Voya Insurance & Annuity 10-Q 2013 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

——————————————————————

FORM 10-Q

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

For the quarterly period ended March 31, 2013

OR

o 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, 333-133152

ING USA ANNUITY AND LIFE INSURANCE COMPANY

(Exact name of registrant as specified in its charter)

Iowa	41-0991508
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
1475 Dunwoody Drive
West Chester, Pennsylvania	19380-1478
(Address of principal executive offices)	(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 ý    No o

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   ý    No   o

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    o	Accelerated filer    o
Non-accelerated filer    x	Smaller reporting company     o
(Do not check if a 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 o  No ý

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 250,000 shares of Common Stock, $10 par value, as of May 10, 2013, 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).

1

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, 2013

INDEX
		PAGE
PART I.	FINANCIAL INFORMATION (UNAUDITED)
Item 1.	Financial Statements:
	Condensed Balance Sheets	4
	Condensed Statements of Operations	6
	Condensed Statements of Comprehensive Income	7
	Condensed Statements of Changes in Shareholder’s Equity	8
	Condensed Statements of Cash Flows	9
	Notes to Condensed Financial Statements	10
Item 2.	Management’s Narrative Analysis of the Results of Operations and Financial Condition	53
Item 4.	Controls and Procedures	80
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	81
Item 1A.	Risk Factors	81
Item 5.	Other Information	81
Item 6.	Exhibits	82
Signature		83
Exhibit Index		84

2

NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including "Management’s Narrative Analysis of the Results of Operations and Financial Condition," contains statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to trends in operations and financial results and the business and products of ING USA Annuity and Life Insurance Company ("the Company"), as well as other statements including words such as "anticipate," "believe," "plan," "estimate," "expect," "intend" and other similar expressions. Forward-looking statements are made based upon management’s current expectations and beliefs concerning future developments and their potential effects on us. 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. Factors that could cause such differences include, but are not limited to, those discussed in Part II., Item 1A. "Risk Factors" and in the "Forward-Looking Information/Risk Factors" in Part I., Item 2. of this Form 10-Q as well as those discussed in Part I., Item 1A. "Risk Factors" in the Company’s 2012 Annual Report on Form 10-K.

3

PART I.    FINANCIAL INFORMATION (UNAUDITED)

Item 1.    Financial Statements

ING USA Annuity and Life Insurance Company

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

Condensed Balance Sheets

March 31, 2013 (Unaudited) and December 31, 2012

(In millions, except share data)

	As of		As of
	March 31, 2013		December 31, 2012
Assets
Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost of $18,549.8 at 2013 and $18,560.6 at 2012)	$	20,386.3	$	20,586.6
Fixed maturities, at fair value using the fair value option	307.5		326.7
Equity securities, available-for-sale, at fair value (cost of $10.9 at 2013 and $26.4 at 2012)	15.2		29.8
Short-term investments	1,564.7		2,686.6
Mortgage loans on real estate, net of valuation allowance of $1.2 at 2013 and at 2012	2,867.3		2,835.0
Policy loans	100.2		101.8
Limited partnerships/corporations	165.4		166.9
Derivatives	1,172.4		1,381.3
Other investments	80.4		80.7
Securities pledged (amortized cost of $766.8 at 2013 and $684.7 at 2012)	806.0		714.0
Total investments	27,465.4		28,909.4
Cash and cash equivalents	396.1		295.6
Short-term investments under securities loan agreement, including collateral delivered	205.0		138.9
Accrued investment income	212.5		208.7
Receivable for securities sold	16.7		7.5
Premium receivable	26.6		30.9
Deposits and reinsurance recoverable	3,821.7		4,014.7
Deferred policy acquisition costs, Value of business acquired and Sales inducements to contract owners	3,095.1		3,738.2
Due from affiliates	30.0		37.0
Other assets	369.8		370.0
Assets held in separate accounts	41,050.9		39,799.1
Total assets	$	76,689.8	$	77,550.0

The accompanying notes are an integral part of these Condensed Financial Statements.
	4

ING USA Annuity and Life Insurance Company

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

Condensed Balance Sheets

March 31, 2013 (Unaudited) and December 31, 2012

(In millions, except share data)

	As of			As of
	March 31, 2013			December 31, 2012
Liabilities and Shareholder’s Equity
Future policy benefits and contract owner account balances	$	26,685.7		$	27,094.2
Payable for securities purchased	53.1			0.2
Payables under securities loan agreement, including collateral held	613.5			905.5
Long-term debt	435.0			435.0
Due to affiliates	113.9			64.1
Funds held under reinsurance treaties with affiliates	2,976.8			4,082.9
Derivatives	669.8			798.6
Current income tax payable to Parent	37.6			22.6
Deferred income taxes	79.1			32.9
Other liabilities	173.6			182.8
Liabilities related to separate accounts	41,050.9			39,799.1
Total liabilities	72,889.0			73,417.9
Shareholder’s equity:
Common stock (250,000 shares authorized, issued and outstanding; $10 per share value)	2.5			2.5
Additional paid-in capital	5,755.5			5,755.5
Accumulated other comprehensive income (loss)	639.5			634.2
Retained earnings (deficit)	(2,596.7		)	(2,260.1		)
Total shareholder’s equity	3,800.8			4,132.1
Total liabilities and shareholder’s equity	$	76,689.8		$	77,550.0

The accompanying notes are an integral part of these Condensed Financial Statements.
	5

ING USA Annuity and Life Insurance Company

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

Condensed Statements of Operations

For the Three Months Ended March 31,2013 and 2012 (Unaudited)

(In millions)

	Three Months Ended March 31,
	2013			2012
Revenues:
Net investment income	$	302.7		$	346.0
Fee income	200.8			207.9
Premiums	115.8			112.5
Net realized capital gains (losses):
Total other-than-temporary impairments	(1.2		)	(3.9		)
Less: Portion of other-than-temporary impairments recognized in Other comprehensive income (loss)	—			(0.1		)
Net other-than-temporary impairments recognized in earnings	(1.2		)	(3.8		)
Other net realized capital gains (losses)	(776.0		)	(1,309.9		)
Total net realized capital gains (losses)	(777.2		)	(1,313.7		)
Other revenue	6.9			8.1
Total revenues	(151.0		)	(639.2		)
Benefits and expenses:
Interest credited and other benefits to contract owners	(608.4		)	(804.6		)
Operating expenses	109.5			111.4
Net amortization of deferred policy acquisition costs and value of business acquired	718.4			127.3
Interest expense	7.0			7.8
Other expense	5.7			11.2
Total benefits and expenses	232.2			(546.9		)
Income (loss) before income taxes	(383.2		)	(92.3		)
Income tax expense (benefit)	(46.6		)	(32.8		)
Net income (loss)	$	(336.6	)	$	(59.5	)

The accompanying notes are an integral part of these Condensed Financial Statements.
	6

ING USA Annuity and Life Insurance Company

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

Condensed Statements of Comprehensive Income

For the Three Months Ended March 31,2013 and 2012 (Unaudited)

(In millions)

	Three Months Ended March 31,
	2013			2012
Net income (loss)	$	(336.6	)	$	(59.5	)
Other comprehensive income (loss), before tax:
Unrealized gains/losses on securities	129.1			261.3
Other-than-temporary impairments	3.9			5.6
Other comprehensive income (loss), before tax	133.0			266.9
Income tax expense (benefit) related to items of other comprehensive income (loss)	127.7			90.5
Other comprehensive income (loss), after tax	5.3			176.4
Comprehensive income (loss)	$	(331.3	)	$	116.9

The accompanying notes are an integral part of these Condensed Financial Statements.
	7

ING USA Annuity and Life Insurance Company

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

Condensed Statements of Changes in Shareholder’s Equity

For the Three Months Ended March 31,2013 and 2012 (Unaudited)

(In millions)

	Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Deficit)			Total Shareholder's Equity
Balance at January 1, 2012	$	2.5	$	5,971.6		$	245.1	$	(2,083.1	)	$	4,136.1
Comprehensive income (loss):
Net income (loss)	—		—			—		(59.5		)	(59.5		)
Other comprehensive income (loss), after tax	—		—			176.4		—			176.4
Total comprehensive income (loss)											116.9
Employee related benefits	—		33.8			—		—			33.8
Balance at March 31, 2012	$	2.5	$	6,005.4		$	421.5	$	(2,142.6	)	$	4,286.8
Balance at January 1, 2013	$	2.5	$	5,755.5		$	634.2	$	(2,260.1	)	$	4,132.1
Comprehensive income (loss):
Net income (loss)	—		—			—		(336.6		)	(336.6		)
Other comprehensive income (loss), after tax	—		—			5.3		—			5.3
Total comprehensive income (loss)											(331.3		)
Employee related benefits	—		—		*	—		—			—			*
Balance at March 31, 2013	$	2.5	$	5,755.5		$	639.5	$	(2,596.7	)	$	3,800.8
*Less than $0.1.

The accompanying notes are an integral part of these Condensed Financial Statements.
	8

ING USA Annuity and Life Insurance Company (A wholly owned subsidiary of Lion Connecticut Holdings Inc.) Condensed Statements of Cash Flows For the Three Months Ended March 31, 2013 and 2012 (Unaudited) (In millions)
	Three Months Ended March 31,
	2013			2012
Net cash provided by operating activities	$	353.2		$	532.8
Cash Flows from Investing Activities:
Proceeds from the sale, maturity, disposal or redemption of:
Fixed maturities	$	1,273.8		$	2,531.8
Equity securities, available-for-sale	0.7			1.8
Mortgage loans on real estate	187.2			77.9
Limited partnerships/corporations	3.8			6.8
Acquisition of:
Fixed maturities	(1,295.1		)	(1,750.3		)
Equity securities, available-for-sale	(0.5		)	(2.6		)
Mortgage loans on real estate	(219.6		)	(34.0		)
Limited partnerships/corporations	(1.7		)	(11.9		)
Derivatives, net	(986.4		)	(1,127.9		)
Short-term investments, net	1,121.9			608.6
Loan-Dutch State obligation, net	—			68.0
Policy loans, net	1.6			3.4
Collateral (delivered) received, net	(358.1		)	(250.9		)
Other, net	—			0.1
Purchases of fixed assets, net	(0.7		)	—
Net cash (used in) provided by investing activities	(273.1		)	120.8
Cash Flows from Financing Activities:
Deposits received for investment contracts	1,681.0			1,564.7
Maturities and withdrawals from investment contracts	(1,755.6		)	(2,063.7		)
Reinsurance recoverable on investment contracts	95.0			(151.0		)
Short-term loans to affiliates, net	—			165.1
Net cash provided by (used in) financing activities	20.4			(484.9		)
Net increase in cash and cash equivalents	100.5			168.7
Cash and cash equivalents, beginning of period	295.6			121.2
Cash and cash equivalents, end of period	$	396.1		$	289.9

The accompanying notes are an integral part of these Condensed Financial Statements.
	9

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

1.    Business, Basis of Presentation and Significant Accounting Policies

Business

ING USA Annuity and Life Insurance Company ("ING USA" or "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.

In 2009, ING Groep N.V. ("ING Group" or "ING") announced the anticipated separation of its global banking and insurance businesses, including the divestiture of ING U.S., Inc., which together with its subsidiaries, including the Company, constitutes ING's U.S.-based retirement, investment management and insurance operations. On May 7, 2013, ING U.S., Inc. completed the offering of 65,192,307 shares of its common stock, including the issuance and sale by ING U.S., Inc. of 30,769,230 shares of common stock and the sale by ING Insurance International B.V. ("ING International"), an indirect wholly owned subsidiary of ING Group and previously the sole stockholder of ING U.S., Inc., of 34,423,077 shares of outstanding stock of ING U.S., Inc. (collectively, the "IPO"). Following the IPO, ING International owns approximately 75% of the outstanding common stock of ING U.S., Inc. (before any exercise of the underwriters' option to acquire from ING International up to an additional 9,778,846 shares of ING U.S., Inc. common stock).

ING USA is a direct, wholly owned subsidiary of Lion Connecticut Holdings Inc. ("Lion" or "Parent"), which is a direct, wholly owned subsidiary of ING U.S., Inc. Following the IPO, ING International owns approximately 75% of the common stock of ING U.S., Inc. ING International is a wholly owned subsidiary of ING Verzekeringen N.V., which is a wholly owned subsidiary of ING Insurance Topholding N.V., which is a wholly owned subsidiary of ING Group, the ultimate parent company. 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."

On April 11, 2013, ING U.S., Inc. announced plans to rebrand in the future as Voya Financial. The Voya Financial identity is reflected in the ING U.S., Inc.'s new ticker symbol (NYSE: VOYA).

The Company offers various insurance products, including immediate and deferred fixed annuities. The Company's fixed annuity products are distributed by national and regional brokerage and 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 retail variable annuity products in March of 2010, as part of a global business strategy and risk reduction plan. New amounts will continue to be deposited on ING USA variable annuities as add-on premiums to existing contracts. The Company has historically issued guaranteed investment contracts and funding agreements (collectively referred to as "GICs"), primarily to institutional investors and corporate benefit plans. In 2009, the Company made a strategic decision to run-off the assets and liabilities in the GIC business over time. New GIC contracts may be issued on a limited basis to replace maturing contracts. The Company has one operating segment.

Basis of Presentation

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

The accompanying Condensed Financial Statements reflect all adjustments (including normal, recurring adjustments) necessary to present fairly the financial position of the Company as of March 31, 2013, its results of operations, comprehensive income, changes in shareholder's equity and cash flows for the three months ended March 31, 2013 and 2012, in conformity with U.S. GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2012 Balance Sheet is from the audited Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012,

10

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

filed with the SEC, which included all disclosures required by U.S. GAAP. Therefore, these Condensed Financial Statements should be read in conjunction with the Financial Statements of the Company included in the 2012 Annual Report on Form 10-K.

Adoption of New Pronouncements

Disclosures about Offsetting Assets and Liabilities

In December 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-11, "Balance Sheet (ASC Topic 210): Disclosures about Offsetting Assets and Liabilities" ("ASU 2011-11"), which requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position, as well as instruments and transactions subject to an agreement similar to a master netting arrangement. In addition, the standard requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements.

In January 2013, the FASB issued ASU 2013-01, "Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities" ("ASU 2013-01"), which clarifies that the scope of ASU 2011-11 applies to derivatives accounted for in accordance with ASU Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements and securities borrowing and securities lending transactions that are either offset in accordance with Section 210-20-45 or Section 815-10-45 or subject to an enforceable master netting arrangement or similar agreement.

The provisions of ASU 2013-01 and ASU 2011-11 were adopted retrospectively by the Company on January 1, 2013. The adoption had no effect on the Company's financial condition, results of operations, or cash flows as the pronouncement only pertains to additional disclosure. The disclosures required by ASU 2011-11 and ASU 2013-01 are included in the Derivative Financial Instruments Note to these Condensed Financial Statements.

Disclosures about Amounts Reclassified out of AOCI

In January 2013, the FASB issued ASU 2013-02, "Comprehensive Income (ASC Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income" ("ASU 2013-02"), which requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts.

The provisions of ASU 2013-02 were adopted by the Company on January 1, 2013. The adoption had no effect on the Company's financial condition, results of operations, or cash flows as the pronouncement only pertains to additional disclosure. The disclosures required by ASU 2013-02, including comparative period disclosures, are included in the Accumulated Other Comprehensive Income (Loss) Note to these Condensed Financial Statements.

Future Adoption of Accounting Pronouncements

Joint and Several Liability Arrangements

In February 2013, the FASB issued ASU 2013-04, "Liabilities (ASC Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date” ("ASU 2013-04"), which requires an entity to measure obligations resulting from joint and several liable arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of (1) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (2) any additional amount it expects to pay on behalf of its co-obligors. ASU 2013-04 also requires an entity to disclose the nature and amount of the obligation, as well as other information about those obligations.

The provisions of ASU 2013-04 are effective for years and interim periods within those years, beginning after December 15, 2013. The amendments should be applied retrospectively for those obligations resulting from joint and several liability arrangements that exist at the beginning of an entity's year of adoption. The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2013-04.

11

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

2.Investments

Fixed Maturities and Equity Securities

Available-for-sale and fair value option ("FVO") fixed maturities and equity securities were as follows as of March 31, 2013:

	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Embedded Derivatives(2)			Fair Value		OTTI(3)
Fixed maturities:
U.S. Treasuries	$	1,633.2	$	77.9	$	—	$	—		$	1,711.1	$	—
U.S. government agencies and authorities	18.3		3.8		—		—			22.1		—
State, municipalities and political subdivisions	50.1		7.4		0.3		—			57.2		—
U.S. corporate securities	9,363.4		929.0		18.5		—			10,273.9		6.2
Foreign securities(1):
Government	401.5		28.4		4.0		—			425.9		—
Other	4,420.5		436.5		10.6		—			4,846.4		—
Total foreign securities	4,822.0		464.9		14.6		—			5,272.3		—
Residential mortgage-backed securities:
Agency	1,032.0		132.5		4.4		34.8			1,194.9		—
Non-Agency	505.8		63.4		16.7		13.6			566.1		54.9
Total Residential mortgage-backed securities	1,537.8		195.9		21.1		48.4			1,761.0		54.9
Commercial mortgage-backed securities	1,551.1		193.7		2.2		—			1,742.6		—
Other asset-backed securities	648.2		28.6		14.1		(3.1		)	659.6		0.3
Total fixed maturities, including securities pledged	19,624.1		1,901.2		70.8		45.3			21,499.8		61.4
Less: Securities pledged	766.8		40.3		1.1		—			806.0		—
Total fixed maturities	18,857.3		1,860.9		69.7		45.3			20,693.8		61.4
Equity securities	10.9		4.3		—		—			15.2		—
Total fixed maturities and equity securities investments	$	18,868.2	$	1,865.2	$	69.7	$	45.3		$	20,709.0	$	61.4

⁽¹⁾ Primarily U.S. dollar denominated.

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

⁽³⁾ Represents other-than-temporary impairments ("OTTI") reported as a component of Other comprehensive income.

12

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Available-for-sale and FVO fixed maturities and equity securities were as follows as of December 31, 2012:

	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Embedded Derivatives(2)			Fair Value		OTTI(3)
Fixed maturities:
U.S. Treasuries	$	1,218.9	$	92.6	$	—	$	—		$	1,311.5	$	—
U.S. government agencies and authorities	19.3		4.4		—		—			23.7		—
State, municipalities and political subdivisions	80.1		9.9		—		—			90.0		—
U.S. corporate securities	9,511.8		1,039.6		13.9		—			10,537.5		6.5
Foreign securities(1):
Government	404.7		41.4		2.7		—			443.4		—
Other	4,473.1		469.9		19.8		—			4,923.2		—
Total foreign securities	4,877.8		511.3		22.5		—			5,366.6		—
Residential mortgage-backed securities
Agency	1,072.4		144.9		4.6		39.4			1,252.1		—
Non-Agency	544.7		68.4		26.8		15.3			601.6		58.5
Total Residential mortgage-backed securities	1,617.1		213.3		31.4		54.7			1,853.7		58.5
Commercial mortgage-backed securities	1,565.4		201.2		3.0		—			1,763.6		—
Other asset-backed securities	681.6		26.5		23.5		(3.9		)	680.7		0.3
Total fixed maturities, including securities pledged	19,572.0		2,098.8		94.3		50.8			21,627.3		65.3
Less: Securities pledged	684.7		29.8		0.5		—			714.0		—
Total fixed maturities	18,887.3		2,069.0		93.8		50.8			20,913.3		65.3
Equity securities	26.4		3.6		0.2		—			29.8		—
Total fixed maturities and equity securities investments	$	18,913.7	$	2,072.6	$	94.0	$	50.8		$	20,943.1	$	65.3

⁽¹⁾ Primarily U.S. dollar denominated.

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

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

13

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The amortized cost and fair value of fixed maturities, including securities pledged, as of March 31, 2013, are shown below by contractual maturity. Actual maturities may differ from contractual maturities as securities may be restructured, called, or prepaid. Mortgage-backed securities ("MBS") and Other asset-backed securities ("ABS") are shown separately because they are not due at a single maturity date.

	Amortized Cost		Fair Value
Due to mature:
One year or less	$	1,284.1	$	1,309.9
After one year through five years	5,124.8		5,430.4
After five years through ten years	5,825.7		6,371.5
After ten years	3,652.4		4,224.8
Mortgage-backed securities	3,088.9		3,503.6
Other asset-backed securities	648.2		659.6
Fixed maturities, including securities pledged	$	19,624.1	$	21,499.8

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

As of March 31, 2013 and December 31, 2012, the Company did not have any investments in a single issuer, other than obligations of the U.S. government and government agencies, with a carrying value in excess of 10% of the Company’s Shareholder’s equity.

The following tables set forth the composition of the U.S. and foreign corporate securities within the fixed maturity portfolio by industry category as of March 31, 2013 and December 31, 2012:

	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Fair Value
2013
Communications	$	1,074.8	$	129.5	$	0.6	$	1,203.7
Financial	1,611.7		179.8		11.6		1,779.9
Industrial and other companies	8,184.4		726.5		10.3		8,900.6
Utilities	2,514.6		289.6		6.3		2,797.9
Transportation	398.4		40.1		0.3		438.2
Total	$	13,783.9	$	1,365.5	$	29.1	$	15,120.3
2012
Communications	$	991.8	$	138.8	$	0.5	$	1,130.1
Financial	1,669.5		179.0		17.6		1,830.9
Industrial and other companies	8,393.6		839.0		5.5		9,227.1
Utilities	2,573.6		310.8		9.9		2,874.5
Transportation	356.4		41.9		0.2		398.1
Total	$	13,984.9	$	1,509.5	$	33.7	$	15,460.7

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 significant decreases and increases in interest rates resulting in the prepayment of principal from the underlying mortgages, either earlier or later than originally anticipated. As of March 31, 2013

14

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

and December 31, 2012, approximately 30.9% and 32.9%, respectively, of the Company’s CMO holdings, such as interest-only or principal-only strips, were invested in those types of CMOs, which are subject to more prepayment and extension risk than traditional CMOs.

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 meet the requirements to be accounted for as financing arrangements. As of March 31, 2013 and December 31, 2012 the Company did not have any securities pledged in dollar rolls and repurchase agreement transactions.

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. As of March 31, 2013 and December 31, 2012, the Company did not have any securities pledged under reverse repurchase agreements.

