per share of Common Stock	$	0.15	$	0.01	$	0.17	$	0.03

Share Repurchase Program

From time to time, the Company's Board of Directors authorizes the Company to repurchase shares of its common stock. These authorizations permit stock repurchases up to a prescribed dollar amount and generally may be accomplished through various means, including, without limitation, open market transactions, privately negotiated transactions, forward, derivative, or accelerated repurchase, or automatic repurchase transactions, including 10b5-1 plans, or tender offers. Share repurchase authorizations typically expire if unused by a prescribed date.

On May 2, 2019, the Board of Directors provided share repurchase authorization, increasing the aggregate of the Company's common stock authorized for repurchase by $500. The current share repurchase authorization expires on June 30, 2020 (unless extended), and does not obligate the Company to purchase any shares. The authorization for the share repurchase program may be terminated, increased or decreased by the Board of Directors at any time.

On October 31, 2019, the Board of Directors provided its most recent share repurchase authorization, increasing the aggregate of the Company's common stock authorized for repurchase by $800. The additional share repurchase authorization expires on December 31, 2020 (unless extended). The authorization for the share repurchase program may be terminated, increased or decreased by the Board of Directors at any time.The following table presents repurchases of the Company's common stock through share repurchase agreements with third-party financial institutions during the nine months ended September 30, 2019:



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



Execution Date	Payment		Initial Shares Delivered	Closing Date	Additional Shares Delivered	Total Shares Repurchased
January 3, 2019	$	250	5,059,449	April 4, 2019	290,765	5,350,214
April 9, 2019	$	236	3,593,453	June 4, 2019	879,199	4,472,652
June 19, 2019	$	200	2,963,512	August 6, 2019	695,566	3,659,078

During the nine months ended September 30, 2019, the Company repurchased 4,926,775 shares of the Company's common stock in open market repurchases for an aggregate purchase price of $250.

Warrants

On May 7, 2013, the Company issued to ING Group warrants to purchase up to 26,050,846 shares of the Company's common stock equal in the aggregate to 9.99% of the issued and outstanding shares of common stock at that date. The exercise price of the warrants at the time of issuance was $48.75 per share of common stock, subject to adjustments, including for stock dividends, cash dividends in excess of $0.01 per share a quarter, subdivisions, combinations, reclassifications and non-cash distributions. The warrants also provide for, upon the occurrence of certain change of control events affecting the Company, an increase in the number of shares to which a warrant holder will be entitled upon payment of the aggregate exercise price of the warrant. The warrants became exercisable to ING Group and its affiliates on January 1, 2017 and to all other holders starting on the first anniversary of the completion of the IPO (May 7, 2014). The warrants expire on the tenth anniversary of the completion of the IPO (May 7, 2023). The warrants are net share settled, which means that no cash will be payable by a warrant holder in respect of the exercise price of a warrant upon exercise, and are classified as permanent equity. They have been recorded at their fair value determined on the issuance date of May 7, 2013 in the amount of $94 as an addition and reduction to Additional-paid-in-capital. Warrant holders are not entitled to receive dividends. On March 12, 2018, ING Group sold its remaining interests in the warrants and no longer owns any warrants.

On September 27, 2019, the Company paid a quarterly dividend of $0.15 per share on its common stock. As a consequence, the exercise price of the warrants to purchase shares of common stock was adjusted to $48.61 per share of common stock and the number of shares of common stock for which each warrant is exercisable has been adjusted to 1.002840621. As of September 30, 2019, no warrants have been exercised.

Preferred Stock

On June 11, 2019, the Company issued 300,000 shares of 5.35% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series B ("the Series B preferred stock"), with a $0.01 par value per share and a liquidation preference of $1,000 per share, for aggregate net proceeds of $293. The Company deposited the Series B preferred stock under a deposit agreement with a depositary, which issued interests in fractional shares of the Series B preferred stock in the form of depositary shares ("Depositary Shares") evidenced by depositary receipts; each Depositary Share representing 1/40th interest in a share of the Series B preferred stock.

On September 12, 2018, the Company issued 325,000 shares of 6.125% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series A ("the Series A preferred stock"), with a $0.01 par value per share and a liquidation preference of $1,000 per share, for aggregate net proceeds of $319.

The ability of the Company to declare or pay dividends on, or purchase, redeem or otherwise acquire, shares of its common stock will be substantially restricted in the event that the Company does not declare and pay (or set aside) dividends on the Series A and B preferred stock for the last preceding dividend period.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The Series A and Series B preferred stock are not subject to any mandatory redemption, sinking fund, retirement fund, purchase fund or similar provisions. The Company may, at its option, redeem the Series A preferred stock, (a) in whole but not in part, at any time, within 90 days after the occurrence of a "rating agency event," at a redemption price equal to $1,020 per share, plus an amount equal to any dividends per share of preferred stock that have accrued but not been declared and paid for the then-current dividend period to, but excluding, the redemption date and (b) (i) in whole but not in part, at any time within 90 days after the occurrence of a "regulatory capital event" or (ii) in whole or in part, from time to time, on September 15, 2023 or any subsequent "reset date," in each case, at a redemption price equal to $1,000 per share of preferred stock, plus an amount equal to any dividends per share of preferred stock that have accrued but not been declared and paid for the then-current dividend period to, but excluding, such redemption date. The Company may, at its option, redeem the Series B preferred stock, (a) in whole but not in part, at any time, within 90 days after the occurrence of a "rating agency event," at a redemption price equal to $1,020 per share (equivalent to $25.50 per Depositary Share), plus an amount equal to any accrued and unpaid dividends per share that have accrued but not been declared and paid for the then-current dividend period, but excluding, such redemption date and (b) (i) in whole but not in part , at any time, within 90 days after the occurrence of a "regulatory capital event," or (ii) in whole or in part, from time to time, on September 15, 2029 or any reset date, in each case, at a redemption price equal to $1,000 per share of the Series B preferred stock (equivalent to $25.00 per Depositary Share), plus an amount equal to any accrued and unpaid dividends per share that have accrued but not been declared and paid for the then-current dividend period to, but excluding, such redemption date.

A "rating agency event" means that any nationally recognized statistical rating organization that then publishes a rating for the Company amends, clarifies or changes the criteria it uses to assign equity credit to securities like the preferred stock, which results in the lowering of the equity credit assigned to the preferred stock, as applicable, or shortens the length of time that the preferred stock is assigned a particular level of equity credit.

A "regulatory capital event" means that the Company becomes subject to capital adequacy supervision by a capital regulator and the capital adequacy guidelines that apply to the Company as a result of being so subject set forth criteria pursuant to which the preferred stock would not qualify as capital under such capital adequacy guidelines, as the Company may determine at any time, in its sole discretion.

As of September 30, 2019 and December 31, 2018, there were 100,000,000 shares of preferred stock authorized. Preferred stock issued and outstanding are as follows:



	September 30, 2019		December 31, 2018
Series	Issued	Outstanding	Issued	Outstanding
6.125% Non-cumulative Preferred Stock, Series A	325,000	325,000	325,000	325,000
5.35% Non-cumulative Preferred Stock, Series B	300,000	300,000	—	—
Total	625,000	625,000	325,000	325,000

As of September 30, 2019, there were no preferred stock dividends in arrears.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

9. Earnings per Common Share

The following table presents a reconciliation of Net income (loss) and shares used in calculating basic and diluted net income (loss) per common share for the periods indicated:



	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions, except for per share data)	2019		2018		2019			2018
Earnings
Net income (loss) available to common shareholders:
Income (loss) from continuing operations	$	139	$	165	$	545		$	378
Less: Preferred stock dividends	14		—		24			—
Less: Net income (loss) attributable to noncontrolling interest	19		23		43			81
Income (loss) from continuing operations available to common shareholders	106		142		478			297
Income (loss) from discontinued operations, net of tax	—		—		(82		)	457
Net income (loss) available to common shareholders	$	106	$	142	$	396		$	754

Weighted average common shares outstanding
Basic	138.4		159.6		143.1			166.3
Dilutive Effects:
Warrants	2.3		0.4		1.6			1.1
RSU awards	1.3		1.5		1.3			1.7
PSU awards	1.7		1.9		1.9			1.9
Stock Options	0.6		0.6		0.6			0.7
Diluted	144.3		164.0		148.5			171.7

Basic⁽¹⁾
Income (loss) from continuing operations available to Voya Financial, Inc.'s common shareholders	$	0.77	$	0.89	$	3.34		$	1.79
Income (loss) from discontinued operations, net of taxes available to Voya Financial, Inc.'s common shareholders	$	—	$	—	$	(0.57	)	$	2.75
Income (loss) available to Voya Financial, Inc.'s common shareholders	$	0.77	$	0.89	$	2.77		$	4.54
Diluted⁽¹⁾
Income (loss) from continuing operations available to Voya Financial, Inc.'s common shareholders	$	0.74	$	0.87	$	3.22		$	1.73
Income (loss) from discontinued operations, net of taxes available to Voya Financial, Inc.'s common shareholders	$	—	$	—	$	(0.55	)	$	2.66
Income (loss) available to Voya Financial, Inc.'s common shareholders	$	0.74	$	0.87	$	2.67		$	4.39

⁽¹⁾ Basic and diluted earnings per share are calculated using unrounded, actual amounts. Therefore, the components of earnings per share may not sum to its corresponding total.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

10. Accumulated Other Comprehensive Income (Loss)

Shareholders' equity included the following components of Accumulated Other Comprehensive Income ("AOCI") as of the dates indicated:



	September 30,
	2019			2018
Fixed maturities, net of OTTI	$	5,827		$	1,486
Derivatives⁽¹⁾	195			142
DAC/VOBA adjustment on available-for-sale securities	(1,593		)	(482		)
Premium deficiency reserve	(257		)	(109		)
Sales inducements and other intangibles adjustment on available-for-sale securities	(204		)	(82		)
Unrealized capital gains (losses), before tax	3,968			955
Deferred income tax asset (liability)	(479		)	(186		)
Net unrealized capital gains (losses)	3,489			769
Pension and other postretirement benefits liability, net of tax	8			8
AOCI	$	3,497		$	777

⁽¹⁾Gains and losses reported in Accumulated Other Comprehensive Income (AOCI) from hedge transactions that resulted in the acquisition of an identified asset are reclassified into earnings in the same period or periods during which the asset acquired affects earnings. As of September 30, 2019, the portion of the AOCI that is expected to be reclassified into earnings within the next 12 months is $27.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Changes in AOCI, including the reclassification adjustments recognized in the Condensed Consolidated Statements of Operations were as follows for the periods indicated:



	Three Months Ended September 30, 2019
	Before-Tax Amount				Income Tax			After-Tax Amount
Available-for-sale securities:
Fixed maturities	$	1,314			$	(275	)	$	1,039
Other	—				—			—
OTTI	—				—			—
Adjustments for amounts recognized in Net realized capital gains (losses) in the Condensed Consolidated Statements of Operations	(8		)		1			(7		)
DAC/VOBA	(364		)		77			(287		)
Premium deficiency reserve	(123		)		26			(97		)
Sales inducements and other intangibles	(47		)		9			(38		)
Change in unrealized gains/losses on available-for-sale securities	772				(162		)	610

Derivatives:
Derivatives	32			⁽¹⁾	(7		)	25
Adjustments related to effective cash flow hedges for amounts recognized in Net investment income in the Condensed Consolidated Statements of Operations	(6		)		1			(5		)
Change in unrealized gains/losses on derivatives	26				(6		)	20

Pension and other postretirement benefits liability:
Amortization of prior service cost recognized in Operating expenses in the Condensed Consolidated Statements of Operations	(1		)		1			—
Change in pension and other postretirement benefits liability	(1		)		1			—
Change in Accumulated other comprehensive income (loss)	$	797			$	(167	)	$	630

⁽¹⁾ See the Derivative Financial Instruments Note to these Condensed Consolidated Financial Statements for additional information.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



	Nine Months Ended September 30, 2019
	Before-Tax Amount				Income Tax			After-Tax Amount
Available-for-sale securities:
Fixed maturities	$	4,753			$	(997	)	$	3,756
Other	—				—			—
OTTI	2				—			2
Adjustments for amounts recognized in Net realized capital gains (losses) in the Condensed Consolidated Statements of Operations	(2		)		—			(2		)
DAC/VOBA	(1,212		)	⁽¹⁾	255			(957		)
Premium deficiency reserve	(200		)		42			(158		)
Sales inducements and other intangibles	(140		)		29			(111		)
Change in unrealized gains/losses on available-for-sale securities	3,201				(671		)	2,530

Derivatives:
Derivatives	43			⁽²⁾	(9		)	34
Adjustments related to effective cash flow hedges for amounts recognized in Net investment income in the Condensed Consolidated Statements of Operations	(19		)		4			(15		)
Change in unrealized gains/losses on derivatives	24				(5		)	19

Pension and other postretirement benefits liability:
Amortization of prior service cost recognized in Operating expenses in the Condensed Consolidated Statements of Operations	(3		)		1			(2		)
Change in pension and other postretirement benefits liability	(3		)		1			(2		)
Change in Accumulated other comprehensive income (loss)	$	3,222			$	(675	)	$	2,547

⁽¹⁾ See the Deferred Policy Acquisition Costs and Value of Business Acquired Note to these Condensed Consolidated Financial Statements for additional information.

⁽²⁾ See the Derivative Financial Instruments Note to these Condensed Consolidated Financial Statements for additional information.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



	Three Months Ended September 30, 2018
	Before-Tax Amount				Income Tax			After-Tax Amount
Available-for-sale securities:
Fixed maturities	$	(309	)		$	66		$	(243	)
Other	—				—			—
OTTI	—				—			—
Adjustments for amounts recognized in Net realized capital gains (losses) in the Condensed Consolidated Statements of Operations	(9		)		—			(9		)
DAC/VOBA	88				(19		)	69
Premium deficiency reserve	19				(4		)	15
Sales inducements and other intangibles	6				(1		)	5
Change in unrealized gains/losses on available-for-sale securities	(205		)		42			(163		)

Derivatives:
Derivatives	5			⁽¹⁾	(5		)	—
Adjustments related to effective cash flow hedges for amounts recognized in Net investment income in the Condensed Consolidated Statements of Operations	(6		)		5			(1		)
Change in unrealized gains/losses on derivatives	(1		)		—			(1		)

Pension and other postretirement benefits liability:
Amortization of prior service cost recognized in Operating expenses in the Condensed Consolidated Statements of Operations	(4		)		2			(2		)
Change in pension and other postretirement benefits liability	(4		)		2			(2		)
Change in Accumulated other comprehensive income (loss)	$	(210	)		$	44		$	(166	)

⁽¹⁾ See the Derivative Financial Instruments Note to these Condensed Consolidated Financial Statements for additional information.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



	Nine Months Ended September 30, 2018
	Before-Tax Amount				Income Tax			After-Tax Amount
Available-for-sale securities:
Fixed maturities	$	(3,933	)		$	986		$	(2,947	)
Other	18				(8		)	10
OTTI	30				(9		)	21
Adjustments for amounts recognized in Net realized capital gains (losses) in the Condensed Consolidated Statements of Operations	38				(10		)	28
DAC/VOBA	989			⁽¹⁾	(234		)	755
Premium deficiency reserve	81				(17		)	64
Sales inducements and other intangibles	196				(55		)	141
Change in unrealized gains/losses on available-for-sale securities	(2,581		)		653			(1,928		)

Derivatives:
Derivatives	34			⁽²⁾	(14		)	20
Adjustments related to effective cash flow hedges for amounts recognized in Net investment income in the Condensed Consolidated Statements of Operations	(19		)		8			(11		)
Change in unrealized gains/losses on derivatives	15				(6		)	9

Pension and other postretirement benefits liability:
Amortization of prior service cost recognized in Operating expenses in the Condensed Consolidated Statements of Operations	(10		)		3			(7		)
Change in pension and other postretirement benefits liability	(10		)		3			(7		)
Change in Accumulated other comprehensive income (loss)	$	(2,576	)		$	650		$	(1,926	)

⁽¹⁾ See the Deferred Policy Acquisition Costs and Value of Business Acquired Note to these Condensed Consolidated Financial Statements for additional information.

⁽²⁾ See the Derivative Financial Instruments Note to these Condensed Consolidated Financial Statements for additional information.

11. Income Taxes

The Company uses the estimated annual effective tax rate method in computing its interim tax provision. Certain items, including changes in the realizability of deferred tax assets and changes in liabilities for uncertain tax positions, are excluded from the estimated annual effective tax rate and the actual tax expense or benefit is reported in the period the related item is incurred.

The Company's effective tax rate for the three and nine months ended September 30, 2019 was 2.8% and 11.8%, respectively. The effective tax rate differed from the statutory rate of 21% primarily due to the effect of the dividends received deduction ("DRD"), tax credits, and noncontrolling interest.

The Company's effective tax rate for the three and nine months ended September 30, 2018 was 11.3% and 15.6%, respectively. The effective tax rate differed from the statutory rate of 21% primarily due to the effect of the DRD, noncontrolling interest, nondeductible executive compensation, the valuation allowance and alternative minimum tax ("AMT") sequestration (sequestration applies only to the nine months ended September 30, 2018).



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Tax Regulatory Matters

For the tax years 2017 through 2019, the Company participates in the Internal Revenue Service ("IRS") Compliance Assurance Process ("CAP"), which is a continuous audit program provided by the IRS. During 2019, the IRS finalized the audit of the Company for the period ended December 31, 2017. The Company is under examination for the period ended December 31, 2018. The Company expects the examination to be finalized within the next twelve months.

12. Financing Agreements

Short-term and Long-term Debt

The following table summarizes the carrying value of the Company’s debt securities issued and outstanding as of September 30, 2019 and December 31, 2018:



	Maturity	September 30, 2019		December 31, 2018
5.5% Senior Notes, due 2022	07/15/2022	$	—	$	96
3.125% Senior Notes, due 2024	07/15/2024	397		396
3.65% Senior Notes, due 2026	06/15/2026	496		496
5.7% Senior Notes, due 2043	07/15/2043	395		395
4.8% Senior Notes, due 2046	06/15/2046	297		297
4.7% Fixed-to-Floating Rate Junior Subordinated Notes, due 2048	01/23/2048	345		344
5.65% Fixed-to-Floating Rate Junior Subordinated Notes, due 2053	05/15/2053	739		739
7.25% Voya Holdings Inc. debentures, due 2023⁽¹⁾	08/15/2023	139		138
7.63% Voya Holdings Inc. debentures, due 2026⁽¹⁾	08/15/2026	138		138
6.97% Voya Holdings Inc. debentures, due 2036⁽¹⁾	08/15/2036	79		79
8.42% Equitable of Iowa Companies Capital Trust II Notes, due 2027	04/01/2027	13		14
1.00% Windsor Property Loan	06/14/2027	4		5
Subtotal		3,042		3,137
Less: Current portion of long-term debt		1		1
Total		$	3,041	$	3,136

⁽¹⁾ Guaranteed by ING Group.

Loss on Debt Extinguishment

The Company incurred a loss on debt extinguishment of $9 for the three and nine months ended September 30, 2019, which was recorded in Interest Expense in the Condensed Consolidated Statements of Operations. The Company did not incur a loss on debt extinguishment for the three months ended September 30, 2018. The Company incurred a loss on debt extinguishment of $3 for the nine months ended September 30, 2018, which was recorded in Interest Expense in the Condensed Consolidated Statements of Operations.

Senior Notes

On July 12, 2019, the Company completed the redemption of the remaining $97 aggregate principal amount of 5.5% Senior Notes due 2022 (the "2022 Notes").



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Aetna Notes

As of September 30, 2019, the outstanding principal amount of the Aetna Notes was $358, which is guaranteed by ING Group. During the nine months ended September 30, 2019, the Company deposited $4 of collateral to a control account benefiting ING Group with a third-party collateral agent and provided a $63 letter of credit benefiting ING Group, thereby increasing the remaining collateral balance to $271. The collateral may be exchanged at any time upon the posting of any other form of acceptable collateral to the account.

Senior Unsecured Credit Facility Agreement

As of September 30, 2019, the Company was a party to a Second Amended and Restated Revolving Credit Agreement ("Second Amended and Restated Credit Agreement"), which was amended from time to time, with a syndicate of banks, which was set to expire on May 6, 2021 and required the Company to maintain a minimum net worth of $6.6 billion. The minimum net worth amount may increase upon any future equity issuances by the Company. There was a $750 sublimit available for direct borrowings.

As of September 30, 2019, there were no amounts outstanding as revolving credit borrowings and no amounts of LOCs outstanding under the senior unsecured credit facility.

Effective November 1, 2019, the Company revised the terms of its Second Amended and Restated Credit Agreement, dated January 24, 2018, by entering into a Third Amended and Restated Revolving Credit Agreement ("Third Amended and Restated Credit Agreement") with a syndicate of banks, all of which participated in the Second Amended and Restated Credit Agreement. The Third Amended and Restated Credit Agreement modifies the Second Amended Credit Agreement by extending the term of the agreement to November 1, 2024 and reducing the total amount of LOCs that may be issued from $1.0 billion to $500. The revolving credit sublimit was removed and the full $500 may be utilized for direct borrowings. The terms require the Company to maintain a minimum net worth of $6.15 billion. The minimum net worth amount may increase upon any future equity issuances by the Company.

13. Commitments and Contingencies

Commitments

Through the normal course of investment operations, the Company commits to either purchase or sell securities, mortgage loans, or money market instruments, at a specified future date and at a specified price or yield. The inability of counterparties to honor these commitments may result in either a higher or lower replacement cost. Also, there is likely to be a change in the value of the securities underlying the commitments.

As of September 30, 2019, the Company had off-balance sheet commitments to acquire mortgage loans of $106 and purchase limited partnerships and private placement investments of $1,265, of which $339 related to consolidated investment entities.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Restricted Assets

The Company is required to maintain assets on deposit with various regulatory authorities to support its insurance operations. The Company may also post collateral in connection with certain securities lending, repurchase agreements, funding agreements, credit facilities and derivative transactions. The components of the fair value of the restricted assets were as follows as of the dates indicated:



	September 30, 2019		December 31, 2018
Fixed maturity collateral pledged to FHLB ⁽¹⁾	$	2,244	$	1,472
FHLB restricted stock⁽²⁾	91		75
Other fixed maturities-state deposits	143		129
Cash and cash equivalents	26		13
Securities pledged⁽³⁾	1,804		1,867
Total restricted assets	$	4,308	$	3,556

⁽¹⁾ Included in Fixed maturities, available for sale, at fair value on the Condensed Consolidated Balance Sheets.

⁽²⁾ Included in Other investments on the Condensed Consolidated Balance Sheets.

⁽³⁾Includes the fair value of loaned securities of $1,535 and $1,635 as of September 30, 2019 and December 31, 2018, respectively. In addition, as of September 30, 2019 and December 31, 2018, the Company delivered securities as collateral of $204 and $232, respectively. Loaned securities and securities delivered as collateral are included in Securities pledged on the Condensed Consolidated Balance Sheets.

Federal Home Loan Bank Funding Agreements

The Company is a member of the FHLB of Des Moines, FHLB of Boston and the FHLB of Topeka and is required to pledge collateral to back funding agreements issued to the FHLB. As of September 30, 2019 and December 31, 2018, the Company had $1,669 and $1,209, respectively, in non-putable funding agreements, which are included in Contract owner account balances on the Condensed Consolidated Balance Sheets. As of September 30, 2019 and December 31, 2018, assets with a market value of approximately $2,244 and $1,472, respectively, collateralized the FHLB funding agreements. Assets pledged to the FHLB are included in Fixed maturities, available-for-sale, at fair value on the Condensed Consolidated Balance Sheets.

Litigation, Regulatory Matters and Contingencies

Litigation, regulatory and other loss contingencies arise in connection with the Company's activities as a diversified financial services firm. The Company is a defendant in a number of litigation matters arising from the conduct of its business, both in the ordinary course and otherwise. In some of these matters, claimants seek to recover very large or indeterminate amounts, including compensatory, punitive, treble and exemplary damages. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages and other relief. Claimants are not always required to specify the monetary damages they seek or they may be required only to state an amount sufficient to meet a court's jurisdictional requirements. Moreover, some jurisdictions allow claimants to allege monetary damages that far exceed any reasonably possible verdict. The variability in pleading requirements and past experience demonstrates that the monetary and other relief that may be requested in a lawsuit or claim often bears little relevance to the merits or potential value of a claim. Litigation against the Company includes a variety of claims including negligence, breach of contract, fraud, violation of regulation or statute, breach of fiduciary duty, negligent misrepresentation, failure to supervise, elder abuse and other torts.

As with other financial services companies, the Company periodically receives informal and formal requests for information from various state and federal governmental agencies and self-regulatory organizations in connection with inquiries and investigations of the products and practices of the Company or the financial services industry. It is the practice of the Company to cooperate fully in these matters.

The outcome of a litigation or regulatory matter is difficult to predict and the amount or range of potential losses associated with these or other loss contingencies requires significant management judgment. It is not possible to predict the ultimate outcome or to provide reasonably possible losses or ranges of losses for all pending regulatory matters, litigation and other loss contingencies.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

While it is possible that an adverse outcome in certain cases could have a material adverse effect upon the Company's financial position, based on information currently known, management believes that neither the outcome of pending litigation and regulatory matters, nor potential liabilities associated with other loss contingencies, are likely to have such an effect. However, given the large and indeterminate amounts sought in certain litigation and the inherent unpredictability of all such matters, it is possible that an adverse outcome in certain of the Company's litigation or regulatory matters, or liabilities arising from other loss contingencies, could, from time to time, have a material adverse effect upon the Company's results of operations or cash flows in a particular quarterly or annual period.

