Voya Insurance & Annuity 10Q 2010 Q1 Quarterly report


UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2010 OR
¨ 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: 333-133154, 333-133076, 333-133153, 333-133155, 333-158928
ING USA ANNUITY AND LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
Iowa (State or other jurisdiction of incorporation or organization) 1475 Dunwoody Drive West Chester, Pennsylvania (Address of principal executive offices)	41-0991508 (IRS Employer Identification No.) 19380-1478 (Zip Code)
(610) 425-3400 (Registrant's telephone number, including area code)

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

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 x No ¨

Indicate by check mark whether the registrant (1) has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer £	Accelerated filer £	Non-accelerated filer x (Do not check if a smaller reporting company)	Smaller reporting company £

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

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: 250,000 shares of Common Stock, $10 par value, as of May 7, 2010, are authorized, issued, and outstanding, all of which were directly owned by Lion Connecticut Holdings Inc.

NOTE: WHEREAS ING USA ANNUITY AND LIFE INSURANCE COMPANY MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q, THIS FORM IS BEING FILED WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION H(2).

ING USA Annuity and Life Insurance Company (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.) Form 10-Q for the period ended March 31, 2010

	INDEX

PART I.	FINANCIAL INFORMATION (UNAUDITED)	PAGE

Item 1.	Financial Statements:
	Condensed Statements of Operations	3
	Condensed Balance Sheets	4
	Condensed Statements of Changes in Shareholder's Equity	6
	Condensed Statements of Cash Flows	7
	Notes to Condensed Financial Statements	8

Item 2.	Management’s Narrative Analysis of the Results of Operations and Financial Condition	53

Item 4.	Controls and Procedures	92

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	93

Item 1A.	Risk Factors	93

Item 6.	Exhibits	96

Signature		97

Exhibit Index		98

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)


PART I. FINANCIAL INFORMATION (UNAUDITED)

Item 1. Financial Statements


Condensed Statements of Operations
(Unaudited)
(In millions)


	Three Months Ended March 31,
	2010			2009
Revenues:
Net investment income	$	319.6		$	380.7
Fee income		268.2			199.4
Premiums		49.6			114.0
Net realized capital losses:
Total other-than-temporary impairment losses		(71.5	)		(300.3	)
Portion of other-than-temporary impairment losses
recognized in Other comprehensive income (loss)		46.0			-
Net other-than-temporary impairments recognized in earnings		(25.5	)		(300.3	)
Other net realized capital (losses) gains		(237.0	)		148.5
Total net realized capital losses		(262.5	)		(151.8	)
Other income		0.1			1.4
Total revenue		375.0			543.7
Benefits and expenses:
Interest credited and other benefits to contractowners		184.9			500.2
Operating expenses		101.4			88.3
Net amortization of deferred policy acquisition costs and value
of business acquired		65.6			268.6
Interest expense		8.0			7.3
Other expense		9.7			6.7
Total benefits and expenses		369.6			871.1
Income (loss) before income taxes		5.4			(327.4	)
Income tax benefit		(1.2	)		(91.8	)
Net income (loss)	$	6.6		$	(235.6	)

The accompanying notes are an integral part of these financial statements.

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Condensed Balance Sheets
(In millions, except share data)

	As of		As of
	March 31,		December 31,
	2010		2009
	(Unaudited)
Assets
Investments:
Fixed maturities, available-for-sale, at fair value
(amortized cost of $17,625.8 at 2010 and $17,724.3 at 2009 )	$	17,555.9	$	17,156.5
Equity securities, available-for-sale, at fair value
(cost of $160.5 at 2010 and $150.8 at 2009)		167.5		154.3
Short-term investments		3,139.7		2,044.0
Mortgage loans on real estate		3,286.5		3,413.2
Policy loans		129.4		131.6
Loan - Dutch State obligation		933.2		1,026.0
Limited partnerships/corporations		258.8		252.6
Derivatives		261.0		317.4
Other investments		24.2		23.9
Securities pledged (amortized cost of $840.5 at 2010
and $1,079.4 at 2009)		818.0		1,092.5
Total investments		26,574.2		25,612.0
Cash and cash equivalents		69.1		37.8
Short-term investments under securities loan agreement		139.0		169.0
Accrued investment income		201.0		187.3
Receivable for securities sold		55.8		7.6
Premium receivable		54.8		86.9
Deposits and reinsurance recoverable		3,297.9		3,350.0
Deferred policy acquisition costs		3,592.0		3,718.0
Value of business acquired		98.8		113.4
Sales inducements to contractowners		744.6		810.2
Short-term loan to affiliate		652.6		545.5
Due from affiliates		44.1		816.3
Other assets		396.9		398.7
Assets held in separate accounts		43,893.7		42,996.1
Total assets	$	79,814.5	$	78,848.8

The accompanying notes are an integral part of these financial statements.

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Condensed Balance Sheets
(In millions, except share data)


	As of			As of
	March 31,			December 31,
	2010			2009
	(Unaudited)
Liabilities and Shareholder's Equity
Future policy benefits and claims reserves	$	27,069.2		$	27,044.7
Payable for securities purchased		111.6			115.7
Payables under securities loan agreement,
including collateral held		176.9			201.1
Borrowed money		-			311.1
Notes to affiliates		435.0			435.0
Due to affiliates		161.0			122.5
Current income taxes		121.9			69.0
Deferred income taxes		774.8			767.5
Other liabilities		3,847.6			4,045.2
Liabilities related to separate accounts		43,893.7			42,996.1
Total liabilities		76,591.7			76,107.9

Shareholder's equity:
Common stock (250,000 shares authorized, issued
and outstanding; $10 per share value)		2.5			2.5
Additional paid-in capital		5,412.1			5,172.7
Accumulated other comprehensive loss		(276.9	)		(512.8	)
Retained earnings (deficit)		(1,914.9	)		(1,921.5	)
Total shareholder's equity		3,222.8			2,740.9
Total liabilities and shareholder's equity	$	79,814.5		$	78,848.8

The accompanying notes are an integral part of these financial statements.

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Condensed Statements of Changes in Shareholder’s Equity
(Unaudited)
(In millions)


					Accumulated
				Additional	Other			Retained	Total
		Common		Paid-In	Comprehensive			Earnings	Shareholder's
		Stock		Capital	Loss			(Deficit)	Equity
Balance at December 31, 2008	$	2.5	$	4,335.4	$	(1,333.7)	$	(2,236.7)	$	767.5
Comprehensive income:
Net loss		-		-		-		(235.6)		(235.6)
Other comprehensive income (loss), net of tax:
Change in net unrealized capital gains (losses)
on securities ($520.8 pretax), including
valuation allowance of $5.4		-		-		343.9		-		343.9
Pension liability ($(0.2) pretax)		-		-		(0.1)		-		(0.1)
Total comprehensive income										108.2
Contribution of capital		-		835.0		-		-		835.0
Employee share-based payments		-		0.6		-		-		0.6
Balance at March 31, 2009	$	2.5	$	5,171.0	$	(989.9)	$	(2,472.3)	$	1,711.3

Balance at December 31, 2009	$	2.5	$	5,172.7	$	(512.8)	$	(1,921.5)	$	2,740.9
Comprehensive income:
Net income		-		-		-		6.6		6.6
Other comprehensive income (loss), net of tax:
Change in net unrealized capital gains (losses)
on securities ($338.5 pretax), including
decrease in valuation allowance of $(52.2)		-		-		272.3		-		272.3
Portion of other-than-temporary impairment
losses recognized in other comprehensive
income (loss) ($(46.0) pretax), including
increase in tax valuation allowance
of $16.1		-		-		(46.0)		-		(46.0)
Change in other-than-temporary impairment
losses recognized in other comprehensive
income (loss) ($9.6 pretax), including
decrease in tax valuation allowance
of $(3.4)		-		-		9.6		-		9.6
Total comprehensive income										242.5
Contribution of capital		-		239.0		-		-		239.0
Employee share-based payments		-		0.4		-		-		0.4
Balance at March 31, 2010	$	2.5	$	5,412.1	$	(276.9)	$	(1,914.9)	$	3,222.8

The accompanying notes are an integral part of these financial statements.

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Condensed Statements of Cash Flows
(Unaudited)
(In millions)


	Three Months Ended March 31,
	2010			2009
Net cash provided by operating activities	$	1,347.5		$	721.5

Cash Flows from Investing Activities:
Proceeds from the sale, maturity, or redemption of:
Fixed maturities, available-for-sale		2,149.5			1,682.2
Equity securities, available-for-sale		2.3			3.6
Mortgage loans on real estate		204.1			97.3
Limited partnerships/corporations		0.4			1.8
Derivatives		(259.3	)		113.1
Acquisition of:
Fixed maturities, available-for-sale		(1,853.4	)		(1,427.9	)
Equity securities, available-for-sale		(10.1	)		(0.3	)
Mortgage loans on real estate		(75.1	)		(16.6	)
Limited partnerships/corporations		(12.7	)		(5.7	)
Derivatives		(16.1	)		(41.5	)
Short-term investments, net		(1,095.8	)		(223.8	)
Loan-Dutch State obligation, net		92.8			-
Collateral held		5.8			5.2
Other investments, net		(0.3	)		(0.2	)
Other, net		(161.5	)		(2.5	)
Net cash (used in) provided by investing activities		(1,029.4	)		184.7

Cash Flows from Financing Activities:
Deposits received for investment contracts		534.5			685.1
Maturities and withdrawals from investment contracts		(668.4	)		(2,977.1	)
Block of deposits coinsured to affiliate		26.2			98.9
Reinsurance recoverable on investment contracts		0.1			313.9
Short-term repayments of repurchase agreements, net		(311.1	)		(29.6	)
Short-term loans to affiliates		(107.1	)		(338.9	)
Contribution of capital		239.0			835.0
Net cash used in financing activities		(286.8	)		(1,412.7	)
Net increase (decrease) in cash and cash equivalents		31.3			(506.5	)
Cash and cash equivalents, beginning of period		37.8			610.8
Cash and cash equivalents, end of period	$	69.1		$	104.3

The accompanying notes are an integral part of these financial statements.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

1.	Organization and Significant Accounting Policies

Basis of Presentation

ING USA Annuity and Life Insurance Company (“ING USA” or the “Company,” as appropriate) is a stock life insurance company domiciled in the State of Iowa and provides financial products and services in the United States. ING USA is authorized to conduct its insurance business in all states, except New York, and the District of Columbia.

ING USA is a direct, wholly-owned subsidiary of Lion Connecticut Holdings Inc. (“Lion” or “Parent”), which is an indirect, wholly-owned subsidiary of ING Groep N.V. (“ING”). ING is a global financial services holding company based in the Netherlands, with American Depository Shares listed on the New York Stock Exchange under the symbol “ING”.

As part of a restructuring plan approved by the European Commission (“EC”), ING has agreed to separate its banking and insurance businesses by 2013. ING intends to achieve this separation by divestment of its insurance and investment management operations, including the Company. ING has announced that it will explore all options for implementing the separation including initial public offerings, sales, or a combination thereof.

The condensed financial statements and notes as of March 31, 2010, and for the three months ended March 31, 2010 and 2009, have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are unaudited.

The condensed financial statements reflect all adjustments (consisting only of normal, recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations, and cash flows, for the interim periods. These condensed financial statements and notes should be read in conjunction with the financial statements and related notes as presented in the Company’s 2009 Annual Report on Form 10-K. The results of operations for the interim periods may not be considered indicative of results to be expected for the full year.

Description of Business

The Company currently offers various insurance products, including immediate and deferred fixed annuities. The Company’s annuity products are distributed by national wirehouses, regional securities firms, independent broker-dealers, banks, life insurance companies with captive agency sales forces, independent insurance agents, independent marketing organizations, and affiliated broker-dealers. The Company’s primary annuity customers are individual consumers. The Company ceased new sales of variable annuity products in March of 2010, as part of a global business strategy and risk reduction plan. Some new flows will continue on ING USA variable annuities either as transfers related to applications that were in process prior to the product closures or as add-on premiums to existing contracts.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The Company also offers guaranteed investment contracts and funding agreements (collectively referred to as “GICs”), sold primarily to institutional investors and corporate benefit plans. These products are marketed by home office personnel or through specialty insurance brokers.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from reported results using those estimates.

Reclassifications

Certain reclassifications have been made to prior year financial information to conform to the current year classifications.

Subsequent Events

The Company has evaluated subsequent events for recognition and disclosure through the date the condensed financial statements, as of March 31, 2010 and for the three months then ended, were issued.

Significant Accounting Policies

For a description of significant accounting policies, see the Organization and Significant Accounting Policies footnote to the Financial Statements included in the Company’s 2009 Annual Report on Form 10-K. There have been no material changes to the Company’s significant accounting policies since the filing of the Company’s 2009 Annual Report on Form 10-K, except as noted in the Recently Adopted Accounting Standards footnote.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

2.	Recently Adopted Accounting Standards

Improving Disclosures about Fair Value Measurements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, “Fair Value Measurements and Disclosure (ASC Topic 820): Improving Disclosures about Fair Value Measurements,” (“ASU 2010-06”), which requires several new disclosures, as well as clarification to existing disclosures, as follows:

§	Significant transfers in and out of Level 1 and Level 2 fair value measurements and the reason for the transfers;

§	Purchases, sales, issuances, and settlement, in the Level 3 fair value measurements reconciliation on a gross basis;

§	Fair value measurement disclosures for each class of assets and liabilities (i.e., disaggregated); and

§	Valuation techniques and inputs for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3 fair value measurements.

The provisions of ASU 2010-06 were adopted by the Company on January 1, 2010, and are included in the Financial Instruments footnote, except for the disclosures related to the Level 3 reconciliation, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. As the pronouncement only pertains to additional disclosure, the adoption had no effect on the Company’s financial condition, results of operations, or cash flows.

Improvements to Financial Reporting by Enterprises Involved in Variable Interest Entities

In December 2009, the FASB issued ASU 2009-17, “Consolidations (ASC Topic 810): Improvements to Financial Reporting by Enterprises Involved in Variable Interest Entities,” (“ASU 2009-17”), which eliminates the exemption for qualifying special-purpose entities (“QSPEs”), as well as amends the consolidation guidance for variable interest entities (“VIEs”), as follows:

Removes the quantitative-based assessment for consolidation of VIEs and, instead, requires a qualitative assessment of whether an entity has the power to direct the VIE’s activities, and whether the entity has the obligation to absorb losses or the right to reserve benefits that could be significant to the VIE; and

§	Requires an ongoing reassessment of whether an entity is the primary beneficiary of a VIE.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

In addition, in February 2010, the FASB issued ASU 2010-10, “Consolidation (ASC Topic 810): Amendments for Certain Investment Funds” (ASU 2010-10), which primarily defers ASU 2009-17 for an investment in an entity that is accounted for as an investment company.

The provisions of ASU 2009-17 and ASU 2010-10 were adopted on January 1, 2010. The Company determined, however, that there was no effect on the Company’s financial condition, results of operations, or cash flows upon adoption, as the consolidation conclusions were consistent with those under previous US GAAP. The disclosure provisions required by ASU 2009-17 are presented in the Financial Instruments footnote.

Accounting for Transfers of Financial Assets

In December 2009, the FASB issued ASU 2009-16 “Transfers & Servicing (ASC Topic 860): Accounting for Transfers of Financial Assets” (“ASU 2009-16”), which eliminates the QSPE concept and requires a transferor of financial assets to:

§	Consider the transferor’s continuing involvement in assets, limiting the circumstances in which a financial asset should be derecognized when the transferor has not transferred the entire asset to an entity that is not consolidated;

§	Account for the transfer as a sale only if an entity transfers an entire financial asset and surrenders controls, unless the transfer meets the conditions for a participating interest; and

§	Recognize and initially measure at fair value all assets obtained and liabilities incurred as a result of a transfer of financial assets accounted for as a sale.

The provisions of ASU 2009-16 were adopted on January 1, 2010. The Company determined, however, that there was no effect on the Company’s financial condition, results of operations, or cash flows upon adoption, as the Company did not have any QSPEs under previous US GAAP, and the requirements for sale accounting treatment are consistent with those previously applied by the Company under US GAAP.

Measuring the Fair Value of Certain Alternative Investments

In September 2009, the FASB issued ASU 2009-12, “Fair Value Measurements and Disclosures (ASC Topic 820): Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)” (“ASU 2009-12”), which allows the use of net asset value to estimate the fair value of certain alternative investments, such as interests in hedge funds, private equity funds, real estate funds, venture capital funds, offshore fund vehicles, and funds of funds. In addition, ASU 2009-12 requires disclosures about the attributes of such investments.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The provisions of ASU 2009-12 were adopted by the Company on December 31, 2009. The Company determined, however, that there was no effect on the Company’s financial condition, results of operations, or cash flows upon adoption, as its guidance is consistent with that previously applied by the Company under US GAAP. The disclosure provisions required by ASU 2009-12 are presented in the Investments footnote to these financial statements.

FASB Accounting Standards Codification

In June 2009, the FASB issued ASU 2009-01, “Topic 105 – Generally Accepted Accounting Principles: amendments based on Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles” (“ASU 2009-01”), which confirms that as of July 1, 2009, the “FASB Accounting Standards CodificationTM” (“the Codification” or “ASC”) is the single official source of authoritative, nongovernmental US GAAP. All existing accounting standard documents are superseded, and all other accounting literature not included in the Codification is considered nonauthoritative.

The Company adopted the Codification as of July 1, 2009. There was no effect on the Company’s financial condition, results of operations, or cash flows. The Company has revised its disclosures to incorporate references to the Codification topics.

Subsequent Events

In May 2009, the FASB issued new guidance on subsequent events, included in ASC Topic 855, “Subsequent Events,” which establishes:

§	The period after the balance sheet date during which an entity should evaluate events or transactions for potential recognition or disclosure in the financial statements;

§	The circumstances under which an entity should recognize such events or transactions in its financial statements; and

§	Disclosures regarding such events or transactions and the date through which an entity has evaluated subsequent events.

These provisions, as included in ASC Topic 855, were adopted by the Company on June 30, 2009. In addition, in February 2010, the FASB issued ASU 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements”, which clarifies that an SEC filer should evaluate subsequent events through the date the financial statements are issued and eliminates the requirement for an SEC filer to disclose that date, effective upon issuance. The Company determined that there was no effect on the Company’s financial condition, results of operations, or cash flows upon adoption, as the guidance is consistent with that previously applied by the Company under U.S. auditing standards. The disclosure provisions included in ASC Topic 855, as amended, are presented in the Organization and Significant Accounting Policies footnote to these financial statements.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Recognition and Presentation of Other-Than-Temporary Impairments

In April 2009, the FASB issued new guidance on recognition and presentation of other-than-temporary impairments, included in ASC Topic 320, “Investments-Debt and Equity Securities,” which requires:

§	Noncredit related impairments to be recognized in other comprehensive income (loss), if management asserts that it does not have the intent to sell the security and that it is more likely than not that the entity will not have to sell the security before recovery of the amortized cost basis;

§	Total other-than-temporary impairments (“OTTI”) to be presented in the Statement of Operations with an offset recognized in other comprehensive income (loss) for the noncredit related impairments;

§	A cumulative effect adjustment as of the beginning of the period of adoption to reclassify the noncredit component of a previously recognized other-than-temporary impairment from Retained earnings (deficit) to Accumulated other comprehensive income (loss); and

§	Additional interim disclosures for debt and equity securities regarding types of securities held, unrealized losses, and other-than-temporary impairments.

These provisions, as included in ASC Topic 320, were adopted by the Company on April 1, 2009. As a result of implementation, the Company recognized a cumulative effect of change in accounting principle of $312.0 after considering the effects of deferred policy acquisition costs (“DAC”) and income taxes of $(139.1) and $48.6, respectively, as an increase to April 1, 2009 Retained earnings (deficit) with a corresponding decrease to Accumulated other comprehensive income (loss).

In addition, the Company recognized an increase in amortized cost for previously impaired securities due to the recognition of the cumulative effect of change in accounting principle as of April 1, 2009, as follows:

	Change in
	Amortized Cost
Fixed maturities:
U.S. corporate, state and municipalities	$	53.3
Foreign		69.2
Residential mortgage-backed		64.3
Commercial mortgage-backed		92.6
Other asset-backed		123.1
Total investments, available-for-sale	$	402.5

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The disclosure provisions, as included in ASC Topic 320, are presented in the Investments footnote to these financial statements.

Interim Disclosures about Fair Value of Financial Instruments

In April 2009, the FASB issued new guidance on interim disclosures about fair value of financial instruments, included in ASC Topic 825, “Financial Instruments,” which requires that the fair value of financial instruments be disclosed in an entity’s interim financial statements, as well as in annual financial statements. The provisions included in ASC Topic 825 also require that fair value information be presented with the related carrying value and that the method and significant assumptions used to estimate fair value, as well as changes in method and significant assumptions, be disclosed.

These provisions, as included in ASC Topic 825, were adopted by the Company on April 1, 2009 and are presented in the Financial Instruments footnote to these financial statements. As the pronouncement only pertains to additional disclosure, the adoption had no effect on the Company’s financial condition, results of operations, or cash flows.

Disclosures about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued new guidance on disclosures about derivative instruments and hedging activities, included in ASC Topic 815, “Derivatives and Hedging,” which requires enhanced disclosures about objectives and strategies for using derivatives, fair value amounts of, and gains and losses on, derivative instruments, and credit-risk-related contingent features in derivative agreements, including:

§	How and why derivative instruments are used;

§	How derivative instruments and related hedged items are accounted for under US GAAP for derivative and hedging activities; and

§	How derivative instruments and related hedged items affect an entity’s financial statements.

