As filed with the Securities and Exchange Commission on April 29, 2009

Registration No. 333-133158

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

FORM S-1
POST-EFFECTIVE AMENDMENT NO. 3

TO

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ING LIFE INSURANCE AND ANNUITY COMPANY

Connecticut

(State or other jurisdiction of incorporation or organization)

6311

(Primary Standard Industrial Classification Code Number)

71-0294708

(I.R.S. Employer Identification No.)

ING
One Orange Way
Windsor, Connecticut 06095-4774
1-800-262-3862
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

John S. (Scott) Kreighbaum, Esq.
ING Life Insurance and Annuity Company
1475 Dunwoody Drive
West Chester, PA 19380-1478
(610) 425-3404
(Name and Address of Agent for Service of Process)

Copy to:
J. Neil McMurdie, Esq.
ING Life Insurance and Annuity Company
One Orange Way
Windsor, CT 06095-4774
(860) 580-2824
_____________________________________________________________________________________________
Approximate date of commencement of proposed sale to the public:

It is proposed that the public offering will commence as soon as practicable after
effectiveness of this filing.
If any of the securities being registered to this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.	[ X ]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.	[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.	[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.	[ ]

PART I
INFORMATION REQUIRED IN THE PROSPECTUS

ING Life Insurance and Annuity Company

Single Premium Deferred Modified Guaranteed Annuity Contract

                                                                     ING MULTI-RATE ANNUITY

May 1, 2009

The Contract. The contract described in this prospectus is a group or individual, single purchase payment,
modified guaranteed deferred annuity contract issued by ING Life Insurance and Annuity Company (the
“Company,” “we,” “us,” “our”). The contract is available as a non-qualified deferred annuity. Additionally, the
contract is available as a rollover to a traditional Individual Retirement Annuity (“IRA”) under section 408(b) of the
Internal Revenue Code of 1986, as amended (“Tax Code”) or a rollover to a Roth IRA under Tax Code section
408A. See “Purchase” in this prospectus for additional information.

Why Reading this Prospectus is Important. This prospectus contains facts about the contract that you should
know before investing. The information will help you determine if the contract is right for you. Read this
prospectus carefully. If you do invest in the contract, retain this document for future reference.

How it Works. Upon purchase, you may direct your purchase payment to different guaranteed terms ranging up to
and including ten years. Each guaranteed term has its own guaranteed interest rate. When the guaranteed term(s)
end, you can reinvest in another guaranteed term, begin receiving income phase payments, or withdraw your full
account value.

Withdrawals. You may withdraw all or part of your accumulated funds at any time. Withdrawals prior to the
end of a guaranteed term may be subject to a market value adjustment and certain fees. Upon a full
withdrawal, you could, therefore, receive less than your purchase payment. See the “Market Value
Adjustment (MVA)” section and “Fees” section in this prospectus for additional information.

Additional Disclosure Information. Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed on the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense. We do not intend for this prospectus to be an
offer to sell or a solicitation of an offer to buy these securities in any state that does not permit their sale. We have
not authorized anyone to provide you with information different from that contained in this prospectus. The contract
is not a deposit with, obligation of, or guaranteed or endorsed by any bank, nor is it insured by the FDIC.

Our Home Office:	Our Customer Service Center:
ING Life Insurance and Annuity	ING
Company	P.O. Box 9271
One Orange Way	Des Moines, IA 50306-9271
Windsor, CT 06095-4774	(800) 531-4547
(800) 262-3862

ILIAC Multi-Rate Annuity – ILIACMRA

TABLE OF CONTENTS

	Page
CONTRACT OVERVIEW	1
GUARANTEED TERMS AND GUARANTEED INTEREST RATES	2
YOUR CHOICES AT THE END OF A GUARANTEED TERM	4
PURCHASE	4
RIGHT TO CANCEL	5
FEES	6
WITHDRAWALS	8
SYSTEMATIC DISTRIBUTION OPTIONS	9
MARKET VALUE ADJUSTMENT (MVA)	10
DEATH BENEFIT	11
INCOME PHASE	12
INVESTMENTS	15
TAXATION	16
OTHER TOPICS	23
APPENDIX I – Calculating a Market Value Adjustment (MVA)	I-1

ILIAC Multi-Rate Annuity – ILIACMRA

CONTRACT OVERVIEW

The following is intended as a summary. Please read each section of this prospectus for additional detail.

Questions: Contacting the Company. To answer your questions, contact your sales representative or write or call
our Customer Service Center:

ING
P.O. Box 9271
Des Moines, IA 50306-9271
(800) 531-4547

Contract Design:

The contract described in this prospectus is a group or individual, single purchase payment, modified guaranteed
deferred annuity contract issued by ING Life Insurance and Annuity Company. It is intended to be used as a
retirement savings vehicle that allows you to invest in fixed interest options in order to help meet long-term financial
goals.

Who’s Who:

The contract holder (you): The person to whom we issue an individual contract or a certificate under a group
contract.

The Company (we, us, our): ING Life Insurance and Annuity Company. We issue the contract.

The contract: Both individual contracts and certificates under a group contract are referred to in this prospectus as
the contract.

Contract Phases:

The Accumulation Phase

• At Investment. Upon purchase, you may direct your purchase payment to different guaranteed terms ranging up to and including ten years. Each guaranteed term has its own guaranteed interest rate.
  Generally, your purchase payment will earn interest at the guaranteed interest rate(s) for the duration of the guaranteed term(s) you select. If you withdraw or transfer amounts prior to the end of a guaranteed term, those amounts may be subject to a market value adjustment and certain fees. See “Market Value Adjustment (MVA)” and “Fees.”
• At Maturity. We will notify you at least 18 days before the guaranteed term ends. If you do not make any election before the guaranteed term ends, we will automatically renew the contract for a guaranteed term of the same or similar duration. If you do not want to automatically renew, contact us before the guaranteed term ends. Prior to the end of a guaranteed term, you can elect to reinvest in a
  different guaranteed term, begin income phase payments, or withdraw the full amount available at maturity.

The Income Phase

You may start receiving income phase payments any time after the first year of the contract. Several payment
options are available. See “Income Phase.” In general, you may receive payments for a specified period of time or
for life; receive payments monthly, quarterly, semi-annually or annually; and select an option that provides a death
benefit to beneficiaries.

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Contract Facts:

Free Look/Right to Cancel: You may cancel the contract within ten days of receipt (or as otherwise provided by
state law). See “Right to Cancel.”

Death Benefit: A beneficiary may receive a benefit in the event of your death prior to the income phase. Benefits
during the income phase depend upon the payment option selected. See “Death Benefit” and “Income Phase.”

Withdrawals: During the accumulation phase, you may withdraw all or part of your account value. Amounts
withdrawn may be subject to a market value adjustment, early withdrawal charge, maintenance fee, tax withholding
and taxation. See “Market Value Adjustment (MVA),” “Withdrawals,” “Fees” and “Taxation.”

Systematic Distribution Options: You may elect to receive regular payments from your account, while retaining
the account in the accumulation phase. See “Systematic Distribution Options.”

Fees: Certain fees may be deducted from your account value. See “Fees.”

Taxation: You will not generally pay taxes on any earnings from the annuity contract described in this prospectus
until they are withdrawn. Tax-qualified retirement arrangements (e.g., IRAs) also defer payment of taxes on
earnings until they are withdrawn. If you are considering funding a tax-qualified retirement arrangement with an
annuity contract, you should know that the annuity contract does not provide any additional tax deferral of earnings
beyond the tax deferral provided by the tax-qualified retirement arrangement. However, annuities do provide other
features and benefits which may be valuable to you. You should discuss your alternatives with your financial
representative.

Taxes will generally be due when you receive a distribution. Tax penalties may apply in some circumstances. See
“Taxation.”

Market Value Adjustment (MVA): If you withdraw all or part of your account value before a guaranteed term is
completed, an MVA may apply. The MVA reflects the change in the value of the investment due to changes in
interest rates since the date of investment, and may be positive or negative. See “Market Value Adjustment
(MVA).”

GUARANTEED TERMS AND GUARANTEED INTEREST RATES

The contract offers fixed interest options called guaranteed terms. On the application or enrollment form, you select
the guaranteed term(s) you want to invest in from among the guaranteed terms we offer at that time. Your purchase
payment earns interest at the guaranteed interest rate applicable to that guaranteed term.

Guaranteed Terms:

Start Date. Guaranteed terms always start on the first business day of the month.

Length. Guaranteed terms are offered at our discretion for various lengths of time ranging up to and including ten
years.

Minimum Payments. Your single purchase payment must be at least $10,000. You may divide your single
purchase payment among any of the various guaranteed terms we offer, but you must invest at least $1,000 in any
single guaranteed term.

Guaranteed Interest Rates
We state the guaranteed interest rates as an effective annual rate of return. In other words, we credit the interest you
earn on your purchase payment at a rate that provides the guaranteed rate of return over a one-year period, assuming
you make no withdrawals. Guaranteed interest rates will never be less than the minimum guaranteed interest rate

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stated in the contract. We reserve the right to offer, from time to time, guaranteed interest rates to prospective
investors that are higher than those offered to current contract holders with respect to guaranteed terms of the same
duration.

One Guaranteed Term/Multiple Guaranteed Interest Rates. More than one guaranteed interest rate may be
applicable during a guaranteed term greater than one year. For example, a guaranteed term of five years may apply
one guaranteed interest rate for the first year, a different guaranteed interest rate for the next two years, and a third
guaranteed interest rate for the last two years. You may not select a guaranteed term with multiple guaranteed
interest rates if your contract is issued in the State of New York.

Example of Interest Crediting at the Guaranteed Interest Rate. The example below shows how interest is
credited during a guaranteed term. The hypothetical guaranteed interest rate used in this example is illustrative only
and is not intended to predict future guaranteed interest rates to be offered under the contract. Actual guaranteed
interest rates offered may be more or less than those shown. The example assumes no withdrawals of any amount
during the entire seven-year guaranteed term illustrated. The example does not reflect any market value adjustment,
federal income taxes, possible tax penalties, or deductions of any early withdrawal charge, premium taxes, or
maintenance fees. See “Withdrawals,” “Market Value Adjustment (MVA),” “Fees” and “Taxation.”

Example:
Purchase payment:	$20,000.00
Guaranteed term:	7 years
Guaranteed interest rate:	6.00% per year

The guaranteed interest rate is applied in this example by using the formula:

1 + the guaranteed interest rate = 1.06
Account Value at End	Interest Earned at End
of Each Contract Year	of Each Contract Year
Contract year 1 = $21,200.00	Interest at end of contract year 1
($20,000.00 x 1.06)	= $1,200.00
Contract year 2 = $22,472.00	Interest at end of contract year 2
($21,200.00 x 1.06)	= $1,272.00
Contract year 3 = $23,820.32	Interest at end of contract year 3
($22,472.00 x 1.06)	= $1,348.32
Contract year 4 = $25,249.54	Interest at end of contract year 4
($23,820.32 x 1.06)	= $1,429.22
Contract year 5 = $26,764.51	Interest at end of contract year 5
($25,249.54 x 1.06)	= $1,514.97
Contract year 6 = $28,370.38	Interest at end of contract year 6
($26,764.51 x 1.06)	= $1,605.87
End of guaranteed term = $30,072.61	Interest at end of contract year 7
($28,370.38 x 1.06)	= $1,702.23

Total interest credited in guaranteed term = $10,072.61 ($30,072.61 - $20,000.00)

Determination of Guaranteed Interest Rates. We will periodically determine the guaranteed interest rates we
offer at our sole discretion. We have no specific formula for determining the rate of interest we will declare as
future guaranteed interest rates. Our determination of guaranteed interest rates is influenced by, but does not

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necessarily correspond to, interest rates available on the types of debt instruments in which we intend to invest the
amounts attributable to the contract. See “Investments.” The Company’s management will also consider various
factors in determining guaranteed interest rates for a given guaranteed term, including some or all of the following:

• Regulatory and tax requirements;
• Sales commissions;
• Administrative expenses;
• General economic trends; and
• Competitive factors.

The Company’s management determines the guaranteed interest rates we will offer. We cannot predict nor
guarantee future levels of guaranteed interest rates above the contractually guaranteed minimum rate nor
guarantee what rates will be offered in the future.

YOUR CHOICES AT THE END OF A GUARANTEED TERM

At least 18 calendar days prior to the end of a guaranteed term, we will notify you that the guaranteed term is about
to end. At the end of a guaranteed term, you can do three things with the amount you have accumulated for that
guaranteed term:

• Reinvest all or part of it in another guaranteed term;
• Withdraw all or part of it; or
• Use all or part of it to start your income phase payments.

These choices can also be combined. For example, you can withdraw part of the amount you have accumulated and
reinvest the balance or reinvest part and use the balance to start income phase payments. Each of these choices has
certain consequences, which you should consider carefully. See “Withdrawals,” “Income Phase” and “Taxation.”

Requesting Your Choice. Once you decide what you want to do with your account value for that guaranteed term,
you must advise us of your decision by completing an election form. We must receive your completed election form
at least five days prior to the end of the guaranteed term to which it applies.

If we do not receive your properly completed election form in time, or you do not submit an election form, your
account value at the end of the guaranteed term will be automatically reinvested in the following manner:

• For a guaranteed term equal to the guaranteed term just ended;
• If no such guaranteed term is available, for the guaranteed term with the next shortest duration; or
• If no such shorter guaranteed term is available, for the guaranteed term with the next longest duration.

Your account value will then earn interest at the guaranteed interest rate applicable to the guaranteed term
automatically selected for you. We will mail a confirmation statement to you the next business day after the
completion of the just-ended guaranteed term advising you of the new guaranteed term and guaranteed interest rate.

PURCHASE

Contract Type. The contract may be purchased as one of the following:

(1)	A non-qualified deferred annuity;
(2)	A rollover to a traditional individual retirement annuity (IRA) under Tax Code section 408(b) (limitations apply, see “Purchasing a Traditional IRA” in this section); or
(3)	A rollover to a Roth IRA under Tax Code section 408A (limitations apply, see “Purchasing a Roth IRA” in this section).

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How to Purchase. To purchase a contract, complete an application or enrollment form and submit it to the
Company along with your purchase payment.

Payment Methods. The following purchase payment methods are allowed:

• One lump-sum payment; or
• Transfer or rollover from a pre-existing plan or account.

We reserve the right to reject any payments without advance notice.

Payment Amount. The minimum purchase payment is $10,000. We may limit the amount of the maximum purchase
payment. All purchase payments over $1,000,000 will be allowed only with our consent. You may not make any
additional purchase payments under an existing contract. However, eligible persons may purchase additional
contracts at the then prevailing guaranteed interest rates and guaranteed terms.

Purchasing a Traditional IRA. To purchase the contract as a traditional IRA, your purchase payment must be a
transfer of amounts held in one of the following:

• A traditional individual retirement account under Tax Code section 408(a);
• A traditional individual retirement annuity under Tax Code section 408(b); or
• A retirement plan qualified under Tax Code section 401 or 403.

Purchasing a Roth IRA. A contract may be purchased as a Roth IRA under Tax Code section 408A, by
transferring amounts previously accumulated under another Roth IRA or from a traditional individual retirement
annuity or individual retirement account, provided certain conditions are met. See “Taxation.”

Acceptance or Rejection of Applications or Enrollment Forms. We must accept or reject your application or
enrollment form within two business days of receipt. If the application or enrollment form is incomplete, we may
hold it and any accompanying purchase payment for five days. Payments may be held for longer periods only with
your consent, pending acceptance of the application or enrollment form. If the application or enrollment form is
accepted, a contract will be issued to you. If the application or enrollment form is rejected, we will return it and any
payments to you, without interest.

We may also refuse to accept certain forms of premium payments or loan repayments, if applicable, (traveler’s
checks, for example) or restrict the amount of certain forms of premium payments or loan repayments. In addition,
we may require information as to why a particular form of payment was used (third party checks, for example) and
the source of the funds of such payment in order to determine whether or not we will accept it. Use of an
unacceptable form of payment may result in us returning your premium payment and not issuing the contract.

What Happens to Your Purchase Payment? If we accept your application or enrollment form, your purchase
payment becomes part of our general assets and is credited to an account established for you. We will confirm the
crediting of your purchase payment within five business days of receipt of your properly completed application or
enrollment form. You start earning interest on your purchase payment beginning on the effective date of the
contract, which is the date your purchase payment is credited. During the period of time between the date your
purchase payment is credited and the start of the guaranteed term you selected, your purchase payment earns interest
at the guaranteed interest rate applicable to the guaranteed term you selected.

RIGHT TO CANCEL

You may cancel the contract within ten days of receiving it (or as otherwise provided by state law) by returning it to
our Customer Service Center along with a written notice of cancellation. We will issue a refund within seven days
of our receipt of the contract and written notice of cancellation. The refund will equal the amount of your purchase
payment.

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FEES

The following fees and other deductions may impact your account value:

• Early Withdrawal Charge (see below);
• Maintenance Fee (see below);
• Premium Taxes (see below);
• Market Value Adjustment (see “Market Value Adjustment (MVA)”); and
• Taxation (see “Taxation”).

Early Withdrawal Charge
Withdrawals of all or a portion of your account value may be subject to a charge. In the case of a partial withdrawal
where you request a specified dollar amount, the amount withdrawn from your account will be the amount you
specified plus adjustment for any applicable early withdrawal charge.

Amount. The amount is a percentage of the purchase payment you withdraw. The percentage will be determined
by the early withdrawal charge schedule below.

Purpose. This is a deferred sales charge. It reimburses some of our sales and administrative expenses associated
with the contract.

Early Withdrawal Charge Schedule:
Years since purchase payment credited:	0	1	2	3	4	5	6	7
Fee as a percentage of payment withdrawn:	7%	7%	6%	6%	5%	4%	2%	0%

How We Apply the Schedule. For purposes of applying the early withdrawal charge, all time periods are measured
from the date your purchase payment is credited, even if you reinvest all or part of your account value in another
guaranteed term. Once the early withdrawal charge declines to 0%, it no longer applies, regardless of how long you
own the contract.

The early withdrawal charge applies only to withdrawals of your purchase payment. However, for the purposes of
this charge, we assume you are withdrawing all or part of your purchase payment first (not your earnings). This
assumption is not made for tax purposes. See “Taxation.”

Example. Assume the first guaranteed term you select is for five years. Further assume that at the end of this five-
year guaranteed term, you decide to reinvest your account value for another guaranteed term of four years. Assume
you then make a withdrawal (but not a special withdrawal, as described below) during the second year of the new
guaranteed term. Because six years have passed since your purchase payment was credited, you would pay a 2%
early withdrawal charge, even though you could have withdrawn all or part of your account value at the end of the
first five-year guaranteed term without paying an early withdrawal charge. See “Waiver of Charge,” below.
However, if you make a withdrawal during the third year of the new guaranteed term, or anytime thereafter, you
would pay no early withdrawal charge, because seven years would have passed since your purchase payment was
credited.

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Special Withdrawals. After 12 months from the contract effective date, you may make one withdrawal equal to
10% or less of your account value during any calendar year, valued at the time we receive your withdrawal request
in writing, and we will not deduct any early withdrawal charge. This special withdrawal is subject to the following
restrictions:

• It applies only to the first withdrawal each calendar year;
• All subsequent withdrawals that calendar year are subject to an early withdrawal charge, even if you did not withdraw the full 10% with your first withdrawal; and
• If your first withdrawal of the calendar year is in excess of 10% of your account value, the excess amount is subject to an early withdrawal charge.

Waiver of Charge. The early withdrawal charge is waived for amounts that are:

• Withdrawn at the end of a guaranteed term, provided that at least five days prior to the end of that guaranteed term we receive your withdrawal request in writing. (If you reinvest those amounts in another guaranteed term, future withdrawals will be subject to an early withdrawal charge as described above.); or
• $2,500 or less, provided that no withdrawal has been made from your account during the prior 12 months; or
• Withdrawn due to your election of a systematic distribution option (see “Systematic Distribution Options”); or
• Withdrawn due to an involuntary termination. This may occur if your account value is less than $2,500. See “Other Topics — Involuntary Terminations.”

Nursing Home Waiver. If approved in your state, you may withdraw all or a portion of your account value without
an early withdrawal charge if all of the following conditions are met:

• More than one account year has elapsed since the date your purchase payment was credited;
• The annuitant, designated under the contract, has spent at least 45 consecutive days in a licensed nursing facility (in New Hampshire, the facility may be non-licensed); and
• The withdrawal is requested within three years of the designated annuitant’s admission to a licensed nursing facility (in Oregon there is no three year limitation and in New Hampshire, the facility may be non- licensed).

We will not waive the early withdrawal charge if the annuitant was in a licensed nursing care facility at the time you
purchased the contract. The nursing home waiver may not be available in all states.

Market Value Adjustment and Taxation. Except for withdrawals at the end of a guaranteed term as noted above,
and withdrawals under a systematic distribution option, a market value adjustment is applicable to any amounts you
withdraw. Regardless of when or how withdrawals are taken, you may also be required to pay taxes and tax
penalties. See “Market Value Adjustment (MVA)” and “Taxation.”

Annual Maintenance Fee
Currently we do not charge a maintenance fee. However, prior to the time you enter the income phase, an annual
maintenance fee may be deducted from your account value on each anniversary of the contract’s effective date and
if you make a full withdrawal from the contract. The terms and conditions under which the maintenance fee may be
deducted are stated in the contract. A maintenance fee would be used to reimburse us for our administrative
expenses relating to establishing and maintaining the contract.

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Premium Taxes

Maximum Amount. Some states and municipalities charge a premium tax on annuities. These taxes currently
range from 0% to 4%, depending upon the jurisdiction.

When/How. We reserve the right to deduct a charge for premium taxes from your account value or from your
payment to the account at any time, but not before there is a tax liability under state law. For example, we may
deduct a charge for premium taxes at the time of a complete withdrawal or we may reflect the cost of premium taxes
in our income phase payment rates when you commence income phase payments. If, at your death, your beneficiary
elects to receive a lump-sum distribution, a charge may be deducted for any premium taxes paid on your behalf for
which we have not been reimbursed. If we deduct premium taxes from your purchase payment, the amount invested
in a guaranteed term will be equal to the amount of your purchase payment reduced by any applicable premium tax.

WITHDRAWALS

You may withdraw all or part of your account value at any time during the accumulation phase. Amounts are
withdrawn on a pro-rata basis from each of the guaranteed terms under the contract. You may request that we
inform you in advance of the amount payable upon a withdrawal.

Steps for Making a Withdrawal.

Select the withdrawal amount.
(1)	Full Withdrawal: You will receive, reduced by any required withholding tax, your account value, plus or minus any applicable market value adjustment, and minus any applicable early withdrawal charge and annual maintenance fee.
(2)	Partial Withdrawal (Percentage or Specified Dollar Amount): You will receive, reduced by any required withholding tax, the amount you specify, subject to the value available in your account.
	However, the amount actually withdrawn from your account will be adjusted for any applicable early withdrawal charge and any positive or negative market value adjustment, and accordingly, may be more or less than the amount requested.
Properly complete a disbursement form and submit it to our Customer Service Center.

Delivery of Payment. Payment of withdrawal requests will be made in accordance with the SEC’s requirements.
Normally, payment will be sent not later than seven days following our receipt of the disbursement form in good
order. Generally, a request is considered to be in “good order” when it is signed, dated and made with such clarity
and completeness that we are not required to exercise any discretion in carrying it out. However, under certain
emergency situations, we may defer payment of any withdrawal for a period not exceeding six months from the date
we receive your withdrawal request.

Taxes, Fees and Deductions. Amounts withdrawn may be subject to one or more of the following:

• Early Withdrawal Charge: Withdrawals of all or a portion of your account may be subject to an early withdrawal charge. This is a deferred sales charge that reimburses us for some of the sales and administrative expenses associated with the contract. See “Fees — Early Withdrawal Charge.”
• Annual Maintenance Fee: If you make a full withdrawal from the contract, we may deduct any applicable annual maintenance fee. See “Fees — Annual Maintenance Fee.”
• Market Value Adjustment (MVA): The MVA reflects changes in interest rates since the deposit period. The MVA may be positive or negative. If you make a withdrawal before the end of a guaranteed term, we will calculate an MVA and the amount withdrawn will be adjusted for any applicable positive or negative

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MVA. See “Market Value Adjustment (MVA).”
• Tax Penalty: If you make a withdrawal before you attain age 59½, the amount withdrawn may be subject to a 10% penalty tax. See “Taxation.”
• Tax Withholding: Amounts withdrawn may be subject to withholding for federal income taxes. See “Taxation.”

All applicable fees and deductions are deducted from the amount of your withdrawal in accordance with the terms of
the contract. Any market value adjustment applicable to your withdrawal, taxes, fees and deductions may either
increase or decrease the amount paid to you. To determine which may apply, refer to the appropriate sections of this
prospectus, contact your sales representative or call our Customer Service Center at the number listed in “Contract
Overview.”

SYSTEMATIC DISTRIBUTION OPTIONS

Features of a Systematic Distribution Option
A systematic distribution option allows you to receive regular payments from the contract without moving into the
income phase. By remaining in the accumulation phase, certain rights and flexibility not available during the
income phase are retained.

These options may be exercised at any time during the accumulation phase of the contract.

The following systematic distribution options may be available:

• Systematic Withdrawal Option (SWO). SWO is a series of automatic partial withdrawals from your account based on a payment method you select. It is designed for those who want a periodic income while retaining investment flexibility for amounts accumulated under the contract.
  
  SWO allows you to withdraw either a specified amount or a specified percentage of the contract’s value, or to withdraw amounts over a specified time period that you determine, within certain limits described in the contract. SWO payments can be made on a monthly or quarterly basis, and the amount of each payment is determined by dividing the designated annual amount by the number of payments due each calendar year. SWO payments are withdrawn pro-rata from each of the guaranteed terms under the contract.
  
  Under a contract purchased as a traditional IRA, if the SWO payment for any year is less than the required minimum distribution under the Tax Code, the SWO payment will be increased to an amount equal to the minimum distribution amount.
  
  If you participate in SWO, you may not utilize a special withdrawal to make additional withdrawals from the contract. See “Withdrawals — Special Withdrawals.”
  
• Estate Conservation Option (ECO). ECO offers the same investment flexibility as SWO, but is designed for those who want to receive only the minimum distribution the Tax Code requires each year.
  
  Under ECO, we calculate the minimum distribution amount required by law, and pay you that amount once a year. ECO is not available under non-qualified contracts or under Roth IRA contracts. ECO payments are withdrawn pro-rata from each of the guaranteed terms under the contract.
  
  We will, upon request, inform you in advance of the amount payable under ECO.
  
  If you participate in ECO, you may not utilize a special withdrawal to make additional withdrawals from the contract. See “Withdrawals — Special Withdrawals.”

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• Other Systematic Distribution Options. We may add additional systematic distribution options from time to time. You may obtain additional information relating to any of the systematic distribution options from your sales representative or from our Customer Service Center.

Availability. If allowed by applicable law, we reserve the right to discontinue the availability of one or all of the
systematic distribution options for new elections at any time and to change the terms of future elections.

Eligibility. To exercise one of these options you must meet certain age criteria and your account value must meet
certain minimum requirements. To determine if you meet the age and account value criteria and to assess terms and
conditions that may apply, contact your sales representative or our Customer Service Center.

Termination. You may revoke a systematic distribution option at any time by submitting a written request to our
Customer Service Center. However, once cancelled, you or your spousal beneficiary may not elect SWO again. In
addition, once cancelled, ECO may not be elected again until 36 months have elapsed.