For some matters, the Company is able to estimate a possible range of loss. For such matters in which a loss is probable, an accrual has been made. For matters where the Company, however, believes a loss is reasonably possible, but not probable, no accrual is required. For matters for which an accrual has been made, but there remains a reasonably possible range of loss in excess of the amounts accrued or for matters where no accrual is required, the Company develops an estimate of the unaccrued amounts of the reasonably possible range of losses. As of September 30, 2019, the Company estimates the aggregate range of reasonably possible losses, in excess of any amounts accrued for these matters as of such date, to be up to approximately $50.

For other matters, the Company is currently not able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from plaintiffs and other parties, investigation of factual allegations, rulings by a court on motions or appeals, analysis by experts and the progress of settlement discussions. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation and regulatory contingencies and updates the Company's accruals, disclosures and reasonably possible losses or ranges of loss based on such reviews.

Litigation includes Goetz v. Voya Financial and Voya Retirement Insurance and Annuity Company (USDC District of Delaware, No. 1:17-cv-1289) (filed September 8, 2017), a putative class action in which plaintiff, a participant in a 401(k) plan, seeks to represent other participants in the plan as well as a class of similarly situated plans that "contract with [Voya] for recordkeeping and other services." Plaintiff alleges that "Voya" breached its fiduciary duty to the plan and other plan participants by charging unreasonable and excessive recordkeeping fees, and that "Voya" distributed materially false and misleading 404a-5 administrative and fund fee disclosures to conceal its excessive fees. The Company denies the allegations, which it believes are without merit, and intends to defend the case vigorously.

Litigation also includes Henkel of America v. ReliaStar Life Insurance Company (USDC District of Connecticut, No. 1:18-cv-00965) (filed June 8, 2018). Plaintiff alleges that ReliaStar breached the terms of a stop loss policy it issued to Plaintiff by refusing to reimburse Plaintiff for more than $47 in claims incurred by participants in prior years and submitted for coverage under the stop loss policy. Plaintiff alleges a breach of contract claim or, in the alternative, that the stop loss policy be declared to cover the submitted claims, and also asserts that ReliaStar engaged in unfair trade practices and unfair insurance practices in violation of state statutes, and did so willfully and intentionally to warrant an award of punitive damages under state law. The Company denies the allegations, which it believes are without merit, and intends to defend the case vigorously.

Lastly, litigation includes Zhou v. Voya Financial, Inc. and Security Life of Denver (USDC District of Colorado, No. 1:19-cv-02781)(filed September 27, 2019), a putative class action in which the plaintiff alleges that the Company did not properly administer certain universal life insurance policies. The plaintiff claims that the Company did not timely credit interest earned on the payment of her premiums and incorrectly calculated the amount of interest that the Company credited to her account. In addition to the class allegations, the lawsuit alleges breach of contract and conversion and seeks declaratory and injunctive relief. The Company denies the allegations, which it believes are without merit, and intends to defend the case vigorously.

Finally, industry wide, life insurers continue to be exposed to class action litigation related to the cost of insurance rates and periodic deductions from cash value. Common allegations include that insurance companies have breached the terms of their universal life insurance policies by establishing or increasing the cost of insurance rates using cost factors not permitted by the contract, thereby unjustly enriching themselves. This litigation is generally known as cost of insurance litigation.

Cost of insurance litigation for the Company includes Barnes v. Security Life of Denver (USDC District of Colorado, No. 1:18-cv-00718) (filed March 27, 2018), a putative class action in which the plaintiff alleges that his insurance policy only permitted the Company to rely upon his expected future mortality experience to establish and increase his cost of insurance, but the Company



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Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

instead relied upon other, non-disclosed factors to do so. Plaintiff alleges breach of contract and conversion claims against the Company and also seeks declaratory relief. The Company denies the allegations in the complaint, believes the complaint to be without merit, and intends to defend the matter vigorously.

Cost of insurance litigation for the Company also includes Advance Trust & Life Escrow Services, LTA v. Security Life of Denver (USDC District of Colorado, No. 1:18-cv-01897) (filed July 26, 2018), a putative class action in which Plaintiff alleges that two specific types of universal life insurance policies only permitted the Company to rely upon the policyholder’s expected future mortality experience to establish and increase the cost of insurance, but the Company instead relied upon other, non-disclosed factors not only in the administration of the policies over time, but also in the decision to increase insurance costs beginning in approximately October 2015. Plaintiff alleges a breach of contract and seeks class certification. The Company denies the allegations in the complaint, believes the complaint to be without merit, and intends to defend the lawsuit vigorously.

Finally, cost of insurance litigation includes Advance Trust & Life Escrow Services, LTA v. ReliaStar Life Insurance Company (USDC District of Minnesota, No. 1:18-cv-02863) (filed October 5, 2018), a putative class action in which Plaintiff alleges that the Company’s universal life insurance policies only permitted the Company to rely upon the policyholders’ expected future mortality experience to establish the cost of insurance, and that as projected mortality experience improved, the policy language required the Company to decrease the cost of insurance. Plaintiff alleges that the Company did not decrease the cost of insurance as required, thereby breaching its contract with the policyholders, and seeks class certification. The Company denies the allegations in the complaint, believes the complaint to be without merit, and will defend the lawsuit vigorously.

In October 2019, under the terms of the applicable insurance coverage policy, the Company received $38 as settlement of a request for recovery of charges related to a litigation matter settled in the prior year. Consequently, the gain related to this recovery was reflected in the Condensed Consolidated Financial Statements for the third quarter of 2019.

Contingencies related to Performance-based Capital Allocations on Private Equity Funds

Certain performance-based capital allocations related to sponsored private equity funds ("carried interest") are not final until the conclusion of an investment term specified in the relevant asset management contract. As a result, such carried interest, if accrued or paid to the Company during such term, is subject to later adjustment based on subsequent fund performance. If the fund’s cumulative investment return falls below specified investment return hurdles, some or all of the previously accrued carried interest is reversed to the extent that the Company is no longer entitled to the performance-based capital allocation. Should the fund’s cumulative investment return subsequently increase above specified investment return hurdles in future periods, previous reversals could be fully or partially recovered.

As of September 30, 2019, approximately $79 of previously accrued carried interest would be subject to full or partial reversal in future periods if cumulative fund performance hurdles are not maintained throughout the remaining life of the affected funds.

14. Consolidated Investment Entities

In the normal course of business, the Company provides investment management services to, invests in and has transactions with, various types of investment entities which may be considered VIEs or VOEs. The Company evaluates its involvement with each entity to determine whether consolidation is required.

The Company holds variable interests in certain investment entities in the form of debt or equity investments, as well as the right to receive management fees, performance fees, and carried interest. The Company consolidates certain entities under the VIE guidance when it is determined that the Company is the primary beneficiary. Alternatively, certain entities are consolidated under the VOE guidance when control is obtained through voting rights.

The Company has no right to the benefits from, nor does it bear the risks associated with consolidated investment entities beyond the Company’s direct equity and debt investments in and management fees generated from these entities. Such direct investments amounted to approximately $317 and $354 as of September 30, 2019 and December 31, 2018, respectively. If the Company were to liquidate, the assets held by consolidated investment entities would not be available to the general creditors of the Company as a result of the liquidation.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Consolidated VIEs and VOEs

Collateral Loan Obligations Entities ("CLOs")

The Company is involved in the design, creation, and the ongoing management of CLOs. These entities are created for the purpose of acquiring diversified portfolios of senior secured floating rate leveraged loans, and securitizing these assets by issuing multiple tranches of collateralized debt; thereby providing investors with a broad array of risk and return profiles. Also known as collateralized financing entities under Topic 810, CLOs are variable interest entities by definition.

In return for providing collateral management services, the Company earns investment management fees and contingent performance fees. In addition to earning fee income, the Company often holds an investment in certain of the CLOs it manages, generally within the unrated and most subordinated tranche of each CLO. The fee income earned and investments held are included in the Company's ongoing consolidation assessment for each CLO. The Company was the primary beneficiary of 4 and 2 CLOs as of September 30, 2019 and December 31, 2018, respectively.

Limited Partnerships

The Company invests in and manages various limited partnerships, including private equity funds and hedge funds. These entities have been evaluated by the Company and are determined to be VIEs due to the equity holders, as a group, lacking the characteristics of a controlling financial interest.

In return for serving as the general partner of and providing investment management services to these entities, the Company earns management fees and carried interest in the normal course of business. Additionally, the Company often holds an investment in each limited partnership it manages, generally in the form of general partner and limited partner interests. The fee income, carried interest, and investments held are included in the Company’s ongoing consolidation analysis for each limited partnership. The Company consolidated 12 funds, which were structured as partnerships, as of September 30, 2019 and December 31, 2018.

Registered Investment Companies

The Company consolidated one sponsored investment fund accounted for as a VOE as of September 30, 2019 and December 31, 2018, because it is the majority investor in the fund, and as such, has a controlling financial interest in the fund.



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Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table summarizes the components of the consolidated investment entities as of the dates indicated:



	September 30, 2019		December 31, 2018
Assets of Consolidated Investment Entities
VIEs
Cash and cash equivalents	$	74	$	331
Corporate loans, at fair value using the fair value option	544		542
Limited partnerships/corporations, at fair value	1,420		1,313
Other assets	5		15
Total VIE assets	2,043		2,201
VOEs
Limited partnerships/corporations, at fair value	145		108
Other assets	1		1
Total VOE assets	146		109
Total assets of consolidated investment entities	$	2,189	$	2,310

Liabilities of Consolidated Investment Entities
VIEs
CLO notes, at fair value using the fair value option	$	503	$	540
Other liabilities	707		681
Total VIE liabilities	1,210		1,221
VOEs
Other liabilities	2		7
Total VOE liabilities	2		7
Total liabilities of consolidated investment entities	$	1,212	$	1,228

Fair Value Measurement

Upon consolidation, the Company elected to apply the FVO for financial assets and financial liabilities held by CLOs and continued to measure these assets (primarily corporate loans) and liabilities (debt obligations issued by CLOs) at fair value in subsequent periods. The Company has elected the FVO to more closely align its accounting with the economics of its transactions and allows the Company to more effectively align changes in the fair value of CLO assets with a commensurate change in the fair value of CLO liabilities.

Investments held by consolidated private equity funds are measured and reported at fair value in the Company's Condensed Consolidated Financial Statements. Changes in the fair value of consolidated investment entities are recorded as a separate line item within Income (loss) related to consolidated investment entities in the Company's Condensed Consolidated Statements of Operations.

The methodology for measuring the fair value of financial assets and liabilities of consolidated investment entities, and the classification of these measurements in the fair value hierarchy is consistent with the methodology and classification applied by the Company to its investment portfolio.

As discussed in more detail below, the Company utilizes valuations obtained from third-party commercial pricing services, brokers and investment sponsors or third-party administrators that supply NAV (or its equivalent) per share used as a practical expedient. The valuations obtained from brokers and third-party commercial pricing services are non-binding. These valuations are reviewed on a monthly or quarterly basis depending on the entity and its underlying investments. Procedures include, but are not limited to, a review of underlying fund investor reports, review of top and worst performing funds requiring further scrutiny, review of variance



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Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

from prior periods and review of variance from benchmarks, where applicable. In addition, the Company considers both macro and fund specific events that may impact the latest NAV supplied and determines if further adjustments of value should be made. Such changes, if any, are subject to senior management review.

When a price cannot be obtained from a commercial pricing service, independent broker quotes are solicited. Securities priced using independent broker quotes are classified as Level 3. Broker quotes and prices obtained from pricing services are reviewed and validated through an internal valuation committee price variance review, comparisons to internal pricing models, back testing to recent trades or monitoring of trading volumes.

Cash and Cash Equivalents

The carrying amounts for cash reflect the assets’ fair values. The fair value for cash equivalents is determined based on quoted market prices. These assets are classified as Level 1.

CLOs

Corporate loans: Corporate loan investments, which comprise the majority of consolidated CLO portfolio collateral, are senior secured corporate loans maturing at various dates between 2020 and 2026, paying interest at LIBOR, EURIBOR or PRIME plus a spread of up to 10.0%. As of September 30, 2019 and December 31, 2018, the unpaid principal balance exceeded the fair value of the corporate loans by approximately $15 and $13, respectively. Less than 1.0% of the collateral assets were in default as of September 30, 2019 and December 31, 2018.

The fair values for corporate loans are determined using independent commercial pricing services. Fair value measurement based on pricing services may be classified in Level 2 or Level 3 depending on the type, complexity, observability and liquidity of the asset being measured. The inputs used by independent commercial pricing services, such as benchmark yields and credit risk adjustments, are those that are derived principally from or corroborated by observable market data. Hence, the fair value measurement of corporate loans priced by independent pricing service providers is classified within Level 2 of the fair value hierarchy. In addition, there are assets held with CLO portfolios that represent senior level debt of other third party CLOs. These CLO investments are classified within Level 3 of the fair value hierarchy. See description of fair value process for CLO notes below.

CLO notes: The CLO notes are backed by a diversified loan portfolio consisting primarily of senior secured floating rate leveraged loans. Repayment risk is segmented into tranches with credit ratings of these tranches reflecting both the credit quality of underlying collateral as well as how much protection a given tranche is afforded by tranches that are subordinate to it. The most subordinated tranche bears the first loss and receives the residual payments, if any. The interest rates are generally variable rates based on LIBOR plus a pre-defined spread, which varies from 0.7% for the more senior tranches to 5.4% for the more subordinated tranches. CLO notes mature in 2026 and have a weighted average maturity of 6.8 years as of September 30, 2019. The investors in this debt are not affiliated with the Company and have no recourse to the general credit of the Company for this debt.

The fair values of the CLO notes are measured based on the fair value of the CLO's corporate loans, as the Company uses the measurement alternative available under ASU 2014-13 and determined that the inputs for measuring financial assets are more observable. The CLO notes are classified within Level 2 of the fair value hierarchy, consistent with the classification of the majority of the CLO financial assets.

The Company reviews the detailed prices including comparisons to prior periods for reasonableness. The Company utilizes a formal pricing challenge process to request a review of any price during which time the vendor examines its assumptions and relevant market inputs to determine if a price change is warranted.

The following narrative indicates the sensitivity of inputs:


•	Default Rate: An increase (decrease) in the expected default rate would likely increase (decrease) the discount margin (increase risk premium) used to value the CLO investments and CLO notes and, as a result, would potentially decrease the value of the CLO investments and CLO notes.



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Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)


•	Recovery Rate: A decrease (increase) in the expected recovery of defaulted assets would potentially decrease (increase) the valuation of CLO investments and CLO notes.


•	Prepayment Rate: A decrease (increase) in the expected rate of collateral prepayments would potentially decrease (increase) the valuation of CLO investments and CLO notes as the expected weighted average life ("WAL") would increase (decrease).


•	Discount Margin (spread over LIBOR): An increase (decrease) in the discount margin used to value the CLO investments and CLO notes would decrease (increase) the value of the CLO investments and CLO notes.

Private Equity Funds

As prescribed in ASC Topic 820, the unit of account for these investments is the interest in the investee fund. The Company owns an undivided interest in the fund portfolio and does not have the ability to dispose of individual assets and liabilities in the fund portfolio. Rather, the Company would be required to redeem or dispose of its entire interest in the investee fund. There is no current active market for interests in underlying private equity funds.

Valuation is generally based on the valuations provided by the fund's general partner or investment manager. The valuations typically reflect the fair value of the Company's capital account balance of each fund investment, including unrealized capital gains (losses), as reported in the financial statements of the respective investee fund as of the respective year end or the latest available date. In circumstances where fair values are not provided, the Company seeks to determine the fair value of fund investments based upon other information provided by the fund's general partner or investment manager or from other sources.

The fair value of securities received in-kind from fund investments is determined based on the restrictions around the securities.


•	Unrestricted, publicly traded securities are valued at the closing public market price on the reporting date;


•	Restricted, publicly traded securities may be valued at a discount from the closing public market price on the reporting date, depending on the circumstances; and


•	Privately held securities are valued by the directors/general partner of the investee fund, based on a variety of factors, including the price of recent transactions in the company's securities and the company's earnings, revenue and book value.

In the case of direct investments or co-investments in private equity companies, the Company initially recognizes investments at cost and subsequently adjusts investments to fair value. On a quarterly basis, the Company reviews the general partner or lead investor's valuation of the investee company, taking into account other available information, such as indications of a market value through subsequent issues of capital or transactions between third parties, performance of the investee company during the period and public, comparable companies' analysis, where appropriate.

Investments in these funds typically may not be fully redeemed at NAV within 90 days because of inherent restriction on near term redemptions.

As of September 30, 2019 and December 31, 2018, certain private equity funds maintained term loans and revolving lines of credit of $800 and $753, respectively. The term loans renew every three years and the revolving lines of credit renew annually; all loans bear interest at LIBOR/EURIBOR plus 150 - 155 bps. The lines of credit are used for funding transactions before capital is called from investors, as well as for the financing of certain purchases. As of September 30, 2019 and December 31, 2018, outstanding borrowings amount to $640 and $584, respectively.

On February 1, 2018, Pomona Investment Fund entered into a three-year revolving credit agreement with Credit Suisse. The size of the facility as of September 30, 2019 is $25; the loan bears interest at LIBOR plus 325 bps and has a commitment fee of 160 bps. There was no outstanding borrowing as of September 30, 2019.

The borrowings are reflected in Liabilities related to consolidated investment entities - other liabilities on the Company's Condensed Consolidated Balance Sheets. The borrowings are carried at an amount equal to the unpaid principal balance.



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Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table summarizes the fair value hierarchy levels of consolidated investment entities as of September 30, 2019:



	Level 1		Level 2		Level 3		NAV		Total
Assets
VIEs
Cash and cash equivalents	$	74	$	—	$	—	$	—	$	74
Corporate loans, at fair value using the fair value option	—		544		—		—		544
Limited partnerships/corporations, at fair value	—		—		—		1,420		1,420
VOEs
Limited partnerships/corporations, at fair value	—		—		—		145		145
Total assets, at fair value	$	74	$	544	$	—	$	1,565	$	2,183
Liabilities
VIEs
CLO notes, at fair value using the fair value option	$	—	$	503	$	—	$	—	$	503
Total liabilities, at fair value	$	—	$	503	$	—	$	—	$	503

The following table summarizes the fair value hierarchy levels of consolidated investment entities as of December 31, 2018:



	Level 1		Level 2		Level 3		NAV		Total
Assets
VIEs
Cash and cash equivalents	$	331	$	—	$	—	$	—	$	331
Corporate loans, at fair value using the fair value option	—		542		—		—		542
Limited partnerships/corporations, at fair value	—		—		—		1,313		1,313
VOEs
Limited partnerships/corporations, at fair value	—		—		—		108		108
Total assets, at fair value	$	331	$	542	$	—	$	1,421	$	2,294
Liabilities
VIEs
CLO notes, at fair value using the fair value option	$	—	$	540	$	—	$	—	$	540
Total liabilities, at fair value	$	—	$	540	$	—	$	—	$	540

Transfers of investments out of Level 3 and into Level 2 or Level 1, if any, are recorded as of the beginning of the period in which the transfer occurred. For the three and nine months ended September 30, 2019 and 2018, there were no transfers in or out of Level 3 or transfers between Level 1 and Level 2.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Deconsolidation of Certain Investment Entities

There were no deconsolidations during the three and nine months ended September 30, 2019. During the nine months ended September 30, 2018, the Company determined it was no longer the primary beneficiary of three previously consolidated CLOs due to a reduction in the Company’s investment in the CLO. This caused a reduction in the Company's obligation to absorb losses and right to receive benefits of the CLO that could potentially be significant to the CLO. As a result of this determination, the Company deconsolidated three investment entities during the nine months ended September 30, 2018. The Company had no deconsolidations during the three months ended September 30, 2018.

Nonconsolidated VIEs

CLOs

In addition to the consolidated CLOs, the Company also holds variable interest in certain CLOs that are not consolidated as it has been determined that the Company is not the primary beneficiary. With these CLOs, the Company serves as the investment manager and receives investment management fees and contingent performance fees. Generally, the Company does not hold any interest in the nonconsolidated CLOs but if it does, such ownership has been deemed to be insignificant. The Company has not provided, and is not obligated to provide, any financial or other support to these entities.

The Company reviews its assumptions on a periodic basis to determine if conditions have changed such that the projection of these contingent fees becomes significant enough to reconsider the Company's consolidation status as variable interest holder. As of September 30, 2019 and December 31, 2018, the Company held $495 and $525 ownership interests, respectively, in unconsolidated CLOs.

Limited Partnerships

The Company manages or holds investments in certain private equity funds and hedge funds. With these entities, the Company serves as the investment manager and is entitled to receive at-market investment management fees and at-market contingent performance fees. The Company does not consolidate any of these investment funds for which it is not considered to be the primary beneficiary.

In addition, the Company does not consolidate the funds in which its involvement takes a form of a limited partner interest and is restricted to a role of a passive investor, as a limited partner's interest does not provide the Company with any substantive kick-out or participating rights, nor does it provide the Company with power to direct the activities of the fund.

The following table presents the carrying amounts of the variable interests in VIEs in which the Company concluded that it holds a variable interest, but is not the primary beneficiary as of the dates indicated. The Company determines its maximum exposure to loss to be: (i) the amount invested in the debt or equity of the VIE and (ii) other commitments and guarantees to the VIE.



Variable Interests on the Condensed Consolidated Balance Sheet
	September 30, 2019				December 31, 2018
	Carrying Amount		Maximum exposure to loss		Carrying Amount		Maximum exposure to loss
Fixed maturities, available for sale	$	495	$	495	$	523	$	523
Limited partnership/corporations	1,486		1,486		1,158		1,158

Securitizations

The Company invests in various tranches of securitization entities, including RMBS, CMBS and ABS. Through its investments, the Company is not obligated to provide any financial or other support to these entities. Each of the RMBS, CMBS and ABS entities are thinly capitalized by design and considered VIEs. The Company's involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer or investment manager,



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Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

which are generally viewed to have the power to direct the activities that most significantly impact the securitization entities' economic performance, in any of these entities, nor does the Company function in any of these roles. The Company, through its investments or other arrangements, does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity. Therefore, the Company is not the primary beneficiary and does not consolidate any of the RMBS, CMBS and ABS entities in which it holds investments. These investments are accounted for as investments available-for-sale as described in the Fair Value Measurements (excluding Consolidated Investment Entities) Note to these Condensed Consolidated Financial Statements and unrealized capital gains (losses) on these securities are recorded directly in AOCI, except for certain RMBS which are accounted for under the FVO whose change in fair value is reflected in Other net realized gains (losses) in the Condensed Consolidated Statements of Operations. The Company’s maximum exposure to loss on these structured investments is limited to the amount of its investment. Refer to the Investments (excluding Consolidated Investment Entities) Note to these Condensed Consolidated Financial Statements for details regarding the carrying amounts and classifications of these assets.

15. Restructuring

Organizational Restructuring

As a result of the closing of the 2018 Transaction, the decision to cease new sales following the strategic review of the Company’s Individual Life business and the recently announced additional cost savings targets, the Company is undertaking further restructuring efforts to execute the 2018 Transaction, reduce stranded expenses, as well as improve operational efficiency, strengthen technology capabilities and centralize certain sales, operations and investment management activities ("Organizational Restructuring").

These activities have resulted in recognition of severance and organizational transition costs and are reflected in Operating expenses in the Condensed Consolidated Statements of Operations, 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 the Company's segments. For the three and nine months ended September 30, 2019, the Company incurred Organizational Restructuring expenses of $26 and $164, respectively associated with continuing operations. For the three and nine months ended September 30, 2018, the Company incurred Organizational Restructuring expenses of $13 and $25, respectively associated with continuing operations.

Restructuring expenses that were directly related to the preparation for and execution of the 2018 Transaction are included in Income (loss) from discontinued operations, net of tax, in the Condensed Consolidated Statements of Operations. For the three and nine months ended September 30, 2019, the Company did not incur any Organizational Restructuring expenses associated with discontinued operations as a result of the 2018 Transaction. For the three and nine months ended September 30, 2018, the Company incurred Organizational Restructuring expenses as a result of the 2018 Transaction of $0 and $6, respectively, of severance and organizational transition costs, which are reflected in discontinued operations.

In addition to the restructuring costs incurred above, the anticipated reduction in employees from the execution of the initiatives described above triggered an immaterial curtailment loss and related re-measurement gain of the Company's qualified defined benefit pension plan as of January 31, 2019, which was recorded during the first quarter of 2019.

The summary below presents Organizational Restructuring expenses, pre-tax, by type of costs incurred, for the periods indicated:



	Three Months Ended September 30,					Nine Months Ended September 30,				Cumulative Amounts Incurred to Date
	2019			2018		2019		2018		Cumulative Amounts Incurred to Date
Severance benefits	$	(9	)	$	—	$	42	$	5	$	61
Organizational transition costs	35			13		122		26		162
Total restructuring expenses	$	26		$	13	$	164	$	31	$	223

Including the expense of $164 for the nine months ended September 30, 2019, the aggregate amount of Organizational Restructuring expenses expected to be incurred is in the range of $200 to $300. The Company anticipates that these costs, which will include



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Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

severance, organizational transition costs incurred to reorganize operations and other costs such as contract terminations and asset write-offs, will occur at least through the end of 2020.

The following table presents the accrued liability associated with Organizational Restructuring expenses as of September 30, 2019:



	Severance Benefits			Organizational Transition Costs			Total
Accrued liability as of January 1, 2019	$	12		$	9		$	21
Provision	42			122			164
Payments	(17		)	(102		)	(119		)
Accrued liability as of September 30, 2019	$	37		$	29		$	66

2016 Restructuring

In 2016, the Company began implementing a series of initiatives designed to make it a simpler, more agile company able to deliver an enhanced customer experience ("2016 Restructuring"). These initiatives include an increasing emphasis on less capital-intensive products and the achievement of operational synergies.

Substantially all of the initiatives associated with the 2016 Restructuring program concluded at the end of 2018. However, the Company expects to incur approximately $10 to $20 of additional restructuring costs associated with the completion of the information technology transition agreement entered into during 2017.