These provisions, as included in ASC Topic 815, were adopted by the Company on January 1, 2009 and are included in the Financial Instruments footnote to these financial statements. As the pronouncement only pertains to additional disclosure, the adoption had no effect on the Company’s financial condition, results of operations, or cash flows. In addition, the Company’s derivatives are generally not accounted for using hedge accounting treatment under ASC Topic 815, as the Company has not historically sought hedge accounting treatment.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

3.	New Accounting Pronouncements

Consolidation Analysis of Investments Held through Separate Accounts

In April 2010, the FASB issued ASU 2010-15, “Financial Services—Insurance (ASC Topic 944): How Investments Held through Separate Accounts Affect an Insurer’s Consolidation Analysis of Those Investments” (“ASU 2010-15”), which clarifies that an insurance entity generally should not consider any separate account interests held for the benefit of policy holders in an investment to be the insurer's interests, and should not combine those interests with its general account interest in the same investment when assessing the investment for consolidation. The provisions of ASU 2010-15 are effective for fiscal years and interim periods beginning after December 15, 2010. The amendments are to be applied retrospectively to all prior periods as of the date of adoption. The Company does not expect any effect on its financial condition, results of operations, or cash flows upon adoption, as the guidance is consistent with that previously applied by the Company under ASC Topic 944.

Scope Exception Related to Embedded Credit Derivatives

In March 2010, the FASB issued ASU 2010-11, “Derivatives and Hedging (ASC Topic 815): Scope Exception Related to Embedded Credit Derivatives” (“ASU 2010-11”), which clarifies that the only type of embedded credit derivatives that are exempt from bifurcation requirements are those that relate to the subordination of one financial instrument to another. The provisions of ASU 2010-11 are effective as of the beginning of the first fiscal quarter after June 15, 2010, with early adoption permitted. The Company does not expect any effect on its financial condition, results of operations, or cash flows upon adoption, as the guidance is consistent with that previously applied by the Company under ASC Topic 815.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

4.	Financial Instruments

Fair Value Measurements

ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements.

Fair Value Hierarchy

The Company has categorized its financial instruments into a three level hierarchy based on the priority of the inputs to the valuation technique.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded at fair value on the Condensed Balance Sheets are categorized as follows:

§	Level 1 - Unadjusted quoted prices for identical assets or liabilities in an active market.

§	Level 2 - Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.

Level 2 inputs include the following:

a)	Quoted prices for similar assets or liabilities in active markets;

b)	Quoted prices for identical or similar assets or liabilities in non-active markets;

c)	Inputs other than quoted market prices that are observable; and

d)	Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

Level 3 - Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. 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.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following tables present the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of March 31, 2010 and December 31, 2009.

	2010
	Level 1		Level 2		Level 3(1)		Total
Assets:
Fixed maturities, available-for-sale, including securities pledged:
U.S. Treasuries	$	3,345.1	$	85.2	$	-	$	3,430.3
U.S government agencies and authorities		-		24.4		-		24.4
U.S. corporate, state and municipalities		-		5,937.0		41.1		5,978.1
Foreign		-		3,539.9		71.3		3,611.2
Residential mortgage-backed securities		-		1,565.4		44.5		1,609.9
Commercial mortgage-backed securities		-		2,464.9		7.9		2,472.8
Other asset-backed securities		-		597.4		649.8		1,247.2
Equity securities, available-for-sale		155.7		-		11.8		167.5
Derivatives:
Interest rate contracts		-		54.5		-		54.5
Foreign exchange contracts		0.2		12.6		-		12.8
Equity contracts		23.2		-		170.3		193.5
Credit contracts		-		0.2		-		0.2
Embedded derivative on reinsurance		-		24.0		-		24.0
Cash and cash equivalents, short-term investments, and short-
term investments under securities loan agreement		3,347.8		-		-		3,347.8
Assets held in separate accounts		43,893.7		-		-		43,893.7
Total	$	50,765.7	$	14,305.5	$	996.7	$	66,067.9

Liabilities:
Investment contract guarantees:
Fixed Indexed Annuities ("FIA")	$	-	$	-	$	978.8	$	978.8
Guaranteed Minimum Withdrawal and
Accumulation Benefits ("GMWB" and "GMAB")		-		-		55.1		55.1
Derivatives:
Interest rate contracts		-		297.7		-		297.7
Foreign exchange contracts		-		47.4		-		47.4
Equity contracts		1.5		-		13.2		14.7
Credit contracts		-		14.0		81.5		95.5
Total	$	1.5	$	359.1	$	1,128.6	$	1,489.2

(1) Level 3 net assets and liabilities accounted for 0.2% of total net assets and liabilities measured at fair value on a recurring basis. Excluding
separate accounts assets for which the policyholder bears the risk, the Level 3 net assetsand liabilities in relation to total net assets and
liabilities measured at fair value on a recurring basis totaled 0.6%.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

	2009
	Level 1		Level 2		Level 3(1)		Total
Assets:
Fixed maturities, available-for-sale, including securities pledged	$	4,123.5	$	12,613.4	$	1,512.1	$	18,249.0
Equity securities, available-for-sale:		149.8		-		4.5		154.3
Derivatives		42.8		59.1		215.5		317.4
Embedded derivatives on reinsurance		-		38.7		-		38.7
Cash and cash equivalents, short-term investments, and short-
term investments under securities loan agreement		2,242.8		8.0		-		2,250.8
Assets held in separate accounts		42,996.1		-		-		42,996.1
Total	$	49,555.0	$	12,719.2	$	1,732.1	$	64,006.3

Liabilities:
Investment contract guarantees:
Fixed Indexed Annuities ("FIA")	$	-	$	-	$	927.2	$	927.2
Guaranteed Minimum Withdrawal and Accumulation Benefits
("GMWB"and "GMAB")		-		-		73.9		73.9
Other liabilities (primarily derivatives)		3.2		393.6		103.6		500.4
Total	$	3.2	$	393.6	$	1,104.7	$	1,501.5
(1) Level 3 net assets and liabilities accounted for 1.0% of total net assets and liabilities measured at fair value on a recurrin g
basis. Excluding separate accounts assets for which the policyholder bears the risk, the Level 3 net assets and liabilities in
relation to total net assets and liabilities measured at fair value on a recurring basis totaled 3.2%.

Transfers in and out of Level 1 and 2

Certain US Treasury securities valued by commercial pricing services where prices are derived using market observable inputs have been transferred from Level 1 to Level 2. These securities for the three months ended March 31, 2010, include US Treasury strips of $83.5 in which prices are modeled incorporating a variety of market observable information in their valuation techniques, including benchmark yields, broker-dealer quotes, credit quality, issuer spreads, bids, offers and other reference data. The Company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Valuation of Financial Assets and Liabilities

As described below, certain assets and liabilities are measured at estimated fair value on the Company’s Condensed Balance Sheets. In addition, further disclosure of estimated fair values is included in this Financial Instruments footnote. 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 in which the fair value is determined based on a hypothetical transaction at the measurement date, from a market participant’s perspective. The Company considers three broad valuation techniques 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 techniques 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 brokers and third-party commercial pricing services are non-binding. 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.

All valuation methods and assumptions are validated at least quarterly to ensure the accuracy and relevance of the fair values. There were no material changes to the valuation methods or assumptions used to determine fair values except for the Company’s use of commercial pricing services to value certain collateralized mortgage obligations (“CMO-Bs”) in the first quarter of 2010. CMO-Bs were previously valued using an average of broker quotes when more than one broker quote is provided.

The following valuation methods and assumptions were used by the Company in estimating the fair value of the following financial instruments:

Fixed maturities, available-for-sale: The fair values for the actively traded marketable bonds are determined based upon the quoted market prices and are classified as Level 1 assets. Assets in this category would primarily include certain US Treasury securities. The fair values for marketable bonds without an active market, excluding subprime residential mortgage-backed securities, are obtained through several commercial pricing services, which provide the estimated fair values, and are classified as Level 2 assets. These services incorporate a variety of market observable information in their valuation techniques, including benchmark yields, broker-dealer quotes, credit quality, issuer spreads, bids, offers and other reference data. This category includes US & foreign corporate bonds, Asset-backed Securities (“ABS”), US agency and government guaranteed securities, Commercial Mortgage-backed Securities (“CMBS”), and Residential Mortgage-backed Securities (“RMBS”), including certain CMO-Bs.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed 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 monthly through an internal valuation committee price variance review, comparisons to internal pricing models, back testing to recent trades, or monitoring of trading volumes. At March 31, 2010, $379.5 and $14.3 billion of a total of $18.4 billion in fixed maturities were valued using unadjusted broker quotes and unadjusted prices obtained from pricing services, respectively, and verified through the review process. The remaining balance in fixed maturities consisted primarily of privately placed bonds valued using a matrix-based pricing.

All prices and broker quotes obtained go through the review process described above including valuations for which only one broker quote is obtained. After review, for those instruments where the price is determined to be appropriate, the unadjusted price provided is used for financial statement valuation. If it is determined that the price is questionable, another price may be requested from a different vendor. The internal valuation committee then reviews all prices for the instrument again, along with information from the review, to determine which price best represents “exit price” for the instrument.

Fair values of privately placed bonds are determined using a matrix-based pricing model and are 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.

Trading activity for the Company’s RMBS, particularly subprime and Alt-A RMBS, declined during 2008 as a result of the dislocation of the credit markets. The Company continued to obtain pricing information from commercial pricing services and brokers. However, the pricing for subprime and Alt-A RMBS did not represent regularly occurring market transactions since the trading activity declined significantly in the second half of 2008. As a result, the Company concluded in the second half of 2008 that the market for subprime and Alt-A RMBS was inactive and classified these securities as Level 3 assets. The Company did not change its valuation procedures, which are consistent with those used for Level 2 marketable bonds without an active market, as a result of determining that the market was inactive. Due to increased trade activity of Alt-A RMBS during the second half of 2009, the Company determined that the Alt-A RMBS should be transferred to Level 2 of the valuation hierarchy as its overall assessment of the market was that it was active. The market for subprime RMBS remains largely inactive, and as such these securities will remain in Level 3 of the valuation hierarchy. The Company will continue to monitor market activity for RMBS to determine proper classification in the valuation hierarchy.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Equity securities, available-for-sale: Fair values of publicly traded equity securities are based upon quoted market price and are classified as Level 1 assets. Other equity securities, typically private equities or equity securities not traded on an exchange, are valued by other sources such as analytics or brokers and are classified as Level 3 assets.

Cash and cash equivalents, Short-term investments, and Short-term investments under securities loan agreement: The carrying amounts for cash reflect the assets’ fair values. The fair values for cash equivalents and short-term investments are determined based on quoted market prices. These assets are classified as Level 1. Other short-term investments are valued and classified in the fair value hierarchy consistent with the policies described herein, depending on investment type.

Assets held in separate accounts: Assets held in separate accounts are reported at the quoted fair values of the underlying investments in the separate accounts. The underlying investments include mutual funds, the valuations of which are based upon a quoted market price and are classified as Level 1.

Derivatives: The carrying amounts for these financial instruments, which can be assets or liabilities, reflect the fair value of the assets and liabilities. Derivatives are carried at fair value (on the Condensed Balance Sheets), 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, Standard & Poor’s (“S&P”) 500 Index prices, and London Inter Bank Offered Rates (“LIBOR”), or through 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. Valuations for the Company’s futures contracts are based on unadjusted quoted prices from an active exchange and, therefore, are classified as Level 1. The Company also has certain credit default swaps and options that are priced 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. However, all other derivative instruments are valued based on market observable inputs and are classified as Level 2.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Investment contract guarantees: The Company records guarantees, which can be either assets or liabilities, for annuity contracts containing guaranteed riders for GMABs and GMWBs without life contingencies in accordance with US GAAP for derivative instruments and hedging activities. The guarantee is treated as an embedded derivative and is required to be reported 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 best estimate assumptions. These derivatives are classified as Level 3 assets in the fair value hierarchy.

The Company also records for its FIA contracts an embedded derivative liability for interest payments to contractholders above the minimum guaranteed interest rate, in accordance with US GAAP for derivative instruments and hedging activities. The guarantee is treated as an embedded derivative and is required to be reported 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. The cash flow estimates are produced by best estimate assumptions. These derivatives are classified as Level 3 assets in the fair value hierarchy.

Nonperformance risk for investment contract guarantees contains adjustments to the fair values of these contract liabilities related to the current credit standing of ING and the Company based on credit default swaps with similar term to maturity and priority of payment. The ING credit default swap spread is applied to the discount factors for FIAs and the risk-free rates for GMABs and GMWBs in the Company’s valuation models in order to incorporate credit risk into the fair values of these investment contract guarantees. As of March 31, 2010, the credit spreads of ING and the Company increased by approximately 20 basis points from December 31, 2009, which contributed to changes in the valuation of the reserves for all investment contract guarantees.

Embedded derivative on reinsurance: The carrying value of the embedded derivative is estimated based upon the change in the fair value of the assets supporting the funds withheld payable under the combined coinsurance and coinsurance funds withheld reinsurance agreement between the Company and Security Life of Denver International Limited (“SLDI”). As the fair value of the assets held in trust is based on a quoted market price (Level 1), the fair value of the embedded derivative is based on market observable inputs and is classified as Level 2.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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 in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates, in many cases, could not be realized in immediate settlement of the instrument.

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 following valuation methods and assumptions were used by the Company in estimating the fair value of the following financial instruments, which are not carried at fair value on the Condensed Balance Sheets, and therefore not categorized in the fair value hierarchy:

Limited partnerships/corporations: The fair value for these investments, primarily private equities and hedge funds, is estimated based on the Net Asset Value (“NAV”) as provided by the investee.

Mortgage loans on real estate: The fair values for mortgage loans on real estate are estimated using discounted cash flow analyses and rates currently being offered in the marketplace for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations.

Loan - Dutch State obligation: The fair value of the Dutch State loan obligation is estimated utilizing discounted cash flows at market risk-free rates adjusted for credit spreads.

Policy loans: The fair value of policy loans is equal to the carrying, or cash surrender, value of the loans. Policy loans are fully collateralized by the account value of the associated insurance contracts.

Other investments: The fair value of other investments is estimated based on the Company’s percentage of ownership of third party appraised value for joint ventures and third party appraised value for real estate.

Deposits from affiliates: Fair value is estimated based on the fair value of the liabilities for the account values of the underlying contracts, plus the fair value of the unamortized ceding allowance based on the present value of the projected release of the ceding allowance, discounted at risk-free rates, plus a credit spread.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Investment contract liabilities (included in Future policy benefits and claims reserves):

With a fixed maturity: Fair value is estimated by discounting cash flows, including associated expenses for maintaining the contracts, at rates, which are market risk-free rates augmented by credit spreads on current Company credit default swaps. The augmentation is present to account for non-performance risk. A margin for non-financial risks associated with the contracts is also included.

Without a fixed maturity: Fair value is estimated as the mean present value of stochastically modeled cash flows associated with the contract liabilities relevant to both the contractholder and to the Company. Here, the stochastic valuation scenario set is consistent with current market parameters, and discount is taken using stochastically evolving short risk-free rates in the scenarios augmented by credit spreads on current Company debt. The augmentation in the discount is present to account for non-performance risk. Margins for non-financial risks associated with the contract liabilities are also included.

Notes to affiliates: Estimated fair value of the Company’s notes to affiliates is based upon discounted future cash flows using a discount rate approximating the current market rate.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The carrying values and estimated fair values of certain of the Company’s financial instruments were as follows at March 31, 2010 and December 31, 2009.

	2010				2009
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Assets:

Fixed maturities, available-for-sale, including securities pledged	$	18,373.9	$	18,373.9	$	18,249.0	$	18,249.0
Equity securities, available-for-sale		167.5		167.5		154.3		154.3
Mortgage loans on real estate		3,286.5		3,216.8		3,413.2		3,417.3
Loan - Dutch State obligation		933.2		900.2		1,026.0		971.4
Policy loans		129.4		129.4		131.6		131.6
Cash, cash equivalents, Short-term
investments, and Short-term
investments under securities loan
agreement		3,347.8		3,347.8		2,250.8		2,250.8
Derivatives		261.0		261.0		317.4		317.4
Other investments		24.2		37.7		23.9		37.4
Deposits from affiliates		1,725.8		1,857.7		1,752.0		1,873.6
Embedded derivative on reinsurance		24.0		24.0		38.7		38.7
Assets held in separate accounts		43,893.7		43,893.7		42,996.1		42,996.1
Liabilities:
Investment contract liabilities:
Deferred annuities		20,897.1		20,990.8		20,665.8		20,766.5
Guaranteed investment contracts
and funding agreements		2,544.4		2,615.3		2,646.5		2,718.3
Supplementary contracts and
immediate annuities		813.0		770.2		823.6		782.7
Derivatives		455.3		455.3		500.4		500.4
Investment contract guarantees:
Fixed indexed annuities		978.8		978.8		927.2		927.2
Guaranteed minimum withdrawal
and accumulation benefits		55.1		55.1		73.9		73.9
Notes to affiliates		435.0		430.5		435.0		426.9

Fair value estimates are made at a specific point in time, based on available market information and judgments about various financial instruments, such as estimates of timing and amounts of future cash flows. Such estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized capital gains (losses). In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instruments. In evaluating the Company’s management of interest rate, price, and liquidity risks, the fair values of all assets and liabilities should be taken into consideration, not only those presented above.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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 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, with particular attention addressed to changes in derivatives, FIAs, and GMWBs and GMABs due to their impacts on the Company’s results of operations.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following tables summarize the changes in fair value of the Company’s Level 3 assets and liabilities for the three months ended March 31, 2010.

			Three Months Ended March 31, 2010
		Fair Value		Total realized/unrealized					Purchases,
		as of		gains (losses) included in:					issuances, and
		January 1		Net income			OCI		settlements
Fixed maturities, available for sale,
	including securities pledged:
	U.S. corporate, state and municipalities	$	-	$	-		$	0.2	$	27.5
	Foreign		-		(0.5)			0.4		29.6
	Residential mortgage-backed securities		1,088.2		(1.5)			0.8		(4.8)
	Commercial mortgage-backed securities		-		-			-		-
	Other asset-backed securities		423.9		(3.5)			42.8		(35.5)
Total Fixed maturities, available for sale,
	including securities pledged:		1,512.1		(5.5)			44.2		16.8

Equity securities, available for sale			4.5		-			(0.6)		7.9

Derivatives			111.9		(0.4)			-		(35.9)

Investment contract guarantees:
	FIA		(927.2)		(27.1)			-		(24.5)
	GMWB/GMAB		(73.9)		20.3			-		(1.5)
Total Investment contract guarantees			(1,001.1)		(6.8)	(1)		-		(26.0)

									Change in
		Transfers		Transfers			Fair Value		unrealized gains
		in to		out of			as of		(losses) included
		Level 3(2)		Level 3(2)			March 31		in earnings(3)
Fixed maturities, available for sale,
	including securities pledged:
	U.S. corporate, state and municipalities	$	13.4	$	-		$	41.1	$	-
	Foreign		41.8		-			71.3		(0.5)
	Residential mortgage-backed securities		13.2		(1,051.4)			44.5		(0.1)
	Commercial mortgage-backed securities		7.9		-			7.9		-
	Other asset-backed securities		222.1		-			649.8		(3.6)
Total Fixed maturities, available for sale,
	including securities pledged:		298.4		(1,051.4)			814.6		(4.2)

Equity securities, available for sale			-		-			11.8		-

Derivatives			-		-			75.6		-

Investment contract guarantees:
	FIA		-		-			(978.8)		-
	GMWB/GMAB		-		-			(55.1)		-
Total Investment contract guarantees			-		-			(1,033.9)		-
(1)	This amount is included in Interest credited and other benefits to contractowners on the Condensed Statements of Operations. 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.
(2)	The Company's policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
(3)	For financial instruments still held as of March 31.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table summarizes the changes in fair value of the Company’s Level 3 assets and liabilities for the three months ended March 31, 2009.

			Three Months Ended March 31, 2009
		Fair Value		Total realized/unrealized					Purchases,		Transfers		Fair Value
		as of		gains (losses) included in:					issuances, and		in to		as of
		January 1		Net income			OCI		settlements		Level 3(2)		March 31
Fixed maturities, available for sale,
	including securities pledged	$	2,589.6	$	28.4		$	545.4	$	(1,333.9)	$	344.6	$	2,174.1

Derivatives			10.0		(34.8)			-		(29.1)		-		(53.9)

Investment contract guarantees:
	FIA		(638.9)		74.3			-		6.2		-		(558.4)
	GMWB/GMAB		(153.0)		(3.5)			-		(1.7)		-		(158.2)
Total Investment contract guarantees			(791.9)		70.8	(1)		-		4.5		-		(716.6)
(1)	This amount is included in Interest credited and other benefits to contractowners on the Condensed Statements of Operations. 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.
(2)	The Company's policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

Changes in Level 3 fair value balances are discussed below by investment type.

Fixed Maturities, available-for-sale, including securities pledged: The transfers out of Level 3 for the three months ended March 31, 2010, are due to the Company’s use of commercial pricing services to value CMO-Bs. These services incorporate a variety of market observable information in their valuation techniques, including benchmark yields, broker-dealer quotes, credit quality, issuer spreads, bids, offers and other reference data and have been classified as Level 2. The CMO-Bs had previously been valued by using the average of broker quotes when more than one broker quote was provided.