Securities Lending

The Company engages in securities lending whereby certain domestic securities from its portfolio are loaned to other institutions for short periods of time. As of March 31, 2013 and December 31, 2012, the fair value of loaned securities was $199.3 and $134.7, respectively, and is included in Securities pledged on the Condensed Balance Sheets. As of March 31, 2013 and December 31, 2012, collateral retained by the lending agent and invested in liquid assets on the Company's behalf was $205.0 and $138.9, respectively, and recorded in Short-term investments under securities loan agreement, including collateral delivered on the Condensed Balance Sheets. As of March 31, 2013 and December 31, 2012, liabilities to return collateral of $205.0 and $138.9, respectively, are included in Payables under securities loan agreement, including collateral held on the Condensed Balance Sheets.

Variable Interest Entities ("VIEs")

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. The Company provided no non-contractual financial support and its carrying value represents the Company’s exposure to loss. The carrying value of the equity tranches of the collateralized loan obligations ("CLOs") of $3.4 and $4.0 as of March 31, 2013 and December 31, 2012, respectively, is included in Limited partnerships/corporations on the Condensed Balance Sheets. Income and losses recognized on these investments are reported in Net investment income in the Condensed Statements of Operations.

Securitizations

The Company invests in various tranches of securitization entities, including residential mortgage-backed securities ("RMBS"), commercial mortgage-backed securities ("CMBS") and ABS. Certain RMBS investments represent agency pass-through securities and close-to-the-index tranches issued by Fannie Mae, Freddie Mac, or a similar government-sponsored entity. Investments held by the Company in non-agency RMBS and CMBS also include interest-only, principal-only and inverse floating securities. Through its investments, the Company is not obligated to provide any financial or other support to these entities. Each of the RMBS, CMBS and ABS entities described above are thinly capitalized by design and considered VIEs under ASC 810-10-25 as amended by ASU 2009-17. As discussed above, the Company's involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer, or investment manager, which are generally viewed to have the power to direct the activities that most significantly impact the securitization entities' economic performance, in any of these entities, nor does the Company function in any of these roles. The Company through its investments or other arrangements does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity. Therefore, the Company is not the primary beneficiary and will not consolidate any of the RMBS, CMBS and ABS entities in which it holds investments. These investments are accounted for as investments available-for-sale and unrealized capital gains (losses) on these securities are recorded in AOCI, except for certain RMBS which are accounted for under the FVO for

15

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

which changes in fair value are reflected in Other net realized gains (losses) in the Condensed Statements of Operations. The Company's maximum exposure to loss on these structured investments is limited to the amount of its investment.

Unrealized Capital Losses

Unrealized capital losses (including noncredit impairments), along with the fair value of fixed maturity securities, including securities pledged, by market sector and duration were as follows as of March 31, 2013 and December 31, 2012:

	Six Months or Less Below Amortized Cost				More Than Six Months and Twelve Months or Less Below Amortized Cost				More Than Twelve Months Below Amortized Cost				Total
	Fair Value		Unrealized Capital Losses		Fair Value		Unrealized Capital Losses		Fair Value		Unrealized Capital Losses		Fair Value		Unrealized Capital Losses
2013
U.S. corporate, state and municipalities	$	483.7	$	8.3	$	46.8	$	1.6	$	76.2	$	8.9	$	606.7	$	18.8
Foreign	135.5		2.6		24.9		1.1		80.2		10.9		240.6		14.6
Residential mortgage-backed	178.1		1.3		8.6		0.3		167.9		19.5		354.6		21.1
Commercial mortgage-backed	4.5		—		1.9		0.1		15.6		2.1		22.0		2.2
Other asset-backed	7.8		—		—		—		134.4		14.1		142.2		14.1
Total	$	809.6	$	12.2	$	82.2	$	3.1	$	474.3	$	55.5	$	1,366.1	$	70.8
2012
U.S. corporate, state and municipalities	$	237.3	$	2.9	$	40.1	$	0.6	$	94.0	$	10.4	$	371.4	$	13.9
Foreign	33.3		3.1		23.9		1.8		158.1		17.6		215.3		22.5
Residential mortgage-backed	116.3		2.2		10.9		0.1		181.6		29.1		308.8		31.4
Commercial mortgage-backed	4.8		—		11.2		1.2		15.8		1.8		31.8		3.0
Other asset-backed	0.1		—		—		—		152.8		23.5		152.9		23.5
Total	$	391.8	$	8.2	$	86.1	$	3.7	$	602.3	$	82.4	$	1,080.2	$	94.3

Of the unrealized capital losses aged more than twelve months, the average fair value of the related fixed maturities was 89.5% and 87.9% of the average book value as of March 31, 2013 and December 31, 2012, respectively.

16

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Unrealized capital losses (including noncredit impairments) in fixed maturities, including securities pledged, for instances in which fair value declined below amortized cost by greater than or less than 20% for consecutive months as indicated in the tables below, were as follows as of March 31, 2013 and December 31, 2012:

	Amortized Cost				Unrealized Capital Losses				Number of Securities
	< 20%		> 20%		< 20%		> 20%		< 20%	> 20%
2013
Six months or less below amortized cost	$	948.9	$	5.0	$	25.9	$	1.2	193	7
More than six months and twelve months or less below amortized cost	157.9		10.6		9.0		2.4		51	4
More than twelve months below amortized cost	238.0		76.5		9.9		22.4		81	26
Total	$	1,344.8	$	92.1	$	44.8	$	26.0	325	37
2012
Six months or less below amortized cost	$	553.1	$	27.3	$	22.8	$	6.5	116	13
More than six months and twelve months or less below amortized cost	151.9		2.9		7.9		1.0		35	3
More than twelve months below amortized cost	290.1		149.2		10.0		46.1		83	55
Total	$	995.1	$	179.4	$	40.7	$	53.6	234	71

Unrealized capital losses (including noncredit impairments) in fixed maturities, including securities pledged, by market sector for instances in which fair value declined below amortized cost by greater than or less than 20% were as follows as of March 31, 2013 and December 31, 2012:

	Amortized Cost				Unrealized Capital Losses				Number of Securities
	< 20%		> 20%		< 20%		> 20%		< 20%	> 20%
2013
U.S. corporate, state and municipalities	611.4		14.1		13.8		5.0		90	1
Foreign	218.8		36.4		5.2		9.4		38	6
Residential mortgage-backed	350.2		25.5		13.7		7.4		145	23
Commercial mortgage-backed	22.3		1.9		1.8		0.4		8	1
Other asset-backed	142.1		14.2		10.3		3.8		44	6
Total	$	1,344.8	$	92.1	$	44.8	$	26.0	325	37
2012
U.S. corporate, state and municipalities	$	370.3	$	15.0	$	7.5	$	6.4	50	1
Foreign	187.8		50.0		7.6		14.9		20	10
Residential mortgage-backed	277.3		62.9		13.3		18.1		112	43
Commercial mortgage-backed	33.2		1.6		2.5		0.5		12	1
Other asset-backed	126.5		49.9		9.8		13.7		40	16
Total	$	995.1	$	179.4	$	40.7	$	53.6	234	71

All investments with fair values less than amortized cost are included in the Company's other-than-temporary impairments analysis and impairments were recognized as disclosed in the "Evaluating Securities for Other-Than-Temporary Impairments" section below. The Company evaluates non-agency RMBS and ABS for other-than-temporary impairments each quarter based on actual and projected cash flows after considering the quality and updated loan-to-value ratios reflecting current home prices of underlying

17

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

collateral, forecasted loss severity, the payment priority within the tranche structure of the security and amount of any credit enhancements. The Company's assessment of current levels of cash flows compared to estimated cash flows at the time the securities were acquired indicates the amount and the pace of projected cash flows from the underlying collateral has generally been lower and slower, respectively. However, since cash flows are typically projected at a trust level, the impairment review incorporates the security's position within the trust structure as well as credit enhancement remaining in the trust to determine whether an impairment is warranted. Therefore, while lower and slower cash flows will impact the trust, the effect on a particular security within the trust will be dependent upon the trust structure. Where the assessment continues to project full recovery of principal and interest on schedule, the Company has not recorded an impairment. Unrealized losses on below investment grade securities are principally related to RMBS (primarily Alt-A RMBS) and ABS (primarily subprime RMBS) largely due to economic and market uncertainties including concerns over unemployment levels, lower interest rate environment on floating rate securities requiring higher risk premiums since purchase and valuations of residential real estate supporting non-agency RMBS. Based on this analysis, the Company determined that the remaining investments in an unrealized loss position were not other-than-temporarily impaired and therefore no further other-than-temporary impairment was necessary.

Fixed Maturity Securities Credit Quality - Ratings

Information about certain of the Company's fixed maturity securities holdings by NAIC designations is set forth in the following tables. Corresponding rating agency designation does not directly translate into NAIC designation, but represents the Company's best estimate of comparable ratings from rating agencies, including Fitch Ratings, Inc. ("Fitch"), Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Services ("S&P"). If no rating is available from a rating agency, then an internally developed rating is used.

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 similar to that used by the rating agencies. Ratings are derived from three ARO ratings and are applied as follows based on the number of agency ratings received:

• when three ratings are received, the middle rating is applied;

• when two ratings are received, the lower rating is applied;

• when a single rating is received, the ARO rating is applied; and

• when ratings are unavailable, an internal rating is applied.

Subprime and Alt-A Mortgage Exposure

The Company does not originate or purchase subprime or Alt-A whole-loan mortgages.  Subprime lending is the origination of loans to customers with weaker credit profiles. The Company defines Alt-A Loans to include the following: 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.

The Company's exposure to subprime mortgage backed securities is primarily in the form of ABS structures collateralized by subprime residential mortgages and the majority of these holdings are included in Other ABS in the "Fixed Maturities and Equity Securities" section above. As of March 31, 2013, the fair value and gross unrealized losses related to the Company's exposure to subprime mortgage backed securities was $198.6 and $14.2, respectively, representing 0.9% of total fixed maturities, including securities pledged, based on fair value. As of December 31, 2012, the fair value and gross unrealized losses related to the Company's exposure to subprime mortgage backed securities were $194.0 and $23.5, respectively, representing 0.9% of total fixed maturities, including securities pledged, based on fair value.

18

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following tables summarize the Company's exposure to subprime mortgage-backed securities by credit quality using NAIC designations, ARO ratings and vintage year as of March 31, 2013 and December 31, 2012:

	% of Total Subprime Mortgage-backed Securities
	NAIC Designation			ARO Ratings			Vintage
2013
	1	65.0	%	AAA	—	%	2007	12.4	%
	2	3.1	%	AA	0.3	%	2006	6.2	%
	3	14.9	%	A	12.5	%	2005 and prior	81.4	%
	4	13.9	%	BBB	7.8	%		100.0	%
	5	2.0	%	BB and below	79.4	%
	6	1.1	%		100.0	%
		100.0	%
2012
	1	67.1	%	AAA	—	%	2007	13.2	%
	2	3.1	%	AA	4.0	%	2006	6.2	%
	3	14.2	%	A	9.1	%	2005 and prior	80.6	%
	4	13.5	%	BBB	8.5	%		100.0	%
	5	1.0	%	BB and below	78.4	%
	6	1.1	%		100.0	%
		100.0	%

19

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The Company's exposure to Alt-A mortgages is included in Residential mortgage-backed securities in the "Fixed Maturities and Equity Securities" section above. As of March 31, 2013, the fair value and gross unrealized losses related to the Company's exposure to Alt-A RMBS aggregated to $132.5 and $13.5, respectively, representing 0.6% of total fixed maturities including securities pledged, based on fair value. As of December 31, 2012, the fair value and gross unrealized losses related to the Company's exposure to Alt-A RMBS aggregated to $133.6 and $21.7, respectively, representing 0.6% of total fixed maturities, including securities pledged, based on fair value.

The following tables summarize the Company's exposure to Alt-A residential mortgage-backed securities by credit quality using NAIC designations, ARO ratings and vintage year as of March 31, 2013 and December 31, 2012:

	% of Total Alt-A Mortgage-backed Securities
	NAIC Designation			ARO Ratings			Vintage
2013
	1	40.0	%	AAA	0.2	%	2007	32.2	%
	2	13.7	%	AA	0.4	%	2006	19.5	%
	3	23.9	%	A	0.8	%	2005 and prior	48.3	%
	4	17.8	%	BBB	2.6	%		100.0	%
	5	3.6	%	BB and below	96.0	%
	6	1.0	%		100.0	%
		100.0	%
2012
	1	36.3	%	AAA	0.2	%	2007	31.4	%
	2	10.9	%	AA	0.8	%	2006	19.4	%
	3	15.7	%	A	0.6	%	2005 and prior	49.2	%
	4	30.4	%	BBB	2.6	%		100.0	%
	5	5.7	%	BB and below	95.8	%
	6	1.0	%		100.0	%
		100.0	%

20

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Commercial Mortgage-backed and Other Asset-backed Securities

As of March 31, 2013 and December 31, 2012, the fair value of the Company's CMBS totaled $1.7 billion and $1.8 billion, respectively. As of March 31, 2013 and December 31, 2012, the gross unrealized losses related to CMBS totaled $2.2 and $3.0, respectively. CMBS investments represent pools of commercial mortgages that are broadly diversified across property types and geographical areas.

The following tables summarize the Company's exposure to CMBS holdings by credit quality using NAIC designations, ARO ratings and vintage year as of March 31, 2013 and December 31, 2012:

	% of Total CMBS
	NAIC Designation			ARO Ratings			Vintage
2013
	1	97.5	%	AAA	46.8	%	2008	0.6	%
	2	1.8	%	AA	23.3	%	2007	29.0	%
	3	0.4	%	A	10.2	%	2006	35.4	%
	4	0.3	%	BBB	6.7	%	2005 and prior	35.0	%
	5	—	%	BB and below	13.0	%		100.0	%
	6	—	%		100.0	%
		100.0	%
2012
	1	97.5	%	AAA	47.6	%	2008	0.6	%
	2	1.8	%	AA	25.4	%	2007	28.8	%
	3	0.4	%	A	10.1	%	2006	35.3	%
	4	0.3	%	BBB	7.3	%	2005 and prior	35.3	%
	5	—	%	BB and below	9.6	%		100.0	%
	6	—	%		100.0	%
		100.0	%

21

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

As of March 31, 2013 and December 31, 2012 the fair value of the Company's Other ABS, excluding subprime exposure, totaled $466.2 and $491.9, respectively. As of March 31, 2013 and December 31, 2012 there were no gross unrealized losses related to Other ABS, excluding subprime exposure.

As of March 31, 2013, Other ABS was also broadly diversified both by type and issuer with credit card receivables, nonconsolidated collateralized loan obligations and automobile receivables, comprising 28.2%, 11.2% and 37.3%, respectively, of total Other ABS, excluding subprime exposure. As of December 31, 2012, Other ABS was also broadly diversified both by type and issuer with credit card receivables, nonconsolidated collateralized loan obligations and automobile receivables, comprising 29.2%, 11.2% and 36.6%, respectively, of total Other ABS, excluding subprime exposure.

The following tables summarize the Company's exposure to Other ABS holdings, excluding subprime exposure, by credit quality using NAIC designations, ARO ratings and vintage year as of March 31, 2013 and December 31, 2012:

	% of Total Other ABS
	NAIC Designation			ARO Ratings			Vintage
2013
	1	98.4	%	AAA	93.6	%	2013	—	%
	2	0.7	%	AA	2.0	%	2012	17.0	%
	3	—	%	A	2.8	%	2011	18.0	%
	4	—	%	BBB	0.7	%	2010	4.4	%
	5	—	%	BB and below	0.9	%	2009	6.3	%
	6	0.9	%		100.0	%	2008	3.2	%
		100.0	%				2007 and prior	51.1	%
								100.0	%
2012
	1	97.0	%	AAA	92.5	%	2012	18.0	%
	2	2.2	%	AA	1.0	%	2011	17.1	%
	3	—	%	A	3.5	%	2010	4.6	%
	4	—	%	BBB	2.2	%	2009	6.0	%
	5	—	%	BB and below	0.8	%	2008	3.1	%
	6	0.8	%		100.0	%	2007	14.7	%
		100.0	%				2006 and prior	36.5	%
								100.0	%

Troubled Debt Restructuring

The Company invests in high quality, well performing portfolios of commercial mortgage loans and private placements. Under certain circumstances, modifications are granted to these contracts. Each modification is evaluated as to whether a troubled debt restructuring has occurred. A modification is a troubled debt restructure when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the face amount or maturity amount of the debt as originally stated, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company considers the amount, timing and extent of the concession granted in determining any impairment or changes in the specific valuation allowance recorded in connection with the troubled debt restructuring. A valuation allowance may have been recorded prior to the quarter when the loan is modified in a troubled debt restructuring. Accordingly, the carrying value (net of the specific valuation allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment. As of March 31, 2013 and December 31, 2012, the Company did not have any troubled debt restructurings.

22

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

As of March 31, 2013 and December 31, 2012, the Company did not have any commercial mortgage loans or private placements modified in a troubled debt restructuring with a subsequent payment default.

Mortgage Loans on Real Estate

The Company's mortgage loans on real estate are all commercial mortgage loans, which are reported at amortized cost, less impairment write-downs and allowance for losses. The Company diversifies its commercial mortgage loan portfolio by geographic region and property type to reduce concentration risk.  The Company manages risk when originating commercial mortgage loans by generally lending only up to 75% of the estimated fair value of the underlying real estate.  Subsequently, the Company continuously evaluates all mortgage loans based on relevant current information including an appraisal of loan-specific credit quality, property characteristics and market trends. Loan performance is monitored on a loan-specific basis through the review of submitted appraisals, operating statements, rent revenues and annual inspection reports, among other items. This review ensures properties are performing at a consistent and acceptable level to secure the debt.

The following table summarizes the Company’s investment in mortgage loans as of March 31, 2013 and December 31, 2012:

	2013			2012
Commercial mortgage loans	$	2,868.5		$	2,836.2
Collective valuation allowance	(1.2		)	(1.2		)
Total net commercial mortgage loans	$	2,867.3		$	2,835.0

There were no impairments taken on the mortgage loan portfolio for the three months ended March 31, 2013 and 2012.

The following table summarizes the activity in the allowance for losses for all commercial mortgage loans for the three months ended March 31, 2013 and the year ended December 31, 2012:

	2013		2012
Collective valuation allowance for losses, beginning of period	$	1.2	$	1.5
Addition to / (reduction of) allowance for losses	—		(0.3		)
Collective valuation allowance for losses, end of period	$	1.2	$	1.2

There were no troubled debt restructured loans, loans 90 days or more past due, loans in foreclosure, or unpaid principal balance on loans 90 days or more past due as of March 31, 2013 and December 31, 2012.

There were no mortgage loans in the Company's portfolio in process of foreclosure as of March 31, 2013 and December 31, 2012.

There were no other loans in arrears with respect to principal and interest as of March 31, 2013 and December 31, 2012.

The Company had no impaired loans, average investment during the period or interest income recognized on impaired loans and troubled debt restructured loans for the three months ended March 31, 2013 and 2012.

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

23

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table presents the LTV ratios as of March 31, 2013 and December 31, 2012:

	2013(1)		2012(1)
Loan-to-Value Ratio:
0% - 50%	$	592.0	$	658.9
50% - 60%	838.6		848.0
60% - 70%	1,300.8		1,169.4
70% - 80%	127.0		149.4
80% and above	10.1		10.5
Total Commercial mortgage loans	$	2,868.5	$	2,836.2

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

The following table presents the DSC ratios as of March 31, 2013 and December 31, 2012:

	2013(1)		2012(1)
Debt Service Coverage Ratio:
Greater than 1.5x	$	1,990.5	$	1,970.9
1.25x - 1.5x	480.9		464.8
1.0x - 1.25x	268.9		259.2
Less than 1.0x	128.2		141.3
Total Commercial mortgage loans	$	2,868.5	$	2,836.2

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

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, 2013 and December 31, 2012:

	2013(1)				2012(1)
	Gross Carrying Value		% of Total		Gross Carrying Value		% of Total
Commercial Mortgage Loans by U.S. Region:
Pacific	$	624.7	21.7	%	$	622.7	22.1	%
South Atlantic	505.1		17.6	%	528.3		18.6	%
Middle Atlantic	310.6		10.8	%	338.9		11.9	%
East North Central	353.9		12.3	%	347.2		12.2	%
West South Central	420.4		14.7	%	373.7		13.2	%
Mountain	368.7		12.9	%	338.2		11.9	%
West North Central	136.5		4.8	%	135.8		4.8	%
New England	77.1		2.7	%	77.5		2.7	%
East South Central	71.5		2.5	%	73.9		2.6	%
Total Commercial mortgage loans	$	2,868.5	100.0	%	$	2,836.2	100.0	%

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

24

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

	2013(1)				2012(1)
	Gross Carrying Value		% of Total		Gross Carrying Value		% of Total
Commercial Mortgage Loans by Property Type:
Industrial	$	1,160.6	40.4	%	$	1,159.2	41.0	%
Retail	809.2		28.2	%	711.8		25.0	%
Office	387.6		13.5	%	427.4		15.1	%
Apartments	324.0		11.3	%	366.8		12.9	%
Hotel/Motel	85.2		3.0	%	69.0		2.4	%
Mixed use	25.6		0.9	%	16.6		0.6	%
Other	76.3		2.7	%	85.4		3.0	%
Total Commercial mortgage loans	$	2,868.5	100.0	%	$	2,836.2	100.0	%

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

The following table sets forth the breakdown of mortgages by year of origination as of March 31, 2013 and December 31, 2012:

	2013(1)		2012(1)
Year of Origination:
2013	$	201.5	$	—
2012	313.3		314.3
2011	784.6		795.4
2010	174.7		184.8
2009	65.6		65.9
2008	202.2		253.8
2007 and prior	1,126.6		1,222.0
Total Commercial mortgage loans	$	2,868.5	$	2,836.2

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

Evaluating Securities for Other-Than-Temporary Impairments

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

25

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following tables identify the Company’s credit-related and intent-related impairments included in the Condensed Statements of Operations, excluding impairments included in Other comprehensive income (loss) by type for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31,
	2013				2012
	Impairment			No. of Securities	Impairment		No. of Securities
Foreign(1)	$	—		—	$	0.4	2
Residential mortgage-backed	1.2			31	1.5		31
Commercial mortgage-backed	—		*	1	1.7		1
Other asset-backed	—			—	0.2		2
Total	$	1.2		32	$	3.8	36
(1) Primarily U.S. dollar denominated.
* Less than $0.1.

The above tables include $1.2 and $1.6 of write-downs related to credit impairments for the three months ended March 31, 2013 and 2012, respectively, in Other-than-temporary impairments which are recognized in the Condensed Statements of Operations. The remaining immaterial amount in write-downs for the three months ended March 31, 2013 are related to intent impairments.