Deductions and Taxation. When you elect a systematic distribution option, your account value remains in the
accumulation phase and subject to the applicable charges and deductions described in “Fees.” However, we will not
apply an early withdrawal charge or market value adjustment to any part of your account value paid under SWO or
ECO. Taking a withdrawal through a systematic distribution option may have tax consequences. If you are
concerned about tax implications consult a tax adviser before one of these options is elected. See “Taxation.”

MARKET VALUE ADJUSTMENT (MVA)

Purpose of the MVA. If you make an early withdrawal from the contract, we may need to liquidate certain assets
or use existing cash flow that would otherwise be available to invest at current interest rates. The assets we may
liquidate to provide your withdrawal amount may be sold at a profit or a loss, depending upon market conditions.
To lessen this impact, certain withdrawals are subject to an MVA.

What is an MVA? In certain situations described below, including when you make a withdrawal before the end of
a guaranteed term, we will calculate an MVA and either add or deduct that value from the amount withdrawn. The
calculation we use to determine the MVA reflects the change in the value of your investment due to changes in interest
rates since the start of the guaranteed term under the contract. When these interest rates increase, the value of the
investment decreases, and the MVA amount may be negative and cause a deduction from your withdrawal amount.
Conversely, when these interest rates decrease, the value of the investment increases, and the MVA amount may be
positive and cause an increase in your withdrawal amount.

Calculation of the MVA. For a further explanation of how the MVA is calculated, see Appendix I.

When Does an MVA Apply? An MVA may apply when:

• You request a withdrawal before the end of a guaranteed term. In this case the withdrawal amount may be increased or decreased by the application of the MVA.
• You initiate income phase payments before the end of your guaranteed term. In this case an MVA may be applied to any amounts used to start income phase payments. While either a positive or negative MVA may apply to amounts used to start a nonlifetime payment option, only a positive MVA will apply to amounts used to start a lifetime payment option. See “Income Phase.”
• We terminate the contract because your account value is less than $2,500.
• You cancel the contract.

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• A death benefit is paid upon the death of the annuitant, more than six months after the annuitant’s death. See “Death Benefit.”
• A death benefit is paid upon the death of a person other than the annuitant.

When Does an MVA Not Apply? An MVA will not be applied to:

• Withdrawals under SWO or ECO as described in “Systematic Distribution Options.”
• A death benefit payable upon death of an annuitant, if paid within six months of the annuitant’s death. See “Death Benefit.”
• Amounts withdrawn at the end of a guaranteed term, provided that at least five days prior to the end of that guaranteed term we receive your withdrawal request in writing. The MVA, however, remains applicable to any amount you reinvest for another guaranteed term.

DEATH BENEFIT

During the Accumulation Phase

Who Receives the Benefit? If you or the annuitant die during the accumulation phase, a death benefit will be paid
to your beneficiary in accordance with the terms of the contract subject to the following:

• Upon the death of a joint contract holder, the surviving joint contract holder will be deemed the designated beneficiary, and any other beneficiary on record will be treated as the beneficiary at the death of the surviving joint contract holder.
• If you are not a natural person, the death benefit will be payable at the death of the annuitant designated under the contract or upon any change of the annuitant.
• If you die and no beneficiary exists, the death benefit will be paid in a lump sum to your estate.

Designating a Beneficiary(ies). You may designate a beneficiary on your application or enrollment form, or by
providing a written request in good order to our Customer Service Center. Generally, a request is considered to be
in “good order” when it is signed, dated and made with such clarity and completeness that we are not required to
exercise any discretion in carrying it out.

Calculation of the Benefit. The death benefit is calculated as of the date proof of death and the beneficiary’s right to
receive the death benefit are received in good order at our Customer Service Center. The amount of the death
benefit is determined as follows:

• If the death benefit is paid within six months of the death of the annuitant, the amount equals your account value.
• If the death benefit is paid more than six months after the date of death of the annuitant, or if paid upon your death and you are not the annuitant, it equals your account value as adjusted by any applicable market value adjustment.
• If you are not the annuitant, the death benefit payable may be subject to an early withdrawal charge.

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Benefit Payment Options. If you are the annuitant and you die before income phase payments begin, or if you are
not a natural person and the annuitant dies before income phase payments begin, any beneficiary under the contract
who is an individual has several options for receiving payment of the death benefit. The death benefit may be paid:

• In one lump-sum payment;
• In accordance with any of the available income phase payment options. See “Income Phase — Payment Options;” or
• In certain circumstances, your beneficiary, spousal beneficiary or joint contract holder may have the option to continue the contract rather than receive the death benefit.

Unless your beneficiary elects otherwise, the distribution will be made into an interest bearing account, backed by
our general account, that is accessed by the beneficiary through a checkbook feature. The beneficiary may access
death benefit proceeds at any time without penalty. Interest earned on this account may be less than interest paid on
other settlement options.

Taxation. The Tax Code requires distribution of death benefit proceeds within a certain period of time. Failure to
begin receiving death benefit payments within those time periods can result in tax penalties. Regardless of the
method of payment, death benefit proceeds will generally be taxed to the beneficiary in the same manner as if you
had received those payments. See “Taxation” for additional information.

Change of Beneficiary. You may change the beneficiary previously designated at any time by submitting notice in
writing to our Customer Service Center. The change will not be effective until we receive and record it.

INCOME PHASE

During the income phase you receive payments from your accumulated account value. You may apply all or a
portion of your account value to provide these payments. Income phase payments are made to you or you can,
subject to availability, request that payments be deposited directly to your bank account. After your death, we will
send your designated beneficiary any income phase payments still due. You may be required to pay taxes on all or a
portion of the income phase payments you receive. See “Taxation.”

Partial Entry into the Income Phase. You may elect a payment option for a portion of your account value, while
leaving the remaining portion in a guaranteed term(s). Whether the Tax Code considers such payments taxable as
annuity payments or as withdrawals is currently unclear; therefore, you should consult with a qualified tax adviser
before electing this option.

Initiating Income Phase Payments. At least 30 days prior to the date you want to start receiving income phase
payments, you must notify us in writing of the following:

• Start date;
• Payment option (see the payment options table in this section); and
• Payment frequency (i.e., monthly, quarterly, semi-annually or annually).

The account will continue in the accumulation phase until you properly initiate income phase payments. You may
change your payment option election up to 30 days before income phase payments begin. Once you elect for
income phase payments to begin, you may not elect a different payment option or elect to receive a lump-sum
payment.

What Affects Income Phase Payment Amounts? Some of the factors that may affect payment amounts include
your age, your gender, your account value, the payment option selected and number of guaranteed payments (if any)
selected.

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Minimum Income Phase Payment Amounts. The payment option you select must result in one or both of the
following:

• A first payment of at least $50.
• Total yearly payments of at least $250.

If your account value is too low to meet these minimum payment amounts, you must elect a lump-sum payment.
We reserve the right to increase the minimum payment amount based upon increases in the Consumer Price Index—
Urban.

Payment Start Date. Income phase payments may start any time after the first year of the contract, and will start
the later of the annuitant’s 85th birthday or the tenth anniversary of your purchase payment, unless you elect
otherwise.

Regardless of your income phase payment start date, your income phase payments will not begin until you have
selected an income phase payment option. Failure to select a payment option by your payment start date, or
postponement of the start date past the later of the annuitant’s 85th birthday or the tenth anniversary of your
purchase payment, may have adverse tax consequences. You should consult with a qualified tax adviser if you are
considering either of these courses of action.

Payment Length. If you choose a lifetime income phase payment option with guaranteed payments, the age of the
annuitant plus the number of years for which payments are guaranteed must not exceed 95 at the time payments
begin. Additionally, federal income tax requirements currently applicable to traditional IRAs provide that the period
of years guaranteed may not be greater than the joint life expectancies of the payee and his or her designated
beneficiary.

Charges Deducted. No early withdrawal charge will be applied to amounts used to start income phase payments,
although a market value adjustment may be applicable.

Market Value Adjustment. If your income phase payments start before the end of your guaranteed term, a market
value adjustment will be applied to any amounts used to start income phase payments. If you select a lifetime
payment option, only a positive market value adjustment will be applied. See “Market Value Adjustment (MVA).”

Death Benefit During the Income Phase. Upon the death of either the annuitant or the surviving joint annuitant,
the amount payable, if any, to your beneficiary depends on the payment option currently in force. Any amounts
payable must be paid at least as rapidly as under the method of distribution in effect at the annuitant’s death. If you
die and you are not the annuitant, any remaining payments will continue to be made to your beneficiary at least as
rapidly as under the method of distribution in effect at your death.

Taxation. To avoid certain tax penalties, you or your beneficiary must meet the distribution rules imposed by the
Tax Code. See “Taxation.”

Income Phase Payment Options
The following table lists the income phase payment options and accompanying death benefits that may be available
during the income phase. We may offer additional payment options under the contract from time to time.

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Terms Used in the Tables:

Annuitant: The person(s) on whose life expectancy the income phase payments are calculated.

Beneficiary: The person designated to receive the death benefit payable under the contract.

Lifetime Income Phase Payment Options
Life Income	Length of Payments: For as long as the annuitant lives. It is possible only one payment
	will be made should the annuitant die prior to the second payment’s due date.
	Death Benefit—None: All payments end upon the annuitant’s death.
Life Income—	Length of Payments: For as long as the annuitant lives, with payments guaranteed for
Guaranteed	your choice of 5, 10, 15, or 20 years, or other periods specified in the contract.
Payments
	Death Benefit: If the annuitant dies before we have made all the guaranteed payments,
	payments will continue to the beneficiary.
Life Income—	Length of Payments: For as long as either annuitant lives. It is possible only one
Two Lives	payment will be made should both the annuitant and joint annuitant die before the second
	payment’s due date.
	Continuing Payments: When you select this option, you will also choose either:
	(a) 100%, 66 2/3%, or 50% of the payment to continue to the surviving annuitant after
	the first death; or
	(b) 100% of the payment to continue to the first annuitant on the second annuitant’s
	death, and 50% of the payment to continue to the second annuitant on the first
	annuitant’s death.
	Death Benefit—None: Payments cease upon the death of both annuitants.
Life Income—	Length of Payments: For as long as either annuitant lives, with payments guaranteed
Two Lives—	for a minimum of 120 months, or other periods specified in the contract.
Guaranteed
Payments	Continuing Payments: 100% of the payment will continue to the surviving annuitant
	after the first death.
	Death Benefit: If both annuitants die before the guaranteed payments have all been
	paid, payments will continue to the beneficiary.
Nonlifetime Income Phase Payment Options
Nonlifetime—	Length of Payments: Payments will continue for your choice of 10 through 30 years (or
Guaranteed	other periods specified in the contract).
Payments
	Death Benefit: If the annuitant dies before we make all the guaranteed payments,
	payment will continue to the beneficiary.

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INVESTMENTS

Separate Account. Purchase Payments received under the contract and allocated to guaranteed terms will be
deposited to and accounted for in a nonunitized separate account that we established under Connecticut law. A
nonunitized separate account is a separate account in which you do not participate in the performance of the assets
through unit values or any other interest.

Persons allocating amounts to the nonunitized separate account do not receive a unit value of ownership of assets
accounted for in the separate account. The assets accrue solely to our benefit and we bear the entire risk of
investment gain or loss. All of our obligations due to allocations to the nonunitized separate account are contractual
guarantees we have made and are accounted for in the separate account. All of our general assets are available to
meet the guarantees under the contracts. However, to the extent provided for in the applicable contracts, assets of
the nonunitized separate account are not chargeable with liabilities arising out of any other business we conduct.
Income, gains or losses of the separate account are credited to or charged against the assets of the separate account
without regard to other income, gains or losses of the Company.

Setting Guaranteed Interest Rates. We do not have any specific formula for setting guaranteed interest rates for the
guaranteed terms. We expect the guaranteed interest rates to be influenced by, but not necessarily correspond to,
yields on fixed income securities we acquire with amounts allocated to the guaranteed terms when the guaranteed
interest rates are set.

Types of Investments. Our assets will be invested in accordance with the requirements established by applicable
state laws regarding the nature and quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of investment. In general, these laws permit
investments, within specified limits and subject to certain qualifications, in federal, state, and municipal obligations,
corporate bonds, preferred and common stocks, real estate mortgages, and certain other investments.

We intend to invest in assets which, in the aggregate, have characteristics, especially cash flow patterns, reasonably
related to the characteristics of the liabilities. Various immunization techniques will be used to achieve the objective
of close aggregate matching of assets and liabilities. We will primarily invest in investment-grade fixed income
securities including:

• Securities issued by the United States Government or its agencies or instrumentalities, which issues may or may not be guaranteed by the United States Government;
• Debt securities that are rated, at the time of purchase, within the four highest grades assigned by Moody’s Investors Services, Inc. (Aaa, Aa, A or Baa) or Standard & Poor’s Corporation (AAA, AA, A or BBB) or any other nationally recognized rating organizations;
• Other debt instruments including those issued or guaranteed by banks or bank holding companies and of corporations, which although not rated by Moody’s, Standard & Poor’s, or other nationally recognized rating organizations, are deemed by the Company’s management to have an investment quality comparable to securities which may be purchased as stated above; and
• Commercial paper, cash or cash equivalents, and other short-term investments having a maturity of less than one year which are considered by the Company’s management to have investment quality comparable to securities which may be purchased as stated above.

In addition, we may invest in futures and options. We purchase financial futures and related options and options on
securities solely for nonspeculative hedging purposes. In the event securities prices are anticipated to decline, we may
sell a futures contract or purchase a put option on futures or securities to protect the value of securities held in or to
be sold for the nonunitized separate account. Similarly, if securities prices are expected to rise, we may purchase a
futures contract or a call option against anticipated positive cash flow or we may purchase options on securities.

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While this section generally describes our investment strategy, we are not obligated to invest the assets
attributable to the contract according to any particular strategy, except as may be required by Connecticut
and other state insurance laws. The guaranteed interest rates we establish need not relate to the investment
performance of the nonunitized separate account.

TAXATION

Introduction
This section discusses our understanding of current federal income tax laws affecting the contract. Federal Income
tax treatment of the contracts is complex and sometimes uncertain. You should keep the following in mind when
reading it:

• Your tax position (or the tax position of the designated beneficiary, as applicable) determines federal taxation of amounts held or paid out under the contract;
• Tax laws change. It is possible that a change in the future could affect contracts issued in the past;
• This section addresses some, but not all, applicable federal income tax rules and does not discuss federal estate and gift tax implications, state and local taxes, or any other tax provisions; and
• We do not make any guarantee about the tax treatment of the contract or transactions involving the contract.

We do not intend this information to be tax advice. For advice about the effect of federal income taxes or any other
taxes on amounts held or paid out under the contract, consult a tax adviser. For more comprehensive information,
contact the Internal Revenue Service (IRS).

Types of Contracts: Non-Qualified or Qualified
The contract may be purchased on a non-tax-qualified basis (non-qualified contracts) or purchased on a tax-qualified
basis (qualified contracts).

Non-qualified contracts are purchased with after tax contributions and are not related to retirement plans that receive
special income tax treatment under the Tax Code.

Qualified contracts are designed for use by individuals whose premium payments are comprised solely of proceeds
from and/or contributions under retirement plans that are intended to qualify for special income tax treatment under
Sections 401, 408 or 408A, and some provisions of 403 of the Tax Code.

Taxation of Non-Qualified Contracts

Taxation of Gains Prior to Distribution
Tax Code section 72 governs taxation of annuities in general. We believe that if you are a natural person you
will generally not be taxed on increases in the value of a non-qualified contract until a distribution occurs or until
annuity payments begin. This assumes that the contract will qualify as an annuity contract for federal income tax
purposes. For these purposes, the agreement to assign or pledge any portion of the contract value generally will be
treated as a distribution. In order to be eligible to receive deferral of taxation, the following requirements must be
satisfied:

Required Distributions. In order to be treated as an annuity contract for federal income tax purposes, the
Tax Code requires any non-qualified contract to contain certain provisions specifying how your interest in the
contract will be distributed in the event of your death. The non-qualified contracts contain provisions that are
intended to comply with these Tax Code requirements, although no regulations interpreting these requirements have
yet been issued. We intend to review such distribution provisions and modify them if necessary to assure that they
comply with the applicable requirements when such requirements are clarified by regulation or otherwise.

Non-Natural Holders of a Non-Qualified Contract. If you are not a natural person, a non-qualified
contract generally is not treated as an annuity for income tax purposes and the income on the contract for the taxable

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year is currently taxable as ordinary income. Income on the contract is any increase over the year in the excess of
the contract value over the “investment in the contract” (generally, the premiums or other consideration you paid for
the contract less any nontaxable withdrawals) during the taxable year. There are some exceptions to this rule and a
non-natural person should consult with its tax adviser prior to purchasing the contract. When the contract owner is
not a natural person, a change in the annuitant is treated as the death of the contract owner.

Delayed Annuity Starting Date. If the contract’s annuity starting date occurs (or is scheduled to occur) at
a time when the annuitant has reached an advanced age (e.g., after age 85), it is possible that the contract would not
be treated as an annuity for federal income tax purposes. In that event, the income and gains under the contract
could be currently includible in your income.

Taxation of Distributions

General. When a withdrawal from a non-qualified contract occurs, the amount received will be treated as
ordinary income subject to tax up to an amount equal to the excess (if any) of the contract value (unreduced by the
amount of any surrender charge) immediately before the distribution over the contract owner’s investment in the
contract at that time. Investment in the contract is generally equal to the amount of all contributions to the contract,
plus amounts previously included in your gross income as the result of certain loans, assignments or gifts, less the
aggregate amount of non-taxable distributions previously made.

In the case of a surrender under a non-qualified contract, the amount received generally will be taxable only to the
extent it exceeds the contract owner’s cost basis in the contract.

10% Penalty Tax. A distribution from a non-qualified contract may be subject to a federal tax penalty
equal to 10% of the amount treated as income. In general, however, there is no penalty on distributions:

• made on or after the taxpayer reaches age 59½;
• made on or after the death of a contract owner (the annuitant if the contract owner is a non-natural person);
• attributable to the taxpayer’s becoming disabled as defined in the Tax Code;
• made as part of a series of substantially equal periodic payments (at least annually) over your life or life expectancy or the joint lives or joint life expectancies of you and your designated beneficiary; or
• the distribution is allocable to investment in the contract before August 14, 1982.

The 10% penalty does not apply to distributions from an immediate annuity as defined in the Tax Code. Other
exceptions may be applicable under certain circumstances and special rules may be applicable in connection with
the exceptions enumerated above. A tax adviser should be consulted with regard to exceptions from the penalty tax.

Tax-Free Exchanges. Section 1035 of the Tax Code permits the exchange of a life insurance, endowment
or annuity contract for an annuity contract on a tax-free basis. In such instance, the “investment in the contract” in
the old contract will carry over to the new contract. You should consult with your tax adviser regarding procedures
for making Section 1035 exchanges.

If your contract is purchased through a tax-free exchange of a life insurance, endowment or annuity contract that
was purchased prior to August 14, 1982, then any distributions other than annuity payments will be treated, for tax
purposes, as coming:

• First, from any remaining “investment in the contract” made prior to August 14, 1982 and exchanged into the contract;
• Next, from any “income on the contract” attributable to the investment made prior to August 14, 1982;
• Then, from any remaining “income on the contract;” and
• Lastly, from any remaining “investment in the contract.”

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The IRS has concluded that in certain instances, the partial exchange of a portion of one annuity contract for another
contract will be tax-free. However, the IRS has reserved the right to treat transactions it considers abusive as
ineligible for favorable partial 1035 tax-free exchange treatment. It is not certain whether the IRS would treat an
immediate withdrawal or annuitization after a partial exchange as abusive. In addition, it is unclear how the IRS
will treat a partial exchange from a life insurance, endowment, or annuity contract directly into an immediate
annuity. Currently, we will accept a partial 1035 exchange from a non-qualified annuity into a deferred annuity or
an immediate annuity as a tax-free transaction unless we believe that we would be expected to treat the transaction
as abusive. We are not responsible for the manner in which any other insurance company, for tax reporting
purposes, or the IRS, with respect to the ultimate tax treatment, recognizes or reports a partial exchange. We
strongly advise you to discuss any proposed 1035 exchange with your tax adviser prior to proceeding with the
transaction.

Taxation of Annuity Payments. Although tax consequences may vary depending on the payment option
elected under an annuity contract, a portion of each annuity payment is generally not taxed and the remainder is
taxed as ordinary income. The non-taxable portion of an annuity payment is generally determined in a manner that
is designed to allow you to recover your investment in the contract ratably on a tax-free basis over the expected
stream of annuity payments, as determined when annuity payments start. Once your investment in the contract has
been fully recovered, however, the full amount of each subsequent annuity payment is subject to tax as ordinary
income. The tax treatment of partial annuitizations is unclear. We currently treat any partial annuitizations as
withdrawals rather than as annuity payments. Please consult your tax adviser before electing a partial annuitization.

Death Benefits. Amounts may be distributed from a contract because of your death or the death of the
annuitant. Generally, such amounts are includible in the income of the recipient as follows: (i) if distributed in a
lump sum, they are taxed in the same manner as a surrender of the contract, or (ii) if distributed under a payment
option, they are taxed in the same way as annuity payments. Special rules may apply to amounts distributed after a
beneficiary has elected to maintain contract value and receive payments.

Different distribution requirements apply if your death occurs:

• After you begin receiving annuity payments under the contract; or
• Before you begin receiving such distributions.

If your death occurs after you begin receiving annuity payments, distributions must be made at least as rapidly as
under the method in effect at the time of your death.

If your death occurs before you begin receiving annuity payments, your entire balance must be distributed within
five years after the date of your death. For example, if you died on September 1, 2009, your entire balance must be
distributed by August 31, 2014. However, if distributions begin within one year of your death, then payments may
be made over one of the following timeframes:

• Over the life of the designated beneficiary; or
• Over a period not extending beyond the life expectancy of the designated beneficiary.

If the designated beneficiary is your spouse, the contract may be continued with the surviving spouse as the new
contract owner. If the contract owner is a non-natural person and the primary annuitant dies, the same rules apply
on the death of the primary annuitant as outlined above for the death of a contract owner.

The contract offers a death benefit that may exceed the greater of the premium payments and the contract value.
Certain charges are imposed with respect to the death benefit. It is possible that these charges (or some portion
thereof) could be treated for federal tax purposes as a distribution from the contract.

Assignments and Other Transfers. A transfer, pledge or assignment of ownership of a non-qualified
contract, the selection of certain annuity dates, or the designation of an annuitant or payee other than an owner may
result in certain tax consequences to you that are not discussed herein. The assignment, pledge or agreement to
assign or pledge any portion of the contract value generally will be treated as a distribution. Anyone contemplating
any such transfer, pledge, assignment, or designation or exchange, should consult a tax adviser regarding the
potential tax effects of such a transaction.

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Immediate Annuities. Under section 72 of the Tax Code, an immediate annuity means an annuity (1)
which is purchased with a single premium, (2) with annuity payments starting within one year from the date of
purchase, and (3) which provides a series of substantially equal periodic payments made annually or more
frequently. While this contract is not designed as an immediate annuity, treatment as an immediate annuity would
have significance with respect to exceptions from the 10% early withdrawal penalty, to contracts owned by non-
natural persons, and for certain exchanges.

Multiple Contracts. Tax laws require that all non-qualified deferred annuity contracts that are issued by a
company or its affiliates to the same contract owner during any calendar year be treated as one annuity contract for
purposes of determining the amount includible in gross income under Tax Code section 72(e). In addition, the
Treasury Department has specific authority to issue regulations that prevent the avoidance of Tax Code section 72(e)
through the serial purchase of annuity contracts or otherwise.

Withholding. We will withhold and remit to the IRS a part of the taxable portion of each distribution
made under a contract unless the distributee notifies us at or before the time of the distribution that he or she elects
not to have any amounts withheld. Withholding is mandatory, however, if the distributee fails to provide a valid
taxpayer identification number or if we are notified by the IRS that the taxpayer identification number we have on
file is incorrect. The withholding rates applicable to the taxable portion of periodic annuity payments are the same
as the withholding rates generally applicable to payments of wages. In addition, a 10% withholding rate applies to the
taxable portion of non-periodic payments. Regardless of whether you elect not to have federal income tax withheld,
you are still liable for payment of federal income tax on the taxable portion of the payment.

If you or your designated beneficiary is a non-resident alien, then any withholding is governed by Tax Code section
1441 based on the individual’s citizenship, the country of domicile and treaty status, and we may require additional
documentation prior to processing any requested distribution.

Taxation of Qualified Contracts

General
The contracts are primarily designed for use with IRAs under Tax Code section 408 and 408A (We refer to
these as “qualified plans”). The tax rules applicable to participants in these qualified plans vary according to the
type of plan and the terms and conditions of the plan itself. The ultimate effect of federal income taxes on the
amounts held under a contract, or on annuity payments, depends on the type of retirement plan and your tax status.
Special favorable tax treatment may be available for certain types of contributions and distributions. In addition,
certain requirements must be satisfied in purchasing a qualified contract with proceeds from a tax-qualified plan in
order to continue receiving favorable tax treatment.

Adverse tax consequences may result from: contributions in excess of specified limits; distributions before age 59½
(subject to certain exceptions); distributions that do not conform to specified commencement and minimum
distribution rules; and in other specified circumstances. Some qualified plans may be subject to additional
distribution or other requirements that are not incorporated into the contract. No attempt is made to provide more
than general information about the use of the contracts with qualified plans. Contract owners, annuitants, and
beneficiaries are cautioned that the rights of any person to any benefits under these qualified plans may be subject to
the terms and conditions of the plans themselves, regardless of the terms and conditions of the contract. The
Company is not bound by the terms and conditions of such plans to the extent such terms contradict the contract,
unless we consent.

Contract owners and beneficiaries generally are responsible for determining that contributions, distributions and
other transactions with respect to the contract comply with applicable law. Therefore, you should seek competent
legal and tax advice regarding the suitability of a contract for your particular situation. The following discussion
assumes that qualified contracts are purchased with proceeds from and/or contributions under retirement plans or
programs that qualify for the intended special federal tax treatment.

Tax Deferral
Under the federal tax laws, earnings on amounts held in annuity contracts are generally not taxed until they are
withdrawn. However, in the case of a qualified plan (as defined in this prospectus), an annuity contract is not

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necessary to obtain this favorable tax treatment and does not provide any tax benefits beyond the deferral already
available to the qualified plan itself. Annuities do provide other features and benefits (such as guaranteed living
benefits and/or death benefits or the option of lifetime income phase options at established rates) that may be
valuable to you. You should discuss your alternatives with your financial representative taking into account the
additional fees and expenses you may incur in an annuity.

Individual Retirement Annuities. Section 408 of the Tax Code permits eligible individuals to contribute
to an individual retirement program known as an Individual Retirement Annuity (“IRA”). IRAs are subject to limits
on the amounts that can be contributed, the deductible amount of the contribution, the persons who may be eligible,
and the time when distributions commence. Contributions to IRAs must be made in cash or as a rollover or a
transfer from another eligible plan. Also, distributions from IRAs, individual retirement accounts, and other types of
retirement plans may be “rolled over” on a tax-deferred basis into an IRA. If you make a tax-free rollover of a
distribution from an IRA you may not make another tax-free rollover from the IRA within a 1-year period. Sales of
the contract for use with IRAs may be subject to special requirements of the IRS.

The IRS has not reviewed the contracts described in this prospectus for qualification as IRAs and has not addressed,
in a ruling of general applicability, whether the contract's death benefit provisions comply with IRS qualification
requirements.