The transfers into level 3 for the three months ended March 31, 2010, are securities that are primarily valued using independent broker quotes when prices are not available from one of the commercial pricing services. These securities are generally less liquid with very limited trading activity or where less transparency exists corroborating the inputs to the valuation methodologies.

Investment contract guarantees: The losses on the FIA embedded derivatives and gains on GMWB/GMAB embedded derivatives were primarily driven by favorable equity market performance. For the three months ended March 31, 2010, the net realized gains attributable to credit risk were $52.6.

Equity securities, available-for-sale: The increase in Level 3 equity securities is mainly driven by an increase in net purchases.

Derivatives: Level 3 derivatives declined primarily due to net settlements.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Derivative Financial Instruments

See the Organization & Significant Accounting Policies footnote to the Financial Statements included in the Company’s 2009 Annual Report on Form 10-K for disclosure regarding the Company’s purpose for entering into derivatives and the policies on valuation and classification of derivatives. In addition, the Company’s derivatives are generally not accounted for using hedge accounting treatment under US GAAP, as the Company has not historically sought hedge accounting treatment. The Company enters into the following derivatives:

Interest rate caps: Interest rate caps are used to manage the interest rate risk in the Company’s fixed maturity portfolio. Interest rate caps are purchased contracts that are used by the Company to hedge annuity products in an increasing interest rate environment.

Interest rate swaps: Interest rate swaps are used to manage the interest rate risk in the Company’s fixed maturity portfolio, as well as the Company’s liabilities. Interest rate swaps represent contracts that require the exchange of cash flows at regular interim periods, typically monthly or quarterly.

Foreign exchange swaps: Foreign exchange swaps are used to reduce the risk of a change in the value, yield, or cash flow with respect to invested assets. Foreign exchange swaps represent contracts that require the exchange of foreign currency cash flows for U.S. dollar cash flows at regular interim periods, typically quarterly or semi-annually.

Credit default swaps: Credit default swaps are used to reduce the 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 and amounts for the purchase or sale of credit protection. In the event of a default on the underlying credit exposure, the Company will either receive an additional payment (purchased credit protection) or will be required to make an additional payment (sold credit protection) equal to par minus recovery value of the swap contract.

Total return swaps: Total return swaps are used to hedge against a decrease in variable annuity account values, which are invested in certain funds. The difference between floating-rate interest amounts calculated by reference to an agreed upon notional principal amount is exchanged with other parties at specified intervals.

Forwards: Certain forwards are acquired to hedge the Company’s CMO-B portfolio against movements in interest rates, particularly mortgage rates. On the settlement date, the Company will either receive a payment (interest rate drops on purchased forwards or interest rate rises on sold forwards) or will be required to make a payment (interest rate rises on purchased forwards or interest rate drops on sold forwards). The Company also uses currency forward contracts to hedge policyholder liabilities in variable annuity contracts which are linked to foreign indexes.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Futures: Futures contracts are used to hedge against a decrease in certain equity indices. Such decreases may result in 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. Futures contracts are also used to hedge against an increase in certain equity indices. Such increases may result in increased payments to contract holders of fixed indexed annuity contracts, and the futures income would serve to offset this increased expense. The underlying reserve liabilities are valued under ASC Topic 820, ASC Topic 815 and ASC Topic 944, “Financial Services - Insurance.” The change in reserve liabilities is recorded in Interest credited and other benefits to contractowners in the Condensed Statements of Operations.

Options: Call options are used to hedge against an increase in the various equity indices. Such increase may result in increased payments to contract holders of fixed indexed annuity contracts, and the options offset this increased expense. Put options are used to hedge the liability associated with embedded derivatives in certain variable annuity contracts and as part of a hedging program designed to mitigate the impact of potential declines in equity markets and their impact on regulatory capital. Both the options and the embedded derivative reserves are carried at fair value.

Embedded derivatives: The Company also has investments in certain fixed maturity instruments, and has issued certain retail annuity products, that contain embedded derivatives whose 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 a coinsurance with funds withheld arrangement which contains an embedded derivative whose fair value is based on the change in the fair value of the underlying assets held in trust.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The notional amounts and fair values of derivatives were as follows as of March 31, 2010 and December 31, 2009.

	2010							2009
	Notional		Asset		Liability			Notional		Asset		Liability
	Amount		Fair Value		Fair Value			Amount		Fair Value		Fair Value
Interest rate caps(1)		122.0	$	0.1	$	-	**		122.0	$	0.4	$	(0.1	)
Interest rate swaps(1)		7,525.8		54.4		(297.7	)		6,765.3		44.2		(325.1	)
Foreign exchange swaps(1)		307.8		2.0		(45.0	)		287.3		-		(52.9	)
Credit default swaps(1)		297.1		0.2		(95.5	)		358.9		0.3		(106.0	)
Total return swaps(1)		181.8		1.2		(4.8	)		124.3		-		(2.9	)
Forwards(1)		810.1		10.8		(2.4	)		528.5		14.2		-	**
Futures(1)		5,802.5		23.2		(1.5	)		5,121.8		42.8		(3.2	)
Options(1)		3,160.5		169.1		(8.4	)		5,097.8		215.5		(10.2	)
Embedded derivatives:
Within securities(2)		N/A		51.5		(9.2	)		N/A		47.8		(9.4	)
Within retail annuity
products(3)		N/A		-		(1,033.9	)		N/A		-		(1,001.1	)
Within reinsurance
agreement(3)		N/A		24.0		-			N/A		38.7		-
Total		18,207.6	$	336.5	$	(1,498.4	)		18,405.9	$	403.9	$	(1,510.9	)
N/A - Not applicable.
** Less than $0.1.
(1) The fair values of these derivatives are reported in Derivatives or Other liabilities on the Condensed Balance Sheets.
(2) The fair values of embedded derivatives within securities are reported in Fixed maturities, available-for-sale, on the Condensed Balance Sheets with the underlying instrument.
(3) The fair values of embedded derivatives within retail annuity products and reinsurance agreements are reported in Future policy benefits and claim reserves on the Condensed Balance Sheets.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Net realized gains (losses) on derivatives were as follows for the three months ended March 31, 2010 and 2009.

	For the Three Months Ended March 31,
	2010			2009
Interest rate caps(1)	$	(0.2	)	$	-	*
Interest rate swaps(1)		(18.7	)		(38.6	)
Foreign exchange swaps(1)		10.3			8.8
Credit default swaps(1)		0.1			13.6
Total return swaps(1)		(8.8	)		(2.4	)
Forwards(1)		31.4			1.6
Swaptions(1)		-			(2.1	)
Futures(1)		(301.3	)		137.9
Options(1)		(0.2	)		(33.9	)
Embedded derivatives:
Within securities(2)		3.9			(34.7	)
Within retail annuity products(2)		(6.8	)		70.8
Within reinsurance agreements(2)		24.0			-
Total	$	(266.3	)	$	121.0
* Less than $0.1.
(1) Changes in value are included in Net realized capital losses on the Condensed Statements of Operations.
(2) Changes in value are included in Interest credited and other benefits to contractowners on the Condensed Statements of Operations.

Credit Default Swaps

The Company has entered into various credit default swaps. When credit default swaps are sold, the Company assumes credit exposure to certain assets that it does not own. Credit default swaps may also be purchased to reduce credit exposure in the Company’s portfolio. Credit default swaps involve a transfer of credit risk from one party to another in exchange for periodic payments. These instruments are typically written for a maturity period of five years and do not contain recourse provisions, which would enable the seller to recover from third parties. The Company has International Swaps and Derivatives Association, Inc. (“ISDA”) agreements with each counterparty with which it conducts business and tracks the collateral positions for each counterparty. To the extent cash collateral is received, it is included in Payables under securities loan agreement, including collateral held, on the Condensed Balance Sheets and is reinvested in short-term investments. Collateral held is used in accordance with the Credit Support Annex (“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 Balance Sheets. In the event of a default on the underlying credit exposure, the Company will either receive an additional payment (purchased credit protection) or will be required to make an additional payment (sold credit protection) equal to par minus recovery value of the swap contract. At March 31, 2010, the fair value of credit default swaps of $0.2 and $95.5 was included in Derivatives and Other liabilities, respectively, on the Condensed Balance Sheets. At December 31, 2009, the fair value of credit default swaps of $0.3 and $106.0 was included in Derivatives and Other liabilities, respectively, on the Balance Sheets. As of March 31, 2010 and December 31, 2009, the maximum potential future exposure to the Company on the sale of credit protection under credit default swaps was $114.5 and $122.9, respectively.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

5.	Investments

Fixed Maturities and Equity Securities

Fixed maturities and equity securities, available-for-sale, were as follows as of March 31, 2010.

				Gross		Gross
				Unrealized		Unrealized
		Amortized		Capital		Capital				Fair
		Cost		Gains		Losses		OTTI(2)		Value
Fixed maturities:
	U.S. Treasuries	$	3,497.1	$	6.4	$	73.2	$	-	$	3,430.3
	U.S. government agencies and authorities		26.0		0.1		1.7		-		24.4
	State, municipalities, and political
	subdivisions		47.8		2.5		5.2		-		45.1

	U.S. corporate securities:
	Public utilities		1,058.1		60.9		5.2		-		1,113.8
	Other corporate securities		4,584.8		274.8		40.0		0.4		4,819.2
	Total U.S. corporate securities		5,642.9		335.7		45.2		0.4		5,933.0

	Foreign securities(1):
	Government		346.7		26.3		3.4		-		369.6
	Other		3,122.9		165.1		46.3		0.1		3,241.6
	Total foreign securities		3,469.6		191.4		49.7		0.1		3,611.2

	Residential mortgage-backed securities		1,589.6		204.8		107.7		76.8		1,609.9
	Commercial mortgage-backed securities		2,660.9		68.4		247.8		8.7		2,472.8
	Other asset-backed securities		1,532.4		13.5		248.2		50.5		1,247.2
	Total fixed maturities, including securities pledged		18,466.3		822.8		778.7		136.5		18,373.9
	Less: securities pledged		840.5		2.4		24.9		-		818.0
Total fixed maturities			17,625.8		820.4		753.8		136.5		17,555.9
Equity securities			160.5		7.7		0.7		-		167.5
Total investments, available-for-sale		$	17,786.3	$	828.1	$	754.5	$	136.5	$	17,723.4
(1) Primarily U.S. dollar denominated.
(2) Represents other-than-temporary impairments reported as a component of Other comprehensive income ("noncredit impairments").

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Fixed maturities and equity securities, available-for-sale, were as follows as of December 31, 2009.

				Gross		Gross
				Unrealized		Unrealized
		Amortized		Capital		Capital				Fair
		Cost		Gains		Losses		OTTI(2)		Value
Fixed maturities:
	U.S. Treasuries	$	4,201.0	$	2.5	$	80.0	$	-	$	4,123.5
	U.S. government agencies and authorities		26.1		0.1		1.6		-		24.6
	State, municipalities, and political
	subdivisions		47.8		2.2		5.2		-		44.8

	U.S. corporate securities:
	Public utilities		997.4		57.5		6.9		-		1,048.0
	Other corporate securities		4,290.8		247.8		71.8		0.4		4,466.4
	Total U.S. corporate securities		5,288.2		305.3		78.7		0.4		5,514.4

	Foreign securities(1):
	Government		369.8		23.8		8.3		-		385.3
	Other		2,880.8		131.7		78.5		0.4		2,933.6
	Total foreign securities		3,250.6		155.5		86.8		0.4		3,318.9

	Residential mortgage-backed securities		1,758.9		210.7		150.7		70.9		1,748.0
	Commercial mortgage-backed securities		3,012.5		25.3		448.2		-		2,589.6
	Other asset-backed securities		1,218.6		11.8		316.8		28.4		885.2
	Total fixed maturities, including securities pledged		18,803.7		713.4		1,168.0		100.1		18,249.0
	Less: securities pledged		1,079.4		35.3		22.2		-		1,092.5
Total fixed maturities			17,724.3		678.1		1,145.8		100.1		17,156.5
Equity securities			150.8		4.3		0.8		-		154.3
Total investments, available-for-sale		$	17,875.1	$	682.4	$	1,146.6	$	100.1	$	17,310.8
(1) Primarily U.S. dollar denominated.
(2) Represents other-than-temporary impairments reported as a component of Other comprehensive income ("noncredit impairments").

At March 31, 2010 and December 31, 2009, net unrealized losses were $85.4 and $551.2, respectively, on total fixed maturities, including securities pledged to creditors, and equity securities.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The amortized cost and fair value of fixed maturities, excluding securities pledged, as of March 31, 2010, are shown below by contractual maturity. Actual maturities may differ from contractual maturities as securities may be restructured, called, or prepaid.

	Amortized		Fair
	Cost		Value
Due to mature:
One year or less	$	436.9	$	439.7
After one year through five years		4,899.5		5,122.1
After five years through ten years		3,912.0		4,051.7
After ten years		3,435.0		3,430.5
Mortgage-backed securities		4,250.5		4,082.7
Other asset-backed securities		1,532.4		1,247.2
Less: securities pledged		840.5		818.0
Fixed maturities, excluding securities pledged	$	17,625.8	$	17,555.9

The Company did not have any investments in a single issuer, other than obligations of the U.S. government and government agencies and the Dutch State loan obligation, with a carrying value in excess of 10.0% of the Company’s Shareholder’s equity at March 31, 2010 and December 31, 2009.

The Company invests in various categories of collateralized mortgage obligations (“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 dramatic decreases and increases in interest rates resulting in the prepayment of principal from the underlying mortgages, either earlier or later than originally anticipated. At March 31, 2010 and December 31, 2009, approximately 20.3% and 26.1%, respectively, of the Company’s CMO holdings were invested in those types of CMOs which are subject to more prepayment and extension risk than traditional CMOs, such as interest-only or principal-only strips.

Certain CMOs, primarily interest-only and principal-only strips, are accounted for as hybrid instruments and valued at fair value. The fair value of these instruments at March 31, 2010 and December 31, 2009 was $179.2 and $192.6, respectively, and is included in Fixed maturities, available for sale, on the Condensed Balance Sheets. The impact to Other net realized capital gains (losses) on the Condensed Statements of Operations related to these hybrid instruments was $(0.2) and $34.0 for the three months ended March 31, 2010 and 2009, respectively.

The Company is a member of the Federal Home Loan Bank of Des Moines (“FHLB”) and is required to maintain a collateral deposit that backs funding agreements issued to the FHLB. At March 31, 2010 and December 31, 2009, the Company had $1,279.6 and $1,304.5, respectively, in non-putable funding agreements, including accrued interest, issued to the FHLB. These non-putable funding agreements are included in Future policy benefits and claims reserves, in the Condensed Balance Sheets. At March 31, 2010 and December 31, 2009, assets with a market value of approximately $1,533.6 and $1,657.9, respectively, collateralized the funding agreements to the FHLB. Assets pledged to the FHLB are included in Fixed maturities, available-for-sale, in the Condensed Balance Sheets.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Securities Lending

The Company engages in securities lending whereby certain securities from its portfolio are loaned to other institutions for short periods of time. Initial collateral, primarily cash, is required at a rate of 102% of the market value of the loaned domestic securities. The collateral is deposited by the borrower with a lending agent, and retained and invested by the lending agent according to the Company’s guidelines to generate additional income. 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. At March 31, 2010 and December 31, 2009, the fair value of loaned securities was $135.3 and $163.7, respectively, and is included in Securities pledged on the Condensed Balance Sheets.

Variable Interest Entities

The Company holds certain VIEs for investment purposes. VIEs may be in the form of private placement securities, structured securities, securitization transactions, or limited partnerships. The Company has reviewed each of its holdings and determined that consolidation of these investments in the Company’s financial statements is not required, as the Company is not the primary beneficiary, because the Company does not have both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation or right to potentially significant losses or benefits, for any of its investments in VIEs. Rather, the VIEs are accounted for using the cost or equity method of accounting. The Company provided no non-contractual financial support and its carrying value represents the Company’s exposure to loss. The carrying value of collateralized loan obligations (“CLOs”) of $0.9 at March 31, 2010 is included in Limited partnerships/corporations on the Condensed Balance Sheets. Income and losses recognized on these investments are reported in Net investment income on the Condensed Statements of Operations.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Repurchase Agreements

The Company engages in dollar repurchase agreements with mortgage-backed securities (“dollar rolls”) and repurchase agreements with other collateral types to increase its return on investments and improve liquidity. Such arrangements typically meet the requirements to be accounted for as financing arrangements. The Company enters into dollar roll transactions by selling existing mortgage-backed securities and concurrently entering into an agreement to repurchase similar securities within a short time frame in the future at a lower price. Under repurchase agreements, the Company borrows cash from a counterparty at an agreed upon interest rate for an agreed upon time frame and pledges collateral in the form of securities. At the end of the agreement, the counterparty returns the collateral to the Company and the Company, in turn, repays the loan amount along with the additional agreed upon interest. Company policy requires that at all times during the term of the dollar roll and repurchase agreements that cash or other collateral types obtained is sufficient to allow the Company to fund substantially all of the cost of purchasing replacement assets (the “Required Collateral Value Amount”). Cash collateral received is invested in short term investments, with the offsetting collateral liability included in Borrowed money on the Balance Sheets. At March 31, 2010, the Company did not have securities pledged in dollar rolls and repurchase agreement transactions. At December 31, 2009, the carrying value of the securities pledged in dollar rolls and repurchase agreement transactions was $354.1 and is included in Securities pledged on the Condensed Balance Sheets. The repurchase obligation related to dollar rolls and repurchase agreements, including accrued interest, totaled $311.1 at December 31, 2009 and is included in Borrowed money on the Condensed Balance Sheets. In addition to the repurchase obligation, the Company holds $28.9 in collateral posted by the counterparty in connection with the increase in the value of pledged securities that will be released upon settlement.

The Company also enters into reverse repurchase agreements. These transactions involve a purchase of securities and an agreement to sell substantially the same securities as those purchased. Company policy requires that, at all times during the term of the reverse repurchase agreements, cash or other collateral types provided is sufficient to allow the counterparty to fund substantially all of the cost of purchasing replacement assets. At March 31, 2010 and December 31, 2009, the Company did not have any securities pledged under reverse repurchase agreements.

The primary risk associated with short-term collateralized borrowings is that the counterparty will be unable to perform under the terms of the contract. The Company’s exposure is limited to the excess of the net replacement cost of the securities over the value of the short-term investments, an amount that was immaterial at March 31, 2010. The Company believes the counterparties to the dollar rolls, repurchase, and reverse repurchase agreements are financially responsible and that the counterparty risk is minimal.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Unrealized Capital Losses

Unrealized capital losses (including non-credit impairments) in fixed maturities, including securities pledged to creditors, for Investment Grade (“IG”) and Below Investment Grade (“BIG”) securities by duration were as follows at March 31, 2010 and December 31, 2009.

		2010						2009
			% of IG			% of IG			% of IG			% of IG
		IG	and BIG		BIG	and BIG		IG	and BIG		BIG	and BIG
Six months or less
below amortized cost	$	92.9	10.2%	$	10.2	1.1%	$	170.1	13.5%	$	21.2	1.7%
More than six months and
twelve months or less
below amortized cost		45.3	4.9%		93.6	10.2%		259.3	20.4%		200.8	15.8%
More than twelve months
below amortized cost		331.9	36.3%		341.3	37.3%		419.0	33.0%		197.7	15.6%
Total unrealized capital losses	$	470.1	51.4%	$	445.1	48.6%	$	848.4	66.9%	$	419.7	33.1%

The following table summarizes the unrealized capital losses (including non-credit impairments) by duration and reason, along with the fair value of fixed maturities, including securities pledged to creditors, in unrealized capital loss positions at March 31, 2010 and December 31, 2009.

	Six Months		More than
	or Less		Six Months and		More than		Total
	Below		Twelve Months		Twelve Months		Unrealized
	Amortized		or Less Below		Below		Capital
2010	Cost		Amortized Cost		Amortized Cost		Losses
Interest rate or spread widening	$	88.4	$	14.9	$	72.2	$	175.5
Mortgage and other asset-backed securities		14.7		124.0		601.0		739.7
Total unrealized capital losses	$	103.1	$	138.9	$	673.2	$	915.2
Fair value	$	3,322.9	$	446.3	$	2,822.4	$	6,591.6

2009
Interest rate or spread widening	$	99.3	$	31.6	$	122.2	$	253.1
Mortgage and other asset-backed securities		92.0		428.5		494.5		1,015.0
Total unrealized capital losses	$	191.3	$	460.1	$	616.7	$	1,268.1
Fair value	$	5,275.9	$	1,058.2	$	2,714.5	$	9,048.6

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Unrealized capital losses (including non-credit impairments), along with the fair value of fixed maturities, including securities pledged to creditors, by market sector and duration were as follows at March 31, 2010 and December 31, 2009.