The remaining $2.2 in write-downs for the three months ended March 31, 2012 are related to intent impairments.

The following tables summarize these intent impairments, which are also recognized in earnings, by type for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31,
	2013				2012
	Impairment			No. of Securities	Impairment		No. of Securities
Foreign(1)	$	—		—	$	0.4	2
Commercial mortgage-backed	—		*	1	1.7		1
Other asset-backed	—			—	0.1		1
Total	$	—	*	1	$	2.2	4
(1) Primarily U.S. dollar denominated.
* Less than $0.1.

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. Accordingly, these factors may lead the Company to record additional intent related capital losses.

The fair value of fixed maturities with OTTI as of March 31, 2013 and December 31, 2012 was $2.1 billion and $2.2 billion, respectively.

26

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following tables identify the amount of credit impairments on fixed maturities for which a portion of the OTTI loss was recognized in Other comprehensive income (loss) and the corresponding changes in such amounts for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31,
	2013			2012
Balance at January 1	$	47.9		$	64.1
Additional credit impairments:
On securities not previously impaired	—			—
On securities previously impaired	1.2			1.5
Reductions:
Securities intent impaired	—			—
Securities sold, matured, prepaid or paid down	(2.3		)	(4.1		)
Balance at March 31	$	46.8		$	61.5

Net Investment Income

The following table summarizes Net investment income for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31,
	2013		2012
Fixed maturities	$	263.6	$	300.1
Equity securities, available-for-sale	0.7		0.8
Mortgage loans on real estate	39.2		42.0
Policy loans	1.6		1.3
Short-term investments and cash equivalents	—		0.3
Other	10.1		14.8
Gross investment income	315.2		359.3
Less: Investment expenses	12.5		13.3
Net investment income	$	302.7	$	346.0

As of March 31, 2013 the Company had $0.2 of investments in fixed maturities which produced no net investment income. As of December 31, 2012 the Company did not have any investments in fixed maturities which produced no net investment income. Fixed maturities are moved to a non-accrual status immediately when the investment defaults.

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. Realized investment gains and losses are also primarily generated from changes in fair value of embedded derivatives within product guarantees and fixed maturities, changes in fair value of fixed maturities recorded at FVO and changes in fair value including accruals on derivative instruments, except for effective cash flow hedges. The cost of the investments on disposal is generally determined based on first-in-first-out ("FIFO") methodology.

27

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Net realized capital gains (losses) were as follows for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31,
	2013			2012
Fixed maturities, available-for-sale, including securities pledged	$	5.9		$	63.5
Fixed maturities, at fair value option	(21.7		)	(23.3		)
Equity securities, available-for-sale	0.2			—
Derivatives	(1,068.4		)	(1,621.4		)
Embedded derivative - fixed maturities	(5.3		)	(3.4		)
Embedded derivative - product guarantees	312.2			272.3
Other investments	(0.1		)	(1.4		)
Net realized capital gains (losses)	$	(777.2	)	$	(1,313.7	)
After-tax net realized capital gains (losses)	$	(505.2	)	$	(853.9	)

Proceeds from the sale of fixed maturities and equity securities, available-for-sale and the related gross realized gains and losses, before-tax were as follows for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31,
	2013		2012
Proceeds on sales	$	883.7	$	2,054.3
Gross gains	14.1		72.0
Gross losses	2.8		4.6

3.    Derivative Financial Instruments

The Company enters into the following types of derivatives:

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

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

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

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

28

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Currency forwards: The Company uses currency forward contracts to hedge policyholder liabilities associated with the variable annuity contracts which are linked to foreign indices. The currency fluctuations may result in a decrease in account values, which would increase the possibility of the Company incurring an expense for guaranteed benefits in excess of account values. The Company utilizes these contracts in non-qualifying hedging relationships.

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

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. The Company also uses futures contracts as a hedge against an increase in certain equity indices. Such increases may result in increased payments to the holders of the fixed index annuity ("FIA") contracts. The Company enters into exchange traded futures with regulated futures commissions that are members of the exchange. The Company also posts initial and variation margin with the exchange on a daily basis. The Company utilizes exchange-traded futures in non-qualifying hedging relationships.

Swaptions: A swaption is an option to enter into a swap with a forward starting effective date. The Company uses swaptions to

hedge the interest rate exposure associated with the minimum crediting rate and book value guarantees embedded in the retirement products that the Company offers. Increases in interest rates will generate losses on assets that are backing such liabilities. In certain instances, the Company locks in the economic impact of existing purchased swaptions by entering into offsetting written swaptions. Swaptions are also used to hedge against an increase in the interest rate benchmarked crediting strategies within FIA contracts. Such increases may result in increased payments to contract holders of FIA contracts and the interest rate swaptions offset this increased exposure. The Company pays a premium when it purchases the swaption. The Company utilizes these contracts in non-qualifying hedging relationships.

Options: The Company uses put options to manage the equity, interest rate and equity volatility risk of the economic liabilities associated with variable annuity minimum guaranteed living benefits. The Company also uses call options to hedge against an increase in various equity indices. Such increases may result in increased payments to the holders of the FIA contracts. The Company pays an upfront premium to purchase these options. The Company utilizes these options in non-qualifying hedging relationships.

Variance swaps: The Company uses variance swaps to manage equity volatility risk on the economic liabilities associated with certain minimum guaranteed living benefits. An increase in the equity volatility results in a higher valuations of such liabilities. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on the changes in equity volatility over a defined period. The Company utilizes equity variance swaps in non-qualifying hedging relationships.

Embedded derivatives: The Company also invests in certain fixed maturity instruments and has issued certain 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 a 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.  The embedded derivatives for certain fixed maturity instruments, certain annuity products and coinsurance with funds withheld arrangements are reported with the host contract in investments, in Future policy benefits and contract owner account balances or Funds held under reinsurance treaties with affiliates, respectively, on the Condensed Consolidated Balance Sheets. Changes in the fair value of embedded derivatives within fixed maturity investments and within annuity products are recorded in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations. Changes in fair value of embedded derivatives with reinsurance agreements are reported in Interest credited and other benefits to contract owners in the Condensed Consolidated Statements of Operations.

The Company's use of derivatives is limited mainly to economic hedging to reduce the Company's exposure to cash flow variability of assets and liabilities, interest rate risk, credit risk, exchange rate risk and market risk. It is the Company's policy not to offset amounts recognized for derivative instruments and amounts recognized for the right to reclaim cash collateral or the obligation to

29

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

return cash collateral arising from derivative instruments executed with the same counterparty under a master netting arrangement, which provides the Company with the legal right of offset.

The notional amounts and fair values of derivatives were as follows as of March 31, 2013 and December 31, 2012:

	2013						2012
	Notional Amount		Asset Fair Value		Liability Fair Value		Notional Amount		Asset Fair Value		Liability Fair Value
Derivatives: Qualifying for hedge accounting(1)
Fair value hedges:
Interest rate contracts	$	501.1	$	—	$	82.1	$	—	$	—	$	—
Derivatives: Non-qualifying for hedge accounting(1)
Interest rate contracts	32,661.3		1,057.5		503.7		31,588.1		1,283.5		539.5
Foreign exchange contracts	1,349.9		8.9		30.9		1,508.7		10.4		27.4
Equity contracts	13,535.3		104.4		53.1		14,482.7		86.4		231.7
Credit contracts	155.5		1.6		—		155.5		1.0		—
Embedded derivatives:
Within fixed maturity investments	N/A		45.3		—		N/A		50.8		—
Within annuity products	N/A		—		3,125.8		N/A		—		3,397.8
Within reinsurance agreements	N/A		—		193.5		N/A		—		301.3
Total			$	1,217.7	$	3,989.1			$	1,432.1	$	4,497.7

N/A - Not Applicable

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

Although the Company has not elected to net its derivative exposures, the notional amounts and fair value of derivatives eligible for offset were as follows as of March 31, 2013 and December 31, 2012:

	2013
	Notional Amount		Assets Fair Value			Liability Fair Value
Credit contracts	$	155.5	$	1.6		$	—
Equity contracts	3,686.5		102.0			23.0
Foreign exchange contracts	1,349.9		8.9			30.9
Interest rate contracts	33,162.4		1,057.5			585.8
			1,170.0			639.7
Counterparty netting(1)			(564.1		)	(564.1		)
Cash collateral netting(2)			(401.0		)	—
Securities collateral netting(2)			(133.1		)	(51.2		)
Net			$	71.8		$	24.4

⁽¹⁾ Represents the netting of receivable balances with payable balances for the same counterparty under enforceable netting agreements.

⁽²⁾ Represents the netting of collateral received and posted on a counterparty basis under credit support agreements.

30

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

	2012
	Notional Amount		Assets Fair Value			Liability Fair Value
Credit contracts	$	155.5	$	1.0		$	—
Equity contracts	3,739.8		62.5			19.1
Foreign exchange contracts	1,508.8		10.4			27.4
Interest rate contracts	31,588.1		1,283.5			539.5
			1,357.4			586.0
Counterparty netting(1)			(548.3		)	(548.3		)
Cash collateral netting(2)			(730.4		)	—
Securities collateral netting(2)			(42.3		)	(8.1		)
Net			$	36.4		$	29.6

⁽¹⁾ Represents the netting of receivable balances with payable balances for the same counterparty under enforceable netting agreements.

⁽²⁾ Represents the netting of collateral received and posted on a counterparty basis under credit support agreements.

Collateral

Under the terms of the Company’s Over-The-Counter Derivative International Swaps and Derivatives Association, Inc. ("ISDA Agreements") 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. To the extent cash collateral is received and delivered, it is included in Payables under securities loan agreements, including collateral held and Short term investments under securities loan agreements, including collateral delivered, respectively, on the Condensed Balance Sheets and is reinvested in short-term investments. Collateral held is used in accordance with the CSA to satisfy any obligations. Investment grade bonds owned by the Company are the source of noncash collateral posted, which is reported in Securities pledged on the Condensed Balance Sheets. As of March 31, 2013 and December 31, 2012, the Company held $408.5 and $766.7, of net cash collateral, respectively, related to derivative contracts. In addition, as of March 31, 2013 and December 31, 2012, the Company delivered collateral of $606.7 and $579.3, respectively, in fixed maturities pledged under derivatives contracts.

Net realized gains (losses) on derivatives were as follows for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31,
	2013			2012
Derivatives: Qualifying for hedge accounting(1):
Fair value hedges:
Interest rate contracts	$	1.2		$	—
Derivatives: Non-qualifying for hedge accounting(2):
Interest rate contracts	(206.8		)	(398.3		)
Foreign exchange contracts	65.9			(7.3		)
Equity contracts	(929.7		)	(1,215.3		)
Credit contracts	1.0			(0.5		)
Embedded derivatives:
Within fixed maturity investments(2)	(5.3		)	(3.4		)
Within annuity products(2)	312.2			272.3
Within reinsurance agreements(3)	100.2			51.5
Total	$	(661.3	)	$	(1,301.0	)

⁽¹⁾ Changes in value for effective fair value hedges are recorded in Other net realized capital gains (losses) in the Condensed Statements of Operations. For the three months ended March 31, 2013 and 2012, ineffective amounts were immaterial.

⁽²⁾ Changes in value are included in Other net realized capital gains (losses) in the Condensed Statements of Operations.

⁽³⁾ Changes in value are included in Interest credited and Other benefits to contract owners in the Condensed Statements of Operations.

31

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Credit Default Swaps

As of March 31, 2013, the fair value of credit default swaps of $1.6 were included in Derivatives assets and there were no credit default swaps included in Derivatives liabilities on the Condensed Balance Sheets.  As of December 31, 2012, the fair value of credit default swaps of $1.0 were included in Derivatives assets and there were no credit default swaps included in Derivatives liabilities on the Condensed Balance Sheets.  As of March 31, 2013 and December 31, 2012, the maximum potential future exposure to the Company was $155.5 on credit default swaps.

4. Fair Value Measurements

Fair Value Measurement

The Company categorizes its financial instruments into a three-level hierarchy based on the priority of the inputs to the valuation technique, pursuant to the Fair Value Measurements and disclosures of the FASB Accounting Standard Codification ("ASC") Topic 820. 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), as described in the Fair Value Measurements Note in the Financial Statements included in the Company's Form 10-K for the year ended December 31, 2012. 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.

When available, the estimated fair value of financial instruments is based on quoted prices in active markets that are readily and regularly obtainable. When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies, including discounted cash flow methodologies, matrix pricing, or other similar techniques.

32

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of March 31, 2013:

	2013
	Level 1		Level 2		Level 3		Total
Assets:
Fixed maturities, including securities pledged:
U.S. Treasuries	$	1,693.8	$	17.3	$	—	$	1,711.1
U.S government agencies and authorities	—		22.1		—		22.1
U.S. corporate, state and municipalities	—		10,201.0		130.1		10,331.1
Foreign(1)	—		5,252.9		19.4		5,272.3
Residential mortgage-backed securities	—		1,737.2		23.8		1,761.0
Commercial mortgage-backed securities	—		1,742.6		—		1,742.6
Other asset-backed securities	—		585.3		74.3		659.6
Total fixed maturities, including securities pledged	1,693.8		19,558.4		247.6		21,499.8
Equity securities, available-for-sale	14.8		—		0.4		15.2
Derivatives:
Interest rate contracts	1.4		1,056.1		—		1,057.5
Foreign exchange contracts	—		8.9		—		8.9
Equity contracts	2.3		50.5		51.6		104.4
Credit contracts	—		1.6		—		1.6
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	2,159.7		6.1		—		2,165.8
Assets held in separate accounts	41,050.9		—		—		41,050.9
Total assets	$	44,922.9	$	20,681.6	$	299.6	$	65,904.1
Liabilities:
Annuity product guarantees:
FIA	$	—	$	—	$	1,519.8	$	1,519.8
GMAB / GMWB / GMWBL(2)	—		—		1,606.0		1,606.0
Embedded derivative on reinsurance	—		193.5		—		193.5
Derivatives:
Interest rate contracts	—		585.8		—		585.8
Foreign exchange contracts	—		30.9		—		30.9
Equity contracts	30.1		23.0		—		53.1
Total liabilities	$	30.1	$	833.2	$	3,125.8	$	3,989.1

⁽¹⁾ Primarily U.S. dollar dominated

⁽²⁾ Guaranteed minimum accumulation benefits ("GMAB"), Guaranteed minimum withdrawal benefits ("GMWB"), Guaranteed minimum withdrawal benefits for life ("GMWBL").

33

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2012:

	2012
	Level 1		Level 2		Level 3		Total
Assets:
Fixed maturities, including securities pledged:
U.S. Treasuries	$	1,303.7	$	7.8	$	—	$	1,311.5
U.S government agencies and authorities	—		23.7		—		23.7
U.S. corporate, state and municipalities	—		10,513.9		113.6		10,627.5
Foreign(1)	—		5,345.7		20.9		5,366.6
Residential mortgage-backed securities	—		1,829.5		24.2		1,853.7
Commercial mortgage-backed securities	—		1,763.6		—		1,763.6
Other asset-backed securities	—		602.5		78.2		680.7
Total fixed maturities, including securities pledged	1,303.7		20,086.7		236.9		21,627.3
Equity securities, available-for-sale	14.0		—		15.8		29.8
Derivatives:
Interest rate contracts	—		1,283.5		—		1,283.5
Foreign exchange contracts	—		10.4		—		10.4
Equity contracts	23.9		50.8		11.7		86.4
Credit contracts	—		1.0		—		1.0
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	3,115.0		6.1		—		3,121.1
Assets held in separate accounts	39,799.1		—		—		39,799.1
Total assets	$	44,255.7	$	21,438.5	$	264.4	$	65,958.6
Liabilities:
Annuity product guarantees:
FIA	$	—	$	—	$	1,393.8	$	1,393.8
GMAB / GMWB / GMWBL	—		—		2,004.0		2,004.0
Embedded derivative on reinsurance	—		301.3		—		301.3
Derivatives:
Interest rate contracts	0.4		539.1		—		539.5
Foreign exchange contracts	—		27.4		—		27.4
Equity contracts	212.6		19.1		—		231.7
Total liabilities	$	213.0	$	886.9	$	3,397.8	$	4,497.7

⁽¹⁾ Primarily U.S. dollar dominated

Valuation of Financial Assets and Liabilities at Fair Value

Certain assets and liabilities are measured at estimated fair value on the Company’s Condensed Balance Sheets. The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The exit price and the transaction (or entry) price will be the same at initial recognition in many circumstances. However, in certain cases, the transaction price may not represent fair value. The fair value of a liability is based on the amount that would be paid to transfer a liability to a third-party with an equal credit standing. Fair value is required to be a market-based measurement which 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

34

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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 third-party commercial pricing services are non-binding. The Company reviews the assumptions and inputs used by third-party commercial pricing services for each reporting period in order to determine an appropriate fair value hierarchy level. The documentation and analysis obtained from third-party commercial pricing services are reviewed by the Company, including in-depth validation procedures confirming the observability of inputs. The valuations are reviewed and validated monthly through the internal valuation committee price variance review, comparisons to internal pricing models, back testing to recent trades, or monitoring of trading volumes.

Transfers in and out of Level 1 and 2

There were no securities transferred between Levels 1 and Level 2 for the three months ended March 31, 2013 and 2012.  The Company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

Level 3 Financial Instruments

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

35

ING USA Annuity and Life Insurance Company

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

Notes to Financial Statements

(Dollar amounts in millions, unless otherwise stated)

The following table summarizes the change in fair value of the Company’s Level 3 assets and liabilities and transfers in and out of Level 3 for the three months ended March 31, 2013:

	Three Months Ended March 31, 2013
	Fair Value as of January 1			Total Realized/Unrealized Gains (Losses)  Included in:							Purchases		Issuances			Sales		Settlements			Transfers in to Level 3(2)		Transfers out of Level 3(2)			Fair Value as of March 31			Change in Unrealized Gains (Losses) Included in Earnings (3)
				Net  Income				OCI
Fixed maturities, including securities pledged:
U.S. corporate, state and municipalities	$	113.6		$	—			$	0.7		$	20.1	$	—		$	—	$	(0.9	)	$	16.1	$	(19.5	)	$	130.1		$	—
Foreign	20.9			—				(0.1		)	—		—			—		(1.4		)	—		—			19.4			—
Residential mortgage-backed securities	24.2			(0.1		)		(0.1		)	—		—			—		(0.2		)	—		—			23.8			(0.1		)
Other asset-backed securities	78.2			2.3				—			—		—			—		(6.2		)	—		—			74.3			1.6
Total fixed maturities, including securities pledged	236.9			2.2				0.5			20.1		—			—		(8.7		)	16.1		(19.5		)	247.6			1.5
Equity securities, available-for-sale	15.8			(0.1		)		0.1			—		—			—		—			—		(15.4		)	0.4			—
Derivatives, net	11.7			42.4				—			4.7		—			—		(7.2		)	—		—			51.6			36.5
Annuity product guarantees:
FIA	(1,393.8		)	(122.8		)		—			—		(15.1		)	—		11.9			—		—			(1,519.8		)	—
GMWB/GMAB/GMWBL	(2,004.0		)	435.0				—			—		(37.1		)	—		0.1			—		—			(1,606.0		)	—
Total annuity product guarantees	(3,397.8		)	312.2			(1)	—			—		(52.2		)	—		12.0			—		—			(3,125.8		)	—
(1) All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis. These amounts are included in Other net realized capital gains (losses) in the Condensed Statements of Operations.
(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, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Statements of Operations.

36

ING USA Annuity and Life Insurance Company

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

Notes to Financial Statements

(Dollar amounts in millions, unless otherwise stated)

The following table summarizes the change in fair value of the Company’s Level 3 assets and liabilities and transfers in and out of Level 3 for the three months ended March 31, 2012:

	Three Months Ended March 31, 2012
	Fair Value as of January 1			Total Realized/Unrealized Gains (Losses)  Included in:							Purchases		Issuances			Sales			Settlements			Transfers in to Level 3(2)		Transfers out of Level 3(2)			Fair Value as of March 31			Change in Unrealized Gains (Losses) Included in Earnings (3)
				Net  Income				OCI
Fixed maturities, including securities pledged:
U.S. corporate, state and municipalities	$	124.5		$	—			$	0.9		$	—	$	—		$	—		$	(2.2	)	$	14.1	$	—		$	137.3		$	—
Foreign	56.9			0.6				(0.6		)	—		—			(3.7		)	(1.4		)	—		(34.4		)	17.4			—
Residential mortgage-backed securities	60.7			—				0.4			—		—			—			(0.3		)	—		(41.7		)	19.1			—
Other asset-backed securities	72.8			2.1				1.3			—		—			(4.4		)	(0.5		)	—		—			71.3			2.1
Total fixed maturities, including securities pledged	314.9			2.7				2.0			—		—			(8.1		)	(4.4		)	14.1		(76.1		)	245.1			2.1
Equity securities, available-for-sale	16.3			—				(0.1		)	2.3		—			(1.7		)	—			—		—			16.8			—
Derivatives, net	(4.3		)	11.4				—			4.8		—			—			14.5			—		(1.5		)	24.9			13.2
Annuity product guarantees:
FIA	(1,282.2		)	(183.9		)		—			—		(32.7		)	—			31.7			—		—			(1,467.1		)	—
GMWB/GMAB/GMWBL	(2,229.9		)	456.2				—			—		(37.3		)	—			0.1			—		—			(1,810.9		)	—
Total annuity product guarantees	(3,512.1		)	272.3			(1)	—			—		(70.0		)	—			31.8			—		—			(3,278.0		)	—
(1) All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis. These amounts are included in Other net realized capital gains (losses) in the Condensed Statements of Operations.
(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, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Statements of Operations.

37

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The transfers in and out of Level 3 for fixed maturities, including securities pledged and equity securities for the three months ended March 31, 2013, were primarily due to the variation in inputs relied upon for valuation each quarter. Securities that are primarily valued using independent broker quotes when prices are not available from one of the commercial pricing services are reflected as transfers into Level 3. When securities are valued using more widely available information, the securities are transferred out of Level 3 and into Level 1 or 2, as appropriate.

The transfers out of Level 3 for fixed maturities, including securities pledged, for the three months ended March 31, 2012 were primarily due to the Company’s determination that the market for subprime RMBS securities has become active.  While the valuation methodology has not changed, the Company has concluded that the frequency of transactions in the market for subprime RMBS securities represent regularly occurring market transactions and therefore are now classified as Level 2.