Roth IRAs. Section 408A of the Tax Code permits certain eligible individuals to contribute to a Roth IRA.
Contributions to a Roth IRA are subject to limits on the amount of contributions and the persons who may be
eligible to contribute, are not deductible, and must be made in cash or as a rollover or transfer from an eligible
retirement plan, another Roth IRA or other IRA. Certain qualifying individuals may convert an IRA, SEP, or a
SIMPLE to a Roth IRA. Such rollovers and conversions are subject to tax, and other special rules may apply. If
you make a tax-free rollover of a distribution from a Roth IRA to another Roth IRA, you may not make another tax-
free rollover from the Roth IRA from which the rollover was made within a 1-year period. A 10% penalty may
apply to amounts attributable to a conversion to a Roth IRA if the amounts are distributed during the five taxable
years beginning with the year in which the conversion was made.

Sales of a contract for use with a Roth IRA may be subject to special requirements of the IRS. The IRS has not
reviewed the contracts described in this prospectus for qualification as IRAs and has not addressed, in a ruling of
general applicability, whether the contract's death benefit provisions comply with IRS qualification requirements.

Contributions
In order to be excludable from gross income for federal income tax purposes, total annual contributions to
certain qualified plans are limited by the Tax Code. You should consult with your tax adviser in connection with
contributions to a qualified contract.

Distributions – General
Certain tax rules apply to distributions from the contract. A distribution is any amount taken from a contract
including withdrawals, annuity payments, rollovers, exchanges and death benefit proceeds. We report the taxable
portion of all distributions to the IRS.

Individual Retirement Annuities. All distributions from an IRA are taxed as received unless either one of
the following is true:

• The distribution is rolled over to another IRA or to a plan eligible to receive rollovers as permitted under the Tax Code; or
• You made after-tax contributions to the IRA. In this case, the distribution will be taxed according to rules detailed in the Tax Code.

The Tax Code imposes a 10% penalty tax on the taxable portion of any distribution from an IRA unless certain
exceptions, including one or more of the following, have occurred:

• You have attained age 59½;
• You have become disabled, as defined in the Tax Code;

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• You have died and the distribution is to your beneficiary;
• The distribution amount is rolled over into another eligible retirement plan or to an IRA in accordance with the terms of the Tax Code;
• The distribution is made due to an IRS levy upon your plan;
• The withdrawal amount is paid to an alternate payee under a Qualified Domestic Relations Order (QDRO); or
• The distribution is a qualified reservist distribution as defined under the Pension Protection Act of 2006.

In addition, the 10% penalty tax does not apply to a distribution made from an IRA to pay for health insurance
premiums for certain unemployed individuals, a qualified first-time home purchase, or for higher education
expenses.

Roth IRAs. A qualified distribution from a Roth IRA is not taxed when it is received. A qualified
distribution is a distribution:

• Made after the five-taxable year period beginning with the first taxable year for which a contribution was made to a Roth IRA of the owner; and
• Made after you attain age 59½, die, become disabled as defined in the Tax Code, or for a qualified first-time home purchase.

If a distribution is not qualified, it will be taxable to the extent of the accumulated earning. A partial distribution
will first be treated as a return of contributions which is not taxable and then as taxable accumulated earnings.

The Tax Code imposes a 10% penalty tax on the taxable portion of any distribution from a Roth IRA that is not a
qualified distribution unless certain exceptions have occurred. In general, the exceptions for an IRA listed above
also apply to a distribution from a Roth IRA that is not a qualified distribution or a rollover to a Roth IRA that is not
a qualified rollover contribution. The 10% penalty tax is also waived on a distribution made from a Roth IRA to pay
for health insurance premiums for certain unemployed individuals, used for a qualified first-time home purchase, or
for higher education expenses.

Lifetime Required Minimum Distributions (IRAs only). To avoid certain tax penalties, you and any
designated beneficiary must also meet the minimum distribution requirements imposed by the Tax Code. These
rules may dictate the following:

• Start date for distributions;
• The time period in which all amounts in your account(s) must be distributed; and
• Distribution amounts.

Start Date and Time Period. Generally, you must begin receiving distributions by April 1 of the
calendar year following the calendar year in which you attain age 70½. We must pay out distributions from the
contract over a period not extending beyond one of the following time periods:

• Over your life or the joint lives of you and your designated beneficiary; or
• Over a period not greater than your life expectancy or the joint life expectancies of you and your designated beneficiary.

Distribution Amounts. The amount of each required distribution must be calculated in accordance
with Tax Code section 401(a)(9). The entire interest in the account includes the amount of any outstanding rollover,
transfer, recharacterization, if applicable, and the actuarial present value of any other benefits provided under the
account, such as guaranteed death benefits.

50% Excise Tax. If you fail to receive the minimum required distribution for any tax year, a 50%
excise tax may be imposed on the required amount that was not distributed.

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Lifetime Required Minimum Distributions are not applicable to Roth IRAs. Further information regarding required
minimum distributions may be found in your contract.

Required Minimum Distribution Relief for 2009. The Worker, Retiree and Employer Recovery Act of
2008 (“WRERA 2008”) suspends the minimum distribution requirements for IRAs and most employer sponsored
defined contribution plans for the 2009 tax year. The relief extends to IRAs only.

Required Distributions Upon Death (IRAs and Roth IRAs Only). Different distribution requirements
apply after your death, depending upon if you have been receiving required minimum distributions. Further
information regarding required distributions upon death may be found in your contract.

If your death occurs on or after you begin receiving minimum distributions under the contract, distributions
generally must be made at least as rapidly as under the method in effect at the time of your death. Tax Code section
401(a)(9) provides specific rules for calculating the required minimum distributions after your death.

If your death occurs before you begin receiving minimum distributions under the contract, your entire balance must
be distributed by December 31 of the calendar year containing the fifth anniversary of the date of your death. For
example, if you died on September 1, 2009, your entire balance must be distributed to the designated beneficiary by
December 31, 2014. However, if distributions begin by December 31 of the calendar year following the calendar
year of your death, and you have named a designated beneficiary, then payments may be made over either of the
following time frames:

• Over the life of the designated beneficiary; or
• Over a period not extending beyond the life expectancy of the designated beneficiary.

Start Dates for Spousal Beneficiaries. If the designated beneficiary is your spouse, distributions
must begin on or before the later of the following:

• December 31 of the calendar year following the calendar year of your death; or
• December 31 of the calendar year in which you would have attained age 70½.

No Designated Beneficiary. If there is no designated beneficiary, the entire interest generally must be
distributed by the end of the calendar containing the fifth anniversary of the contract owner’s death.

Required Minimum Distribution Relief for 2009. Under WRERA 2008, the five year rule discussed
above is determined without regard to 2009.

Special Rule for IRA Spousal Beneficiaries (IRAs and Roth IRAs Only). In lieu of taking a distribution
under these rules, if the sole designated beneficiary is the contract owner’s surviving spouse, the spousal beneficiary
may elect to treat the contract as his or her own IRA and defer taking a distribution until his or her own start date.
The surviving spouse is deemed to have made such an election if the surviving spouse makes a rollover to or from
the contract or fails to take a distribution within the required time period.

Withholding
Any taxable distributions under the contract are generally subject to withholding. Federal income tax liability
rates vary according to the type of distribution and the recipient's tax status.

IRAs and Roth IRAs. Generally, you or, if applicable, a designated beneficiary may elect not to have tax
withheld from distributions.

Non-resident Aliens. If you or your designated beneficiary is a non-resident alien, then any withholding is
governed by Tax Code section 1441 based on the individual's citizenship, the country of domicile and treaty status,
and we may require additional documentation prior to processing any requested distribution.

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Assignment and Other Transfers

IRAs and Roth IRAs. The Tax Code does not allow a transfer or assignment of your rights under the
contracts except in limited circumstances. Adverse tax consequences may result if you assign or transfer your
interest in the contract to persons other than your spouse incident to a divorce. Anyone contemplating such an
assignment or transfer should contact a qualified tax adviser regarding the potential tax effects of such a transaction.

Possible Changes in Taxation
Although the likelihood of legislative change and tax reform is uncertain, there is always the possibility that the tax
treatment of the contracts could change by legislation or other means. It is also possible that any change could be
retroactive (that is, effective before the date of the change). You should consult a tax adviser with respect to
legislative developments and their effect on the contract.

Taxation of the Company
We are taxed as a life insurance company under the Tax Code. The Company owns all assets supporting the
contract obligations. Any income earned on such assets is considered income to the Company. We do not intend to
make any provision or impose a charge under the contracts with respect to any tax liability of the Company.

OTHER TOPICS

The Company
ING Life Insurance and Annuity Company is a stock life insurance company organized under the insurance laws of
the State of Connecticut in 1976 and an indirect wholly-owned subsidiary of ING Groep, N.V. (“ING”), a global
financial institution active in the fields of insurance, banking and asset management. Although we are a subsidiary
of ING, ING is not responsible for the obligations under the contract. The obligations under the contract are solely
the responsibility of ING Life Insurance and Annuity Company. Prior to January 1, 2002, ING Life Insurance and
Annuity Company was known as Aetna Life Insurance and Annuity Company.

We are engaged in the business of selling life insurance and annuities. Our principal executive offices are located
at:

One Orange Way
Windsor, CT 06095-4774

Regulatory Matters
As with many financial services companies, the Company and its affiliates have received informal and formal
requests for information from various state and federal governmental agencies and self-regulatory organizations in
connection with inquiries and investigations of the products and practices of the financial services industry. In each
case, the Company and its affiliates have been and are providing full cooperation.

Insurance and Retirement Plan Products and Other Regulatory Matters. Federal and state regulators and
self-regulatory agencies are conducting broad inquiries and investigations involving the insurance and retirement
industries. These initiatives currently focus on, among other things, compensation, revenue sharing, and other sales
incentives; potential conflicts of interest; sales and marketing practices (including sales to seniors); specific product
types (including group annuities and indexed annuities); and disclosure. The Company and certain of its U.S.
affiliates have received formal and informal requests in connection with such investigations, and have cooperated
and are cooperating fully with each request for information. Some of these matters could result in regulatory action
involving the Company. These initiatives also may result in new legislation and regulation that could significantly
affect the financial services industry, including businesses in which the Company is engaged. In light of these and
other developments, U.S. affiliates of ING, including the Company, periodically review whether modifications to
their business practices are appropriate.

Investment Product Regulatory Issues. Since 2002, there has been increased governmental and regulatory
activity relating to mutual funds and variable insurance products. This activity has primarily focused on

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inappropriate trading of fund shares; directed brokerage; compensation; sales practices, suitability, and supervision;
arrangements with service providers; pricing; compliance and controls; adequacy of disclosure; and document
retention.

In addition to responding to governmental and regulatory requests on fund trading issues, ING management, on its
own initiative, conducted, through special counsel and a national accounting firm, an extensive internal review of
mutual fund trading in ING insurance, retirement, and mutual fund products. The goal of this review was to identify
any instances of inappropriate trading in those products by third parties or by ING investment professionals and
other ING personnel.

The internal review identified several isolated arrangements allowing third parties to engage in frequent trading of
mutual funds within the variable insurance and mutual fund products of certain affiliates of the Company, and
identified other circumstances where frequent trading occurred despite measures taken by ING intended to combat
market timing. Each of the arrangements has been terminated and disclosed to regulators, to the independent
trustees of ING Funds (U.S.) and in Company reports previously filed with the SEC pursuant to the Securities
Exchange Act of 1934, as amended.

Action has been or may be taken by regulators with respect to certain ING affiliates before investigations relating to
fund trading are completed. The potential outcome of such action is difficult to predict but could subject certain
affiliates to adverse consequences, including, but not limited to, settlement payments, penalties, and other financial
liability. It is not currently anticipated, however, that the actual outcome of any such action will have a material
adverse effect on ING or ING’s U.S.-based operations, including the Company.

ING has agreed to indemnify and hold harmless the ING Funds from all damages resulting from wrongful conduct
by ING or its employees or from ING’s internal investigation, any investigations conducted by any governmental or
self-regulatory agencies, litigation or other formal proceedings, including any proceedings by the SEC.
Management reported to the ING Funds Board that ING management believes that the total amount of any
indemnification obligations will not be material to ING or ING’s U.S.-based operations, including the Company.

Product Regulation. Our products are subject to a complex and extensive array of state and federal tax,
securities and insurance laws, and regulations, which are administered and enforced by a number of governmental
and self-regulatory authorities. Specifically, U.S. federal income tax law imposes requirements relating to non-
qualified annuity product design, administration, and investments that are conditions for beneficial tax treatment of
such products under the Internal Revenue Code. (See “Federal Tax Considerations” for further discussion of some
of these requirements.) Failure to administer certain non-qualified contract features (for example, contractual
annuity start dates in non-qualified annuities) could affect such beneficial tax treatment. In addition, state and
federal securities and insurance laws impose requirements relating to insurance and annuity product design, offering
and distribution, and administration. Failure to meet any of these complex tax, securities, or insurance requirements
could subject the Company to administrative penalties, unanticipated remediation, or other claims and costs.

Contract Distribution
The Company’s subsidiary, ING Financial Advisers, LLC, serves as the principal underwriter for the contracts. ING
Financial Advisers, LLC, a Delaware limited liability company, is registered as a broker-dealer with the SEC. ING
Financial Advisers, LLC is also a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the
Securities Investor Protection Corporation (“SIPC”). ING Financial Advisers, LLC’s principal office is located at
One Orange Way, Windsor, Connecticut 06095-4774.

The contracts are offered to the public by individuals who are registered representatives of ING Financial Advisers,
LLC or other broker-dealers which have entered into a selling arrangement with ING Financial Advisers, LLC. We
refer to ING Financial Advisers, LLC and the other broker-dealers selling the contracts as “distributors.”

All registered representatives selling the contracts must also be licensed as insurance agents for the Company.

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The following is a list of broker/dealers that are affiliated with the Company:

·	Bancnorth Investment Group, Inc.	·	ING Financial Partners, Inc.
·	Directed Services LLC	·	ING Funds Distributor, LLC
·	Financial Network Investment Corporation	·	ING Investment Advisors, LLC
·	Guaranty Brokerage Services, Inc.	·	ING Investment Management Services LLC
·	ING America Equities, Inc.	·	Multi-Financial Securities Corporation
·	ING DIRECT Funds Limited	·	PrimeVest Financial Services, Inc.
·	ING Financial Advisers, LLC	·	ShareBuilder Securities Corporation
·	ING Financial Markets LLC	·	Systematized Benefits Administrators, Inc.

Registered representatives of distributors who solicit sales of the contracts typically receive a portion of the
compensation paid to the distributor in the form of commissions or other compensation, depending upon the
agreement between the distributor and the registered representative. This compensation, as well as other
incentives or payments, is not paid directly by contract owners or the Separate Account. We intend to recoup this
compensation and other sales expenses paid to distributors through fees and charges imposed under the contracts.

Commission Payments. Persons who offer and sell the contracts may be paid a commission. The maximum
percentage amount that may be paid with respect to a given purchase payment is the first-year percentage which
ranges from 0% to a maximum of 6.0% of the first year of payments to an account. Renewal commissions paid on
payments made after the first year and asset-based service fees may also be paid.

Individual registered representatives may receive all or a portion of compensation paid to their distributor,
depending upon the firm’s practices. Commissions and any annual payments, when combined, could exceed 6.0%
of total premium payments. To the extent permitted by SEC and FINRA rules and other applicable laws and
regulations, we may also pay or allow other promotional incentives or payments in the form of cash payments or
other compensation to distributors, which may require the registered representative to attain a certain threshold of
sales of Company products.

We may also enter into special compensation arrangements with certain distributors based on those firms’ aggregate
or anticipated sales of the contracts or other criteria. These special compensation arrangements will not be offered
to all distributors, and the terms of such arrangements may differ among distributors based on various factors. Any
such compensation payable to a distributor will not result in any additional direct charge to you by us.

Some sales personnel may receive various types of non-cash compensation as special sales incentives, including
trips, and we may also pay for some sales personnel to attend educational and/or business seminars. Any such
compensation will be paid in accordance with SEC and FINRA rules. Management personnel of the Company, and
of its affiliated broker-dealers, may receive additional compensation if the overall amount of investments in funds
advised by the Company or its affiliates meets certain target levels or increases over time. Compensation for certain
management personnel, including sales management personnel, may be enhanced if management personnel meet or
exceed goals for sales of the contracts, or if the overall amount of investments in the contracts and other products
issued or advised by the Company or its affiliates increases over time. Certain sales management personnel may
also receive compensation that is a specific percentage of the commissions paid to distributors or of purchase
payments received under the contracts, or which may be a flat dollar amount that varies based upon other factors,
including management’s ability to meet or exceed service requirements, sell new contracts or retain existing
contracts, or sell additional service features such as a common remitting program.

In addition to direct cash compensation for sales of contracts described above, ING Financial Advisers, LLC may
also pay distributors additional compensation or reimbursement of expenses for their efforts in selling the contracts
to you and other customers. These amounts may include:

• Marketing/distribution allowances which may be based on the percentages of premium received, the aggregate commissions paid and/or the aggregate assets held in relation to certain types of designated insurance products issued by the Company and/or its affiliates during the year;

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• Loans or advances of commissions in anticipation of future receipt of premiums (a form of lending to agents/registered representatives). These loans may have advantageous terms such as reduction or elimination of the interest charged on the loan and/or forgiveness of the principal amount of the loan, which terms may be conditioned on fixed insurance product sales;
• Education and training allowances to facilitate our attendance at certain educational and training meetings to provide information and training about our products. We also hold training programs from time to time at our expense;
• Sponsorship payments or reimbursements for broker/dealers to use in sales contests and/or meetings for their agents/registered representatives who sell our products. We do not hold contests based solely on the sales of this product;
• Certain overrides and other benefits that may include cash compensation based on the amount of earned commissions, agent/representative recruiting or other activities that promote the sale of policies; and
• Additional cash or noncash compensation and reimbursements permissible under existing law. This may include, but is not limited to, cash incentives, merchandise, trips, occasional entertainment, meals and tickets to sporting events, client appreciation events, business and educational enhancement items, payment for travel expenses (including meals and lodging) to pre-approved training and education seminars, and payment for advertising and sales campaigns.

We may pay commissions, dealer concessions, wholesaling fees, overrides, bonuses, other allowances and benefits
and the costs of all other incentives or training programs from our resources, which include the fees and charges
imposed under the contracts.

The following is a list of the top 25 selling firms that, during 2008, received the most compensation, in the
aggregate, from us in connection with the sale of registered variable annuity contracts issued by us, ranked by total
dollars received:

1.	SagePoint Financial, Inc.	14.	Mutual Service Corporation
2.	Symetra Investment Services, Inc.	15.	Waterstone Financial Group, Inc.
3.	Huckin Financial Group, Inc.	16.	Northwestern Mutual Investment Services, LLC
4.	LPL Financial Corporation	17.	Lincoln Investment Planning, Inc.
5.	Walnut Street Securities, Inc.®	18.	Cadaret, Grant & Co., Inc.
6.	ING Financial Partners, Inc.	19.	Securities America, Inc.
7.	NFP Securities, Inc.	20.	Edward D. Jones & Co., L.P.
8.	Valor Insurance Agency, Inc.	21.	American Portfolios Financial Services, Inc.
9.	Lincoln Financial Securities Corporation	22.	Ameritas Investment Corp.
10.	Financial Network Investment Corporation	23.	First Heartland® Capital, Inc.
11.	NRP Financial, Inc.	24.	Lincoln Financial Advisors Corporation
12.	National Planning Corporation	25.	Morgan Keegan and Company, Inc.
13.	Multi-Financial Securities Corporation

If the amounts paid to ING Financial Advisers, LLC were included, ING Financial Advisers, LLC would be first on
the list.

This is a general discussion of the types and levels of compensation paid by us for the sale of our variable annuity
contracts. It is important for you to know that the payment of volume- or sales-based compensation to a distributor
or registered representative may provide that registered representative a financial incentive to promote our contracts
over those of another Company, and may also provide a financial incentive to promote one of our contracts over
another.

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Contract Modification
Only an authorized officer of the Company may change the terms of the contract. We may change the contract as
required by federal or state law. In addition, we may, upon 30 days’ written notice to the contract holder, make
other changes to group contracts that would apply only to individuals who become participants under that contract
after the effective date of such changes. If the group contract holder does not agree to a change, we reserve the right
to refuse to establish new accounts under the contract. Certain changes will require the approval of appropriate state
or federal regulatory authorities.

Transfer of Ownership; Assignment
Your rights under a non-qualified contract may be assigned or transferred. An assignment of a contract will only be
binding on us if it is made in writing and sent to and accepted by us at our Customer Service Center. We will use
reasonable procedures to confirm the assignment is authentic, including verification of signature. If we fail to
follow our own procedures, we will be liable for any losses to you directly resulting from the failure. Otherwise, we
are not responsible for the validity of any assignment. The rights of the contract holder and the interest of the
annuitant and any beneficiary will be subject to the rights of any assignee we have on our records. We reserve the
right not to accept any assignment or transfer to a non-natural person. In some cases, an assignment may have
adverse tax consequences. You should consult a tax adviser.

Involuntary Terminations
We reserve the right to terminate any account with a value of $2,500 or less immediately following a partial
withdrawal. However, an IRA may only be closed out when payments to the contract have not been received for a
24-month period and the paid-up annuity benefit at maturity would be less than $20 per month. If such right is
exercised, you will be given 90 days’ advance written notice. No early withdrawal charge will be deducted for
involuntary terminations. We do not intend to exercise this right in cases where the account value is reduced to
$2,500 or less solely due to investment performance.

Legal Matters
The Company’s organization and authority, and the contract’s legality and validity, have been passed on by the
Company’s legal department.

Experts
The consolidated financial statements of the Company appearing in the Company's Annual Report (Form 10-K) for
the year ended December 31, 2008 (including schedules appearing therein), have been audited by Ernst & Young
LLP, independent registered public accounting firm, as set forth in their reports thereon included therein, and are
included and incorporated herein by reference. Such consolidated financial statements are included and
incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in
accounting and auditing.

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

ING Financial Advisers, LLC, the principal underwriter and distributor of the contract, is a party to threatened or
pending lawsuits/arbitration that generally arise from the normal conduct of business. Some of these suits may seek
class action status and sometimes include claims for substantial compensatory, consequential or punitive damages and
other types of relief. ING Financial Advisers, LLC is not involved in any legal proceeding which, in the opinion of
management, is likely to have material adverse effect on its ability to distribute the contract.

Further Information
This prospectus does not contain all of the information contained in the registration statement of which this
prospectus is a part. Portions of the registration statement have been omitted from this prospectus as allowed by the

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Securities and Exchange Commission (“SEC”). You may obtain the omitted information from the offices of the
SEC, as described below. We are required by the Securities Exchange Act of 1934 to file periodic reports and other
information with the SEC. You may inspect or copy information concerning the Company at the Public Reference
Room of the SEC at:

SEC Public Reference Branch
100 F Street, N.E., Room 1580
Washington, DC 20549

You may also obtain copies of these materials at prescribed rates from the Public Reference Room of the above
office. You may obtain information on the operation of the Public Reference Room by calling the SEC at either
(800) SEC-0330 or (202) 551-8090. You may also find more information about the Company by visiting the
Company’s homepage on the internet at www.ingretirementplans.com.

A copy of the Company’s annual report on Form 10-K accompanies this prospectus. We refer to Form 10-K for a
description of the Company and its business, including financial statements. We intend to send contract holders
annual account statements and other such legally-required reports. We do not anticipate such reports will include
periodic financial statements or information concerning the Company.

You can find this prospectus and other information the Company files electronically with the SEC on the SEC’s web
site at www.sec.gov.

Incorporation of Certain Documents by Reference
We have incorporated by reference the Company’s latest Annual Report on Form 10-K, as filed with the SEC and in
accordance with the Securities and Exchange Act of 1934. The Annual Report must accompany this prospectus.
Form 10-K contains additional information about the Company including certified financial statements for the latest
fiscal year. As of the date of this prospectus, we were not required to file any other reports pursuant to Section 13(a)
or 15(d) of the Securities and Exchange Act since the end of the fiscal year covered by that Form 10-K. The
registration statement for this prospectus incorporates some documents by reference. We will provide a free copy of
any such documents upon the written or oral request of anyone who has received this prospectus. We will not
include exhibits to those documents unless they are specifically incorporated by reference into the document. Direct
requests to:

ING
Customer Service Center
P.O. Box 9271
Des Moines, IA 50306-9271
(800) 531-4547

Inquiries
You may contact us directly by writing or calling us at the address or phone number shown above.

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APPENDIX I

Calculating a Market Value Adjustment (MVA)

Market Value Adjustment Formula

The mathematical formula used to determine the MVA is:

	x
{ (1+i)	} 365
(1+j)

Where:

• i is the deposit period yield;
• j is the current yield; and
• x is the number of days remaining (computed from Wednesday of the week of withdrawal) in the guaranteed term.

We make an adjustment in the formula of the MVA to reflect the period of time remaining in the guaranteed term
from the Wednesday of the week of a withdrawal.

Explanation of the Market Value Adjustment Formula
The MVA essentially involves a comparison of two yields: the yield available at the start of the current guaranteed
term of the contract (the deposit period yield) and the yield currently available (the current yield).

The MVA depends on the relationship between the following:

• The deposit period yield of U.S. Treasury Notes that mature in the last quarter of the guaranteed term; and
• The current yield of these U.S. Treasury Notes at the time of withdrawal.

If the current yield is the lesser of the two, the MVA will decrease the amount withdrawn from the contract to satisfy
the withdrawal request (the MVA will be positive). If the current yield is the higher of the two, the MVA will
increase the amount withdrawn from the contract to satisfy the withdrawal request (the MVA will be negative, or
detrimental to the investor). As a result of the MVA imposed, the amount withdrawn from the contract prior to the
maturity date may be less than the amount paid into the contract.

To determine the deposit period yield and the current yield, certain information must be obtained about the prices of
outstanding U.S. Treasury Notes. This information may be found each business day in publications such as the Wall
Street Journal, which publishes the yield-to-maturity percentages for all Treasury Notes as of the preceding business
day. These percentages are used in determining the deposit period yield and the current yield for the MVA
calculation.

Deposit Period Yield
Determining the deposit period yield in the MVA calculation involves consideration of interest rates prevailing at
the start of the guaranteed term from which the withdrawal will be made, as follows:

• We identify the Treasury Notes that mature in the last three months of the guaranteed term; and
• We determine the yield-to-maturity percentages of these Treasury Notes for the last business day of each week in the deposit period.

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The resulting percentages are then averaged to determine the deposit period yield. The deposit period is the period
of time during which the purchase payment or any reinvestment may be made to available guaranteed terms. A deposit
period may be a month, a calendar quarter, or any other period of time we specify.

Current Yield
To determine the current yield, we use the same Treasury Notes identified for the deposit period yield —Treasury
Notes that mature in the last three months of the guaranteed term. However, the yield-to-maturity percentages used are
those for the last business day of the week preceding the withdrawal. We average these percentages to determine
the current yield.

Examples of MVA Calculations
The following are examples of MVA calculations using several hypothetical deposit period yields and current
yields. These examples do not include the effect of any early withdrawal charge that may be assessed under the
contract upon withdrawal.

