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Consolidated Investment Entities

12 Months Ended

Dec. 31, 2019

Consolidated Investment Entities [Abstract]

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 $279 and $290 on a continuing basis as of December 31, 2019 and 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.

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 3 and 2 CLOs as of December 31, 2019 and 2018, respectively.

Limited Partnerships ("LPs")

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 December 31, 2019 and 2018, respectively.

Registered Investment Companies

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

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



	December 31, 2019		December 31, 2018
Assets of Consolidated Investment Entities
VIEs
Cash and cash equivalents	$	68	$	331
Corporate loans, at fair value using the fair value option	513		542
Limited partnerships/corporations, at fair value	1,470		1,313
Other assets	12		15
Total VIE assets	2,063		2,201
VOEs
Limited partnerships/corporations, at fair value	162		108
Other assets	1		1
Total VOE assets	163		109
Total assets of consolidated investment entities	$	2,226	$	2,310

Liabilities of Consolidated Investment Entities
VIEs
CLO notes, at fair value using the fair value option	$	474	$	540
Other liabilities	650		681
Total VIE liabilities	1,124		1,221
VOEs
Other liabilities	2		7
Total VOE liabilities	2		7
Total liabilities of consolidated investment entities	$	1,126	$	1,228

The following tables summarize the impact of consolidation of investment entities into the Consolidated Balance Sheets as of the dates indicated:



	Before Consolidation⁽¹⁾		CLOs		LPs and VOEs		CLOs Adjustments⁽²⁾			LPs and VOEs Adjustments⁽²⁾			Total
December 31, 2019
Total investments and cash	$	55,146	$	—	$	—	$	(32	)	$	(246	)	$	54,868
Other assets	10,219		—		—		—			(1		)	10,218
Assets held in consolidated investment entities	—		551		1,675		—			—			2,226
Assets held in separate accounts	81,670		—		—		—			—			81,670
Assets held for sale	20,069		—		—		—			—			20,069
Total assets	$	167,104	$	551	$	1,675	$	(32	)	$	(247	)	$	169,051

Future policy benefits and contract owner account balances	$	50,868	$	—	$	—	$	—		$	—		$	50,868
Other liabilities	6,659		—		—		—			—			6,659
Liabilities held in consolidated investment entities	1		551		607		(32		)	(1		)	1,126
Liabilities related to separate accounts	81,670		—		—		—			—			81,670
Liabilities held for sale	18,498		—		—		—			—			18,498
Total liabilities	157,696		551		607		(32		)	(1		)	158,821
Equity attributable to common shareholders	9,408		—		1,068		—			(1,068		)	9,408
Equity attributable to noncontrolling interest in consolidated investment entities	—		—		—		—			822			822
Total liabilities and equity	$	167,104	$	551	$	1,675	$	(32	)	$	(247	)	$	169,051

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

⁽²⁾Adjustments include the elimination of intercompany transactions between the Company and CIEs. This consists primarily of the Company’s direct investments in CIEs, but may also contain intercompany receivables or payables. The Company’s direct investments are eliminated against CIE liabilities in the case of CLOs, or the net assets of consolidated private equity and other funds.



	Before Consolidation⁽¹⁾		CLOs		LPs and VOEs		CLOs Adjustments⁽²⁾			LPs and VOEs Adjustments⁽²⁾			Total
December 31, 2018
Total investments and cash	$	52,142	$	—	$	—	$	(7	)	$	(283	)	$	51,852
Other assets	11,293		—		—		—			(1		)	11,292
Assets held in consolidated investment entities	—		589		1,721		—			—			2,310
Assets held in separate accounts	69,931		—		—		—			—			69,931
Assets held for sale	20,045		—		—		—			—			20,045
Total assets	$	153,411	$	589	$	1,721	$	(7	)	$	(284	)	$	155,430

Future policy benefits and contract owner account balances	$	50,770	$	—	$	—	$	—		$	—		$	50,770
Other liabilities	6,593		—		—		—			—			6,593
Liabilities held in consolidated investment entities	1		589		646		(7		)	(1		)	1,228
Liabilities related to separate accounts	69,931		—		—		—			—			69,931
Liabilities held for sale	17,903		—		—		—			—			17,903
Total liabilities	145,198		589		646		(7		)	(1		)	146,425
Equity attributable to common shareholders	8,213		—		1,075		—			(1,075		)	8,213
Equity attributable to noncontrolling interest in consolidated investment entities	—		—		—		—			792			792
Total liabilities and equity	$	153,411	$	589	$	1,721	$	(7	)	$	(284	)	$	155,430