The remaining transfers in and out of Level 3 for fixed maturities, including securities pledged during the three months ended March 31, 2012 were due to the variation in inputs relied upon for valuation each quarter. Securities that are primarily valued using independent broker quotes when prices are not available from one of the commercial pricing services are reflected as transfers into Level 3, as these securities are generally less liquid with very limited trading activity or where less transparency exists corroborating the inputs to the valuation methodologies. When securities are valued using more widely available information, the securities are transferred out of Level 3 and into Level 1 or 2, as appropriate.

The fair value of certain options and swap contracts are valued using observable inputs and were transferred from Level 3 to Level 2 during the three months ended March 31, 2012.

Significant Unobservable Inputs

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

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

Significant unobservable inputs used in the fair value measurements of GMABs, GMWBs and GMWBLs include long-term equity implied volatility, correlations between the rate of return on policyholder funds and between interest rates and equity returns, nonperformance risk, mortality and policyholder behavior assumptions, such as benefit utilization, lapses and partial withdrawals.

Significant unobservable inputs used in the fair value measurements of FIAs include nonperformance risk and lapses. Such inputs are monitored quarterly.

Following is a description of selected inputs:

Equity Volatility: A term-structure model is used to approximate implied volatility for the equity indices for GMAB, GMWB and GMWBL fair value measurements. Where no implied volatility is readily available in the market, an alternative approach is applied based on historical volatility.

Correlations: Integrated interest rate and equity scenarios are used in GMAB, GMWB and GMWBL fair value measurements to better reflect market interest rates and interest rate volatility correlations between equity and fixed income fund groups and between equity fund groups and interest rates. The correlations are based on historical fund returns and swap rates from external sources.

Nonperformance Risk: For the estimate of the fair value of embedded derivatives associated with the Company's product guarantees, the Company uses a blend of observable, similarly rated peer company credit default swap spreads, adjusted to reflect the credit quality of the Company as well as adjustment to reflect the priority of policyholder claims.

38

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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

39

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table presents the unobservable inputs for Level 3 fair value measurements as of March 31, 2013:

	Range(1)
Unobservable Input	GMWB / GMWBL		GMAB		FIA
Long-term equity implied volatility	15% to 25%		15% to 25%		—
Correlations between:
Equity Funds	50% to 98%		50% to 98%		—
Equity and Fixed Income Funds	-20% to 44%		-20% to 44%		—
Interest Rates and Equity Funds	-30% to -16%		-30% to -16%		—
Nonperformance risk	0.01% to 1.3%		0.01% to 1.3%		0.01% to 1.3%
Actuarial Assumptions:
Benefit Utilization	85% to 100%	(2)	—		—
Partial Withdrawals	0% to 10%		0% to 10%		—
Lapses	0.08% to 32%	(3)	0.08% to 31%	(3)	0% to 10%	(3)
Mortality	—	(4)	—	(4)	—

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

⁽²⁾ Those policyholders who have elected systematic withdrawals are assumed to continue taking withdrawals. As a percent of account value, 26% are taking systematic withdrawals. Of those policyholders who are not taking withdrawals, we assume that 85% will begin systematic withdrawals after a delay period. The utilization function varies by policyholder age and policy duration. Interactions with lapses and mortality also affect utilization. The utilization rate for GMWB and GMWBL tends to be lower for younger contract owners and contracts that have not reached their maximum accumulated GMWB and GMWBL benefit amount. There is also a lower utilization rate, though indirectly, for contracts that are less “in the money” (i.e., where the notional benefit amount is in excess of the account value) due to higher lapses. Conversely, the utilization rate tends to be higher for contract owners near or beyond retirement age and contracts that have accumulated their maximum GMWB or GMWBL benefit amount. There is also a higher utilization rate, though indirectly, for contracts that are highly “in the money”. The chart below provides the GMWBL account value by current age group and average expected delay times from the associated attained age group as of March 31, 2013 (account value amounts are in $ billions).

	Account Values
Attained Age Group	In the Money		Out of the Money		Total		Average Expected Delay (Years)
< 60	$	3.0	$	0.8	$	3.8	5.5
60-69	6.2		1.2		7.4		1.8
70+	4.0		0.5		4.5		0.1
	$	13.2	$	2.5	$	15.7	2.7

⁽³⁾ Lapse rates tend to be lower during the contractual surrender charge period and higher after the surrender charge period ends; the highest lapse rates occur in the year immediately after the end of the surrender charge period. The Company makes dynamic adjustments to lower the lapse rates for contracts that are more “in the money.” The table below shows an analysis of policy account values according to whether they are in or out of the surrender charge period and to whether they are "in the money" or "out of the money" as of March 31, 2013 (account value amounts are in $ billions).

		GMAB			GMWB/GMWBL
	Moneyness	Account Value		Lapse Range	Account Value		Lapse Range
During Surrender Charge Period
	In the Money**	$	—	0.08% to 8.2%	$	6.8	0.08% to 5.8%
	Out of the Money	—		0.41% to 12%	2.0		0.35% to 12%
After Surrender Charge Period
	In the Money**	—		2.4% to 22%	6.5		1.5% to 17%
	Out of the Money	0.1		12% to 31%	1.2		3.2% to 32%

** The low end of the range corresponds to policies that are highly "in the money." The high end of the range corresponds to the policies that are close to zero in terms of "in the moneyness."

⁽⁴⁾ The mortality rate is based on the Annuity 2000 Basic table with mortality improvements.

40

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table presents the unobservable inputs for Level 3 fair value measurements as of December 31, 2012:

	Range(1)
Unobservable Input	GMWB / GMWBL		GMAB		FIA
Long-term equity implied volatility	15% to 25%		15% to 25%		—
Correlations between:
Equity Funds	50% to 98%		50% to 98%		—
Equity and Fixed Income Funds	-20% to 44%		-20% to 44%		—
Interest Rates and Equity Funds	-25% to -16%		-25% to -16%		—
Nonperformance risk	0.10% to 1.3%		0.10% to 1.3%		0.10% to 1.3%
Actuarial Assumptions:					—
Benefit Utilization	85% to 100%	(2)	—		—
Partial Withdrawals	0% to 10%		0% to 10%		—
Lapses	0.08% to 32%	(3)	0.08% to 31%	(3)	0% to 10%	(3)
Mortality	—	(4)	—	(4)	—

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

⁽²⁾ Those policyholders who have elected systematic withdrawals are assumed to continue taking withdrawals. As a percent of account value, 26% are taking systematic withdrawals. Of those policyholders who are not taking withdrawals, we assume that 85% will begin systematic withdrawals after a delay period. The utilization function varies by policyholder age and policy duration. Interactions with lapses and mortality also affect utilization. The utilization rate for GMWB and GMWBL tends to be lower for younger contract owners and contracts that have not reached their maximum accumulated GMWB and GMWBL benefit amount. There is also a lower utilization rate, though indirectly, for contracts that are less “in the money” (i.e., where the notional benefit amount is in excess of the account value) due to higher lapses. Conversely, the utilization rate tends to be higher for contract owners near or beyond retirement age and contracts that have accumulated their maximum GMWB or GMWBL benefit amount. There is also a higher utilization rate, though indirectly, for contracts that are highly “in the money”. The chart below provides the GMWBL account value by current age group and average expected delay times from the associated attained age group as of December 31, 2012 (account value amounts are in $ billions).

	Account Values
Attained Age Group	In the Money		Out of the Money		Total		Average Expected Delay (Years)
< 60	$	3.5	$	0.3	$	3.8	5.5
60-69	6.8		0.4		7.2		1.9
70+	4.2		0.1		4.3		0.2
	$	14.5	$	0.8	$	15.3	2.8

⁽³⁾ Lapse rates tend to be lower during the contractual surrender charge period and higher after the surrender charge period ends; the highest lapse rates occur in the year immediately after the end of the surrender charge period. The Company makes dynamic adjustments to lower the lapse rates for contracts that are more “in the money.” The table below shows an analysis of policy account values according to whether they are in or out of the surrender charge period and to whether they are "in the money" or "out of the money" as of December 31, 2012 (account value amounts are in $ billions).

		GMAB			GMWB/GMWBL
	Moneyness	Account Value		Lapse Range	Account Value		Lapse Range
During Surrender Charge Period
	In the Money**	$	—	0.08% to 8.2%	$	8.5	0.08% to 5.8%
	Out of the Money	—		0.41% to 12%	0.9		0.35% to 12%
After Surrender Charge Period
	In the Money**	—		2.4% to 22%	6.1		1.5% to 17%
	Out of the Money	0.1		12% to 31%	0.6		3.2% to 32%

** The low end of the range corresponds to policies that are highly "in the money." The high end of the range corresponds to the policies that are close to zero in terms of "in the moneyness."

⁽⁴⁾ The mortality rate is based on the Annuity 2000 Basic table with mortality improvements.

41

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Generally, the following will cause an increase (decrease) in the GMAB, GMWB and GMWBL embedded derivative fair value liabilities:

• An increase (decrease) in long-term equity implied volatility

• An increase (decrease) in equity-interest rate correlations

• A decrease (increase) in nonperformance risk

• A decrease (increase) in mortality

• An increase (decrease) in benefit utilization

• A decrease (increase) in lapses

Changes in fund correlations may increase or decrease the fair value depending on the direction of the movement and the mix of funds. Changes in partial withdrawals may increase or decrease the fair value depending on the timing and magnitude of withdrawals.

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

• A decrease (increase) in nonperformance risk

• A decrease (increase) in lapses

The Company notes the following interrelationships:

• Higher long-term equity implied volatility is often correlated with lower equity returns, which will result in higher in-the-moneyness, which in turn, results in lower lapses due to the dynamic lapse component reducing the lapses. This increases the projected number of policies that are available to use the GMWBL benefit and may also increase the fair value of the GMWBL.

• Generally, an increase (decrease) in benefit utilization will decrease (increase) lapses for GMWB and GMWBL.

42

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Other Financial Instruments

The carrying values and estimated fair values of the Company’s financial instruments were as follows as of March 31, 2013 and December 31, 2012:

	2013				2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Fixed maturities, including securities pledged	$	21,499.8	$	21,499.8	$	21,627.3	$	21,627.3
Equity securities, available-for-sale	15.2		15.2		29.8		29.8
Mortgage loans on real estate	2,867.3		2,945.5		2,835.0		2,924.7
Policy loans	100.2		100.2		101.8		101.8
Limited partnerships/corporations	165.4		165.4		166.9		166.9
Cash, cash equivalents, short-term investments and short-term investments under securities loan agreements	2,165.8		2,165.8		3,121.1		3,121.1
Derivatives	1,172.4		1,172.4		1,381.3		1,381.3
Other investments	80.4		80.4		80.7		80.7
Deposits from affiliates	855.2		931.1		901.7		984.4
Assets held in separate accounts	41,050.9		41,050.9		39,799.1		39,799.1
Liabilities:
Investment contract liabilities:
Deferred annuities(1)	19,902.2		20,592.0		20,262.4		21,062.8
Funding agreements with a fixed maturity and guaranteed investment contracts	2,011.6		1,920.2		1,818.6		1,718.0
Supplementary contracts, immediate annuities and other	1,091.3		1,183.7		1,094.1		1,194.4
Annuity product guarantees:
FIA	1,519.8		1,519.8		1,393.8		1,393.8
GMAB/GMWB/GMWBL	1,606.0		1,606.0		2,004.0		2,004.0
Derivatives	669.8		669.8		798.6		798.6
Long-term debt	435.0		503.4		435.0		491.6
Embedded derivative on reinsurance	193.5		193.5		301.3		301.3

⁽¹⁾ Certain amounts included in Deferred annuities are also reflected within the Annuity product guarantees section of the table above.

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

43

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Mortgage loans on real estate: The fair values for mortgage loans on real estate are estimated on a monthly basis 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. Mortgage loans on real estate are classified as Level 3.

Policy loans: The fair value of policy loans approximates to the carrying, or cash surrender, value of the loans. Policy loans are fully collateralized by the cash surrender value of the associated insurance contracts and are classified as Level 2. 

Limited partnerships/corporations: The fair value for these investments, primarily private equity fund of funds and hedge funds, is based on actual or estimated Net Asset Value ("NAV") information as provided by the investee and are classified as Level 3.

Other investments: Federal Home Loan Bank ("FHLB") stock is carried at cost and periodically evaluated for impairment based on ultimate recovery of par value and is classified as Level 1.

Deposits from affiliates: Fair value is estimated based on the fair value of the liabilities for the underlying contracts, plus the fair value of the unamortized ceding allowance. The Fair value of the liabilities of the underlying contract is estimated based on the mean present value of stochastically modeled cash flows associated with the contract liabilities taking into account assumptions about contract holder behavior. The stochastic valuation scenario set is consistent with current market parameters and discount is taken using stochastically evolving short risk-free rates plus an adjustment for nonperformance risk. Margins for non-financial risks associated with the contract liabilities are also included. The fair value of the unamortized ceding allowance is based on the projected release ceding allowances and discounted at risk-free rates plus an adjustment for nonperformance risk. These liabilities are classified as Level 3.

Investment contract liabilities:

Deferred annuities: Fair value is estimated as the mean present value of stochastically modeled cash flows associated with the contract liabilities, taking into account assumptions about contract holder behavior. The stochastic valuation scenario set is consistent with current market parameters and discount is taken using stochastically evolving risk-free rates in the scenarios plus an adjustment for nonperformance risk. Margins for non-financial risks associated with the contract liabilities are also included. These liabilities are classified as Level 3.

Funding agreements with a fixed maturity and guaranteed investment contracts: Fair value is estimated by discounting cash flows, including associated expenses for maintaining the contracts, at rates, which are risk-free rates plus an adjustment for nonperformance risk. These liabilities are classified as Level 2.

Supplementary contracts and immediate annuities: Fair value is estimated as the mean present value of the single deterministically modeled cash flows associated with the contract liabilities discounted using stochastically evolving short risk-free rates in the scenarios plus an adjustment for nonperformance risk. The valuation is consistent with current market parameters. Margins for non-financial risks associated with the contract liabilities are also included. These liabilities are classified as Level 3.

Long-term debt: 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, incorporating nonperformance risk and is classified as Level 2.

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.

44

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

5.    Deferred Policy Acquisition Costs and Value of Business Acquired

Activity within DAC was as follows for the three months ended March 31, 2013 and 2012.

	Three Months Ended March 31,
	2013			2012
Balance at January 1	$	2,968.2		$	3,326.5
Deferrals of commissions and expenses	20.4			26.2
Amortization:
Amortization(1)	(764.6		)	(184.5		)
Interest accrued(2)	47.7			61.6
Net amortization included in the Condensed Statements of Operations	(716.9		)	(122.9		)
Change in unrealized capital gains/losses on available-for-sale securities	236.6			124.1
Balance at March 31	$	2,508.3		$	3,353.9

⁽¹⁾ Includes loss recognition of $305.0 in 2013.

⁽²⁾ Interest accrued at 1.0% to 6.0% during 2013 and 3.0% to 6.0% during 2012.

Activity within VOBA was as follows for the three months ended March 31, 2013 and 2012.

	Three Months Ended March 31,
	2013			2012
Balance at January 1	$	28.4		$	46.1
Amortization:
Amortization(1)	(2.2		)	(5.2		)
Interest accrued(2)	0.7			0.8
Net amortization included in the Condensed Statements of Operations	(1.5		)	(4.4		)
Change in unrealized capital gains/losses on available-for-sale securities	3.8			5.1
Balance at March 31	$	30.7		$	46.8

⁽¹⁾ Includes loss recognition of $1.0 in 2013.

⁽²⁾ Interest accrued at 1.0% to 6.0% during 2013 and 4.0% to 7.0% during 2012.

6.    Capital Contributions and Dividends

During the three months ended March 31, 2013 and 2012, the Company did not receive any capital contributions from its Parent.

During the three months ended March 31, 2013 and 2012, the Company did not pay a dividend or return of capital distribution on its common stock to its Parent.

On March 28, 2013, the Iowa Insurance Division ("the Division") approved an extraordinary distribution of $230.0 from the Company to Lion, contingent upon the consummation of the IPO of ING U.S., Inc. and the use of such funds for ING U.S. operations. The Company paid the extraordinary dividend to Lion on May 8, 2013.

On May 8, 2013, the Company reset on a one-time basis its negative unassigned funds account as of December 31, 2012 (as reported in its 2012 statutory annual statement) to zero (with an offsetting reduction in gross paid-in capital and contributed surplus). The reset was made pursuant to a permitted practice in accordance with statutory accounting practices granted by the Division. This permitted practice has no impact on total capital and surplus of the Company and will be reflected in the Company's second quarter statutory financial statements.

45

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

7.Accumulated Other Comprehensive Income (Loss)

Shareholder’s equity included the following components of AOCI as of March 31, 2013 and 2012.

	2013			2012
Fixed maturities, net of OTTI	$	1,830.4		$	1,396.0
Equity securities, available-for-sale	4.3			2.8
Derivatives	(0.7		)	(0.8		)
DAC/VOBA and sales inducements adjustment on available-for-sale securities	(977.1		)	(934.4		)
Other	(35.4		)	(35.4		)
Unrealized capital gains (losses), before tax	821.5			428.2
Net deferred income tax asset (liability)	(183.0		)	(7.9		)
Unrealized capital gains (losses), after tax	638.5			420.3
Pension liability, net of tax	1.0			1.2
AOCI	$	639.5		$	421.5

46

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Changes in AOCI, including the reclassification adjustments recognized in the Condensed Statements of Operations, were as follows for the three months ended March 31, 2013 and 2012.

	Three Months Ended March 31, 2013
	Before-Tax Amount				Income Tax				After-Tax Amount
Available-for-sale securities:
Net unrealized gains/losses on Fixed maturities	$	(169.5	)		$	(21.8	)	(4)	$	(191.3	)
Net unrealized gains/losses on Equity securities	0.9				(0.3		)		0.6
Net unrealized gains/losses on Other	—				—				—
OTTI	3.9				(1.4		)		2.5
Adjustments for amounts recognized in Net realized capital gains (losses) in the Condensed Statements of Operations	(8.5		)		3.0				(5.5		)
DAC/VOBA and sales inducements	306.2			(1)	(107.2		)		199.0
Net realized gains/losses on available-for-sale securities	133.0				(127.7		)		5.3
Derivatives:
Net unrealized capital gains/losses arising during the period	—			(2)*	—			*	—			*
Adjustments for amounts recognized in Net investment income in the Condensed Statements of Operations	—				—				—
Net unrealized gains/losses on derivatives	—			*	—			*	—			*
Pension and other post-retirement benefits liability:
Amortization of prior service cost recognized in Operating expenses in the Condensed Statements of Operations	—			(3)*	—			*	—			*
Net pension and other post-retirement benefits liability	—			*	—			*	—			*
Other comprehensive income (loss)	$	133.0			$	(127.7	)		$	5.3

^* Less than $0.1.

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

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

⁽³⁾ Amount reported in Net periodic pension cost which is reported in Operating expenses.

See Benefit Plans Note in the Company's 2012 Annual Report on Form 10-K for additional information.

⁽⁴⁾ Amount included $(81.1) valuation allowance. See Income Taxes Note to these Condensed Financial Statements for additional information.

47

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

	Three Months Ended March 31, 2012
	Before-Tax Amount				Income Tax				After-Tax Amount
Available-for-sale securities:
Net unrealized gains/losses on Fixed maturities	$	122.8			$	(39.9	)	(4)	$	82.9
Net unrealized gains/losses on Equity securities	1.8				(0.6		)		1.2
Net unrealized gains/losses on Other	0.2				(0.1		)		0.1
OTTI	5.6				(2.0		)		3.6
Adjustments for amounts recognized in Net realized capital gains (losses) in the Condensed Statements of Operations	(63.5		)		22.1				(41.4		)
DAC/VOBA and sales inducements	199.7			(1)	(69.9		)		129.8
Net realized gains/losses on available-for-sale securities	266.6				(90.4		)		176.2
Derivatives:
Net unrealized capital gains/losses arising during the period	0.3			(2)	(0.1		)		0.2
Adjustments for amounts recognized in Net investment income in the Condensed Statements of Operations	—				—				—
Net unrealized gains/losses on derivatives	0.3				(0.1		)		0.2
Pension and other post-retirement benefits liability:
Amortization of prior service cost recognized in Operating expenses in the Condensed Statements of Operations	—			(3)*	—			*	—			*
Net pension and post-retirement benefits liability	—			*	—			*	—			*
Other comprehensive income (loss)	$	266.9			$	(90.5	)		$	176.4

^* Less than $0.1.

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

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

⁽³⁾ Amount reported in Net periodic pension cost which is reported in Operating expenses.

See Benefit Plans Note in the Company's 2012 Annual Report on Form 10-K for additional information.

⁽⁴⁾ Amount included $3.0 valuation allowance. See Income Taxes Note to these Condensed Financial Statements for additional information.

48

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

8.    Income Taxes

Income taxes were different from the amount computed by applying the federal income tax rate to income (loss) before income taxes for the following reasons for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31,
	2013					2012
Income (loss) before income taxes	$	(383.2	)			$	(92.3	)
Tax rate	35.0		%			35.0		%
Income tax expense (benefit) at federal statutory rate	(134.1		)			(32.3		)
Tax effect of:
Dividends received deduction	(14.6		)	(1)		(11.0		)	(1)
Valuation allowance	102.6			(1)		11.0			(1)
Audit settlements	—					—			*
Tax credits	(0.5		)	(1)		(0.5		)	(1)
Other	—			(1)	*	—			(1)	*
Income tax expense (benefit)	$	(46.6	)			$	(32.8	)
(1) Certain of these amounts were allocated to Other comprehensive income in accordance with the exception described in ASC 740-20-45-7.
*Less than $0.1.

Valuation allowances are provided when it is considered unlikely that deferred tax assets will be realized. As of March 31, 2013 and December 31, 2012, the Company had a tax valuation allowance of $508.6 and $406.0, respectively, that was allocated to Net income (loss) and $(104.5) and $(185.7), respectively, that was allocated to Other comprehensive income. Therefore, after consideration of available sources of taxable income required to realize the Company's deferred tax assets in the future, the Company had a tax valuation allowance of $404.1 related to deferred tax assets as of March 31, 2013.

Tax Sharing Agreement

The results of the Company's operations are included in the consolidated tax return of ING U.S., Inc. Generally, the Company's financial statements recognize the current and deferred income tax consequences that result from the Company's activities during the current and preceding periods pursuant to the provisions of Income Taxes (ASC 740) as if the Company were a separate taxpayer rather than a member of ING U.S., Inc.'s consolidated income tax return group with the exception of any net operating loss carryforwards and capital loss carryforwards, which are recorded pursuant to the tax sharing agreement. Effective January 1, 2013, the Company entered into a new tax sharing agreement with ING U.S., Inc. which provides that, for 2013 and subsequent years, ING U.S., Inc. will pay the Company for the tax benefits of ordinary and capital losses only in the event that the consolidated tax group actually uses the tax benefit of losses generated.