EXAMPLE I
Assumptions:	Assumptions:
i, the deposit period yield, is 4%	i, the deposit period yield, is 5%
j, the current yield, is 6%	j, the current yield, is 6%
x, the number of days remaining (computed from	x, the number of days remaining (computed from
Wednesday of the week of withdrawal) in the guaranteed	Wednesday of the week of withdrawal) in the guaranteed
term, is 927.	term, is 927.

x	x
MVA = { (1+i) } 365	MVA = { (1+i) } 365
(1+j)	(1+j)
927	927
= { (1.04) } 365	= { (1.05) } 365
(1.06)	(1.06)
= .9528	= .9762

In this example, the deposit period yield of 4% is less than	In this example, the deposit period yield of 5% is less than
the current yield of 6%; therefore, the MVA is less than	the current yield of 6%; therefore, the MVA is less than
one. The amount withdrawn from the guaranteed term is	one. The amount withdrawn from the guaranteed term is
multiplied by this MVA.	multiplied by this MVA.
If a withdrawal or transfer of a specific dollar amount is	If a withdrawal or transfer of a specific dollar amount is
requested, the amount withdrawn from a guaranteed term	requested, the amount withdrawn from a guaranteed term
will be increased to compensate for the negative MVA	will be increased to compensate for the negative MVA
amount. For example, a withdrawal request to receive a	amount. For example, a withdrawal request to receive a
check for $2,000.00 would result in a $2,099.08	check for $2,000.00 would result in a $2,048.76
withdrawal from the guaranteed term.	withdrawal from the guaranteed term.

ILIAC Multi-Rate Annuity – ILIACMRA

I-2

EXAMPLE II
Assumptions:	Assumptions:
i, the deposit period yield, is 6%	i, the deposit period yield, is 5%
j, the current yield, is 4%	j, the current yield, is 4%
x, the number of days remaining (computed from	x, the number of days remaining (computed from
Wednesday of the week of withdrawal) in the guaranteed	Wednesday of the week of withdrawal) in the guaranteed
term, is 927.	term, is 927.

x	x
MVA = { (1+i) } 365	MVA = { (1+i) } 365
(1+j)	(1+j)
927	927
= { (1.06) } 365	= { (1.05) } 365
(1.04)	(1.04)
= 1.0496	= 1.0246

In this example, the deposit period yield of 6% is greater	In this example, the deposit period yield of 5% is greater
than the current yield of 4%; therefore, the MVA is	than the current yield of 4%; therefore, the MVA is
greater than one. The amount withdrawn from the	greater than one. The amount withdrawn from the
guaranteed term is multiplied by this MVA.	guaranteed term is multiplied by this MVA.
If a withdrawal or transfer of a specific dollar amount is	If a withdrawal or transfer of a specific dollar amount is
requested, the amount withdrawn from a guaranteed term	requested, the amount withdrawn from a guaranteed term
will be decreased to compensate for the positive MVA	will be decreased to compensate for the positive MVA
amount. For example, a withdrawal request to receive a	amount. For example, a withdrawal request to receive a
check for $2,000.00 would result in a $1,905.49	check for $2,000.00 would result in a $1,951.98
withdrawal from the guaranteed term.	withdrawal from the guaranteed term.

ILIAC Multi-Rate Annuity – ILIACMRA

I-3

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December31, 2008 Commission File Number:333-150147, 333-133157, 333-133158, 333-130833, 333-130827
ING LIFE INSURANCE AND ANNUITY COMPANY (Exact name of registrant as specified in its charter)
Connecticut (State or other jurisdiction of incorporation or organization) One Orange Way Windsor, Connecticut (Address of principal executive offices)		71-0294708 (IRS Employer Identification No.) 06095-4774 (Zip Code)
(860) 580-4646 (Registrant's telephone number, including area code)
Former name, former address and former fiscal year, if changed since last report
Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes     o      No     x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes     o      No     x Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.       Yes     x      No     o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-K or any amendment to this Form 10-K.       Yes     x      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 definition 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 (Do not check if a smaller reporting company)	Smaller reporting company     o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).        Yes     o      No     x State the aggregate market value of the voting and non-voting common equity held by non-affiliates:     N/A 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: 55,000 shares of Common Stock, $50 par value, as of March 24, 2009, are issued and outstanding, all of which were directly owned by Lion Connecticut Holdings Inc. NOTE: WHEREAS ING LIFE INSURANCE AND ANNUITY COMPANY MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-K, THIS FORM IS BEING FILED WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION I(2).

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ING Life Insurance and Annuity Company and Subsidiaries (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.) Annual Report on Form 10-K For the Year Ended December31, 2008
		TABLEOFCONTENTS
			PAGE
PARTI
Item 1.	Business**		3
Item 1A.	Risk Factors		11
Item 1B.	Unresolved Staff Comments****		23
Item 2.	Properties**		23
Item 3.	Legal Proceedings		23
Item 4.	Submission of Matters to a Vote of Security Holders*		23
PARTII
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters
		and Issuer Purchases of Equity Securities	24
Item 6.	Selected Financial Data***		25
Item 7.	Management’s Narrative Analysis of the Results of Operations and
		Financial Condition**	26
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		71
Item 8.	Financial Statements and Supplementary Data		75
Item 9.	Changes in and Disagreements With Accountants on Accounting and
		Financial Disclosure	143
Item 9A.	Controls and Procedures		143
Item 9B.	Other Information		145
PARTIII
Item 10.	Directors, Executive Officers, and Corporate Governance*		146
Item 11.	Executive Compensation*		146
Item 12.	Security Ownership of Certain Beneficial Owners and Management
		and Related Stockholder Matters*	146
Item 13.	Certain Relationships, Related Transactions, and Director Independence*		146
Item 14.	Principal Accounting Fees and Services		147
PARTIV
Item 15.	Exhibits, Consolidated Financial Statement Schedules		149
	Index to Consolidated Financial Statement Schedules		150
	Signatures		154
	Exhibits Index		155
*          Item omitted pursuant to General Instruction I(2) of Form 10-K, except as to Part III, Item 10 with respect to compliance with Sections 406  and 407 of the Sarbanes-Oxley Act of 2002. **        Item prepared in accordance with General Instruction I(2) of Form 10-K. ***       Although item may be omitted pursuant to General Instruction I(2) of Form 10-K, the Company has provided certain disclosure under this item. ****     Item omitted as registrant is neither an accelerated filer nor a well-known seasoned issuer.

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PART I

 

Item 1. Business

(Dollar amounts in millions, unless otherwise stated)

Organization of Business

ING Life Insurance and Annuity Company (“ILIAC”) is a stock life insurance company domiciled in the state of Connecticut. ILIAC and its wholly-owned subsidiaries (collectively, the “Company”) are providers of financial products and services in the United States. ILIAC is authorized to conduct its insurance business in all states and in the District of Columbia.

The consolidated financial statements include ILIAC and its wholly-owned subsidiaries, ING Financial Advisers, LLC (“IFA”) and Directed Services LLC (“DSL”). ILIAC is a direct, wholly-owned subsidiary of Lion Connecticut Holdings Inc. (“Lion” or “Parent”), which is an indirect, wholly-owned subsidiary of ING Groep N.V. (“ING”). ING is a global financial services holding company based in The Netherlands, with American Depository Shares listed on the New York Stock Exchange under the symbol “ING.”

On December 1, 2006, Lion contributed to ILIAC, Directed Services, Inc. (“DSI”), a New York corporation registered as a broker-dealer under the Securities Exchange Act of 1934 and as an investment advisor under the Investment Advisors Act of 1940, whose primary functions were the distribution of variable insurance products and investment advisory services for open-end mutual funds. Additionally, on December 12, 2006, ILIAC organized DSL as a wholly-owned Delaware limited liability company. On December 31, 2006, DSI merged with and into DSL and ceased to exist. Upon merger, the operations and broker-dealer and investment advisor registrations of DSI were consolidated into DSL, the surviving company. Effective January 1, 2007, ILIAC’s investment advisory agreement with certain variable funds offered in Company products was assigned to DSL.

On May 11, 2006, ILIAC organized Northfield Windsor LLC (“NWL”) as a wholly-owned subsidiary for the purpose of purchasing, constructing, developing, leasing, and managing a new corporate office facility to be located at One Orange Way, Windsor, Connecticut (the “Windsor Property”). Effective October 1, 2007, the principal executive office of ILIAC was changed to One Orange Way, Windsor, Connecticut.

On October 31, 2007, ILIAC’s subsidiary, NWL merged with and into ILIAC. As of the merger date, NWL ceased to exist, and ILIAC became the surviving corporation. The merger did not have an impact on ILIAC’s consolidated results of operations and financial position, as NWL was a wholly-owned subsidiary and already included in the consolidated financial statements for all periods presented since its formation.

Description of Business

The Company offers qualified and nonqualified annuity contracts that include a variety of funding and payout options for individuals and employer-sponsored retirement plans qualified under Internal Revenue Code Sections 401, 403, 408, and 457, as well as nonqualified deferred compensation plans and related services. The

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Company’s products are offered primarily to individuals, pension plans, small businesses, and employer-sponsored groups in the health care, government, and education markets (collectively “not-for-profit” organizations) and corporate markets. The Company’s products are generally distributed through pension professionals, independent agents and brokers, third party administrators, banks, dedicated career agents, and financial planners.

See “Reserves” for a discussion of the Company’s reserves by product type.

The Company has one operating segment, which offers the products described below.

Products and Services

Products offered by the Company include deferred and immediate (payout annuities) annuity contracts. Company products also include programs offered to qualified plans and nonqualified deferred compensation plans that package administrative and record-keeping services along with a variety of investment options, including affiliated and nonaffiliated mutual funds and variable and fixed investment options. In addition, the Company offers wrapper agreements entered into with retirement plans, which contain certain benefit responsive guarantees (i.e., liquidity guarantees of principal and previously accrued interest for benefits paid under the terms of the plan) with respect to portfolios of plan-owned assets not invested with the Company. The Company also offers pension and retirement savings plan administrative services.

Annuity contracts offered by the Company contain variable and fixed investment options. Variable options generally provide for assumption by the customer of investment risks. Assets supporting variable annuity options are held in separate accounts that invest in mutual funds distributed by ILIAC, and managed and/or distributed by its affiliates, or unaffiliated entities. Variable separate account investment income and realized capital gains and losses are not reflected in the Consolidated Statements of Operations.

Fixed options are either “fully-guaranteed” or “experience-rated”. Fully-guaranteed fixed options provide guarantees on investment returns and maturity values. Experience-rated fixed options require the contractowner to assume certain investment risks, including realized capital gains and losses on the sale of invested assets, and other risks subject to, among other things, principal and interest guarantees.

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

Guaranteed Minimum Death Benefits (“GMDBs”):

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

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

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

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§ Combination Annual Ratchet and 5% RollUp - Guarantees that, upon death, the death benefit will be no less than the greater of (1) Annual Ratchet or (2) aggregate premiums paid by the contractowner accruing interest at 5% per annum.

§ Combination Seven-Year Ratchet and 4% RollUp - Guarantees that, upon death, the death benefit will be no less than the greater of (1) a seven year ratchet or (2) aggregate premiums paid by the contractowner accruing interest at 4% per annum.

Products offering Annual Ratchet, Five Year Ratchet, Combination Ratchet and 5% RollUp, and Combination Seven-Year Ratchet and 4% RollUp, guarantees are no longer being sold by the Company.

Variable annuity contracts containing guaranteed minimum death benefits expose the Company to equity risk. A decrease in the equity markets may cause a decrease in the account values, thereby increasing the possibility that the Company may be required to pay amounts to customers due to guaranteed death benefits. An increase in the value of the equity markets may increase account values for these contracts, thereby decreasing the Company’s risk associated with the GMDBs. Most contracts with GMDBs are reinsured to third party reinsurers to mitigate the risk produced by such guaranteed death benefits.

Fees and Margins

Insurance and expense charges, investment management fees, and other fees earned by the Company vary by product and depend on, among other factors, the funding option selected by the customer under the product. For annuity products where assets are allocated to variable funding options, the Company may charge the separate account asset-based insurance and expense fees.

In addition, where the customer selects a variable funding option, the Company may receive compensation from the fund’s adviser, administrator, or other affiliated entity, for the performance of certain services. The Company may also receive administrative service, distribution (12b-1), and/or service plan fees from the funds in which customers invest, in addition to compensation from the fund’s adviser, administrator, or other affiliated entity for the performance of certain services.

For fixed funding options, the Company earns a margin that is based on the difference between income earned on the investments supporting the liability and interest credited to customers.

In connection with programs offered to qualified plans and nonqualified deferred compensation plans that package administrative and recordkeeping services along with a menu of investment options, the Company may receive 12b-1 and service plan fees, as well as compensation from the affiliated or nonaffiliated fund’s advisor, administrator, or other affiliated entity for the performance of certain shareholder services.

The Company may also receive other fees or charges depending on the nature of the products.

5

Strategy, Method of Distribution, and Principal Markets

The Company’s products are offered primarily to individuals, pension plans, small businesses, and employer-sponsored groups in not-for-profit organizations, and corporate markets. The Company’s products generally are distributed through pension professionals, independent agents and brokers, third party administrators, banks, dedicated career agents, and financial planners.

The Company is not dependent upon any single customer and no single customer accounted for more than 10% of consolidated revenue in 2008. In addition, the loss of business from any one, or a few, independent brokers or agents would not have a material adverse effect on the Company.

Assets Under Management and Administration

A substantial portion of the Company’s fees, or other charges and margins, are based on general and separate account assets under management (“AUM”). General account AUM represents assets in which the Company bears the investment risk, while separate account AUM represent assets in which the contractowners bear the investment risk. AUM is principally affected by net deposits (i.e., new deposits, less surrenders and other outflows) and investment performance (i.e., interest credited to contractowner accounts for fixed options or market performance for variable options). A portion of the Company’s fee income is also based on assets under administration (“AUA”), which are assets not included on the Company’s Consolidated Balance Sheets and for which the Company provides administrative services only. The general and separate account AUM, AUA, and deposits, were as follows at December 31, 2008 and 2007.

				2008		2007
New deposits:
	Variable annuities		$	6,140.8	$	6,418.4
	Fixed annuities			2,131.5		1,531.9
	Stabilizer			926.5		743.9
Total new deposits			$	9,198.8	$	8,694.2
Assets under management:
	Variable annuities		$	27,699.5	$	42,969.5
	Fixed annuities			17,398.2		15,145.7
		Total annuities		45,097.7		58,115.2
	Plan sponsored and other			751.6		1,383.2
Total assets under management				45,849.3		59,498.4
Assets under administration				22,001.9		27,876.7
Total assets under management and administration			$	67,851.2	$	87,375.1

AUM are generally available for contractowner withdrawal and are generally subject to market value adjustments and/or deferred surrender charges. To encourage customer retention and recover acquisition expenses, contracts typically impose a surrender charge on contractowner balances withdrawn within a period of time after the contract’s inception. The period of time and level of the charge vary by product. In addition, an approach incorporated into certain recent variable annuity contracts

6

with fixed funding options allows contractowners to receive an incremental interest rate if withdrawals from the fixed account are spread over a period of five years. Further, more favorable credited rates may be offered after policies have been in force for a period of time. Existing tax penalties on annuity and certain custodial account distributions prior to age 59-1/2 provide further disincentive to customers for premature surrenders of account balances, but generally do not impede transfers of those balances to products of competitors.

Competition

Within the retirement services business, competition from traditional insurance carriers, as well as banks, mutual fund companies, and other investment managers, offers consumers many choices. Principal competitive factors are reputation for investment performance, product features, service, cost, and the perceived financial strength of the investment manager. Competition may affect, among other matters, both business growth and the pricing of the Company’s products and services.

Reserves

The Company records as liabilities reserves to meet the Company’s future obligations under its variable annuity and fixed annuity products.

Future policy benefits and claims reserves include reserves for deferred annuities and immediate annuities with and without life contingent payouts.

Reserves for individual and group deferred annuity investment contracts and individual immediate annuities without life contingent payouts are equal to cumulative deposits, less charges and withdrawals, plus credited interest thereon, net of adjustments for investment experience that the Company is entitled to reflect in future credited interest. Credited interest rates vary by product and range from 1.6% to 7.8% for the years 2008, 2007, and 2006. Certain reserves also may include net unrealized gains and losses related to investments and unamortized net realized gains and losses on investments for experience-rated contracts. Reserves on experience-rated contracts reflect the rights of contractowners, plan participants, and the Company. During 2008, the Company did not include the net unrealized and unamortized realized losses associated with experienced-rated contracts in Future policy benefits and claims reserves. The net unrealized losses are reflected in Accumulated other comprehensive (loss) income, and the amortization of the unamortized realized losses has been recorded in Interest credited and other benefits to contractowners. Reserves for group immediate annuities without life contingent payouts are equal to the discounted value of the payment at the implied break-even rate.

Reserves for individual immediate annuities with life contingent payout benefits are computed on the basis of assumed interest discount rates, mortality, and expenses, including a margin for adverse deviations. Such assumptions generally vary by annuity type plan, year of issue, and policy duration. For the years 2008, 2007, and 2006, reserve interest rates ranged from 5.3% to 5.9%.

7

The Company records reserves for product guarantees, which can be either assets or liabilities, for annuity contracts containing guaranteed credited rates. The guarantee is treated as an embedded derivative or a stand-alone derivative (depending on the underlying product) and is reported at fair value in accordance with Statement of Financial Accounting Standards (“FAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”), FAS No. 97, “Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments” (“FAS 97”), and FAS No. 157, “Fair Value Measurements” (“FAS 157”).

The Company’s domestic individual life insurance business was disposed of on October 1, 1998 via an indemnity reinsurance agreement. The Company includes an amount in Reinsurance recoverable on the Consolidated Balance Sheets, which equals the Company’s total individual life reserves. Individual life reserves are included in Future policy benefits and claims reserves on the Consolidated Balance Sheets.

As discussed under “Products and Services,” the Company also has guaranteed death benefits included in variable annuities, which are included in reserves.

Reinsurance Arrangements

The Company utilizes indemnity reinsurance agreements to reduce its exposure to losses from its annuity insurance business. Reinsurance permits recovery of a portion of losses from reinsurers, although it does not discharge the Company’s primary liability as the direct insurer of the risks. Reinsurance treaties are structured as yearly renewable term, coinsurance, or modified coinsurance. All agreements that the Company currently has relate to specifically-identified blocks of business or contracts; therefore the agreements do not cover new contracts written, if any.

The Company has a significant concentration of reinsurance arising from the disposition of its individual life insurance business. In 1998, the Company entered into an indemnity reinsurance arrangement with certain subsidiaries of Lincoln National Corporation (“Lincoln”). At December 31, 2008 and 2007, the Company had $2.5 billion and $2.6 billion, respectively, related to reinsurance recoverables from those subsidiaries of Lincoln. Effective March 1, 2007, the reinsurance agreements were assigned to a single subsidiary of Lincoln, and that subsidiary established a trust to secure its obligations to the Company under the reinsurance transaction.

The Company evaluates the financial strength of potential reinsurers and continually monitors the financial strength and credit ratings of its reinsurers. Only those reinsurance recoverable balances deemed probable of recovery are reflected as assets on the Company’s Consolidated Balance Sheets.

Investment Overview and Strategy

The Company’s investment strategy focuses on diversification by asset class. The Company seeks to achieve economic diversification, while reducing overall credit risk and liquidity risk. In addition, the Company seeks to mitigate the impact of cash flow variability from embedded options within certain investment products, such as prepayment options, interest rate options embedded in collateralized mortgage

8

obligations, and call options embedded in corporate bonds. The investment management function is centralized under ING Investment Management LLC, an affiliate of the Company, pursuant to an investment advisory agreement. Separate portfolios are established for groups of products with similar liability characteristics within the Company.

The Company’s general account invests primarily in fixed maturity investments, including publicly issued bonds (including government bonds), privately placed notes and bonds, mortgage-backed securities, and asset-backed securities. The primary investment strategy is to optimize the risk-adjusted return through superior asset selection predicated on a developed relative value approach, credit research and monitoring, superior management of interest rate risk, and active exploration into new investment product opportunities. Investments are purchased when market returns, adjusted for risk and expenses, are sufficient to profitably support growth of the liability block of business. In addition, assets and liabilities are analyzed and reported for internal management purposes on an option-adjusted basis. The level of required capital of given transactions is a primary factor in determining relative value among different investment and liability alternatives, within the scope of each product type’s objective. An active review of existing holdings identifies specific assets that could be effectively traded in order to enhance the risk-adjusted returns of the portfolio, while minimizing adverse tax and accounting impacts. The Company strives to maintain a portfolio weighted average asset quality rating of A, based on Standard & Poor’s (“S&P”) ratings classifications. The weighted average excludes mortgage loans, but includes mortgage-backed securities, which are reported with bonds.

The Company uses derivatives for hedging purposes to reduce the Company’s exposure to cash flow variability of assets and liabilities, interest rate risk, credit risk, and market risk. In addition, the Company uses credit default swaps to reduce the credit loss exposure with respect to certain assets that the Company owns, or to assume credit exposure to certain assets that the Company does not own. These credit default swaps are similar in credit risk to bonds of the named issuer and allow the Company to gain access to a broader, more diversified pool of credit risks. These derivatives do not qualify for hedge accounting under accounting principles generally accepted in the United States (“US GAAP”). See “Liquidity and Capital Resources - Derivatives” in Management’s Narrative Analysis of the Results of Operations and Financial Condition for further discussion of the Company’s use of derivatives.

Ratings

On January 27, 2009, S&P reaffirmed its AA (Very Strong) counterparty credit and financial strength rating of ING’s primary U.S. insurance operating companies (“ING U.S.”), including the Company. S&P also, on that date, reaffirmed it’s A-1+ short-term counterparty credit rating on the Company. S&P currently maintains a negative outlook for the Company. In February 2009, S&P announced that it will conduct new reviews of ratings of European global multi-line insurers to assess their ability to “maintain financial strength through a period of heightened stress.” Upon completion of its review, S&P announced on March 31, 2009 that it had downgraded ING U.S., including the Company, to AA- from AA and reaffirmed a negative outlook for the Company.

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On October 21, 2008, Moody’s Investors Service, Inc. (“Moody’s”) placed the Aa3 insurance financial strength rating of ING U.S. under review for possible downgrade. On January 28, 2009, Moody’s downgraded the insurance financial ratings of ING U.S., including the Company, to A1 from Aa3 and removed its outlook from Negative to Stable. Moody’s also, on that date, affirmed the short-term financial strength rating of Prime-1 (P-1) for the Company.

On June 18, 2008, A.M. Best Company, Inc. (“A.M. Best”) reaffirmed the financial strength rating of A+ (Superior) of ING U.S., including the Company, with a stable outlook. A.M. Best assigned an issuer credit rating of AA- to ILIAC at that time.

On January 28, 2009, Fitch Ratings Ltd. (“Fitch”) downgraded its ratings for ING U.S. from AA to AA- and kept its outlook at Negative.

The downgrades by Fitch and Moody’s reflect a broader view of how the financial services industry is being challenged by the current economic environment. In response to weakening global markets, the rating agencies have been continuously re-evaluating their ratings of banks and insurance companies around the world. Over the past several months, the rating agencies have adjusted their outlook of the financial services industry overall downward, while reviewing the individual ratings they give to specific entities.

Regulation

The Company’s operations are subject to comprehensive regulation throughout the United States. The laws of the various jurisdictions establish supervisory agencies, including the state insurance departments, with broad authority to grant licenses to transact business and regulate many aspects of the products and services offered by the Company, as well as solvency and reserve adequacy. Many agencies also regulate the investment activities of insurance companies on the basis of quality, diversification, and other quantitative criteria. The Company’s operations and accounts are subject to examination at regular intervals by certain of these regulators.

ILIAC is subject to the insurance laws of the State of Connecticut, where it is domiciled, and other jurisdictions in which it transacts business. The primary regulators of the Company’s insurance operations are the insurance departments of Connecticut and New York. Among other matters, these agencies may regulate trade practices, agent licensing, policy forms, underwriting and claims practices, minimum interest rates to be credited to fixed annuity contractowner accounts, and the maximum interest rates that can be charged on policy loans.

The Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority (“FINRA”), the self-regulatory organization which succeeded to the regulatory functions of the National Association of Securities Dealers and the New York Stock Exchange, and, to a lesser extent, the states, regulate the sales and investment management activities and operations of the Company. Generally, the Company’s variable annuity products and certain of its fixed annuities are registered as securities with the SEC. Regulations of the SEC, Department of Labor (“DOL”), and Internal Revenue Service (“IRS”) also impact certain of the Company’s annuity and other investment and retirement products. These products may involve separate accounts and mutual funds registered under the Investment Company Act of 1940.

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The Company also provides a variety of products and services to employee benefit plans that are covered by the Employee Retirement Income Security Act of 1974.

Insurance Holding Company Laws

A number of states regulate affiliated groups that include insurers such as the Company under holding company statutes. These laws, among other things, place certain restrictions on investments in, or transactions with, affiliates and may require prior approval of the payment of certain dividends by the Company to its Parent.

Insurance Company Guaranty Fund Assessments

Insurance companies are assessed the costs of funding the insolvencies of other insurance companies by the various state guaranty associations, generally based on the amount of premiums companies collect in that state.

The Company accrues the cost of future guaranty fund assessments based on estimates of insurance company insolvencies provided by the National Organization of Life and Health Insurance Guaranty Associations and the amount of premiums written in each state. The Company has estimated this liability to be $7.7 and $7.9 as of December 31, 2008 and 2007, respectively. The Company has also recorded an asset of $5.5 and $5.9 as of December 31, 2008 and 2007, respectively, for future credits to premium taxes for assessments already paid.

For information regarding certain other potential regulatory changes relating to the Company’s businesses, see Item 1A. Risk Factors.

Employees and Other Shared Services

ILIAC had 1,964 employees as of December 31, 2008, primarily focused on managing new business processing, product distribution, marketing, customer service, and product management for the Company and certain of its affiliates, as well as, providing product development, actuarial, and finance services to the Company and certain of its affiliates. The Company also utilizes services provided by ING North America Insurance Corporation and other affiliates. These services include risk management, human resources, investment management, information technology, and legal and compliance services, as well as other new business processing, actuarial, and finance related services. The affiliated companies are reimbursed for the Company’s use of various services and facilities under a variety of intercompany agreements.

Item 1A. Risk Factors

In addition to the normal risks of business, the Company is subject to significant risks and uncertainties, including those which are described below.

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The current financial crisis has reached unprecedented levels of market volatility and has adversely affected and may continue to adversely affect the Company’s business and results of operations

Markets in the United States and elsewhere have experienced extreme volatility and disruption for more than twelve months, due largely to the stresses affecting the global financial systems, which accelerated significantly in the second half of 2008. The United States has entered a severe recession that is likely to persist throughout and even beyond 2009, despite past and future expected governmental intervention in the world’s major economies. These circumstances have exerted significant downward pressure on prices of equity securities and virtually all other asset classes and have resulted in substantially increased market volatility, severely constrained credit and capital markets, particularly for financial institutions, and an overall loss of investor confidence. Economic conditions have continued to deteriorate in early 2009. These market conditions have affected and may continue to affect the Company’s results of operations and investment portfolio since the Company is exposed to significant financial and capital markets risk, including changes in interest rates, credit spreads and equity prices.

The Company’s exposure to interest rate risk relates primarily to the market price and cash flow variability associated with changes in interest rates. Changes in interest rates may be caused by either changes in the underlying risk-free rates or changes in the credit spreads required for various levels of risk within the market A rise in interest rates or widening of credit spreads will increase the net unrealized loss position of the Company’s investment portfolio and, if long-term interest rates rise dramatically within a six to twelve month time period, certain contractowners may surrender their contracts, requiring the Company to liquidate assets in an unrealized loss position. Due to the long-term nature of the liabilities associated with certain of the Company’s products, sustained declines in long term interest rates may subject the Company to reinvestment risks and spread compression. As interest rates decline, borrowers may prepay or redeem mortgages and other investments with embedded call options. This may force the Company to reinvest the proceeds at lower interest rates. Also the reinvestment of proceeds at lower interest rates could cause spread compression, (i.e., the difference between the net rate earned by the Company and the rates credited to customers of the Company could be lower than the spread assumed by the Company in product pricing). In extreme situations, the rates earned by the Company could be lower than the credited rates guaranteed to the customers. The net result will be lower earnings to the Company.