Total 2016 Restructuring expenses are reflected in Operating expenses in the Condensed Consolidated Statements of Operations, 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 the Company's segments.

The summary below presents 2016 Restructuring expenses, pre-tax, by type of costs incurred, for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,					Cumulative Amounts Incurred to Date
	2019			2018			2019		2018			Cumulative Amounts Incurred to Date
Severance benefits	$	1		$	5		$	1	$	9		$	70
Asset write-off costs	—			—		^*	—		—		^*	17
Transition costs	(1		)	1			—		7			24
Other costs	2			4			7		11			43
Total restructuring expenses	$	2		$	10		$	8	$	27		$	154

* Less than $1

The following table presents the accrued liability associated with 2016 Restructuring expenses as of September 30, 2019:



	Severance Benefits			Transition Costs			Other Costs			Total
Accrued liability as of January 1, 2019	$	8		$	14		$	2		$	24
Provision	1			—			7			8
Payments	(3		)	(3		)	(7		)	(13		)
Accrued liability as of September 30, 2019	$	6		$	11		$	2		$	19



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

16. Segments

The Company provides its principal products and services through four segments: Retirement, Investment Management, Employee Benefits, and Individual Life. Corporate includes activities not directly related to the segments, results of the Retained Business and certain insignificant run-off activities.

Measurement

Adjusted operating earnings before income taxes is a measure used by management to evaluate segment performance. The Company believes that Adjusted operating earnings before income taxes provides a meaningful measure of its business and segment performances and enhances the understanding of the Company’s financial results by focusing on the operating performance and trends of the underlying business segments and excluding items that tend to be highly variable from period to period based on capital market conditions and/or other factors. The Company uses the same accounting policies and procedures to measure segment Adjusted operating earnings before income taxes as it does for the directly comparable U.S. GAAP measure Income (loss) from continuing operations before income taxes. Adjusted operating earnings before income taxes does not replace Income (loss) from continuing operations before income taxes as the U.S. GAAP measure of the Company’s consolidated results of operations. Therefore, the Company believes that it is useful to evaluate both Income (loss) from continuing operations before income taxes and Adjusted operating earnings before income taxes when reviewing the Company’s financial and operating performance. Each segment’s Adjusted operating earnings before income taxes is calculated by adjusting Income (loss) from continuing operations before income taxes for the following items:

•

Net investment gains (losses), net of related amortization of DAC, VOBA, sales inducements and unearned revenue, which are significantly influenced by economic and market conditions, including interest rates and credit spreads, and are not indicative of normal operations. Net investment gains (losses) include gains (losses) on the sale of securities, impairments, changes in the fair value of investments using the FVO unrelated to the implied loan-backed security income recognition for certain mortgage-backed obligations and changes in the fair value of derivative instruments, excluding realized gains (losses) associated with swap settlements and accrued interest;

•

Net guaranteed benefit hedging gains (losses), which are significantly influenced by economic and market conditions and are not indicative of normal operations, include changes in the fair value of derivatives related to guaranteed benefits, net of related reserve increases (decreases) and net of related amortization of DAC, VOBA and sales inducements, less the estimated cost of these benefits. The estimated cost, which is reflected in operating results, reflects the expected cost of these benefits if markets perform in line with the Company's long-term expectations and includes the cost of hedging. Other derivative and reserve changes related to guaranteed benefits are excluded from adjusted operating earnings, including the impacts related to changes in the Company's nonperformance spread;

•

Income (loss) related to businesses exited through reinsurance or divestment that do not qualify as discontinued operations, which includes gains and (losses) associated with transactions to exit blocks of business (including net investment gains (losses) on securities sold and expenses directly related to these transactions) and residual run-off activity; these gains and (losses) are often related to infrequent events and do not reflect performance of operating segments. Excluding this activity better reveals trends in the Company's core business, which would be obscured by including the effects of business exited, and more closely aligns Adjusted operating earnings before income taxes with how the Company manages its segments;

•

Income (loss) attributable to noncontrolling interest, which represents the interest of shareholders, other than the Company, in consolidated entities. Income (loss) attributable to noncontrolling interest represents such shareholders' interests in the gains and (losses) of those entities, or the attribution of results from consolidated VIEs or VOEs to which the Company is not economically entitled;


•	Dividend payments made to preferred shareholders are included as reductions to reflect the Adjusted operating earnings that is available to common shareholders;



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)


•	Income (loss) related to early extinguishment of debt, which includes losses incurred as a result of transactions where the Company repurchases outstanding principal amounts of debt; these losses are excluded from Adjusted operating earnings before income taxes since the outcome of decisions to restructure debt are not indicative of normal operations;


•	Impairment of goodwill, value of management contract rights and value of customer relationships acquired, which includes losses as a result of impairment analysis; these represent losses related to infrequent events and do not reflect normal, cash-settled expenses;

•

Immediate recognition of net actuarial gains (losses) related to the Company's pension and other postretirement benefit obligations and gains (losses) from plan amendments and curtailments, which includes actuarial gains and losses as a result of differences between actual and expected experience on pension plan assets or projected benefit obligation during a given period. The Company immediately recognizes actuarial gains and (losses) related to pension and other postretirement benefit obligations and gains and losses from plan adjustments and curtailments. These amounts do not reflect normal, cash-settled expenses and are not indicative of current Operating expense fundamentals; and


•	Other items not indicative of normal operations or performance of the Company's segments or related to events such as

capital or organizational restructurings undertaken to achieve long-term economic benefits, including certain costs related to debt and equity offerings and severance and other expenses associated with such activities. These items vary widely in timing, scope and frequency between periods as well as between companies to which the Company is compared. Accordingly, the Company adjusts for these items as management believes that these items distort the ability to make a meaningful evaluation of the current and future performance of the Company's segments.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The summary below reconciles Adjusted operating earnings before income taxes for the segments to Income (loss) from continuing operations before income taxes for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Income (loss) from continuing operations before income taxes	$	143		$	186		$	618		$	448
Less Adjustments:
Net investment gains (losses) and related charges and adjustments	17			11			95			(90		)
Net guaranteed benefit hedging gains (losses) and related charges and adjustments	(19		)	14			(30		)	2
Income (loss) related to businesses exited through reinsurance or divestment	27			—			8			(53		)
Income attributable to noncontrolling interest	19			23			43			81
Income (loss) related to early extinguishment of debt	(12		)	—			(12		)	(3		)
Immediate recognition of net actuarial gains (losses) related to pension and other post-employment benefit obligations and gains (losses) from plan amendments and curtailments	—			—			66			—
Dividend payments made to preferred shareholders	14			—			24			—
Other adjustments	(28		)	(25		)	(173		)	(53		)
Total adjustments to income (loss) from continuing operations	$	18		$	23		$	21		$	(116	)

Adjusted operating earnings before income taxes by segment:
Retirement	$	117		$	253		$	426		$	531
Investment Management	46			48			121			161
Employee Benefits	57			50			144			117
Individual Life	(33		)	(134		)	62			(76		)
Corporate	(62		)	(54		)	(156		)	(169		)
Total	$	125		$	163		$	597		$	564

Adjusted operating revenues is a measure of the Company's segment revenues. Each segment's Operating revenues are calculated by adjusting Total revenues to exclude the following items:

•

Net investment gains (losses) and related charges and adjustments, which are significantly influenced by economic and market conditions, including interest rates and credit spreads and are not indicative of normal operations. Net investment gains (losses) include gains (losses) on the sale of securities, impairments, changes in the fair value of investments using the FVO unrelated to the implied loan-backed security income recognition for certain mortgage-backed obligations and changes in the fair value of derivative instruments, excluding realized gains (losses) associated with swap settlements and accrued interest. These are net of related amortization of unearned revenue;



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

•

Gain (loss) on change in fair value of derivatives related to guaranteed benefits, which is significantly influenced by economic and market conditions and not indicative of normal operations, includes changes in the fair value of derivatives related to guaranteed benefits, less the estimated cost of these benefits. The estimated cost, which is reflected in Adjusted operating revenues, reflects the expected cost of these benefits if markets perform in line with the Company's long-term expectations and includes the cost of hedging. Other derivative and reserve changes related to guaranteed benefits are excluded from Adjusted operating revenues, including the impacts related to changes in the Company's nonperformance spread;

•

Revenues related to businesses exited through reinsurance or divestment that do not qualify as discontinued operations, which includes revenues associated with transactions to exit blocks of business (including net investment gains (losses) on securities sold related to these transactions) and residual run-off activity; these gains and (losses) are often related to infrequent events and do not reflect performance of operating segments. Excluding this activity better reveals trends in the Company's core business, which would be obscured by including the effects of business exited, and more closely aligns Operating revenues with how the Company manages its segments;


•	Revenues attributable to noncontrolling interest, which represents the interests of shareholders, other than the Company, in consolidated entities. Revenues attributable to noncontrolling interest represents such shareholders' interests in the gains and losses of those entities, or the attribution of results from consolidated VIEs or VOEs to which the Company is not economically entitled; and


•	Other adjustments to Total revenues primarily reflect fee income earned by the Company's broker-dealers for sales of non-proprietary products, which are reflected net of commission expense in the Company's segments’ operating revenues, other items where the income is passed on to third parties and the elimination of intercompany investment expenses included in Adjusted operating revenues.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The summary below reconciles Adjusted operating revenues for the segments to Total revenues for the periods indicated:



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
Total revenues	$	2,237		$	2,252	$	6,780		$	6,332

Adjustments:
Net realized investment gains (losses) and related charges and adjustments	22			—		83			(122		)
Gain (loss) on change in fair value of derivatives related to guaranteed benefits	(12		)	12		(19		)	9
Revenues related to businesses exited through reinsurance or divestment	50			22		202			(36		)
Revenues attributable to noncontrolling interest	29			34		77			116
Other adjustments	86			76		257			201
Total adjustments to revenues	175			144		600			168

Adjusted operating revenues by segment:
Retirement	675			705		2,011			2,037
Investment Management	167			168		478			524
Employee Benefits	503			469		1,526			1,382
Individual Life	653			660		1,922			1,932
Corporate	64			106		243			289
Total	$	2,062		$	2,108	$	6,180		$	6,164

Other Segment Information

The Investment Management segment revenues include the following intersegment revenues, primarily consisting of asset-based management and administration fees for the periods indicated:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Investment Management intersegment revenues	$	29	$	29	$	89	$	111



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The summary below presents Total assets for the Company’s segments as of the dates indicated:



	September 30, 2019		December 31, 2018
Retirement	$	115,468	$	104,995
Investment Management	704		690
Employee Benefits	2,813		2,560
Individual Life	28,226		26,431
Corporate	17,767		18,051
Total assets, before consolidation⁽¹⁾	164,978		152,727
Consolidation of investment entities	1,872		1,955
Total assets	$	166,850	$	154,682

⁽¹⁾Total assets, before consolidation includes the Company's direct investments in CIEs prior to consolidation, which are accounted for using the equity method or fair value option.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

17. Condensed Consolidating Financial Information

The accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10, "Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered" ("Rule 3-10"). The condensed consolidating financial information presents the financial position of Voya Financial, Inc. ("Parent Issuer"), Voya Holdings ("Subsidiary Guarantor") and all other subsidiaries ("Non-Guarantor Subsidiaries") of the Company as of September 30, 2019 and December 31, 2018, their results of operations and comprehensive income for the three and nine months ended September 30, 2019 and 2018, and statements of cash flows for the nine months ended September 30, 2019 and 2018.

The 5.7% senior notes due 2043, the 3.65% senior notes due 2026, the 4.8% senior notes due 2046, the 3.125% senior notes due 2024 (collectively, the "Senior Notes"), the 5.65% fixed-to-floating rate junior subordinated notes due 2053 and the 4.7% fixed-to-floating junior subordinated notes due 2048 (collectively, the "Junior Subordinated Notes"), each issued by Parent Issuer, are fully and unconditionally guaranteed by Subsidiary Guarantor, a 100% owned subsidiary of Parent Issuer. No other subsidiary of Parent Issuer guarantees the Senior Notes or the Junior Subordinated Notes. Rule 3-10(h) provides that a guarantee is full and unconditional if, when the issuer of a guaranteed security has failed to make a scheduled payment, the guarantor is obligated to make the scheduled payment immediately and, if it does not, any holder of the guaranteed security may immediately bring suit directly against the guarantor for payment of amounts due and payable. In the event that Parent Issuer does not fulfill the guaranteed obligations, any holder of the Senior Notes or the Junior Subordinated Notes may immediately bring a claim against Subsidiary Guarantor for amounts due and payable.

The following condensed consolidating financial information is presented in conformance with the components of the Condensed Consolidated Financial Statements. Investments in subsidiaries are accounted for using the equity method for purposes of illustrating the consolidating presentation. Equity in the subsidiaries is therefore reflected in the Parent Issuer's and Subsidiary Guarantor's Investment in subsidiaries and Equity in earnings of subsidiaries. Non-Guarantor Subsidiaries represent all other subsidiaries on a combined basis. The consolidating adjustments presented herein eliminate investments in subsidiaries and intercompany balances and transactions.



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Condensed Consolidating Balance Sheet

September 30, 2019



	Parent Issuer			Subsidiary Guarantor		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Assets:
Investments:
Fixed maturities, available-for-sale, at fair value	$	5		$	—	$	51,124		$	(15	)	$	51,114
Fixed maturities, at fair value using the fair value option	—			—		3,461			—			3,461
Equity securities, at fair value	125			—		248			—			373
Short-term investments	—			—		145			—			145
Mortgage loans on real estate, net of valuation allowance	—			—		8,319			—			8,319
Policy loans	—			—		1,796			—			1,796
Limited partnerships/corporations	4			—		1,482			—			1,486
Derivatives	51			—		625			(101		)	575
Investments in subsidiaries	12,257			8,493		—			(20,750		)	—
Other investments	—			—		104			—			104
Securities pledged	—			—		1,804			—			1,804
Total investments	12,442			8,493		69,108			(20,866		)	69,177
Cash and cash equivalents	211			—		1,165			—			1,376
Short-term investments under securities loan agreements, including collateral delivered	11			—		1,822			—			1,833
Accrued investment income	—			—		679			—			679
Premium receivable and reinsurance recoverable	—			—		6,780			—			6,780
Deferred policy acquisition costs and Value of business acquired	—			—		2,771			—			2,771
Current income taxes	(25		)	14		129			—			118
Deferred income taxes	566			24		(189		)	—			401
Loans to subsidiaries and affiliates	236			—		129			(365		)	—
Due from subsidiaries and affiliates	3			—		3			(6		)	—
Other assets	5			—		1,387			—			1,392
Assets related to consolidated investment entities:
Limited partnerships/corporations, at fair value	—			—		1,565			—			1,565
Cash and cash equivalents	—			—		74			—			74
Corporate loans, at fair value using the fair value option	—			—		544			—			544
Other assets	—			—		6			—			6
Assets held in separate accounts	—			—		80,134			—			80,134
Total assets	$	13,449		$	8,531	$	166,107		$	(21,237	)	$	166,850



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Condensed Consolidating Balance Sheet (Continued)

September 30, 2019



	Parent Issuer		Subsidiary Guarantor		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Liabilities and Shareholders' Equity:
Future policy benefits	$	—	$	—	$	15,284	$	—		$	15,284
Contract owner account balances	—		—		50,953		—			50,953
Payables under securities loan and repurchase agreements, including collateral held	—		—		1,915		—			1,915
Short-term debt	129		73		164		(365		)	1
Long-term debt	2,668		371		17		(15		)	3,041
Derivatives	51		—		567		(101		)	517
Pension and other postretirement provisions	—		—		409		—			409
Due to subsidiaries and affiliates	1		—		3		(4		)	—
Other liabilities	49		4		2,122		(2		)	2,173
Liabilities related to consolidated investment entities:
Collateralized loan obligations notes, at fair value using the fair value option	—		—		503		—			503
Other liabilities	—		—		709		—			709
Liabilities related to separate accounts	—		—		80,134		—			80,134
Total liabilities	2,898		448		152,780		(487		)	155,639
Shareholders' equity:
Total Voya Financial, Inc. shareholders' equity	10,551		8,083		12,667		(20,750		)	10,551
Noncontrolling interest	—		—		660		—			660
Total shareholders' equity	10,551		8,083		13,327		(20,750		)	11,211
Total liabilities and shareholders' equity	$	13,449	$	8,531	$	166,107	$	(21,237	)	$	166,850



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Condensed Consolidating Balance Sheet

December 31, 2018



	Parent Issuer			Subsidiary Guarantor		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Assets:
Investments:
Fixed maturities, available-for-sale, at fair value	$	—		$	—	$	46,313	$	(15	)	$	46,298
Fixed maturities, at fair value using the fair value option	—			—		2,956		—			2,956
Equity securities, at fair value	99			—		174		—			273
Short-term investments	—			—		168		—			168
Mortgage loans on real estate, net of valuation allowance	—			—		8,676		—			8,676
Policy loans	—			—		1,833		—			1,833
Limited partnerships/corporations	—			—		1,158		—			1,158
Derivatives	39			—		286		(78		)	247
Investments in subsidiaries	10,099			7,060		—		(17,159		)	—
Other investments	—			—		90		—			90
Securities pledged	—			—		1,867		—			1,867
Total investments	10,237			7,060		63,521		(17,252		)	63,566
Cash and cash equivalents	209			2		1,327		—			1,538
Short-term investments under securities loan agreements, including collateral delivered	11			—		1,673		—			1,684
Accrued investment income	—			—		650		—			650
Premium receivable and reinsurance recoverable	—			—		6,860		—			6,860
Deferred policy acquisition costs and Value of business acquired	—			—		4,116		—			4,116
Current income taxes	(37		)	26		248		—			237
Deferred income taxes	553			22		582		—			1,157
Loans to subsidiaries and affiliates	79			—		4		(83		)	—
Due from subsidiaries and affiliates	2			—		3		(5		)	—
Other assets	13			—		1,323		—			1,336
Assets related to consolidated investment entities:
Limited partnerships/corporations, at fair value	—			—		1,421		—			1,421
Cash and cash equivalents	—			—		331		—			331
Corporate loans, at fair value using the fair value option	—			—		542		—			542
Other assets	—			—		16		—			16
Assets held in separate accounts	—			—		71,228		—			71,228
Total assets	$	11,067		$	7,110	$	153,845	$	(17,340	)	$	154,682



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Condensed Consolidating Balance Sheet (Continued)

December 31, 2018



	Parent Issuer		Subsidiary Guarantor		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Liabilities and Shareholders' Equity:
Future policy benefits	$	—	$	—	$	14,488	$	—		$	14,488
Contract owner account balances	—		—		51,001		—			51,001
Payables under securities loan and repurchase agreements, including collateral held	—		—		1,821		—			1,821
Short-term debt	4		—		80		(83		)	1
Long-term debt	2,763		371		17		(15		)	3,136
Derivatives	39		—		178		(78		)	139
Pension and other postretirement provisions	—		—		551		—			551
Due to subsidiaries and affiliates	1		—		2		(3		)	—
Other liabilities	47		55		2,048		(2		)	2,148
Liabilities related to consolidated investment entities:
Collateralized loan obligations notes, at fair value using the fair value option	—		—		540		—			540
Other liabilities	—		—		688		—			688
Liabilities related to separate accounts	—		—		71,228		—			71,228
Total liabilities	2,854		426		142,642		(181		)	145,741
Shareholders' equity:
Total Voya Financial, Inc. shareholders' equity	8,213		6,684		10,475		(17,159		)	8,213
Noncontrolling interest	—		—		728		—			728
Total shareholders' equity	8,213		6,684		11,203		(17,159		)	8,941
Total liabilities and shareholders' equity	$	11,067	$	7,110	$	153,845	$	(17,340	)	$	154,682



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2019



	Parent Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenues:
Net investment income	$	4		$	—		$	851		$	(2	)	$	853
Fee income	—			—			692			—			692
Premiums	—			—			571			—			571
Net realized capital gains (losses):
Total other-than-temporary impairments	—			—			(3		)	—			(3		)
Less: Portion of other-than-temporary impairments recognized in Other comprehensive income (loss)	—			—			—			—			—
Net other-than-temporary impairments recognized in earnings	—			—			(3		)	—			(3		)
Other net realized capital gains (losses)	—			—			(12		)	—			(12		)
Total net realized capital gains (losses)	—			—			(15		)	—			(15		)
Other revenue	—			—			93			—			93
Income (loss) related to consolidated investment entities:
Net investment income	—			—			43			—			43
Total revenues	4			—			2,235			(2		)	2,237
Benefits and expenses:
Policyholder benefits	—			—			874			—			874
Interest credited to contract owner account balances	—			—			385			—			385
Operating expenses	4			—			637			—			641
Net amortization of Deferred policy acquisition costs and Value of business acquired	—			—			134			—			134
Interest expense	44			9			—			(2		)	51
Operating expenses related to consolidated investment entities:
Interest expense	—			—			8			—			8
Other expense	—			—			1			—			1
Total benefits and expenses	48			9			2,039			(2		)	2,094
Income (loss) from continuing operations before income taxes	(44		)	(9		)	196			—			143
Income tax expense (benefit)	(13		)	(6		)	23			—			4
Income (loss) from continuing operations	(31		)	(3		)	173			—			139
Income (loss) from discontinued operations, net of tax	—			—			—			—			—
Net income (loss) before equity in earnings (losses) of unconsolidated affiliates	(31		)	(3		)	173			—			139
Equity in earnings (losses) of subsidiaries, net of tax	151			119			—			(270		)	—
Net income (loss)	120			116			173			(270		)	139
Less: Net income (loss) attributable to noncontrolling interest	—			—			19			—			19
Net income (loss) available to Voya Financial, Inc.	120			116			154			(270		)	120
Less: Preferred stock dividends	14			—			—			—			14
Net income (loss) available to Voya Financial, Inc.'s common shareholders	$	106		$	116		$	154		$	(270	)	$	106



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2019



	Parent Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenues:
Net investment income	$	27		$	—		$	2,530		$	(9	)	$	2,548
Fee income	—			—			2,019			—			2,019
Premiums	—			—			1,738			—			1,738
Net realized capital gains (losses):
Total other-than-temporary impairments	—			—			(39		)	—			(39		)
Less: Portion of other-than-temporary impairments recognized in Other comprehensive income (loss)	—			—			—			—			—
Net other-than-temporary impairments recognized in earnings	—			—			(39		)	—			(39		)
Other net realized capital gains (losses)	—			—			91			—			91
Total net realized capital gains (losses)	—			—			52			—			52
Other revenue	—			—			308			—			308
Income (loss) related to consolidated investment entities:
Net investment income	—			—			115			—			115
Total revenues	27			—			6,762			(9		)	6,780
Benefits and expenses:
Policyholder benefits	—			—			2,541			—			2,541
Interest credited to contract owner account balances	—			—			1,136			—			1,136
Operating expenses	10			—			2,020			—			2,030
Net amortization of Deferred policy acquisition costs and Value of business acquired	—			—			286			—			286
Interest expense	116			23			5			(9		)	135
Operating expenses related to consolidated investment entities:
Interest expense	—			—			29			—			29
Other expense	—			—			5			—			5
Total benefits and expenses	126			23			6,022			(9		)	6,162
Income (loss) from continuing operations before income taxes	(99		)	(23		)	740			—			618
Income tax expense (benefit)	(24		)	(8		)	105			—			73
Income (loss) from continuing operations	(75		)	(15		)	635			—			545
Income (loss) from discontinued operations, net of tax	—			(82		)	—			—			(82		)
Net income (loss) before equity in earnings (losses) of unconsolidated affiliates	(75		)	(97		)	635			—			463
Equity in earnings (losses) of subsidiaries, net of tax	495			340			—			(835		)	—
Net income (loss)	420			243			635			(835		)	463
Less: Net income (loss) attributable to noncontrolling interest	—			—			43			—			43
Net income (loss) available to Voya Financial, Inc.	420			243			592			(835		)	420
Less: Preferred stock dividends	24			—			—			—			24
Net income (loss) available to Voya Financial, Inc.'s common shareholders	$	396		$	243		$	592		$	(835	)	$	396



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2018



	Parent Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenues:
Net investment income	$	7		$	—		$	850		$	(2	)	$	855
Fee income	—			—			704			—			704
Premiums	—			—			550			—			550
Net realized capital gains (losses):
Total other-than-temporary impairments	—			—			(7		)	—			(7		)
Less: Portion of other-than-temporary impairments recognized in Other comprehensive income (loss)	—			—			—			—			—
Net other-than-temporary impairments recognized in earnings	—			—			(7		)	—			(7		)
Other net realized capital gains (losses)	—			—			(39		)	—			(39		)
Total net realized capital gains (losses)	—			—			(46		)	—			(46		)
Other revenue	1			—			126			—			127
Income (loss) related to consolidated investment entities:
Net investment income	—			—			62			—			62
Total revenues	8			—			2,246			(2		)	2,252
Benefits and expenses:
Policyholder benefits	—			—			876			—			876
Interest credited to contract owner account balances	—			—			392			—			392
Operating expenses	3			—			653			—			656
Net amortization of Deferred policy acquisition costs and Value of business acquired	—			—			86			—			86
Interest expense	39			8			2			(2		)	47
Operating expenses related to consolidated investment entities:
Interest expense	—			—			8			—			8
Other expense	—			—			1			—			1
Total benefits and expenses	42			8			2,018			(2		)	2,066
Income (loss) from continuing operations before income taxes	(34		)	(8		)	228			—			186
Income tax expense (benefit)	(3		)	(10		)	34			—			21
Income (loss) from continuing operations	(31		)	2			194			—			165
Income (loss) from discontinued operations, net of tax	—			—			—			—			—
Net income (loss) before equity in earnings (losses) of unconsolidated affiliates	(31		)	2			194			—			165
Equity in earnings (losses) of subsidiaries, net of tax	173			281			—			(454		)	—
Net income (loss)	142			283			194			(454		)	165
Less: Net income (loss) attributable to noncontrolling interest	—			—			23			—			23
Net income (loss) available to Voya Financial, Inc.	142			283			171			(454		)	142
Less: Preferred stock dividends	—			—			—			—			—
Net income (loss) available to Voya Financial, Inc.'s common shareholders	$	142		$	283		$	171		$	(454	)	$	142