Tax Regulatory Matters

In March 2013, the Internal Revenue Service ("IRS") completed its examination of the Company's return for tax year 2011. The 2011 audit settlement did not have a material impact on the financial statements.

The Company is currently under audit by the IRS for tax years 2012 and 2013 and it is expected that the examination of tax year 2012 will be finalized within the next twelve months. The timing of the payment (if any) of the remaining allowance of $2.7 cannot be reliably estimated. The Company and the IRS have agreed to participate in the Compliance Assurance Program ("CAP") for the tax years 2012 and 2013.

49

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

9.    Financing Agreements

Reciprocal Loan Agreement

The Company maintains a reciprocal loan agreement with ING U.S., Inc., 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% of the Company's statutory net admitted assets, excluding Separate Accounts, as of the preceding December 31.

Under this agreement, the Company did not incur interest expense for the three months ended March 31, 2013 and 2012. The Company did not earn interest income for the three months ended March 31, 2013 and earned $0.3 for the three months ended March 31, 2012. As of March 31, 2013 and December 31, 2012, the Company did not have an outstanding receivable/payable from/to ING U.S., Inc. under the reciprocal loan agreement.

For information on the Company's additional financing agreements, see the Related Party Transactions Note to the Financial Statements included in the Company's 2012 Annual Report on Form 10-K.

10.    Commitments and Contingencies

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, 2013 and December 31, 2012, the Company had off-balance sheet commitments to purchase investments equal to their fair value of $238.4 and $304.7, respectively.

Federal Home Loan Bank Funding

The Company is a member of the Federal Home Loan Bank of Des Moines ("FHLB") and is required to maintain collateral that backs funding agreements issued to the FHLB. As of March 31, 2013 and December 31, 2012, the Company had $1,548.0, in non-putable funding agreements, including accrued interest, issued to the FHLB. These non-putable funding agreements are included in Future policy benefits and contract owner account balances on the Condensed Balance Sheets. As of March 31, 2013 and December 31, 2012, assets with a market value of $1,823.9 and $1,855.1, respectively, collateralized the funding agreements to the FHLB. Assets pledged to the FHLB are included in Fixed maturities, available-for-sale, on the Condensed Balance Sheets.

50

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Restricted Assets

The Company is required to maintain assets on deposit with various regulatory authorities to support its insurance operation. The Company may also post collateral in connection with certain securities lending, repurchase agreements, funding agreement, LOC and derivative transactions as described further in this note. The components of the fair value of the restricted assets were as follows as of March 31, 2013 and December 31, 2012:

	2013		2012
Fixed maturity collateral pledged to FHLB	$	1,823.9	$	1,855.1
FHLB restricted stock(1)	78.9		78.9
Other fixed maturities-state deposits	14.9		12.1
Securities pledged(2)	806.0		714.0
Total restricted assets	$	2,723.7	$	2,660.1

⁽¹⁾ Reported in Other investments on the Condensed Balance Sheets.

⁽²⁾ Includes the fair value of loaned securities of $199.3 and $134.7 as of March 31, 2013 and December 31, 2012, respectively, which is included in Securities pledged on the Condensed Balance Sheets. In addition, as of March 31, 2013 and December 31, 2012, the Company delivered securities as collateral of $606.7 and $579.3, respectively, which was included in Securities pledged on the Condensed Balance Sheets.

Litigation and Regulatory Matters

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

As with other financial services companies, the Company periodically receives informal and formal requests for information from various state and federal governmental agencies and self-regulatory organizations in connection with inquiries and investigations of the products and practices of the Company or the financial services industry. It is the practice of the Company to cooperate fully in these matters. Regulatory investigations, exams, inquiries and audits could result in regulatory action against the Company. The potential outcome of such action is difficult to predict but could subject the Company to adverse consequences, including, but not limited to, settlement payments, additional payments to beneficiaries and additional escheatment of funds deemed abandoned under state laws. They may also result in fines and penalties and changes to the Company's procedures for the identification and escheatment of abandoned property or the correction of processing errors and other financial liability.

It is not possible to predict the ultimate outcome or to provide reasonably possible losses or ranges of losses for all pending regulatory matters and litigation. While it is possible that an adverse outcome in certain cases could have a material adverse effect upon the Company's financial position, based on information currently known, management believes that the outcome of pending litigation and regulatory matters is not likely to have such an effect. However, given the large and indeterminate amounts sought and the inherent unpredictability of such matters, it is possible that an adverse outcome in certain of the Company's litigation or regulatory matters could, from time to time, have a material adverse effect upon the Company's results of operations or cash flows in a particular quarterly or annual period.

For some matters, the Company is able to estimate a possible range of loss. For such matters in which a loss is probable, an accrual has been made. For matters where the Company, however, believes a loss is reasonably possible, but not probable, no accrual is required to be made. Accordingly, the Company's estimate reflects both types of matters. For matters for which an accrual has

51

ING USA Annuity and Life Insurance Company

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

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

been made, but there remains a reasonably possible range of loss in excess of the amounts accrued, the estimate reflects the reasonably possible range of loss in excess of the accrued amounts. For other matters included within this estimation for which a reasonably possible but not probable range of loss exists, the estimate reflects the reasonably possible and unaccrued loss or range of loss. As of March 31, 2013, the Company estimates the aggregate range of reasonably possible losses in excess of any amounts accrued for these matters as of such date is not material to the Company.

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

11.    Related Party Transactions

Guaranteed Living Benefit — Coinsurance and Coinsurance Funds Withheld

Effective June 30, 2008, the Company entered into an automatic reinsurance agreement with an affiliate, Security Life of Denver International Limited ("SLDI"), covering 100% of the benefits guaranteed under specific variable annuity guaranteed living benefit riders attached to certain variable annuity contracts issued by the Company on or after January 1, 2000.

Also effective June 30, 2008, the Company entered into a services agreement with SLDI, under which the Company provides certain actuarial risk modeling consulting services to SLDI with respect to hedge positions undertaken by SLDI in connection with the reinsurance agreement. For the three months ended March 31, 2013 and 2012, revenue related to the agreement was $3.1.

Effective July 1, 2009, the reinsurance agreement was amended and restated to change the reinsurance basis from coinsurance to a combined coinsurance and coinsurance funds withheld basis. On July 31, 2009, SLDI transferred assets with a market value of $3.2 billion to the Company and the Company deposited those assets into a funds withheld trust account.  As of March 31, 2013, the assets on deposit in the trust account were $2.8 billion. The Company also established a corresponding funds withheld liability to SLDI, which is included in Funds held under reinsurance treaties with affiliates on the Condensed Balance Sheets. Funds held under reinsurance treaties with affiliates had a balance of $2.6 billion and $3.6 billion, at March 31, 2013 and December 31, 2012, respectively. In addition, as of March 31, 2013 and December 31, 2012, the Company had an embedded derivative with a value of $188.8 and $293.6, respectively, which is recorded in Funds held under reinsurance treaties with affiliates on the Condensed Balance Sheets.

Also effective July 1, 2009, the Company and SLDI entered into an asset management services agreement, under which SLDI serves as asset manager for the funds withheld account. SLDI has retained its affiliate, ING Investment Management LLC, as subadviser for the funds withheld account.

Effective October 1, 2011, the Company and SLDI entered into an amended and restated automatic reinsurance agreement in order to provide more flexibility to the Company and SLDI with respect to the collateralization of the reserves related to the variable annuity guaranteed living benefits reinsured under the agreement. As of March 31, 2013 and December 31, 2012, reserves ceded by the Company under this agreement were $2.0 billion and $2.1 billion, respectively.  In addition, a deferred loss in the amount of $339.3 and $343.9 as of March 31, 2013 and December 31, 2012, respectively, is included in Other assets on the Condensed Balance Sheets and is amortized over the period of benefit.

On May 8, 2013, following the ING U.S., Inc. IPO, ING U.S., Inc. made a cash capital contribution in the amount of $1.782 billion into SLDI, which SLDI deposited into the funds withheld trust account established to provide collateral for the variable annuity guaranteed living benefit riders ceded to SLDI under the amended and restated automatic reinsurance agreement. Upon deposit of such contributed capital into the funds withheld trust, the Company submitted $1.5 billion of contingent capital letters of credit issued under the facility which have been canceled.

52

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," the "Company," "we" or "us," as appropriate) for each of the three months ended March 31, 2013 and 2012 and financial condition as of March 31, 2013 and December 31, 2012. This item should be read in its entirety and in conjunction with the Condensed Financial Statements and related notes and other supplemental data, 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 our 2012 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, we caution readers regarding certain forward-looking statements contained in this report and in any other statements made by, or on behalf of, us, 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 our beliefs concerning future levels of sales and redemptions of our products, investment spreads and yields, or the earnings and profitability of our 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 our 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, us. 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. Continued difficult conditions in the global capital markets and the economy generally have affected and may continue to affect our business and results of operations.

2. Adverse capital and credit market conditions may impact our ability to access liquidity and capital, as well as the cost of credit and capital.

3. The level of interest rates may adversely affect our profitability, particularly in the event of a continuation of the current low interest rate environment.

4. A downgrade or a potential downgrade in our financial strength or credit ratings could result in a loss of business and adversely affect our results of operations and financial condition.

5. Because we operate in highly competitive markets, we may not be able to increase or maintain our market share, which may have an adverse effect on our results of operations.

6. Our risk management policies and procedures, including hedging programs, may prove inadequate for the risks we face, which could negatively affect our business or result in losses.

7. The inability of counterparties to meet their financial obligations could have an adverse effect on our results of operations.

8. Requirements to post collateral or make payments related to changes in market value of specified assets may adversely affect liquidity.

9. Our investment portfolio is subject to several risks that may diminish the value of our invested assets and the investment returns credited to customers, which could reduce our sales, revenues, AUM and results of operations.

10. Some of our investments are relatively illiquid and are in asset classes that have been experiencing significant market valuation fluctuations.

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11. Defaults or delinquencies in our commercial mortgage loan portfolio may adversely affect our profitability.

12. Our products and services are complex and are frequently sold through intermediaries, and a failure to properly perform services or the misrepresentation of our products or services could have an adverse effect on our revenues and income.

13. The valuation of many of our financial instruments includes methodologies, estimations and assumptions that are subject to differing interpretations and could result in changes to investment valuations that may materially and adversely affect our results of operations and financial condition.

14. The determination of the amount of allowances and impairments taken on our investments is subjective and could materially and adversely impact our results of operations or financial condition. Gross unrealized losses may be realized or result in future impairments, resulting in a reduction in our net income (loss).

15. Our participation in a securities lending program and a reverse repurchase program subjects us to potential liquidity and other risks.

16. Differences between actual claims experience and reserving assumptions may adversely affect our results of operations or financial condition.

17. We may face significant losses if mortality rates, persistency rates or other underwriting assumptions differ significantly from our pricing expectations.

18. We may be required to accelerate the amortization of DAC, deferred sales inducements (“DSI”) and/or VOBA, any of which could adversely affect our results of operations or financial condition.

19. Reinsurance subjects us to the credit risk of reinsurers and may not be available, affordable or adequate to protect us against losses.

20. Although we no longer actively market retail variable annuities, our business, results of operations, financial condition and liquidity will continue to be affected by our variable annuity products for the foreseeable future.

21. The performance of our variable annuity products depend on assumptions that may not be accurate.

22. A decrease in our RBC ratio (as a result of a reduction in statutory surplus and/or increase in risk-based capital (“RBC”) requirements) could result in increased scrutiny by insurance regulators and rating agencies and have a material adverse effect on our business, results of operations and financial condition.

23. A significant portion of our GICs originate from a Federal Home Loan Bank, which subjects us to liquidity risks associated with sourcing a large concentration of our GIC deposits from one counterparty.

24. Any failure to protect the confidentiality of customer information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operation.

25. Changes in accounting standards could adversely impact our reported results of operations and our reported financial condition.

26. Under the tax sharing agreement effective January 1, 2013 a change in control could affect the availability of cash payments to which we would otherwise be entitled under the prior tax sharing agreement.

27. We may be required to establish an additional valuation allowance against the deferred income tax asset if our business does not generate sufficient taxable income or if our tax planning strategies are modified. Increases in the deferred tax valuation allowance could have a material adverse effect on results of operations and financial condition.

28. Our business may be negatively affected by adverse publicity or increased governmental and regulatory actions with respect to us, other well-known companies or the financial services industry in general.

29. Litigation may adversely affect our profitability and financial condition.

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30. A loss of, or significant change in, key product distribution relationships could materially affect sales.

31. The occurrence of natural or man-made disasters may adversely affect our results of operations and financial condition.

32. The loss of key personnel could negatively affect our financial results and impair our ability to implement our business strategy.

33. Interruption or other operational failures in telecommunication, information technology and other operational systems, or a failure to maintain the security, integrity, confidentiality or privacy of sensitive data residing on such systems, including as a result of human error, could harm our business.

34. We may not be able to protect our intellectual property and may be subject to infringement claims.

35. Our businesses and those of ING Group and its affiliates are heavily regulated and changes in regulation or the application of regulation may reduce our profitability.

36. Our businesses are heavily regulated, and changes in regulation in the United States, enforcement actions and regulatory investigations may reduce profitability.

37. Our products are subject to extensive regulation and failure to meet any of the complex product requirements may reduce profitability.

38. The Dodd-Frank Act, its implementing regulations and other financial regulatory reform initiatives could have adverse consequences for the financial services industry, including us and/or materially affect our results of operations, financial condition or liquidity.

39. Changes in U.S. federal income tax law and interpretations of existing tax law could affect our profitability and financial condition by making some products less attractive to customers and increasing our tax costs or tax costs of our customers.

40. Our separation from ING Group could adversely affect our business and profitability due to ING Group's strong brand and reputation and various uncertainties associated with implementation of our separation from ING Group.

41. Our continuing relationship with ING Group, our ultimate parent, and with affiliates of ING Group, may affect our ability to operate and finance our business as we deem appropriate and changes with respect to ING Group could negatively impact us.

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 we filed with the SEC. Except as may be required by the federal securities laws, we disclaim any obligation to update forward-looking information.

Basis of Presentation

ING USA 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.

In 2009, ING Groep N.V. ("ING Group" or "ING") announced the anticipated separation of its global banking and insurance businesses, including the divestiture of ING U.S., Inc., which together with its subsidiaries, including us, constitutes ING's U.S.-based retirement, investment management and insurance operations. On May 7, 2013, ING U.S., Inc. completed the offering of 65,192,307 shares of its common stock, including the issuance and sale by ING U.S., Inc. of 30,769,230 shares of common stock and the sale by ING Insurance International B.V. ("ING International"), an indirect wholly owned subsidiary of ING Group and previously the sole stockholder of ING U.S., Inc., of 34,423,077 shares of outstanding stock of ING U.S., Inc. (collectively, the "IPO"). Following the IPO, ING International owns approximately 75% of the outstanding common stock of ING U.S., Inc. (before any exercise of the underwriters' option to acquire from ING International up to an additional 9,778,846 shares of ING U.S., Inc. common stock).

ING USA is a direct, wholly owned subsidiary of Lion Connecticut Holdings Inc. ("Lion" or "Parent"), which is a direct, wholly owned subsidiary of ING U.S., Inc. Following the IPO, ING International owns approximately 75% of the common stock of ING

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U.S., Inc. ING International is a wholly owned subsidiary of ING Verzekeringen N.V. ("ING V"), which is a wholly owned subsidiary of ING Insurance Topholding N.V., which is a wholly owned subsidiary of ING Group, the ultimate parent company. 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."

On April 11, 2013, ING U.S., Inc. announced plans to rebrand in the future as Voya Financial. The Voya Financial identity is reflected in the ING U.S., Inc.'s new ticker symbol (NYSE: VOYA).

We have one operating segment.

Critical Accounting Policies, Judgments and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") requires the application of accounting policies that often involve a significant degree of judgment. Management, on an ongoing basis reviews estimates and assumptions used in the preparation of the financial statements. There can be no assurance that actual results will conform to estimates and assumptions and that reported results of operations will not be materially affected by the need to make future accounting adjustments to reflect changes in these estimates and assumptions from time to time.

We have identified the following accounting policies, judgments and estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability:

Reserves for future policy benefits, valuation and amortization of deferred policy acquisition costs ("DAC"), value of business acquired ("VOBA") and sales inducements, valuation of investments and derivatives, impairments, income taxes and contingencies.

In developing these accounting estimates and policies, we make subjective and complex judgments that are inherently uncertain and subject to material changes as facts and circumstances develop. Although variability is inherent in these estimates, we believe the amounts provided are appropriate based upon the facts available upon preparation of the Condensed Financial Statements.

In assessing loss recognition related to deferred policy acquisition costs, value of business acquired, and sales inducements to contract owners, we must select an approach for aggregating different blocks of business in the loss recognition calculation. In the first quarter of 2013, we updated the aggregation approach used in the assessment of such loss recognition. This change in estimate was due to certain organizational changes that commenced in the first quarter of 2013, which resulted in changes to how we manage the variable annuity business that is no longer actively marketed. As a result of this estimate change, we recognized loss recognition of $350.8 before taxes for the three months ended March 31, 2013. This amount was recorded in the Condensed Statements of Operations of $306.0 to Net amortization of deferred policy acquisition costs and value of business acquired and $44.8 to Interest credited and other benefits to contract owners, with a corresponding decrease in the Condensed Balance Sheets to Deferred policy acquisition costs, Value of business acquired, and Sales inducements to contract owners. This update impacted the loss recognition calculation for us but did not have an impact on the consolidated financial statements of ING U.S., Inc.

The above critical accounting estimates are described in the Business, Basis of Presentation and Significant Accounting Policies Note to the Financial Statements in the 2012 Annual Report on Form 10-K.

Results of Operations

Overview

Products currently offered by us 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 sold primarily to institutional investors and corporate benefit plans.

We derive our revenue mainly from (a) fee income generated on variable assets under management ("AUM"), (b) investment income earned on investments, (c) premiums, (d) realized capital gains (losses) on investments and product guarantees and (e) certain other management fees.  Fee income is primarily generated from separate account assets supporting variable options under variable annuity contract investments, as designated by contract owners.  Investment income earned on invested assets is mainly generated from annuity products with fixed investment options, guaranteed investment contract ("GIC") deposits and funding agreements.  Our expenses primarily consist of (a) interest credited and other benefits to contract owners, (b) amortization

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of DAC, value of business acquired ("VOBA") and sales inducements, (c) expenses related to the selling and servicing of the various products offered by us and (d) other general business expenses.

Three Months Ended March 31,2013 compared to Three Months Ended March 31,2012

Our results of operations for the three months ended March 31, 2013 and 2012 and changes therein, primarily reflect higher Net amortization of DAC/VOBA, unfavorable changes in Interest credited and other benefits to contract owners and lower Net investment income. These unfavorable items were partially offset by a favorable change in Total net realized capital losses.

	Three Months Ended March 31,						$ Increase (Decrease)			% Increase (Decrease)
	2013			2012
Revenues:
Net investment income	$	302.7		$	346.0		$	(43.3	)	(12.5	)%
Fee income	200.8			207.9			(7.1		)	(3.4	)%
Premiums	115.8			112.5			3.3			2.9	%
Net realized capital gains (losses):
Total other-than-temporary impairments	(1.2		)	(3.9		)	2.7			69.2	%
Less: Portion of other-than-temporary impairments recognized in Other comprehensive income (loss)	—			(0.1		)	0.1			100.0	%
Net other-than-temporary impairments recognized in earnings	(1.2		)	(3.8		)	2.6			68.4	%
Other net realized capital gains (losses)	(776.0		)	(1,309.9		)	533.9			40.8	%
Total net realized capital gains (losses)	(777.2		)	(1,313.7		)	536.5			40.8	%
Other revenue	6.9			8.1			(1.2		)	(14.8	)%
Total revenues	(151.0		)	(639.2		)	488.2			76.4	%
Benefits and expenses:
Interest credited and other benefits to contract owners	(608.4		)	(804.6		)	196.2			24.4	%
Operating expenses	109.5			111.4			(1.9		)	(1.7	)%
Net amortization of deferred policy acquisition costs and value of business acquired	718.4			127.3			591.1			NM
Interest expense	7.0			7.8			(0.8		)	(10.3	)%
Other expense	5.7			11.2			(5.5		)	(49.1	)%
Total benefits and expenses	232.2			(546.9		)	779.1			NM
Income (loss) before income taxes	(383.2		)	(92.3		)	(290.9		)	NM
Income tax expense (benefit)	(46.6		)	(32.8		)	(13.8		)	(42.1	)%
Net income (loss)	$	(336.6	)	$	(59.5	)	$	(277.1	)	NM
NM - Not Meaningful

Revenues

Total revenuesincreased$488.2 from $(639.2) to $(151.0) for the three months ended March 31, 2013, primarily due to lower Total net realized capital losses, partially offset by lower Net investment income.

Net investment incomedecreased$43.3 from $346.0 to $302.7 primarily due to lower general account assets. General account assets decreased mainly due to lapses in multi-year guaranteed annuities ("MYGAs"). Certain MYGAs, mostly sold in 2002, reached the end of their current guarantee period in 2012. Most of these MYGAs had high crediting rates and the supporting assets generated returns below the targets set when the contracts were issued. The high lapse rate was expected as renewal crediting rates offered were lower than the crediting rates during the initial term.

Total net realized capital lossesdecreased$536.5 from $(1,313.7) to $(777.2) primarily due to favorable net changes in variable annuity and fixed indexed annuity hedging derivatives, partially offset by losses on fixed maturities. Under the variable annuity

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and fixed indexed annuity hedge programs, changes in equity and interest markets during the three months ended March 31, 2013 resulted in net losses of $1,074.1 on interest, equity and foreign exchange derivatives compared to net losses of $1,614.1 during the first quarter 2012, a net change of $540.0. Derivative losses of $1,029.6 in the first quarter 2013 and derivative losses of $1,295.0 in the first quarter 2012 were ceded to Security Life of Denver International Limited ("SLDI") under the combined coinsurance and coinsurance funds withheld agreement and an offset is recorded in Interest credited and other benefits to contract holders. Favorable net changes of $39.9 in the fair value of embedded derivatives on variable annuity and fixed indexed annuity product guarantees (from a gain of $272.3 in the first quarter 2012 to a gain of $312.2 in the first quarter 2013) also contributed to the variance. Partially offsetting these variances were lower realized gains of $5.9 in the current quarter compared to $63.5 in the prior year period on fixed maturities.