With the continued widening of credit spreads, the net unrealized loss position of the Company’s investment portfolio increased $635.4 in 2008 and has also contributed to the increase in other than temporary impairments. If issuer credit spreads continue to widen or increase significantly over an extended period of time, it would likely exacerbate these effects, resulting in greater and additional other-than-temporary impairments. In addition, a reduction in market liquidity has made it difficult to value certain of the Company’s securities as trading has become less frequent. As such, valuations may include assumptions or estimates that may be more susceptible to significant changes which could have a material adverse effect on the Company’s results of operations or financial condition.

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The combination of adverse interest rates and the continued widening of credit spreads have had a significant impact on the fair value of the Company’s product guarantees that are accounted for as free-standing or embedded derivatives. A portion of this business has guarantees at 3%. In low interest rate environments, the Company is at risk of crediting rates higher than it can earn, thus creating an asset/liability mismatch. Risk also exists in a rising interest rate environment, where an increased level of book value withdrawals causes greater losses than can be recovered through future adjustments to credited rates. The continued widening of credit spreads has resulted in lower market to book value ratios, putting downward pressure on credited rates and putting the Company at risk of a greater volume of book value withdrawals.

Another important primary exposure to equity risk relates to the potential for lower earnings associated with variable annuities where fee income is earned based upon the fair value of the assets under management. During the course of 2008, the declines in equity markets have negatively impacted assets under management. As a result, fee income earned on the value of those assets under management has also been negatively impacted.

Continuing adverse financial market conditions may significantly affect the Company’s ability to meet liquidity needs, access to capital and cost of capital

Adverse capital market conditions may affect the availability and cost of borrowed funds, including commercial paper, thereby ultimately impacting profitability and ability to support or grow the businesses. While the Company has various sources of liquidity available, sustained adverse market conditions could impact the cost and availability of these borrowing sources, including the availability and cost of letters of credit. The Company may not be able to raise sufficient capital as and when required if the financial markets remain in turmoil, and any capital raised may be on unfavorable terms. Any sales of securities or other assets may be completed on unfavorable terms or cause the Company to incur losses. The Company would lose the potential for market upside on those assets in a market recovery. Without sufficient liquidity, the Company could be forced to curtail certain operations, and the business could suffer.

The amount of statutory capital that the Company must hold to maintain its financial strength and credit ratings can vary significantly from time to time and is sensitive to a number of factors outside of the Company’s control

The National Association of Insurance Commissioners (“NAIC”) has established regulations that provide minimum capitalization requirements based on risk-based capital (“RBC”) formulas for insurance companies. The RBC formula for life insurance companies establishes capital requirements relating to insurance, business, asset and interest rate risks, including equity, interest rate and expense recovery risks associated with variable annuities and group annuities that contain death benefits.

In any particular year, statutory surplus amounts and RBC ratios may increase or decrease depending on a variety of factors – the amount of statutory income or losses generated by the Company (which itself is sensitive to equity market and credit market conditions), the amount of additional capital the Company must hold to support business growth, changes in equity market levels, the value and credit ratings

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of certain fixed-income and equity securities in its investment portfolio, the value of certain derivative instruments that do not receive hedge accounting, changes in interest rates, as well as changes to the NAIC RBC formulas. Most of these factors are outside of the Company’s control. The Company’s financial strength and credit ratings are significantly influenced by its statutory surplus amounts and RBC. In addition, rating agencies may implement changes to internal models that have the effect of increasing or decreasing the amount of statutory capital the Company must hold in order to maintain its current ratings. In addition, in extreme scenarios of equity market declines, the amount of additional statutory reserves that the Company is required to hold for variable annuity guarantees increases at a greater than linear rate. This reduces the statutory surplus available for use in calculating the Company’s RBC ratios. On January 28, 2009, the Company’s financial strength ratings were downgraded by two rating agencies. See “Ratings” in Item 1. Business. To the extent that the Company’s statutory capital resources are deemed to be insufficient to maintain a particular rating by one or more rating agencies, the Company may seek to raise additional capital. Alternatively, if the Company were unable to raise additional capital in such a scenario, the Company’s financial strength and credit ratings might be further downgraded by one or more rating agencies.

The Company has experienced ratings downgrades recently and may experience additional future downgrades in the Company’s ratings which may negatively affect profitability and financial condition

Ratings are an important factor in establishing the competitive position of insurance companies. On January 28, 2009, Moody’s downgraded the financial strength rating of ING U.S., including the Company, to “A1” from “Aa3”. On the same day, Fitch downgraded the financial strength rating of ING U.S., including the Company, to “AA-” from “AA”. On March 31, 2009, S&P downgraded the financial strength rating of ING U.S., including the Company, to “AA-” from “AA”. See “Ratings” in Item 1. Business.

A downgrade, or the potential for a downgrade, of any of the Company’s ratings may lead to lower margins and fee income as follows:

§ Increase in annuity contract surrenders and withdrawals;

§ Termination of relationships with broker-dealers, banks, agents, wholesalers, and other distributors of products and services;

§ Reduction of new annuity contract sales; and

§ Ratings triggers under Collateral Support Annexes of derivatives contracts, which would require the Company to post additional collateral.

The Company cannot predict what actions rating organizations may take, or what actions the Company may be required to take in response to the actions of rating organizations, which could adversely affect the Company. Rating organizations assign ratings based upon several factors, including the following:

§ Statutory capital;

§ Risk of investment portfolio;

§ Views of the rating organization;

§ Economic trends affecting the financial services industry;

§ Changes in models and formulas used by rating organizations to assess the financial strength of a rated company;

§ Strength of the Company’s management team;

§ Enterprise risk management; and

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§ Other circumstances outside the rated company’s control.

In view of the difficulties experienced recently by many financial institutions, including insurance companies, it is possible that rating organizations will heighten the level of scrutiny that they apply to such institutions, will increase the frequency and scope of their credit reviews, will request additional information from the companies that they rate, and may adjust upward the capital and other requirements employed in the rating organization models for maintenance of certain ratings levels. It is possible that the outcome of such reviews of the Company will have additional adverse ratings consequences, which could have a material adverse effect on results of operation and financial condition.

Regulatory initiatives intended to alleviate the current financial crisis that have been adopted may not be effective and, in any event, may be accompanied by other initiatives, including new capital requirements or other regulations, that could materially affect the Company’s results of operations, financial condition and liquidity

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

In addition, the Company is subject to extensive laws and regulations that are administered and/or enforced by a number of different governmental authorities and non-governmental self-regulatory bodies, including state insurance regulators, state securities administrators, the NAIC, the SEC, FINRA, Financial Accounting Standards Board, and state attorneys general. In light of the current financial crisis, some of these authorities are or may in the future consider enhanced or new requirements intended to prevent future crises or otherwise assure the stability of institutions under their supervision. These authorities may also seek to exercise their supervisory or enforcement authority in new or more robust ways. All of these possibilities, if they occurred, could affect the way the Company conducts its business and manages capital, and may require the Company to satisfy increased capital requirements, any of which in turn could materially affect the Company’s results of operations, financial condition and liquidity. Section 382 of the United States Internal Revenue Code contains a so-called loss limitation rule, the general purpose of which is to prevent trafficking in tax losses (i.e., it is an anti-abuse rule). The rule

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is triggered when the ownership of a company changes by more than 50% (measured by value) on a cumulative basis in any three year period. If triggered, restrictions may be imposed on the future use of realized tax losses as well as certain losses that are built into the assets of the company at the time of the ownership change and that are realized within the next five years. The issuance of EUR 10 billion of securities by ING to the Dutch State on November 12, 2008, brought ING’s (cumulative) change of ownership as per that date to approximately 42%. As a result, future increases in capital or other changes of ownership may adversely affect the net result or equity of ING, unless relief from the loss limitation rules is obtained, which may or may not be possible.

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

The following financial instruments are carried at fair value in the Company’s financial statements: fixed maturities, equity securities, freestanding and embedded derivatives, and separate account assets. The Company has categorized these securities into a three-level hierarchy, based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). In many situations, inputs used to measure the fair value of an asset or liability position may fall into different levels of the fair value hierarchy. In these situations, the Company will determine the level in which the fair value falls based upon the lowest level input that is significant to the determination of the fair value.

The determination of fair values are made at a specific point in time, based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. The use of different methodologies and assumptions may have a material effect on the estimated fair value amounts.

During periods of market disruption such as the Company is currently experiencing, including periods of rapidly widening credit spreads or illiquidity, it has been and will likely continue to be difficult to value certain of the Company’s securities, such as Alt-A or subprime mortgage-backed securities, if trading becomes less frequent and/or market data becomes less observable. There may be certain asset classes that were in active markets with significant observable data that become illiquid due to the current financial environment. In such cases, more securities may fall to Level 3 and thus require more subjectivity and management judgment. As such, valuations may include inputs and assumptions that are less observable or require greater estimation thereby resulting in values which may differ materially from the value at which the investments may be ultimately sold. Further, rapidly changing and unprecedented credit and equity market conditions could materially impact the valuation of securities as reported within the financial statements and the period-to-period changes in value could vary significantly. Decreases in value could have a material adverse effect on our results of operations and financial condition. During the third quarter of 2008, the Company determined that the market for Alt-A and subprime mortgage-backed securities was inactive and, as such, classified those assets as Level 3. As of

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December 31, 2008, 11.7%, 72.7% and 15.6% of the Company’s available-for-sale securities were considered to be Level 1, 2 and 3, respectively.

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

The Company defers acquisition costs associated with the sales of its variable annuity products. These costs are amortized over the expected life of the contracts in proportion to the present value of estimated gross profits. The projection of estimated gross profits requires the use of certain assumptions, principally related to separate account fund returns in excess of amounts credited to policyholders, surrender and lapse rates, interest margin, mortality, future impairments and hedging costs. Of these factors, the Company anticipates that changes in investment returns are most likely to impact the rate of amortization of such costs. However, other factors such as those the Company might employ to reduce risk also significantly reduce estimates of future gross profits. Estimating future gross profits is a complex process requiring considerable judgment and the forecasting of events well into the future. If assumptions regarding policyholder behavior or costs to employ other risk mitigating techniques prove to be inaccurate or if significant or sustained equity market declines persist, the Company could be required to accelerate the amortization of DAC, which would result in a charge to earnings. Such adjustments could have a material adverse effect on results of operations and financial condition.

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

Deferred income tax represents the tax effect of the differences between the book and tax basis of assets and liabilities. Deferred tax assets are assessed periodically by management to determine if they are realizable. Factors in management’s determination include the performance of the business, including the ability to generate capital gains from a variety of sources and tax planning strategies. If based on available information, it is more likely than not that the deferred income tax asset will not be realized, then a valuation allowance must be established with a corresponding charge to net income. As of December 31, 2008, the Company’s valuation allowance was $333.0. However, based on facts and circumstances identified in the future, the valuation allowance may not be sufficient. Charges to increase the valuation allowance could have a material adverse effect on the Company’s results of operations and financial position.

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

Thecollectibilityofreinsurancerecoverablesissubjecttouncertaintyarisingfromanumberoffactors,includingwhethertheinsuredlossesmeetthequalifyingconditionsofthereinsurancecontractandwhetherreinsurers,ortheiraffiliates,havethefinancialcapacityandwillingnesstomakepaymentsunderthetermsofthereinsurancetreatyorcontract.TheCompany’sinabilitytocollectamaterialrecovery

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fromareinsurercouldhaveamaterialadverseeffectonprofitabilityandfinancialcondition.

While the Company has a significant concentration of reinsurance with Lincoln National Corporation (“Lincoln”) associated with the disposition of its individual life insurance business, a trust was established effective March 1, 2007, by a subsidiary of Lincoln to secure Lincoln’s obligations of the Company under the reinsurance transaction.

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

Third-parties that owe the Company money, securities or other assets many not pay or perform under their obligations. These parties include issuers of securities held by the Company, customers, trading counterparties, counterparties under swaps, credit default and other derivative contracts, clearing agents, exchanges and other financial intermediaries. Defaults by one of more of these parties on their obligations to the Company due to bankruptcy, lack of liquidity, economic downturns, operational failure or even rumors about potential defaults by one of more of these parties could have an adverse effect on the Company's results of operations, financial condition or cash flows.

Changes in underwriting and actual experience could materially affect profitability

The Company prices its products based on long-term assumptions regarding investment returns, mortality, persistency, and operating costs. Management establishes target returns for each product based upon these factors and the average amount of regulatory and rating agency capital that the Company must hold to support in-force contracts. The Company monitors and manages pricing and sales mix to achieve target returns. Profitability from a new business emerges over a period of years, depending on the nature and life of the product, and is subject to variability as actual results may differ from pricing assumptions.

The Company’s profitability depends on the following:

§ Adequacy of investment margins;

§ Management of market and credit risks associated with investments;

§ Ability to maintain premiums and contract charges at a level adequate to cover mortality, benefits, and contract administration expenses;

§ Adequacy of contract charges on variable contracts to cover the cost of product features;

§ Persistency of policies to ensure recovery of acquisition expenses and value of business acquired, as applicable; and

§ Management of operating costs and expenses within anticipated pricing allowances.

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A loss of key product distribution relationships could materially affect sales

The Company distributes certain products under agreements with other members of the financial services industry that are not affiliated with the Company. Termination of one or more of these agreements due to, for example, a loss of confidence or a change in control of one of the distributors, could reduce sales.

Competition could negatively affect the ability to maintain or increase profitability

The insurance industry is intensely competitive. The Company competes based on factors including the following:

 

§ Name recognition and reputation;

§ Service;

§ Investment performance;

§ Product features;

§ Price;

§ Perceived financial strength; and

§ Claims paying and credit ratings.

The Company’s competitors include insurers, broker-dealers, financial advisors, asset managers, and other financial institutions, which may, for example, have greater market share, offer a broader range of products, or have higher claims-paying or credit ratings than the Company.

In recent years, there has been substantial consolidation among companies in the financial services industry resulting in increased competition from large, well-capitalized financial services firms. Current economic turmoil may accelerate consolidation activity. Many of these firms also have been able to increase their distribution systems through mergers or contractual arrangements. Furthermore, larger competitors may lower operating costs and have an ability to absorb greater risk, while maintaining financial strength ratings, allowing them to price products more competitively. While the Company cannot predict the future level of consolidation, the Company expects consolidation to continue and perhaps accelerate in the future, increasing competitive pressure.

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

Annuity products that the Company sells currently benefit from one or more forms of tax favored status under current federal tax law. The Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs Act and Growth Tax Relief Reconciliation Act of 2003 significantly lowered and reduced the benefits of deferral on the build-up of value of annuities. Many of these provisions expire in 2010. It is likely that looming federal deficits will spawn numerous revenue raising proposals, including those directed at the life insurance industry and its products. 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

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insurance and annuity products. While countering any such revenue proposal is a top industry priority, if such a proposal should be made, the Company cannot predict its scope, effect or likelihood of outcome.

Additionally, the Company is 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. There is risk that changes to federal tax law or in IRS interpretation of existing tax law may be enacted or adopted, and could result in materially higher corporate taxes than would be incurred under existing tax law or interpretation and adversely impact profitability.

Litigation may adversely affect profitability and financial condition

The Company is, and may be in the future, subject to legal actions in the ordinary course of insurance, investment management, and other business operations. These legal actions may include proceedings relating to aspects of businesses and operations that are specific to the Company and proceedings that are typical of the businesses in which the Company operates. Some of these proceedings may be brought on behalf of a class. Plaintiffs may seek large or indeterminate amounts of damage, including compensatory, liquidated, treble, and/or punitive damages. Given the large or indeterminate amounts sometimes sought, and the inherent unpredictability of litigation, it is possible that an adverse outcome could, from time to time, have an adverse effect on the Company’s reputation, results of operations, or cash flows, in particular quarterly or annual periods.

Changes in regulation in the United States and recent regulatory investigations may reduce profitability

The Company’s insurance and securities business is subject to comprehensive state and federal regulation and supervision throughout the United States. The primary purpose of state regulation is to protect contractowners, and not necessarily to protect creditors and investors. State insurance and securities regulators, state attorneys general, the NAIC, the SEC, FINRA, the DOL and the IRS continually reexamine existing laws and regulations and may impose changes in the future. Changes in legislation and administrative policies, or new interpretations of existing laws, in areas such as employee benefit plan regulation, financial services regulation, and federal taxation, could lessen the competitive advantages of certain of the Company’s products, result in the surrender of existing contracts and policies, increase costs, reduce new product sales, or result in higher taxes affecting the Company, thus reducing the Company’s profitability. In response to current economic conditions, there has been an increase in legislative proposals to reform retirement plans.

Since 2002, the insurance industry has become the focus of increased regulatory scrutiny as various state and federal governmental agencies and self-regulatory organizations conduct inquiries and investigations into the products and practices of the financial services industries. These initiatives currently focus on areas such as:

§ Inappropriate trading of fund shares;

§ Revenue sharing and directed brokerage;

§ Sales and marketing practices (including sales to seniors);

§ Suitability;

§ Arrangements with service providers;

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§ Pricing;

§ Product cost and fees;

§ Compensation and sales incentives;

§ Potential conflicts of interest;

§ Specific product types (including group annuities and indexed annuities); and

§ Adequacy of disclosure.

In some cases, this regulatory scrutiny has led to new proposed legislation and regulation that could significantly affect the financial services industry, including businesses in which the Company is engaged, or has resulted in regulatory penalties, settlements, and litigation. At this time, the Company does not believe that any of this regulatory scrutiny will have a material adverse affect on it. The Company cannot guarantee, however, that new laws, regulations, and other regulatory actions aimed at the business practices under scrutiny would not adversely affect its business. The adoption of new laws and regulations, enforcement actions, or litigation, whether or not involving the Company, could influence the manner in which the Company distributes its products, result in negative coverage of the industry by the media, cause significant harm to the Company’s reputation, and adversely impact profitability.

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

The Company’s insurance and annuity products are subject to a complex and extensive array of state and federal tax, securities, insurance, and employee benefit plan laws, and regulations, which are administered and enforced by a number of different governmental and self-regulatory authorities, including state insurance regulators, state securities administrators, the SEC, the FINRA, the DOL, and the IRS.

For example, U.S. federal income tax law imposes requirements relating to insurance and annuity product design, administration, and investments that are conditions for beneficial tax treatment of such products under the Internal Revenue Code. Failure to administer certain contract features (for example, contractual annuity start dates in nonqualified annuities) could affect such beneficial tax treatment. Additionally, state and federal securities and insurance laws impose requirements relating to insurance and annuity product design, offering and distribution, and administration. Failure to meet any of these complex tax, securities, or insurance requirements could subject the Company to administrative penalties imposed by a particular governmental or self-regulatory authority, unanticipated costs associated with remedying such failure or other claims, harm to the Company's reputation, interruption of the Company's operations, or adversely impact profitability.

A failure of the Company’s operating systems or a compromise of security with respect to operating systems or portable electronic devices could adversely affect the Company’s results of operations and financial condition

The Company is highly dependent on automated systems to record and process Company and contractowner transactions. The Company may experience a failure of its operating systems or a compromise of its security due to technical system flaws, clerical or record-keeping errors, or tampering or manipulation of those systems by

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employees or unauthorized third parties. Information security risks also exist with respect to the use of portable electronic devices, such as laptops, which are particularly vulnerable to loss and theft. The Company may also be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control (for example, natural disasters, acts of terrorism, epidemics, computer viruses, and electrical/telecommunications outages). All of these risks are also applicable where the Company relies on outside vendors to provide services to it and its contractowners. Operating system failures or disruptions or the compromise of security with respect to operating systems or portable electronic devices could subject the Company to regulatory sanctions, or other claims, harm the Company’s reputation, interrupt the Company’s operations, and adversely affect the Company’s business, results of operations, or financial condition.

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

The Company is exposed to various risks arising from natural disasters, including hurricanes, global warming, floods, earthquakes, tornadoes, and pandemic disease, caused by a virus such as H5N1 (the “Avian flu” virus), as well as man-made disasters, including acts of terrorism and military actions, which may adversely affect assets under management, results of operations and financial condition, as follows:

§ Losses in the Company’s investment portfolio due to significant volatility in global financial markets or the failure of counterparties to perform.

§ Changes in the rate of mortality, lapses and surrenders of existing policies/contracts, as well as sales of new policies/contracts.

§ Disruption of the Company’s normal business operations due to catastrophic property damage, loss of life, or disruption of public and private infrastructure, including communications and financial services.

While the Company has a business continuation and crisis management plan, there can be no assurance that the Company’s plan and insurance coverages would be effective in mitigating any negative effects on operations or profitability in the event of a disaster.

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

The Company has developed risk management policies and procedures and expects to continue to do so in the future. Nonetheless, the Company’s policies and procedures to identify, monitor, and manage risks may not be fully effective. Many of the Company’s methods of managing risk and exposures are based upon observed historical market behavior or statistics based on historical models. As a result, these methods may not predict future exposures, which could be significantly greater than historical measures indicate. Other risk management methods depend on the evaluation of information regarding markets, clients, catastrophe occurrence, or other matters, that is publicly available or otherwise accessible to the Company. This information may not always be accurate, complete, up-to-date or properly evaluated. Management of operational, legal, and regulatory risks requires, among other things, policies and procedures to record and verify large numbers of transactions and events. These policies and procedures may not be fully effective.

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Item 1B. Unresolved Staff Comments

Omitted as registrant is neither an accelerated filer nor a well-known seasoned issuer.

 

Item 2. Properties

The Company’s home office is located at One Orange Way, Windsor, Connecticut, 06095-4774. All Company office space other than the home office is leased or subleased by the Company or its other affiliates. The Company pays substantially all expenses associated with its owned or leased and subleased office properties. Affiliates within ING’s U.S. operations provide the Company with various management, finance, investment management and other administrative services, primarily from facilities located at 5780 Powers Ferry Road, N.W., Atlanta, Georgia 30327-4390. The affiliated companies are reimbursed for the Company’s use of these services and facilities under a variety of intercompany agreements.

Item 3. Legal Proceedings

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

 

Item 4. Submission of Matters to a Vote of Security Holders

Omitted pursuant to General Instruction I(2)(c) of Form 10-K.

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PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(Dollar amounts in millions, unless otherwise stated)

There is no public trading market for the common stock of ING Life Insurance and Annuity Company (“ILIAC”). All of ILIAC’s outstanding common stock is owned by its parent, Lion Connecticut Holdings Inc. (“Lion” or “Parent”), a Connecticut holding and management company. All of the outstanding common stock of Lion is owned by ING America Insurance Holdings, Inc. (“ING AIH”), whose ultimate parent is ING Groep N.V. (“ING”).

ILIAC’s ability to pay dividends to its Parent is subject to the prior approval of insurance regulatory authorities of the State of Connecticut for payment of any dividend, which, when combined with other dividends paid within the preceding twelve months, exceeds the greater of (1) ten percent (10%) of ILIAC’s statutory surplus at the prior year end or (2) ILIAC’s prior year statutory net gain from operations.

During 2008, ILIAC did not pay any dividends to Lion. During 2007 and 2006, ILIAC paid $145.0 and $256.0, respectively, in dividends on its common stock to Lion.

During 2006, Lion contributed to ILIAC, Directed Services, Inc., which had $50.5 in equity on the date of contribution and was accounted for in a manner similar to a pooling-of-interests. During 2008, 2007, and 2006, ILIAC did not receive any cash capital contributions from Lion.

On November 12, 2008, ING issued to The State of the Netherlands (the “Dutch State”) non-voting Tier 1 securities for a total consideration of Euro 10 billion. On February 24, 2009, $2.2 billion was contributed to direct and indirect insurance company subsidiaries of ING AIH, of which $365.0 was contributed to the Company. The contribution was comprised of the proceeds from the investment by the Dutch State and the redistribution of currently existing capital within ING.

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Item 6. Selected Financial Data

(Dollar amounts in millions, unless otherwise stated)

ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES

3-YEAR SUMMARY OF SELECTED FINANCIAL DATA

The following selected financial data has been derived from the consolidated financial statements. The following selected financial data should be read in conjunction with "Management's Narrative Analysis of Results of Operations and Financial Condition" and the consolidated financial statements and notes thereto, which can be found under Part II, Item 7. and Item 8. contained herein.

			2008		2007		2006
CONSOLIDATED OPERATING RESULTS
Net investment income		$	1,083.7	$	1,054.7	$	1,029.7
Fee income			612.9		769.9		714.8
Premiums			46.9		46.8		37.5
Broker-dealer commission revenue			622.5		568.4		429.2
Net realized capital (losses) gains			(653.1)		(27.6)		3.0
Total revenue			1,734.2		2,432.5		2,229.9
Interest credited and other benefits to contractowners			1,432.4		802.8		783.7
Broker-dealer commission expense			622.5		568.4		429.2
Amortization of deferred policy acquisition
	costs and value of business acquired		128.9		129.2		21.3
Net (loss) income			(1,030.2)		218.4		301.8
CONSOLIDATED FINANCIAL POSITION
Total investments		$	17,884.5	$	17,898.4	$	19,010.5
Assets held in separate accounts			35,927.7		48,091.2		43,550.8
Total assets			60,489.9		71,639.8		68,482.3
Future policy benefits and claims reserves			20,782.1		18,569.1		19,984.1
Liabilities related to separate accounts			35,927.7		48,091.2		43,550.8
Total shareholder's equity			1,564.5		3,041.0		3,013.7
ASSETS UNDER MANAGEMENT AND
	ADMINISTRATION
Variable annuities		$	27,699.5	$	42,969.5	$	39,992.9
Fixed annuities			17,398.2		15,145.7		16,287.5
Plan sponsored and other			751.6		1,383.2		4,709.9
Total assets under management			45,849.3		59,498.4		60,990.3
Assets under administration			22,001.9		27,876.7		25,950.4
Total assets under management and administration		$	67,851.2	$	87,375.1	$	86,940.7

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Item 7. 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 consolidated results of operations of ING Life Insurance and Annuity Company (“ILIAC”) and its wholly-owned subsidiaries (collectively, the “Company”) for each of the three years ended December 31, 2008, 2007 and 2006, and financial condition as of December 31, 2008 and 2007. This item should be read in its entirety and in conjunction with the selected financial data, consolidated financial statements and related notes, and other supplemental data, which can be found under Part II, Item 6. and Item 8. contained herein.

Forward-Looking Information/Risk Factors

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

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

(1) The current financial crisis has reached unprecedented levels of market volatility and has adversely affected and may continue to adversely affect the Company’s business and results of operations;

(2) Continuing adverse financial market conditions may significantly affect the Company’s ability to meet liquidity needs, access to capital and cost of capital;

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

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

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(5) Regulatory initiatives intended to alleviate the current financial crisis that have been adopted may not be effective and, in any event, may be accompanied by other initiatives, including new capital requirements or other regulations, that could materially affect the Company’s results of operations, financial condition and liquidity;

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

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

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

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

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

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

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

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

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

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

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

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

(18) A failure of the Company’s operating systems or a compromise of security with respect to operating systems or portable electronic devices could adversely affect the Company’s results of operations and financial condition;

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

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

Investors are also directed to consider the risks and uncertainties discussed in Items 1A., 7., and 7A. contained herein, as well as in other documents filed by the Company with the SEC. Except as may be required by the federal securities laws, the Company disclaims any obligation to update forward-looking information.