					More Than Six
					Months and Twelve				More Than Twelve
	Six Months or Less				Months or Less				Months Below
	Below Amortized Cost				Below Amortized Cost				Amortized Cost				Total
			Unrealized				Unrealized				Unrealized				Unrealized
	Fair Value		Capital Loss		Fair Value		Capital Loss		Fair Value		Capital Loss		Fair Value		Capital Loss
2010
U.S. Treasuries	$	2,130.5	$	71.9	$	13.3	$	1.3	$	-	$	-	$	2,143.8	$	73.2
U.S. government
agencies
and authorities		-		-		15.2		0.9		8.1		0.8		23.3		1.7
U.S. corporate, state,
and municipalities		480.4		6.7		141.8		9.8		528.3		34.3		1,150.5		50.8
Foreign		288.3		9.8		46.3		2.9		401.4		37.1		736.0		49.8
Residential
mortgage-backed		27.4		5.5		133.3		58.3		335.3		120.7		496.0		184.5
Commercial
mortgage-backed		157.0		7.7		44.7		37.5		975.3		211.3		1,177.0		256.5
Other asset-backed		239.3		1.5		51.7		28.2		574.0		269.0		865.0		298.7
Total	$	3,322.9	$	103.1	$	446.3	$	138.9	$	2,822.4	$	673.2	$	6,591.6	$	915.2

2009
U.S. Treasuries	$	3,761.2	$	80.0	$	-	$	-	$	-	$	-	$	3,761.2	$	80.0
U.S. government
agencies		15.2		0.8		8.2		0.8		-		-		23.4		1.6
and authorities
U.S. corporate, state,
and municipalities		273.8		6.7		108.1		13.5		737.7		64.1		1,119.6		84.3
Foreign		228.1		11.8		107.8		17.3		472.6		58.1		808.5		87.2
Residential
mortgage-backed		139.1		46.5		183.5		92.3		260.7		82.8		583.3		221.6
Commercial
mortgage-backed		795.5		44.1		534.6		243.1		682.7		161.0		2,012.8		448.2
Other asset-backed		63.0		1.4		116.0		93.1		560.8		250.7		739.8		345.2
Total	$	5,275.9	$	191.3	$	1,058.2	$	460.1	$	2,714.5	$	616.7	$	9,048.6	$	1,268.1

Of the unrealized capital losses aged more than twelve months, the average market value of the related fixed maturities was 80.7% of the average book value as of March 31, 2010. In addition, this category includes 465 securities, which have an average quality rating of A-.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Unrealized capital losses (including non-credit impairments) in fixed maturities, including securities pledged to creditors, for instances in which fair value declined below amortized cost by greater than or less than 20% for consecutive periods as indicated in the tables below, were as follows for March 31, 2010 and December 31, 2009.

	Amortized Cost				Unrealized Capital Loss				Number of Securities
	< 20%		> 20%		< 20%		> 20%		< 20%		> 20%
2010
Six months or less
below amortized cost	$	1,880.0	$	59.3	$	112.1	$	15.7		196		17
More than six months and
twelve months or less
below amortized cost		2,708.2		389.9		103.4		184.0		193		125
More than twelve months
below amortized cost		1,365.0		1,104.4		60.1		439.9		134		153
Total	$	5,953.2	$	1,553.6	$	275.6	$	639.6		523		295

2009
Six months or less
below amortized cost	$	6,184.5	$	396.8	$	265.1	$	111.8		282		96
More than six months and
twelve months or less
below amortized cost		1,248.5		982.3		68.8		433.2		191		115
More than twelve months
below amortized cost		619.0		885.6		27.8		361.4		113		158
Total	$	8,052.0	$	2,264.7	$	361.7	$	906.4		586		369

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Unrealized capital losses (including non-credit impairments) in fixed maturities, including securities pledged to creditors, by market sector for instances in which fair value declined below amortized cost by greater than or less than 20% for consecutive periods as indicated in the tables below, were as follows for March 31, 2010 and December 31, 2009.

	Amortized Cost				Unrealized Capital Loss				Number of Securities
	< 20%		> 20%		< 20%		> 20%		< 20%		> 20%
2010
U.S. Treasuries	$	2,217.0	$	-	$	73.2	$	-		11		-
U.S. government agencies
and authorities		25.0		-		1.7		-		4		-
U.S. corporate, state and
municipalities		1,172.6		28.7		44.1		6.7		213		13
Foreign		701.2		84.6		23.9		25.9		93		18
Residential mortgage-backed		286.0		394.5		32.2		152.3		69		112
Commercial mortgage-backed		965.9		467.6		71.3		185.2		62		35
Other asset-backed		585.5		578.2		29.2		269.5		71		117
Total	$	5,953.2	$	1,553.6	$	275.6	$	639.6		523		295

2009
U.S. Treasuries	$	3,841.2	$	-	$	80.0	$	-		21		-
U.S. government agencies
and authorities		25.0		-		1.6		-		4		-
U.S. corporate, state and
municipalities		1,139.0		64.9		67.8		16.5		220		32
Foreign		712.7		183.0		33.1		54.1		93		30
Residential mortgage-backed		336.0		468.9		35.9		185.7		83		119
Commercial mortgage-backed		1,534.5		926.5		104.2		344.0		96		60
Other asset-backed		463.6		621.4		39.1		306.1		69		128
Total	$	8,052.0	$	2,264.7	$	361.7	$	906.4		586		369

During the three months ended March 31, 2010, unrealized capital losses on fixed maturities decreased by $352.9. Lower unrealized losses are due to improved economic conditions and tightening of credit spreads leading to increased value of fixed maturities.

At March 31, 2010, the Company had 13 fixed maturities with unrealized capital losses in excess of $10.0. The unrealized capital losses on these fixed maturities equaled $244.5, or 26.7% of the total unrealized losses, as of March 31, 2010. At December 31, 2009, the Company had 19 fixed maturities with unrealized capital losses in excess of $10.0. The unrealized capital losses on these fixed maturities equaled $353.9, or 27.9% of the total unrealized losses, as of December 31, 2009.

All securities with fair values less than amortized cost are included in the Company’s other-than-temporary impairment analysis, and impairments were recognized as disclosed in “Other-Than-Temporary Impairments,” which follows this section. Management determined that no additional recognition of the unrealized loss as an other-than-temporary impairment was necessary.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Other-Than-Temporary Impairments

The Company analyzes its general account investments to determine whether there has been an other-than-temporary decline in fair value below the amortized cost basis. Factors considered in this analysis include, but are not limited to, the length of time and the extent to which the fair value has been less than amortized cost, the issuer’s financial condition and near-term prospects, future economic conditions and market forecasts, interest rate changes, and changes in ratings of the security.

When assessing the Company’s intent to sell a security or if it is more likely than not it will be required to sell a security before recovery of its cost basis, management evaluates facts and circumstances such as, but not limited to, decisions to rebalance the investment portfolio and sales of investments to meet cash flow needs.

When the Company has determined it has the intent to sell or if it is more likely than not that it will be required to sell a security before recovery of its amortized cost basis and the fair value has declined below amortized cost (“intent impairment”) the individual security is written down from amortized cost to fair value and a corresponding charge is recorded in Net realized capital gains (losses) on the Condensed Statements of Operations as an other-than-temporary impairment (“OTTI”). If the Company does not intend to sell the security nor is it more likely than not it will be required to sell the security before recovery of its amortized cost basis, but the Company has determined that there has been an other-than-temporary decline in fair value below the amortized cost basis, the OTTI is bifurcated into the amount representing the present value of the decrease in cash flows expected to be collected (“credit impairment”) and the amount related to other factors (“noncredit impairment”). The credit impairment is recorded in Net realized capital gains (losses) on the Condensed Statements of Operations. The noncredit impairment is recorded in Other comprehensive income (loss) on the Condensed Balance Sheets in accordance with the requirements of ASC Topic 320.

In order to determine the amount of the OTTI that is considered a credit impairment, the Company estimates the recovery value by performing a discounted cash flow analysis based upon the best estimate of expected future cash flows, discounted at the effective interest rate implicit in the underlying debt security. The effective interest rate is the current yield prior to impairment for a fixed rate security or current coupon yield for a floating rate security.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table identifies the Company’s credit-related and intent-related other-than-temporary impairments included in the Condensed Statement of Operations, excluding impairments included in Other comprehensive income (loss), by type for the three months ended March 31, 2010 and 2009.

	Three Months Ended March 31,
	2010			2009
			No. of			No. of
	Impairment		Securities	Impairment		Securities
U.S. Treasuries	$	-	-	$	34.2	3
U.S. corporate		1.3	5		41.3	38
Foreign(1)		11.9	6		18.0	24
Residential mortgage-backed		6.5	43		91.9	56
Other asset-backed		3.3	14		112.7	27
Commercial mortgage-backed		2.1	1		-	-
Equity securities		-	-		2.2	4
Public utilities		0.2	3		-	-
Mortgage loans on real estate		0.2	1		-	-
Total	$	25.5	73	$	300.3	152
(1) Primarily U.S. dollar denominated.

The above schedule includes $22.3 and $80.2 for the three months ended March 31, 2010 and 2009, respectively, in other-than-temporary write-downs related to credit impairments, which are recognized in earnings. The remaining write-downs reflected in the schedules above are related to intent impairments.

The following table summarizes these intent impairments, which are also recognized in earnings, by type for the three months ended March 31, 2010 and 2009.

	Three Months Ended March 31,
	2010			2009
			No. of			No. of
	Impairment		Securities	Impairment		Securities
U.S. Treasuries	$	-	-	$	34.2	3
U.S. corporate		1.3	5		35.7	24
Foreign(1)		1.7	3		18.0	24
Residential mortgage-backed		-	-		23.1	8
Other asset-backed		-	-		109.1	11
Public utilities		0.2	3		-	-
Total	$	3.2	11	$	220.1	70
(1) Primarily U.S. dollar denominated.

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

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table identifies the noncredit impairments recognized in Other comprehensive income (loss) by type for the three months ended March 31, 2010.

	Three Months Ended
	March 31, 2010*
			No of
	Impairment		Securities
Commercial mortgage-backed	$	8.7		1
Residential mortgage-backed		11.4		19
Other asset-backed		25.9		6
Total	$	46.0		26
* No amounts disclosed for the three months ended March 31, 2009, as new guidance on OTTI, included in ASC Topic 320, was adopted on April 1, 2009.

The fair value of fixed maturities with other-than-temporary impairments as of March 31, 2010 and 2009 was $2,385.9 and $2,686.6, respectively.

The following table identifies the amount of credit impairments on fixed maturities for the three months ended March 31, 2010, for which a portion of the OTTI was recognized in Other comprehensive income (loss), and the corresponding changes in such amounts.

	Three Months Ended
	March 31, 2010*
Balance at January 1, 2010	$	123.3
Additional credit impairments:
On securities not previously impaired		4.4
On securities previously impaired		(4.7	)
Reductions:
Securities sold, matured, prepaid or paid down		(5.5	)
Balance at March 31, 2010	$	117.5
* No amounts disclosed for the three months ended March 31, 2009, as new guidance on OTTI, included in ASC Topic 320, was adopted on April 1, 2009.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Net Realized Capital Gains (Losses)

Net realized capital gains (losses) are comprised of 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 and changes in fair value of derivatives. The cost of the investments on disposal is determined based on specific identification of securities. Net realized capital gains (losses) on investments were as follows for the three months ended March 31, 2010 and 2009.

	Three Months Ended March 31,
	2010			2009
Fixed maturities, available-for-sale, including net OTTI
of $(25.3) and $(298.1) in 2010 and 2009, respectively	$	23.1		$	(232.4	)
Equity securities, available-for-sale, including net OTTI of
$0 and $(2.2) in 2010 and 2009, respectively		0.1			(2.0	)
Derivatives		(287.4	)		84.9
Other investments, including net OTTI of $(0.2) in 2010		1.7			(2.3	)
Net realized capital losses	$	(262.5	)	$	(151.8	)
After-tax net realized capital losses, including tax valuation
allowance of $(7.3) for 2010 and of $(30.9) for 2009	$	(177.9	)	$	(129.6	)

Total net realized capital losses increased for the three months ended March 31, 2010, primarily due to losses on futures related to a) hedging of variable annuity guaranteed death benefits, b) a gain in the first quarter of 2009 related to a hedging program designed to mitigate the impact of potential declines in equity markets and their impact on regulatory capital, c) hedging of variable annuity guaranteed living benefits (“VAGLB”) ceded to SLDI, an affiliate, under the combined coinsurance and coinsurance funds withheld agreement, which commenced in the third quarter of 2009. However, the losses on the VAGLB futures incurred are ceded to SLDI and reported as a corresponding decrease in Interest credited and other benefits to policyholders. Futures were in a short position and their fair value decreased as equity markets improved in 2010. The derivative losses on futures were partially offset by gains on currency swaps and forwards related to the rise of the US Dollar in 2010, gains on options in a long position which are used to hedge risks associated with fixed indexed annuities, and realized gains on fixed maturities primarily due to a reduction in impairments as economic conditions improved.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Proceeds from the sale of fixed maturities and equity securities, available-for-sale, and the related gross realized gains and losses were as follows for the three months ended March 31, 2010 and 2009.

	2010		2009
Proceeds on sales	$	1,786.4	$	1,074.3
Gross gains		53.4		25.6
Gross losses		7.4		47.9

6.	Deferred Policy Acquisition Costs and Value of Business Acquired

Activity within DAC was as follows for the three months ended March 31, 2010 and 2009.

	2010			2009
Balance at January 1	$	3,718.0		$	4,205.5
Deferrals of commissions and expenses		63.4			115.5
Amortization:
Amortization		(115.1	)		(302.3	)
Interest accrued at 5% to 7%		57.3			37.4
Net amortization included in the Condensed
Statements of Operations		(57.8	)		(264.9	)
Change in unrealized capital gains/losses on available-for-sale securities		(131.6	)		(27.6	)
Balance at March 31	$	3,592.0		$	4,028.5

Activity within value of business acquired (“VOBA”) was as follows for the three months ended March 31, 2010 and 2009.

	2010			2009
Balance at January 1	$	113.4		$	195.1
Amortization:
Amortization		(9.1	)		(5.4	)
Interest accrued at 5%		1.3			1.7
Net amortization included in the Condensed
Statements of Operations		(7.8	)		(3.7	)
Change in unrealized capital gains/losses on available-for-sale securities		(6.8	)		(31.1	)
Balance at March 31	$	98.8		$	160.3

During the first quarter of 2010, the Company revised its gross profit projections, mainly related to the emergence of separate account performance and projected hedge and claim costs, resulting in a $7.6 increase in amortization of DAC and VOBA.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

During the first quarter of 2009, the Company revised its gross profit projections, mainly related to the emergence of separate account performance and projected hedge and claim costs, resulting in a $336.4 increase in amortization of DAC and VOBA.

	2010			2009
Impact of separate account growth and contractowner withdrawal
behavior different from assumptions	$	0.4		$	102.6
Impact of current year gross profit variances		(7.7	)		93.4
Impact of refinements of gross profit projections		14.9			140.4
Total unlocking effect on Amortization of DAC and VOBA	$	7.6		$	336.4

7.	Capital Contributions and Dividends

During the three months ended March 31, 2010 and 2009, the Company received $239.0 and $835.0, respectively, in capital contributions from its Parent.

During the three months ended March 31, 2010 and 2009, the Company did not pay any dividends or return of capital distributions on its capital stock to its Parent.

8.	Income Taxes

The Company’s effective tax rates for the three months ended March 31, 2010 and 2009 were (22.2)% and 28.0% respectively. The effective rates differ from the statutory rate due to the following items:

	Three Months Ended March 31,
	2010			2009
Statutory rate		35.0	%		35.0	%

Dividends received deduction		(188.5	)%		2.5	%
Valuation allowance		136.6	%		(9.5	)%
Low income housing tax credit		(6.3	)%		0.1	%
Other		1.0	%		(0.1	)%
Effective rate at March 31		(22.2	)%		28.0	%

Valuation allowances are provided when it is considered unlikely that deferred tax assets will be realized. At March 31, 2010 and December 31, 2009, the Company had a tax valuation allowance of $204.8 and $197.5, respectively, related to realized capital losses. The change from December 31, 2009 to March 31, 2010 in tax valuation allowance of $7.3 is included in Net income (loss). Additionally, at March 31, 2010 and December 31, 2009, the Company had a tax valuation allowance of $66.5 and $106.0, respectively, which is included in Accumulated other comprehensive income (loss). At March 31, 2010, the Company had a $5.1 tax valuation allowance against foreign tax credits, the benefit of which is uncertain.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Unrecognized Tax Benefits

As of March 31, 2010, the Company’s gross unrecognized tax benefit was $61.4, of which $54.5 would affect the Company’s effective tax rate, if recognized. As of December 31, 2009, the Company’s gross cumulative unrecognized tax benefit was $60.3. Additionally, the Company recognized a gross liability of $4.4 for interest related to its unrecognized tax benefits as of March 31, 2010 and December 31, 2009. The Company continually evaluates its uncertain tax positions. It is reasonably possible that the total unrecognized tax benefits could decrease during the next 12 months by up to $35.1, due to completion of tax authority examinations.

9.	Financing Agreements

Reciprocal Loan Agreement

The Company maintains a reciprocal loan agreement with ING America Insurance Holdings, Inc. (“ING AIH”), an affiliate, to facilitate the handling of unanticipated short-term cash requirements that arise in the ordinary course of business. Under this agreement, which became effective in January 2004 and expires on January 14, 2014, either party can borrow from the other up to 3.0% of the Company's statutory admitted assets as of the preceding December 31. Interest on any Company borrowing is charged at the rate of ING AIH’s cost of funds for the interest period, plus 0.15%. Interest on any ING AIH borrowing is charged at a rate based on the prevailing interest rate of U.S. commercial paper available for purchase with a similar duration.

Under this agreement, the Company did not incur any interest expense for the three months ended March 31, 2010. The Company incurred interest expense of $0.1 for the three months ended March 31, 2009. The Company earned interest income of $0.3 for the three months ended March 31, 2010 and 2009. Interest expense and income are included in Interest expense and Net investment income, respectively, on the Condensed Statements of Operations. As of March 31, 2010 and December 31, 2009, the Company had an outstanding receivable of $652.6 and $545.5, respectively, with ING AIH under the reciprocal loan agreement.

For information on the Company’s additional financing agreements, see the Financing Agreements footnote to the Financial Statements included in the Company’s 2009 Annual Report on Form 10-K.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

10.	Commitments and Contingent Liabilities

Commitments

Through the normal course of investment operations, the Company commits to either purchase or sell securities, commercial 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 March 31, 2010, the Company had off-balance sheet commitments to purchase investments equal to their fair value of $469.0, of which $184.7 was with related parties. At December 31, 2009, the Company had off-balance sheet commitments to purchase investments equal to their fair value of $354.6, of which $193.0 was with related parties. During the three months ended March 31, 2010, $8.3 was funded to related parties under these commitments.

Collateral

Under the terms of the Company’s Over-The-Counter Derivative ISDA Agreements (“ISDA Agreements”), the Company may receive from, or deliver to, counterparties, collateral to assure that all terms of the ISDA Agreements will be met with regard to the CSA. The terms of the CSA call for the Company to pay interest on any cash received equal to the Federal Funds rate. As of March 31, 2010 and December 31, 2009, the Company held $37.9 and $32.1, respectively, of cash collateral, related to derivative contracts, which was included in Payables under securities loan agreement, including collateral held, on the Condensed Balance Sheets. In addition, as of March 31, 2010 and December 31, 2009, the Company delivered collateral of $682.6 and $574.6, respectively, in fixed maturities pledged under derivatives contracts, which was included in Securities pledged on the Condensed Balance Sheets.

Litigation

The Company is involved in threatened or pending lawsuits/arbitrations arising from the normal conduct of business. Due to the climate in insurance and business litigation/arbitrations, suits against the Company sometimes include claims for substantial compensatory, consequential, or punitive damages, and other types of relief. Moreover, certain claims are asserted as class actions, purporting to represent a group of similarly situated individuals. While it is not possible to forecast the outcome of such lawsuits/arbitrations, in light of existing insurance, reinsurance, and established reserves, it is the opinion of management that the disposition of such lawsuits/arbitrations will not have a materially adverse effect on the Company’s operations or financial position.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Regulatory Matters

As with many financial services companies, the Company and its affiliates have received 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 and of the financial services industry. In each case, the Company and its affiliates have been and are providing full cooperation. For information on the focus of such regulatory inquiries and the actions undertaken by ING in connection therewith, see the Other Regulatory Matters section of the Commitments and Contingent Liabilities footnote to the Financial Statements included in the Company’s 2009 Annual Report on Form 10-K.

11.	Restructuring Charges

Expense and Staff Reductions

During the fourth quarter of 2008, the Company implemented an expense reduction program for the purpose of streamlining its overall operations. The restructuring charges related to this expense reduction initiative include severance and other employee benefits and lease abandonment costs, which are included in Operating Expenses on the Condensed Statements of Operations.

On January 12, 2009, ING announced expense and staff reductions across all U.S. operations, which resulted in the elimination of 114 current and open positions in the Company. Due to the staff reductions, curtailment of pension benefits occurred during the first quarter of 2009, which resulted in the recognition of an immaterial loss related to unrecognized prior service costs. For the three months ended March 31, 2010, the Company incurred immaterial severance costs. For the three months ended March 31, 2009, the Company incurred $8.3 in charges related to employee severance and termination benefits and pension curtailment charges. For the three months ended March 31, 2010 and 2009, the Company made payments of $1.7 and $4.1, respectively, related to employee severance and termination. The total restructuring reserve outstanding was $2.0 at March 31, 2010.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

12.	Accumulated Other Comprehensive Income (Loss)

Shareholder’s equity included the following components of Accumulated other comprehensive income (loss) as of March 31, 2010 and 2009.