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2018



	Parent Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenues:
Net investment income	$	14		$	1		$	2,485		$	(9	)	$	2,491
Fee income	—			—			2,040			—			2,040
Premiums	—			—			1,622			—			1,622
Net realized capital gains (losses):
Total other-than-temporary impairments	—			—			(21		)	—			(21		)
Less: Portion of other-than-temporary impairments recognized in Other comprehensive income (loss)	—			—			1			—			1
Net other-than-temporary impairments recognized in earnings	—			—			(22		)	—			(22		)
Other net realized capital gains (losses)	—			—			(325		)	—			(325		)
Total net realized capital gains (losses)	—			—			(347		)	—			(347		)
Other revenue	(4		)	—			331			—			327
Income (loss) related to consolidated investment entities:
Net investment income	—			—			199			—			199
Total revenues	10			1			6,330			(9		)	6,332
Benefits and expenses:
Policyholder benefits	—			—			2,290			—			2,290
Interest credited to contract owner account balances	—			—			1,156			—			1,156
Operating expenses	9			—			1,992			—			2,001
Net amortization of Deferred policy acquisition costs and Value of business acquired	—			—			260			—			260
Interest expense	119			28			4			(9		)	142
Operating expenses related to consolidated investment entities:
Interest expense	—			—			30			—			30
Other expense	—			—			5			—			5
Total benefits and expenses	128			28			5,737			(9		)	5,884
Income (loss) from continuing operations before income taxes	(118		)	(27		)	593			—			448
Income tax expense (benefit)	(316		)	(15		)	401			—			70
Income (loss) from continuing operations	198			(12		)	192			—			378
Income (loss) from discontinued operations, net of tax	—			—			457			—			457
Net income (loss) before equity in earnings (losses) of unconsolidated affiliates	198			(12		)	649			—			835
Equity in earnings (losses) of subsidiaries, net of tax	556			1,368			—			(1,924		)	—
Net income (loss)	754			1,356			649			(1,924		)	835
Less: Net income (loss) attributable to noncontrolling interest	—			—			81			—			81
Net income (loss) available to Voya Financial, Inc.	754			1,356			568			(1,924		)	754
Less: Preferred stock dividends	—			—			—			—			—
Net income (loss) available to Voya Financial, Inc.'s common shareholders	$	754		$	1,356		$	568		$	(1,924	)	$	754



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Condensed Consolidating Statement of Comprehensive Income

For the Three Months Ended September 30, 2019



	Parent Issuer			Subsidiary Guarantor		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income (loss)	$	120		$	116	$	173		$	(270	)	$	139
Other comprehensive income (loss), before tax:
Unrealized gains (losses) on securities	798			526		797			(1,323		)	798
Other-than-temporary impairments	—			—		—			—			—
Pension and other postretirement benefits liability	(1		)	—		(1		)	1			(1		)
Other comprehensive income (loss), before tax	797			526		796			(1,322		)	797
Income tax expense (benefit) related to items of other comprehensive income (loss)	167			111		167			(278		)	167
Other comprehensive income (loss), after tax	630			415		629			(1,044		)	630
Comprehensive income (loss)	750			531		802			(1,314		)	769
Less: Comprehensive income (loss) attributable to noncontrolling interest	—			—		19			—			19
Comprehensive income (loss) attributable to Voya Financial, Inc.	$	750		$	531	$	783		$	(1,314	)	$	750

Condensed Consolidating Statement of Comprehensive Income

For the Nine Months Ended September 30, 2019



	Parent Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income (loss)	$	420		$	243		$	635		$	(835	)	$	463
Other comprehensive income (loss), before tax:
Unrealized gains (losses) on securities	3,223			2,436			3,223			(5,659		)	3,223
Other-than-temporary impairments	2			2			2			(4		)	2
Pension and other postretirement benefits liability	(3		)	(1		)	(3		)	4			(3		)
Other comprehensive income (loss), before tax	3,222			2,437			3,222			(5,659		)	3,222
Income tax expense (benefit) related to items of other comprehensive income (loss)	675			510			675			(1,185		)	675
Other comprehensive income (loss), after tax	2,547			1,927			2,547			(4,474		)	2,547
Comprehensive income (loss)	2,967			2,170			3,182			(5,309		)	3,010
Less: Comprehensive income (loss) attributable to noncontrolling interest	—			—			43			—			43
Comprehensive income (loss) attributable to Voya Financial, Inc.	$	2,967		$	2,170		$	3,139		$	(5,309	)	$	2,967



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Condensed Consolidating Statement of Comprehensive Income

For the Three Months Ended September 30, 2018



	Parent Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income (loss)	$	142		$	283		$	194		$	(454	)	$	165
Other comprehensive income (loss), before tax:
Unrealized gains (losses) on securities	(206		)	(216		)	(206		)	422			(206		)
Other-than-temporary impairments	—			1			—			(1		)	—
Pension and other postretirement benefits liability	(4		)	(1		)	(4		)	5			(4		)
Other comprehensive income (loss), before tax	(210		)	(216		)	(210		)	426			(210		)
Income tax expense (benefit) related to items of other comprehensive income (loss)	(44		)	(18		)	(43		)	61			(44		)
Other comprehensive income (loss), after tax	(166		)	(198		)	(167		)	365			(166		)
Comprehensive income (loss)	(24		)	85			27			(89		)	(1		)
Less: Comprehensive income (loss) attributable to noncontrolling interest	—			—			23			—			23
Comprehensive income (loss) attributable to Voya Financial, Inc.	$	(24	)	$	85		$	4		$	(89	)	$	(24	)

Condensed Consolidating Statement of Comprehensive Income

For the Nine Months Ended September 30, 2018



	Parent Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income (loss)	$	754		$	1,356		$	649		$	(1,924	)	$	835
Other comprehensive income (loss), before tax:
Unrealized gains (losses) on securities	(2,596		)	(1,975		)	(2,596		)	4,571			(2,596		)
Other-than-temporary impairments	30			29			30			(59		)	30
Pension and other postretirement benefits liability	(10		)	(3		)	(10		)	13			(10		)
Other comprehensive income (loss), before tax	(2,576		)	(1,949		)	(2,576		)	4,525			(2,576		)
Income tax expense (benefit) related to items of other comprehensive income (loss)	(650		)	(379		)	(649		)	1,028			(650		)
Other comprehensive income (loss), after tax	(1,926		)	(1,570		)	(1,927		)	3,497			(1,926		)
Comprehensive income (loss)	(1,172		)	(214		)	(1,278		)	1,573			(1,091		)
Less: Comprehensive income (loss) attributable to noncontrolling interest	—			—			81			—			81
Comprehensive income (loss) attributable to Voya Financial, Inc.	$	(1,172	)	$	(214	)	$	(1,359	)	$	1,573		$	(1,172	)



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Condensed Consolidating Statement of Cash Flows For the Nine Months Ended September 30, 2019

	Parent Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net cash (used in) provided by operating activities	$	(91	)	$	425		$	952		$	(435	)	$	851
Cash Flows from Investing Activities:
Proceeds from the sale, maturity, disposal or redemption of:
Fixed maturities	—			—			5,999			—			5,999
Equity securities	18			—			2			—			20
Mortgage loans on real estate	—			—			858			—			858
Limited partnerships/corporations	—			—			181			—			181
Acquisition of:
Fixed maturities	(5		)	—			(6,227		)	—			(6,232		)
Equity securities	(27		)	—			(3		)	—			(30		)
Mortgage loans on real estate	—			—			(508		)	—			(508		)
Limited partnerships/corporations	(4		)	—			(367		)	—			(371		)
Short-term investments, net	—			—			23			—			23
Derivatives, net	—			—			35			—			35
Sales from consolidated investments entities	—			—			484			—			484
Purchases within consolidated investment entities	—			—			(1,120		)	—			(1,120		)
Maturity (issuance) of short-term intercompany loans, net	(157		)	—			(125		)	282			—
Return of capital contributions and dividends from subsidiaries	956			414			—			(1,370		)	—
Capital contributions to subsidiaries	(3		)	—			—			3			—
Collateral received (delivered), net	—			—			(55		)	—			(55		)
Other, net	—			—			(37		)	—			(37		)
Net cash used in investing activities - discontinued operations	—			(128		)	—			—			(128		)
Net cash provided by (used in) investing activities	778			286			(860		)	(1,085		)	(881		)



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Condensed Consolidating Statement of Cash Flows (Continued) For the Nine Months Ended September 30, 2019

	Parent Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Cash Flows from Financing Activities:
Deposits received for investment contracts	—			—			4,686			—			4,686
Maturities and withdrawals from investment contracts	—			—			(4,724		)	—			(4,724		)
Settlements on deposit contracts	—			—			(6		)	—			(6		)
Repayment of debt with maturities of more than three months	(106		)	—			—			—			(106		)
Net proceeds from (repayments of) short-term intercompany loans	125			73			84			(282		)	—
Return of capital contributions and dividends to parent	—			(786		)	(1,019		)	1,805			—
Contributions of capital from parent	—			—			3			(3		)	—
Borrowings of consolidated investment entities	—			—			853			—			853
Repayments of borrowings of consolidated investment entities	—			—			(726		)	—			(726		)
Contributions from (distributions to) participants in consolidated investment entities	—			—			598			—			598
Proceeds from issuance of common stock, net	3			—			—			—			3
Proceeds from issuance of preferred stock, net	293			—			—			—			293
Share-based compensation	(17		)	—			—			—			(17		)
Common stock acquired - Share repurchase	(936		)	—			—			—			(936		)
Dividends paid on common stock	(23		)	—			—			—			(23		)
Dividends paid on preferred stock	(24		)	—			—			—			(24		)
Principal payments for financing leases	—			—			(3		)	—			(3		)
Net cash (used in) provided by financing activities	(685		)	(713		)	(254		)	1,520			(132		)
Net increase (decrease) in cash and cash equivalents	2			(2		)	(162		)	—			(162		)
Cash and cash equivalents, beginning of period	209			2			1,327			—			1,538
Cash and cash equivalents, end of period	$	211		$	—		$	1,165		$	—		$	1,376



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Condensed Consolidating Statement of Cash Flows For the Nine Months Ended September 30, 2018

	Parent Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net cash (used in) provided by operating activities	$	(5	)	$	311		$	1,718		$	(390	)	$	1,634
Cash Flows from Investing Activities:
Proceeds from the sale, maturity, disposal or redemption of:
Fixed maturities	—			—			5,845			—			5,845
Equity securities	24			—			69			—			93
Mortgage loans on real estate	—			—			700			—			700
Limited partnerships/corporations	—			—			245			—			245
Acquisition of:
Fixed maturities	—			—			(6,515		)	—			(6,515		)
Equity securities	(23		)	—			(3		)	—			(26		)
Mortgage loans on real estate	—			—			(761		)	—			(761		)
Limited partnerships/corporations	—			—			(270		)	—			(270		)
Short-term investments, net	212			—			207			—			419
Derivatives, net	—			—			61			—			61
Sales from consolidated investments entities	—			—			888			—			888
Purchases within consolidated investment entities	—			—			(740		)	—			(740		)
Maturity (issuance) of short-term intercompany loans, net	128			—			418			(546		)	—
Return of capital contributions and dividends from subsidiaries	1,143			122			—			(1,265		)	—
Capital contributions to subsidiaries	—			(45		)	—			45			—
Collateral received (delivered), net	—			—			76			—			76
Other, net	(13		)	1			14			—			2
Net cash provided by (used in) investing activities - discontinued operations	—			331			(297		)	—			34
Net cash provided by (used in) investing activities	1,471			409			(63		)	(1,766		)	51



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Voya Financial, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Condensed Consolidating Statement of Cash Flows (Continued) For the Nine Months Ended September 30, 2018

	Parent Issuer			Subsidiary Guarantor			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Cash Flows from Financing Activities:
Deposits received for investment contracts	—			—			4,327			—			4,327
Maturities and withdrawals from investment contracts	—			—			(4,197		)	—			(4,197		)
Proceeds from issuance of debt with maturities of more than three months	350			—			—			—			350
Repayment of debt with maturities of more than three months	(337		)	(13		)	—			—			(350		)
Debt issuance costs	(6		)	—			—			—			(6		)
Net (repayments of) proceeds from short-term intercompany loans	(418		)	(68		)	(60		)	546			—
Return of capital contributions and dividends to parent	—			(638		)	(1,017		)	1,655			—
Contributions of capital from parent	—			—			45			(45		)	—
Borrowings of consolidated investment entities	—			—			588			—			588
Repayments of borrowings of consolidated investment entities	—			—			(543		)	—			(543		)
Contributions from (distributions to) participants in consolidated investment entities, net	—			—			(126		)	—			(126		)
Proceeds from issuance of common stock, net	3			—			—			—			3
Proceeds from issuance of preferred stock, net	319			—			—			—			319
Share-based compensation	(13		)	—			—			—			(13		)
Common stock acquired - Share repurchase	(750		)	—			—			—			(750		)
Dividends paid on common stock	(5		)	—			—			—			(5		)
Net cash used in financing activities - discontinued operations	—			—			(1,209		)	—			(1,209		)
Net cash (used in) provided by financing activities	(857		)	(719		)	(2,192		)	2,156			(1,612		)
Net increase (decrease) in cash and cash equivalents	609			1			(537		)	—			73
Cash and cash equivalents, beginning of period	244			1			1,471			—			1,716
Cash and cash equivalents, end of period	$	853		$	2		$	934		$	—		$	1,789



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Dollar amounts in millions, unless otherwise stated)

For the purposes of the discussion in this Quarterly Report on Form 10-Q, 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 consolidated results of operations for the three and nine months ended September 30, 2019 and 2018 and financial condition as of September 30, 2019 and December 31, 2018. This item should be read in its entirety and in conjunction with the Condensed Consolidated Financial Statements and related notes contained in Part I, Item 1. of this Quarterly Report on Form 10-Q, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contained in our Annual Report on Form 10-K for the year ended December 31, 2018 ("Annual Report on Form 10-K").

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 our principal products and services through four segments: Retirement, Investment Management, Employee Benefits and Individual Life. Corporate includes activities not directly related to our segments, results of the Retained Business and certain insignificant run-off activities that are not meaningful to our business strategy. See the Segments Note to our Consolidated Financial Statements in Part II, Item 8. of our Annual Report on Form 10-K for further information on our segments.

The following represents segment percentage contributions to total Adjusted operating revenues and Adjusted operating earnings before income taxes for the nine months ended September 30, 2019:



	September 30, 2019
percent of total	Adjusted Operating Revenues		Adjusted Operating Earnings before Income Taxes
Retirement	32.5	%	71.4	%
Investment Management	7.7	%	20.3	%
Employee Benefits	24.7	%	24.1	%
Individual Life	31.1	%	10.4	%
Corporate	4.0	%	(26.2	)%

Discontinued Operations

On June 1, 2018, we consummated a series of transactions (collectively, the "2018 Transaction") pursuant to a Master Transaction Agreement dated December 20, 2017 ("MTA") with VA Capital Company LLC ("VA Capital") and Athene Holding Ltd. ("Athene"). As part of the 2018 Transaction, Venerable Holdings, Inc. ("Venerable"), a wholly owned subsidiary of VA Capital, acquired two of our subsidiaries, Voya Insurance and Annuity Company ("VIAC") and Directed Services, LLC ("DSL"), and VIAC and other Voya subsidiaries reinsured to Athene substantially all of their fixed and fixed indexed annuities business. The 2018 Transaction resulted in the disposition of substantially all of our Closed Block Variable Annuity ("CBVA") and Annuities businesses. Pursuant to the terms of the 2018 Transaction, we have retained a small number of CBVA and Annuities policies that are not included in the disposed businesses described above as "Retained Business." Refer to the Discontinued Operations Note in our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for further details.

During 2019, we settled the outstanding purchase price true-up amounts with VA Capital. We do not anticipate further material charges in connection with the 2018 Transaction. Income (loss) from discontinued operations, net of tax for the nine months ended September 30, 2019 includes a $82 charge related to the purchase price true-up settlement in connection with the 2018 Transaction.



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The following table summarizes the components of Income (loss) from discontinued operations, net of tax for the nine months ended September 30, 2019 and 2018:



	Nine Months Ended September 30,
	2019			2018
Revenues:
Net investment income	$	—		$	510
Fee income	—			295
Premiums	—			(50		)
Total net realized capital gains (losses)	—			(345		)
Other revenue	—			10
Total revenues	—			420
Benefits and expenses:
Interest credited and other benefits to contract owners/policyholders	—			442
Operating expenses	—			(14		)
Net amortization of Deferred policy acquisition costs and Value of business acquired	—			49
Interest expense	—			10
Total benefits and expenses	—			487
Income (loss) from discontinued operations before income taxes	—			(67		)
Income tax expense (benefit)	—			(19		)
Adjustment to loss on sale, net of tax	(82		)	505
Income (loss) from discontinued operations, net of tax	$	(82	)	$	457

Trends and Uncertainties

We describe known material trends and uncertainties that might affect our business in our Annual Report on Form 10-K for the year ended December 31, 2018, under the caption "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Trends and Uncertainties", and in other sections of that document, including "Risk Factors". In addition, we describe below in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") more recently developing known trends and uncertainties that we believe may materially affect our future liquidity, financial condition or results of operations.

Interest Rates

In the third quarter of 2019, interest rates declined significantly in a continuation of a trend that has persisted through much of the first half of 2019. Intermediate parts of the yield curve inverted - with some intermediate Treasury maturities offering lower yields than shorter-dated maturities - as the market prices in lower future monetary policy rates. On July 31, 2019, the Federal Reserve lowered its key policy rate by 25 basis points, the first Federal Funds rate cut since 2008. The Federal Reserve followed up with a second rate cut of 25 basis points on September 18^th, 2019. Lower rates in the United States were consistent with trends in global markets, presumably reflecting expectations for lower global growth and subdued inflationary pressures.

The interest rate environment will continue to influence our business and financial performance for several reasons, including the following:

•

Our continuing business general account investment portfolio, which was approximately $67.4 billion as of September 30, 2019, consists predominantly of fixed income investments and had an annualized earned yield of approximately 5.1% in the third quarter of 2019, inclusive of alternative and prepayment income. In the near term and absent a material change in yields available on fixed income investments, we expect the yield we earn on new investments will be lower than the yields we earn on maturing investments, which were generally purchased in environments where interest rates were higher than current levels. While our continuing business general account investment portfolio is predominantly comprised of fixed rate investments acquired to back our fixed rate liabilities, our general account also includes a small amount of securities with an earned yield that fluctuates with changes in short-term interest rates.



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•

Certain of our products pay guaranteed minimum rates - for example, fixed accounts and a portion of the stable value accounts included within defined contribution retirement plans and universal life ("UL") policies. 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.

Further changes in interest rates, whether positive or negative, would likely have modest effects on our future Adjusted operating earnings. For example, we estimate that a 100 basis point increase or decrease in rates, as compared to rates prevailing at the start of the current fiscal year, over the next three years would generally increase or decrease our Adjusted operating earnings by approximately 2-4% in future periods, with the impacts increasing from the lower to the higher end of the range the longer the rate change persists.

Stranded Costs

As a result of the 2018 Transaction, certain costs that relate to activities for which we continue to provide transitional services for businesses sold and for which we are reimbursed under a transition services agreement ("TSA"), 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, and other expenses that do not meet the foregoing criteria are reported within continuing operations. These costs reported within continuing operations ("Stranded Costs") are included in Adjusted operating earnings before income taxes and Income (loss) from continuing operations for all periods presented. Because we do not believe that TSA revenues and Stranded Costs are representative of the future run-rate of revenues and expenses of our continuing operations, they are recorded in Corporate. We plan to address the Stranded Costs through a cost reduction strategy. Refer to Restructuring in the section below for more information on this program.

Restructuring

Organizational Restructuring

As a result of the closing of the 2018 Transaction, we are undertaking further restructuring efforts to execute the transition and reduce stranded expenses associated with businesses sold, as well as our corporate and shared services functions ("Organizational Restructuring").

In October 2018, we announced our decision to cease new sales following the strategic review of our Individual Life business. See the Business, Basis of Presentation and Significant Accounting Policies Note in Part I, Item 1. of this Quarterly Report on Form 10-Q for additional information.

In November 2018, we announced that we are targeting an additional $100 million of cost savings by the end of 2020, which is in addition to savings previously announced of $110 to $130 million by the middle of 2019 and $20 million of expected savings from ceasing Individual Life sales referenced above. These savings initiatives will improve operational efficiency, strengthen technology capabilities and centralize certain sales, operations and investment management activities. The restructuring charges in connection with these initiatives are not reflected in our run-rate cost savings estimates.

The Organizational Restructuring initiatives described above have resulted in recognition of severance and organizational transition costs and are reflected in Operating expenses in the Condensed Consolidated Statements of Operations, but excluded from Adjusted operating earnings before income taxes. For the three and nine months ended September 30, 2019, we incurred Organizational Restructuring expenses of $26 million and $164 million, respectively, of severance and organizational transition costs associated with continuing operations. For the three and nine months ended September 30, 2018, we incurred Organizational Restructuring expenses of $13 million and $25 million, respectively, of severance and organizational transition costs associated with continuing operations.

In addition to the restructuring costs incurred above, the anticipated reduction in employees from the execution of the initiatives described above triggered an immaterial curtailment loss and related re-measurement gain of our qualified defined benefit pension plan as of January 31, 2019, which was recorded during the first quarter of 2019.

Including the expense of $164 million for the nine months ended September 30, 2019, the aggregate amount of Organizational Restructuring expenses we expect to incur is in the range of $200 to $300 million. We anticipate that these costs, which will include severance, organizational transition costs incurred to reorganize operations and other costs such as contract terminations and asset write-offs, will occur at least through the end of 2020.



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Restructuring expenses that were directly related to the preparation for and execution of the 2018 Transaction are included in Income (loss) from discontinued operations, net of tax, in the Condensed Consolidated Statements of Operations. For the three and nine months ended September 30, 2019, we did not incur any Organizational Restructuring expenses associated with discontinued operations as a result of the 2018 Transaction. For the three and nine months ended September 30, 2018, we incurred Organizational Restructuring expenses as a result of the 2018 Transaction of $0 million and $6 million, respectively, of severance and organizational transition costs, which are reflected in discontinued operations.

2016 Restructuring

In 2016, we began implementing a series of initiatives designed to make us a simpler, more agile company able to deliver an enhanced customer experience ("2016 Restructuring"). These initiatives include an increasing emphasis on less capital-intensive products and the achievement of operational synergies.

Substantially all of the initiatives associated with the 2016 Restructuring program concluded at the end of 2018. However, we expect to incur approximately $10 to $20 million of additional restructuring costs associated with the completion of the information technology transition agreement entered into during 2017.

For the three and nine months ended September 30, 2019, the total of all initiatives in the 2016 Restructuring program resulted in restructuring expenses of $2 million and $8 million, respectively, which are reflected in Operating expenses in the Condensed Consolidated Statements of Operations, but are excluded from Adjusted operating earnings before income taxes. For the three and nine months ended September 30, 2018, these initiatives resulted in restructuring expenses of $10 million and $27 million, respectively, which are reflected in Operating expenses in the Condensed Consolidated Statements of Operations, but are 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.

Operating Measures

This MD&A includes a discussion of Adjusted operating earnings before income taxes and Adjusted operating revenues, each of which is a measure used by management to evaluate segment performance. We believe that Adjusted operating earnings before income taxes provides a meaningful measure of our business performance and enhances the understanding of our financial results by focusing on the operating performance and trends of the underlying business segments and excluding items that tend to be highly variable from period to period based on capital market conditions or other factors. Adjusted operating earnings before income taxes does not replace Income (loss) from continuing operations before income taxes as the comparable U.S. GAAP measure of our consolidated results of operations. Therefore, we believe that it is useful to evaluate both Income (loss) from continuing operations before income taxes and Adjusted operating earnings before income taxes when reviewing our financial and operating performance. See the Segments Note in our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for a description of the adjustments made to reconcile Income (loss) before income taxes to Total adjusted operating earnings before income taxes and the adjustments made to reconcile Total revenues to Total adjusted operating revenues.



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Results of Operations - Company Condensed Consolidated

The following table presents summary condensed consolidated financial information for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Revenues:
Net investment income	$	853		$	855		$	2,548		$	2,491
Fee income	692			704			2,019			2,040
Premiums	571			550			1,738			1,622
Net realized capital gains (losses)	(15		)	(46		)	52			(347		)
Other revenue	93			127			308			327
Income related to consolidated investment entities	43			62			115			199
Total revenues	2,237			2,252			6,780			6,332
Benefits and expenses:
Interest credited and other benefits to contract owners/policyholders	1,259			1,268			3,677			3,446
Operating expenses	641			656			2,030			2,001
Net amortization of Deferred policy acquisition costs and Value of business acquired	134			86			286			260
Interest expense	51			47			135			142
Operating expenses related to consolidated investment entities	9			9			34			35
Total benefits and expenses	2,094			2,066			6,162			5,884
Income from continuing operations before income taxes	143			186			618			448
Income tax expense	4			21			73			70
Income from continuing operations	139			165			545			378
Income (loss) from discontinued operations, net of tax	—			—			(82		)	457
Net Income	139			165			463			835
Less: Net income attributable to noncontrolling interest	19			23			43			81
Less: Preferred stock dividends	14			—			24			—
Net income (loss) available to our common shareholders	$	106		$	142		$	396		$	754



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The following table presents information about our Operating expenses for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Operating expenses:
Commissions	$	165		$	168		$	543		$	505
General and administrative expenses:
Net actuarial (gains)/losses related to pension and other postretirement benefit obligations	—			—			(66		)	—
Restructuring expenses	28			23			172			52
Other general and administrative expenses	471			517			1,534			1,598
Total general and administrative expenses	499			540			1,640			1,650
Total operating expenses, before DAC/VOBA deferrals	664			708			2,183			2,155
DAC/VOBA deferrals	(23		)	(52		)	(153		)	(154		)
Total operating expenses	$	641		$	656		$	2,030		$	2,001

The following table presents AUM and AUA as of the dates indicated:



	As of September 30,
($ in millions)	2019			2018
AUM and AUA:
Retirement⁽²⁾	$	407,810		$	434,862
Investment Management	267,293			259,405
Employee Benefits	1,911			1,838
Individual Life	15,521			15,728
Eliminations/Other	(124,228		)	(121,145		)
Total AUM and AUA⁽¹⁾⁽²⁾	$	568,307		$	590,688

AUM	310,367			298,093
AUA⁽²⁾	257,940			292,595
Total AUM and AUA⁽¹⁾⁽²⁾	$	568,307		$	590,688

⁽¹⁾Includes AUM and AUA related to the businesses sold in the prior period, for which a substantial portion of the assets continue to be managed by our Investment Management segment.

