Stable Value Market to 2013

Transcription

1 City of San Jose Stable Value Update Tony Camp Voya Financial TM Stable Value Products Registered Representative of Voya Financial Partners, LLC Member SIPC September 22, 2014

2 Stable Value Market to to 2009 Mortgage crisis spurns 2008 capital market meltdown Large positive flows to stable value funds Banks and some insurers exit stable value wrapper market Stable Value Managers dependent upon outside wrappers cannot fully invest Two very large Pooled Collective Trust Funds liquidate SSGA, Merrill Lynch Wrap capacity for pooled funds is impaired QDIA DOL selects Target Date Funds, Balanced Funds and Managed Accounts as QDIAs for ERISA plans 2012 to 2013 Goldman Sachs purchases Dwight and Deutsche stable value books of business Low interest rates persist stable value crediting rates remain superior to cash De-risking of stable value funds/strategies Movement from core to intermediate core Shorter duration/caps Reduction/elimination of below investment grade securities Smaller caps on sectors/issuer exposure Dodd/Frank Issue CFTC/SEC decision on whether stable value investment contracts are swaps still pending 2

3 Stable Value Market Most portfolios have recovered nicely from problems in 2008, focus is now protecting portfolios from long anticipated rise in rates How can I protect my stable value fund from a rise in rates and still credit a competitive yield? Cash flows most plans net zero or negative caused in part by hot equity market in 2013/2014 Wrap capacity update: Some new entrants with tougher contract terms Banks continue exiting market Insurance companies are now primary issuers of wraps Low interest rates persists - crediting rates lower but still provide a good spread to cash De-risking stable value funds/strategies started in 2009 majority of market has been de-risked Regulatory issues add some uncertainty, but market is generally optimistic that Stable Value offered through insurance companies will be exempted NAIC Regulation NAIC Sub-Group looking into changing the reserve model for Separate Account and Synthetic GICs Separate Account Insulation NAIC looking at viability of separate account insulation for insurance products NAIC has just closed comment period ACLI, CAI and AAA all commented in favor of retaining insulation GAO The GAO is researching the effectiveness and usage of QDIA alternatives (since 2007 DOL ruling), the addition of Stable Value as the fourth QDIA may be considered 3

4 Voya TM Stable Value Strategy - Selective Growth Product Breadth Voya has multiple Stable Value Products shelf ready in all markets to fund various size mandates (401/457/403b) All products designed to comply with FASB requirements for book value accounting and are in compliance with CT 38a-459/NY Reg. 128 (S-GIC and SA-GIC Regulations) Products available Investment Only or with Plan Administration Voya s Stable Value Wrap Capacity Voya continues to issue stable value wrap contracts Voya can deploy wrap capability when needed not dependent upon external firms for capacity Stable Value Asset Management Investment management expertise in stable value/long term track record 20+ years in several strategies Focus on growing AUM Underwriting Discipline Demographic and cashflow profile of plan and stable value investors Investment guidelines Market to book ratio Selective Growth of Book Bid on mandates that fit company risk profile Dynamic Pricing 4

5 Voya Retirement Insurance and Annuity Company Stable Value Product Suite Stabilizer MCA Fixed Account Separate Account GIC Separate Account insulation ING provides wrap and investment management $8.2B 1 Synthetic GIC Off-balance sheet product ILIAC provides the guarantee or wrap Assets are primarily managed by outside fund manager $29.4B 1 General Account Guaranteed credited rates provided by ILIAC Credited rate announced in advance $25.6B 2 Total DC Stable Value $62.9B 1 Source: 6/30/14 Internal Data 2 Market Value of Invested Assets for ING Life Insurance and Annuity Company s (ILIAC) General Account. Total invested assets exclude due and accrued investment income, real estate, and loans to affiliates. Source: Compiled from information included in the ILIAC Form 10- Q as of 03/31/2014, pages 4 and 12. 5

6 Our Financial Strength As of June 30, 2014, unless otherwise noted Key Facts and Figures Financial Strength Ratings 4 for Voya s Life Companies Shareholder s Equity of $14,818 million Top 10 in public life insurance company statutory capital 1 Estimated combined RBC ratio of 501%; above target of 425% 2 Approximately $90 billion of assets in the investment portfolio Debt to Capital ratio of 23.2% 3 Standard & Poor s A.M. Best Fitch Ratings Moody s As of March 2014: A- Outlook Positive As of July 2014: A Outlook Positive As of March 2014: A- Outlook Positive As of May 2014: A3 Outlook Positive 1. Based on U.S. life insurance total adjusted capital as of December 31, 2013; Ranking based on publicly-traded insurers; Source: SNL 2. Estimated combined RBC ratio primarily for our four principal U.S. insurance subsidiaries; pro-forma for the effects of upstreaming $722 million in ordinary dividends to the holding company in 2Q 14, estimated combined RBC ratio would be approximately 552% (this does not take into account any related impacts to deferred tax assets) 3. Refer to the 2Q'14 supplement for financial leverage reconciliation 4. Insurance financial strength ratings for ING Life Insurance and Annuity Company, ING USA Annuity & Life Insurance Company, ReliaStar Life Insurance Company, ReliaStar Life Insurance Company of New York, and Security Life of Denver Insurance Company; for all insurance financial strength ratings, refer to the 1Q'14 supplement at investors.voya.com 6

7 City of San Jose Historical Net Cashflow: (1) 20,000, ,000, ,000, ,000, ,000, ,000, (1) 2006 excludes initial funding of $183.8 million and 2014 data as of 7/31/2014 7

8 City of San Jose Historical Crediting Rates Period Floor Rate Participant Net Credited Rate Period Floor Rate Participant Net Credited Rate 10/06/ /31/ % 5.80% 07/01/ /30/ % 1.75% 01/01/ /31/ % 5.00% 10/01/ /31/ % 2.01% 01/01/ /30/ % 3.00% 01/01/ /31/ % 2.25% 10/01/ /31/ % 2.75% 04/01/ /30/ % 2.38% 01/01/ /31/ % 2.50% 07/01/ /30/ % 2.46% 04/01/ /30/ % 2.38% 10/01/ /31/ % 1.78% 07/01/ /30/ % 2.45% 01/01/ /31/ % 1.97% 10/01/ /31/ % 1.84% 04/01/ /30/ % 1.97% 01/01/ /31/ % 2.00% 07/01/ /30/ % 2.13% 04/01/ /30/ % 2.00% 8

9 City of San Jose Position as of August 31, 2014 Participant Blended Net Crediting Rate: 2.13% City of San Jose Portfolio Yield: 2.60% Duration: 3.74 Years Plan Market Value (MV) Book Value (BV) MV BV MV/BV Deferred Compensation $200,369,548 $198,701,752 $1,667, % PTC Deferred Compensation $15,653,731 $15,407,163 $246, % Lifestyle $31,563,211 $31,198,347 $364, % Total $247,586,490 $245,307,262 $2,279, % 9

10 City of San Jose Historical Crediting Rate vs U.S. Treasury Rates (1) 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 03/14 06/14 07/14 2 Year Treasury 5 Year Treasury 10 Year Treasury Blended Gross Crediting Rate Blended Net Crediting Rate (1) Annualized month end market yield on U.S. Treasury securities at 2, 5, and 10-year constant maturity, quoted on investment basis. Source: Compiled from information from Federal Reserve 10