	2010			2009
Net unrealized capital gains (losses):
Fixed maturities, available-for-sale, including OTTI of $(136.5) in 2010	$	(92.4	)	$	(2,680.2	)
Equity securities, available-for-sale		7.0			0.8
DAC/VOBA adjustment on available-for-sale securities		(202.7	)		1,081.0
Sales inducements adjustment on available-for-sale securities		(25.4	)		123.0
Other investments		(5.3	)		(5.8	)
Unrealized capital losses, before tax		(318.8	)		(1,481.2	)
Deferred income tax asset		111.6			518.4
Deferred tax asset valuation allowance		(66.5	)		(24.4	)
Net unrealized capital losses		(273.7	)		(987.2	)
Pension liability, net of tax		(3.2	)		(2.7	)
Accumulated other comprehensive loss	$	(276.9	)	$	(989.9	)

On April 1, 2009, the Company adopted new US GAAP guidance on impairments, included in ASC Topic 320. As prescribed by this accounting guidance, noncredit impairments, reflecting the portion of the impairment between the present value of future cash flows and fair value, were recognized in Other comprehensive income (loss). As of March 31, 2010, net unrealized capital gains (losses) on available-for-sale fixed maturities included $136.5 of noncredit impairments.

Changes in unrealized capital gains (losses) on securities, including securities pledged and noncredit impairments, as recognized in Accumulated other comprehensive income (loss), reported net of DAC, VOBA, and income taxes, were as follows for the three months ended March 31, 2010 and 2009.

		2010		2009
Net unrealized capital holding gains (losses) arising
	during the period(1)	$	208.9	$	204.7
Less: reclassification adjustment for gains (losses) and
	other items included in Net income (loss)(2)		12.5		(133.8	)
Net change in unrealized capital gains (losses) on securities		$	196.4	$	338.5
(1)	Pretax net unrealized capital holding gains (losses) arising during the period were $321.4 and $315.0 for the threemonths ended March 31, 2010 and 2009, respectively.
(2)	Pretax reclassification adjustments for gains (losses) and other items included in Net income (loss) were $19.3 and $(205.8) for the three months ended March 31,
	2010 and 2009, respectively.

The reclassification adjustments for gains (losses) and other items included in Net income (loss) in the above table are determined by specific identification of each security sold during the period.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table identifies the amount of noncredit impairments on fixed maturities recognized in Other comprehensive income (loss) as of the dates indicated.

		2010
Balance at January 1, 2010		$	100.1
	Additional noncredit impairments:
	On securities not previously impaired		45.6
	On securities previously impaired		0.4
	Reductions:
	Securities sold, matured, prepaid or paid down(1)		(3.4	)
	Securities with additional credit impairments(1)		(6.2	)
Balance at March 31, 2010		$	136.5
(1)	Represents realization of noncredit impairments to Net income (loss).

Item 2.

Management’s Narrative Analysis of the Results of Operations and Financial Condition

(Dollar amounts in millions, unless otherwise stated)

Overview

The following narrative analysis presents a review of the results of operations of ING USA Annuity and Life Insurance Company (“ING USA” or the “Company”, as appropriate) for each of the three months ended March 31, 2010 and 2009, and financial condition as of March 31, 2010 and December 31, 2009. This item should be read in its entirety and in conjunction with the condensed financial statements and related notes, which can be found under Part I, Item 1. contained herein, as well as the “Management’s Narrative Analysis of the Results of Operations and Financial Condition” section contained in the Company’s 2009 Annual Report on Form 10-K.

Forward-Looking Information/Risk Factors

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company cautions readers regarding certain forward-looking statements contained in this report and in any other statements made by, or on behalf of, the Company, whether or not in future filings with the Securities and Exchange Commission (“SEC”). Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Statements using verbs such as “expect,” “anticipate,” “believe,” or words of similar import, generally involve forward-looking statements. Without limiting the foregoing, forward-looking statements include statements that represent the Company’s beliefs concerning future levels of sales and redemptions of the Company’s products, investment spreads and yields, or the earnings and profitability of the Company’s activities.

Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond the Company’s control and many of which are subject to change. These uncertainties and contingencies could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable developments, including, but not limited to the following:

(1)

While the United States is slowly emerging from the recent financial crisis after substantial governmental intervention, significant risks still remain for the United States and other world economies. Recent concerns regarding certain sovereign credit risks and the threat of contagion could increase U.S. market uncertainty and volatility. These global market conditions have affected and may continue to affect the Company’s results of operations;

(2)	Adverse financial market conditions, changes in rating agency standards and practices and/or actions taken by ratings agencies may significantly affect the Company’s ability to meet liquidity needs, access to capital and cost of capital;

(3)

Circumstances associated with implementation of ING Groep’s recently announced global business strategy and the final restructuring plan submitted to the European Commission in connection with its review of ING Groep’s receipt of state aid from the Dutch State could adversely affect the Company’s results of operations and financial condition;

(4)	The amount of statutory capital that the Company holds can vary significantly from time to time and is sensitive to a number of factors outside of the Company’s control and influences its financial strength and credit ratings;

(5)	The Company has experienced ratings downgrades recently and may experience additional future downgrades in the Company’s ratings, which may negatively affect profitability, financial condition, and access to liquidity;

(6)

Recent federal actions taken to alleviate the financial crisis may not be effective and state and federal financial regulatory reform initiatives, including new laws and regulations, could have unintended consequences for the financial services industry, including the Company and/or materially affect the Company’s results of operations, financial condition and liquidity;

(7)	The valuation of many of the Company’s financial instruments include methodologies, estimations and assumptions that are subject to differing interpretations and could result in changes to investment valuations that may materially adversely affect results of operations and financial condition;

(8)	The determination of the amount of impairments taken on the Company’s investments is subjective and could materially impact results of operations;

(9)

If assumptions used in estimating future gross profits differ from actual experience or if an estimation technique used to estimate future gross profits is modified, the Company may be required to accelerate the amortization of Deferred Acquisition Costs (“DAC”), which could have a material adverse effect on results of operations and financial condition;

(10)	If the Company’s business does not generate sufficient taxable income, the Company may be required to establish an additional valuation allowance against the deferred income tax asset, which could have a material adverse effect on results of operations and financial condition;

(11)	Reinsurance subjects the Company to the credit risk of reinsurers and may not be adequate to protect against losses arising from ceded reinsurance;

(12)	Offshore reinsurance subjects the Company to the risk that the reinsurer is unable to provide acceptable credit for reinsurance;

(13)

The Company’s risk management program attempts to balance a number of important factors including regulatory capital, risk based capital, liquidity, earnings, and other factors. Certain actions taken as part of our risk management strategy could result in materially lower or more volatile U.S. GAAP earnings in periods of changes in equity markets;

(14)	The inability of counterparties to meet their financial obligations could have an adverse effect on the Company's results of operations;

(15)	Changes in underwriting and actual experience could materially affect profitability;

(16)	Changes in reserve estimates may reduce profitability;

(17)	A loss of key product distribution relationships could materially affect sales;

(18)	Competition could negatively affect the ability to maintain or increase profitability;

(19)	Changes in federal income tax law or interpretations of existing tax law could affect profitability and financial condition by making some products less attractive to contractowners and increasing tax costs of contractowners or the Company;

(20)	The Company may be adversely affected by increased governmental and regulatory scrutiny or negative publicity;

(21)	A loss of key employees could increase the Company’s operational risks and could adversely affect the effectiveness of internal controls over financial reporting;

(22)	Litigation may adversely affect profitability and financial condition;

(23)	Changes in regulation in the United States and recent regulatory investigations may reduce profitability;

(24)	The Company’s products are subject to extensive regulation and failure to meet any of the complex product requirements may reduce profitability;

(25)

Failure of a Company operating or information system or a compromise of security with respect to an operating or information system or portable electronic device or a failure to implement system modifications or a new accounting, actuarial or other operating system effectively could adversely affect the Company’s results of operations and financial condition or the effectiveness of internal controls over financial reporting;

(26)	The occurrence of natural or man-made disasters may adversely affect the Company’s results of operations and financial condition; and

(27)	The occurrence of unidentified or unanticipated risks could negatively affect the Company’s business or result in losses.

Investors are also directed to consider the risks and uncertainties discussed in this Item 2. and in Item 1A. of Part II contained herein, as well as in other documents filed by the Company with the SEC. Except as may be required by the federal securities laws, the Company disclaims any obligation to update forward-looking information.

Basis of Presentation

The Company is a stock life insurance company domiciled in the State of Iowa and provides financial products and services in the United States. ING USA is authorized to conduct its insurance business in all states, except New York, and in the District of Columbia.

The Company has one operating segment.

Critical Accounting Policies

There have been no material changes to the Company’s critical accounting policies since the filing of the Company’s 2009 Annual Report on Form 10-K, except as noted in the Recently Adopted Accounting Standards footnote.

Results of Operations

Overview

Products currently offered by the Company include immediate and deferred fixed annuities, designed to address individual customer needs for tax-advantaged savings, retirement needs, and wealth-protection concerns, and guaranteed investment contracts and funding agreements (collectively referred to as “GICs”), sold primarily to institutional investors and corporate benefit plans.

On April 9, 2009, ING USA’s ultimate parent, ING, announced a global business strategy which identified certain core and non-core businesses and geographies, stated ING’s intention to explore divestiture of non-core businesses over time, withdraw from certain non-core geographies, limit future acquisitions and implement enterprise-wide expense reductions. In particular, with respect to ING’s U.S. insurance operations, ING is seeking to further reduce its risk by focusing on individual life products, retirement services and a new suite of simpler, lower risk annuity products to be sold by ING USA's affiliate, ING Life Insurance and Annuity Company. As part of this strategy, ING USA ceased new sales of variable annuity products in March of 2010. Some new flows will continue on ING USA variable annuities either as transfers related to applications that were in process prior to the product closures or as add-on premiums to existing contracts.

The Company derives its revenue mainly from (a) fee income generated on variable assets under management (“AUM”), (b) investment income earned on fixed AUM, and (c) certain other management fees. Fee income is primarily generated from separate account assets supporting variable options under variable annuity contract investments, as designated by contractowners. Investment income from fixed AUM is mainly generated from annuity products with fixed investment options and GIC deposits. The Company’s expenses primarily consist of (a) interest credited and other benefits to contractowners, (b) amortization of DAC and value of business acquired (“VOBA”), (c) expenses related to the selling and servicing of the various products offered by the Company, and (d) other general business expenses.

Economic Analysis

The U.S. economic environment in 2010 has continued to show improvement from the extreme volatility and disruption experienced since the latter part of 2008 and throughout 2009, due largely to the stresses affecting the global financial systems. It appears the United States is slowly emerging from a severe recession and although some improvement in the economic environment began to materialize in the latter part of the first quarter of 2009, a mostly sluggish economy has persisted into 2010 and significant risks still remain for the United States and other world economies. These economic conditions present challenges to the Company and the entire insurance industry.

Equity markets improved for the three months ended March 31, 2010. Equity market performance impacts the Company on several fronts. Higher average equity market levels in 2010, in comparison with the same period in 2009, favorably impacted variable AUM and corresponding fee revenue, and contributed to lower net amount at risk for variable annuity guaranteed benefits when compared to prior year.

The market continued to show signs of recovery from the credit and liquidity crisis that impacted short-term, London InterBank Offered Rates (“LIBOR”) and U.S. Treasury rates, including the narrowing of credit spreads during the latter part of 2009 and the first quarter of 2010, although they remained wide compared to average credit spreads over the past 20 years. The long-term U.S. Treasury rates in the first quarter of 2010 decreased from the year-end of 2009, which had a positive effect on the fixed maturities portfolio and resulted in lower unrealized capital losses and a decrease in other-than-temporary impairments.

Quarter ended March 31, 2010 compared to quarter ended March 31, 2009

The Company’s results of operations for the three months ended March 31, 2010, and changes therein, include a favorable variance in net income (loss) due primarily to a decrease in net amortization of DAC and VOBA driven by favorable equity markets, and lower interest credited and other benefits to contractowners. These favorable items were partially offset by higher net realized capital losses mainly related to futures, lower Premiums and lower Net investment income.

	Three Months Ended March 31,						$ Increase			% Increase
	2010			2009			(Decrease)			(Decrease)
Revenues:
Net investment income	$	319.6		$	380.7		$	(61.1	)		(16.0	)%
Fee income		268.2			199.4			68.8			34.5	%
Premiums		49.6			114.0			(64.4	)		(56.5	)%
Net realized capital losses:
Total other-than-temporary impairment losses		(71.5	)		(300.3	)		228.8			76.2	%
Portion of other-than-temporary
impairment losses recognized in Other
comprehensive income (loss)		46.0			-			46.0		NM
Net other-than-temporary impairments
recognized in earnings		(25.5	)		(300.3	)		274.8			91.5	%
Other net realized capital (losses) gains		(237.0	)		148.5			(385.5	)	NM
Total net realized capital losses		(262.5	)		(151.8	)		(110.7	)		(72.9	)%
Other income		0.1			1.4			(1.3	)		(92.9	)%
Total revenue		375.0			543.7			(168.7	)		(31.0	)%
Benefits and expenses:
Interest credited and other benefits to contractowners		184.9			500.2			(315.3	)		(63.0	)%
Operating expenses		101.4			88.3			13.1			14.8	%
Net amortization of deferred policy acquisition
costs and value of business acquired		65.6			268.6			(203.0	)		(75.6	)%
Interest expense		8.0			7.3			0.7			9.6	%
Other expense		9.7			6.7			3.0			44.8	%
Total benefits and expenses		369.6			871.1			(501.5	)		(57.6	)%
Income (loss) before income taxes		5.4			(327.4	)		332.8		NM
Income tax benefit		(1.2	)		(91.8	)		90.6			98.7	%
Net income (loss)	$	6.6		$	(235.6	)	$	242.2		NM
Effective tax rate		(22.2	)%		28.0	%

Revenues

Total revenue decreased for the three months ended March 31, 2010, primarily reflecting an increase in Net realized capital losses, lower Premiums and Net investment income, partially offset by higher Fee income.

Net investment income for the three months ended March 31, 2010, decreased due to higher asset balances in short-term assets, which produce lower yields. This decline was partially offset by lower management fees charged by the Company’s affiliate, ING Investment Management, LLC, for management of its general account assets, higher returns on alternative investments and equity securities, as well as an increase in investment income as a result of the combined coinsurance and coinsurance funds withheld agreement with Security Life of Denver International Limited (“SLDI”), an affiliate. However, investment income related to this agreement is ceded to SLDI and reported as a corresponding increase in Interest credited and other benefits to policyholders.

The increase in Fee income for the three months ended March 31, 2010, reflects an increase in average variable AUM, primarily driven by improvements in the equity market. In addition, fee income is generated from living benefit riders related to the combined coinsurance and coinsurance funds withheld agreement with SLDI. This fee income is ceded to SLDI and is reported as a corresponding increase in Interest credited and other benefits to policyholders.

Premiums for the three months ended March 31, 2010, decreased due to lower sales on a small block of business ceded to the Company from ReliaStar Life Insurance Company (“RLI”), an affiliate, under the bulk reinsurance agreements entered into during the fourth quarter of 2008 and the ceding of group term life premiums reinsured from RLI to a third party under the monthly renewable term reinsurance agreement, which was effective June 30, 2009. In addition, effective January 1, 2010, the Company terminated its U.S. Group Reinsurance agreement due to the sale of the business to Reinsurance Group of America.

Benefits and Expenses

Total benefits and expenses for the three months ended March 31, 2010, decreased primarily due to a decrease in Interest credited and other benefits to contractowners and lower Net amortization of DAC and VOBA.

The decrease in Interest credited and other benefits to contractowners for the three months ended March 31, 2010, reflects a decline driven by the ceding of losses on futures, investment income and fee income under the combined coinsurance and coinsurance funds withheld agreement with SLDI. The corresponding losses, investment income, and fee income are reported in Total net realized capital losses, Net investment income, and Fee income, respectively. In addition, interest credited and other benefits to contractowners reflects a favorable change in variable annuity guaranteed benefit reserves which was primarily driven by the increase in equity markets in 2010 compared to a decline in the first quarter of 2009. The decline in a small block of business ceded to the Company from its affiliate, RLI, also contributed to lower interest credited. These decreases were partially offset by an unfavorable change in fixed indexed annuity reserves attributable to the increase in equity markets during 2010.

The Net amortization of DAC and VOBA decreased for the three months ended March 31, 2010, driven by an increase in estimated future gross profits due to the increase in equity markets in 2010 compared to a decline in the first quarter of 2009.

Income Taxes

Income tax benefit decreased for the three months ended March 31, 2010, primarily due to changes in income (loss) before taxes, offset by a decrease in the tax valuation allowance on realized capital losses and an increase in the dividends received deduction.

Financial Condition

Investments

Investment Strategy

The Company’s investment strategy focuses on diversification by asset class. The Company seeks to achieve economic diversification, while reducing overall credit risk and liquidity risks. In addition, the Company seeks to mitigate the impact of cash flow variability from embedded options within certain investment products, such as prepayment options and interest rate options embedded in collateralized mortgage obligations and call options embedded in corporate bonds. The investment management function is centralized under ING Investment Management LLC, an affiliate, pursuant to an investment advisory agreement. Separate portfolios are established for groups of products with similar liability characteristics within the Company.

Portfolio Composition

The following tables present the investment portfolio at March 31, 2010 and December 31, 2009.

	2010					2009
	Carrying		% of			Carrying		% of
	Value		Total			Value		Total
Fixed maturities, available-for-sale,
including securities pledged	$	18,373.9		69.1	%	$	18,249.0		71.3	%
Equity securities, available-for-sale		167.5		0.6	%		154.3		0.6	%
Short-term investments		3,139.7		11.8	%		2,044.0		8.0	%
Mortgage loans on real estate		3,286.5		12.4	%		3,413.2		13.3	%
Policy loans		129.4		0.5	%		131.6		0.5	%
Loan - Dutch State obligation		933.2		3.5	%		1,026.0		4.0	%
Limited partnerships/corporations		258.8		1.0	%		252.6		1.0	%
Derivatives		261.0		1.0	%		317.4		1.2	%
Other investments		24.2		0.1	%		23.9		0.1	%
Total investments	$	26,574.2		100.0	%	$	25,612.0		100.0	%

Fixed Maturities

Fixed maturities, available-for-sale, were as follows as of March 31, 2010.

				Gross		Gross
				Unrealized		Unrealized
		Amortized		Capital		Capital				Fair
		Cost		Gains		Losses		OTTI(2)		Value
Fixed maturities:
	U.S. Treasuries	$	3,497.1	$	6.4	$	73.2	$	-	$	3,430.3
	U.S. government agencies and authorities		26.0		0.1		1.7		-		24.4
	State, municipalities, and political
	subdivisions		47.8		2.5		5.2		-		45.1

	U.S. corporate securities:
	Public utilities		1,058.1		60.9		5.2		-		1,113.8
	Other corporate securities		4,584.8		274.8		40.0		0.4		4,819.2
	Total U.S. corporate securities		5,642.9		335.7		45.2		0.4		5,933.0

	Foreign securities(1):
	Government		346.7		26.3		3.4		-		369.6
	Other		3,122.9		165.1		46.3		0.1		3,241.6
	Total foreign securities		3,469.6		191.4		49.7		0.1		3,611.2

	Residential mortgage-backed securities		1,589.6		204.8		107.7		76.8		1,609.9
	Commercial mortgage-backed securities		2,660.9		68.4		247.8		8.7		2,472.8
	Other asset-backed securities		1,532.4		13.5		248.2		50.5		1,247.2
	Total fixed maturities, including securities pledged		18,466.3		822.8		778.7		136.5		18,373.9
	Less: securities pledged		840.5		2.4		24.9		-		818.0
Total fixed maturities		$	17,625.8	$	820.4	$	753.8	$	136.5	$	17,555.9
(1) Primarily U.S. dollar denominated.
(2) Represents other-than-temporary impairments reported as a component of Other comprehensive income ("noncredit impairments").

Fixed maturities, available-for-sale, were as follows as of December 31, 2009.

				Gross		Gross
				Unrealized		Unrealized
		Amortized		Capital		Capital				Fair
		Cost		Gains		Losses		OTTI(2)		Value
Fixed maturities:
	U.S. Treasuries	$	4,201.0	$	2.5	$	80.0	$	-	$	4,123.5
	U.S. government agencies and authorities		26.1		0.1		1.6		-		24.6
	State, municipalities, and political
	subdivisions		47.8		2.2		5.2		-		44.8

	U.S. corporate securities:
	Public utilities		997.4		57.5		6.9		-		1,048.0
	Other corporate securities		4,290.8		247.8		71.8		0.4		4,466.4
	Total U.S. corporate securities		5,288.2		305.3		78.7		0.4		5,514.4

	Foreign securities(1):
	Government		369.8		23.8		8.3		-		385.3
	Other		2,880.8		131.7		78.5		0.4		2,933.6
	Total foreign securities		3,250.6		155.5		86.8		0.4		3,318.9

	Residential mortgage-backed securities		1,758.9		210.7		150.7		70.9		1,748.0
	Commercial mortgage-backed securities		3,012.5		25.3		448.2		-		2,589.6
	Other asset-backed securities		1,218.6		11.8		316.8		28.4		885.2
	Total fixed maturities, including securities pledged		18,803.7		713.4		1,168.0		100.1		18,249.0
	Less: securities pledged		1,079.4		35.3		22.2		-		1,092.5
Total fixed maturities		$	17,724.3	$	678.1	$	1,145.8	$	100.1	$	17,156.5
(1) Primarily U.S. dollar denominated.
(2) Represents other-than-temporary impairments reported as a component of Other comprehensive income ("noncredit impairments").

It is management’s objective that the portfolio of fixed maturities be of high quality and be well diversified by market sector. The fixed maturities in the Company’s portfolio are generally rated by external rating agencies and, if not externally rated, are rated by the Company on a basis believed to be similar to that used by the rating agencies. The average quality rating of the Company's fixed maturities portfolio was A+ and AA- at March 31, 2010 and December 31, 2009, respectively. Ratings are calculated using a rating hierarchy that considers Standard and Poor’s (“S&P”), Moody’s Investors Service, Inc. (“Moody’s”), and internal ratings.