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Basis of Presentation

ILIAC is a stock life insurance company domiciled in the state of Connecticut. ILIAC and its wholly-owned subsidiaries are providers of financial products and services in the United States. ILIAC is authorized to conduct its insurance business in all states and in the District of Columbia.

The consolidated financial statements include ILIAC and its wholly-owned subsidiaries, ING Financial Advisers, LLC (“IFA”) and Directed Services LLC (“DSL”). ILIAC is a direct, wholly-owned subsidiary of Lion Connecticut Holdings Inc. (“Lion” or “Parent”), which is an indirect, wholly-owned subsidiary of ING Groep N.V. (“ING”). ING is a global financial services holding company based in The Netherlands, with American Depository Shares listed on the New York Stock Exchange under the symbol “ING.”

On December 1, 2006, Lion contributed to ILIAC, Directed Services, Inc. (“DSI”), a New York corporation registered as a broker-dealer under the Securities Exchange Act of 1934 and as an investment advisor under the Investment Advisors Act of 1940, whose primary functions were the distribution of variable insurance products and investment advisory services for open-end mutual funds. Additionally, on December 12, 2006, ILIAC organized DSL as a wholly-owned Delaware limited liability company. On December 31, 2006, DSI merged with and into DSL and ceased to exist. Upon merger, the operations and broker-dealer and investment advisor registrations of DSI were consolidated into DSL, the surviving company. Effective January 1, 2007, ILIAC’s investment advisory agreement with certain variable funds offered in Company products was assigned to DSL.

On May 11, 2006, ILIAC organized Northfield Windsor LLC (“NWL”) as a wholly-owned subsidiary for the purpose of purchasing, constructing, developing, leasing, and managing a new corporate office facility to be located at One Orange Way, Windsor, Connecticut (the “Windsor Property”). Effective October 1, 2007, the principal executive office of ILIAC was changed to One Orange Way, Windsor, Connecticut.

On October 31, 2007, ILIAC’s subsidiary, NWL merged with and into ILIAC. As of the merger date, NWL ceased to exist, and ILIAC became the surviving corporation. The merger did not have an impact on ILIAC’s consolidated results of operations and financial position, as NWL was a wholly-owned subsidiary and already included in the consolidated financial statements for all periods presented since its formation.

The Company has one operating segment.

Critical Accounting Policies

General

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related footnotes. These estimates and assumptions are evaluated on an on-going basis based on historical developments,

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market conditions, industry trends, and other information that is reasonable under the circumstances. There can be no assurance that actual results will conform to estimates and assumptions, and that reported results of operations will not be materially adversely affected by the need to make future accounting adjustments to reflect changes in these estimates and assumptions from time to time.

The Company has identified the following estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability: reserves, income taxes, valuation of investments and other-than-temporary impairments, and amortization of DAC and value of business acquired (“VOBA”). In developing these estimates, management makes 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, management believes the amounts provided are appropriate based upon the facts available upon compilation of the consolidated financial statements.

Reserves

The Company records as liabilities reserves to meet the Company’s future obligations under its variable annuity and fixed annuity products.

Future policy benefits and claims reserves include reserves for deferred annuities and immediate annuities with and without life contingent payouts.

Reserves for individual and group deferred annuity investment contracts and individual immediate annuities without life contingent payouts are equal to cumulative deposits, less charges and withdrawals, plus credited interest thereon, net of adjustments for investment experience that the Company is entitled to reflect in future credited interest. Credited interest rates vary by product and range from 1.6% to 7.8% for the years 2008, 2007, and 2006. Certain reserves also may include net unrealized gains and losses related to investments and unamortized net realized gains and losses on investments for experience-rated contracts. Reserves on experience-rated contracts reflect the rights of contractowners, plan participants, and the Company. During 2008, the Company did not include net unrealized and unamortized realized losses associated with experience-rated contracts in Future policy benefits and claims reserves. Reserves for group immediate annuities without life contingent payouts are equal to the discounted value of the payment at the implied break-even rate. The net unrealized losses are reflected in Accumulated other comprehensive (loss) income, and the amortization of the unamortized realized losses has been recorded in Interest credited and other benefits to contractowners.

Reserves for individual immediate annuities with life contingent payout benefits are computed on the basis of assumed interest discount rates, mortality, and expenses, including a margin for adverse deviations. Such assumptions generally vary by annuity type plan, year of issue, and policy duration. For the years 2008, 2007, and 2006, reserve interest rates ranged from 5.3% to 5.9%.

The Company records reserves for product guarantees, which can be either assets or liabilities, for annuity contracts containing guaranteed credited rates. The guarantee is treated as an embedded derivative or a stand-alone derivative (depending on the underlying product) and is reported at fair value in accordance with Statement of Financial Accounting Standards (“FAS”) No. 133, “Accounting for Derivative

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Instruments and Hedging Activities” (“FAS 133”), FAS No. 97, “Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments” (“FAS 97”), and FAS No. 157, “Fair Value Measurements” (“FAS 157”). The adoption of FAS 157 did not have a significant impact on the valuation of these product guarantees.

The Company has a significant concentration of reinsurance arising from the disposition of its individual life insurance business. In 1998, the Company entered into an indemnity reinsurance arrangement with certain subsidiaries of Lincoln National Corporation (“Lincoln”). Effective March 1, 2007, the reinsurance agreements were assigned to a single subsidiary of Lincoln, and that subsidiary established a trust to secure its obligations to the Company under the reinsurance transaction. The Company includes an amount in Reinsurance recoverable on the Consolidated Balance Sheets, which equals the Company’s total individual life reserves. Individual life reserves are included in Future policy benefits and claims reserves of the Consolidated Balance Sheets.

Certain variable annuity contracts offer guaranteed minimum death benefits (“GMDB”). The GMDB is accrued in the event the customer’s account value at death is below the guaranteed value and is included in reserves. See Item I, Business, “Products and Services”, for a description of the GMDBs.

Income Taxes

Management uses certain assumptions and estimates in determining the income taxes payable or refundable for the current year, the deferred income tax liabilities and assets for items recognized differently in its financial statements from amounts shown on its income tax returns, and the federal income tax expense. Determining these amounts requires analysis and interpretation of current tax laws and regulations, including the loss limitation rules associated with change in control. Management exercises considerable judgment in evaluating the amount and timing of recognition of the resulting income tax liabilities and assets. These judgments and estimates are reevaluated on a continual basis as regulatory and business factors change.

Valuation of Investmentsand Other-Than-Temporary Impairments

All of the Company’s fixed maturities and equity securities are currently designated as available-for-sale. Available-for-sale securities are reported at fair value and unrealized capital gains (losses) on these securities are recorded directly in Shareholder’s equity, after adjustment, if required, for related changes in experience-rated contract allocations, DAC, VOBA, and deferred income taxes. The Company’s valuation methods for investments did not change with the adoption of FAS 157.

The fair values for the actively traded marketable fixed maturities are determined based upon the quoted market prices or dealer quotes. The fair values for marketable bonds without an active market are obtained through several commercial pricing services, which provide the estimated fair values. These services incorporate a variety of market observable information in their valuation techniques, including benchmark yields, broker-dealer quotes, credit quality, issuer spreads, bids, offers and other reference data. Valuations obtained from third party commercial pricing services are non-binding and are validated monthly through comparisons to internal pricing models, back testing to recent trades, and monitoring of trading volumes.

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

The fair values for certain collateralized mortgage obligations (“CMO-Bs”) are determined by taking the average of broker quotes when more than one broker quote is provided. A few of the CMO-Bs are priced by the originating broker due to the complexity and unique characteristics of the asset.

The fair values for actively traded equity securities are based on quoted market prices.

Mortgage loans on real estate are reported at amortized cost, less impairment write-downs. If the value of any mortgage loan is determined to be impaired (i.e., when it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement), the carrying value of the mortgage loan is reduced to the present value of expected cash flows from the loan, discounted at the loan’s effective interest rate, or fair value of the collateral. If the loan is in foreclosure, the carrying value is reduced to the fair value of the underlying collateral, net of estimated costs to obtain and sell. The carrying value of the impaired loans is reduced by establishing a permanent write-down recorded in Net realized capital gains (losses).

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

The fair values for short-term investments are based on quoted market prices.

Derivative instruments are reported at fair value primarily using the Company’s derivative accounting system. The system uses key financial data, such as yield curves, exchange rates, Standard and Poor’s (“S&P”) 500 Index prices, and London Inter Bank Offered Rates (“LIBOR”), which are obtained from third party sources and uploaded into the system. For those derivatives that are unable to be valued by the accounting system, the Company typically utilizes values established by third party brokers. Embedded derivative instruments are reported at fair value based upon internally established valuations that are consistent with external valuation models or market guidelines.

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between knowledgeable, unrelated willing parties. As such, the estimated fair value of a financial instrument may differ significantly from the amount that could be realized if the security was sold immediately.

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The Company’s accounting policy requires that a decline in the value of an investment below its amortized cost basis be assessed to determine if the decline is other-than-temporary. If so, the investment is deemed to be other-than-temporarily impaired, and a charge is recorded in Net realized capital gains (losses) equal to the difference between fair value and the amortized cost basis of the investment. The fair value of the other-than-temporarily impaired investment becomes its new cost basis.

The evaluation of other-than-temporary impairments included in the Company’s general account is a quantitative and qualitative process, which is subject to risks and uncertainties and is intended to determine whether declines in the fair value of investments should be recognized in current period earnings. The risks and uncertainties include the length of time and extent to which the fair value has been less than amortized cost, the issuer’s financial condition and near-term prospects, future economic conditions and market forecasts, and the Company’s intent and ability to retain the investment for a period of time sufficient to allow for recovery in fair value.

In addition, the Company invests in structured securities that meet the criteria of Emerging Issues Task Force (“EITF”) Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets” (“EITF 99-20”). Under EITF 99-20, a determination of the required impairment is based on the analysis discussed in the preceding paragraph, as well as credit risk and the possibility of significant prepayment risk that restricts the Company’s ability to recover the investment. An impairment is recognized if the fair value of the security is less than amortized cost and there has been an adverse change in cash flow since the last remeasurement date.

Amortization of Deferred Acquisition Costs and Value of Business Acquired

DAC represents policy acquisition costs that have been capitalized and are subject to amortization. Such costs consist principally of certain commissions, underwriting, contract issuance, and certain agency expenses, related to the production of new and renewal business.

VOBA represents the outstanding value of in force business capitalized in purchase accounting when the Company was acquired and is subject to amortization. The value is based on the present value of estimated net cash flows embedded in the Company’s contracts.

FAS 97 applies to universal life and investment-type products, such as fixed and variable deferred annuities. Under FAS 97, DAC and VOBA are amortized, with interest, over the life of the related contracts in relation to the present value of estimated future gross profits from investment, mortality, and expense margins, plus surrender charges.

Contractowners may periodically exchange one contract for another, or make modifications to an existing contract. Beginning January 1, 2007, these transactions are identified as internal replacements and are accounted for in accordance with Statement of Position (“SOP”) 05-1, “Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts” (“SOP 05-1”).

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Internal replacements that are determined to result in substantially unchanged contracts are accounted for as continuations of the replaced contracts. Any costs associated with the issuance of the new contracts are considered maintenance costs and expensed as incurred. Unamortized DAC and VOBA related to the replaced contracts continue to be deferred and amortized in connection with the new contracts, as follows:

§ For deferred annuities, the estimated future gross profits of the new contracts are treated as revisions to the estimated future gross profits of the replaced contracts in the determination of amortization.

§ As of January 1, 2007, internal replacements that are determined to result in contracts that are substantially changed are accounted for as extinguishments of the replaced contracts, and any unamortized DAC and VOBA related to the replaced contracts are written off to Amortization of deferred policy acquisition costs and value of business acquired in the Consolidated Statements of Operations.

Changes in assumptions can have a significant impact on DAC and VOBA balances and amortization rates. Several assumptions are considered significant in the estimation of future gross profits associated with variable universal life and variable deferred annuity products. One of the most significant assumptions involved in the estimation of future gross profits is the assumed return associated with the variable account performance. The overall return on the variable account is dependent on multiple factors, including the relative mix of the underlying sub-accounts among bond funds and equity funds, as well as equity sector weightings. Other significant assumptions include surrender and lapse rates, estimated interest spread, and estimated mortality.

Due to the relative size and sensitivity to minor changes in underlying assumptions of DAC and VOBA balances, the Company performs quarterly and annual analyses of DAC and VOBA for the annuity and life businesses, respectively. The DAC and VOBA balances are also evaluated for recoverability.

At each evaluation date, actual historical gross profits are reflected, and estimated future gross profits and related assumptions are evaluated for continued reasonableness. Any adjustment in estimated future gross profits requires that the amortization rate be revised (“unlocking”) retroactively to the date of the policy or contract issuance. The cumulative unlocking adjustment is recognized as a component of current period amortization. In general, sustained increases in investment, mortality, and expense margins, and thus estimated future profits, lower the rate of amortization. However, sustained decreases in investment, mortality, and expense margins, and thus estimated future gross profits, increase the rate of amortization.

For interest rate and equity sensitivity and related effects on DAC and VOBA, see Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

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Results of Operations

Overview

Products offered by the Company include qualified and nonqualified annuity contracts that include a variety of funding and payout options for individuals and employer-sponsored retirement plans qualified under Internal Revenue Code Sections 401, 403, 408, and 457, as well as nonqualified deferred compensation plans.

The Company derives its revenue mainly from (a) fee income generated from separate account assets supporting variable options under variable annuity contract investments, as designated by contractowners, (b) investment income earned on assets supporting fixed assets under management (“AUM”), mainly generated from annuity products with fixed investment options, and (c) certain other fees. The Company’s expenses primarily consist of (a) interest credited and other benefits to contractowners, (b) amortization of DAC and VOBA, (c) expenses related to the selling and servicing of the various products offered by the Company, and (d) other general business expenses. In addition, the Company collects broker-dealer commissions through its subsidiary DSL, which are, in turn, paid to broker-dealers and expensed.

Economic Analysis

The current economic environment presents challenges for the Company and the insurance industry. The Company’s sales and financial results continue to be affected by economic trends.

The credit and liquidity crisis caused turmoil in the financial markets during the second half of 2008 impacting short-term, LIBOR and U.S. Treasury rates. Although U.S. Treasury market rates declined during this period, the unrealized and realized losses on fixed maturities increased due to the continued widening of credit spreads that is driven by the higher perceived risk related to investment grade securities.

During the second half of 2008, short-term Treasury rates fell more than long-term rates. The rate declines were driven by investor “flight to quality”, which is the trend of investors selecting U.S. Treasuries as opposed to higher yielding, potentially riskier investments.

The credit crisis also negatively impacted equity markets, as investor confidence in the economy diminished. The Company’s fee revenue from variable AUM is generally affected by equity market performance. In addition, variable product demand often mirrors consumer demand for equity market investments. Poor equity market performance during 2008 unfavorably impacted AUM related to variable annuity products. In addition, the Company experienced higher realized and unrealized losses on equity securities.

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Year ended December31, 2008 compared to year ended December31, 2007

The Company’s results of operations for the year ended December 31, 2008, and changes therein, were impacted by higher realized capital losses and unfavorable product experience driven by poor equity market performance and lower variable AUM.

				YearsEndedDecember31,				$Increase	%Increase
				2008		2007		(Decrease)	(Decrease)
Revenues:
	Net investment income		$	1,083.7	$	1,054.7	$	29.0	2.7%
	Fee income			612.9		769.9		(157.0)	(20.4)%
	Premiums			46.9		46.8		0.1	0.2%
	Broker-dealer commission revenue			622.5		568.4		54.1	9.5%
	Net realized capital losses			(653.1)		(27.6)		(625.5)	NM
	Other income			21.3		20.3		1.0	4.9%
Total revenue				1,734.2		2,432.5		(698.3)	(28.7)%
Benefitsandexpenses:
	Interest credited and other
		benefits to contractowners		1,432.4		802.8		629.6	78.4%
	Operating expenses			687.5		652.2		35.3	5.4%
	Broker-dealer commission expense			622.5		568.4		54.1	9.5%
	Net amortization of deferred policy
		acquisition costs and value
		of business acquired		128.9		129.2		(0.3)	0.2%
	Interest expense			1.4		5.5		(4.1)	(74.5)%
Total benefits and expenses				2,872.7		2,158.1		714.6	33.1%
(Loss) income before income taxes				(1,138.5)		274.4		(1,412.9)	NM
Income tax (benefit) expense				(108.3)		56.0		(164.3)	NM
Net (loss) income			$	(1,030.2)	$	218.4	$	(1,248.6)	NM
Effective tax rate				9.5%		20.4%
NM - Not meaningful.

Revenues

Total revenue decreased for the year ended December 31, 2008, primarily reflecting higher Net realized capital losses and decreases in Fee income, partially offset by increases in Broker-dealer commission revenue and Net investment income.

The increase in Net realized capital losses for the year ended December 31, 2008, was primarily due to higher credit and intent related impairments of fixed maturities driven by the widening of credit spreads. In addition, the Company experienced losses on equity securities mainly due to the poor market performance and losses on interest rate swaps due to lower LIBOR rates in 2008.

Fee income decreased for the year ended December 31, 2008, as overall average variable AUM decreased, which was driven by poor equity market performance.

Broker-dealer commission revenue increased for the year ended December 31, 2008, due to higher sales of variable annuity products. The increase in commission revenue is offset by the increase in Broker-dealer commission expense.

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The increase in Net investment income for the year ended December 31, 2008, was mainly due to higher average fixed AUM.

Benefits and Expenses

Total benefits and expenses increased for the year ended December 31, 2008, primarily due to increases in Interest credited and other benefits to contractowners.

Interest credited and other benefits to contractowners increased for the year ended December 31, 2008, due to the amortization of realized losses associated with experience-rated contracts and higher reserves associated with minimum guarantees on variable annuities due to the widening of credit spreads during 2008.

Income Taxes

Income tax benefit expense increased for the year ended December 31, 2008, primarily due to lower income before taxes, favorable audit settlements offset by lower dividends received deduction and the establishment of a tax valuation allowance on capital losses.

Year ended December31, 2007 compared to year ended December31, 2006

The Company’s results of operations for the year ended December 31, 2007, and changes therein, were primarily impacted by net amortization of DAC and VOBA and operating expenses, partially offset by fee income resulting from higher average variable AUM and favorable net margins on average fixed AUM.

				YearsEndedDecember31,				$Increase	%Increase
				2007		2006		(Decrease)	(Decrease)
Revenues:
	Net investment income		$	1,054.7	$	1,029.7	$	25.0	2.4%
	Fee income			769.9		714.8		55.1	7.7%
	Premiums			46.8		37.5		9.3	24.8%
	Broker-dealer commission revenue			568.4		429.2		139.2	32.4%
	Net realized capital (losses) gains			(27.6)		3.0		(30.6)	NM
	Other income			20.3		15.7		4.6	29.3%
Total revenue				2,432.5		2,229.9		202.6	9.1%
Benefitsandexpenses:
	Interest credited and other
		benefits to contractowners		802.8		783.7		19.1	2.4%
	Operating expenses			652.2		568.3		83.9	14.8%
	Broker-dealer commission expense			568.4		429.2		139.2	32.4%
	Net amortization of deferred policy
		acquisition costs and value
		of business acquired		129.2		21.3		107.9	NM
	Interest expense			5.5		2.9		2.6	89.7%
Total benefits and expenses				2,158.1		1,805.4		352.7	19.5%
Income before income taxes				274.4		424.5		(150.1)	(35.4)%
Income tax expense				56.0		122.7		(66.7)	(54.4)%
Net income			$	218.4	$	301.8	$	(83.4)	(27.6)%
Effective tax rate				20.4%		28.9%
NM - Not meaningful.

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Revenues

Total revenue increased for the year ended December 31, 2007, primarily reflecting increases in Fee income and Net investment income and partially offset by an increase in Net realized capital losses and a decrease in Other income.

Fee income increased for the year ended December 31, 2007, as overall average variable AUM increased, driven by continuing increase in sales and favorable investment performance in variable product lines.

The increase in Net investment income for the year ended December 31, 2007, was mainly due to favorable yields on investments supporting average fixed AUM.

The increase in Premiums for the year ended December 31, 2007, was entirely offset by the Interest credited and other benefits to contractowners.

The increase in Net realized capital losses for the year ended December 31, 2007, was primarily due to realized losses on derivatives, primarily related to losses on interest rate swaps and the widening of credit spreads.

Benefits and Expenses

Total benefits and expenses increased for the year ended December 31, 2007, primarily due to increases in Net amortization of DAC and VOBA, Operating expenses, and Interest credited and other benefits to contractowners.

The increase in Net amortization of DAC and VOBA for the year ended December 31, 2007, was primarily driven by an increase in actual gross profits related to higher fee income and fixed margins in 2007. In addition, amortization for the year ended December 31, 2006 was lower due to favorable unlocking, as a result of prospective expense assumption changes.

Operating expenses for the year ended December 31, 2007 increased in conjunction with the growth of the business and were primarily driven by higher operating expenses and commissions. The increase in commissions was due to higher renewal premiums and higher average variable AUM.

Interest credited and other benefits to contractowners increased for the year ended December 31, 2007, primarily driven by the increase in reserves associated with minimum guarantees on variable annuities due to the widening of credit spreads in the fourth quarter of 2007.

Income Taxes

Income tax expense decreased for the year ended December 31, 2007, primarily due to the audit settlement with the State of Connecticut, dividends received deduction, and lower income before taxes.

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Financial Condition

Investments

Investment Strategy

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

The Company’s general account invests primarily in fixed maturity investments, including publicly issued bonds (including government bonds), privately placed notes and bonds, mortgage-backed securities, and asset-backed securities. The primary investment strategy is to optimize the risk-adjusted return through superior asset selection predicated on a developed relative value approach, credit research and monitoring, superior management of interest rate risk, and active exploration into new investment product opportunities. Investments are purchased when market returns, adjusted for risk and expenses, are sufficient to profitably support growth of the liability block of business. In addition, assets and liabilities are analyzed and reported for internal management purposes on an option-adjusted basis. The level of required capital of given transactions is a primary factor in determining relative value among different investment and liability alternatives, within the scope of each product type’s objective. An active review of existing holdings identifies specific assets that could be effectively traded in order to enhance the risk-adjusted returns of the portfolio, while minimizing adverse tax and accounting impacts. The Company strives to maintain a portfolio weighted average asset quality rating of A, based on S&P ratings classifications. The weighted average excludes mortgage loans, but includes mortgage-backed securities which are reported with bonds.

The Company uses derivatives for hedging purposes to reduce the Company’s exposure to cash flow variability of assets and liabilities, interest rate risk, credit risk, and market risk. In addition, the Company uses credit default swaps to reduce the credit loss exposure with respect to certain assets that the Company owns, or to assume credit exposure to certain assets that the Company does not own. These credit default swaps are similar in credit risk to bonds of the named issuer and allow the Company to gain access to a broader, more diversified pool of credit risks. See “Liquidity and Capital Resources - Derivatives” for further discussion of the Company’s use of derivatives.

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Portfolio Composition

The following table presents the investment portfolio at December 31, 2008 and 2007.

			2008			2007
			CarryingValue	%		CarryingValue	%
Fixed maturities, available-for-sale,
	including securities pledged	$	14,477.6	81.0%	$	14,250.4	79.6%
Equity securities, available-for-sale			240.3	1.3%		446.4	2.5%
Mortgage loans on real estate			2,107.8	11.8%		2,089.4	11.7%
Policy loans			267.8	1.5%		273.4	1.5%
Other investments			791.0	4.4%		838.8	4.7%
Total investments		$	17,884.5	100.0%	$	17,898.4	100.0%

Fixed Maturities

Fixed maturities, available-for-sale, were as follows as of December 31, 2008.

					Gross		Gross
					Unrealized		Unrealized
			Amortized		Capital		Capital		Fair
			Cost		Gains		Losses		Value
Fixed maturities:
	U.S. Treasuries		$	1,391.4	$	84.5	$	0.9	$	1,475.0
	U.S. government agencies and authorities			797.1		77.2		1.2		873.1
	State, municipalities, and political subdivisions			72.9		0.3		17.7		55.5
	U.S. corporate securities:
		Public utilities		1,112.4		4.4		117.6		999.2
		Other corporate securities		3,986.2		85.6		436.6		3,635.2
	Total U.S. corporate securities			5,098.6		90.0		554.2		4,634.4
	Foreign securities(1):
		Government		397.8		4.3		61.4		340.7
		Other		2,188.5		27.0		274.0		1,941.5
	Total foreign securities			2,586.3		31.3		335.4		2,282.2
	Residential mortgage-backed securities			3,412.6		153.6		266.7		3,299.5
	Commercial mortgage-backed securities			1,604.0		0.1		370.5		1,233.6
	Other asset-backed securities			830.2		9.0		214.9		624.3
	Total fixed maturities, including
		fixed maturities pledged		15,793.1		446.0		1,761.5		14,477.6
	Less: fixed maturities pledged			1,160.5		72.7		7.8		1,225.4
Total fixed maturities			$	14,632.6	$	373.3	$	1,753.7	$	13,252.2
(1) Primarily U.S. dollar denominated.

39

Fixed maturities, available-for-sale, were as follows as of December 31, 2007.

					Gross		Gross
					Unrealized		Unrealized
			Amortized		Capital		Capital		Fair
			Cost		Gains		Losses		Value
Fixed maturities:
	U.S. Treasuries		$	11.2	$	0.7	$	-	$	11.9
	U.S. government agencies and authorities			0.6		-		-		0.6
	State, municipalities, and political subdivisions			66.1		0.1		2.2		64.0
	U.S. corporate securities:
		Public utilities		1,049.1		10.8		15.6		1,044.3
		Other corporate securities		3,855.1		46.1		65.2		3,836.0
	Total U.S. corporate securities			4,904.2		56.9		80.8		4,880.3
	Foreign securities(1):
		Government		379.3		17.1		6.6		389.8
		Other		1,955.8		29.9		40.3		1,945.4
	Total foreign securities			2,335.1		47.0		46.9		2,335.2
	Residential mortgage-backed securities			4,146.1		101.8		63.5		4,184.4
	Commercial mortgage-backed securities			1,927.3		10.7		52.3		1,885.7
	Other asset-backed securities			924.3		5.5		41.5		888.3
	Total fixed maturities, including
		fixed maturities pledged		14,314.9		222.7		287.2		14,250.4
	Less: fixed maturities pledged			940.2		8.0		14.1		934.1
Total fixed maturities			$	13,374.7	$	214.7	$	273.1	$	13,316.3
(1) Primarily U.S. dollar denominated.

At December 31, 2008 and 2007, the Company’s carrying value of fixed maturities, available-for-sale, including securities pledged to creditors, (hereinafter referred to as “total fixed maturities”) represented 81.0% and 79.6%, respectively, of the total general account invested assets. For the same periods, $10,529.3 or 72.7% of total fixed maturities, and $10,179.9, or 71.4% of total fixed maturities, respectively, supported experience-rated products.

It is management’s objective that the portfolio of fixed maturities be of high quality and be well diversified by market sector. The fixed maturities in the Company’s portfolio are generally rated by external rating agencies and, if not externally rated, are rated by the Company on a basis believed to be similar to that used by the rating agencies. At December 31, 2008 and 2007, the average qualify rating of the Company’s fixed maturities portfolio was AA-. Ratings are calculated using a rating hierarchy that considers S&P, Moody’s Investors Service, Inc. (“Moody’s”), and internal ratings.