Benefits and Expenses

Total benefits and expensesincreased$779.1 from $(546.9) to $232.2 for the three months ended March 31, 2013 primarily due to an unfavorable variance in Net amortization of DAC/VOBA and Interest credited and other benefits to contract owners.

Interest credited and other benefits to contract owners increased$196.2 from $(804.6) to $(608.4) primarily due to the change in the amount of equity and interest rate derivative gains/losses transferred under the combined coinsurance and coinsurance funds withheld agreement with SLDI (the corresponding offsetting amount is reported in Total net realized capital gains/(losses)) and the change in the embedded derivative on the two coinsurance funds withheld arrangements. Additionally, the current period includes a loss recognition on sales inducements of $44.8, which was partially offset by lower credited interest on lower general account assets.

Net amortization of DAC and VOBAincreased$591.1 from $127.3 to $718.4 primarily due to an increase in amortization of $306.0 resulting from loss recognition on DAC and VOBA (see Critical Accounting Policies, Judgments and Estimates). The remaining increase is primarily due to higher positive DAC/VOBA unlocking in the prior year period compared to the current period.

Income Taxes

Income tax expense (benefit) changed $13.8 from $(32.8) to $(46.6) primarily due to intraperiod tax allocation considering the exception described in ASC 740-20-45-7, which was applicable for both periods. For the three months ended March 31, 2013, the income tax benefit allocated to continuing operations was limited to the tax effect of income generated in Other comprehensive income. For the three months ended March 31, 2012, the income tax benefit allocated to continuing operations was limited, with the exception of certain credits, to the tax effect of loss generated in continuing operations.

Financial Condition

Investments

Investment Strategy

Our investment strategy seeks to achieve sustainable risk-adjusted returns by focusing on principal preservation, disciplined matching of asset characteristics with liability requirements and the diversification of risks. Investment activities are undertaken according to investment policy statements that contain internally established guidelines and risk tolerances and in all cases are required to comply with applicable laws and insurance regulations. Risk tolerances are established for credit risk, credit spread risk, market risk, liquidity risk and concentration risk across issuers, sectors and asset types that seek to mitigate the impact of cash flow variability arising from these risks.

Segmented portfolios are established for groups of products with similar liability characteristics. Our investment portfolio consists largely of high quality fixed maturities and short-term investments, investments in commercial mortgage loans, alternative investments and other instruments, including a small amount of equity holdings. Fixed maturities include publicly issued corporate bonds, government bonds, privately placed notes and bonds, ABS, traditional MBS and various CMO tranches managed in combination with financial derivatives as part of a proprietary strategy.

We use derivatives for hedging purposes to reduce our exposure to the cash flow variability of assets and liabilities, interest rate risk, credit risk and market risk. In addition, we use credit derivatives to replicate exposure to individual securities or pools of securities as a means of achieving credit exposure similar to bonds of the underlying issuer(s) more efficiently.

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Since the height of the financial crisis in 2008, we have pursued a substantial repositioning of the investment portfolio aimed at reducing risk, increasing the stability and predictability of returns and pursuing intentional investment risks that are reliant on our core strengths. The repositioning has resulted in a significant decrease in exposure to structured assets, an improvement in the NAIC designation profile of our remaining structured assets and an increase in exposure to public and private investment grade corporate bonds and U.S. Treasury securities.

Portfolio Composition

The following table presents the investment portfolio as of March 31, 2013 and December 31, 2012:

	2013				2012
	Carrying Value		% of Total		Carrying Value		% of Total
Fixed maturities, available-for-sale, excluding securities pledged	$	20,386.3	74.2	%	$	20,586.6	71.1	%
Fixed maturities, at fair value using the fair value option	307.5		1.1	%	326.7		1.1	%
Equity securities, available-for-sale	15.2		0.1	%	29.8		0.1	%
Short-term investments(1)	1,564.7		5.7	%	2,686.6		9.3	%
Mortgage loans on real estate	2,867.3		10.4	%	2,835.0		9.8	%
Policy loans	100.2		0.4	%	101.8		0.4	%
Limited partnerships/corporations	165.4		0.6	%	166.9		0.6	%
Derivatives	1,172.4		4.3	%	1,381.3		4.8	%
Other investments	80.4		0.3	%	80.7		0.3	%
Securities pledged(2)	806.0		2.9	%	714.0		2.5	%
Total investments	$	27,465.4	100.0	%	$	28,909.4	100.0	%

⁽¹⁾ Short-term investments include investments with remaining maturities of one year or less, but greater than 3 months, at the time of purchase.

⁽²⁾ See “Management's Discussion and Analysis of Results of Operations and Financial Condition-Liquidity and Capital Resources” for information regarding securities pledged.

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Fixed Maturities

Total fixed maturities by market sector, including securities pledged, were as follows as of March 31, 2013 and December 31, 2012:

	2013
	Amortized Cost		% of Total		Fair Value		% of Total
Fixed Maturities:
U.S. Treasuries	$	1,633.2	8.3	%	$	1,711.1	7.9	%
U.S. government agencies and authorities	18.3		0.1	%	22.1		0.1	%
State, municipalities and political subdivisions	50.1		0.3	%	57.2		0.3	%
U.S. corporate securities	9,363.4		47.7	%	10,273.9		47.8	%
Foreign securities(1)	4,822.0		24.6	%	5,272.3		24.5	%
Residential mortgage-backed	1,537.8		7.8	%	1,761.0		8.2	%
Commercial mortgage-backed	1,551.1		7.9	%	1,742.6		8.1	%
Other asset-backed	648.2		3.3	%	659.6		3.1	%
Total fixed maturities, including securities pledged	$	19,624.1	100.0	%	$	21,499.8	100.0	%
(1) Primarily U.S. dollar denominated.
	2012
	Amortized Cost		% of Total		Fair Value		% of Total
Fixed Maturities:
U.S. Treasuries	$	1,218.9	6.2	%	$	1,311.5	6.1	%
U.S. government agencies and authorities	19.3		0.1	%	23.7		0.1	%
State, municipalities and political subdivisions	80.1		0.4	%	90.0		0.4	%
U.S. corporate securities	9,511.8		48.6	%	10,537.5		48.7	%
Foreign securities(1)	4,877.8		24.9	%	5,366.6		24.8	%
Residential mortgage-backed	1,617.1		8.3	%	1,853.7		8.6	%
Commercial mortgage-backed	1,565.4		8.0	%	1,763.6		8.2	%
Other asset-backed	681.6		3.5	%	680.7		3.1	%
Total fixed maturities, including securities pledged	$	19,572.0	100.0	%	$	21,627.3	100.0	%
(1) Primarily U.S. dollar denominated.

As of March 31, 2013, the average duration of our fixed maturities portfolio, including securities pledged, was between 5 and 6 years.

Fixed Maturities Credit Quality - Ratings

Information about certain of our fixed maturity securities holdings by NAIC designation is set forth in the following tables. Corresponding rating agency designation does not directly translate into NAIC designation, but represents our best estimate of comparable ratings from rating agencies, including Fitch Ratings, Inc. ("Fitch"), Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Service ("S&P"). If no rating is available from a rating agency, then an internally developed rating is used.

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The fixed maturities in our portfolio are generally rated by external rating agencies and, if not externally rated, are rated by us on a basis similar to that used by the rating agencies. As of March 31, 2013 and December 31, 2012, the average quality rating of our fixed maturities portfolio was A. Ratings are derived from three ARO ratings and are applied as follows based on the number of agency ratings received:

• when three ratings are received, the middle rating is applied;

• when two ratings are received, the lower rating is applied;

• when a single rating is received, the ARO rating is applied; and

• when ratings are unavailable, an internal rating is applied.

Total fixed maturities by NAIC quality designation category, including securities pledged, were as follows as of March 31, 2013 and December 31, 2012:

	2013
NAIC Quality Designation	Amortized Cost		% of Total		Fair Value		% of Total
1	$	10,875.1	55.4	%	$	11,910.9	55.4	%
2	7,756.9		39.5	%	8,515.3		39.6	%
3	698.1		3.6	%	740.9		3.4	%
4	174.5		0.9	%	175.2		0.8	%
5	76.7		0.4	%	87.8		0.4	%
6	42.8		0.2	%	69.7		0.4	%
Total	$	19,624.1	100.0	%	$	21,499.8	100.0	%
	2012
NAIC Quality Designation	Amortized Cost		% of Total		Fair Value		% of Total
1	$	10,615.6	54.1	%	$	11,753.1	54.3	%
2	7,899.0		40.4	%	8,752.2		40.5	%
3	719.6		3.7	%	755.0		3.5	%
4	205.9		1.1	%	196.6		0.9	%
5	91.9		0.5	%	103.1		0.5	%
6	40.0		0.2	%	67.3		0.3	%
Total	$	19,572.0	100.0	%	$	21,627.3	100.0	%

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Total fixed maturities by ARO quality rating category, including securities pledged, were as follows as of March 31, 2013 and December 31, 2012:

	2013
ARO Quality Ratings	Amortized Cost		% of Total		Fair Value		% of Total
AAA	$	4,114.9	21.0	%	$	4,469.6	20.8	%
AA	1,351.4		6.9	%	1,469.9		6.8	%
A	5,038.5		25.7	%	5,537.7		25.8	%
BBB	7,767.7		39.6	%	8,533.9		39.7	%
BB	733.8		3.7	%	802.7		3.7	%
B and below	617.8		3.1	%	686.0		3.2	%
Total	$	19,624.1	100.0	%	$	21,499.8	100.0	%
	2012
ARO Quality Ratings	Amortized Cost		% of Total		Fair Value		% of Total
AAA	$	3,810.7	19.5	%	$	4,213.3	19.5	%
AA	1,355.4		6.9	%	1,488.1		6.9	%
A	5,202.2		26.6	%	5,767.0		26.7	%
BBB	7,867.9		40.2	%	8,718.8		40.3	%
BB	675.8		3.5	%	733.4		3.4	%
B and below	660.0		3.3	%	706.7		3.2	%
Total	$	19,572.0	100.0	%	$	21,627.3	100.0	%

Fixed maturities rated BB and below 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.

The amortized cost and fair value of fixed maturities, including securities pledged, as of March 31, 2013 and December 31, 2012, are shown below by contractual maturity. Actual maturities may differ from contractual maturities as securities may be restructured, called, or prepaid. Mortgage-backed securities ("MBS") and Other ABS are shown separately because they are not due at a single maturity date.

	2013				2012
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due to mature:
One year or less	$	1,284.1	$	1,309.9	$	1,122.5	$	1,145.2
After one year through five years	5,124.8		5,430.4		4,967.1		5,274.6
After five years through ten years	5,825.7		6,371.5		5,836.5		6,440.6
After ten years	3,652.4		4,224.8		3,781.8		4,468.9
Mortgage-backed securities	3,088.9		3,503.6		3,182.5		3,617.3
Other asset-backed securities	648.2		659.6		681.6		680.7
Fixed maturities, including securities pledged	$	19,624.1	$	21,499.8	$	19,572.0	$	21,627.3

As of March 31, 2013 and December 31, 2012 we did not have any investments in a single issuer, other than obligations of the U.S. government and government agencies, with a carrying value in excess of 10% of our Shareholder’s equity.

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Unrealized Capital Losses

Unrealized capital losses (including noncredit impairments), along with the fair value of fixed maturities, including securities pledged, by market sector and duration were as follows as of March 31, 2013 and December 31, 2012:

	Six Months or Less Below Amortized Cost				More Than Six Months and Twelve Months or Less Below Amortized Cost				More Than Twelve Months Below Amortized Cost				Total
	Fair Value		Unrealized Capital Losses		Fair Value		Unrealized Capital Losses		Fair Value		Unrealized Capital Losses		Fair Value		Unrealized Capital Losses
2013
U.S. corporate, state and municipalities	$	483.7	$	8.3	$	46.8	$	1.6	$	76.2	$	8.9	$	606.7	$	18.8
Foreign	135.5		2.6		24.9		1.1		80.2		10.9		240.6		14.6
Residential mortgage-backed	178.1		1.3		8.6		0.3		167.9		19.5		354.6		21.1
Commercial mortgage-backed	4.5		—		1.9		0.1		15.6		2.1		22.0		2.2
Other asset-backed	7.8		—		—		—		134.4		14.1		142.2		14.1
Total	$	809.6	$	12.2	$	82.2	$	3.1	$	474.3	$	55.5	$	1,366.1	$	70.8
2012
U.S. corporate, state and municipalities	$	237.3	$	2.9	$	40.1	$	0.6	$	94.0	$	10.4	$	371.4	$	13.9
Foreign	33.3		3.1		23.9		1.8		158.1		17.6		215.3		22.5
Residential mortgage-backed	116.3		2.2		10.9		0.1		181.6		29.1		308.8		31.4
Commercial mortgage-backed	4.8		—		11.2		1.2		15.8		1.8		31.8		3.0
Other asset-backed	0.1		—		—		—		152.8		23.5		152.9		23.5
Total	$	391.8	$	8.2	$	86.1	$	3.7	$	602.3	$	82.4	$	1,080.2	$	94.3

Of the unrealized capital losses aged more than twelve months, the average market value of the related fixed maturities was 89.5% and 87.9% of the average book value as of March 31, 2013 and December 31, 2012, respectively.

For the three months ended March 31, 2013 and 2012, unrealized capital losses on fixed maturities decreased by $23.5 and $94.8, respectively. The decrease in gross unrealized losses was primarily due to improving market conditions within Other ABS and RMBS in addition to tightening credit spreads.

As of March 31, 2013 and December 31, 2012, we did not have any individual fixed maturities with an unrealized capital loss in excess of $10.0.

Subprime and Alt-A Mortgage Exposure

The performance of underlying subprime and Alt-A mortgage collateral, originated prior to 2008, has continued to reflect the problems associated with a housing market that has since seen substantial price declines and an employment market that has declined significantly and remains under stress.  Credit spreads have widened meaningfully from issuance and rating agency downgrades have been widespread and severe within the sector. During 2012, market prices and sector liquidity demonstrated more sustained improvements, driven by an improved technical picture and positive sentiment regarding the potential for fundamental improvement within the sector. This positive momentum continued into 2013, with the first quarter characterized by improving housing market indicators and strong liquidity.  In managing our risk exposure to subprime and Alt-A mortgages, we take into account collateral performance and structural characteristics associated with our various positions.

We do not originate or purchase subprime or Alt-A whole-loan mortgages. Subprime lending is the origination of loans to customers with weaker credit profiles. We define Alt-A mortgages to include the following: residential mortgage loans to customers who

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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.

We have exposure to RMBS, CMBS and ABS. Our exposure to subprime mortgage-backed securities is primarily in the form of ABS structures collateralized by subprime residential mortgages and the majority of these holdings were included in Other ABS under "Fixed Maturities" above. As of March 31, 2013, the fair value, amortized cost and gross unrealized losses related to our exposure to subprime mortgage-backed securities was $198.6, $200.6 and $14.2, respectively, representing 0.9% of total fixed maturities, including securities pledged, based on fair value. As of December 31, 2012, the fair value, amortized cost and gross unrealized losses related to our exposure to subprime mortgage-backed securities were $194.0, $207.9 and $23.5, respectively, representing 0.9% of total fixed maturities, including securities pledged, based on fair value.

The NAIC designations for structured securities, including subprime and Alt-A RMBS, are based upon a comparison of the bond's amortized cost to the NAIC's loss expectation for each security. Securities where modeling results in no expected loss in all scenarios are considered to have the highest designation of NAIC 1. A large percentage of our RMBS securities carry a NAIC 1 designation while the ARO rating indicates below investment grade. This is primarily due to the credit and intent impairments recorded by us which reduced the amortized cost on these securities to a level resulting in no expected loss in all scenarios, which corresponds to a NAIC 1 designation. The revised methodology reduces regulatory reliance on rating agencies and allows for greater regulatory input into the assumptions used to estimate expected losses from such structured securities.

The following tables present our exposure to subprime mortgage-backed securities by credit quality using NAIC designations, ARO ratings and vintage year as of March 31, 2013 and December 31, 2012:

	% of Total Subprime Mortgage-backed Securities
	NAIC Designation			ARO Ratings			Vintage
2013
	1	65.0	%	AAA	—	%	2007	12.4	%
	2	3.1	%	AA	0.3	%	2006	6.2	%
	3	14.9	%	A	12.5	%	2005 and prior	81.4	%
	4	13.9	%	BBB	7.8	%		100.0	%
	5	2.0	%	BB and below	79.4	%
	6	1.1	%		100.0	%
		100.0	%
2012
	1	67.1	%	AAA	—	%	2007	13.2	%
	2	3.1	%	AA	4.0	%	2006	6.2	%
	3	14.2	%	A	9.1	%	2005 and prior	80.6	%
	4	13.5	%	BBB	8.5	%		100.0	%
	5	1.0	%	BB and below	78.4	%
	6	1.1	%		100.0	%
		100.0	%

Our exposure to Alt-A mortgages is included in the "RMBS" line item in the "Fixed Maturities" table under "Fixed Maturities" section above. As of March 31, 2013, the fair value, amortized cost and gross unrealized losses related to our exposure to Alt-A RMBS aggregated to $132.5, $132.7 and $13.5, respectively, representing 0.6% of total fixed maturities including securities pledged, based on fair value. As of December 31, 2012, the fair value, amortized cost and gross unrealized losses related to our exposure to Alt-A RMBS aggregated to $133.6, $139.9 and $21.7, respectively, representing 0.6% of total fixed maturities, including securities pledged, based on fair value.

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The following tables summarize our exposure to Alt-A residential mortgage-backed securities by credit quality using NAIC designations, ARO ratings and vintage year as of March 31, 2013 and December 31, 2012:

	% of Total Alt-A Mortgage-backed Securities
	NAIC Designation			ARO Ratings			Vintage
2013
	1	40.0	%	AAA	0.2	%	2007	32.2	%
	2	13.7	%	AA	0.4	%	2006	19.5	%
	3	23.9	%	A	0.8	%	2005 and prior	48.3	%
	4	17.8	%	BBB	2.6	%		100.0	%
	5	3.6	%	BB and below	96.0	%
	6	1.0	%		100.0	%
		100.0	%
2012
	1	36.3	%	AAA	0.2	%	2007	31.4	%
	2	10.9	%	AA	0.8	%	2006	19.4	%
	3	15.7	%	A	0.6	%	2005 and prior	49.2	%
	4	30.4	%	BBB	2.6	%		100.0	%
	5	5.7	%	BB and below	95.8	%
	6	1.0	%		100.0	%
		100.0	%

Commercial Mortgage-backed and Other Asset-backed Securities

CMBS investments represent pools of commercial mortgages that are broadly diversified across property types and geographical areas. Delinquency rates on commercial mortgages increased over the course of 2009 through mid-2012. Since then, the steep pace of increases observed in the early years following the credit crisis has slowed and some recent months have posted month over month declines in delinquencies. In addition, other performance metrics like vacancies, property values and rent levels have shown improvements, although these metrics can differ widely by dimensions such as geographic location and property type.  The primary market for CMBS has continued its recovery from the credit crisis with higher total new issuances in 2012, the fourth straight year of higher new issuances. This positive momentum continued into 2013, with total new issuance volume in Q1 the highest quarterly total since 2007. Higher primary issuance resulted in increased credit availability within the commercial real estate market.

For consumer Other ABS, delinquency and loss rates have exhibited general stability after the credit crisis and done so at levels considered historically low. Relative strength in various credit metrics across multiple types of asset-backed loans have been observed on a sustained basis.

As of March 31, 2013, the fair value, amortized cost and gross unrealized losses related to our exposure to CMBS aggregated to $1.7 billion, $1.6 billion and $2.2, respectively. As of December 31, 2012, the fair value, amortized cost and gross unrealized losses related to our exposure to CMBS aggregated to $1.8 billion, $1.6 billion and $3.0, respectively.

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The following tables summarize our exposure to CMBS holdings by credit quality using NAIC designations, ARO ratings and vintage year as of March 31, 2013 and December 31, 2012:

	% of Total CMBS
	NAIC Designation			ARO Ratings			Vintage
2013
	1	97.5	%	AAA	46.8	%	2008	0.6	%
	2	1.8	%	AA	23.3	%	2007	29.0	%
	3	0.4	%	A	10.2	%	2006	35.4	%
	4	0.3	%	BBB	6.7	%	2005 and prior	35.0	%
	5	—	%	BB and below	13.0	%		100.0	%
	6	—	%		100.0	%
		100.0	%
2012
	1	97.5	%	AAA	47.6	%	2008	0.6	%
	2	1.8	%	AA	25.4	%	2007	28.8	%
	3	0.4	%	A	10.1	%	2006	35.3	%
	4	0.3	%	BBB	7.3	%	2005 and prior	35.3	%
	5	—	%	BB and below	9.6	%		100.0	%
	6	—	%		100.0	%
		100.0	%

As of March 31, 2013, the fair value and amortized cost related to our exposure to Other ABS, excluding subprime exposure, aggregated to $466.2 and $450.9, respectively. As of March 31, 2013 and December 31, 2012 there were no gross unrealized losses related to Other ABS, excluding subprime exposure. As of December 31, 2012, the fair value and amortized cost related to our exposure to Other ABS, excluding subprime exposure, aggregated to $491.9 and $476.1, respectively.

As of March 31, 2013, the Other ABS was also broadly diversified both by type and issuer with credit card receivables, nonconsolidated collateralized loan obligations ("CLO") and automobile receivables, comprising 28.2%, 11.2% and 37.3%, respectively, of total Other ABS, excluding subprime exposure. As of December 31, 2012, Other ABS was also broadly diversified both by type and issuer with credit card receivables, nonconsolidated CLO and automobile receivables, comprising 29.2%, 11.2% and 36.6%, respectively, of total Other ABS, excluding subprime exposure.