Total fixed maturities by quality rating category, including securities pledged to creditors, were as follows at March 31, 2010 and December 31, 2009.

	2010
	Fair		% of			Amortized		% of
	Value		Total			Cost		Total
AAA	$	6,624.9		36.0	%	$	6,545.2		35.4	%
AA		1,025.4		5.6	%		1,084.7		5.9	%
A		3,852.0		21.0	%		3,752.0		20.3	%
BBB		5,368.9		29.2	%		5,225.2		28.3	%
BB		738.4		4.0	%		808.8		4.4	%
B and below		764.3		4.2	%		1,050.4		5.7	%
Total	$	18,373.9		100.0	%	$	18,466.3		100.0	%

		2009
	Fair		% of			Amortized		% of
	Value		Total			Cost		Total
AAA	$	7,577.0		41.5	%	$	7,658.8		40.7	%
AA		896.7		4.9	%		1,028.9		5.5	%
A		3,440.2		18.9	%		3,465.0		18.4	%
BBB		5,029.9		27.6	%		4,992.4		26.6	%
BB		720.8		3.9	%		861.4		4.6	%
B and below		584.4		3.2	%		797.2		4.2	%
Total	$	18,249.0		100.0	%	$	18,803.7		100.0	%

91.8% and 92.9% of the fixed maturities were invested in securities rated BBB and above (Investment Grade) at March 31, 2010 and December 31, 2009, respectively.

Fixed maturities rated BB and below (Below Investment Grade) may have speculative characteristics, and changes in economic conditions or other circumstances 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.

Total fixed maturities, including securities pledged to creditors, by market sector were as follows at March 31, 2010 and December 31, 2009.

	2010
	Fair		% of			Amortized		% of
	Value		Total			Cost		Total
U.S. Treasuries	$	3,430.3		18.7	%	$	3,497.1		18.9	%
U.S. government agencies and authorities		24.4		0.1	%		26.0		0.2	%
U.S. corporate, state, and municipalities		5,978.1		32.5	%		5,690.7		30.8	%
Foreign		3,611.2		19.6	%		3,469.6		18.8	%
Residential mortgage-backed		1,609.9		8.8	%		1,589.6		8.6	%
Commercial mortgage-backed		2,472.8		13.5	%		2,660.9		14.4	%
Other asset-backed		1,247.2		6.8	%		1,532.4		8.3	%
Total	$	18,373.9		100.0	%	$	18,466.3		100.0	%

	2009
	Fair		% of			Amortized		% of
	Value		Total			Cost		Total
U.S. Treasuries	$	4,123.5		22.6	%	$	4,201.0		22.3	%
U.S. government agencies and authorities		24.6		0.1	%		26.1		0.1	%
U.S. corporate, state, and municipalities		5,559.2		30.5	%		5,336.0		28.4	%
Foreign		3,318.9		18.2	%		3,250.6		17.3	%
Residential mortgage-backed		1,748.0		9.6	%		1,758.9		9.4	%
Commercial mortgage-backed		2,589.6		14.2	%		3,012.5		16.0	%
Other asset-backed		885.2		4.8	%		1,218.6		6.5	%
Total	$	18,249.0		100.0	%	$	18,803.7		100.0	%

	Amortized		Fair
	Cost		Value
Due to mature:
One year or less	$	436.9	$	439.7
After one year through five years		4,899.5		5,122.1
After five years through ten years		3,912.0		4,051.7
After ten years		3,435.0		3,430.5
Mortgage-backed securities		4,250.5		4,082.7
Other asset-backed securities		1,532.4		1,247.2
Less: securities pledged		840.5		818.0
Fixed maturities, excluding securities pledged	$	17,625.8	$	17,555.9

Subprime and Alt-A Mortgage Exposure

Since the third quarter of 2007, credit markets have become more turbulent amid concerns about subprime and Alt-A mortgages and collateralized debt obligations (“CDOs”). This resulted in a general widening of credit spreads, reduced price transparency, reduced liquidity, increased rating agency downgrades and increased volatility across certain markets. Although some improvement in credit markets occurred in 2009, these challenging conditions largely remain in 2010.

The Company does not originate or purchase subprime or Alt-A whole-loan mortgages. The Company does have exposure to Residential Mortgage-backed Securities (“RMBS”) and Asset-backed Securities (“ABS”). Subprime lending is the origination of loans to customers with weaker credit profiles. The Company defines Alt-A Loans to include residential mortgage loans to customers who have strong credit profiles but lack some element(s), such as documentation to substantiate income; residential mortgage loans to borrowers that would otherwise be classified as prime but whose loan structure provides repayment options to the borrower that increase the risk of default; and any securities backed by residential mortgage collateral not clearly identifiable as prime or subprime.

Trading activity for the Company’s RMBS, particularly subprime and Alt-A mortgage-backed securities, declined during 2008 as a result of the dislocation of the credit markets. The Company continued to obtain pricing information from commercial pricing services and brokers. However, the pricing for subprime and Alt-A RMBS did not represent regularly occurring market transactions since the trading activity declined significantly in the second half of 2008. As a result, the Company concluded in the second half of 2008 that the market for subprime and Alt-A RMBS was inactive. The Company did not change its valuation procedures as a result of determining that the market was inactive. Due to increased trade activity of Alt-A RMBS during the second half of 2009, the Company determined that the Alt-A RMBS market is now active.

The following summarizes the Company’s exposure to subprime and Alt-A mortgages as of March 31, 2010 and December 31, 2009.

The Company’s exposure to subprime mortgages was primarily in the form of ABS structures collateralized by subprime residential mortgages, and the majority of these holdings were included in other asset-backed securities in the fixed maturities by market sector table above. As of March 31, 2010, the fair value and gross unrealized losses related to the Company’s exposure to subprime mortgages were $443.8 and $271.0, respectively, representing 2.4% of total fixed maturities. As of December 31, 2009, the fair value and gross unrealized losses related to the Company’s exposure to subprime mortgages were $429.2 and $304.3, respectively, representing 2.7% of total fixed maturities.

The following tables summarize the Company’s exposure to subprime mortgage-backed holdings by credit quality and vintage year as of March 31, 2010 and December 31, 2009:

2010							2009
% of Total							% of Total
Subprime							Subprime
Mortgage-backed							Mortgage-backed
Securities			Vintage				Securities			Vintage
AAA	29.4	%		2007	39.2	%	AAA	33.7	%		2007	38.7	%
AA	17.9	%		2006	7.1	%	AA	20.7	%		2006	7.2	%
A	7.6	%	2005 and prior		53.7	%	A	6.9	%	2005 and prior		54.1	%
BBB	8.4	%			100.0%		BBB	8.3	%			100.0%
BB and below	36.7	%					BB and below	30.4	%
	100.0%							100.0%

The Company’s exposure to Alt-A mortgages was included in residential mortgage-backed securities in the fixed maturities by market sector table above. As of March 31, 2010, the fair value and gross unrealized losses aggregated to $151.1 and $82.6, respectively, representing 0.8% of total fixed maturities. As of December 31, 2009, the fair value and gross unrealized losses aggregated to $156.5 and $94.0, respectively, representing 1.0% of total fixed maturities.

The following tables summarize the Company’s exposure to Alt-A mortgage-backed holdings by credit quality and vintage year as of March 31, 2010 and December 31, 2009:

2010						2009
% of Total						% of Total
Alt-A						Alt-A
Mortgage-backed						Mortgage-backed
Securities			Vintage			Securities			Vintage
AAA	24.2	%	2007	30.1	%	AAA	27.9	%	2007	30.4	%
AA	1.5	%	2006	19.3	%	AA	1.8	%	2006	20.1	%
A	0.0	%	2005 and prior	50.6	%	A	0.8	%	2005 and prior	49.5	%
BBB	0.9	%		100.0%		BBB	6.9	%		100.0%
BB and below	73.4	%				BB and below	62.6	%
	100.0%						100.0%

Commercial Mortgage-backed and Other Asset-backed Securities

While the delinquency rates on commercial mortgages have been stable in recent years, commercial real estate rents and property values have recently become more volatile. In addition, there are growing concerns with consumer loans as a result of the current economic environment, which includes lower family income and higher unemployment rates.

As of March 31, 2010 and December 31, 2009, the fair value of the Company’s commercial mortgage-backed securities (“CMBS”) totaled $2.5 billion and $2.6 billion, respectively, and other ABS, excluding subprime exposure, totaled $808.6 and $461.3, respectively. CMBS investments represent pools of commercial mortgages that are broadly diversified across property types and geographical areas.

As of March 31, 2010, the other ABS was also broadly diversified both by type and issuer with credit card receivables, collateralized loan obligations, and automobile receivables comprising 55.1%, 19.8%, and 11.7%, respectively, of total other ABS, excluding subprime exposure. As of December 31, 2009, the other ABS was also broadly diversified both by type and issuer with credit card receivables, collateralized loan obligations, and automobile receivables comprising 35.0%, 44.7%, and 5.9%, respectively, of total other ABS, excluding subprime exposure.

The following tables summarize the Company’s exposure to CMBS holdings by credit quality and vintage year as of March 31, 2010 and December 31, 2009:

2010						2009
% of Total CMBS			Vintage			% of Total CMBS			Vintage
AAA	52.1	%	2008	0.4	%	AAA	66.8	%	2008	0.5	%
AA	14.1	%	2007	26.9	%	AA	9.6	%	2007	26.2	%
A	18.4	%	2006	30.0	%	A	14.2	%	2006	29.9	%
BBB	11.3	%	2005 and prior	42.7	%	BBB	6.4	%	2005 and prior	43.4	%
BB and below	4.1	%		100.0%		BB and below	3.0	%		100.0%
	100.0%						100.0%

The following tables summarize the Company’s exposure to other ABS holdings, excluding subprime exposure, by credit quality and vintage year as of March 31, 2010 and December 31, 2009:

2010						2009
% of Total other ABS			Vintage			% of Total other ABS			Vintage
AAA	64.4	%	2009	22.3	%	AAA	32.9	%	2008	0.0	%
AA	12.7	%	2008	1.5	%	AA	21.3	%	2007	9.7	%
A	7.4	%	2007	20.0	%	A	16.6	%	2006	36.5	%
BBB	14.0	%	2006	27.0	%	BBB	24.7	%	2005 and prior	53.8	%
BB and below	1.5	%	2005 and prior	29.2	%	BB and below	4.5	%		100.0%
	100.0%			100.0%			100.0%

Mortgage Loans on Real Estate

The Company’s mortgage loans on real estate are all commercial mortgage loans, which totaled $3.3 billion and $3.4 billion as of March 31, 2010 and December 31, 2009, respectively. These loans are reported at amortized cost, less impairment write-downs and allowance for losses.

All mortgage loans are evaluated by seasoned underwriters, including an appraisal of loan-specific credit quality, property characteristics, and market trends, and assigned a quality rating using the Company’s internally developed quality rating system. Loan performance is continuously monitored on a loan-specific basis through the review of borrower 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.

All commercial mortgages are rated for the purpose of quantifying the level of risk. Those loans with higher risk are placed on a watch list and are closely monitored for collateral deficiency or other credit events that may lead to a potential loss of principal or interest. If the value of any mortgage loan is determined to be impaired (i.e., when it is probable that the Company will be unable to collect on all 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. Impairments taken on the mortgage loan portfolio were $0.2 for the three months ended March 31, 2010. There were no impairments taken on the mortgage portfolio for the three months ended March 31, 2009. 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. One mortgage loan in the Company’s portfolio was in arrears with respect to principal and interest at March 31, 2010, which was subsequently paid off in April 2010. Due to challenges that the current economy presents to the commercial mortgage market, effective with the third quarter of 2009, the Company recorded an allowance for probable incurred, but not specifically identified, losses related to factors inherent in the lending process. At March 31, 2010 and December 31, 2009, the Company had a $3.6 and $4.1 allowance for mortgage loan credit losses, respectively.

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. 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. These ratios are utilized as part of the review process described above. LTV and DSC ratios as of March 31, 2010 and December 31, 2009, are as follows:

	2010(1)		2009(1)
Loan to Value Ratio:
0% - 50%	$	1,438.3	$	1,541.0
50% - 60%		753.2		742.5
60% - 70%		822.0		845.0
70% - 80%		253.2		264.9
80% - 90%		23.4		23.9
Total Commercial Mortgage Loans	$	3,290.1	$	3,417.3
(1) Balances do not include allowance for mortgage loan credit losses.

	2010(1)(2)		2009(1)(2)
Debt Service Coverage Ratio:
Greater than 1.5x	$	2,329.1	$	2,356.1
1.25x - 1.5x		341.5		371.5
1.0x - 1.25x		274.8		284.1
Less than 1.0x		194.2		219.5
Total Commercial Mortgage Loans	$	3,139.6	$	3,231.2
(1) Balances do not include allowance for mortgage loan credit losses.
(2) Excludes mortgages that are secured by loans on land or construction deals.

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 March 31, 2010 and December 31, 2009.

		2010(1)					2009(1)
		Gross					Gross
		Carrying Value		% of Total			Carrying Value		% of Total
Commercial Mortgage Loans
	by US Region:
	Pacific	$	856.1		26.0	%	$	894.6		26.2	%
	South Atlantic		627.0		19.1	%		649.7		19.0	%
	Middle Atlantic		418.6		12.7	%		465.7		13.6	%
	East North Central		392.7		11.9	%		401.6		11.8	%
	West South Central		367.2		11.2	%		371.0		10.9	%
	Mountain		372.5		11.3	%		375.8		11.0	%
	New England		90.0		2.8	%		90.6		2.6	%
	West North Central		99.4		3.0	%		100.8		2.9	%
	East South Central		66.6		2.0	%		67.5		2.0	%
Total Commercial Mortgage Loans		$	3,290.1		100.0%		$	3,417.3		100.0%
(1) Balances do not include allowance for mortgage loan credit losses.

		2010(1)					2009(1)
		Gross					Gross
		Carrying Value		% of Total			Carrying Value		% of Total
Commercial Mortgage Loans
	by Property Type:
	Apartments	$	543.9		16.5	%	$	547.7		16.0	%
	Hotel/Motel		178.5		5.4	%		180.5		5.3	%
	Industrial		1,064.0		32.4	%		1,105.7		32.3	%
	Mixed Use		10.7		0.3	%		16.2		0.5	%
	Office		663.4		20.2	%		703.5		20.6	%
Other			108.3		3.3	%		136.0		4.0	%
Retail			721.3		21.9	%		727.7		21.3	%
Total Commercial Mortgage Loans		$	3,290.1		100.0	%	$	3,417.3		100.0	%

(1) Balances do not include allowance for mortgage loan credit losses.

The following table sets forth the breakdown of commercial mortgages by year of origination as of March 31, 2010 and December 31, 2009.

		2010(1)		2009(1)
Year of Origination:
	2010	$	62.5	$	-
	2009		34.9		36.7
	2008		464.1		477.6
	2007		553.5		601.8
	2006		346.0		385.1
	2005 and prior		1,829.1		1,916.1
Total Commercial Mortgage Loans		$	3,290.1	$	3,417.3
(1) Balances do not include allowance for mortgage loan credit losses.

Unrealized Capital Losses

		2010						2009
			% of IG			% of IG			% of IG			% of IG
		IG	and BIG		BIG	and BIG		IG	and BIG		BIG	and BIG
Six months or less
below amortized cost	$	92.9	10.2%	$	10.2	1.1%	$	170.1	13.5%	$	21.2	1.7%
More than six months and
twelve months or less
below amortized cost		45.3	4.9%		93.6	10.2%		259.3	20.4%		200.8	15.8%
More than twelve months
below amortized cost		331.9	36.3%		341.3	37.3%		419.0	33.0%		197.7	15.6%
Total unrealized capital losses	$	470.1	51.4%	$	445.1	48.6%	$	848.4	66.9%	$	419.7	33.1%

	Six Months		More than
	or Less		Six Months and		More than		Total
	Below		Twelve Months		Twelve Months		Unrealized
	Amortized		or Less Below		Below		Capital
2010	Cost		Amortized Cost		Amortized Cost		Losses
Interest rate or spread widening	$	88.4	$	14.9	$	72.2	$	175.5
Mortgage and other asset-backed securities		14.7		124.0		601.0		739.7
Total unrealized capital losses	$	103.1	$	138.9	$	673.2	$	915.2
Fair value	$	3,322.9	$	446.3	$	2,822.4	$	6,591.6

2009
Interest rate or spread widening	$	99.3	$	31.6	$	122.2	$	253.1
Mortgage and other asset-backed securities		92.0		428.5		494.5		1,015.0
Total unrealized capital losses	$	191.3	$	460.1	$	616.7	$	1,268.1
Fair value	$	5,275.9	$	1,058.2	$	2,714.5	$	9,048.6

					More Than Six
					Months and Twelve				More Than Twelve
	Six Months or Less				Months or Less				Months Below
	Below Amortized Cost				Below Amortized Cost				Amortized Cost				Total
			Unrealized				Unrealized				Unrealized				Unrealized
	Fair Value		Capital Loss		Fair Value		Capital Loss		Fair Value		Capital Loss		Fair Value		Capital Loss
2010
U.S. Treasuries	$	2,130.5	$	71.9	$	13.3	$	1.3	$	-	$	-	$	2,143.8	$	73.2
U.S. government
agencies
and authorities		-		-		15.2		0.9		8.1		0.8		23.3		1.7
U.S. corporate, state,
and municipalities		480.4		6.7		141.8		9.8		528.3		34.3		1,150.5		50.8
Foreign		288.3		9.8		46.3		2.9		401.4		37.1		736.0		49.8
Residential
mortgage-backed		27.4		5.5		133.3		58.3		335.3		120.7		496.0		184.5
Commercial
mortgage-backed		157.0		7.7		44.7		37.5		975.3		211.3		1,177.0		256.5
Other asset-backed		239.3		1.5		51.7		28.2		574.0		269.0		865.0		298.7
Total	$	3,322.9	$	103.1	$	446.3	$	138.9	$	2,822.4	$	673.2	$	6,591.6	$	915.2

2009
U.S. Treasuries	$	3,761.2	$	80.0	$	-	$	-	$	-	$	-	$	3,761.2	$	80.0
U.S. government
agencies		15.2		0.8		8.2		0.8		-		-		23.4		1.6
and authorities
U.S. corporate, state,
and municipalities		273.8		6.7		108.1		13.5		737.7		64.1		1,119.6		84.3
Foreign		228.1		11.8		107.8		17.3		472.6		58.1		808.5		87.2
Residential
mortgage-backed		139.1		46.5		183.5		92.3		260.7		82.8		583.3		221.6
Commercial
mortgage-backed		795.5		44.1		534.6		243.1		682.7		161.0		2,012.8		448.2
Other asset-backed		63.0		1.4		116.0		93.1		560.8		250.7		739.8		345.2
Total	$	5,275.9	$	191.3	$	1,058.2	$	460.1	$	2,714.5	$	616.7	$	9,048.6	$	1,268.1

	Amortized Cost				Unrealized Capital Loss				Number of Securities
	< 20%		> 20%		< 20%		> 20%		< 20%		> 20%
2010
Six months or less
below amortized cost	$	1,880.0	$	59.3	$	112.1	$	15.7		196		17
More than six months and
twelve months or less
below amortized cost		2,708.2		389.9		103.4		184.0		193		125
More than twelve months
below amortized cost		1,365.0		1,104.4		60.1		439.9		134		153
Total	$	5,953.2	$	1,553.6	$	275.6	$	639.6		523		295

2009
Six months or less
below amortized cost	$	6,184.5	$	396.8	$	265.1	$	111.8		282		96
More than six months and
twelve months or less
below amortized cost		1,248.5		982.3		68.8		433.2		191		115
More than twelve months
below amortized cost		619.0		885.6		27.8		361.4		113		158
Total	$	8,052.0	$	2,264.7	$	361.7	$	906.4		586		369

	Amortized Cost				Unrealized Capital Loss				Number of Securities
	< 20%		> 20%		< 20%		> 20%		< 20%		> 20%
2010
U.S. Treasuries	$	2,217.0	$	-	$	73.2	$	-		11		-
U.S. government agencies
and authorities		25.0		-		1.7		-		4		-
U.S. corporate, state and
municipalities		1,172.6		28.7		44.1		6.7		213		13
Foreign		701.2		84.6		23.9		25.9		93		18
Residential mortgage-backed		286.0		394.5		32.2		152.3		69		112
Commercial mortgage-backed		965.9		467.6		71.3		185.2		62		35
Other asset-backed		585.5		578.2		29.2		269.5		71		117
Total	$	5,953.2	$	1,553.6	$	275.6	$	639.6		523		295

2009
U.S. Treasuries	$	3,841.2	$	-	$	80.0	$	-		21		-
U.S. government agencies
and authorities		25.0		-		1.6		-		4		-
U.S. corporate, state and
municipalities		1,139.0		64.9		67.8		16.5		220		32
Foreign		712.7		183.0		33.1		54.1		93		30
Residential mortgage-backed		336.0		468.9		35.9		185.7		83		119
Commercial mortgage-backed		1,534.5		926.5		104.2		344.0		96		60
Other asset-backed		463.6		621.4		39.1		306.1		69		128
Total	$	8,052.0	$	2,264.7	$	361.7	$	906.4		586		369

Other-Than-Temporary Impairments

	Three Months Ended March 31,
	2010			2009
			No. of			No. of
	Impairment		Securities	Impairment		Securities
U.S. Treasuries	$	-	-	$	34.2	3
U.S. corporate		1.3	5		41.3	38
Foreign(1)		11.9	6		18.0	24
Residential mortgage-backed		6.5	43		91.9	56
Other asset-backed		3.3	14		112.7	27
Commercial mortgage-backed		2.1	1		-	-
Equity securities		-	-		2.2	4
Public utilities		0.2	3		-	-
Mortgage loans on real estate		0.2	1		-	-
Total	$	25.5	73	$	300.3	152
(1) Primarily U.S. dollar denominated.