⁽²⁾Retirement includes Assets Under Advisement, which are presented in AUA. For further detail, refer to the Retirement segment results section below. Prior period information have been revised to conform to current period presentation.



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The following table presents a reconciliation of Income (loss) from continuing operations to Adjusted operating earnings before income taxes and the relative contributions of each segment to Adjusted operating earnings before income taxes for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Income from continuing operations before income taxes	$	143		$	186		$	618		$	448
Less Adjustments⁽¹⁾:
Net investment gains (losses) and related charges and adjustments	17			11			95			(90		)
Net guaranteed benefit hedging gains (losses) and related charges and adjustments	(19		)	14			(30		)	2
Income (Loss) related to businesses exited through reinsurance or divestment	27			—			8			(53		)
Income attributable to noncontrolling interest	19			23			43			81
Income (loss) related to early extinguishment of debt	(12		)	—			(12		)	(3		)
Immediate recognition of net actuarial gains (losses) related to pension and other post-employment benefit obligations and gains (losses) from plan amendments and curtailments	—			—			66			—
Dividend payments made to preferred shareholders	14			—			24			—
Other adjustments	(28		)	(25		)	(173		)	(53		)
Total adjustments to income (loss) from continuing operations before income taxes	$	18		$	23		$	21		$	(116	)

Adjusted operating earnings before income taxes by segment:
Retirement	$	117		$	253		$	426		$	531
Investment Management	46			48			121			161
Employee Benefits	57			50			144			117
Individual Life	(33		)	(134		)	62			(76		)
Corporate	(62		)	(54		)	(156		)	(169		)
Total adjusted operating earnings before income taxes	$	125		$	163		$	597		$	564

⁽¹⁾ Refer to the Segments Note to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a description of these items.



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The following table presents a reconciliation of Total revenues to Adjusted operating revenues and the relative contributions of each segment to Adjusted operating revenues for the periods indicated:



	Three Months Ended September 30,					Nine Months Ended September 30,
($ in millions)	2019			2018		2019			2018
Total revenues	$	2,237		$	2,252	$	6,780		$	6,332
Adjustments⁽¹⁾:
Net realized investment gains (losses) and related charges and adjustments	22			—		83			(122		)
Gain (loss) on change in fair value of derivatives related to guaranteed benefits	(12		)	12		(19		)	9
Revenues related to businesses exited through reinsurance or divestment	50			22		202			(36		)
Revenues attributable to noncontrolling interest	29			34		77			116
Other adjustments	86			76		257			201
Total adjustments to revenues	$	175		$	144	$	600		$	168

Adjusted operating revenues by segment:
Retirement	$	675		$	705	$	2,011		$	2,037
Investment Management	167			168		478			524
Employee Benefits	503			469		1,526			1,382
Individual Life	653			660		1,922			1,932
Corporate	64			106		243			289
Total adjusted operating revenues	$	2,062		$	2,108	$	6,180		$	6,164

⁽¹⁾Refer to the Segments Note to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a description of these items.

The following tables describe the components of the reconciliation between Adjusted operating earnings before income taxes and Income (loss) from continuing operations before income taxes related to Net investment gains (losses) and related charges and adjustments and Net guaranteed benefits hedging gains (losses) and related charges and adjustments.

The following table presents the adjustment to Income (loss) from continuing operations before income taxes related to Total investment gains (losses) and the related Net amortization of DAC/VOBA and other intangibles for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Other-than-temporary impairments	$	(3	)	$	(7	)	$	(39	)	$	(21	)
CMO-B fair value adjustments⁽¹⁾	24			(17		)	85			(93		)
Gains (losses) on the sale of securities	12			13			36			(21		)
Other, including changes in the fair value of derivatives	(15		)	18			10			22
Total investment gains (losses)	18			7			92			(113		)
Net amortization of DAC/VOBA and other intangibles on above	(1		)	4			3			23
Net investment gains (losses)	$	17		$	11		$	95		$	(90	)

⁽¹⁾ For a description of our CMO-B portfolio, see Investments - CMO-B Portfolio in Part I, Item 2. of this Quarterly report on Form 10-Q and Part II, Item 7. of our Annual Report on Form 10-K.



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The following table presents the adjustment to Income (loss) from continuing operations before taxes related to Guaranteed benefit hedging gains (losses) net of DAC/VOBA and other intangibles amortization for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Gain (loss), excluding nonperformance risk	$	(25	)	$	21		$	(37	)	$	10
Gain (loss) due to nonperformance risk	6			(7		)	7			(8		)
Net gain (loss) prior to related amortization of DAC/VOBA and sales inducements	(19		)	14			(30		)	2
Net amortization of DAC/VOBA and sales inducements	—			—			—			—
Net guaranteed benefit hedging gains (losses) and related charges and adjustments	$	(19	)	$	14		$	(30	)	$	2

The following table presents DAC/VOBA and other intangibles unlocking, including unlocking related to the GMIR initiative, and annual review of the assumptions, included in Adjusted operating earnings before income taxes for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
DAC/VOBA and other intangibles unlocking^{(1) (2)}	$	(116	)	$	(144	)	$	(116	)	$	(243	)

⁽¹⁾ DAC/VOBA and other intangibles unlocking is included in Fee income, Interest credited and other benefits to contract owners/policyholders and Net amortization of DAC/VOBA. See DAC/VOBA and Other Intangibles Unlocking in Part I, Item 2. of this Quarterly Report on Form 10-Q for further description.

⁽²⁾ Includes unfavorable unlocking of $43 million and $51 million for the three and nine months ended September, 30 2018, respectively, associated with the GMIR initiative. See our Annual Report on Form 10-K for further information.

During the third quarter of 2019, 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 a net unfavorable impact to Adjusted operating earnings before income taxes of $98 million in the current period, compared to a net unfavorable impact of $153 million in the prior period. The unlocking in third quarter 2019 was driven principally by a reduction in the long-term interest rate of 50 basis points and updates to our Individual Life business assumptions including higher than expected persistency at older ages, lower net margins and refinements to our policyholder behavior assumptions. The unlocking in the third quarter 2018 was driven principally by increases in reinsurance rate assumptions in our Individual Life business and the unfavorable adjustment of the GMIR initiative partially offset by favorable changes in equity market assumptions in our Retirement business. For information about the impacts of the annual review of assumptions on DAC/VOBA and other intangibles and Adjusted operating earnings before income taxes related to our segments, see Results of Operations - Segment by Segment in Part I, Item 2. of this Quarterly Report on Form 10-Q.

The following table presents the impact on segment Adjusted operating earnings before income taxes of the annual assumption updates for the periods indicated:



	Three Months Ended September 30,
($ in millions)	2019			2018
Retirement	$	(25	)	$	48
Employee Benefits	—			1
Individual Life	(72		)	(207		)
Corporate	(1		)	5
Total	$	(98	)	$	(153	)



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Terminology Definitions

Net realized capital gains (losses), net realized investment gains (losses) and related charges and adjustments, and Net guaranteed benefit hedging gains (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").

Consolidated - Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

Net Income (Loss)

Net investment income decreased $2 million from $855 million to $853 million primarily due to:


•	lower alternative investment income in the current period primarily driven by the impact of equity market performance; and


•	lower prepayment fee income.

The decrease was partially offset by:


•	the impact of the current interest rate environment on fair value adjustments; and


•	growth in general account assets in our Retirement segment.

Fee income decreased $12 million from $704 million to $692 million primarily due to:


•	unfavorable amortization of unearned revenue partially offset by a favorable variance driven by annual assumption updates in our Individual Life segment; and


•	unfavorable amortization of unearned revenue reserve due to higher gross profits in our Employee Benefits segment.

Premiums increased $21 million from $550 million to $571 million primarily due to:


•	higher premiums driven by growth of the voluntary blocks, stop loss and group life business in our Employee Benefits segment.

The increase was partially offset by:


•	lower considerations of life contingent contracts resulting in lower Premiums which corresponds to a decrease in Interest credited and other benefits to contract owners/policyholders in Retained Business in our Corporate segment; and


•	a decline in term premiums in our Individual Life segment due to discontinued sales.

Net realized capital gains (losses) increased $31 million from a loss of $46 million to a loss of $15 million primarily due to:


•	favorable impact of market value changes associated with business reinsured, which are partially offset by a corresponding amount in Interest credited and other benefits to contract owners/policyholders; and


•	higher Net investment gains and related charges and adjustments primarily due to interest rate and equity market movements, discussed below.

The increase was partially offset by:


•	unfavorable change in the fair value of guaranteed benefit derivatives excluding nonperformance risk as a result of interest rate movements partially offset by gain due to nonperformance risk.

Other revenue decreased $34 million from $127 million to $93 million primarily due to:


•	revised projection of the deferred loss amortization associated with a closed block of business;



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•	unfavorable market value adjustments on separate accounts in our Retirement segment;


•	lower revenue from transition services agreements; and


•	lower broker-dealer revenues in our Retirement segment.

Interest credited and other benefits to contract owners/policyholders decreased $9 million from $1,268 million to $1,259 million primarily due to:


•	lower net unfavorable unlocking due to the impact of higher reinsurance costs on prospective unlocking in the prior period, partially offset by unfavorable mortality experience, net of reserve changes and unlocking impact in our Individual Life segment.

The decrease was partially offset by:


•	market value impacts and changes in the reinsurance deposit asset associated with business reinsured, which are partially offset by a corresponding amount in Net realized capital gains (losses); and


•	growth on stop loss and group life in our Employee Benefits segment.

Operating expenses decreased $15 million from $656 million to $641 million primarily due to:


•	litigation recovery related to a divested business;


•	lower Stranded Costs; and


•	higher expenses related to net compensation adjustments in the prior period.

The decrease was partially offset by:


•	an increase in growth based expenses in our Retirement and Employee Benefits segments, partially offset by lower expenses in our Individual Life segment due to ceasing new business sales.

Net amortization of DAC/VOBA increased $48 million from $86 million to $134 million primarily due to:


•	higher unfavorable impact of annual assumption updates. For more information refer to Results of Operations - Segment by Segment in Part I, Item 2. of this Quarterly Report on Form 10-Q.

The increase was partially offset by:


•	favorable DAC/VOBA and other intangibles unlocking due to the net impact of lower gross profits on amortization and one-time items partially offset by unlocking from mortality experience in our Individual Life segment.

Income from continuing operations before income taxes decreased $43 million from $186 million to a $143 million primarily due to:


•	lower Adjusted operating earnings before income taxes, discussed below; and


•	unfavorable changes in Net guaranteed benefit hedging gains (loss) and related charges and adjustments primarily due to changes in interest rates, discussed below.

The decrease was partially offset by:


•	Gain related to business exited through reinsurance or divestment, discussed below.

Income tax expense decreased $17 million from $21 million to $4 million primarily due to:


•	tax credits;


•	a decrease in income before income taxes; and


•	nondeductible executive compensation in 2018 that did not recur in 2019.

The decrease was partially offset by:


•	a change in valuation allowance;



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•	a change in the dividends received deduction ("DRD"); and


•	a change in noncontrolling interest.

Adjusted operating Earnings before Income Taxes

Adjusted operating earnings before income taxes decreased $38 million from $163 million to $125 million primarily due to:


•	unfavorable DAC/VOBA unlocking due to annual assumption updates as described above in our Retirement segment;


•	higher expenses primarily resulting from business growth in our Retirement and Employee Benefits segments;


•	higher benefits incurred due to growth in business partially offset by lower overall loss ratios in our Employee Benefits segments;


•	a decrease in alternative investment income and prepayment fee income;


•	lower underwriting gains, net of DAC/VOBA and other intangibles amortization, primarily driven by adverse net mortality due to higher severity on the combined interest and non-interest sensitive blocks in our Individual Life segment;


•	preferred stock dividend payments in the current year partially offset by lower interest expense as we converted debt to equity instruments during the fourth quarter of 2018; and


•	residual activity from Retained Business, which will have volatility due to the nature of the block.

The decrease was partially offset by:


•	lower net unfavorable DAC/VOBA and other intangibles unlocking due to prospective assumption updates related to changes in reinsurance in the prior period in our Individual Life segment;


•	higher premiums driven by growth of the voluntary blocks, stop loss and group life business in our Employee Benefits segment; and


•	lower Stranded costs.

Adjustments from Income (Loss) from Continuing Operations before Income Taxes to Adjusted Operating Earnings (Loss) before Income Taxes

Net investment gains (losses) and related charges and adjustments increased $6 million from a gain of $11 million to a gain of $17 million due to:


•	favorable changes in CMO-B fair value adjustments as a result of equity market and interest rate movements; and


•	lower impairments in the current period.

The increase was partially offset by:


•	unfavorable changes in the fair value of derivatives in the current period; and


•	unfavorable amortization of DAC/VOBA and sales inducements in the current period.

Net guaranteed benefit hedging gains losses and related charges and adjustments decreased $33 million from a gain of $14 million to a loss of $19 million primarily due to:


•	unfavorable changes in fair value of guaranteed benefit derivatives excluding nonperformance risk as a result of changes in interest rates.

The decrease was partially offset by:


•	gains due to nonperformance risk.

Income (loss) related to businesses exited through reinsurance or divestment increased $27 million from $0 million to a gain of $27 million primarily due to:


•	a litigation recovery related to a divested business in the current period.

The increase was partially offset by:


•	unfavorable market value changes in assets and liabilities associated with business reinsured in the current period.



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Loss related to early extinguishment of debt increased $12 million primarily due to:


•	losses in connection with repurchased and restructured debt in the current period. See Liquidity and Capital Resources - in Part I, Item 2. of this Quarterly Report on Form 10-Q for further description.

Other adjustments to operating earnings changed $3 million from a loss of $25 million to a loss of $28 million primarily due to:


•	higher costs recorded in the current period related to restructuring. See the Restructuring Note in Part I, Item 1. of this Quarterly Report on Form 10-Q for further description.

Consolidated - Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Net Income (Loss)

Net investment income increased $57 million from $2,491 million to $2,548 million primarily due to:


•	the impact of the current interest rate environment on fair value adjustments;


•	growth in general account assets in our Retirement segment; and


•	higher prepayment fee income.

This increase was partially offset by:


•	lower alternative investment income in the current period primarily driven by the impact of equity market performance.

Fee income decreased $21 million from $2,040 million to $2,019 million primarily due to:


•	margin rate compression and change in business mix in our Retirement segment; and


•	lower management and administrative fees earned in our Investment Management segment due to lower average general account AUM driven by the impact of the 2018 Transaction.

Premiums increased $116 million from $1,622 million to $1,738 million primarily due to:


•	higher premiums driven by growth of the stop loss, voluntary blocks and group life business in our Employee Benefits segment.

The increase was partially offset by:


•	a decline in term premiums in our Individual Life segment due to discontinued sales; and


•	lower considerations of life contingent contracts resulting in lower Premiums which corresponds to a decrease in Interest credited and other benefits to contract owners/policyholders in Retained Business in our Corporate segment.

Net realized capital gains (losses) increased $399 million from a loss of $347 million to a gain of $52 million primarily due to:


•	gains from market value changes associated with business reinsured, which are fully offset by a corresponding amount in Interest credited and other benefits to contract owners/policyholders; and


•	higher Net investment gains and related charges and adjustments primarily due to interest rate and equity market movements, discussed below.

The increase was partially offset by:


•	unfavorable change in the fair value of guaranteed benefit derivatives excluding nonperformance risk as a result of interest rate movements partially offset by gain due to nonperformance risk.

Other revenue decreased $19 million from $327 million to $308 million primarily due to:


•	revised projection of the deferred loss amortization associated with a closed block of business; and


•	lower broker-dealer revenues in our Retirement segment.



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The decrease was partially offset by:


•	higher revenue resulting from transition services agreements.

Interest credited and other benefits to contract owners/policyholders increased $231 million from $3,446 million to $3,677 million primarily due to:


•	market value impacts and changes in the reinsurance deposit asset associated with business reinsured, which are partially offset by a corresponding amount in Net realized capital gains (losses); and


•	growth on stop loss, voluntary blocks and group life business in our Employee Benefits segment.

The increase was partially offset by:


•	lower net unfavorable unlocking due to the impact of higher reinsurance costs on prospective unlocking in the prior period, partially offset by unfavorable mortality experience, net of reserve changes and unlocking impact in our Individual Life segment; and


•	lower considerations of life contingent contracts resulting in lower benefits which corresponds to a decrease in Premiums in the Retained Business in our Corporate segment.

Operating expenses increased $29 million from $2,001 million to $2,030 million primarily due to:


•	higher restructuring charges in the current period;


•	an increase in growth based expenses in our Retirement and Employee Benefit segments, partially offset by lower expenses in our Individual Life segment due to ceasing new business sales; and


•	higher litigation reserves in our Retirement segment.

The increase was partially offset by:


•	litigation recovery related to a divested business in the current period;


•	net actuarial gain related to our pension and other postretirement benefit obligations;


•	lower Stranded Costs; and


•	lower expenses related to net compensation adjustments.

Net amortization of DAC/VOBA increased $26 million from $260 million to $286 million primarily due to:


•	a higher net unfavorable impact of annual assumption updates. For more information refer to Results of Operations - Segment by Segment in Part I, Item 2. of this Quarterly Report on Form 10-Q.


•	favorable amortization in the prior period due to net investment losses; and


•	net unfavorable amortization on our business reinsured.

The increase was partially offset by:


•	unfavorable unlocking in the prior period driven by an update to the assumptions related to the GMIR initiatives in our Retirement segment. See DAC/VOBA and Other Intangibles Unlocking in Part I, Item 2. of this Quarterly Report on Form 10-Q for further information; and


•	higher unlocking in the prior period driven by unfavorable mortality partially offset by higher amortization in the current period on the interest sensitive block, in our Individual Life segment.

Income from continuing operations before income taxes increased $170 million from $448 million to $618 million primarily due to:


•	higher Net investment gains and related charges and adjustments, discussed below;


•	Immediate recognition of net actuarial gain related to pension plan adjustments and curtailments, discussed below;


•	Income on business exited through reinsurance or divestment, discussed below; and


•	higher Adjusted operating earnings before income taxes, discussed below.



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The increase was partially offset by:


•	unfavorable changes in Other adjustments due to higher restructuring charges in the current period;


•	lower Income attributable to noncontrolling interest; and


•	unfavorable changes in Net guaranteed benefit hedging gains (loss) and related charges and adjustments primarily due to changes in interest rates, discussed below.

Income tax expense increased $3 million from $70 million to $73 million primarily due to:


•	an increase in income before income taxes;


•	a change in the valuation allowance; and


•	a change in noncontrolling interest.

The increase was partially offset by:


•	tax credits;


•	AMT sequestration in 2018 that did not recur in 2019;


•	a change in the DRD; and


•	nondeductible executive compensation in 2018 that did not recur in 2019.

Income from discontinued operations, net of tax changed $539 million from a gain of $457 million to a loss of $82 million primarily due to:


•	Adjustment to loss on sale, net of tax excluding costs to sell made in the current period.

Adjusted operating Earnings before Income Taxes

Adjusted operating earnings before income taxes increased $33 million from $564 million to $597 million primarily due to:


•	lower net unfavorable DAC/VOBA and other intangibles unlocking due to prospective assumption updates related to changes in reinsurance in the prior period in our Individual Life segment;


•	higher premiums driven by growth of the stop loss, voluntary blocks and group life business in our Employee Benefits segment; and


•	lower Stranded costs.

The increase was partially offset by:


•	higher expenses primarily resulting from business growth in our Retirement and Employee Benefits segments;


•	higher benefits incurred in stop loss, voluntary blocks and group life business due primarily to growth in business in our Employee Benefits segments;


•	lower underwriting gains, net of DAC/VOBA and other intangibles amortization, primarily driven by adverse net mortality in the combined interest and non-interest sensitive blocks in our Individual Life segment;


•	residual activity from Retained Business, which will have volatility due to the nature of the block;


•	unfavorable DAC/VOBA unlocking due to annual assumption updates in our Retirement segment; and


•	lower alternative investment income.



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Adjustments from Income (Loss) before Income Taxes to Operating Earnings (Loss) before Income Taxes

Net investment losses and related charges and adjustments changed $185 million from a loss of $90 million to a gain of $95 million primarily due to:


•	favorable changes in CMO-B fair value adjustments as a result of equity market and interest rate movements; and


•	gains on the sale of securities in the current period.

The increase was partially offset by:


•	lower favorable amortization of DAC/VOBA and sales inducements;


•	higher impairments; and


•	lower favorable changes in the fair value of derivatives.

Net guaranteed benefit hedging gains and related charges and adjustments decreased $32 million from a gain of $2 million to a loss of $30 million primarily due to:


•	unfavorable changes in fair value of guaranteed benefit derivatives excluding nonperformance risk as a result of changes in interest rates.

The decrease was partially offset by:


•	gains due to nonperformance risk in the current period.

Loss related to businesses exited through reinsurance or divestment decreased $61 million from a loss of $53 million to a gain of $8 million primarily due to:


•	a litigation recovery related to a divested business in the current period.

The decrease was partially offset by:


•	unfavorable market value changes in assets and liabilities associated with business reinsured in the current period.

Immediate recognition of net actuarial gains related to pension and other postretirement benefit obligations and gains from plan adjustments and curtailments changed $66 million due to the remeasurement of the pension plan as a result of a curtailment.

Loss related to early extinguishment of debt increased $9 million to $12 million primarily due to:


•	losses in connection with repurchased and restructured debt in the current period. See Liquidity and Capital Resources - in Part I, Item 2. of this Quarterly Report on Form 10-Q for further description.

Other adjustments to operating earnings changed $120 million from a loss of $53 million to a loss of $173 million primarily due to:


•	higher costs recorded in the current period related to restructuring. See the Restructuring Note in Part I, Item 1. of this Quarterly Report on Form 10-Q for further description.



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Results of Operations - Segment by Segment

Retirement

The following table presents Adjusted operating earnings before income taxes of our Retirement segment for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019		2018
Adjusted operating revenues:
Net investment income and net realized gains (losses)	$	437		$	457		$	1,301	$	1,310
Fee income	218			215			628		637
Premiums	(1		)	—			4		6
Other revenue	21			33			78		84
Total adjusted operating revenues	675			705			2,011		2,037
Operating benefits and expenses:
Interest credited and other benefits to contract owners/policyholders	238			240			707		716
Operating expenses	267			233			783		718
Net amortization of DAC/VOBA	53			(21		)	95		72
Total operating benefits and expenses	558			452			1,585		1,506
Adjusted operating earnings before income taxes⁽¹⁾	$	117		$	253		$	426	$	531

⁽¹⁾ See DAC/VOBA and Other Intangibles Unlocking in Part I, Item 2. of this Quarterly Report on Form 10-Q for further information.



	Three Months Ended September 30,					Nine Months Ended September 30,
($ in millions)	2019			2018		2019			2018
DAC/VOBA and other intangibles unlocking⁽¹⁾	$	(29	)	$	50	$	(20	)	$	12

⁽¹⁾ Includes unfavorable unlocking of $43 million and $51 million for the three and nine months ended September 30, 2018, respectively, associated with the GMIR initiative.

The DAC/VOBA and other intangibles unlocking in the table above includes the net impact of the annual review of the assumptions, completed in the third quarter 2019 and 2018, of $(25) million and $48 million, respectively, which was included in Net amortization of DAC/VOBA. The net unfavorable unlocking in 2019 reflects impacts related to our reduction in the long-term interest rate of 50 basis points and lower net margins. The net favorable unlocking in 2018 reflects changes in equity market assumptions partially offset by an unfavorable adjustment related to the GMIR initiatives.

Starting first quarter of 2019, Assets Under Advisement are presented in AUA, which includes recordkeeping, stable value investment-only wrap, brokerage and investment advisory assets. Prior period information have been revised to conform to current period presentation.



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The following tables present AUM and AUA for our Retirement segment as of the dates indicated:



	As of September 30,
($ in millions)	2019		2018
Corporate markets	$	68,892	$	64,380
Tax-exempt markets	66,636		64,261
Total full service plans	135,528		128,641
Stable value⁽¹⁾ and pension risk transfer	10,630		12,005
Retail wealth management	10,273		9,948
Total AUM	156,431		150,593
AUA	251,379		284,269
Total AUM and AUA	$	407,810	$	434,862

⁽¹⁾ Where Voya is the Investment Manager. Stable Value assets move from AUM to AUA when Voya no longer serves as Investment Manager but continues to provide a book value guarantee.