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

The following tables summarize the impact of consolidation of investment entities into the Consolidated Statements of Operations for the periods indicated:



	Before Consolidation⁽¹⁾			CLOs		LPs and VOEs		CLOs Adjustments⁽²⁾			LPs and VOEs Adjustments⁽²⁾			Total
December 31, 2019
Revenues:
Net investment income	$	2,801		$	—	$	—	$	(1	)	$	(8	)	$	2,792
Fee income	2,008			—		—		(2		)	(37		)	1,969
Premiums	2,273			—		—		—			—			2,273
Net realized capital losses	(166		)	—		—		—			—			(166		)
Other income	465			—		—		—			—			465
Income related to consolidated investment entities	(1		)	23		121		—			—			143
Total revenues	7,380			23		121		(3		)	(45		)	7,476
Benefits and expenses:
Policyholder benefits and Interest credited and other benefits to contract owners	3,750			—		—		—			—			3,750
Other expense	3,121			—		—		—			—			3,121
Operating expenses related to consolidated investment entities	(1		)	23		64		(3		)	(38		)	45
Total benefits and expenses	6,870			23		64		(3		)	(38		)	6,916
Income (loss) before income taxes	510			—		57		—			(7		)	560
Income tax expense (benefit)	(205		)	—		—		—			—			(205		)
Income (loss) from continuing operations	715			—		57		—			(7		)	765
Income (loss) from discontinued operations, net of tax	(1,066		)	—		—		—			—			(1,066		)
Net income (loss)	(351		)	—		57		—			(7		)	(301		)
Less: Net income (loss) attributable to noncontrolling interest	—			—		—		—			50			50
Net income (loss) available to Voya Financial, Inc.	(351		)	—		57		—			(57		)	(351		)
Less: Preferred stock dividends	28			—		—		—			—			28
Net income (loss) available to Voya Financial, Inc.'s common shareholders	$	(379	)	$	—	$	57	$	—		$	(57	)	$	(379	)

⁽¹⁾The Before Consolidation column includes the net investment income and fee income earned from CIEs prior to consolidation.

⁽²⁾Adjustments include the elimination of intercompany transactions between the Company and CIE's, primarily the elimination of management fees expensed by the funds and recorded as fee income by the Company prior to consolidation.



	Before Consolidation⁽¹⁾			CLOs		LPs and VOEs		CLOs Adjustments⁽²⁾			LPs and VOEs Adjustments⁽²⁾			Total
December 31, 2018
Revenues:
Net investment income	$	2,716		$	—	$	—	$	(1	)	$	(46	)	$	2,669
Fee income	2,033			—		—		(3		)	(48		)	1,982
Premiums	2,132			—		—		—			—			2,132
Net realized capital losses	(355		)	—		—		—			—			(355		)
Other income	443			—		—		—			—			443
Income related to consolidated investment entities	—			28		264		—			—			292
Total revenues	6,969			28		264		(4		)	(94		)	7,163
Benefits and expenses:
Policyholder benefits and Interest credited and other benefits to contract owners	3,526			—		—		—			—			3,526
Other expense	3,060			—		—		—			—			3,060
Operating expenses related to consolidated investment entities	—			28		73		(4		)	(48		)	49
Total benefits and expenses	6,586			28		73		(4		)	(48		)	6,635
Income (loss) before income taxes	383			—		191		—			(46		)	528
Income tax expense (benefit)	37			—		—		—			—			37
Income (loss) from continuing operations	346			—		191		—			(46		)	491
Income (loss) from discontinued operations, net of tax	529			—		—		—			—			529
Net income (loss)	875			—		191		—			(46		)	1,020
Less: Net income (loss) attributable to noncontrolling interest	—			—		—		—			145			145
Net income (loss) available to Voya Financial, Inc.	875			—		191		—			(191		)	875
Less: Preferred stock dividends	—			—		—		—			—			—
Net income (loss) available to Voya Financial, Inc.'s common shareholders	$	875		$	—	$	191	$	—		$	(191	)	$	875

⁽¹⁾The Before Consolidation column includes the net investment income and fee income earned from CIEs prior to consolidation.