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The following tables summarize our exposure to Other ABS holdings, excluding subprime exposure, by credit quality using NAIC designations, ARO ratings and vintage year as of March 31, 2013 and December 31, 2012:

	% of Total Other ABS
	NAIC Designation			ARO Ratings			Vintage
2013
	1	98.4	%	AAA	93.6	%	2013	—	%
	2	0.7	%	AA	2.0	%	2012	17.0	%
	3	—	%	A	2.8	%	2011	18.0	%
	4	—	%	BBB	0.7	%	2010	4.4	%
	5	—	%	BB and below	0.9	%	2009	6.3	%
	6	0.9	%		100.0	%	2008	3.2	%
		100.0	%				2007 and prior	51.1	%
								100.0	%
2012
	1	97.0	%	AAA	92.5	%	2012	18.0	%
	2	2.2	%	AA	1.0	%	2011	17.1	%
	3	—	%	A	3.5	%	2010	4.6	%
	4	—	%	BBB	2.2	%	2009	6.0	%
	5	—	%	BB and below	0.8	%	2008	3.1	%
	6	0.8	%		100.0	%	2007	14.7	%
		100.0	%				2006 and prior	36.5	%
								100.0	%

Troubled Debt Restructuring

We seek to invest in high quality, well performing portfolios of commercial mortgage loans and private placements. Under certain circumstances, modifications are granted to these contracts. Each modification is evaluated as to whether a troubled debt restructuring has occurred. A modification is a troubled debt restructuring when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the face amount or maturity amount of the debt as originally stated, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. We consider the amount, timing and extent of the concession granted in determining any impairment or changes in the specific valuation allowance recorded in connection with the troubled debt restructuring. A valuation allowance may have been recorded prior to the quarter when the loan is modified in a troubled debt restructuring. Accordingly, the carrying value (net of the specific valuation allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment. As of March 31, 2013 and December 31, 2012, we did not have any troubled debt restructuring.

As of ended March 31, 2013 and December 31, 2012, we did not have any commercial mortgage loans or private placements modified in a troubled debt restructuring with a subsequent payment default.

Mortgage Loans on Real Estate

Our mortgage loans on real estate are all commercial mortgage loans held for investment, which totaled $2.9 billion and $2.8 billion as of March 31, 2013 and December 31, 2012, respectively. The carrying value of these loans is reported at amortized cost, less impairment write-downs and allowance for losses.

We diversify our commercial mortgage loan portfolio by geographic region and property type to manage concentration risk. We manage risk when originating commercial mortgage loans by generally lending only up to 75% of the estimated fair value of the underlying real estate. Subsequently, we continuously evaluate all mortgage loans based on relevant current information including a review of loan-specific credit, property characteristics and market trends. Loan performance is continuously monitored on a loan-specific basis throughout the year. Our review includes submitted appraisals, operating statements, rent revenues and annual

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inspection reports, among other items. This review evaluates whether the properties are performing at a consistent and acceptable level to secure the debt.

We rate all commercial mortgages to quantify the level of risk. We place those loans with higher risk on a watch list and closely monitor these loans for collateral deficiency or other credit events that may lead to a potential loss of principal and/or interest. If we determine the value of any mortgage loan to be OTTI (i.e., when it is probable that we will be unable to collect on 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. For those mortgages that are determined to require foreclosure, the carrying value is reduced to the fair value of the underlying collateral, net of estimated costs to obtain and sell at the point of foreclosure. The carrying value of the impaired loans is reduced by establishing an other-than-temporary write-down recorded in Net realized capital gains (losses) in the Condensed Statements of Operations.

The following table presents our investment in commercial mortgage loans as of March 31, 2013 and December 31, 2012:

	2013			2012
Commercial mortgage loans	$	2,868.5		$	2,836.2
Collective valuation allowance	(1.2		)	(1.2		)
Total net commercial mortgage loans	$	2,867.3		$	2,835.0

There were no impairments taken on the mortgage loan portfolio for the three months ended March 31, 2013 and 2012.

The following table presents the activity in the allowance for losses for all commercial mortgage loans for the three months ended March 31, 2013 and the year ended December 31, 2012:

	2013		2012
Collective valuation allowance for losses, beginning of period	$	1.2	$	1.5
Addition to / (decrease of) allowance for losses	—		(0.3		)
Collective valuation allowance for losses, end of period	$	1.2	$	1.2

Our policy is to recognize interest income until a loan becomes 90 days delinquent or foreclosure proceedings are commenced, at which point interest accrual is discontinued. Interest accrual is not resumed until the loan is brought current.

Loan-to-value ("LTV") and debt service coverage ("DSC") ratios are measures commonly used to assess the risk and quality of commercial mortgage loans. The LTV ratio, calculated at time of origination, is expressed as a percentage of the amount of the loan relative to the value of the underlying property. An LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the value of the underlying collateral. The DSC ratio, based upon the most recently received financial statements, is expressed as a percentage of the amount of a property's net income (loss) to its debt service payments. A DSC ratio of less than 1.0 indicates that property's operations do not generate sufficient income to cover debt payments. These ratios are utilized as part of the review process described above. The LTV and DSC ratios as of March 31, 2013 and December 31, 2012 are as presented below:

	2013(1)		2012(1)
Loan-to-Value Ratio:
0% - 50%	$	592.0	$	658.9
50% - 60%	838.6		848.0
60% - 70%	1,300.8		1,169.4
70% - 80%	127.0		149.4
80% and above	10.1		10.5
Total Commercial mortgage loans	$	2,868.5	$	2,836.2

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

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	2013(1)		2012(1)
Debt Service Coverage Ratio:
Greater than 1.5x	$	1,990.5	$	1,970.9
1.25x - 1.5x	480.9		464.8
1.0x - 1.25x	268.9		259.2
Less than 1.0x	128.2		141.3
Total Commercial mortgage loans	$	2,868.5	$	2,836.2

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

Other-Than-Temporary Impairments

We evaluate available-for-sale fixed maturities and equity securities for impairment on a regular basis. The assessment of whether impairments have occurred is based on a case-by-case evaluation of the underlying reasons for the decline in estimated fair value.

The following table presents our credit-related and intent-related impairments included in the Condensed Statements of Operations, excluding impairments included in Accumulated other comprehensive income (loss), by type for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31,
	2013				2012
	Impairment			No. of Securities	Impairment		No. of Securities
Foreign(1)	$	—		—	$	0.4	2
Residential mortgage-backed	1.2			31	1.5		31
Commercial mortgage-backed	—		*	1	1.7		1
Other asset-backed	—			—	0.2		2
Total	$	1.2		32	$	3.8	36
(1) Primarily U.S. dollar denominated.
* Less than $0.1.

The above table includes $1.2 and $1.6 of write-downs related to credit impairments for the three months ended March 31, 2013 and 2012, respectively, in Other-than-temporary impairment losses, which are recognized in the Condensed Statements of Operations. The remaining immaterial amount in write-downs for the three months ended March 31, 2013 are related to intent impairments. The remaining $2.2 in write-downs for the three months ended March 31, 2012 are related to intent impairments.

The following tables summarize these intent impairments, which are also recognized in earnings, by type for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31,
	2013				2012
	Impairment			No. of Securities	Impairment		No. of Securities
Foreign(1)	$	—		—	$	0.4	2
Commercial mortgage-backed	—		*	1	1.7		1
Other asset-backed	—			—	0.1		1
Total	$	—	*	1	$	2.2	4
(1) Primarily U.S. dollar denominated.
* Less than $0.1.

As part of our investment strategy, we 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 our previous intent to continue holding a security. Accordingly, these factors may lead us to record additional intent related capital losses.

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The fair value of fixed maturities with OTTI as of March 31, 2013 and December 31, 2012 was $2.1 billion and $2.2 billion, respectively.

During the three months ended March 31, 2013, the primary source of credit-related OTTI was write-downs recorded in the RMBS sector on securities collateralized by Alt-A residential mortgage-backed securities.

Net Investment Income

Net investment income was as presented below for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31,
	2013		2012
Fixed maturities	$	263.6	$	300.1
Equity securities, available-for-sale	0.7		0.8
Mortgage loans on real estate	39.2		42.0
Policy loans	1.6		1.3
Short-term investments and cash equivalents	—		0.3
Other	10.1		14.8
Gross investment income	315.2		359.3
Less: Investment expenses	12.5		13.3
Net investment income	$	302.7	$	346.0

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. Realized investment gains and losses are also primarily generated from changes in fair value of embedded derivatives within product guarantees and fixed maturities, changes in fair value of fixed maturity securities recorded at FVO and changes in fair value including accruals on derivative instruments, except for effective cash flow hedges. The cost of the investments on disposal is generally determined based on first-in-first-out ("FIFO") methodology.

Net realized capital gains (losses) were as presented below for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31,
	2013			2012
Fixed maturities, available-for-sale, including securities pledged	$	5.9		$	63.5
Fixed maturities, at fair value option	(21.7		)	(23.3		)
Equity securities, available-for-sale	0.2			—
Derivatives	(1,068.4		)	(1,621.4		)
Embedded derivative - fixed maturities	(5.3		)	(3.4		)
Embedded derivative - product guarantees	312.2			272.3
Other investments	(0.1		)	(1.4		)
Net realized capital gains (losses)	$	(777.2	)	$	(1,313.7	)

European Exposures

We closely monitor our exposures to European sovereign debt in general, with a primary focus on our exposure to the sovereign debt of Greece, Ireland, Italy, Portugal and Spain (which we refer to as "peripheral Europe"), as these countries have applied for support from the European Financial Stability Facility or received support from the European Central Bank via government bond purchases in the secondary market.

The financial turmoil in Europe continues to be a threat to global capital markets and remains a challenge to global financial stability. Additionally, the possibility of capital market volatility spreading through a highly integrated and interdependent banking system remains elevated. Furthermore, it is our view that the risk among European sovereigns and financial institutions warrants

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specific scrutiny, in addition to our customary surveillance and risk monitoring, given how highly correlated these sectors of the region have become.

We quantify and allocate our exposure to the region, as described in the table below, by attempting to identify all aspects of the region or country risk to which we are exposed. Among the factors we consider are the nationality of the issuer, the nationality of the issuer's ultimate parent, the corporate and economic relationship between the issuer and its parent, as well as the political, legal and economic environment in which each functions. By undertaking this assessment, we believe that we develop a more accurate assessment of the actual geographic risk, with a more integrated understanding of all contributing factors to the full risk profile of the issuer.

In the normal course of our ongoing risk and portfolio management process, we closely monitor compliance with a credit limit hierarchy designed to minimize overly concentrated risk exposures by geography, sector and issuer. This framework takes into account various factors such as internal and external ratings, capital efficiency and liquidity and is overseen by a combination of Investment and Corporate Risk Management, as well as insurance portfolio managers focused specifically on managing the investment risk embedded in our portfolio.

As of March 31, 2013, we had $287.5 of exposure to peripheral Europe, which consists of a broadly diversified portfolio of credit-related investments solely in the industrial and utility sectors. We had no fixed maturity and equity securities exposure to peripheral European sovereigns or financial institutions based in peripheral Europe. Peripheral European exposure included non-sovereign exposure in Italy of $59.4, Ireland of $123.9 and Spain of $104.2. We had no exposure to Greece or Portugal. As of March 31, 2013, there was $0.7 derivative assets exposure to financial institutions in peripheral Europe. For purposes of calculating the derivative assets exposure, we had aggregated exposure to single name and portfolio product CDS, as well as all non-CDS derivative exposure for which we either had counterparty or direct credit exposure to a company whose country of risk is in scope.

Among the remaining $2.4 billion of total non-peripheral European exposure, we had a portfolio of credit-related assets similarly diversified by country and sector across developed and developing Europe. As of March 31, 2013, our sovereign exposure was $99.0, which consists of fixed maturities. We also had $275.4 in net exposure to non-peripheral financial institutions with a concentration in the United Kingdom of $78.6, France of $56.4 and Switzerland of $38.9. The balance of $2.0 billion was invested across non-peripheral, non-financial institutions.

In addition to aggregate concentration to the United Kingdom of $784.7 and the Netherlands of $384.3, we had significant non-peripheral European total country exposures to Switzerland of $201.6, Germany of $234.9 and France of $256.3. We place additional scrutiny on our financial exposure in the United Kingdom, France and Switzerland given our concern for the potential for volatility to spread through the European banking system. We believe the primary risk results from market value fluctuations resulting from spread volatility and the secondary risk is default risk, should the European crisis worsen or fail to be resolved.

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The following table represents our European exposures at fair value and amortized cost as of March 31, 2013.

	Fixed Maturity and Equity Securities										Derivative Assets										Net Non-U.S. Funded at March 31,  2013 (1)
	Sovereign		Financial Institutions		Non-Financial Institutions		Total (Fair Value)		Total (Amortized Cost)		Sovereign		Financial Institutions		Non-Financial Institutions		Less: Margin & Collateral		Total, (Fair Value)
Ireland	$	—	$	—	$	123.2	$	123.2	$	113.2	$	—	$	0.7	$	—	$	—	$	0.7	$	123.9
Italy	—		—		59.4		59.4		54.9		—		—		—		—		—		59.4
Spain	—		—		104.2		104.2		97.5		—		—		—		—		—		104.2
Total Peripheral Europe	—		—		286.8		286.8		265.6		—		0.7		—		—		0.7		287.5
France	—		44.1		199.9		244.0		221.7		—		232.6		—		220.3		12.3		256.3
Germany	—		7.7		219.5		227.2		210.4		—		23.4		—		15.7		7.7		234.9
Norway	—		0.5		118.1		118.6		106.7		—		—		—		—		—		118.6
Netherlands	—		80.6		303.7		384.3		343.7		—		—		—		—		—		384.3
Switzerland	—		22.6		162.7		185.3		168.3		—		68.6		—		52.3		16.3		201.6
United Kingdom	—		78.6		706.1		784.7		720.9		—		35.7		—		35.7		—		784.7
Other non-peripheral(2)	99.0		5.0		286.0		390.0		355.0		—		—		—		—		—		390.0
Total Non-Peripheral Europe	99.0		239.1		1,996.0		2,334.1		2,126.7		—		360.3		—		324.0		36.3		2,370.4
Total	$	99.0	$	239.1	$	2,282.8	$	2,620.9	$	2,392.3	$	—	$	361.0	$	—	$	324.0	$	37.0	$	2,657.9

⁽¹⁾ Represents: (i) Fixed maturity and equity securities at fair value; and (ii) Derivative assets at fair value.

⁽²⁾ Other non-peripheral countries include: Austria, Belgium, Bulgaria, Croatia, Denmark, Finland, Hungary, Iceland, Kazakhstan, Latvia, Lithuania, Luxembourg, Russian Federation, Slovakia, Slovenia, Sweden and Turkey.

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Liquidity and Capital Resources

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

Liquidity Management

Our principal available sources of liquidity are annuity product charges, GIC, funding agreements and fixed annuity deposits, investment income, proceeds from the maturity 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 and payment of dividends.

Our 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 whether 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 contract owner 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 us 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. Our asset/liability management discipline includes strategies to minimize exposure to loss as interest rates and economic and market conditions change. In executing this strategy, we use derivative instruments to manage these risks. Our derivative counterparties are of high credit quality.

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.  We maintain the following agreements:

• A reciprocal loan agreement with ING U.S., Inc. an affiliate, whereby either party can borrow from the other up to 3.0% of our statutory net admitted assets, excluding Separate Accounts, as of the prior December 31. As of March 31, 2013 and December 31, 2012, we did not have any outstanding receivable from ING U.S., Inc. under the reciprocal loan agreement. We and ING U.S., Inc. continue to maintain the reciprocal loan agreement and future borrowings by either party will be subject to the reciprocal loan terms summarized above.

• We hold approximately 49.4% of our assets in marketable securities.  These assets include cash, U.S. Treasuries, Agencies, Corporate Bonds, ABS, CMBS and CMO and Equity securities. In the event of a temporary liquidity need, cash may be raised by entering into reverse repurchase, dollar rolls and/or security lending agreements by temporarily lending securities and receiving cash collateral.  Under our Liquidity Plan, up to 12% of our general account statutory admitted assets may be allocated to reverse repurchase, dollar roll programs and securities lending.  At the time a temporary cash need arises, the actual percentage of admitted assets available for reverse repurchase transactions will depend upon outstanding allocations to the three programs. As of March 31, 2013, we had securities lending obligations of $205.0, which represents approximately 0.3% of our general account statutory admitted assets.

Management believes that our sources of liquidity are adequate to meet our short-term cash obligations.

Capital Contributions and Dividends

During the three months ended March 31, 2013 and 2012, we did not receive any capital contributions from our Parent.

During the three months ended March 31, 2013 and 2012, we did not pay a dividend or return of capital distribution on our common stock to our Parent.

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On March 28, 2013, the Iowa Insurance Division (the "Division") approved an extraordinary distribution of $230.0 from the Company to Lion, contingent upon the consummation of the IPO of ING U.S., Inc. and the use of such funds for ING U.S. operations. We paid the extraordinary dividend to Lion on May 8, 2013.

On May 8, 2013, we reset on a one-time basis our negative unassigned funds account as of December 31, 2012 (as reported in our 2012 statutory annual statement) to zero (with an offsetting reduction in gross paid-in capital and contributed surplus). The reset was made pursuant to a permitted practice in accordance with statutory accounting practices granted by the Division. This permitted practice has no impact on our total capital and surplus and will be reflected in our second quarter statutory financial statements.

Reinsurance Agreements

Reinsurance Ceded

Guaranteed Living Benefit — Coinsurance and Coinsurance Funds Withheld

Effective June 30, 2008, we entered into an automatic reinsurance agreement with an affiliate, SLDI, covering 100% of the benefits guaranteed under specific variable annuity guaranteed living benefit riders attached to certain variable annuity contracts issued by us on or after January 1, 2000.

Also effective June 30, 2008, we entered into a services agreement with SLDI, under which we provide certain actuarial risk modeling consulting services to SLDI with respect to hedge positions undertaken by SLDI in connection with the reinsurance agreement. For the three months ended March 31, 2013 and 2012, revenue related to the agreement was $3.1.

Effective July 1, 2009, the reinsurance agreement was amended and restated to change the reinsurance basis from coinsurance to a combined coinsurance and coinsurance funds withheld basis. On July 31, 2009, SLDI transferred assets with a market value of $3.2 billion to us and we deposited these assets into a funds withheld trust account.  As of March 31, 2013, the assets on deposit in the trust account were $2.8 billion.  We also established a corresponding funds withheld liability to SLDI, which is included in Funds held under reinsurance treaties with affiliates on the Condensed Balance Sheets. Funds held under reinsurance treaties with affiliates had a balance of $2.6 billion and $3.6 billion, at March 31, 2013 and December 31, 2012, respectively. In addition, as of March 31, 2013 and December 31, 2012, we had an embedded derivative with a value of $188.8 and $293.6, respectively, which is recorded in Funds held under reinsurance treaties with affiliates on the Condensed Balance Sheets.

Also effective July 1, 2009, we and SLDI entered into an asset management services agreement, under which SLDI serves as asset manager for the funds withheld account. SLDI has retained its affiliate, ING Investment Management LLC, as subadviser for the funds withheld account.

Effective October 1, 2011, we and SLDI entered into an amended and restated automatic reinsurance agreement in order to provide more flexibility to us and SLDI with respect to the collateralization of the reserves related to the variable annuity guaranteed living benefits reinsured under the agreement. As of March 31, 2013 and December 31, 2012, reserves ceded by us under this agreement were $2.0 billion and $2.1 billion, respectively.  In addition, a deferred loss in the amount of $339.3 and $343.9 as of March 31, 2013 and December 31, 2012, respectively, is included in Other assets on the Condensed Balance Sheets and is amortized over the period of benefit.

On May 8, 2013, following the ING U.S., Inc. IPO, ING U.S., Inc. made a cash capital contribution in the amount of $1.782 billion into SLDI, which SLDI deposited into the funds withheld trust account established to provide collateral for the variable annuity guaranteed living benefit riders ceded to SLDI under the amended and restated automatic reinsurance agreement. Upon deposit of such contributed capital into the funds withheld trust, we submitted $1.5 billion of contingent capital letters of credit issued under the facility which have been canceled.

Ratings

Our access to funding and our related cost of borrowing, requirements for derivatives collateral posting and the attractiveness of certain of our products to customers are affected by our credit ratings and insurance financial strength ratings, which are periodically reviewed by the rating agencies. Financial strength ratings and credit ratings are important factors affecting public confidence in an insurer and its competitive position in marketing products. The credit ratings are also important for the ability to raise capital through the issuance of debt and for the cost of such financing.

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A downgrade in our credit ratings or the credit or financial strength ratings of our parent or rated affiliates could potentially, among other things, limit our ability to market products, reduce our competitiveness, increase the number or value of policy surrenders and withdrawals, increase our borrowing costs and potentially make it more difficult to borrow funds, adversely affect the availability of financial guarantees or LOCs, cause additional collateral requirements or other required payments under certain agreements, allow counterparties to terminate derivative agreements and/or hurt our relationships with creditors, distributors or trading counterparties thereby potentially negatively affecting our profitability, liquidity and/or capital. In addition, we consider nonperformance risk in determining the fair value of our liabilities. Therefore, changes in our credit or financial strength ratings or the credit or financial strength ratings of our Parent or rated affiliates may affect the fair value of our liabilities.

The following table presents our financial strength and credit ratings. In parentheses is an indication of that rating's relative rank within the agency's rating categories. That ranking refers only to the generic or major rating category and not to the modifiers appended to the rating by the rating agencies to denote relative position within such generic or major category. For each rating, the relative position of the rating within the relevant rating agency's ratings scale is presented, with "1" representing the best rating in the scale.

Company	A.M. Best	Fitch	Moody's	S&P
ING USA Annuity & Life Insurance
Financial Strength Rating	A (3 of 16)	A- (3 of 9)	A3 (3 of 9)	A- (3 of 9)
Short-term Issuer Credit Rating	NR	NR	P-2 (2 of 4)	A-2 (2 of 8)

Rating Agency	Financial Strength Rating Scale	Short-term Credit Rating Scale
A.M. Best(1)	"A++" to "S"	"AMB-1+" to "d"
Fitch(2)	"AAA" to "C"	"F1" to "D"
Moody’s(3)	"Aaa" to "C"	"Prime-1" to "Not Prime"
S&P(4)	"AAA" to "R"	"A-1" to "D"

⁽¹⁾ A.M. Best’s financial strength rating is an independent opinion of an insurer's financial strength and ability to meet its ongoing insurance policy and contract obligations. It is based on a comprehensive quantitative and qualitative evaluation of a company's balance sheet strength, operating performance and business profile. Ratings from "aa" to "ccc" may be enhanced with a "+" (plus) or "-" (minus) to indicate whether credit quality is near the top or bottom of a category. A.M. Best’s short-term credit rating is an opinion to the ability of the rated entity to meet its senior financial commitments on obligations maturing in generally less than one year.

⁽²⁾ Fitch’s financial strength ratings provide an assessment of the financial strength of an insurance organization. The IFS Rating is assigned to the insurance company's policyholder obligations, including assumed reinsurance obligations and contract holder obligations, such as guaranteed investment contracts. Within short-term ratings, a "+" or a "–" may be appended to a rating to denote relative status within major rating categories.