	As of September 30,
($ in millions)	2019		2018
General Account	$	32,928	$	32,468
Separate Account	73,358		73,119
Mutual Fund/Institutional Funds	50,145		45,006
AUA	251,379		284,269
Total AUM and AUA	$	407,810	$	434,862

The following table presents a rollforward of AUM for our Retirement segment for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Balance as of beginning of period	$	154,421		$	145,915		$	139,133		$	138,191
Transfer / Adjustment⁽¹⁾	—			—			—			6,212
Deposits	5,468			4,672			15,583			13,631
Surrenders, benefits and product charges	(4,287		)	(4,156		)	(14,530		)	(13,611		)
Net flows	1,181			516			1,053			20
Interest credited and investment performance	829			4,162			16,245			6,170
Balance as of end of period	$	156,431		$	150,593		$	156,431		$	150,593

⁽¹⁾ Reflects investment-only products which were transferred from Corporate effective January 1, 2018 and an adjustment in the three months ended June 30, 2018 to include certain Stable Value assets previously reported as AUA.

Retirement - Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

Adjusted operating earnings before income taxes decreased $136 million from $253 million to $117 million primarily due to:


•	unfavorable DAC/VOBA unlocking due to annual assumption updates as described above;


•	higher expenses primarily resulting from the write-off of previously deferred expenses related to policy acquisition costs, higher pension costs and business growth; and


•	lower alternative asset income.



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Retirement - Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Adjusted operating earnings before income taxes decreased $105 million from $531 million to $426 million primarily due to:


•	higher expenses primarily resulting from the write-off of previously deferred expenses related to policy acquisition costs and business growth;


•	unfavorable DAC/VOBA unlocking due to annual assumption updates; and


•	lower alternative asset income.

The decrease was partially offset by:


•	higher investment spread income.

Investment Management

The following table presents Adjusted operating earnings before income taxes of our Investment Management segment for the periods indicated:



	Three Months Ended September 30,				Nine Months Ended September 30,
($ in millions)	2019		2018		2019		2018
Adjusted operating revenues:
Net investment income and net realized gains (losses)	$	5	$	8	$	10	$	24
Fee income	158		157		455		483
Other revenue	4		3		13		17
Total adjusted operating revenues	167		168		478		524
Operating benefits and expenses:
Operating expenses	121		120		357		363
Total operating benefits and expenses	121		120		357		363
Adjusted operating earnings before income taxes	$	46	$	48	$	121	$	161

Our Investment Management segment operating revenues include the following intersegment revenues, primarily consisting of asset-based management and administration fees.



	Three Months Ended September 30,				Nine Months Ended September 30,
($ in millions)	2019		2018		2019		2018
Investment Management intersegment revenues	$	29	$	29	$	89	$	111



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The following table presents AUM and AUA for our Investment Management segment as of the dates indicated:



	As of September 30,
($ in millions)	2019		2018
Assets under Management
External clients:
Investment Management sourced	$	96,662	$	89,208
Affiliate sourced⁽¹⁾	37,247		38,170
Variable annuities⁽²⁾	27,017		27,175
Total external clients	160,926		154,553
General account	56,336		55,862
Total AUM	217,262		210,415
Assets under Administration⁽³⁾	50,031		48,990
Total AUM and AUA	$	267,293	$	259,405

⁽¹⁾ Affiliate sourced AUM includes assets sourced by other segments and also reported as AUM or AUA by such other segments.

⁽²⁾Reflects AUM associated with the businesses divested as part of the 2018 Transaction.

⁽³⁾ AUA includes assets sourced by other segments and also reported as AUA or AUM by such other segments.

The following table presents net flows for our Investment Management segment for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Net Flows:
Investment Management sourced	$	1,307		$	953		$	3,165		$	2,161
Affiliate sourced	(184		)	48			(1,239		)	(868		)
Variable annuities⁽¹⁾	(621		)	(600		)	(1,787		)	(1,941		)
Sub-advisor replacements⁽²⁾	219			76			1,116			76
Total	$	721		$	477		$	1,255		$	(572	)

⁽¹⁾ Reflects net flows associated with the businesses divested as part of the 2018 Transaction.

⁽²⁾Reflects net flows mainly associated with outside managed funds.

Investment Management - Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

Adjusted operating earnings before income taxes decreased $2 million from $48 million to $46 million primarily due to:


•	lower investment capital returns; and


•	higher operating expenses due primarily to higher non-volume expenses partially offset by lower volume related expenses.

Investment Management - Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Adjusted operating earnings before income taxes decreased $40 million from $161 million to $121 million primarily due to:


•	lower average general account AUM driven by the impact of the 2018 Transaction;


•	lower investment capital returns;


•	lower Other revenue primarily due to higher performance and production fees earned in the prior period.

The decrease was partially offset by:


•	lower operating expenses.



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Employee Benefits

The following table presents Adjusted operating earnings before income taxes of the Employee Benefits segment for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Adjusted operating revenues:
Net investment income and net realized gains (losses)	$	29		$	31		$	84		$	86
Fee income	16			22			48			53
Premiums	460			418			1,399			1,247
Other revenue	(2		)	(2		)	(5		)	(4		)
Total adjusted operating revenues	503			469			1,526			1,382
Operating benefits and expenses:
Interest credited and other benefits to contract owners/policyholders	341			323			1,066			984
Operating expenses	101			88			303			266
Net amortization of DAC/VOBA	4			8			13			15
Total operating benefits and expenses	446			419			1,382			1,265
Adjusted operating earnings before income taxes⁽¹⁾	$	57		$	50		$	144		$	117

⁽¹⁾ See DAC/VOBA and Other Intangibles Unlocking in Part I, Item 2. of this Quarterly Report on Form 10-Q for further information.

In the third quarter of 2019, the net impact of annual review of assumptions was not material. In the third quarter of 2018, the net favorable impact of annual review of assumptions was $1 million, of which $7 million favorable impact in Fee income was offset by $6 million unfavorable impact in Net amortization of DAC/VOBA.

The following table presents sales, gross premiums and in-force for our Employee Benefits segment for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Sales by Product Line:
Group life and Disability	$	7		$	12		$	124		$	84
Stop loss	25			36			270			230
Total group products	32			48			394			314
Voluntary products	6			9			106			84
Total sales by product line	$	38		$	57		$	500		$	398

Total gross premiums and deposits	$	515		$	468		$	1,568		$	1,399

Group life and Disability	$	715		$	654		$	715		$	654
Stop loss	1,037			953			1,037			953
Voluntary	392			309			392			309
Total annualized in-force premiums	$	2,144		$	1,916		$	2,144		$	1,916

Loss Ratios:
Group life (interest adjusted)	76.3		%	78.6		%	76.7		%	79.8		%
Stop loss	78.6		%	77.0		%	78.8		%	79.6		%
Total Loss Ratio⁽¹⁾	71.0		%	73.1		%	71.0		%	73.1		%

⁽¹⁾ Total Loss Ration is presented on a trailing twelve month basis.



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Employee Benefits - Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

Adjusted operating earnings before income taxes increased $7 million from $50 million to $57 million primarily due to:


•	higher premiums driven by growth of the stop loss, voluntary blocks and group life business; and

The increase was partially offset by:


•	higher benefits incurred due to growth in business partially offset by lower overall loss ratios; and


•	higher distribution expenses and commissions to support business growth.

Employee Benefits - Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Adjusted Operating earnings before income taxes increased $27 million from $117 million to $144 million primarily due to:


•	higher premiums driven by growth of the stop loss, voluntary blocks and group life business; and


•	favorable true-ups of $6 million, in the current period, related to certain reserves, commission accruals and deferrals.

The increase was partially offset by:


•	higher benefits incurred due to growth in business partially offset by lower loss ratios; and


•	higher distribution expenses and commissions to support business growth.



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Individual Life

The following table presents Adjusted operating earnings before income taxes of our Individual Life segment for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019		2018
Adjusted operating revenues:
Net investment income and net realized gains (losses)	$	232		$	230		$	687	$	673
Fee income	317			320			932		934
Premiums	101			106			293		314
Other revenue	3			4			10		11
Total adjusted operating revenues	653			660			1,922		1,932
Operating benefits and expenses:
Interest credited and other benefits to contract owners/policyholders	550			628			1,501		1,612
Operating expenses	62			68			193		208
Net amortization of DAC/VOBA	74			98			166		188
Total operating benefits and expenses	686			794			1,860		2,008
Adjusted operating earnings before income taxes⁽¹⁾	$	(33	)	$	(134	)	$	62	$	(76	)

⁽¹⁾ See DAC/VOBA and Other Intangibles Unlocking in Part I, Item 2. of this Quarterly Report on Form 10-Q for further information.

The following table presents DAC/VOBA and other intangibles unlocking, including unlocking related to the annual review of the assumptions, included in Adjusted operating earnings before income taxes for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
DAC/VOBA and other intangibles unlocking	$	(88	)	$	(200	)	$	(97	)	$	(260	)

The DAC/VOBA and other intangibles unlocking in the tables above include the net unfavorable impact of the annual review of the assumptions, completed in the third quarter 2019 and 2018, of $72 million and $207 million, respectively. The net unfavorable unlocking in 2019 was driven by a reduction in the long-term interest rate of 50 basis points, higher than expected persistency at older ages, lower net margins and refinements to our policyholder behavior assumptions. The net unfavorable unlocking in 2018 was driven primarily by reinsurer rate increases.

The following table presents the impact of the annual review of assumptions by line item for the periods indicated:



	Three Months Ended September 30,
($ in millions)	2019			2018
Fee income	$	20		$	14
Interest credited and other benefits to contract owners/policyholders	(41		)	(170		)
Net amortization of DAC/VOBA	(51		)	(51		)
Total	$	(72	)	$	(207	)



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The following table presents gross premiums and in-force policy count for our Individual Life segment for the periods indicated:



	Three Months Ended September 30,				Nine Months Ended September 30,
($ in millions)	2019		2018		2019		2018
Total gross premiums⁽¹⁾	$	423	$	450	$	1,311	$	1,343
End of period:
In-force face amount⁽¹⁾	$	320,417	$	310,132	$	320,417	$	310,132
In-force policy count⁽¹⁾	772,686		784,882		772,686		784,882

⁽¹⁾ Effective 2019, we have ceased sales of our Individual Life products.

Individual Life - Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

Adjusted operating earnings before income taxes increased $101 million from a loss of $134 million to a loss of $33 million primarily due to:


•	lower net unfavorable DAC/VOBA and other intangibles unlocking due to prospective assumption updates related to changes in reinsurance in the prior period which did not recur; and


•	lower operating expenses.

The increase was partially offset by:


•	lower underwriting gains, net of DAC/VOBA and other intangibles amortization, primarily driven by adverse net mortality due to higher severity on the combined interest and non-interest sensitive blocks.

Individual Life - Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Adjusted operating earnings before income taxes increased $138 million from a loss of $76 million to a gain of $62 million primarily due to:


•	lower net unfavorable DAC/VOBA and other intangibles unlocking due to prospective assumption updates related to changes in reinsurance in the prior period which did not recur;


•	higher net investment income primarily due to higher alternative investment income and prepayment fee income; and


•	lower operating expenses.

The increase was partially offset by:


•	lower underwriting gains, net of DAC/VOBA and other intangibles amortization, primarily driven by adverse net mortality in the combined interest and non-interest sensitive block.



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Corporate

The following table presents Adjusted operating earnings before income taxes of Corporate for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Adjusted operating revenues:
Net investment income and net realized gains (losses)	$	32		$	57		$	140		$	187
Fee income	9			12			29			33
Premiums	11			23			39			49
Other revenue	12			14			35			20
Total adjusted operating revenues	64			106			243			289
Operating benefits and expenses:
Interest credited and other benefits to contract owners/policyholders	42			69			145			164
Operating expenses	23			48			90			149
Net amortization of DAC/VOBA	2			(2		)	6			3
Interest expense	59			45			158			142
Total operating benefits and expenses	126			160			399			458
Adjusted operating earnings before income taxes	$	(62	)	$	(54	)	$	(156	)	$	(169	)

The following table presents information about our Operating expenses of Corporate for the periods indicated:



	Three Months Ended September 30,				Nine Months Ended September 30,
($ in millions)	2019		2018		2019		2018
Amortization of intangibles	$	9	$	9	$	26	$	27
Other⁽¹⁾	14		39		64		122
Total Operating expenses	$	23	$	48	$	90	$	149

⁽¹⁾Includes expense from corporate operations, Retained Business and other closed blocks, and expense not allocated to our segments, including Stranded Costs.

Corporate - Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

Adjusted operating earnings before income taxes decreased $8 million from a loss of $54 million to a loss of $62 million primarily related to:


•	preferred stock dividend payments in the current year partially offset by lower interest expense as we converted debt to equity instruments during the fourth quarter of 2018;


•	residual activity from Retained Business, which will have volatility due to the nature of the block; and


•	revenue resulting from transition services agreements.

This decrease was partially offset by:


•	lower Stranded Costs; and


•	net compensation adjustments in the prior period not recurring in the current period.

Corporate - Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Adjusted operating earnings before income taxes improved $13 million from a loss of $169 million to a loss of $156 million primarily due to:


•	lower Stranded Costs;


•	lower net compensation adjustments in the current period; and



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•	revenue resulting from transition services agreements.

The increase was partially offset by:


•	residual activity from Retained Business, which will have volatility due to the nature of the block; and


•	preferred stock dividend payments in the current year partially offset by lower interest expense as we converted debt to equity instruments during the fourth quarter of 2018.

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 Assets held for sale 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.

Alternative investment income for the three and nine months ended September 30, 2019 and 2018, respectively, and the average assets of alternative investments as of the dates indicated were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
($ in millions)	2019		2018		2019		2018
Retirement:
Alternative investment income	$	25	$	38	$	57	$	76
Average alternative investment	773		646		733		580
Investment Management⁽¹⁾:
Alternative investment income	5		8		10		24
Average alternative investment	226		214		221		242
Employee Benefits:
Alternative investment income	3		4		7		8
Average alternative investment	86		63		84		56
Individual Life:
Alternative investment income	22		19		53		44
Average alternative investment	534		387		496		349

⁽¹⁾ Includes performance fees related to sponsored private equity funds (“carried interest”) that are subject to later reversal based on subsequent fund performance, to the extent that cumulative rates of investment return fall below specified investment hurdle rates. Should the market value of a portfolio increase in future periods, reversals of carried interest could be fully or partially recovered. No amounts for carried interest were reversed or recovered for the three and nine months ended September 30, 2019 and 2018.



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DAC/VOBA and Other Intangibles Unlocking

Changes in Adjusted operating earnings before income taxes and Net income (loss) are influenced by increases and decreases in amortization of DAC, VOBA, deferred sales inducements ("DSI") and unearned revenue ("URR"), collectively, "DAC/VOBA and other intangibles." For Individual Life, changes in Adjusted operating earnings before income taxes and Net income (loss) are also influenced by increases and decreases in amortization of net cost of reinsurance, as well as by changes in reserves associated with UL and variable universal life ("VUL") secondary guarantees and paid-up guarantees. Unlocking related to DAC, VOBA, DSI and URR, as well as amortization of net cost of reinsurance and reserve adjustments associated with UL and VUL secondary guarantees and paid-up guarantees are referred to as "DAC/VOBA and other intangibles unlocking." See the "Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles," "Reinsurance," and "Future Policy Benefits and Contract Owner Account Balances" sections in the Business, Basis of Presentation and Significant Accounting Policies Note in our Consolidated Financial Statements in Part II, Item 8. as well as the "DAC/VOBA and Other Intangibles Unlocking" section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7. of our Annual Report on Form 10-K for more information.

In 2017, we began soliciting customer consents to execute a change to reduce the guaranteed minimum interest rate ("GMIR initiative") applicable to future deposits and transfer into fixed investment options for certain retirement plan contracts with above-market GMIRs. This change reduces our interest rate exposure on new deposits, transfers and in certain plans existing fixed account assets and will favorably impact the DAC/VOBA amortization rate and Adjusted operating earnings over time. See Critical Accounting Judgments and Estimates in the Management's Discussion and Analysis section in Part I, Item 2. of this Quarterly Report on Form 10-Q for further information.

During the third quarter of 2019, we completed our annual review of the assumptions, including projection model inputs, in each of our segments (except for the 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 a net unfavorable impact to Adjusted operating earnings before income taxes of $98 million in the current period, compared to a net unfavorable impact of $153 million in the prior period. The unlocking in third quarter 2019 was driven principally by a reduction in the long-term interest rate of 50 basis points and updates to our Individual Life business assumptions including higher than expected persistency at older ages, lower net margins and refinements to our policyholder behavior assumptions. The unlocking in the third quarter 2018 was driven principally by increases in reinsurance rate assumptions in our Individual Life business and the unfavorable adjustment of the GMIR initiative partially offset by favorable changes in equity market assumptions in our Retirement business. For information about the impacts of the annual review of assumptions on DAC/VOBA and other intangibles and Adjusted operating earnings before income taxes related to our segments, see Results of Operations - Segment by Segment in Part I, Item 2. of this Quarterly Report on Form 10-Q. These impacts are included in DAC/VOBA and other intangibles unlocking.

The following table presents the amount of DAC/VOBA and other intangibles unlocking that is included in segment Adjusted operating earnings before income taxes for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Retirement⁽¹⁾	$	(29	)	$	50		$	(20	)	$	12
Employee Benefits	—			1			—			—
Individual Life	(88		)	(200		)	(97		)	(260		)
Corporate	1			5			1			5
Total DAC/VOBA and other intangibles unlocking⁽²⁾	$	(116	)	$	(144	)	$	(116	)	$	(243	)

⁽¹⁾ Includes unfavorable unlocking of $43 million and $51 million for the three and nine months ended September 30, 2018, respectively, associated with the GMIR initiative.

⁽²⁾ Includes the impact of the annual review of assumptions.

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.



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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 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 $750 million revolving credit sublimit of our Second 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.

Voya Financial, Inc.'s primary sources and uses of cash for the periods indicated are presented in the following table:



	Nine Months Ended September 30,
($ in millions)	2019		2018
Beginning cash and cash equivalents balance	$	209	$	244
Sources:
Proceeds from loans from subsidiaries, net of repayments	125		—
Dividends and returns of capital from subsidiaries	956		1,195
Repayment of loans to subsidiaries, net of new issuances	—		128
Amounts received from subsidiaries under tax sharing agreements, net	—		50
Refund of income taxes, net	128		—
Sale of short-term investments	—		212
Proceeds from 2048 Notes offering	—		350
Proceeds from issuance of preferred stock, net	293		319
Total sources	1,502		2,254
Uses:
Premium paid and other fees related to debt extinguishment	9		—
Payment of interest expense	98		110
Capital provided to subsidiaries	3		—
New issuances of loans to subsidiaries, net of repayments	157		418
Amounts paid to subsidiaries under tax sharing agreements, net	128		—
Debt issuance costs	—		6
Common stock acquired - Share repurchase	936		750
Share-based compensation	17		13
Dividends paid on preferred stock	24		—
Dividends paid on common stock	23		5
Maturity of 2018 Notes	—		337
Repurchase of Senior Notes	97		—
Other, net	8		6
Total uses	1,500		1,645
Net increase in cash and cash equivalents	2		609
Ending cash and cash equivalents balance	$	211	$	853



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Share Repurchase Program and Dividends to Common Shareholders

On March 13, 2014, our Board of Directors authorized a share repurchase program, pursuant to which we may, from time to time, purchase shares of our common shares through various means, including, without limitation, open market transactions, privately negotiated transactions, forward, derivative, or accelerated repurchase, or automatic repurchase transactions, including 10b5-1 plans, or tender offers.

Since 2014, our Board of Directors has periodically renewed our authority to repurchase our shares. On May 2, 2019, our Board of Directors provided share repurchase authorization, increasing the aggregate of our common stock authorized for repurchase by $500 million. The additional share repurchase authorization expires on June 30, 2020 (unless extended). The authorization for the share repurchase program may be terminated, increased or decreased by our Board of Directors at any time. As of September 30, 2019, we were authorized to repurchase shares up to an aggregate purchase price of $50 million.

On October 31, 2019, our Board of Directors provided its most recent share repurchase authorization, increasing the aggregate of our common stock authorized for repurchase by $800 million. The additional share repurchase authorization expires on December 31, 2020 (unless extended). The authorization for the share repurchase program may be terminated, increased or decreased by our Board of Directors at any time.

The following table presents repurchases of our common stock through share repurchase agreements with third-party financial institutions during the nine months ended September 30, 2019:



Execution Date	Payment		Initial Shares Delivered	Closing Date	Additional Shares Delivered	Total Shares Repurchased
January 3, 2019	$	250	5,059,449	April 4, 2019	290,765	5,350,214
April 9, 2019	$	236	3,593,453	June 4, 2019	879,199	4,472,652
June 19, 2019	$	200	2,963,512	August 6, 2019	695,566	3,659,078

During the nine months ended September 30, 2019, we repurchased 4,926,775 shares of our common stock in open market repurchases for an aggregate purchase price of $250 million.

The following table summarizes our return of capital to common shareholders:



	Nine Months Ended September 30,
($ in millions)	2019		2018
Dividends to shareholders	$	23	$	5
Repurchase of common shares	936		850
Total cash returned to shareholders	$	959	$	855

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.

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.



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We had $1 million of short-term debt borrowings outstanding consisting entirely of the current portion of long-term debt as of September 30, 2019. The following table summarizes our borrowing activities for the nine months ended September 30, 2019:



($ in millions)	Beginning Balance		Issuance		Maturities and Repurchases			Other Changes			Ending Balance
Long-Term Debt:
Debt securities	$	3,132	$	—	$	(96	)	$	2		$	3,038
Windsor property loan	5		—		—			(1		)	4
Subtotal	3,137		—		(96		)	1			3,042
Less: Current portion of long-term debt	1		—		—			—			1
Total long-term debt	$	3,136	$	—	$	(96	)	$	1		$	3,041

As of September 30, 2019, we were in compliance with our debt covenants.

Preferred Stock. On June 11, 2019, we issued 300,000 shares of 5.35% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series B ("the Series B preferred stock), with a $0.01 par value per share and a liquidation preference of $1,000 per share, represented by 12,000,000 Depositary Shares each representing a 1/40^th interest in a share of the Series B preferred stock, for aggregate net proceeds of $293 million.

During the three and nine months ended September 30, 2019, we declared and paid dividends of $10 million and $20 million on the Series A preferred stock, respectively. During the three and nine months ended September 30, 2019, we declared and paid $4 million on the Series B preferred stock. As of September 30, 2019, there were no preferred stock dividends in arrears. See the Shareholders' Equity Note in Part I, Item 1. of this Quarterly Report on Form 10-Q for further information.

Senior Notes. As of September 30, 2019, Voya Financial, Inc. had four series of senior notes (collectively, the "Senior Notes") with aggregate outstanding principal amount of $1.6 billion. The Senior Notes are guaranteed by Voya Holdings. We are permitted to redeem all or any portion of the Senior Notes at any time at a redemption price equal to the principal amount redeemed, or, if greater, a "make-whole redemption price," plus, in each case accrued and unpaid interest.

On July 12, 2019, we completed the redemption of our remaining $97 million aggregate principal amount of 5.5% Senior Notes due 2022 (the "2022 Notes"). In connection with this transaction, we incurred a loss on debt extinguishment of $9 million for the three and nine months ended September 30, 2019, which was recorded in Interest Expense in the Condensed Consolidated Statements of Operations.

Junior Subordinated Notes. As of September 30, 2019, Voya Financial, Inc. had two series of junior subordinated notes (collectively, the "Junior Subordinated Notes") with aggregate outstanding principal amount of $1.1 billion. The Junior Subordinated Notes are guaranteed on an unsecured, junior subordinated basis by Voya Holdings.

Aetna Notes. As of September 30, 2019, Voya Holdings was the obligor under three series of debentures (collectively, the "Aetna Notes") with aggregate outstanding principal amount of $358 million, which were issued by a predecessor of Voya Holdings and assumed in connection with our acquisition of Aetna’s life insurance and related businesses. In addition, Equitable of Iowa Capital Trust II, a limited purpose trust subsidiary, has outstanding $13 million principal amount of 8.42% Series B Capital Securities due April 1, 2027 (the "Equitable Notes"). ING Group, our previous corporate parent, guarantees the Aetna Notes. The Equitable Notes are guaranteed by Voya Financial, Inc.

As of September 30, 2019, the amount of collateral required to avoid the payment of a fee to ING Group was $258 million.



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Senior Unsecured Credit Facility

As of September 30, 2019, we had a $1.0 billion senior unsecured credit facility which was set to expire on May 6, 2021. The facility provided $1.0 billion of committed capacity for issuing letters of credit and also included a revolving credit borrowing sublimit of $750 million. As of September 30, 2019, there were no amounts outstanding as revolving credit borrowings and no amounts of LOCs outstanding under the senior unsecured credit facility. Under the terms of the facility, Voya Financial, Inc. was required to maintain a minimum net worth of $6.6 billion, which may increase upon any future equity issuances by us.

Effective November 1, 2019, we revised the terms of our senior unsecured credit facility by entering into a Third Amended and Restated Revolving Credit Agreement ("Third Amended and Restated Credit Agreement") with a syndicate of banks, all of which previously participated in the facility. The Third Amended and Restated Credit Agreement modifies the senior unsecured credit facility by extending the term of the agreement to November 1, 2024 and reducing the total amount of LOCs that may be issued from $1.0 billion to $500 million. The revolving credit sublimit was removed and the full $500 million may be utilized for direct borrowings. The terms require us to maintain a minimum net worth of $6.15 billion. The minimum net worth amount may increase upon any future equity issuances by us.

Other Credit Facilities

We use credit facilities to provide collateral required primarily under our affiliated reinsurance transactions with captive insurance subsidiaries. We also issue guarantees and enter into financing arrangements in connection with these credit facilities. These arrangements are designed to facilitate the financing of statutory reserve requirements.

The following table summarizes our credit facilities as of September 30, 2019:

($ in millions)

Obligor / Applicant

Business Supported

Secured / Unsecured

Committed / Uncommitted

Expiration

Capacity

Utilization

Unused Commitment

Voya Financial, Inc.