	Before Consolidation⁽¹⁾			CLOs		LPs and VOEs		CLOs Adjustments⁽²⁾			LPs and VOEs Adjustments⁽²⁾			Total
December 31, 2017
Revenues:
Net investment income	$	2,721		$	—	$	—	$	(2	)	$	(78	)	$	2,641
Fee income	1,937			—		—		(9		)	(39		)	1,889
Premiums	2,097			—		—		—			—			2,097
Net realized capital losses	(209		)	—		—		—			—			(209		)
Other income	379			—		—		—			—			379
Income related to consolidated investment entities	—			82		350		—			—			432
Total revenues	6,925			82		350		(11		)	(117		)	7,229
Benefits and expenses:
Policyholder benefits and Interest credited and other benefits to contract owners	3,658			—		—		—			—			3,658
Other expense	3,099			—		—		—			—			3,099
Operating expenses related to consolidated investment entities	—			82		55		(11		)	(39		)	87
Total benefits and expenses	6,757			82		55		(11		)	(39		)	6,844
Income (loss) before income taxes	168			—		295		—			(78		)	385
Income tax expense (benefit)	687			—		—		—			—			687
Income (loss) from continuing operations	(519		)	—		295		—			(78		)	(302		)
Income (loss) from discontinued operations, net of tax	(2,473		)	—		—		—			—			(2,473		)
Net income (loss)	(2,992		)	—		295		—			(78		)	(2,775		)
Less: Net income (loss) attributable to noncontrolling interest	—			—		—		—			217			217
Net income (loss) available to Voya Financial, Inc.	(2,992		)	—		295		—			(295		)	(2,992		)
Less: Preferred stock dividends	—			—		—		—			—			—
Net income (loss) available to Voya Financial, Inc.'s common shareholders	$	(2,992	)	$	—	$	295	$	—		$	(295	)	$	(2,992	)

⁽¹⁾The Before Consolidation column includes the net investment income and fee income earned from CIEs prior to consolidation.

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 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 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 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 2028, paying interest at LIBOR , EURIBOR or PRIME plus a spread of up to 10.0%. As of December 31, 2019 and 2018, the unpaid principal balance exceeded the fair value of the corporate loans by approximately $18 and $13, respectively. Less than 1.0% of the collateral assets were in default as of December 31, 2019 and 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 6.6 years as of December 31, 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.


•	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 and 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 December 31, 2019 and 2018, certain private equity funds maintained term loans and revolving lines of credit of $669 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 - 200 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 December 31, 2019 and 2018, outstanding borrowings amount to $602 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 is $25; the loan bears interest at LIBOR plus 325 bps and has a commitment fee of 160 bps. There was $3 of outstanding borrowing as of December 31, 2019.

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

The following table summarizes the fair value hierarchy levels of consolidated investment entities as of December 31, 2019:



	Level 1		Level 2		Level 3		NAV		Total
Assets
VIEs
Cash and cash equivalents	$	68	$	—	$	—	$	—	$	68
Corporate loans, at fair value using the fair value option	—		513		—		—		513
Limited partnerships/corporations, at fair value	—		—		—		1,470		1,470
VOEs
Limited partnerships/corporations, at fair value	—		—		—		162		162
Total assets, at fair value	$	68	$	513	$	—	$	1,632	$	2,213
Liabilities
VIEs
CLO notes, at fair value using the fair value option	$	—	$	474	$	—	$	—	$	474
Total liabilities, at fair value	$	—	$	474	$	—	$	—	$	474

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 years ended December 31, 2019 and 2018, there were no transfers in or out of Level 3 or transfers between Level 1 and Level 2.

Deconsolidation of Certain Investment Entities

The Company determined it was no longer the primary beneficiary of previously consolidated CLOs due to a reduction in the Company’s investment in relation to the CLOs' equity. This caused a reduction in the Company's obligation to absorb losses and rights to receive benefits of the CLO that could potentially be significant to the CLO. As a result of this determination, the Company deconsolidated one and three investment entities during the years ended December 31, 2019 and December 31, 2018, respectively.

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 December 31, 2019 and 2018, the Company held $377 and $468 ownership interests, respectively, in unconsolidated CLOs on a continuing basis.

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 on a continuing basis 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 Consolidated Balance Sheet
	December 31, 2019				December 31, 2018
	Carrying Amount		Maximum exposure to loss		Carrying Amount		Maximum exposure to loss
Fixed maturities, available for sale	$	377	$	377	$	466	$	466
Limited partnership/corporations	1,290		1,290		982		982

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, 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 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 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 Consolidated Financial Statements for details regarding the carrying amounts and classifications of these assets.