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Total fixed maturities, including securities pledged to creditors, by quality rating category were as follows at December 31, 2008 and 2007.

		2008			2007
		Fair	%of		Fair	%of
		Value	Total		Value	Total
AAA	$	7,140.9	49.3%	$	6,446.7	45.3%
AA		718.3	5.0%		956.4	6.7%
A		2,420.9	16.7%		2,114.4	14.8%
BBB		3,609.0	24.9%		3,932.9	27.6%
BB		403.6	2.8%		591.0	4.1%
B and below		184.9	1.3%		209.0	1.5%
Total	$	14,477.6	100.0%	$	14,250.4	100.0%

95.9% and 94.4% of fixed maturities were invested in securities rated BBB and above (Investment Grade) at December 31, 2008 and 2007, respectively. From December 31, 2008 through February 28, 2009, the percentage of the Company’s investment grade fixed maturities decreased from 95.9% to 94.7%, while the below investment grade fixed maturities increased from 4.1% to 5.3%.

Fixed maturities rated BB and below (Below Investment Grade) may have speculative characteristics, and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity of the issuer to make principal and interest payments than is the case with higher rated fixed maturities.

Total fixed maturities by market sector, including securities pledged to creditors, were as follows at December 31, 2008 and 2007.

		2008			2007
		Fair	%of		Fair	%of
		Value	Total		Value	Total
U.S. Treasuries	$	1,475.0	10.2%	$	11.9	0.1%
U.S. government agencies and authorities		873.1	6.0%		0.6	0.0%
U.S. corporate, state, and municipalities		4,689.9	32.4%		4,944.3	34.7%
Foreign		2,282.2	15.8%		2,335.2	16.4%
Residential mortgage-backed		3,299.5	22.8%		4,184.4	29.4%
Commercial mortgage-backed		1,233.6	8.5%		1,885.7	13.2%
Other asset-backed		624.3	4.3%		888.3	6.2%
Total	$	14,477.6	100.0%	$	14,250.4	100.0%

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The amortized cost and fair value of fixed maturities as of December 31, 2008, are shown below by contractual maturity. Actual maturities may differ from contractual maturities as securities may be restructured, called, or prepaid.

			Amortized		Fair
			Cost		Value
Due to mature:
	One year or less	$	273.3	$	271.5
	After one year through five years		3,751.8		3,576.2
	After five years through ten years		3,546.6		3,344.4
	After ten years		2,374.6		2,128.1
	Mortgage-backed securities		5,016.6		4,533.1
	Other asset-backed securities		830.2		624.3
Less: securities pledged to creditors			1,160.5		1,225.4
Fixed maturities, excluding securities pledged to creditors		$	14,632.6	$	13,252.2

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 10.0% of the Company’s shareholder’s equity at December 31, 2008 or 2007.

At December 31, 2008 and 2007, fixed maturities with fair values of $14.2 and $13.9, respectively, were on deposit as required by regulatory authorities.

The Company invest in various categories of collateralized mortgage obligations (“CMOs”) that are subject to different degrees of risk from changes in interest rates and, for CMOs that are not agency-backed, defaults. The principal risks inherent in holding CMOs are prepayment and extension risks related to dramatic decreases and increases in interest rates resulting in the prepayment of principal from the underlying mortgages, either earlier or later than originally anticipated. At December 31, 2008 and 2007, approximately 13.0% and 11.3%, respectively, of the Company’s CMO holdings were invested in those types of CMOs which are subject to more prepayment and extension risk than traditional CMOs, such as interest-only or principal-only strips.

Equity Securities

Equity securities, available-for-sale, included investments with fair values of $141.0 and $279.5 in ING proprietary funds as of December 31, 2008 and 2007, respectively.

Subprime and Alt-A Mortgage Exposure

Since the third quarter of 2007, credit markets have become more turbulent amid concerns about subprime and Alt-A mortgages and collateralized debt obligations (“CDOs”). This in turn has resulted in a general widening of credit spreads, reduced price transparency, reduced liquidity, increased rating agency downgrades and increased volatility across certain markets.

The Company does not originate or purchase subprime or Alt-A whole-loan mortgages. The Company does have exposure to Residential Mortgage-Backed Securities (“RMBS”) and asset-backed securities (“ABS”). Subprime lending is the origination of loans to customers with weaker credit profiles. The Company defines Alt-A Loans to include residential mortgage loans to customers who have strong

42

credit profiles but lack some element(s), such as documentation to substantiate income. Commencing in the fourth quarter of 2007, the Company expanded its definition of Alt-A loans to include 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. Further, during the fourth quarter of 2007, the industry coalesced around classifying any securities backed by residential mortgage collateral not clearly identifiable as prime or subprime into the Alt-A category, and the Company is following that lead. The following summarizes the Company’s exposure to subprime and Alt-A mortgages as of December 31, 2008 and 2007.

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

The Company’s exposure to subprime mortgages was primarily in the form of ABS structures collateralized by subprime residential mortgages, and the majority of these holdings were included in other asset-backed securities in the fixed maturities by market sector table above. As of December 31, 2008, the fair value and gross unrealized losses related to the Company’s exposure to subprime mortgages were $249.1 and $114.5, respectively, representing 1.7% of total fixed maturities. As of December 31, 2007, the fair value and gross unrealized losses related to the Company’s exposure to subprime mortgages were $410.2 and $32.9, respectively, representing 2.9% of total fixed maturities.

The following tables summarize the Company’s exposure to subprime mortgage-backed holdings by credit quality and vintage year as of December 31, 2008 and 2007:

2008				2007
%ofTotalSubprime				%ofTotalSubprime
Mortgage-backed				Mortgage-backed
Securities		Vintage		Securities		Vintage
AAA	57.8%	2008	0.3%	AAA	68.9%	2007	35.7%
AA	31.5%	2007	23.6%	AA	26.6%	2006	14.8%
A	4.2%	2006	23.3%	A	4.2%	2005 and prior	49.5%
BBB	6.1%	2005 and prior	52.8%	BBB	0.2%		100.0%
BB and below	0.4%		100.0%	BB and below	0.1%
	100.0%				100.0%

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The Company’s exposure to Alt-A mortgages was included in residential mortgage-backed securities in the fixed maturities by market sector table above. As of December 31, 2008, the fair value and gross unrealized losses aggregated to $750.6 and $24.5, respectively, representing 5.2% of total fixed maturities. As of December 31, 2007, the fair value and gross unrealized losses related to the Company’s exposure to Alt-A mortgages were $1.3 billion and $38.1, respectively, representing 8.9% of total fixed maturities.

The following tables summarize the Company’s exposure to Alt-A mortgage-backed holdings by credit quality and vintage year as of December 31, 2008 and 2007:

2008				2007
%ofTotalAlt-A				%ofTotalAlt-A
Mortgage-backed				Mortgage-backed
Securities		Vintage		Securities		Vintage
AAA	87.4%	2007	9.9%	AAA	99.9%	2007	28.4%
AA	2.4%	2006	27.4%	AA	0.1%	2006	12.9%
A	3.2%	2005 and prior	62.7%		100.0%	2005 and prior	58.7%
BBB	0.2%		100.0%				100.0%
BB and below	6.8%
	100.0%

Transfer of Alt-A RMBS Participation Interest

On January 26, 2009, ING announced it reached an agreement, for itself and on behalf of certain ING affiliates including the Company, with the Dutch State on an Illiquid Assets Back-up Facility (the “Back-up Facility”) covering 80% of ING’s Alt-A residential mortgage-backed securities (“Alt-A RMBS”). Under the terms of the Back-up Facility, a full credit risk transfer to the Dutch State will be realized on 80% of ING’s Alt-A RMBS owned by ING Bank, FSB and ING affiliates within ING Insurance Americas with a book value of $36.0 billion portfolio, including book value of $775.1 of the Alt-A RMBS portfolio owned by the Company (with respect to the Company’s portfolio, the “Designated Securities Portfolio”) (the “ING-Dutch State Transaction”). As a result of the risk transfer, the Dutch State will participate in 80% of any results of the ING Alt-A RMBS portfolio. The risk transfer to the Dutch State will take place at a discount of approximately 10% of par value. In addition, under the Back-up Facility, other fees will be paid both by the Company and the Dutch State. Each ING company participating in the ING-Dutch State Transaction, including the Company will remain the legal owner of 100% of its Alt-A RMBS portfolio and will remain exposed to 20% of any results on the portfolio. Subject to documentation and regulatory approvals, the ING-Dutch State Transaction is expected to close by the end of March 2009, with the affiliate participation conveyance and risk transfer to the Dutch State described in the succeeding paragraph to take effect as of January 26, 2009.

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In order to implement that portion of the ING-Dutch State Transaction related to the Company’s Designated Securities Portfolio, the Company will enter into a participation agreement with its affiliates, ING Support Holding B.V. (“ING Support Holding”) and ING pursuant to which the Company will convey to ING Support Holding an 80% participation interest in its Designated Securities Portfolio and pay a periodic transaction fee, and will receive, as consideration for the participation, an assignment by ING Support Holding of its right to receive payments from the Dutch State under the Illiquid Assets Back-Up Facility related to the Company’s Designated Securities Portfolio among, ING, ING Support Holding and the Dutch State (the “Company Back-Up Facility”). Under the Company Back-Up Facility, the Dutch State will be obligated to pay certain periodic fees and make certain periodic payments with respect to the Company’s Designated Securities Portfolio, and ING Support Holding will be obligated to pay a periodic guarantee fee and make periodic payments to the Dutch State equal to the distributions it receives with respect to the 80% participation interest in the Company’s Designated Securities Portfolio.

In a second transaction, known as the Step 1 Cash Transfer, a portion of the Company’s Alt-A RMBS which has a book value of $4.2 will be sold for cash to an affiliate, Lion II Custom Investments LLC (“Lion II”). Immediately thereafter, Lion II will sell to ING Direct Bancorp the purchased securities (the “Step 2 Cash Transfer”). Contemporaneous with the Step 2 Cash Transfer, ING Direct Bancorp will include such purchased securities as part of its Alt-A RMBS portfolio sale to the Dutch State. Subject to documentation and regulatory approval, the Step 1 Cash Transfer is expected to close by the end of March 2009 contemporaneous with the closing of the ING-Dutch State Transaction.

Since the Company had the intent to sell a portion of its Alt-A RMBS through the 80% participation interest in its Designated Securities Portfolio or as part of the Step 1 Cash Transfer as of December 31, 2008, the Company recognized $253.2 in other-than-temporary impairments with respect to the 80% participation interest in its Designated Securities Portfolio that it expects to convey as part of the ING-Dutch State Transaction and the Step 1 Cash Transfer. The Company expects to recognize a gain in the estimated range of $220.0 to $240.0 upon the closing of the ING-Dutch State Transaction and the Step 1 Cash Transfer.

Commercial Mortgage-backed and Other Asset-backed Securities

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

As of December 31, 2008 and 2007, the fair value of the Company’s commercial mortgage-backed securities (“CMBS”) totaled $1.2 billion and $1.9 billion, respectively, and other ABS, excluding subprime exposure, totaled $372.2 and $512.8, respectively. CMBS investments represent pools of commercial mortgages that are broadly diversified across property types and geographical areas.

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As of December 31, 2008, the other ABS was also broadly diversified both by type and issuer with credit card receivables, automobile receivables, public utility, and collateralized loan obligations comprising 29.3%, 17.2%, 28.6% and 9.2%, respectively, of total other ABS, excluding subprime exposure. As of December 31, 2007, the other ABS was broadly diversified by both type and issuer with credit card receivables, automobile receivables, public utility, and collateralized loan obligations comprising 34.5%, 18.8%, 17.6%, and 13.3%, respectively, of total other ABS, excluding subprime exposure.

The following tables summarize the Company’s exposure to CMBS holdings, excluding subprime exposure, by credit quality and vintage year as of December 31, 2008 and 2007:

2008				2007
%ofTotalCMBS		Vintage		%ofTotalCMBS		Vintage
AAA	94.9%	2008	0.3%	AAA	84.1%	2007	25.4%
AA	3.1%	2007	19.8%	AA	9.3%	2006	11.5%
A	1.9%	2006	16.7%	A	6.4%	2005 and prior	63.1%
BBB	0.1%	2005 and prior	63.2%	BBB	0.2%		100.0%
	100.0%		100.0%		100.0%

The following tables summarize the Company’s exposure to Other ABS holdings by credit quality and vintage year as of December 31, 2008 and 2007:

2008				2007
%ofTotalOtherABS		Vintage		%ofTotalOtherABS		Vintage
AAA	61.7%	2008	5.4%	AAA	60.1%	2007	26.2%
AA	17.1%	2007	14.3%	AA	5.8%	2006	12.9%
A	8.4%	2006	23.8%	A	16.8%	2005 and prior	60.9%
BBB	12.6%	2005 and prior	56.5%	BBB	16.7%		100.0%
BB and below	0.2%		100.0%	BB and below	0.6%
	100.0%				100.0%

Mortgage Loans on Real Estate

Mortgage loans on real estate, primarily commercial mortgage loans, totaled $2,107.8 and $2,089.4 at December 31, 2008 and 2007, respectively. These loans are reported at amortized cost, less impairment write-downs. If the value of any mortgage loan is determined to be impaired (i.e., when it is probable that the Company will be unable to collect on all amounts due according to the contractual terms of the loan agreement), the carrying value of the mortgage loan is reduced to either the present value of expected cash flows from the loan, discounted at the loan’s effective interest rate, or fair value of the collateral. If the loan is in foreclosure, the carrying value is reduced to the fair value of the underlying collateral, net of estimated costs to obtain and sell. The carrying value of the impaired loans is reduced by establishing a permanent write-down charged to Net realized capital gains (losses). At December 31, 2008 and 2007, the Company had no allowance for mortgage loan credit losses. The properties collateralizing mortgage loans are geographically dispersed throughout the United States, with the largest concentration of 15.5% and 16.8% and of properties in California at December 31, 2008 and 2007, respectively.

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Unrealized Capital Losses

Unrealized capital losses related to fixed maturities are analyzed in detail in the following tables.

Unrealized capital losses in fixed maturities, including securities pledged to creditors, for Investment Grade (“IG”) and Below Investment Grade (“BIG”) securities by duration were as follows at December 31, 2008 and 2007.

			2008						2007
				%ofIG			%ofIG			%ofIG			%ofIG
			IG	andBIG		BIG	andBIG		IG	andBIG		BIG	andBIG
Less than six
	months below
	amortized cost	$	169.3	9.6%	$	40.2	2.3%	$	44.8	15.7%	$	4.1	1.4%
More than six
	months and less
	than twelve months
	below amortized cost		511.9	29.1%		58.3	3.3%		119.5	41.6%		11.8	4.1%
More than twelve
	months below
	amortized cost		921.5	52.3%		60.3	3.4%		102.0	35.5%		5.0	1.7%
Total unrealized capital loss		$	1,602.7	91.0%	$	158.8	9.0%	$	266.3	92.8%	$	20.9	7.2%

Unrealized capital losses in fixed maturities at December 31, 2008 and 2007, were primarily related to the effects of interest rate movement or spread widening on mortgage and other asset-backed securities. Mortgage and other asset-backed securities include U.S. government-backed securities, principal protected securities, and structured securities, which did not have an adverse change in cash flows. The following tables summarize the unrealized capital losses by duration and reason, along with the fair value of fixed maturities, including securities pledged to creditors, in unrealized capital loss positions at December 31, 2008 and 2007.

					Morethan
					SixMonths
			Lessthan		andlessthan		Morethan
			SixMonths		TwelveMonths		TwelveMonths		Total
			Below		Below		Below		Unrealized
			Amortized		Amortized		Amortized		Capital
2008			Cost		Cost		Cost		Loss
Interest rate or spread widening		$	144.2	$	381.7	$	383.5	$	909.4
Mortgage and other asset-backed
	securities		65.3		188.5		598.3		852.1
Total unrealized capital loss		$	209.5	$	570.2	$	981.8	$	1,761.5
Fair value		$	2,999.6	$	3,446.7	$	2,964.2	$	9,410.5
2007
Interest rate or spread widening		$	18.8	$	62.3	$	48.8	$	129.9
Mortgage and other asset-backed
	securities		30.1		69.0		58.2		157.3
Total unrealized capital loss		$	48.9	$	131.3	$	107.0	$	287.2
Fair value		$	2,256.2	$	2,217.7	$	3,612.1	$	8,086.0

47

Unrealized capital losses in fixed maturities, including securities pledged to creditors, by market sector and duration were as follows at December 31, 2008 and 2007.

					Morethan
			Lessthan		SixMonths		Morethan
			SixMonths		andlessthan		TwelveMonths		Total
			Below		TwelveMonths		Below		Unrealized
			Amortized		BelowAmortized		Amortized		Capital
2008			Cost		Cost		Cost		Loss
U.S. Treasury		$	0.9	$	-	$	-	$	0.9
U.S. government agencies
	and authorities		0.5		0.7		-		1.2
U.S. corporate, state, and
	municipalities		92.2		244.1		235.6		571.9
Foreign			50.6		136.9		147.9		335.4
Residential mortgage-backed			48.7		94.0		124.0		266.7
Commercial mortgage-backed			2.9		69.5		298.1		370.5
Other asset-backed			13.7		25.0		176.2		214.9
Total unrealized capital loss		$	209.5	$	570.2	$	981.8	$	1,761.5
2007
U.S. corporate, state, and
	municipalities	$	10.7	$	40.7	$	31.6	$	83.0
Foreign			8.1		21.6		17.2		46.9
Residential mortgage-backed			17.3		18.2		28.0		63.5
Commercial mortgage-backed			4.2		33.4		14.7		52.3
Other asset-backed			8.6		17.4		15.5		41.5
Total unrealized capital loss		$	48.9	$	131.3	$	107.0	$	287.2

Of the unrealized capital losses aged more than twelve months, the average market value of the related fixed maturities was 79.2% of the average book value as of December 31, 2008. In addition, this category includes 1,243 securities, which have an average quality rating of AA-. No other-than-temporary impairment loss was considered necessary for these fixed maturities as of December 31, 2008.

Unrealized capital losses in fixed maturities, including securities pledged to creditors, for instances in which fair value declined below amortized cost by greater than or less than 20% were as follows for December 31, 2008 and 2007.

			AmortizedCost				UnrealizedCapitalLoss			NumberofSecurities
			<20%		>20%		<20%		>20%	<20%	>20%
2008
Less than six months below
	amortized cost	$	2,860.5	$	348.6	$	118.7	$	90.8	845	303
More than six months and
	less than twelve months
	below amortized cost		2,618.0		1,398.9		199.5		370.7	791	618
More than twelve months
	below amortized cost		1,541.4		2,404.6		141.8		840.0	412	831
Total		$	7,019.9	$	4,152.1	$	460.0	$	1,301.5	2,048	1,752

48

2007
Less than six months below
	amortized cost	$	2,287.2	$	17.9	$	44.3	$	4.6	734	6
More than six months and
	less than twelve months
	below amortized cost		2,276.3		72.7		116.2		15.1	1,011	43
More than twelve months
	below amortized cost		3,682.0		37.1		96.7		10.3	737	24
Total		$	8,245.5	$	127.7	$	257.2	$	30.0	2,482	73

Unrealized capital losses in fixed maturities, including securities pledged to creditors, by market sector for instances in which fair value decline below amortized cost by greater than or less than 20% were as follows for December 31, 2008 and 2007.

			AmortizedCost				UnrealizedCapitalLoss			NumberofSecurities
			<20%		>20%		<20%		>20%	<20%	>20%
2008
U.S. Treasuries		$	483.7	$	-	$	0.9	$	-	15	-
U.S. government agencies and
	authorities		13.9		-		1.2		-	16	-
U.S. corporate, state and
	municipalities		2,659.4		1,305.4		178.9		393.0	1,004	801
Foreign			1,392.8		785.3		102.6		232.8	572	572
Residential mortgage-backed			1,612.3		576.0		100.5		166.3	252	109
Commercial mortgage-backed			533.9		1,030.3		51.0		319.5	93	129
Other asset-backed			323.9		455.1		25.0		189.9	96	141
Total		$	7,019.9	$	4,152.1	$	460.1	$	1,301.5	2,048	1,752
2007
U.S. corporate, state, and
	municipalities	$	2,670.1	$	10.8	$	81.1	$	1.9	1,179	5
Foreign			1,158.3		39.5		39.5		7.4	586	41
Residential mortgage-backed			2,441.5		20.4		58.2		5.3	344	5
Commercial mortgage-backed			1,230.8		16.1		49.4		2.9	168	4
Other asset-backed			744.8		40.9		29.0		12.5	205	18
Total		$	8,245.5	$	127.7	$	257.2	$	30.0	2,482	73

For 2008, unrealized capital losses on fixed maturities increased by $1.5 billion due to widening of credit spreads.

At December 31, 2008 and 2007, the Company held 8 and 0 fixed maturities, respectively, with unrealized capital losses in excess of $10 million. The unrealized capital losses on these fixed maturities equaled $206.3, or 11.7% of the total unrealized capital losses, as of December 31, 2008. At December 31, 2007, there were no unrealized capital losses on these fixed maturities in excess of $10 million. No other-than-temporary impairment loss was considered necessary for these fixed maturities as of December 31, 2008. The value of the Company’s fixed maturities declined $534.2, before tax and DAC, from December 31, 2008 through February 28, 2009, due to further widening of credit spreads. This decline in fair value includes $81.7 related to the Company’s investments in CMBS.

49

Other-Than-Temporary Impairments

The Company analyzes the general account investments to determine whether there has been an other-than-temporary decline in fair value below the amortized cost basis. Management considers the length of time and the extent to which the fair value has been less than amortized cost, the issuer’s financial condition and near-term prospects, future economic conditions and market forecasts, interest rate changes, and the Company’s intent to retain the investment for a period of time sufficient to allow for recovery in fair value. If it is probable that all amounts due according to the contractual terms of an investment will not be collected, an other-than-temporary impairment is considered to have occurred.

In addition, the Company invests in asset-backed securities. Determination of the required impairment is based on the analysis discussed in the preceding paragraph, as well as credit risk and the possibility of significant prepayment risk that restricts the Company’s ability to recover the investment. An impairment is recognized if the fair value of the security is less than book value and there has been an adverse change in cash flow since the last remeasurement date.

When a decline in fair value is determined to be other-than-temporary, the individual security is written down to fair value, and the loss is recorded in Net realized capital gains (losses).

The following table identifies the Company’s other-than-temporary impairments by type for the years ended December 31, 2008, 2007, and 2006.

		2008			2007			2006
			No.of			No.of			No.of
		Impairment	Securities		Impairment	Securities		Impairment	Securities
U.S. Treasuries	$	-	-	$	-	-	$	6.4	4
U.S. corporate		283.2	233		36.3	113		24.4	67
Foreign		108.9	94		19.1	54		4.2	10
Residential mortgage-backed		349.3	194		7.1	30		16.6	76
Other asset-backed		245.6	64		10.5	21		7.0	1
Equity securities		55.1	17		-	-		0.1	3
Limited partnerships		6.6	6		3.0	1		-	-
Mortgage loans on real estate		3.8	1		-	-		-	-
Total	$	1,052.5	609	$	76.0	219	$	58.7	161

The above schedule includes $235.8, $16.4, and $16.1, for the years ended December 31, 2008, 2007, and 2006, respectively, in other-than-temporary write-downs related to the analysis of credit-risk and the possibility of significant prepayment risk. The remaining $816.7, $59.6, and $42.6, in write-downs for the years ended December 31, 2008, 2007, and 2006, respectively, are related to investments that the Company does not have the intent to retain for a period of time sufficient to allow for recovery in fair value. The following table summarizes these write-downs recognized by type for the years ended December 31, 2008, 2007, and 2006.

50

The following table summarizes these write-downs recognized by type for the years ended December 31, 2008, 2007, and 2006.

		2008			2007			2006
			No.of			No.of			No.of
		Impairment	Securities		Impairment	Securities		Impairment	Securities
U.S. Treasuries	$	-	-	$	-	-	$	6.4	4
U.S. corporate		204.5	180		31.6	102		24.4	67
Foreign		81.3	78		19.1	54		4.2	10
Residential mortgage-backed		291.8	128		2.6	2		0.6	1
Other asset-backed		239.1	43		6.3	16		7.0	1
Total	$	816.7	429	$	59.6	174	$	42.6	83

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.

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 other-than-temporary impairment of investments and changes in fair value of derivatives. The cost of the investments on disposal is determined based on specific identification of securities. Net realized capital gains (losses) on investments were as follows for the years ended December 31, 2008, 2007, and 2006.

		2008		2007		2006
Fixed maturities, available-for-sale	$	(990.8)	$	(50.3)	$	(67.0)
Equity securities, available-for-sale		(81.0)		6.4		9.3
Derivatives		(187.0)		(123.0)		(3.9)
Other		(18.7)		(2.6)		-
Less: allocation to experience-rated contracts		624.4		141.9		64.6
Net realized capital (losses) gains	$	(653.1)	$	(27.6)	$	3.0
After-tax net realized capital (losses) gains	$	(424.5)	$	(17.9)	$	2.0

The increase in Net realized capital losses for the year ended December 31, 2008, was primarily due to higher credit and intent related impairments of fixed maturities driven by the widening of credit spreads. In addition, the Company experienced losses on equity securities mainly due to the poor market performance and losses on interest rate swaps due to lower LIBOR rates in 2008.

Net realized capital gains (losses) allocated to experience-rated contracts are deducted from Net realized capital gains (losses) and an offsetting amount was reflected in Future policy benefits and claims reserves on the Consolidated Balance Sheets. During 2008, as a result of the current economic environment, which resulted in significant realized losses associated with experience-rated contracts, the Company accelerated amortization of realized losses rather than reflecting these losses in Future policy benefits and claims reserves. During 2008, the Company fully amortized $624.4 of net unamortized realized capital losses allocated to experience-rated contractowners, which are reflected in Interest credited and other benefits to contractowners in the Consolidated Statements of Operations. Net unamortized realized capital gains allocated to experienced-rated contractowners were $53.8 and $164.5 at December 31, 2007 and 2006, respectively, and were reflected in Future policy benefits and claims reserves.

51

Liquidity and Capital Resources

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

Sources and Uses of Liquidity

The Company’s principal sources of liquidity are product charges, investment income, premiums, proceeds from the maturity and sale of investments, and capital contributions. Primary uses of these funds are payments of commissions and operating expenses, interest credits, investment purchases, and contract maturities, withdrawals, and surrenders.

The Company’s liquidity position is managed by maintaining adequate levels of liquid assets, such as cash, cash equivalents, and short-term investments. Asset/liability management is integrated into many aspects of the Company’s operations, including investment decisions, product development, and determination of crediting rates. As part of the risk management process, different economic scenarios are modeled, including cash flow testing required for insurance regulatory purposes, to determine that existing assets are adequate to meet projected liability cash flows. Key variables in the modeling process include interest rates, anticipated contractowner behavior, and variable separate account performance. Contractowners bear the investment risk related to variable annuity products, subject, in limited cases, to certain minimum guaranteed rates.

The fixed account liabilities are supported by a general account portfolio, principally composed of fixed rate investments with matching duration characteristics that can generate predictable, steady rates of return. The portfolio management strategy for the fixed account considers the assets available-for-sale. This strategy enables the Company to respond to changes in market interest rates, prepayment risk, relative values of asset sectors and individual securities and loans, credit quality outlook, and other relevant factors. The objective of portfolio management is to maximize returns, taking into account interest rate and credit risk, as well as other risks. The Company’s asset/liability management discipline includes strategies to minimize exposure to loss as interest rates and economic and market conditions change. In executing this strategy, the Company uses derivative instruments to manage these risks. The Company’s derivative counterparties are of high credit quality. As of December 31, 2008, the Company had net derivative liabilities with a fair value of $308.9.