Other

Unsecured

Committed

05/06/2021

1,000

—

1,000

Voya Financial, Inc.

Other

Secured

Uncommitted

Various

—

Voya Financial, Inc. /SLDI

Other

Unsecured

Uncommitted

N/A

300

—

Voya Financial, Inc. / SLDI

Retirement

Unsecured

Committed

03/20/2022

250

239

Voya Financial, Inc. / SLDI

Individual Life

Unsecured

Committed

12/31/2025

475

—

Voya Financial, Inc. / SLDI

Individual Life

Unsecured

Committed

07/01/2037

1,725

1,592

133

Voya Financial, Inc. /Roaring River LLC

Individual Life

Unsecured

Committed

10/01/2025

425

374

Voya Financial, Inc. /Roaring River IV, LLC

Individual Life

Unsecured

Committed

12/31/2028

565

329

236

Voya Financial, Inc.⁽¹⁾

Individual Life

Unsecured

Committed

12/09/2024

300

180

120

Voya Financial, Inc.

Individual Life/Retirement/Other

Unsecured

Committed

02/11/2022

300

—

SLDI

Hannover Re⁽²⁾

Unsecured

Committed

10/29/2023

—

Voya Financial, Inc.

Hannover Re⁽²⁾

Unsecured

Uncommitted

04/27/2021

125

—

Total

5,536

3,676

1,551

N/A- Not Applicable

⁽¹⁾On September 9, 2019, an agreement was completed providing for the extension of the maturity date from 12/09/2023 to 12/09/2024 effective upon December 9, 2019.

⁽²⁾Individual Life Reinsurance business acquired by Hannover Re in 2009 via indemnity reinsurance.

Total fees associated with credit facilities were $9 million and $25 million for the three and nine months ended September 30, 2019, respectively. Total fees associated with credit facilities were $8 million and $26 million for the three and nine months ended September 30, 2018, respectively.



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Voya Financial, Inc. Credit Support of Subsidiaries

In addition to our Senior Unsecured Credit Facility, Voya Financial, Inc. maintains credit facilities with third-party banks to support the reinsurance obligations of our captive reinsurance subsidiaries in which Voya Financial is either a primary obligor or provides a financial guarantee. As of September 30, 2019, such facilities provided for up to $4.4 billion of capacity, of which $3.6 billion was utilized.

We also provide credit support to our Roaring River IV, LLC ("Roaring River IV") captive reinsurance subsidiary through a surplus maintenance agreement with a third-party bank in connection with a financing arrangement involving $565 million of statutory reserves which matures December 31, 2028. The reimbursement agreement requires Voya Financial, Inc. to cause capital to be maintained in Roaring River IV Holding LLC, the intermediate holding company of Roaring River IV, and in Roaring River IV. These amounts will vary over time based on a percentage of Roaring River IV in force life insurance.

In addition, we provide guarantees to certain of our subsidiaries to support various business requirements:

•

Under the Buyer Facility Agreement put into place by Hannover Re, Voya Financial, Inc. and Security Life of Denver International Limited ("SLDI") have contingent reimbursement obligations and Voya Financial, Inc. has guarantee obligations, up to the full $2.9 billion principal amount of the note and one $600 million letter of credit issued pursuant to the agreement, if Security Life of Denver Insurance Company ("SLD") or SLDI were to direct the sale or liquidation of the note other than as permitted by the Buyer Facility Agreement, or fail to return reinsurance collateral (including the note) upon termination of the Buyer Facility Agreement or as otherwise required by the Buyer Facility Agreement. In addition, Voya Financial, Inc. has agreed to indemnify Hannover Re for any losses it incurs in the event that SLD or SLDI were to exercise offset rights unrelated to the Hannover Re block.


•	Voya Financial, Inc. has also entered into a corporate guarantee agreement with a third-party ceding insurer where it guarantees the reinsurance obligations of our subsidiary, SLD, assumed under a reinsurance agreement with the third-party cedent for the amount of the statutory reserves assumed by SLD. The current amount of reserves outstanding as of September 30, 2019 is $14 million.


•	Voya Financial, Inc. guarantees the obligations of Voya Holdings under the $13 million principal amount Equitable Notes maturing in 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. For more information see "Capitalization- Aetna Notes" above.

•

Voya Financial, Inc. and Voya Holdings provide a guarantee to certain Voya insurance subsidiaries of VIAC’s payment obligations to those subsidiaries under certain VIAC surplus notes held by those subsidiaries. The agreement provides for Voya and Voya Holdings to reimburse the applicable subsidiary to the extent that any interest on, principal of, or any redemption payment with respect to such surplus note is unpaid by VIAC on its scheduled date.

We did not recognize any asset or liability as of September 30, 2019 in relation to intercompany indemnifications, guarantees or support agreements. As of September 30, 2019, no circumstances existed in which we were required to currently perform under these arrangements.

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 from the other 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 September 30, 2019, the aggregate amount that may be borrowed or lent under agreements with life insurance subsidiaries was $1.9 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 September 30, 2019, Voya Financial, Inc. had $129 million outstanding borrowings from subsidiaries and had loaned $236 million to its subsidiaries.



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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 Risk Factors- 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 Part I, Item 1A. of our Annual Report on Form 10-K for additional information.

With respect to our reinsurance agreements, based on the amount of reinsurance outstanding as of September 30, 2019 and December 31, 2018, a two-notch downgrade of our insurance subsidiaries would have resulted in an estimated increase in our collateral requirements by approximately $14 million, respectively. The nature of the collateral that we may be required to post is principally in the form of cash, highly rated securities or LOC.

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.

The financial strength and credit ratings of Voya Financial, Inc. and its principal subsidiaries as of the date of this Quarterly Report on Form 10-Q are summarized in the following 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.	withdrawn	BBB+/stable	Baa2/stable	BBB+/Stable

Financial Strength Rating/Outlook:	A/stable	A/stable	A2/stable	A+/Stable
Voya Retirement Insurance and Annuity Company	⁽⁵⁾
Security Life of Denver Insurance Company	⁽⁵⁾
ReliaStar Life Insurance Company
ReliaStar Life Insurance Company of New York

⁽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 Retirement Insurance Annuity Company and Security Life of Denver Insurance 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.



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Ratings actions and outlook changes by A.M. Best, Fitch, Moody's and S&P from December 31, 2018 through September 30, 2019 and subsequently through the date of this Quarterly Report on Form 10-Q are as follows:


•	On March 11, 2019, Fitch affirmed the ratings of the holding company, Voya Financial, Inc. and revised its outlook on the ratings to Stable from Negative. At the same time, Fitch affirmed the financial strength ratings of Voya's life insurance subsidiaries and maintained its Stable outlook on these ratings.

•

On April 11, 2019, A.M. Best affirmed the financial strength rating of A of the life insurance entities of Voya Financial, Inc. Additionally, A.M. Best affirmed the long-term issuer credit rating of "bbb+" of Voya Financial, Inc. The outlook of these was assigned as Stable. Concurrently, A.M. Best withdrew the ratings of Voya, Voya Retirement Insurance Annuity Company and Security Life of Denver Insurance Company at our request to no longer participate in A.M. Best's rating process with respect to those entities.


•	On June 11, 2019, S&P upgraded the long-term issuer credit rating of Voya Financial, Inc. from BBB, Positive to BBB+, Stable and the financial strength rating of the insurance entities of Voya Financial, Inc. from A, Positive to A+, Stable.

Reinsurance

On November 19, 2008, an existing reinsurance agreement between Scottish Re (U.S.), Inc. ("SRUS") and Ballantyne Re, an Irish public limited company ("Ballantyne Re"), concerning a portion of the business that was originally ceded to Scottish Re as part of the 2004 Transaction, was novated with the result that SLD was substituted for SRUS as the ceding company to Ballantyne Re and made the sole beneficiary of the trust established by to support the reserve requirements of the ceded business. On April 12, 2019, SLD entered into a Lock-Up Support Agreement (the "Lock-Up Agreement") with Ballantyne Re, certain other companies, and holders of certain notes issued by Ballantyne Re in connection with the restructuring of Ballantyne Re. Under the terms of the Lock-Up Agreement, SLD agreed, subject to certain conditions, to enter into a novation and related agreements (the "Novation"). The Novation occurred on June 12, 2019 with the result that Swiss Re Life & Health America Inc. ("Swiss Re") was substituted for Ballantyne Re as the reinsurer effective April 1, 2019. As part of the Novation, Swiss Re established a new trust account with assets supporting its reinsurance obligation to SLD. At the time of closing, $582 million of trust assets on a market value basis supporting reserves of $572 million as of March 31, 2019 were funded into the new trust account. The Novation did not change SLD's reinsurance coverage related to the reinsured business.

Restrictions on Dividends and Returns of Capital from Subsidiaries

Our business is conducted through operating subsidiaries. U.S. insurance laws and regulations regulate the payment of dividends and other distributions by our U.S. insurance subsidiaries to their respective parents. These restrictions are based in part on the prior year's statutory income and surplus. In general, dividends up to specified levels are considered ordinary and may be paid without prior approval. Dividends in larger amounts, or "extraordinary" dividends, are subjected to approval by the insurance commissioner of the state of domicile of the insurance subsidiary proposing to pay the dividend. In addition, under the insurance laws of our principal insurance subsidiaries domiciled in Connecticut and Minnesota (these insurance subsidiaries, together with our insurance subsidiary domiciled in Colorado are referred to collectively, as our "Principal Insurance Subsidiaries"), no dividend or other distribution exceeding an amount equal to an insurance company’s earned surplus may be paid without the domiciliary insurance regulator’s prior approval. Our Principal Insurance Subsidiary domiciled in Connecticut has ordinary dividend capacity for 2019. However, as a result of the extraordinary dividends it paid in 2015, 2016 and 2017, together with statutory losses incurred in connection with the recapture and cession to one of our Arizona captives of certain term life business in the fourth quarter of 2016, our Principal Insurance Subsidiary domiciled in Minnesota currently has negative earned surplus. In addition, primarily as a result of statutory losses incurred in connection with the retrocession of our Principal Insurance Subsidiary domiciled in Minnesota of certain life insurance business in the fourth quarter of 2018, our Principal Insurance Subsidiary domiciled in Colorado has a net loss from operations for the twelve-month period ending the preceding December 31. Therefore, neither our Minnesota nor Colorado Principal Insurance Subsidiaries have the capacity at this time to make ordinary dividend payments. Any extraordinary dividend payment would be subject to domiciliary insurance regulatory approval, which can be granted or withheld at the discretion of the regulator.

SLDI and RRII may not declare or pay dividends other than in accordance with their respective annual capital and dividend plans as approved by the Arizona Department of Insurance, which each include a minimum capital requirement.

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.



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Insurance Subsidiaries - Dividends, Returns of Capital, and Capital Contributions

The following table summarizes dividends by each of the Company's Principal Insurance Subsidiaries to its parent for the periods indicated:



	Dividends Paid				Extraordinary Distributions Paid
	Nine Months Ended September 30,				Nine Months Ended September 30,
($ in millions)	2019		2018		2019		2018
Subsidiary Name (State of domicile):
Voya Retirement Insurance and Annuity Company ("VRIAC") (CT)	$	396	$	126	$	—	$	—
Security Life of Denver Insurance Company ("SLD") (CO)	—		52		—		—
ReliaStar Life Insurance Company ("RLI") (MN)	—		—		360		—

Other Subsidiaries - Dividends, Returns of Capital, and Capital Contributions

On March 26, 2019, RRII declared a dividend in the amount of $152 million payable to its parent, SLDI. On the same date, SLDI declared a dividend of $170 million payable to its parent, Voya Financial. Both of these dividends were paid on March 27, 2019.

Off-Balance Sheet Arrangements

We have obligations for the return of non-cash collateral under an amendment to our securities lending program. Non-cash collateral received in connection with the securities lending program may not be sold or re-pledged by our lending agent, except in the event of default, and is not reflected on our Condensed Consolidated Balance Sheets. For information regarding obligations under this program, see the Investments (excluding Consolidated Investment Entities) Note in our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q.

For changes in commitments related to the acquisition of mortgage loans and the purchase of limited partnerships and private placement investments related to consolidated investment entities, see the Commitments and Contingencies Note in our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q.

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 Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q.

Critical Accounting Judgments and Estimates

The preparation of financial statements in conformity with 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 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 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.



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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;


•	DAC, VOBA and other intangibles (collectively, "DAC/VOBA and other intangibles");


•	Valuation of investments and derivatives;


•	Impairments;


•	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 Condensed 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 our Annual Report on Form 10-K.

Assumptions and Periodic Review

Changes in assumptions can have a significant impact on DAC/VOBA and other intangibles 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 and other intangibles, reserves and the related results of operations.

During the third quarter of 2019 and 2018, we conducted our annual review of assumptions, market conditions and other projection model inputs and made a number of changes to our assumptions which impacted the results of our segments. During the third quarter of 2019, the impact of assumption changes resulted in a loss of $101 million, of which $98 million was included in Adjusted operating earnings before income taxes and reflects net unfavorable DAC/VOBA and other intangibles unlocking. The unlocking in the third quarter 2019 was driven principally by a reduction in the long-term interest rate of 50 basis points and updates to our Individual Life business assumptions including higher than expected persistency at older ages, lower net margins and refinements to our policyholder behavior assumptions. During the third quarter of 2018, the impact of assumption changes resulted in a loss of $153 million, all of which was included in Adjusted operating earnings before income taxes and reflected net unfavorable DAC/VOBA and other intangibles unlocking. The unlocking in the third quarter 2018 was driven principally by increases in reinsurance rate assumptions in our Individual Life business and the unfavorable adjustment of the GMIR initiative partially offset by favorable changes in equity market assumptions in our Retirement business.

In 2017, we began soliciting customer consents to execute a change to reduce the guaranteed minimum interest rate ("GMIR initiative") applicable to future deposits and transfers into fixed investment options for certain retirement plan contracts with above-market GMIRs. This change reduces our interest rate exposure on new deposits, transfers and, in certain plans, existing fixed account assets and will favorably impact the DAC/VOBA amortization rate and Adjusted operating earnings over time. There was no unlocking of DAC and VOBA related to GMIR initiative for the nine months ended September 30, 2019. For the nine months ended September 30, 2018, unfavorable unlocking of DAC and VOBA related to GMIR initiative was $51 million, of which $8 million was included in the results of the annual review of assumptions referenced above.

Sensitivity

We perform sensitivity analyses to assess the impact that certain assumptions have on DAC/VOBA and other intangibles, as well as certain reserves. The following table presents the estimated instantaneous net impact to income from continuing operations of various assumption changes on our DAC/VOBA and other intangible balances and the impact on related reserves for future policy benefits and reinsurance. The effects presented 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.



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($ in millions)	As of September 30, 2019
Decrease in long-term equity rate of return assumption by 100 basis points	$	(37	)
A change to the long-term interest rate assumption of -50 basis points	(64		)
A change to the long-term interest rate assumption of +50 basis points	49
An assumed increase in future mortality by 1%	(22		)

Lower assumed equity rates of return, lower assumed interest rates, increased assumed future mortality and decreases in equity market values generally decrease DAC/VOBA and other intangibles and increase future policy benefits, thus decreasing income before income taxes. Higher assumed interest rates generally increase DAC/VOBA and other intangibles and decrease future policy benefits, thus increasing income before income taxes.

Income Taxes

We use the estimated annual effective tax rate method in computing our interim tax provision. Certain items, including changes in the realizability of deferred tax assets and changes in liabilities for uncertain tax positions, are excluded from the estimated annual effective tax rate and the actual tax expense or benefit is reported in the period the related item is incurred.

See the Income Taxes Note to our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for more information.

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.

See Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7. of our Annual Report on Form 10-K for information on our investment strategy.

See the Investments (excluding Consolidated Investment Entities) Note to our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for more information on investments.

Portfolio Composition

The following table presents the investment portfolio as of the dates indicated:



	September 30, 2019				December 31, 2018
($ in millions)	Carrying Value		% of Total		Carrying Value		% of Total
Fixed maturities, available-for-sale, excluding securities pledged	$	51,114	74.0	%	$	46,298	72.9	%
Fixed maturities, at fair value using the fair value option	3,461		5.0	%	2,956		4.7	%
Equity securities, available-for-sale	373		0.5	%	273		0.4	%
Short-term investments⁽¹⁾	145		0.2	%	168		0.3	%
Mortgage loans on real estate	8,319		12.0	%	8,676		13.6	%
Policy loans	1,796		2.6	%	1,833		2.9	%
Limited partnerships/corporations	1,486		2.1	%	1,158		1.8	%
Derivatives	575		0.8	%	247		0.4	%
Other investments	104		0.2	%	90		0.1	%
Securities pledged	1,804		2.6	%	1,867		2.9	%
Total investments	$	69,177	100.0	%	$	63,566	100.0	%

⁽¹⁾ Short-term investments include investments with remaining maturities of one year or less, but greater than three months, at the time of purchase.



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Fixed Maturities

The following tables present total fixed maturities, including securities pledged, by market sector as of the dates indicated:



	September 30, 2019
($ in millions)	Amortized Cost		% of Total		Fair Value		% of Total
Fixed maturities:
U.S. Treasuries	$	1,661	3.3	%	$	2,264	4.0	%
U.S. Government agencies and authorities	198		0.4	%	262		0.5	%
State, municipalities and political subdivisions	1,644		3.3	%	1,814		3.2	%
U.S. corporate public securities	18,281		36.1	%	21,160		37.5	%
U.S. corporate private securities	6,343		12.6	%	6,902		12.2	%
Foreign corporate public securities and foreign governments⁽¹⁾	5,224		10.3	%	5,862		10.5	%
Foreign corporate private securities⁽¹⁾	4,979		9.9	%	5,268		9.3	%
Residential mortgage-backed securities	5,563		11.0	%	5,870		10.4	%
Commercial mortgage-backed securities	3,983		7.9	%	4,320		7.7	%
Other asset-backed securities	2,643		5.2	%	2,657		4.7	%
Total fixed maturities, including securities pledged	$	50,519	100.0	%	$	56,379	100.0	%
⁽¹⁾ Primarily U.S. dollar denominated.



	December 31, 2018
($ in millions)	Amortized Cost		% of Total		Fair Value		% of Total
Fixed maturities:
U.S. Treasuries	$	1,937	3.9	%	$	2,295	4.5	%
U.S. Government agencies and authorities	204		0.4	%	242		0.5	%
State, municipalities and political subdivisions	1,652		3.3	%	1,659		3.2	%
U.S. corporate public securities	19,210		38.4	%	19,848		38.7	%
U.S. corporate private securities	6,264		12.5	%	6,232		12.2	%
Foreign corporate public securities and foreign governments⁽¹⁾	5,429		10.9	%	5,455		10.7	%
Foreign corporate private securities⁽¹⁾	5,176		10.3	%	5,094		10.0	%
Residential mortgage-backed securities	4,616		9.2	%	4,803		9.4	%
Commercial mortgage-backed securities	3,438		6.9	%	3,416		6.7	%
Other asset-backed securities	2,095		4.2	%	2,077		4.1	%
Total fixed maturities, including securities pledged	$	50,021	100.0	%	$	51,121	100.0	%
⁽¹⁾Primarily U.S. dollar denominated.

As of September 30, 2019, the average duration of our fixed maturities portfolio, including securities pledged, is between 8.0 and 8.5 years.

Fixed Maturities Credit Quality - Ratings

For information regarding our fixed maturities credit quality ratings, see the Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Consolidated Financial Statements in Part II, Item 7. of our Annual Report on Form 10-K.



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The following tables present credit quality of fixed maturities, including securities pledged, using NAIC designations as of the dates indicated:



($ in millions)	September 30, 2019
NAIC Quality Designation	1			2			3			4			5			6			Total Fair Value
U.S. Treasuries	$	2,264		$	—		$	—		$	—		$	—		$	—		$	2,264
U.S. Government agencies and authorities	262			—			—			—			—			—			262
State, municipalities and political subdivisions	1,647			164			—			—			1			2			1,814
U.S. corporate public securities	9,827			10,305			871			136			21			—			21,160
U.S. corporate private securities	2,502			3,944			268			171			17			—			6,902
Foreign corporate public securities and foreign governments⁽¹⁾	2,269			3,294			234			59			5			1			5,862
Foreign corporate private securities⁽¹⁾	620			4,348			250			50			—			—			5,268
Residential mortgage-backed securities	5,683			96			26			4			29			32			5,870
Commercial mortgage-backed securities	4,154			152			14			—			—			—			4,320
Other asset-backed securities	2,349			224			23			4			57			—			2,657
Total fixed maturities	$	31,577		$	22,527		$	1,686		$	424		$	130		$	35		$	56,379
% of Fair Value	55.9		%	40.0		%	3.0		%	0.8		%	0.2		%	0.1		%	100.0		%
⁽¹⁾ Primarily U.S. dollar denominated.



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($ in millions)	December 31, 2018
NAIC Quality Designation	1			2			3			4			5			6			Total Fair Value
U.S. Treasuries	$	2,295		$	—		$	—		$	—		$	—		$	—		$	2,295
U.S. Government agencies and authorities	242			—			—			—			—			—			242
State, municipalities and political subdivisions	1,524			133			—			—			—			2			1,659
U.S. corporate public securities	9,062			9,653			924			193			16			—			19,848
U.S. corporate private securities	2,510			3,376			149			175			19			3			6,232
Foreign corporate public securities and foreign governments⁽¹⁾	2,265			2,804			331			52			1			2			5,455
Foreign corporate private securities⁽¹⁾	693			3,984			301			73			42			1			5,094
Residential mortgage-backed securities	4,678			27			40			2			10			46			4,803
Commercial mortgage-backed securities	3,317			79			20			—			—			—			3,416
Other asset-backed securities	1,819			160			33			9			32			24			2,077
Total fixed maturities	$	28,405		$	20,216		$	1,798		$	504		$	120		$	78		$	51,121
% of Fair Value	55.6		%	39.5		%	3.5		%	1.0		%	0.2		%	0.2		%	100.0		%
⁽¹⁾Primarily U.S. dollar denominated.



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The following tables present credit quality of fixed maturities, including securities pledged, using NAIC acceptable rating organizations ("ARO") ratings as of the dates indicated:



($ in millions)	September 30, 2019
ARO Quality Ratings	AAA			AA			A			BBB			BB and Below			Total Fair Value
U.S. Treasuries	$	2,264		$	—		$	—		$	—		$	—		$	2,264
U.S. Government agencies and authorities	252			10			—			—			—			262
State, municipalities and political subdivisions	111			1,002			534			164			3			1,814
U.S. corporate public securities	230			1,345			8,262			10,402			921			21,160
U.S. corporate private securities	162			253			2,248			3,911			328			6,902
Foreign corporate public securities and foreign governments⁽¹⁾	42			512			1,694			3,287			327			5,862
Foreign corporate private securities⁽¹⁾	—			—			635			4,422			211			5,268
Residential mortgage-backed securities	4,149			163			107			515			936			5,870
Commercial mortgage-backed securities	2,087			374			984			716			159			4,320
Other asset-backed securities	714			518			994			229			202			2,657
Total fixed maturities	$	10,011		$	4,177		$	15,458		$	23,646		$	3,087		$	56,379
% of Fair Value	17.8		%	7.4		%	27.5		%	41.8		%	5.5		%	100.0		%
⁽¹⁾Primarily U.S. dollar denominated.



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($ in millions)	December 31, 2018
ARO Quality Ratings	AAA			AA			A			BBB			BB and Below			Total Fair Value
U.S. Treasuries	$	2,295		$	—		$	—		$	—		$	—		$	2,295
U.S. Government agencies and authorities	234			8			—			—			—			242
State, municipalities and political subdivisions	112			920			492			133			2			1,659
U.S. corporate public securities	220			1,118			7,684			9,739			1,087			19,848
U.S. corporate private securities	166			273			2,221			3,230			342			6,232
Foreign corporate public securities and foreign governments⁽¹⁾	45			533			1,725			2,767			385			5,455
Foreign corporate private securities⁽¹⁾	—			—			698			4,137			259			5,094
Residential mortgage-backed securities	3,394			74			64			188			1,083			4,803
Commercial mortgage-backed securities	1,822			390			596			447			161			3,416
Other asset-backed securities	824			210			633			185			225			2,077
Total fixed maturities	$	9,112		$	3,526		$	14,113		$	20,826		$	3,544		$	51,121
% of Fair Value	17.8		%	6.9		%	27.7		%	40.7		%	6.9		%	100.0		%
⁽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, decreased $906 million from $1,084 million to $178 million for the nine months ended September 30, 2019. The decrease in gross unrealized capital losses was primarily due to declining interest rates.

As of September 30, 2019 and December 31, 2018, we held three fixed maturities with unrealized capital losses in excess of $10 million. As of September 30, 2019 and December 31, 2018, the unrealized capital losses on these fixed maturities equaled $38 million or 21.4% and $49 million or 4.5% of the total unrealized losses, respectively.

As of September 30, 2019, we held $4.3 billion of energy sector fixed maturity securities, constituting 7.5% of the total fixed maturities portfolio, with gross unrealized capital losses of $61 million, including three energy sector fixed maturity securities with unrealized capital losses in excess of $10 million. The unrealized capital losses on these fixed maturity securities equaled $38 million. As of September 30, 2019, our fixed maturity exposure to the energy sector is comprised of 92.3% investment grade securities.

As of December 31, 2018, we held $4.1 billion of energy sector fixed maturity securities, constituting 8.0% of the total fixed maturities portfolio, with gross unrealized capital losses of $143 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 $22 million. As of December 31, 2018, our fixed maturity exposure to the energy sector is comprised of 87.6% investment grade securities.