The above schedules include $22.3 and $80.2 for the three months ended March 31, 2010 and 2009, respectively, in other-than-temporary write-downs related to credit impairments, which are recognized in earnings. The remaining write-downs reflected in the schedules above are related to intent impairments.

The following table summarizes these intent impairments, which are also recognized in earnings, by type for the three months ended March 31, 2010 and 2009.

	Three Months Ended March 31,
	2010			2009
			No. of			No. of
	Impairment		Securities	Impairment		Securities
U.S. Treasuries	$	-	-	$	34.2	3
U.S. corporate		1.3	5		35.7	24
Foreign(1)		1.7	3		18.0	24
Residential mortgage-backed		-	-		23.1	8
Other asset-backed		-	-		109.1	11
Public utilities		0.2	3		-	-
Total	$	3.2	11	$	220.1	70
(1) Primarily U.S. dollar denominated.

The following table identifies the noncredit impairments recognized in Other comprehensive income (loss) by type for the three months ended March 31, 2010.

	Three Months Ended
	March 31, 2010*
			No of
	Impairment		Securities
Commercial mortgage-backed	$	8.7		1
Residential mortgage-backed		11.4		19
Other asset-backed		25.9		6
Total	$	46.0		26
* No amounts disclosed for the three months ended March 31, 2009, as new guidance on OTTI, included in ASC Topic 320, was adopted on April 1, 2009.

Net Realized Capital Gains (Losses)

	Three Months Ended March 31,
	2010			2009
Fixed maturities, available-for-sale, including net OTTI
of $(25.3) and $(298.1) in 2010 and 2009, respectively	$	23.1		$	(232.4	)
Equity securities, available-for-sale, including net OTTI of
$0 and $(2.2) in 2010 and 2009, respectively		0.1			(2.0	)
Derivatives		(287.4	)		84.9
Other investments, including net OTTI of $(0.2) in 2010		1.7			(2.3	)
Net realized capital losses	$	(262.5	)	$	(151.8	)
After-tax net realized capital losses, including tax valuation
allowance of $(7.3) for 2010 and of $(30.9) for 2009	$	(177.9	)	$	(129.6	)

Fair Value Hierarchy

The following tables present the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of March 31, 2010 and December 31, 2009.

	2010
	Level 1		Level 2		Level 3(1)		Total
Assets:
Fixed maturities, available-for-sale, including securities pledged:
U.S. Treasuries	$	3,345.1	$	85.2	$	-	$	3,430.3
U.S government agencies and authorities		-		24.4		-		24.4
U.S. corporate, state and municipalities		-		5,937.0		41.1		5,978.1
Foreign		-		3,539.9		71.3		3,611.2
Residential mortgage-backed securities		-		1,565.4		44.5		1,609.9
Commercial mortgage-backed securities		-		2,464.9		7.9		2,472.8
Other asset-backed securities		-		597.4		649.8		1,247.2
Equity securities, available-for-sale		155.7		-		11.8		167.5
Derivatives:
Interest rate contracts		-		54.5		-		54.5
Foreign exchange contracts		0.2		12.6		-		12.8
Equity contracts		23.2		-		170.3		193.5
Credit contracts		-		0.2		-		0.2
Embedded derivative on reinsurance		-		24.0		-		24.0
Cash and cash equivalents, short-term investments, and short-
term investments under securities loan agreement		3,347.8		-		-		3,347.8
Assets held in separate accounts		43,893.7		-		-		43,893.7
Total	$	50,765.7	$	14,305.5	$	996.7	$	66,067.9

Liabilities:
Investment contract guarantees:
Fixed Indexed Annuities ("FIA")	$	-	$	-	$	978.8	$	978.8
Guaranteed Minimum Withdrawal and
Accumulation Benefits ("GMWB" and "GMAB")		-		-		55.1		55.1
Derivatives:
Interest rate contracts		-		297.7		-		297.7
Foreign exchange contracts		-		47.4		-		47.4
Equity contracts		1.5		-		13.2		14.7
Credit contracts		-		14.0		81.5		95.5
Total	$	1.5	$	359.1	$	1,128.6	$	1,489.2

(1) Level 3 net assets and liabilities accounted for 0.2% of total net assets and liabilities measured at fair value on arecurring basis. Excluding
separate accounts assets for which the policyholder bears the risk, the Level 3 net assetsand liabilities in relation to total net assets and
liabilities measured at fair value on a recurring basis totaled 0.6%.

	2009
	Level 1		Level 2		Level 3(1)		Total
Assets:
Fixed maturities, available-for-sale, including securities pledged	$	4,123.5	$	12,613.4	$	1,512.1	$	18,249.0
Equity securities, available-for-sale:		149.8		-		4.5		154.3
Derivatives		42.8		59.1		215.5		317.4
Embedded derivatives on reinsurance		-		38.7		-		38.7
Cash and cash equivalents, short-term investments, and short-
term investments under securities loan agreement		2,242.8		8.0		-		2,250.8
Assets held in separate accounts		42,996.1		-		-		42,996.1
Total	$	49,555.0	$	12,719.2	$	1,732.1	$	64,006.3

Liabilities:
Investment contract guarantees:
Fixed Indexed Annuities ("FIA")	$	-	$	-	$	927.2	$	927.2
Guaranteed Minimum Withdrawal and Accumulation Benefits
("GMWB"and "GMAB")		-		-		73.9		73.9
Other liabilities (primarily derivatives)		3.2		393.6		103.6		500.4
Total	$	3.2	$	393.6	$	1,104.7	$	1,501.5
(1) Level 3 net assets and liabilities accounted for 1.0% of total net assets and liabilities measured at fair value on a recurring
basis. Excluding separate accounts assets for which the policyholder bears the risk, the Level 3 net assets and liabilities in
relation to total net assets and liabilities measured at fair value on a recurring basis totaled 3.2%.

Liquidity and Capital Resources

Liquidity is the ability of the Company to generate sufficient cash flows to meet the cash requirements of operating, investing, and financing activities.

Liquidity Management

The Company’s principal available sources of liquidity are annuity product charges, GIC and fixed annuity deposits and funding agreements, investment income, proceeds from the maturing and sale of investments, proceeds from debt issuance and borrowing facilities, repurchase agreements, securities lending, reinsurance, and capital contributions. Primary uses of these funds are payments of commissions and operating expenses, interest and premium credits, payments under guaranteed death and living benefits, investment purchases, repayment of debt, and contract maturities, withdrawals, and surrenders.

The Company’s liquidity position is managed by maintaining adequate levels of liquid assets, such as cash, cash equivalents, and short-term investments. As part of the liquidity management process, different scenarios are modeled to determine that existing assets are adequate to meet projected cash flows. Key variables in the modeling process include interest rates, equity market movements, quantity and type of interest and equity market hedges, anticipated contractowner behavior, market value of the general account assets, variable separate account performance, and implications of rating agency actions.

The fixed account liabilities are supported by a general account portfolio, principally composed of fixed rate investments with matching duration characteristics that can generate predictable, steady rates of return. The portfolio management strategy for the fixed account considers the assets available-for-sale. This strategy enables the Company to respond to changes in market interest rates, prepayment risk, relative values of asset sectors and individual securities and loans, credit quality outlook, and other relevant factors. The objective of portfolio management is to maximize returns, taking into account interest rate and credit risk, as well as other risks. The Company’s asset/liability management discipline includes strategies to minimize exposure to loss as interest rates and economic and market conditions change. In executing this strategy, the Company uses derivative instruments to manage these risks. The Company’s derivative counterparties are of high credit quality. As of March 31, 2010, the Company had net derivative liabilities with a fair value of $455.3.

Recent Initiatives

In 2009, ING USA took certain actions to reduce its exposure to interest rate and market risks. These actions included revisions to variable annuity guaranteed benefits for new business, reducing the minimum guaranteed interest rate on new fixed indexed annuities business, changes to certain products, reassessment of the investment strategy, hedging certain funds which previously were not hedged, hedging certain guaranteed death benefits which were previously not hedged, hedging interest rate risk on new variable annuity business and hedging the majority of the Company’s foreign currency risk. ING USA continues to monitor these initiatives and their financial impacts, and will determine whether further actions are necessary.

The Company is evaluating its assumptions and estimation techniques for determining estimated gross profits in its amortization of DAC and VOBA. As part of this evaluation, the Company is assessing whether to implement a reversion to the mean technique of estimating its short-term equity market return assumptions in the second quarter of 2010. The reversion to the mean technique is a common industry practice in which DAC and VOBA unlocking for short-term equity returns only occurs if equity market performance falls outside established parameters.

On April 9, 2009, ING USA’s ultimate parent, ING, announced a global business strategy which identified certain core and non-core businesses and geographies, stated ING’s intention to explore divestiture of non-core businesses over time, withdraw from certain non-core geographies, limit future acquisitions and implement enterprise-wide expense reductions. In particular, with respect to ING’s U.S. insurance operations, ING is seeking to further reduce its risk by focusing on individual life products, retirement services and a new suite of simpler, lower risk annuity products to be sold by ING USA's affiliate, ING Life Insurance and Annuity Company. As part of this strategy, ING USA ceased new sales of variable annuity products in March of 2010. Some new flows will continue on ING USA variable annuities either as transfers related to applications that were process prior to the product closures or as add-on premiums to existing contracts.

Volatile capital market conditions commencing in the fourth quarter of 2008 and continuing into 2009, coupled with numerous changes in regulatory and accounting requirements and changes in policyholder behavior as a result of the recent changed economic environment, presented extraordinary challenges to actuarial reserve valuation methodologies and controls. Since the second quarter of 2009, ING USA has been undertaking a review and strengthening of its systems, processes and internal controls, including those with respect to actuarial calculations on fixed and variable annuity products under statutory and other bases of accounting. As part of its internal controls review, ING USA has from time to time identified control issues that require corrective action and has taken, and will continue to undertake appropriate corrective action to address identified control issues. During the fourth quarter of 2009, ING USA implemented proprietary cash flow projection software as part of its systems-strengthening initiative. During 2010, ING USA will continue its controls review, system strengthening and corrective actions, including initiatives to ensure sustainability in controls in business owned applications used in actuarial and financial reporting processes, and to improve change controls and management of actuarial models and key assumptions. In addition, the Company has commenced an assessment of its IT system modification backlog and is enhancing its controls with respect to prioritizing, monitoring and implementing future system modifications.

On October 26, 2009, ING announced the key components of the final Restructuring Plan ING submitted to the EC as part of the process to receive EC approval for the state aid granted to ING by the State of the Netherlands (the “Dutch State”) in the form of EUR 10 billion Core Tier 1 securities issued on November 12, 2008 and the full credit risk transfer to the Dutch State of 80% of ING’s Alt-A RMBS on March 31, 2009 (the “ING-Dutch State Transaction”). As part of the Restructuring Plan, ING has agreed to separate its banking and insurance businesses by 2013. ING intends to achieve this separation by divestment of its insurance and investment management operations, including the Company. ING has announced that it will explore all options for implementing the separation including initial public offerings, sales or combinations thereof.

On January 28, 2010, ING announced the filing of its appeal with the General Court of the European Union against specific elements of the EC’s decision regarding the ING Restructuring Plan. Despite the appeal, ING is committed to executing the formal separation of banking and insurance and the divestment of the latter. In its appeal, ING contests the state aid calculation the EC applied to the reduction in repayment premium agreed upon by ING and the Dutch State in connection with ING’s December 2009 repayment of the first EUR 5 billion of Core Tier 1 securities. ING is also appealing the disproportionality of the price leadership restrictions imposed on ING with respect to the European financial sector.

Liquidity and Capital Resources

Additional sources of liquidity include borrowing facilities to meet short-term cash requirements that arise in the ordinary course of business. The Company maintains the following agreements:

A reciprocal loan agreement with ING America Insurance Holdings, Inc. (“ING AIH”), an affiliate, whereby either party can borrow from the other up to 3.0% of the Company’s statutory net admitted assets, excluding Separate Accounts, as of the prior December 31. At March 31, 2010 and December 31, 2009, the Company had an outstanding receivable of $652.6 and $545.5, respectively, with ING AIH under the reciprocal loan agreement.

§	A $50.0 uncommitted, perpetual revolving note facility with the Bank of New York. At March 31, 2010 and December 31, 2009, the Company had no amounts outstanding under the revolving note facility.

The Company is a member of the Federal Home Loan Bank of Des Moines (“FHLB”) and is required to maintain a collateral deposit that backs funding agreements issued to the FHLB. As of March 31, 2010 and December 31, 2009, the Company had $1,279.6 and $1,304.5, respectively, in non-putable funding agreements, including accrued interest, issued to FHLB. As of March 31, 2010 and December 31, 2009, assets with a market value of approximately $1,533.6 and $1,657.9, respectively, collateralized the funding agreements issued to the FHLB. Assets pledged to the FHLB are included in Fixed maturities, available-for-sale, on the Condensed Balance Sheets.

Management believes that its sources of liquidity are adequate to meet the Company’s short-term cash obligations.

Capital Contributions and Distributions

During the three months ended March 31, 2010 and 2009, the Company received $239.0 and $835.0, respectively, in capital contributions from its Parent.

During the three months ended March 31, 2010 and 2009, the Company did not pay any dividends or return of capital distributions to its Parent.

Collateral

Under the terms of the Company’s Over-The-Counter Derivative International Swaps and Derivatives Association, Inc. Agreements (“ISDA Agreements”), the Company may receive from, or deliver to, counterparties, collateral to assure that all 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. As of March 31, 2010 and December 31, 2009, the Company held $37.9 and $32.1, respectively, of cash collateral, which was included in Payables under securities loan agreement, including collateral held, on the Condensed Balance Sheets. In addition, as of March 31, 2010 and December 31, 2009, the Company delivered collateral of $682.6 and $574.6, respectively, in fixed maturities pledged under derivatives contracts, which was included in Securities pledged on the Condensed Balance Sheets.

Reinsurance Agreements

The Company is a party to a Facultative Coinsurance Agreement with its affiliate, Security Life of Denver Insurance Company (“SLD”), effective August 20, 1999. Under the terms of this agreement, the Company facultatively cedes to SLD, from time to time, certain GICs on a 100% coinsurance basis. The value of GIC reserves ceded by the Company under this agreement was $47.5 at March 31, 2010 and December 31, 2009. The Company utilizes this reinsurance facility primarily for diversification and asset-liability management purposes in connection with this business, which is facilitated by the fact that SLD is also a major GIC issuer. Senior management of the Company has established a current maximum of $4.0 billion for GIC reserves ceded under this agreement.

The Company entered into an automatic reinsurance agreement with SLDI, an affiliate, dated June 30, 2008, covering 100% of the benefits guaranteed under specific variable annuity guaranteed living benefit riders attached to certain variable annuity contracts, which had been issued and in force as of, as well as any such policies issued after, the effective date of the agreement. The value of reserves ceded by the Company under this agreement was $885.6 and $878.6 at March 31, 2010 and December 31, 2009, respectively. In addition, a deferred loss on the transaction in the amount of $370.3 is presented in Other assets on the Condensed Balance Sheets and is amortized over the period of benefit. Effective July 1, 2009, the Company and SLDI entered into an amended and restated reinsurance agreement to change the reinsurance basis of the existing automatic reinsurance agreement dated June 30, 2008 between the Company and SLDI from coinsurance to a combined coinsurance and coinsurance funds withheld basis. To effectuate this transaction, assets with a market value of $3.2 billion were transferred on July 31, 2009 from SLDI to the Company, and the Company deposited those assets into a trust account. The Company also established a corresponding funds withheld liability to SLDI, which is included in Other liabilities on the Condensed Balance Sheets.

Ratings

On October 27, 2009, Moody’s Investors Service, Inc. (“Moody’s”) downgraded the insurance financial strength ratings of ING’s primary U.S. insurance operating companies (“ING U.S.”), including the Company, to A2 from A1. Moody's also on that date downgraded the short-term financial strength rating to Prime-2 (P-2) from Prime-1 (P-1). These actions concluded the review for possible downgrade initiated on September 21, 2009 and the ratings now carry a developing outlook.

On October 27, 2009, Fitch Ratings Ltd. (“Fitch”) downgraded its ratings for ING U.S., including the Company from A to A- and maintained its outlook at Negative.

On December 1, 2009, S&P affirmed its financial strength rating of ING U.S., including the Company, at A+ with a negative outlook. On July 9, 2009, S&P downgraded the financial strength rating of ING U.S, including the Company, to A+ from AA- and removed the rating from CreditWatch with negative implications, where they were placed on April 16, 2009. S&P maintained a negative outlook on the rating of ING U.S., including the Company. In April 2009, S&P announced that it had placed ING U.S., including the Company, on CreditWatch-negative until completion of its evaluation of the effects of ING’s strategic changes on each of its subsidiaries.

On April 24, 2009, A.M. Best Company, Inc. (“A.M. Best”) downgraded the financial strength rating to A (Excellent) from A+ (Superior) and issuer credit ratings to a+ from aa- for ING U.S., including the Company. The outlook for ING USA had been revised to negative.

In response to weakening global markets, the rating agencies have been continuously reevaluating their ratings of banks and insurance companies around the world. Over the past several quarters, the rating agencies have maintained a negative outlook of the financial services industry overall, while reviewing the individual ratings they give to specific entities. The downgrades of the Company by S&P, Fitch, A.M. Best and Moody’s reflect a broader view of how the financial services industry is being challenged by the current economic environment, but also are based on the rating agencies’ specific views of the Company’s financial strength. In making their ratings decisions the agencies consider past and expected future capital and earnings, asset quality and risk, profitability and risk of existing liabilities and current products, market share and product distribution capabilities, and direct or implied support from parent companies, including the implications of the ING restructuring plan, among other factors.

Minimum Guarantees

Variable annuity contracts containing minimum guaranteed death and living benefits expose the Company to equity risk. A decrease in the equity markets may cause a decrease in the account values, thereby increasing the possibility that the Company may be required to pay amounts to contractowners due to guaranteed death and living benefits. An increase in the value of the equity markets may increase account values for these contracts, thereby decreasing the Company’s risk associated with guaranteed death and living benefits.

The Company’s variable annuities offer one or more of the following guaranteed death and living benefits:

Guaranteed Minimum Death Benefits (“GMDBs”):

§	Standard - Guarantees that, upon death, the death benefit will be no less than the premiums paid by the contractowner, adjusted for any contract withdrawals.

§	Ratchet - Guarantees that, upon death, the death benefit will be no less than the greater of (1) Standard or (2) the maximum contract anniversary (or quarterly) value of the variable annuity, adjusted for contract withdrawals.

Combo (Max 7) - Guarantees that, upon death, the death benefit will be no less than the greater of (1) Ratchet or (2) Rollup (Rollup guarantees that, upon death, the death benefit will be no less than the aggregate premiums paid by the contractowner accruing interest at the contractual rate per annum, adjusted for contract withdrawals, which may be subject to a maximum cap on the rolled up amount. The Company has discontinued this option for new sales).

A number of other versions of death benefits were offered previously but sales were discontinued. For contracts issued prior to January 1, 2000, most contracts with enhanced death benefit guarantees were reinsured to third party reinsurers to mitigate the risk produced by such guaranteed death benefits. For contracts issued after December 31, 1999, the Company instituted a variable annuity guarantee hedging program in lieu of reinsurance. The variable annuity guarantee hedging program is based on the Company entering into derivative positions to offset exposures to guaranteed minimum death benefits due to adverse changes in the equity markets.

As of March 31, 2010 and December 31, 2009, the guaranteed value of these death benefits in excess of account values was estimated to be $9.4 billion and $10.3 billion, respectively, before reinsurance. The decrease was primarily driven by the increase in account values due to favorable equity market performance in 2010.

As of March 31, 2010, the guaranteed value of minimum guaranteed death benefits in excess of account values, net of reinsurance, was estimated to be $8.3 billion, of which $8.3 billion was projected to be covered by the Company’s variable annuity guarantee hedging program. As of December 31, 2009, the guaranteed value of guaranteed minimum death benefits in excess of account values, net of reinsurance, was estimated to be $9.1 billion, of which $9.1 billion was projected to be covered by the Company’s variable annuity guarantee hedging program. As of March 31, 2010 and December 31, 2009, the Company recorded a liability of $475.6 and $477.6, respectively, net of reinsurance, representing the estimated net present value of the Company’s future obligation for guaranteed minimum death benefits in excess of account values.

Guaranteed Living Benefits:

§	Guaranteed Minimum Income Benefit (“GMIB”) - Guarantees a minimum income payout, exercisable each contract anniversary on or after a specified date, in most cases the 10th rider anniversary. The Company has discontinued this option for new sales.