⁽³⁾ Moody’s financial strength ratings are opinions of the ability of insurance companies to repay punctually senior policyholder claims and obligations. Moody's appends numerical modifiers 1, 2 and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Moody’s short-term credit ratings are opinions of the ability of issuers to honor short-term financial obligations.

⁽⁴⁾ S&P’s insurer financial strength rating is a forward-looking opinion about the financial security characteristics of an insurance organization with respect to its ability to pay under its insurance policies and contracts in accordance with their terms. A "+" or "-" indicates relative strength within a category. An S&P credit rating is an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Short-term credit ratings reflect the obligor's creditworthiness over a short-term time horizon.

Our ratings by A.M. Best Company, Inc. ("A.M. Best"), Fitch, Moody's and S&P 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 our 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.

Rating agencies use an "outlook" statement for both industry sectors and individual companies. For an industry sector, a stable outlook generally implies that over the next 12 to 18 months the rating agency expects ratings to remain unchanged among companies in the sector. For a particular company, an outlook generally indicates a medium- or long-term trend in credit fundamentals, which if continued, may lead to a rating change.

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Ratings actions affirmation and outlook changes by Fitch, Moody's and S&P from January 1, 2013 through May 14, 2013 are as follows:

• On May 6, 2013, following the announcement by ING U.S., Inc. that it completed the recent IPO, Moody's commented that the completion of the IPO is credit positive for ING U.S., Inc.

• On May 2, 2013, S&P said that ING U.S., Inc.'s announcement that it priced its IPO will not affect the ratings or outlook on ING U.S., Inc. or any of its rated insurance subsidiaries, including us.

• On January 7, 2013, Fitch affirmed the A- insurer financial strength ratings of ING U.S., Inc.'s operating subsidiaries, including us. Furthermore, Fitch removed all ratings from Ratings Watch Evolving and assigned a stable outlook to the ratings.

Minimum Guarantees

Variable annuity contracts containing minimum guaranteed death and living benefits expose us to equity risk.  A decrease in the equity markets may cause a decrease in the account values, thereby increasing the possibility that we may be required to pay amounts to contract owners 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 our risk associated with guaranteed death and living benefits.

We ceased new sales of retail variable annuity products in March 2010.  However, our existing variable annuity block of business contains certain guaranteed death and living benefits made available to contract owners as described below:

Guaranteed Minimum Death Benefits ("GMDBs"):

• Standard - Guarantees that, upon death, the death benefit will be no less than the premiums paid by the contract owner, 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 contract owner 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.)

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, we instituted a variable annuity guarantee hedging program in lieu of reinsurance.  The variable annuity guarantee hedging program is based on us entering into derivative positions to offset exposures to guaranteed minimum death benefits due to adverse changes in the equity markets.

As of March 31, 2013 and December 31, 2012, the guaranteed value of these death benefits in excess of account values was estimated to be as follows:

	(in billions)
	2013
Net amount at risk, before reinsurance	$	6.6
Net amount at risk, net of reinsurance	6.0
	2012
Net amount at risk, before reinsurance	$	7.6
Net amount at risk, net of reinsurance	6.9

The decrease in the guaranteed value of these death benefits was primarily driven by favorable equity market performance during 2013.

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The additional liabilities recognized related to GMDB's, as of March 31, 2013 and December 31, 2012, were as follows:

	2013
Separate account liability	$	41,050.9
Additional liability balance	437.9
	2012
Separate account liability	$	39,799.1
Additional liability balance	488.0

The above additional liability recorded by us, net of reinsurance, represented the estimated net present value of our future obligation for guaranteed minimum death benefits in excess of account values. The liability decreased mainly due to a decrease in expected future claims attributable to favorable equity market performance during the year.

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.

• Guaranteed Minimum Withdrawal Benefit ("GMWB") and Guaranteed Minimum Withdrawal Benefit for Life ("GMWBL") - Guarantees an annual withdrawal amount for a specified period of time (GMWB) or life (GMWBL) that is calculated as a percentage of the benefit base 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% 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 was available to include coverage for spouses.  Most versions of the withdrawal benefit included 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 contract owner 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 contract owner after 10 years, net of any contract withdrawals (GMAB 10).  In the past, we offered an alternative design that guaranteed the account value to be at least 200% of the eligible premiums paid by contract owners after 20 years (GMAB 20).

We reinsured most of our living benefit guarantee riders to SLDI 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. The Non-reinsured living benefits are still covered by our variable annuity guarantee hedging program.

The following guaranteed living benefits information is as of March 31, 2013 and December 31, 2012:

	Non-reinsured Living Benefits (GMAB/GMWB)		Reinsured Living Benefits (GMIB/GMWBL)
	2013
Net amount at risk, before reinsurance	$	28.9	$	4,277.2
Net amount at risk, net of reinsurance	28.9		—
	2012
Net amount at risk, before reinsurance	$	38.4	$	5,219.1
Net amount at risk, net of reinsurance	38.4		—

The net amount at risk for the reinsured living benefits is equal to the excess of the present value of the minimum guaranteed annuity payments available to the contract holder over the current account value. The methodology used to calculate the net amount at risk partially reflects the current interest rate environment and also includes a provision for the expected mortality of the clients covered by these living benefits. The decrease in the net amount at risk of these living benefits from $5.2 billion to$4.3 billion was primarily driven by favorable market performance during 2013.

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The net amount at risk for the non-reinsured living benefits is equal to the guaranteed value of these benefits in excess of the account values, which is reflected in the table above.

The separate account liabilities subject to the requirements for additional reserve liabilities under ASC Topic 944 for minimum guaranteed benefits and the additional liabilities recognized related to minimum guarantees, by type, as of March 31, 2013 and December 31, 2012 were as follows:

	Non-reinsured Living Benefits (GMAB/GMWB)		Reinsured Living Benefits (GMIB/GMWBL)
	2013
Separate account liability	$	964.9	$	30,767.4
Additional liability balance, net of reinsurance	57.9		1,140.6
	2012
Separate account liability	$	954.1	$	29,753.4
Additional liability balance, net of reinsurance	76.0		1,511.8

As of March 31, 2013 and December 31, 2012, the above additional liabilities for non-reinsured living benefits recorded by us, net of reinsurance, represent the estimated net present value of our future obligations for these benefits. The above additional liabilities for reinsured living benefits recorded by us, net of reinsurance, represent the present value of future claims less the present value of future attributed fees (GMWBLs) or the benefits ratio approach (GMIBs), less the reinsurance ceded reserve calculated under Accounting Standards Codification Topic 944. The additional liability for GMIBs was zero. The entire decrease in the additional liability balance for reinsured living benefits corresponds to the GMWBL liability which decreased mainly due to favorable market performance and increasing interest rates during the quarter.

Variable Annuity Guarantee Hedging Program

We primarily mitigate variable annuity market risk exposures through hedging, including hedging for the risks retained by us as well as hedging on behalf of SLDI under the combined coinsurance and coinsurance funds withheld agreement. Market risk arises primarily from the minimum guarantees within the variable annuity products, whose economic costs are primarily dependent on future equity market returns, interest rate levels, equity volatility levels and policyholder behavior. The variable annuity hedging program is used to mitigate our exposure to equity market and interest rate changes and seeks to ensure that the required assets are available to satisfy future death benefit and living benefit obligations. While the variable annuity guarantee hedge program does not explicitly hedge statutory or U.S. GAAP reserves, as markets move up or down, in aggregate the returns generated by the variable annuity hedge program will significantly offset the statutory and U.S. GAAP reserve changes due to market movements.

The objective of the guarantee hedging program is to offset changes in equity market returns for most minimum guaranteed death benefits and all guaranteed living benefits, while also providing interest rate protection for certain minimum guaranteed living benefits. We hedge the equity market exposure using a hedge target set using market consistent valuation techniques for all guaranteed living benefits and most death benefits. We also hedge the interest rate risk in our GMWB/GMAB/GMWBL blocks using a market consistent valuation hedge target. We do not hedge interest rate risks for our GMIB or GMDB primarily because doing so would result in volatility in our regulatory capital that exceeds our tolerances and, secondarily, because doing so would produce additional volatility in US GAAP financial statements.

Equity index futures on various equity indices are used to mitigate the risk of the change in value of the policyholder-directed separate account funds underlying the variable annuity contracts with minimum guarantees. A dynamic trading program is utilized to seek replication of the performance of targeted fund groups (i.e., the fund groups that can be covered by indices where liquid futures markets exist).

Total return swaps are also used to mitigate the risk of the change in value of certain policyholder-directed separate account funds. These include fund classes such as emerging markets and real estate. They may also be used instead of futures of more liquid indices where it may be deemed advantageous. This hedging strategy is employed at our discretion based on current risk exposures and related transaction costs.

Interest rate swaps are used to mitigate the impact of interest rates changes on the economic liabilities associated with certain minimum guaranteed living benefits.

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Variance swaps and equity options are used to mitigate the impact of changes in equity volatility on the economic liabilities associated with certain minimum guaranteed living benefits. This program began in the second quarter of 2012.

Foreign exchange forwards are used to mitigate the impact of policyholder-directed investments in international funds with exposure to fluctuations in exchange rates of certain foreign currencies. Rebalancing is performed based on pre-determined notional exposures to the specific currencies.

Variable Annuity Capital Hedge Overlay Program

Variable annuity guaranteed benefits are hedged based on their economic or fair value; however, the statutory reserves are not based on a market value. When equity markets decrease, the statutory reserve and rating agency required assets for the variable annuity guaranteed benefits can increase more quickly than the value of the derivatives held under the guarantee hedging program. This causes regulatory reserves to increase and rating agency capital to decrease. To protect the residual risk to regulatory reserves and rating agency capital in a decreasing equity market, we implemented the use of a static capital hedge in 2008. In 2010, we shifted to the dynamic Capital Hedge Overlay ("CHO") program. The current CHO strategy is intended to actively mitigate equity risk to the regulatory reserves and rating agency capital of ING U.S., Inc. The hedge is executed through the purchase and sale of equity index futures and is designed to limit the uncovered reserve increase in an immediate down equity market scenario to an amount we believe prudent for ING U.S., Inc. This amount will change over time with market movements, changes in regulatory and rating agency capital and management actions.

Derivatives

Our use of derivatives is limited mainly to economic hedging to reduce our exposure to cash flow variability of assets and liabilities, interest rate risk, credit risk, exchange rate risk and market risk. It is our policy not to offset amounts recognized for derivative instruments and amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral arising from derivative instruments executed with the same counterparty under a master netting arrangement.

We enter into interest rate, equity market, credit default and currency contracts, including swaps, futures, forwards, caps, floors and options, to reduce and manage risks associated with changes in value, yield, price, cash flow, or exchange rates of assets or liabilities held or intended to be held, or to assume or reduce credit exposure associated with a referenced asset, index, or pool. We also utilize options and futures on equity indices to reduce and manage risks associated with our annuity products. Open derivative contracts are reported as Derivatives assets or liabilities on the Condensed Balance Sheets at fair value. Changes in the fair value of derivatives are recorded in Net realized capital gains (losses) in the Condensed Statements of Operations.

If our current debt and claims paying ratings were downgraded in the future, certain terms in our derivative agreements may be triggered, which could negatively impact overall liquidity. For the majority of our counterparties, there is a termination event should our long-term debt ratings drop below BBB+/Baal.

We also have investments in certain fixed maturities and have issued certain annuity products, that contain embedded derivatives whose fair value is at least partially determined by levels of or changes in domestic and/or foreign interest rates (short-term or long-term), exchange rates, prepayment rates, equity markets, or credit ratings/spreads. Embedded derivatives within fixed maturities are included with the host contract on the Condensed Balance Sheets and changes in fair value of the embedded derivatives are recorded in Other net realized capital gains (losses) in the Condensed Statements of Operations. Embedded derivatives within certain annuity products are included in Future policy benefits and contract owner account balances on the Condensed Balance Sheets and changes in the fair value of the embedded derivatives are recorded in Other net realized capital gains (losses) in the Condensed Statements of Operations.

In addition, we have entered into two coinsurance with funds withheld arrangements that each contain an embedded derivative, the fair value which is based on the change in the fair value of the underlying assets held in trust. The embedded derivative within the coinsurance funds withheld arrangement is included in Funds held under reinsurance treaties with affiliates on the Condensed Balance Sheets and changes in the fair value are recorded in Interest credited and other benefits to contract owners in the Condensed Statements of Operations.

Deposits and Reinsurance Recoverable

We utilize reinsurance agreements to reduce our exposure to large losses in most aspects of our insurance business. Such reinsurance permits recovery of a portion of losses from reinsurers, although it does not discharge our primary liability as direct insurer of the

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risks reinsured. We evaluate the financial strength of potential reinsurers and continually monitor the financial condition of reinsurers. Only those reinsurance recoverable balances deemed probable of recovery are reflected as assets on our Condensed Balance Sheets.

Income Taxes

Income tax obligations include the allowance on uncertain tax benefits related to IRS tax audits and state tax exams that have not been completed.  The timing of the payment of the remaining allowance of $2.7 cannot be reliably estimated.

Recent Initiatives

In October 2009, ING Group submitted a restructuring plan (the “2009 Restructuring Plan”) to the European Commission (“EC”) in order to receive approval for state aid granted to ING Group by the Kingdom of The Netherlands (the “Dutch State”) in November 2008 and March 2009. To receive approval for this state aid, ING Group was required to divest its insurance and investment management businesses, including ING U.S., Inc. and its subsidiaries, including us. On November 19, 2012, ING Group and the EC announced that the EC approved amendments to the 2009 Restructuring Plan (the “2012 Amended Restructuring Plan”).

The 2012 Amended Restructuring Plan requires ING Group to divest at least 25% of ING U.S., Inc. and its subsidiaries, including us by December 31, 2013, more than 50% of ING U.S., Inc. and its subsidiaries, including us by December 31, 2014 and 100% of ING U.S., Inc. and its subsidiaries, including us by December 31, 2016. The divestment of 50% of ING U.S., Inc. is measured in terms of a divestment of over 50% of the shares of ING U.S., Inc., the loss of ING Group's majority of directors on ING U.S., Inc.'s board of directors and the accounting deconsolidation of ING U.S., Inc. and its subsidiaries, including us (in line with IFRS accounting rules). In case ING Group does not satisfy its commitment to divest ING U.S., Inc. and its subsidiaries, including us as agreed with the EC, the Dutch State will renotify the recapitalization measure to the EC. In such a case, the EC may require additional restructuring measures or take enforcement actions against ING Group, or, at the request of ING Group and the Dutch State, could allow ING Group more time to complete the divestment. The 2012 Amended Restructuring Plan also contains provisions that could limit our business activities. For additional information on the separation from ING Group and the 2012 Amended Restructuring Plan, see "Risk Factors - Risks Related to Our Separation from and Continuing Relationship with, ING Group" in our 2012 Annual Report on Form 10-K.

In May 2013, ING U.S., Inc. completed the IPO of its common stock. See Business, Basis of Presentation and Significant Accounting Policies Note to the Condensed Financial Statements included in Part I, Item 1, herein. ING anticipates divesting the balance of its ownership interest over time, consistent with the divestiture deadlines set out in the 2012 Amended Restructuring Plan approved by the EC.

Impact of New Accounting Pronouncements

For information regarding the impact of new accounting pronouncements, refer to the Business, Basis of Presentation and Significant Accounting Policies Note in our Condensed Financial Statements, included in Part I, Item 1., herein.

Contingencies

For information regarding other contingencies related to legal proceedings, regulatory matters and other contingencies involving us, see the Commitments and Contingencies Note to the Condensed Financial Statements included in Part I, Item1.

Item 4.    Controls and Procedures

a) The Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as amended ("Exchange Act")) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s current disclosure controls and procedures are effective in ensuring that material information relating to the Company required to be disclosed in the Company’s periodic SEC filings is made known to them in a timely manner.

b) 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.

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PART II.    OTHER INFORMATION

Item 1.    Legal Proceedings

See the Commitments and Contingencies Note to the Condensed Financial Statements included in Part I, Item 1.

Item 1A.    Risk Factors

The following should be read in conjunction with and supplements and amends the risk factors that may affect our business or operations described under "Risk Factors" in Part I, Item 1A. of the 2012 Annual Report on Form 10-K.

Changes in U.S. federal income tax law and interpretations of existing tax law could affect our profitability and financial condition by making some products less attractive to customers and increasing our tax costs or tax costs of our customers.

Annuity products that we sell currently benefit from one or more forms of tax favored status under current federal tax law. However, it is likely that looming federal deficits will generate numerous revenue raising measures, including those directed at the life insurance industry and its products. Such measures could include federal tax changes that reduce the amount an individual can contribute on a pre-tax basis to a tax-deferred product (either directly by reducing current limits or indirectly by changing the tax treatment of such contributions from exclusions to deductions) or that limit an individual's aggregate amount of tax-deferred savings, which could make our retirement products less attractive to customers. Over the years, the life insurance industry has contended with proposals either to limit, or repeal, the continued tax deferral afforded to the “inside build-up” associated with life insurance and annuity products. While countering any such revenue proposal is a top industry priority, if such a proposal should be made, we cannot predict its scope, effect or likelihood of outcome.

One such recent measure is the American Taxpayer Relief Act of 2012 which was passed to avert the “fiscal cliff” and made permanent the marginal income tax rates for individuals, as well as the estate tax threshold and applicable rate. Although we do not consider it likely that Congress will revisit these rates in the short term, it is likely to pursue spending cuts (which may take the form of reducing or eliminating tax preferences associated with our industry and products) to offset mandatory spending cuts, as part of any negotiations to raise the federal borrowing limit and as part of funding the federal government when the current continuing resolution expires. Congress may also consider the same types of spending cuts and revenue raising options on an even larger scale later in 2013 or 2014 if it pursues comprehensive tax reform premised on the notion of reducing corporate and personal rates by reducing tax preferences. We also believe that states that stand to lose tax revenue of their own will exert pressure on the federal government not to enact additional measures as part of comprehensive tax reform that would negatively impact them further. Such a situation may result in even more pressure on raising revenue from tax preferences associated with our Company and products.

Additionally, we are subject to federal corporation income tax and benefits from certain federal tax provisions, including but not limited to, dividends received deductions, various tax credits and insurance reserve deductions. Due in large part to the financial crisis, there continues to be an increased risk that changes to federal tax law could be enacted and could result in materially higher corporate taxes than would be incurred under existing tax law and adversely impact profitability. Also, interpretation and enforcement of existing tax law could change and could be applied to us as part of an Internal Revenue Service (“IRS”) examination and adversely impact our capital position. Although the specific form of any such potential legislation is uncertain, it could include lessening or eliminating some or all of the tax advantages currently benefiting us or our policyholders, including but not limited to, those mentioned above or imposing new costs.

Item 5.    Other Information

Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which was signed into law on August 10, 2012, added a new subsection (r) to Section 13 of the Exchange Act, which requires us to disclose whether the Company or any of its affiliates, including ING Group or its affiliates has engaged during the quarterly period ended March 31, 2013 in certain Iran-related activities, including any transaction or dealing with the Government of Iran that is not conducted pursuant to a specific authorization of the U.S. government.

ING U.S., Inc. and its subsidiaries, including the Company have not knowingly engaged in any transaction or dealing reportable under Section 13(r) of the Exchange Act during the quarterly period ended March 31, 2013. The disclosure below relates solely to a limited legacy portfolio of guarantees, accounts and loans maintained by ING Bank and does not relate to any activities

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conducted by ING U.S., Inc. or its subsidiaries, including the Company, or involve the management of ING U.S., Inc. or its subsidiaries, including the Company.

ING Bank maintains a limited legacy portfolio of guarantees, accounts and loans that involve various entities owned by the Government of Iran. These positions remain on the books, but accounts related thereto are 'frozen' under applicable laws and procedures. Any interest or other payments ING Bank is legally required to make in connection with said positions are made into 'frozen' accounts. Funds can only be withdrawn by relevant Iranian parties from these 'frozen' accounts after due regulatory consent from the relevant competent authorities. ING Bank has strict controls in place to ensure that no unauthorized account activity takes place while the account is 'frozen'. ING Bank may receive loan repayments, but all legacy loan repayments received by ING Bank have been duly authorized by relevant competent authorities. For the three months ended March 31, 2013, ING Bank had gross revenues of approximately $88.2 thousand, which was principally related to legacy loan repayment and ING Bank estimates that it had net profit of approximately $86.1 thousand. ING Bank intends to terminate each of the legacy positions as the nature thereof and applicable law permits.

Item 6.    Exhibits

See Exhibit Index on pages 84 - 85 hereof.

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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 14, 2013	ING USA Annuity and Life Insurance Company
(Date)	(Registrant)
	By: /s/	Christina K. Hack
		Christina K. Hack Senior Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

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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).

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Exhibit Index
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. 333-101487, 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).
10.1+	Federal Tax Sharing Agreement, effective January 1, 2013, between ING U.S., Inc. and each of its undersigned Subsidiaries, including ING USA Annuity and Life Insurance Company.
10.2+	First Amendment to Lease Agreement, dated as of October 2, 2000, between The Graham Group, Inc. and Equitable Life Insurance Company of Iowa, as subsumed by ING USA Annuity and Life Insurance Company pursuant to the January 1, 2004 merger.
10.3+	Second Amendment to Lease Agreement, dated as of February 4, 2002, between The Graham Group, Inc. and Equitable Life Insurance Company of Iowa, as subsumed by ING USA Annuity and Life Insurance Company pursuant to the January 1, 2004 merger.
31.1+	Certificate of Christina K. Hack 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 Christina K. Hack 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.
101.INS+	XBRL Instance Document [1]
101.SCH+	XBRL Taxonomy Extension Schema
101.CAL+	XBRL Taxonomy Extension Calculation Linkbase
101.DEF+	XBRL Taxonomy Extension Definition Linkbase
101.LAB+	XBRL Taxonomy Extension Label Linkbase
101.PRE+	XBRL Taxonomy Extension Presentation Linkbase

[1] Attached as Exhibit 101 to this report are the following Interactive Data Files formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of March 31, 2013 and December 31, 2012; (ii) Condensed Statements of Operations for the three months ended March 31, 2013 and 2012; (iii) Condensed Statements of Comprehensive Income for the three months ended March 31, 2013 and 2012; (iv) Condensed Statements of Changes in Shareholder's Equity for the three months ended March 31, 2013 and 2012; (v) Condensed Statements of Cash Flows for the three months ended March 31, 2013 and 2012; and (vi) Notes to the Condensed Financial Statements.

Users of this data are advised pursuant to Rule 401 of Regulation S-T that the information contained in the XBRL documents is unaudited and these are not the official publicly filed financial statements of ING USA Annuity and Life Insurance Company.

+ Filed herewith.

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