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The following table presents the U.S. and foreign corporate securities within our energy holdings by sector as of the dates indicated:



($ in millions)	September 30, 2019						December 31, 2018
Sector Type	Amortized Cost		Fair Value		% Fair Value		Amortized Cost		Fair Value		% Fair Value
Midstream	$	1,511	$	1,735	40.7	%	$	1,545	$	1,596	39.0	%
Integrated Energy	632		743		17.5	%	817		837		20.5	%
Independent Energy	927		1,023		24.1	%	923		931		22.8	%
Oil Field Services	431		417		9.8	%	472		428		10.5	%
Refining	277		334		7.9	%	277		293		7.2	%
Total	$	3,778	$	4,252	100.0	%	$	4,034	$	4,085	100.0	%

See the Investments (excluding Consolidated Investment Entities) Note in our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for further information on unrealized capital losses.

CMO-B Portfolio

The following table presents fixed maturities balances held in the CMO-B portfolio by NAIC quality rating as of the dates indicated:



($ in millions)	September 30, 2019						December 31, 2018
NAIC Quality Designation	Amortized Cost		Fair Value		% Fair Value		Amortized Cost		Fair Value		% Fair Value
1	$	3,435	$	3,639	95.8	%	$	2,951	$	3,101	97.0	%
2	85		85		2.2	%	17		16		0.5	%
3	13		15		0.4	%	14		25		0.8	%
4	—		—		—	%	—		—		—	%
5	16		29		0.8	%	5		9		0.3	%
6	25		32		0.8	%	30		46		1.4	%
Total	$	3,574	$	3,800	100.0	%	$	3,017	$	3,197	100.0	%

For CMO securities where we elected the FVO, amortized cost represents the market values. For details on the NAIC designation methodology, see "Fixed Maturities Credit Quality-Ratings" in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7. of our Annual Report on Form 10-K.

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:



	September 30, 2019						December 31, 2018
($ in millions)	Notional Amount		Asset Fair Value		Liability Fair Value		Notional Amount		Asset Fair Value		Liability Fair Value
Derivatives non-qualifying for hedge accounting:
Interest Rate Contracts	$	14,118	$	77	$	213	$	15,081	$	32	$	80

The Company utilizes interest rate futures and interest rate swaps as a part of the CMO-B portfolio to hedge interest rate risk.



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The following table presents our CMO-B fixed maturity securities balances and tranche type as of the dates indicated:



($ in millions)	September 30, 2019						December 31, 2018
Tranche Type	Amortized Cost		Fair Value		% Fair Value		Amortized Cost		Fair Value		% Fair Value
Inverse Floater	$	379	$	504	13.3	%	$	399	$	487	15.2	%
Interest Only (IO)	186		192		5.1	%	167		181		5.7	%
Inverse IO	1,609		1,696		44.5	%	1,335		1,393		43.5	%
Principal Only (PO)	246		252		6.6	%	249		252		7.9	%
Floater	14		14		0.4	%	16		16		0.5	%
Agency Credit Risk Transfer	1,138		1,139		30.0	%	849		865		27.1	%
Other	2		3		0.1	%	2		3		0.1	%
Total	$	3,574	$	3,800	100.0	%	$	3,017	$	3,197	100.0	%

During the nine months ended September 30, 2019, the market value of our CMO-B portfolio increased primarily due to new purchase activity exceeding paydowns and maturities. Valuation of the securities within our CMO-B portfolio improved during the quarter benefited by muted prepayment risk resulting in continued positive relative performance for the strategy. Yields within the CMO-B portfolio continue to decline as higher yielding historical CMO-B assets paydown or mature and are replaced with lower yielding new assets.

The following table presents returns for our CMO-B portfolio for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Net investment income (loss)	$	122		$	118		$	342		$	350
Net realized capital gains (losses)⁽¹⁾	(44		)	(76		)	(97		)	(262		)
Income (loss) from continuing operations before income taxes	$	78		$	42		$	245		$	88

⁽¹⁾Net realized capital 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, certain recharacterizations are recognized. The net coupon settlement on interest rate swaps hedging CMO-B securities that is included in Net realized capital gains (losses) is reflected as Adjusted operating earnings before income taxes in the table below. In addition, the premium amortization and change in fair value for securities designated under the FVO are included in Net realized capital 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 realized capital gains (losses) to Adjusted operating earnings before income taxes.

After adjusting for the two items referenced immediately above, the following table presents a reconciliation of Income (loss) from continuing 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:



	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Income (loss) from continuing operations before income taxes	$	78		$	42		$	245		$	88
Realized gains/(losses) including OTTI	2			(1		)	1			(6		)
Fair value adjustments	(24		)	17			(85		)	93
Total adjustments to income (loss) from continuing operations	(22		)	16			(84		)	87
Adjusted operating earnings before income taxes	$	56		$	58		$	161		$	175



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See Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7. of our Annual Report on Form 10-K for information on our CMO-B portfolio.

Structured Securities

Residential mortgage-backed securities

The following tables present our residential mortgage-backed securities as of September 30, 2019 and December 31, 2018:



	September 30, 2019
($ in millions)	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Embedded Derivatives		Fair Value
Prime Agency	$	3,142	$	203	$	6	$	18	$	3,357
Prime Non-Agency	2,238		73		15		4		2,300
Alt-A	158		20		1		11		188
Sub-Prime⁽¹⁾	125		25		1		—		149
Total RMBS	$	5,663	$	321	$	23	$	33	$	5,994
⁽¹⁾ Includes subprime other asset backed securities.

	December 31, 2018
($ in millions)	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Embedded Derivatives		Fair Value
Prime Agency	$	2,916	$	138	$	34	$	14	$	3,034
Prime Non-Agency	1,509		56		17		3		1,551
Alt-A	164		19		—		8		191
Sub-Prime⁽¹⁾	151		26		1		—		176
Total RMBS	$	4,740	$	239	$	52	$	25	$	4,952
⁽¹⁾ Includes subprime other asset backed securities.



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Commercial Mortgage-backed securities

The following tables present our commercial mortgage-backed securities as of September 30, 2019 and December 31, 2018:



	September 30, 2019
($ 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
2013 and prior	$	350	$	396	$	32	$	33	$	88	$	91	$	127	$	135	$	4	$	5	$	601	$	660
2014	329		376		30		31		62		65		25		27		42		43		488		542
2015	318		350		152		158		122		128		138		146		38		39		768		821
2016	85		92		20		21		35		38		63		68		8		8		211		227
2017	247		273		72		72		154		163		70		74		40		42		583		624
2018	257		306		33		35		283		296		106		111		22		22		701		770
2019	257		294		24		24		197		203		153		155		—		—		631		676
Total CMBS	$	1,843	$	2,087	$	363	$	374	$	941	$	984	$	682	$	716	$	154	$	159	$	3,983	$	4,320

	December 31, 2018
($ 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
2013 and prior	$	451	$	462	$	65	$	65	$	81	$	80	$	88	$	93	$	22	$	22	$	707	$	722
2014	368		373		40		39		43		42		29		29		37		37		517		520
2015	382		377		148		148		66		66		123		122		30		30		749		743
2016	119		114		18		18		38		37		53		52		8		7		236		228
2017	343		326		91		90		97		95		45		44		34		34		610		589
2018	171		170		30		30		278		276		109		107		31		31		619		614
2019	—		—		—		—		—		—		—		—		—		—		—		—
Total CMBS	$	1,834	$	1,822	$	392	$	390	$	603	$	596	$	447	$	447	$	162	$	161	$	3,438	$	3,416

As of September 30, 2019, 96.1% and 3.5% of CMBS investments were designated as NAIC-1 and NAIC-2, respectively. As of December 31, 2018, 97.1% and 2.3% of CMBS investments were designated as NAIC-1 and NAIC-2, respectively.



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Other Asset-backed Securities

The following tables present our other asset-backed securities as of September 30, 2019 and December 31, 2018:



	September 30, 2019
($ 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	$	545	$	540	$	416	$	415	$	756	$	743	$	32	$	31	$	90	$	78	$	1,839	$	1,807
Auto-Loans	45		46		10		10		9		9		—		—		—		—		64		65
Student Loans	37		37		87		91		108		111		1		2		—		—		233		241
Credit Card loans	21		22		—		—		—		—		—		—		—		—		21		22
Other Loans	65		69		2		2		125		128		189		194		5		5		386		398
Total Other ABS⁽¹⁾	$	713	$	714	$	515	$	518	$	998	$	991	$	222	$	227	$	95	$	83	$	2,543	$	2,533
⁽¹⁾ Excludes subprime other asset backed securities.

	December 31, 2018
($ 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	$	708	$	699	$	119	$	116	$	444	$	425	$	29	$	27	$	83	$	75	$	1,383	$	1,342
Auto-Loans	22		21		10		10		9		9		—		—		—		—		41		40
Student Loans	14		14		80		81		99		98		—		—		—		—		193		193
Credit Card loans	21		21		—		—		—		—		—		—		—		—		21		21
Other Loans	68		68		2		2		99		99		160		158		5		5		334		332
Total Other ABS⁽¹⁾	$	833	$	823	$	211	$	209	$	651	$	631	$	189	$	185	$	88	$	80	$	1,972	$	1,928
⁽¹⁾ Excludes subprime other asset backed securities.

As of September 30, 2019, 88.0% and 8.7% of Other ABS investments were designated as NAIC-1 and NAIC-2, respectively. As of December 31, 2018, 87.0% and 8.0% of Other ABS investments were designated as NAIC-1 and NAIC-2, respectively.

Mortgage Loans on Real Estate

We rate commercial mortgages to quantify the level of risk. We place those loans with higher risk on a watch list and closely monitor these loans for collateral deficiency or other credit events that may lead to a potential loss of principal and/or interest. If we determine the value of any mortgage loan to be OTTI (i.e., when it is probable that we will be unable to collect on amounts due according to the contractual terms of the loan agreement), the carrying value of the mortgage loan is reduced to either the present value of expected cash flows from the loan, discounted at the loan's effective interest rate or fair value of the collateral. For those mortgages that are determined to require foreclosure, the carrying value is reduced to the fair value of the underlying collateral, net of estimated costs to obtain and sell at the point of foreclosure. The carrying value of the impaired loans is reduced by establishing an other-than-temporary write-down recorded in Net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.

Loan-to-value ("LTV") and debt service coverage ("DSC") ratios are measures commonly used to assess the risk and quality of commercial mortgage loans. The LTV ratio, calculated at time of origination, is expressed as a percentage of the amount of the loan relative to the value of the underlying property. An LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the value of the underlying collateral. The DSC ratio, based upon the most recently received financial statements, is expressed as a percentage of the amount of a property's Net income (loss) to its debt service payments. A DSC ratio of less than 1.0 indicates that property's operations do not generate sufficient income to cover debt payments. These ratios are utilized as part of the review process described above.



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As of September 30, 2019, our mortgage loans on real estate portfolio had a weighted average DSC of 2.2 times and a weighted average LTV ratio of 61.6%. As of December 31, 2018, our mortgage loans on real estate portfolio had a weighted average DSC of 2.2 times, and a weighted average LTV ratio of 61.4%. See the Investments (excluding Consolidated Investment Entities) Note to our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for further information on mortgage loans on real estate.

Other-Than-Temporary 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 to our Consolidated Financial Statements in Part II, Item 8. in our Annual Report on Form 10-K for the policy used to evaluate whether the investments are other-than-temporarily impaired.

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 in our Consolidated Financial Statements in Part II, Item 8. of our 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 financial conditions in Europe have broadly improved, the possibility of capital market volatility spreading through a highly integrated and interdependent banking system remains. Despite signs of continuous improvement in the region, we continue to closely monitor our exposure to the region.

As of September 30, 2019, our total European exposure had an amortized cost and fair value of $4,988 million and $5,453 million, respectively. European exposure with a primary focus on Greece, Ireland, Italy, Portugal and Spain (which we refer to as "peripheral Europe") amounts to $609 million, which includes non-financial institutions exposure in Ireland of $197 million, in Italy of $201 million, in Portugal of $10 million and in Spain of $131 million. We also had financial institutions exposure in Ireland of $28 million, in Italy of $10 million and in Spain of $32 million. We did not have any exposure to Greece.

Among the remaining $4,844 million of total non-peripheral European exposure, we had a portfolio of credit-related assets similarly diversified by country and sector across developed and developing Europe. As of September 30, 2019, our non-peripheral sovereign exposure was $190 million, which consisted of fixed maturities and derivative assets. We also had $785 million in net exposure to non-peripheral financial institutions, with a concentration in Switzerland of $161 million and the United Kingdom of $401 million. The balance of $3,869 million was invested across non-peripheral, non-financial institutions.

Some of the major country level exposures were in the United Kingdom of $2,368 million, in The Netherlands of $466 million, in Belgium of $300 million, in France of $408 million, in Germany of $296 million, in Switzerland of $373 million, and in Russia of $100 million. We believe the primary risk results from market value fluctuations resulting from spread volatility and the secondary risk is default risk, dependent upon the strength of continued recovery of economic conditions in Europe.



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Consolidated Investment Entities

We provide investment management services to, and have transactions with, various collateralized loan obligations ("CLO entities"), private equity funds, hedge funds, registered investment companies, insurance entities, securitizations and other investment entities in the normal course of business. In certain instances, we serve as the investment manager, making day-to-day investment decisions concerning the assets of these entities. These entities are considered to be either variable interest entities ("VIEs") or voting interest entities ("VOEs"), and we evaluate our involvement with each entity to determine whether consolidation is required.

Certain investment entities are consolidated under consolidation guidance. We consolidate certain entities under the VIE guidance when it is determined that we are the primary beneficiary. We consolidate certain entities under the VOE guidance when we act as the controlling general partner and the limited partners have no substantive rights to impact ongoing governance and operating activities of the entity, or when we otherwise have control through voting rights. See Consolidation and Noncontrolling Interests in the Business, Basis of Presentation and Significant Accounting Policies Note to our Consolidated Financial Statements in Part II, Item 8. of our Annual Report on Form 10-K.

We have no right to the benefits from, nor do we bear the risks associated with these investments beyond our direct debt or equity investments in and management fees generated from these entities. Such direct investments amounted to approximately $317 million and $354 million as of September 30, 2019 and December 31, 2018, respectively. If we were to liquidate, the assets held by consolidated investment entities would not be available to our general creditors as a result of the liquidation.

Fair Value Measurement

Upon consolidation of CLO entities, we elected to apply the FVO for financial assets and financial liabilities held by these entities and have continued to measure these assets (primarily corporate loans) and liabilities (debt obligations issued by CLO entities) at fair value in subsequent periods. We have elected the FVO to more closely align the accounting with the economics of the transactions and allow us to more effectively reflect changes in the fair value of CLO assets with a commensurate change in the fair value of CLO liabilities.

Investments held by consolidated private equity funds and hedge funds are reported in our Condensed Consolidated Financial Statements. Changes in the fair value of consolidated investment entities are recorded as a separate line item within Income (loss) related to consolidated investment entities in our Condensed Consolidated Financial Statements.

The methodology for measuring the fair value and fair value hierarchy classification of financial assets and liabilities of consolidated investment entities is consistent with the methodology and fair value hierarchy rules that we apply to our investment portfolio. See 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 our Annual Report on Form 10-K.

Nonconsolidated VIEs

We also hold variable interest in certain CLO entities that we do not consolidate because we have determined that we are not the primary beneficiary. With these CLO entities, we serve as the investment manager and receive investment management fees and contingent performance fees. Generally, we do not hold any interest in the nonconsolidated CLO entities, but if we do, such ownership has been deemed to be insignificant. We have not provided and are not obligated to provide any financial or other support to these entities.

We manage or hold investments in certain private equity funds and hedge funds. With these entities, we serve as the investment manager and are entitled to receive investment management fees and contingent performance fees that are generally expected to be insignificant. Although we have the power to direct the activities that significantly impact the economic performance of the funds, we do not hold a significant variable interest in any of these funds and, as such, do not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity. Accordingly, we are not considered the primary beneficiary and did not consolidate any of these investment funds.

In addition, we do not consolidate funds in which our involvement takes the form of a limited partner interest and is restricted to a role of a passive investor, as a limited partner's interest does not provide us with any substantive kick-out or participating rights, which would overcome the presumption of control by the general partner. See the Consolidated Investment Entities Note to our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for more information.



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Securitizations

We invest in various tranches of securitization entities, including RMBS, CMBS and ABS. Through our investments, we are not obligated to provide any financial or other support to these entities. Each of the RMBS, CMBS and ABS entities are thinly capitalized by design and considered VIEs. Our involvement with these entities is limited to that of a passive investor. We have no unilateral right to appoint or remove the servicer, special servicer or investment manager, which are generally viewed to have the power to direct the activities that most significantly impact the securitization entities' economic performance, in any of these entities, nor do we function in any of these roles. We, through our investments or other arrangements, do not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity. Therefore, we are not the primary beneficiary and do not consolidate any of the RMBS, CMBS and ABS entities in which we hold investments. These investments are accounted for as investments available-for-sale as described in the Fair Value Measurements (excluding Consolidated Investment Entities) Note to our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q and unrealized capital gains (losses) on these securities are recorded directly in AOCI, except for certain RMBS which are accounted for under the FVO whose change in fair value is reflected in Other net realized gains (losses) in the Condensed Consolidated Statements of Operations. Our maximum exposure to loss on these structured investments is limited to the amount of our investment. Refer to the Investments (excluding Consolidated Investment Entities) Note to our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for details regarding the carrying amounts and classifications of these assets.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk that our consolidated financial position and results of operations will be affected by fluctuations in the value of financial instruments. We have significant holdings in financial instruments and are naturally exposed to a variety of market risks. The main market risks we are exposed to include interest rate risk, equity market price risk and credit risk. There have been no material changes in our exposure to these market risks since December 31, 2018. For further details on these market risks, see Quantitative and Qualitative Disclosures About Market Risk in Part II, Item 7A. in our Annual Report on Form 10-K.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended ("Exchange Act")) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company's current disclosure controls and procedures are effective in ensuring that material information relating to the Company required to be disclosed in the Company's periodic SEC filings is made known to them in a timely manner.

Changes in Internal Control Over Financial Reporting

There were no changes to the Company's internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.



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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See the Commitments and Contingencies Note in our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

For a discussion of the Company’s potential risks and uncertainties, see Risk Factors in Part I, Item IA. of our Annual Report on Form 10-K for the year ended December 31, 2018 (the "Annual Report on Form 10-K") filed with the SEC and Management’s Discussion and Analysis of Financial Condition and Results of Operations-Trends and Uncertainties in Part I, Item 2. of this Quarterly Report on Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer

The following table summarizes Voya Financial, Inc.’s repurchases of its common stock for the three months ended September 30, 2019:



Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid Per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs⁽³⁾
						_{(in millions)}
July 1, 2019 - July 31, 2019	28,450	$	54.23		—	$	340
August 1, 2019 - August 31, 2019	3,715,172	50.97		⁽²⁾	3,709,241	151
September 1, 2019 - September 30, 2019	1,919,209	52.75			1,913,100	50
Total	5,662,831	$	51.59		5,622,341	N/A

⁽¹⁾ In connection with the exercise or vesting of equity-based compensation awards, employees may remit to Voya Financial, Inc., or Voya Financial, Inc. may withhold into treasury stock, shares of common stock in respect to tax withholding obligations and option exercise cost associated with such exercise or vesting. For the three months ended September 30, 2019, there was an increase of 40,490 Treasury shares in connection with such withholding activities.

⁽²⁾ On June 19, 2019, the Company entered into a share repurchase agreement with a third-party financial institution to repurchase $200 million of the Company's common stock. Pursuant to the agreement, the Company received initial delivery of 2,963,512 shares. This arrangement closed on August 6, 2019 and an additional 695,566 shares were delivered. The total number of shares repurchased under this share repurchase agreement was 3,659,078 at an average price per share upon settlement of $54.66.

⁽³⁾On October 31, 2019, the Board of Directors provided share repurchase authorization, increasing the aggregate of the Company's common stock authorized for repurchase by $800. The additional share repurchase authorization expires on December 31, 2020 (unless extended) and does not obligate the Company to purchase any shares. The authorization for the share repurchase program may be terminated, increased or decreased by the Board of Directors at any time.

Item 5. Other Information

On November 1, 2019, we amended and restated the terms of our Second Amended and Restated Revolving Credit Agreement (the "Second Amended and Restated Credit Agreement"), dated as of May 6, 2016 (and filed as Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-35897) filed on May 6, 2016), by entering into a Third Amended and Restated Revolving Credit Agreement (the "Third Amended and Restated Credit Agreement") with a syndicate of banks. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Third Amended and Restated Credit Agreement.

The Third Amended and Restated Credit Agreement modifies several of the terms of the Second Amended and Restated Credit Agreement including extending the term of the agreement to November 1, 2024, and reducing the total borrowing capacity to $500 million.

Availability

Under the terms of the Third Amended and Restated Credit Agreement, an aggregate amount of up to $500 million is available for revolving loan borrowings and issuances of letters of credit ("LOCs").



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Repayment

The Third Amended and Restated Credit Agreement matures on November 1, 2024, and any direct borrowing amount still outstanding will be due in full immediately on that date and any letter of credit obligation still outstanding as of that date must be cash collateralized until no such obligations are outstanding. The Third Amended and Restated Credit Agreement may be pre-paid at any time in whole or in part without premium or penalty, subject to breakage fees in the event of a prepayment of a Eurodollar Rate Loan other than at the end of the applicable interest period. In most circumstances, amounts repaid or prepaid (whether voluntary or otherwise) may be re-borrowed, subject to certain conditions precedent to borrowing. The unutilized portion of any commitment under the Third Amended and Restated Credit Agreement may be reduced or terminated by us at any time without penalty. As of November 6, 2019, there were no amounts outstanding as revolving credit borrowings or for LOCs outstanding under the Third Amended and Restated Credit Agreement.

Interest Rates and Fees

Each Eurodollar Rate Loan under the Third Amended and Restated Credit Agreement bears interest on the outstanding principal amount owing at a rate equal to LIBOR (which cannot be less than zero) plus the applicable rate described below. A Base Rate Loan under the Third Amended and Restated Credit Agreement bears interest at a rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America, N.A. as its "prime rate" and (c) the Eurodollar Rate plus 1.00% plus, in each case, the applicable rate described below. The Company pays a fee based on the face value of letters of credit using the applicable rates below.

In addition, the Company pays a commitment fee calculated by multiplying the applicable rate listed in the table below by the unused capacity available under the Third Amended and Restated Credit Agreement.

The applicable rate means a percentage per annum to be determined in accordance with the following Debt Rating based pricing grid.



Debt Ratings S&P/Moody's	Commitment Fee		Letters of Credit		Eurodollar Rate +		Base Rate +
≥ A / A2	0.090	%	0.750	%	0.875	%	—	%
A- / A3	0.110	%	0.875	%	1.000	%	—	%
BBB+ / Baa1	0.125	%	1.000	%	1.125	%	0.125	%
BBB / Baa2	0.175	%	1.250	%	1.375	%	0.375	%
≤ BBB- / Baa3	0.225	%	1.500	%	1.625	%	0.625	%

Guarantee

Voya Holdings Inc., the Company's wholly-owned subsidiary, has provided a guarantee to the lenders in connection with the obligations owed under the Third Amended and Restated Credit Agreement.

Covenants

The Third Amended and Restated Credit Agreement contains negative covenants customarily included in a loan agreement of this type, including restrictions on (i) the granting of liens, (ii) the incurrence of indebtedness and (iii) the sale of assets. In addition, the Third Amended and Restated Credit Agreement also contains certain financial covenants, including a requirement to maintain a minimum "net worth" (as defined the Third Amended and Restated Credit Agreement) of $6.15 billion, with adjustments for equity issuances after June 30, 2019.

The Third Amended and Restated Credit Agreement requires us to deliver our financial statements to the Administrative Agent for distribution to each lender (if they are not posted on EDGAR), and to observe (and cause certain of our subsidiaries to observe) certain affirmative covenants subject to materiality and other customary and agreed exceptions. These affirmative covenants include (i) payment of obligations, (ii) preservation of corporate existence and maintenance of assets (including intellectual property rights and relevant licenses), (iii) maintenance of properties, (iv) maintenance of insurance, (v) maintenance of books and records, (vi) inspection rights and (vii) use of proceeds.



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Events of Default

The Third Amended and Restated Credit Agreement sets out certain customary events of default (subject to applicable grace periods) including for, but not limited to, non-payment, breach of certain covenants, breach of representations or warranties, cross default of certain other Indebtedness and the occurrence of an ERISA Event. A Change of Control (as defined in the Third Amended and Restated Credit Agreement) will constitute an event of default.

Item 6. Exhibits

See Exhibit Index on page 151 hereof.



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Voya Financial, Inc.



Exhibit Index
Exhibit No.		Description of Exhibit
10.1+		Third Amended and Restated Revolving Credit Agreement dated as of November 1, 2019 (included as Exhibit 10.1 to Form 10-Q)
31.1+		Rule 13a-14(a)/15d-14(a) Certification of Rodney O. Martin, Jr. Chief Executive Officer (included as Exhibit 31.1 to Form 10-Q)
31.2+		Rule 13a-14(a)/15d-14(a) Certification of Michael S. Smith, Chief Financial Officer (included as Exhibit 31.2 to Form 10-Q)
32.1+		Section 1350 Certification of Rodney O. Martin, Jr. Chief Executive Officer (included as Exhibit 32.1 to Form 10-Q)
32.2+		Section 1350 Certification of Michael S. Smith, Chief Financial Officer (included as Exhibit 32.2 to Form 10-Q)
101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH+		Inline XBRL Taxonomy Extension Schema
101.CAL+		Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF+		Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB+		Inline XBRL Taxonomy Extension Label Linkbase
101.PRE+		Inline XBRL Taxonomy Extension Presentation Linkbase
104+		Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

+ Filed herewith.



	151

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



November 6, 2019	Voya Financial, Inc.
(Date)	(Registrant)


	By: /s/	Michael S. Smith
		Michael S. Smith
		Executive Vice President and
		Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)



	152