Guaranteed Minimum Withdrawal Benefit (“GMWB”) - Guarantees an annual withdrawal amount for life that is calculated as a percentage of the notional amount that equals premium at the time of contract issue and may increase over time based on a number of factors, including a rollup percentage (7%, 6%, 5%, or 0% depending on versions of the benefit) and ratchet frequency (primarily annual or quarterly depending on versions). The percentage used to determine the guaranteed annual withdrawal amount may vary by age at first withdrawal and depends on versions of the benefit. A joint life-time withdrawal benefit option is available to include coverage for spouses. Most versions of the withdrawal benefit have reset and/or step-up features that may increase the guaranteed withdrawal amount in certain conditions. Earlier versions of the withdrawal benefit guarantee that annual withdrawals of up to 7.0% of eligible premiums may be made until eligible premiums previously paid by the contractowner are returned, regardless of account value performance. Asset allocation requirements apply at all times where withdrawals are guaranteed for life.

Guaranteed Minimum Accumulation Benefit (“GMAB”) - Guarantees that the account value will be at least 100% of the eligible premiums paid by the contractowner after 10 years, net of any contract withdrawals (GMAB 10). In the past, the Company offered an alternative design that guaranteed the account value to be at least 200% of the eligible premiums paid by contractowners after 20 years (GMAB 20). The Company has discontinued both of these options for new sales.

Effective June 30, 2008, the Company reinsured most of its living benefit guarantees to SLDI, an affiliated reinsurer, to mitigate the risk produced by such benefits. This reinsurance agreement covers all of the GMIBs, as well as the GMWBs with lifetime guarantees (“the “Reinsured living benefits”). The GMABs and the GMWBs without lifetime guarantees (the “Non-reinsured living benefits”) are not covered by this reinsurance.

Prior to June 30, 2008, the Company utilized a variable annuity guarantee hedging program to mitigate risks associated with all living benefits. The Non-reinsured living benefits are still covered by the Company’s variable annuity guarantee hedging program.

For the Reinsured living benefits, as of March 31, 2010 and December 31, 2009, the guaranteed value of these benefits in excess of account values was estimated to be $8.4 billion and $8.8 billion, respectively, before reinsurance.

For the Non-reinsured living benefits, as of March 31, 2010 and December 31, 2009, the guaranteed value of these benefits in excess of account values was $84.4 and $104.9, respectively. The Company recorded a liability representing the estimated net present value of its future obligations for these benefits of $55.1 and $73.9 as of March 31, 2010 and December 31, 2009, respectively.

Variable Annuity Guarantee Hedging Program: In order to hedge equity risk associated with non-reinsured GMDBs and guaranteed living benefits, the Company enters into futures positions or put options on various public market equity indices chosen to closely replicate contractowner variable fund returns. The Company uses market consistent valuation techniques to establish its derivative position and to rebalance the derivative positions in response to market fluctuations. One aspect of the hedging program is designed to offset changes related to equity experience in the liability and to pay excess claims not covered by the contractowner account value. The Company also administers a hedging program that mitigates not only equity risk but also the interest rate and equity volatility risk associated with its Principal Guard GMWB product issued in 2005 and beyond. This hedge strategy primarily involves entering into put options. The derivatives under the variable annuity guarantee hedging programs do not qualify for hedge accounting under accounting principles generally accepted in the United States (“US GAAP”).

Other risks posed by market conditions, such as the majority of the Company’s equity volatility and interest rate risk, and risks posed by contractowner experience, such as surrender and mortality experience deviations, are not explicitly mitigated by this program. In addition, certain funds, where there is no replicating market index or where hedging is not appropriate, are excluded from the program.

For those risks addressed by the variable annuity guarantee hedging program, the Company is exposed to the risk that the market indices will not adequately replicate actual contractowner variable fund growth. Any differences between actual results and the market indices result in income volatility.

Repurchase Agreements

Securities Lending

Income Taxes

Estimated liabilities have been provided for uncertain tax benefits related to Internal Revenue Service (“IRS”) tax audits and state tax exams that have not been completed. The current payable of $37.9 may be reduced in less than one year, upon completion of such audits and exams. The timing of the payment of the remaining allowance of $26.3 cannot be reliably estimated.

Recently Adopted Accounting Standards

(See the Recently Adopted Accounting Standards and New Accounting Pronouncements footnotes to the condensed financial statements.)

Recently Enacted Legislation

In March 2010, President Obama signed the Patient Protection and Affordable Care Act (“PPACA”) into law, as well as signed the Health Care and Education Reconciliation Act of 2010 (“HCERA”), which amends certain aspects of the PPACA (collectively, the “Act”). The Act will require employers to make certain conforming changes to retiree health benefits provided in order to comply with the new legislation. Significant provisions of the Act include expanded benefit mandates, an excise tax on health insurance coverage exceeding a threshold amount, and a temporary reinsurance program for eligible employment-based plans. The effect of the Act on the Company's projected benefit obligation and cost depends on finalization of related regulatory requirements; however, the impact is not expected to be material. The Company will continue to monitor and assess the effect of the Act as the regulatory requirements are finalized.

Legislative and Regulatory Initiatives

Legislative proposals, which have been or may again be considered by Congress, include changing the taxation of annuity benefits, changing the tax treatment of insurance products relative to other financial products, and changing life insurance company taxation. Some of these proposals, if enacted, could have a material adverse effect on life insurance, annuity, and other retirement savings product sales, while others could have a material beneficial effect. The Administration’s recent proposal to facilitate “partial annuitizations,” if enacted, could encourage use of annuity products, while its proposal to disallow insurance companies a portion of the dividends received deduction in connection with variable product separate accounts could increase the cost of such products to policyholders. Regarding company taxes, the Administration’s recently proposed “Financial Crisis Responsibility Fee”, to be imposed on large financial institutions, possibly including life insurers, could increase costs if enacted. The SEC has a regulatory initiative underway to improve fee disclosure in financial products and has also adopted Regulation 151A, with an original effective date of January 12, 2011. The new rule will have the effect of requiring the registration of fixed index annuity products. The SEC recently proposed an effective date two years following Rule 151A’s reissue in the Federal Register.

In connection with the March 31, 2009 transfer by ING of an economic interest in 80% of its Alt-A RMBS portfolio to the Dutch State, the EC had a six month period to review and assess the competitive impact of the transaction. On October 26, 2009, ING announced the key components of the final Restructuring Plan ING submitted to the EC as part of the process to receive EC approval for the state aid granted to ING by the Dutch State in the form of EUR 10 billion Core Tier 1 securities issued on November 12, 2008 and the ING-Dutch State Transaction. As part of the Restructuring Plan, ING has agreed to separate its banking and insurance businesses by 2013. ING intends to achieve this separation by the divestment of all insurance and investment management operations, including the Company. In November 2009, the Restructuring Plan received formal EC approval and the separation of insurance and banking operations and other components of the Restructuring Plan were approved by ING shareholders. On January 28, 2010, ING announced the filing of its appeal with the General Court of the European Union against specific elements of the EC’s decision regarding the ING Restructuring Plan. Despite the appeal, ING is committed to executing the formal separation of banking and insurance and the divestment of the latter. In its appeal, ING contests the state aid calculation the EC applied to the reduction in repayment premium agreed upon by ING and the Dutch State in connection with ING’s December 2009 repayment of the first EUR 5 billion of Core Tier securities. ING is also appealing the disproportionality of the price leadership restrictions imposed on ING with respect to the European financial sector.

Item 4.

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 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.

There has not been any change in the internal controls over financial reporting of the Company that occurred during the period covered by this report that has materially affected or is reasonably likely to materially affect these internal controls.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

ING USA Annuity and Life Insurance Company ("the Company") is involved in threatened or pending lawsuits/arbitrations arising from the normal conduct of business. Due to the climate in insurance and business litigation/arbitrations, suits against the Company sometimes include claims for substantial compensatory, consequential, or punitive damages, and other types of relief. Moreover, certain claims are asserted as class actions, purporting to represent a group of similarly situated individuals. While it is not possible to forecast the outcome of such lawsuits/arbitrations, in light of existing insurance, reinsurance, and established reserves, it is the opinion of management that the disposition of such lawsuits/arbitrations will not have a materially adverse effect on the Company’s operations or financial position.

As with many financial services companies, the Company and its affiliates have received 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 and of the financial services industry. In each case, the Company and its affiliates have been and are providing full cooperation. For information on the focus of such regulatory inquiries and the actions undertaken by ING in connection therewith, see the “Other Regulatory Matters” section of “Management’s Narrative Analysis of the Results of Operations and Financial Condition” included in the Company’s 2009 Annual Report on Form 10-K filed on March 31, 2010 (SEC File No. 001-32625).

Item 1A.

Risk Factors

The following should be read in conjunction with and supplements and amends the risk factors that may affect the Company’s business or operations described under “Risk Factors” in Part I, Item 1A. of the 2009 Annual Report on Form 10-K.

On April 9, 2009, the Company's ultimate parent, ING Groep N.V. (“ING”) announced a global business strategy which identified certain core and non-core businesses and geographies, stated ING's intention to explore divestiture of non-core businesses over time, withdraw from certain non-core geographies, limit future acquisitions and implement enterprise-wide expense reductions. In addition, ING’s issuance of EUR 10 billion Core Tier 1 securities to the Dutch State and the transfer by ING of an economic interest in 80% of its Alt-A RMBS portfolio to the Dutch State in the first quarter of 2009 were subject to review by the European Commission (the “EC”), under its state aid rules.

On October 26, 2009, ING announced the key components of the final restructuring plan (the “Restructuring Plan”) ING submitted to the EC as part of the EC state aid review and approval process. As part of the Restructuring Plan, ING has agreed to separate its banking and insurance businesses by 2013. This separation will be achieved over the next four years by ING’s divestment of its insurance and investment management operations, including the Company. ING has announced that it will explore all options for implementing the separation, including initial public offerings, sales or combinations thereof. In November 2009, the Restructuring Plan received formal EC approval and the separation of insurance and banking operations and other components of the Restructuring Plan were approved by ING shareholders. ING also reached an agreement with the Dutch State to alter the repayment terms of the Core Tier 1 securities in order to facilitate early repayment and ING repurchased in December 2009 EUR 5 billion of the total EUR 10 billion issued to the Dutch State. On January 28, 2010, ING announced the filing of an appeal with the General Court of the European Union against specific elements of the EC's decision regarding the Restructuring Plan. Despite the appeal, ING is committed to executing the formal separation of banking and insurance and the divestment of the latter.

Various uncertainties and risks are associated with the implementation of various aspects of ING's global business strategy, and with the implementation of the Restructuring Plan's commitment to separate its insurance and banking businesses, any of which could have an adverse impact on the Company’s business opportunities, results of operations and financial condition. Those uncertainties and risks include, but are not limited to: diversion of management’s attention; difficulty in retaining or attracting employees; negative impact on relationships with distributors and customers; policyholder retention; rating agency downgrades; unforeseen difficulties in transitioning or divesting non-core businesses and geographies; uncertainties regarding the structure and composition of Restructuring Plan separation strategies; and potential implementation challenges or execution risks, and possible increased operating costs related to the Restructuring Plan separation strategies including development of corporate center and other functions previously provided by ING; potential rebranding initiatives; limitations on access to credit and potential increases in the cost of credit for the insurance businesses undergoing such separation from ING’s banking businesses.

Lastly, the capital infusion of EUR 10 billion by the Dutch State resulted in a cumulative change of ownership of ING of approximately 42%. Future increases in capital or other changes of ownership under the Restructuring Plan may trigger Section 382 of the United States Internal Revenue Code which is a loss limitation rule the general purpose of which is to prevent trafficking in tax losses. If applicable, this limitation rule would restrict ING’s ability to use its losses. The rule is triggered when the ownership of a company changes by more than 50% (measured by value) on a cumulative basis in any three year period. If triggered, restrictions may be imposed on the future use of net operating losses as well as certain losses that are built into the assets of the impacted company at the time of the ownership change and that are realized within the next five years. If this should occur, it may adversely affect the net results or equity of ING.

In response to the financial crisis affecting the banking system and financial markets, the U.S. federal government has passed new legislation in an effort to stabilize the financial markets, including the American Recovery and Reinvestment Act of 2009 and the Emergency Economic Stabilization Act of 2008. The Company cannot predict with any certainty the effect these actions or any other legislative initiatives will have on the financial markets or on the Company’s business, results of operations, financial condition, and liquidity. This legislation and other proposals or actions may also have other consequences, including material effects on interest rates, which could materially affect the Company’s investments, results of operations and liquidity in ways that are not predictable. The failure to effectively implement this legislation and related proposals or actions could also result in material adverse effects, notably increased constraints on the liquidity available in the banking system and financial markets and increased pressure on stock prices, any of which could materially and adversely affect the Company’s results of operations, financial condition and liquidity. In the event of future material deterioration in business conditions, the Company may need to raise additional capital or consider other transactions to manage its capital position or liquidity.

The Obama Administration and Congress have made various proposals for financial services regulatory reform. While the final form of this legislation is still unknown, the various proposals under consideration include a federal insurance office within the Treasury Department to monitor all aspects of the insurance industry. The proposals under consideration in Congress also include special regulatory and insolvency regimes, including the possibility for higher capital, prudential and liquidity standards for financial institutions that are deemed to be systemically significant. If ING were determined to be a systemically important company, ING and its subsidiaries could become subject to such enhanced supervision and prudential regulatory standards to be developed by systemic regulators in consultation with primary functional regulators. Although existing state insurance regulators would remain the primary regulators of the Company and its U.S. insurance company affiliates, federal regulators could be granted the authority to provide its own level of oversight, including subjecting ING, the Company and other ING subsidiaries to: increased capital and liquidity requirements and risk management standards; regulatory reporting to, and supervision and examination by, a specifically denominated federal regulator; and a prompt corrective action regime in the event of undercapitalization. The Obama Administration, members of Congress and Federal Banking regulators have also suggested new or increased taxes or assessments on banks and financial firms to mitigate the costs to taxpayers of various government programs established to address the financial crisis and to offset the costs of potential future crises. In addition, the proposed legislation also includes new conditions on the writing and trading of certain standardized and non-standardized derivatives. Although no financial services regulatory reform legislation has yet been enacted or regulations promulgated, any such requirements if adopted in the future could have unintended consequences for the financial services industry, including the Company; make it more expensive for the Company to conduct its business; subject the Company to greater regulatory scrutiny and have a material effect on the Company’s results of operations or financial condition.

In addition, the Company is subject to extensive laws and regulations that are administered and/or enforced by a number of different governmental authorities and non-governmental self-regulatory bodies, including state insurance regulators, state securities administrators, the National Association of Insurance Commissioners, the Securities and Exchange Commission, Financial Industry Regulatory Authority, Financial Accounting Standards Board, and state attorneys general. In light of the current financial crisis, some of these authorities are or may in the future consider enhanced or new requirements intended to prevent future crises or otherwise assure the stability of institutions under their supervision. These authorities may also seek to exercise their supervisory or enforcement authority in new or more robust ways. All of these possibilities, if they occurred, could affect the way the Company conducts its business and manages capital, and may require the Company to satisfy increased capital requirements, any of which in turn could materially affect the Company’s results of operations, financial condition and liquidity.

Item 6. Exhibits

See Exhibit Index on pages 98-99 hereof.

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) 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.

May 7, 2010 (Date)	ING USA Annuity and Life Insurance Company (Registrant)
	By: /s/	Ewout L. Steenbergen
		Ewout L. Steenbergen Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

	ING USA ANNUITY AND LIFE INSURANCE COMPANY (the “Company”)
	Exhibit Index

Exhibit Number	Description of Exhibit

2.1	Agreement and Plan of Merger dated June 25, 2003, by and between USG Annuity & Life Company, United Life & Annuity Insurance Company, Equitable Life Insurance Company of Iowa and Golden American Life Insurance Company, incorporated by reference in Exhibit 99-8 in the Company’s Form 8K filed with the SEC on January 2, 2004 (File No. 333-87270).

3.1	Restated Articles of Incorporation Providing for the Redomestication of Golden American Life Insurance Company dated July 2 and 3, 2003, effective January 1, 2004, incorporated by reference to Company’s 10-K, as filed with the SEC on March 29, 2004 (File No. 033-87270).

3.2	Amendment to Articles of Incorporation Providing for the Name Change of Golden American Life Insurance Company dated November 20, 2003, effective January 1, 2004, incorporated by reference to the Company’s 10-K, as filed with the SEC on March 29, 2004 (File No. 033-87270).

3.3	Amendment to Articles of Incorporation Providing for the Change in Purpose and Powers of ING USA Annuity and Life Insurance Company dated March 3 and 4, 2004, effective March 11, 2004, incorporated by reference to the Company’s 10-Q, as filed with the SEC on May 17, 2004 (File No. 033-87270).

3.4	Amended and Restated By-Laws of ING USA Annuity and Life Insurance Company effective January 1, 2005, incorporated by reference to the Company’s Form 10-Q, as filed with the SEC on May 13, 2005 (File No. 033-87270).

4.1	Single Premium Deferred Modified Guaranteed Annuity Contract, Single Premium Deferred modified Guaranteed Annuity Master Contract, and Single Premium Deferred Modified Guaranteed Annuity Certificate - Incorporated herein by reference to Pre-Effective Amendment No. 1 to Registration Statement on Form S-1 for Golden American Life Insurance Company as filed with the SEC on February 8, 2002 (File No. 333-67660).

4.2	Single Premium Deferred Modified Guaranteed Annuity Master Contract and Single Premium Deferred Modified guaranteed Annuity Certificate – Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form S-1 for Golden American Life Insurance Company, as filed with the SEC on September 13, 2000 (File No. 333-40596).

4.3	Individual Retirement Annuity Rider; Roth Individual Retirement Annuity Rider; Simple Retirement Account Rider; and 403(b) Rider - Incorporated herein by reference to Post-Effective Amendment No. 34 to Registration Statement on Form N-4 for Golden American Life Insurance Company Separate Account B, as filed with the SEC on April 15, 2003 (File No. 033-23351).

4.4	403(b) Rider - Incorporated herein by reference to Initial Registration Statement on Form S-2 for Golden American Life Insurance Company, as filed with the SEC on April 15, 2003 (File No. 333-104547).

4.5	Single Premium Deferred Equity Indexed Modified Guaranteed Annuity Contract; Single Premium Deferred Modified Guaranteed Annuity Group Master Contract; and Single Premium Deferred Equity Indexed Modified Guaranteed Annuity Certificate, - Incorporated herein by reference to Pre-Effective Amendment No. 1 to Registration Statement on Form S-2 for ING USA Annuity and Life Insurance Company, as filed with the SEC on August 13, 2004 (File No. 333-116137).

4.6	Interest in Fixed Account I under Variable Annuity Contracts - Incorporated herein by reference to: Post-Effective Amendment No. 12 to Registration Statement on Form N-4 for Golden American Life Insurance Company Separate Account B, as filed with the SEC on April 23, 1999 (File Nos. 033-59261, 811-5626); Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 for Golden American life Insurance Company, as filed with the SEC on April 23, 1999 (File Nos. 333-28769, 811-5626); and Incorporated by reference to Pre-Effective Amendment No. 1 to Registration statement on Form N-4 for Golden American Life Insurance Company Separate Account B, as filed with the SEC on June 24, 2000 (File Nos. 333-33914, 811-5626).

4.7	Interests in Fixed Account II under Variable Annuity Contracts - Incorporated herein by reference to Post-Effective Amendment No. 7 to Registration Statement on Form N-4 for Separate Account B of Golden American Life Insurance Company as filed with the SEC on October 2, 2000 (File No. 333-28679, 811-5626), Incorporated herein by reference to Post-Effective Amendment No. 2 to Registration Statement on Form N-4 for Separate Account B of Golden American Life Insurance Company as filed with the SEC on February 26, 2001 (File Nos. 333-30180, 811-5626), Incorporated herein by reference to Post-Effective Amendment No. 5 to Registration Statement on Form N-4 for Separate Account B of Golden American Life Insurance Company as filed with the SEC on April 23, 1999 (File Nos. 333-28755, 811-5626), Incorporated herein by reference to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 for Separate Account B of Golden American Life Insurance Company as filed with the SEC on April 23, 1999 (File Nos. 333-66757, 811-5626), Incorporated herein by reference to Pre-Effective Amendment No. 1 to Registration Statement on Form N-4 for Separate Account B of Golden American Life Insurance Company as filed with the SEC on October 26, 2001 (File Nos. 333-63692, 811-5626), Incorporated herein by reference to Pre-Effective Amendment No. 1 to Registration Statement on Form N-4 for Separate Account B of Golden American Life Insurance Company as filed with the SEC on December 11, 2001 (File Nos. 333-70600, 811-5626), Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 for Golden American Life Insurance Company Separate Account B, as filed with the SEC on April 16, 2003 (File Nos. 333-90516, 811-5626) and Incorporated by reference to Pre-Effective Amendment No. 1 to Registration Statement on Form N-4 for Golden American Life Insurance Company Separate Account B, as filed with the SEC on July 3, 2003 (File Nos. 333-101481, 811-5626).

4.8	Interest in the Guaranteed Account under Variable Annuity Contracts - Incorporated herein by reference to Pre-Effective Amendment No. 1 to Registration Statement on Form S-2 for Golden American Life Insurance Company, as filed with the SEC on June 29, 2001 (File No. 333-57212).

10+	Third Agreement to Lease Agreement, dated February 11, 2010, between ING USA Annuity and Life Insurance Company and Lexington Lion Dunwoody, L.P.

12+	Computation of Ratio of Earnings to Fixed Charges, filed herewith.

31.1+	Certificate of Ewout L. Steenbergen pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2+	Certificate of Michael S. Smith pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1+	Certificate of Ewout L. Steenbergen pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2+	Certificate of Michael S. Smith pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

+ Filed herewith.

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. junior Bad

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