In the first quarter of 2009, the Company has taken certain actions to reduce its exposure to interest rate and market risks. These actions include reducing guaranteed interest rates for new business, reducing credited rates on existing business, curtailing sales of some products, reassessment of the investment strategy with a focus on Treasury and investment grade assets, as well as a short-term program to hedge equity market risk associated with variable fee income. During 2009, the Company will be monitoring these initiatives and their impacts on earnings, capital, and liquidity, and will determine whether further actions are necessary.

52

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. ILIAC maintains the following agreements:

§ A reciprocal loan agreement with ING America Insurance Holdings, Inc. (“ING AIH”), an affiliate, whereby either party can borrow from the other up to 3% of ILIAC’s statutory admitted assets as of the prior December 31. As of December 31, 2008, ILIAC had $13.0 due to ING AIH under the reciprocal loan agreement and no amounts due as of December 31, 2007. As of December 31, 2008 and 2007, ILIAC had no amount due from ING AIH under the reciprocal loan agreement.

§ A $50.0 uncommitted, perpetual revolving note facility with the Bank of New York. At December 31, 2008 and 2007, ILIAC had no amounts outstanding under the revolving note facility.

§ A $100.0 uncommitted line-of-credit agreement with PNC Bank. Borrowings are guaranteed by ING AIH, with maximum aggregate borrowings outstanding at anytime to ING AIH and its affiliates of $100.0. At December 31, 2008 and 2007, ILIAC had no amounts outstanding under the line-of-credit agreement. As of October 31, 2008, the Company had not formally renewed this line-of-credit, which subsequently expired on this date.

§ A $100.0 uncommitted line-of-credit agreement with Svenska Handelsbanken AB (Publ.), effective June 2, 2006. Borrowings are guaranteed by ING AIH, with maximum aggregate borrowings outstanding at anytime to ING AIH and its affiliates of $100.0. As of December 31, 2007, ILIAC had no amounts outstanding under the line-of-credit agreement. Effective November 19, 2008, the Company discontinued this line-of-credit.

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

Financing Agreement

As of June 1, 2007, the State of Connecticut, acting by the Department of Economic and Community Development (“DECD”), loaned ILIAC $9.9 (the “DECD Loan”) in connection with the development of the Windsor Property. The loan has a term of twenty years and bears an annual interest rate of 1.00%. As long as no defaults have occurred under the loan, no payments of principal or interest are due for the initial ten years of the loan. For the second ten years of the DECD Loan term, ILIAC is obligated to make monthly payments of principal and interest.

The DECD Loan provides for loan forgiveness at varying amounts up to $5.0 if ILIAC and its affiliates meet certain employment thresholds at the Windsor Property during the term of the loan. ILIAC’s obligations under the DECD Loan are secured by an unlimited recourse guaranty from its affiliate, ING North America Insurance Corporation.

53

On December 1, 2008, the DECD determined that the Company met the employment thresholds for loan forgiveness and, accordingly, forgave $5.0 of the DECD Loan to the Company in accordance with the terms of the DECD Loan.

At December 31, 2008 and 2007, the amount of the loan outstanding was $4.9 and $9.9, respectively, which was reflected in Notes payable on the Consolidated Balance Sheets.

Capital Contributions and Dividends

During 2008, ILIAC did not pay any dividends to Lion. During 2007 and 2006, ILIAC paid $145.0 and $256.0, respectively, in dividends on its common stock to its Parent.

During 2006, Lion contributed to ILIAC, DSI, which had $50.5 in equity on the date of contribution and was accounted for in a manner similar to a pooling-of-interests. During 2008, 2007, and 2006, ILIAC did not receive any cash capital contributions from its Parent.

On November 12, 2008, ING issued to the Dutch State non-voting Tier 1 securities for a total consideration of Euro 10 billion. On February 24, 2009, $2.2 billion was contributed to direct and indirect insurance company subsidiaries of ING AIH, of which $365.0 was contributed to the Company. The contribution was comprised of the proceeds from the investment by the Dutch government and the redistribution of currently existing capital within ING.

Transfer of Alt-A RMBS Participation Interest

On January 26, 2009, ING announced it reached an agreement, for itself and on behalf of certain ING affiliates including the Company, with the Dutch State on an Illiquid Assets Back-up Facility covering 80% of ING’s Alt-A RMBS. Under the terms of the Back-up Facility, a full credit risk transfer to the Dutch State will be realized on 80% of ING’s Alt-A RMBS owned by ING Bank, FSB and ING affiliates within ING Insurance Americas with a book value of $36.0 billion portfolio, including book value of 775.1 of the Alt-A RMBS portfolio owned by the Company. As a result of the risk transfer, the Dutch State will participate in 80% of any results of the ING Alt-A RMBS portfolio. The risk transfer to the Dutch State will take place at a discount of approximately 10% of par value. In addition, under the Back-up Facility, other fees will be paid both by the Company and the Dutch State. Each ING company participating in the ING-Dutch State Transaction, including the Company will remain the legal owner of 100% of its Alt-A RMBS portfolio and will remain exposed to 20% of any results on the portfolio. Subject to documentation and regulatory approvals, the ING-Dutch State Transaction is expected to close by the end of March 2009, with the affiliate participation conveyance and risk transfer to the Dutch State described in the succeeding paragraph to take effect as of January 26, 2009.

54

In order to implement that portion of the ING-Dutch State Transaction related to the Company’s Designated Securities Portfolio, the Company will enter into a participation agreement with its affiliates, ING Support Holding and ING pursuant to which the Company will convey to ING Support Holding an 80% participation interest in its Designated Securities Portfolio and pay a periodic transaction fee, and will receive, as consideration for the participation, an assignment by ING Support Holding of its right to receive payments from the Dutch State under the Illiquid Assets Back-Up Facility related to the Company’s Designated Securities Portfolio among, ING, ING Support Holding and the Dutch State. Under the Company Back-Up Facility, the Dutch State will be obligated to pay certain periodic fees and make certain periodic payments with respect to the Company’s Designated Securities Portfolio, and ING Support Holding will be obligated to pay a periodic guarantee fee and make periodic payments to the Dutch State equal to the distributions it receives with respect to the 80% participation interest in the Company’s Designated Securities Portfolio.

In a second transaction, known as the Step 1 Cash Transfer, a portion of the Company’s Alt-A RMBS which has a book value of $4.2 will be sold for cash to an affiliate, Lion II. Immediately thereafter, Lion II will sell to ING Direct Bancorp the purchased securities. Contemporaneous with the Step 2 Cash Transfer, ING Direct Bancorp will include such purchased securities as part of its Alt-A RMBS portfolio sale to the Dutch State. Subject to documentation and regulatory approval, the Step 1 Cash Transfer is expected to close by the end of March 2009 contemporaneous with the closing of the ING-Dutch State Transaction.

Since the Company had the intent to sell a portion of its Alt-A RMBS through the 80% participation interest in its Designated Securities Portfolio or as part of the Step 1 Cash Transfer as of December 31, 2008, the Company recognized $253.2 in other-than-temporary impairments with respect to the 80% participation interest in its Designated Securities Portfolio that it expects to convey as part of the ING-Dutch State Transaction and the Step 1 Cash Transfer. The Company expects to recognize a gain in the estimated range of $220.0 to $240.0 upon the closing of the ING-Dutch State Transaction and the Step 1 Cash Transfer.

Cash Collateral

Under the terms of the Company’s Over-The-Counter Derivative International Swaps and Derivatives Association, Inc. Agreements (“ISDA Agreements”), the Company may receive from, or deliver to, counterparties, collateral to assure that all terms of the ISDA Agreements will be met with regard to the Credit Support Annex (“CSA”). The terms of the CSA call for the Company to pay interest on any cash received equal to the Federal Funds rate. As of December 31, 2008, the Company held $4.4 of cash collateral, which was included in Collateral held, including payables under securities loan agreement. As of December 31, 2007, the Company delivered $18.8 of cash collateral, which was included in Short-term investments under securities loan agreement, including collateral delivered, on the Consolidated Balance Sheets.

55

Separate Accounts

Separate account assets and liabilities generally represent funds maintained to meet specific investment objectives of contractowners who bear the investment risk, subject, in limited cases, to certain minimum guarantees. Investment income and investment gains and losses generally accrue directly to such contractowners. The assets of each account are legally segregated and are not subject to claims that arise out of any other business of the Company or its affiliates.

Separate account assets supporting variable options under variable annuity contracts are invested, as designated by the contractowner or participant (who bears the investment risk subject, in limited cases, to certain minimum guaranteed rates) under a contract, in shares of mutual funds that are managed by affiliates of the Company, or in other selected mutual funds not managed by affiliates of the Company.

Variable annuity deposits are allocated to various subaccounts established within the separate account. Each subaccount represents a different investment option into which the contractowner may allocate deposits. The account value of a variable annuity contract is equal to the aggregate value of the subaccounts selected by the contractowner (including the value allocated to any fixed account), less fees and expenses. The Company offers investment options for its variable annuity contracts covering a wide range of investment styles, including large, mid, and small cap equity funds, as well as fixed income alternatives. Therefore, unlike fixed annuities, under variable annuity contracts, contractowners bear the risk of investment gains and losses associated with the selected investment allocation. The Company, however, offers certain guaranteed benefits (described below) under which it bears specific risks associated with these benefits. Many of the variable annuities issued by the Company are combination contracts offering both variable and fixed deferred annuity options under which some or all of the deposits may be allocated by the contractowner to a fixed account available under the contract.

The Company’s major source of income from variable annuities is the base contract mortality fees, expense fees, and guaranteed death benefit rider fees charged to the contractowner, less the cost of administering the product, as well as the cost of providing for the guaranteed death benefits.

Minimum Guarantees

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

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

56

Guaranteed Minimum Death Benefits (“GMDBs”):

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

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

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

§ Combination Annual Ratchet and 5% RollUp - Guarantees that, upon death, the death benefit will be no less than the greater of (1) Annual Ratchet or (2) aggregate premiums paid by the contractowner accruing interest at 5% per annum.

§ Combination Seven-Year Ratchet and 4% RollUp - Guarantees that, upon death, the death benefit will be no less than the greater of (1) a seven year ratchet or (2) aggregate premiums paid by the contractowner accruing interest at 4% per annum.

Products offering Annual Ratchet, Five Year Ratchet, Combination Ratchet and 5% RollUp, and Combination Seven-Year Ratchet and 4% RollUp, guarantees are no longer being sold by the Company. Most contracts with GMDBs are reinsured to third party reinsurers to mitigate the risk produced by such guaranteed death benefits.

Other Minimum Guarantees

Other variable annuity contracts contain minimum interest rate guarantees and allow the contractholder to select either the market value of the account or the book value of the account at termination. The book value of the account is equal to deposits plus interest, less any withdrawals. Under the terms of the contract, the book value settlement is paid out over time. These guarantees are accounted for as derivatives under FAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”) and, as of January 1, 2008, computed at fair value in accordance with FAS No. 157, “Fair Value Measurements” (“FAS 157”). At December 31, 2008 and 2007, the fair value of the guaranteed benefits was $180.0 and $78.1, respectively.

Reinsurance

The Company utilizes indemnity reinsurance agreements to reduce its exposure to large losses from GMDBs in its annuity insurance business. Reinsurance permits recovery of a portion of losses from reinsurers, although it does not discharge the Company’s primary liability as direct insurer of the risks. The Company evaluates the financial strength of potential reinsurers and continually monitors the financial strength and credit ratings of its reinsurers.

While the Company has a significant concentration of reinsurance with Lincoln National Corporation (“Lincoln”) associated with the disposition of its individual life insurance business, a trust was established effective March 1, 2007, to secure Lincoln’s obligations to the Company under the reinsurance agreement.

57

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

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.

At December 31, 2008, the Company had off-balance sheet commitments to purchase investments equal to their fair value of $353.3, $253.7 of which was with related parties. At December 31, 2007, the Company had off-balance sheet commitments to purchase investments equal to their fair value of $357.8, $226.6 of which was with related parties. During 2008 and 2007, $81.3 and $87.3, respectively, was funded to related parties under these commitments.

The Company has entered into various credit default swaps to assume credit exposure to certain assets that the Company does not own. Credit default swaps involve a transfer of credit risk from one party to another in exchange for periodic payments. These instruments are typically written for a maturity period of five years and do not contain recourse provisions, which would enable the seller to recover from third parties. The Company’s collateral positions are tracked by the ISDA. To the extent cash collateral was received, it was included in the Collateral held, including payables under securities loan agreement on the Balance Sheets and was reinvested in short-term investments. The source of non-cash collateral posted was investment grade bonds of the entity. Collateral held is used in accordance with the CSA to satisfy any obligations. In the event of a default on the underlying credit exposure, the Company will either receive an additional payment (purchased credit protection) or will be required to make an additional payment (sold credit protection) equal to the notional value of the swap contract. At December 31, 2008, the fair value of credit default swaps of $16.1 and $75.0 was included in Other investments and Other liabilities, respectively, on the Consolidated Balance Sheets. As of December 2008, the maximum potential future exposure to the Company on the sale of credit protection under credit default swaps was $161.0.

The Company owns a 3-year credit-linked note arrangement, whereby the Company agrees to reimburse the guaranteed party upon payment default of the referenced obligation. Upon such default, the Company reimburses the guaranteed party for the loss under the reference obligation, and the Company receives that reference obligation in settlement. The Company can then seek recovery of any losses under the agreement by sale or collection of the received reference obligation. As of December 31, 2008, the maximum potential future exposure to the Company under the guarantee was $30.0.

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As of December 31, 2008, the Company had certain contractual obligations due over a period of time as summarized in the following table.

			PaymentsDuebyPeriod
					Lessthan						Morethan
ContractualObligations			Total		1Year		1-3Years		3-5Years		5Years
Purchase obligations(1)		$	353.3	$	353.3	$	-	$	-	$	-
Reserves for insurance
	obligations(2)		45,880.8		6,686.2		12,712.2		12,556.0		13,926.4
Pension obligations(3)			74.0		6.7		14.2		15.1		38.0
Total		$	46,308.1	$	7,046.2	$	12,726.4	$	12,571.1	$	13,964.4

(1) Purchase obligations consist primarily of outstanding commitments under limited partnerships that may occur any time within the terms of the partnership. The exact timing, however, of funding these commitments cannot be estimated. Therefore, the total amount of the commitments is included in the category “Less than 1 Year.”

(2) Reserves for insurance obligations consist of amounts required to meet the Company’s future obligations under its variable annuity, fixed annuity, and other investment and retirement products.

(3) Pension obligations consist of actuarially-determined pension obligations, contribution matching obligations, and other supplemental retirement and insurance obligations, under various benefit plans.

Repurchase Agreements

The Company engages in dollar repurchase agreements (“dollar rolls”) and repurchase agreements to increase its return on investments and improve liquidity. These transactions involve a sale of securities and an agreement to repurchase substantially the same securities as those sold. Company policies require a minimum of 95% of the fair value of securities pledged under dollar rolls and repurchase agreement transactions to be maintained as collateral. Cash collateral received is invested in fixed maturities, and the offsetting collateral liability is included in Borrowed money on the Consolidated Balance Sheets. At December 31, 2008 and 2007, the carrying value of the securities pledged in dollar rolls and repurchase agreement transactions was $657.2 and $757.6, respectively. The carrying value of the securities pledged in dollar rolls and repurchase agreement transactions is included in Securities pledged on the Consolidated Balance Sheets. The repurchase obligation related to dollar rolls and repurchase agreements totaled $613.9 and $734.8 at December 31, 2008 and 2007, respectively. The repurchase obligation related to dollar rolls and repurchase agreements is included in Borrowed money on the Consolidated Balance Sheets.

The Company also enters into reverse purchase agreements. These transactions involve a purchase of securities and an agreement to sell substantially the same securities as those purchased. Company policies require a minimum of 102% of the fair value of securities pledged under reverse repurchase agreements to be pledged as collateral. At December 31, 2008 and 2007, the Company did not have reverse repurchase agreements. Reverse purchase agreements are included in Cash and cash equivalents on the Consolidated Balance Sheets.

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The primary risk associated with short-term collateralized borrowings is that the counterparty will be unable to perform under the terms of the contract. The Company’s exposure is limited to the excess of the net replacement cost of the securities over the value of the short-term investments, an amount that was immaterial at December 31, 2008. The Company believes the counterparties to the dollar roll, repurchase, and reverse repurchase agreements are financially responsible and that the counterparty risk is minimal.

Securities Lending

The Company engages in securities lending whereby certain securities from its portfolio are loaned to other institutions for short periods of time. Initial collateral, primarily cash, is required at a rate of 102% of the market value of the loaned domestic securities. The collateral is deposited by the borrower with a lending agent, and retained and invested by the lending agent according to the Company’s guidelines to generate additional income. The market value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the market value of the loaned securities fluctuates. At December 31, 2008 and 2007, the fair value of loan securities was $474.8 and $176.5, respectively.

Derivatives

The Company’s use of derivatives is limited mainly to hedging purposes to reduce the Company’s exposure to cash flow variability of assets and liabilities, interest rate risk, credit risk, and market risk. Generally, derivatives are not accounted for using hedge accounting treatment under FAS 133, as the Company has not historically sought hedge accounting treatment.

The Company enters into interest rate, equity market, credit default, and currency contracts, including swaps, 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. The Company also utilizes options and futures on equity indices to reduce and manage risks associated with its annuity products. Open derivative contracts are reported as either Other investments or Other liabilities, as appropriate, on the Consolidated Balance Sheets. Changes in the fair value of such derivatives are recorded in Net realized capital gains (losses) in the Consolidated Statements of Operations.

If current debt and claims paying ratings were downgraded in the future, the terms in the Company’s derivative agreements may be triggered, which could negatively impact overall liquidity. For the majority of our counterparties, there is a termination event should long term debt ratings drop below BBB+/Baa1. In addition, contractual selling agreements with intermediaries could be negatively impacted, which could have an adverse impact on overall sales of annuities, life insurance, and investment products. See Part I, Item 1A. Risk Factors and Part I, Item 1. Business – “Ratings” for more information.

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The Company also had investments in certain fixed maturity instruments, and has issued certain retail annuity products, that contain embedded derivatives whose market value is at least partially determined by, among other things, levels of or changes in domestic and/or foreign interest rates (short- or long-term), exchange rates, prepayment rates, equity markets, or credit ratings/spreads.

Embedded derivatives within fixed maturity instruments are included in Fixed maturities, available-for-sale, on the Consolidated Balance Sheets, and changes in fair value are recorded in Net realized capital gains (losses) in the Consolidated Statements of Operations.

Embedded derivatives within retail annuity products are included in Future policy benefits and claims reserves on the Consolidated Balance Sheets, and changes in the fair value are recorded in Interest credited and benefits to contractowners in the Consolidated Statements of Operations.

Statutory Capital and Risk-Based Capital

The Connecticut Insurance Department recognizes only statutory accounting practices prescribed or permitted by the State of Connecticut for determining and reporting the financial condition and results of operations of an insurance company, and for determining its solvency under the Connecticut Insurance Law. The National Association of Insurance Commissioners' (“NAIC”) Accounting Practices and Procedures Manual has been adopted as a component of prescribed or permitted practices by the State of Connecticut.

The Commissioner of the State of Connecticut Insurance Department (the “Department”) has the right to permit other specific practices that deviate from prescribed practices. During 2008, the Company received a permitted practice regarding deferred income taxes. Specifically, this permitted practice modifies the accounting for deferred income taxes prescribed by the NAIC by increasing the realization period for deferred tax assets from one year to three years and increasing the asset recognition limit from 10% to 15% of adjusted statutory capital and surplus. The benefits of this permitted practice may not be considered by the Company when determining surplus available for dividends. This permitted practice expires on December 15, 2009. This permitted practice increased admitted assets and statutory surplus by $58.4 for the year ended December 31, 2008. This permitted practice had no ipact on net income. The Company’s risk-based capital would not have triggered a regulatory event without the benefit of this permitted practice.

The Department also has the ability to revise certain reserving requirements at its discretion. Due to the financial crisis and related federal government interest rate actions, the Department provided the Company and other domestic life insurers the opportunity to elect to use a formula for the discount rate for statutory reserve and reserve related calculations that resulted in the discount rate being floored at 3.25% for December 31, 2008; the formula stipulated by the Department was such that the discount rate was to equal the greater of 3.25% or 105% of the otherwise applicable spot rate; this reserve relief reduces statutory reserves and increases surplus by approximately $700.0. This reserve relief is available for the period from December 31, 2008 through September 30, 2009 and is not a permitted practice. The Company also discloses that, as in prior years, its asset adequacy analysis associated with these reserves is favorable.

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The NAIC risk-based capital requirements require insurance companies to calculate and report information under a risk-based capital formula. These requirements are intended to allow insurance regulators to monitor the capitalization of insurance companies based upon the type and mixture of risks inherent in a company’s operations. The formula includes components for asset risk, liability risk, interest rate exposure, and other factors. ILIAC has complied with the NAIC’s risk-based capital reporting requirements. Amounts reported indicate that, as of December 31, 2008, ILIAC has total adjusted capital above all required capital levels.

The sensitivity of the Company’s statutory reserves and surplus established for variable annuity contracts and certain minimum interest rate guarantees (See “Other Minimum Guarantees” above) to changes in the interest rates, credit spreads, and equity markets will vary depending on the magnitude of the decline. The sensitivity will be affected by the level of account values, the level of guaranteed amounts and product design. Should statutory reserves increase for the reasons cited in the prior paragraph, this could result in future reductions in the Company’s surplus, which may also impact risk-based capital. During 2008, the combination of adverse changes in interest rates and the continued widening of credit spreads resulted in an increase in the reserves for these product guarantees which adversely impacted statutory surplus. Future declines in interest rates and a continued widening of credit spreads could cause future reductions in the Company’s surplus, which may also impact risk-based capital.

See “Liquidity and Capital Resources - Minimum Guarantees”, contained herein.

Risk-based capital is also affected by the product mix of the in force book of business (i.e., the amount of business without guarantees is not subject to the same level of reserves as the business with guarantees). Risk-based capital is an important factor in the determination of the credit and financial strength ratings of the Company.

Income Taxes

On September 25, 2007, the Internal Revenue Service (“IRS”) issued Revenue Ruling 2007-61, which announced its intention to issue regulations with respect to certain computational aspects of the dividend received deduction (“DRD”) on separate account assets held in connection with variable annuity and life insurance contracts. Revenue Ruling 2007-61 suspended Revenue Ruling 2007-54 issued in August 2007 that purported to change accepted industry and IRS interpretations of the statutes governing these computational questions. Any regulations that the IRS ultimately proposes for issuance in this area will be subject to public notice and comment, at which time insurance companies and other members of the public will have the opportunity to raise legal and practical questions about the content, scope and application of such regulations. As a result, the ultimate timing, substance, and effective date of any such regulations are unknown, but they could result in the elimination of some or all of the separate account DRD tax benefit that the Company receives. Management believes that such regulations would apply prospectively.

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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 current liability of $8.3 may be paid in less than one year, upon completion of such audits and exams. The timing of the payment of the remaining allowance of $15.9 cannot be reliably estimated.

Recently Adopted Accounting Standards

(See the Organization and Significant Accounting Policies footnote to the consolidated financial statements set forth in Part II, Item 8. herein, for further information.)

Fair Value Measurements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“FAS”) No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 provides guidance for using fair value to measure assets and liabilities whenever other standards require (or permit) assets or liabilities to be measured at fair value. FAS 157 does not expand the use of fair value to any new circumstances.

Under FAS 157, the FASB clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, FAS 157 establishes a fair value hierarchy that prioritizes the information used to develop such assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. FAS 157 also requires separate disclosure of fair value measurements by level within the hierarchy and expanded disclosure of the effect on earnings for items measured using unobservable data.

FAS 157 was adopted by the Company on January 1, 2008. As a result of implementing FAS 157, the Company recognized $1.7, before tax, as an increase to Net income on the date of adoption related to the fair value measurements of the reserves for product guarantees. The impact of implementation was included in Interest credited and other benefits to contractholders on the Consolidated Statements of Operations.

In October 2008, the FASB issued FASB Staff Position (“FSP”) FAS No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (“FSP FAS 157-3”), which provides clarifying guidance on the application of FAS 157 to financial assets in a market that is not active and was effective upon issuance. FSP FAS 157-3 had no effect on the Company’s financial condition, results of operations, or cash flows upon adoption, as its guidance is consistent with that applied by the Company upon adoption of FAS 157.

The Company recognized no other adjustments to its financial statements related to the adoption of FAS 157, and new disclosures are included in the Financial Instruments footnote set forth in Part II, Item 8. herein.

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The Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“FAS 159”), which allows a company to make an irrevocable election, on specific election dates, to measure eligible items at fair value with unrealized gains and losses recognized in earnings at each subsequent reporting date. The election to measure an item at fair value may be determined on an instrument by instrument basis, with certain exceptions. If the fair value option is elected, any upfront costs and fees related to the item will be recognized in earnings as incurred. Items eligible for the fair value option include:

§ Certain recognized financial assets and liabilities;

§ Rights and obligations under certain insurance contracts that are not financial instruments;

§ Host financial instruments resulting from the separation of an embedded nonfinancial derivative instrument from a nonfinancial hybrid instrument; and

§ Certain commitments.

FAS 159 was adopted by the Company on January 1, 2008. In implementing FAS 159, the Company elected not to take the fair value option for any eligible assets or liabilities in existence on January 1, 2008, or in existence at the date of the consolidated financial statements set forth in Part II, Item 8. herein.

Offsetting of Amounts Related to Certain Contracts

On April 30, 2007, the FASB issued a FSP on FASB Interpretation (“FIN”) No. 39, “Offsetting of Amounts Related to Certain Contracts” (“FSP FIN 39-1”), which permits a reporting entity to offset fair value amounts recognized for the right to reclaim or the obligation to return cash collateral against fair value amounts recognized for derivative instruments under master netting arrangements. FSP FIN 39-1 had no effect on the financial condition, results of operations, or cash flows upon adoption by the Company on January 1, 2008, as it is the Company’s accounting policy not to offset such fair value amounts.

Accounting for Uncertainty in Income Taxes

In June 2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which creates a single model to address the accounting for the uncertainty in income tax positions recognized in a company’s financial statements. FIN 48 prescribes a recognition threshold and measurement criteria that must be satisfied to recognize a financial statement benefit of tax positions taken, or expected to be taken, on an income tax return. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

FIN 48 was adopted by the Company on January 1, 2007. As a result of implementing FIN 48, the Company recognized a cumulative effect of change in accounting principle of $2.9 as a reduction to January 1, 2007 Retained earnings (deficit).

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Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts

In September 2005, the American Institute of Certified Public Accountants ("AICPA") issued SOP 05-1, which states that when an internal replacement transaction results in a substantially changed contract, the unamortized deferred acquisition costs, unearned revenue liabilities, and deferred sales inducement assets, related to the replaced contract should not be deferred in connection with the new contract. Contract modifications that meet various conditions defined by SOP 05-1 and result in a new contract that is substantially unchanged from the replaced contract, however, should be accounted for as a continuation of the replaced contract.

SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverage that occurs by the exchange of a contract for a new contract, by amendment, endorsement, or rider, to a contract, or by the election of a feature or coverage within a contract. SOP 05-1 applies to internal replacements made primarily to contracts defined by FAS No. 60, “Accounting and Reporting by Insurance Enterprises” (“FAS 60”), as short-duration and long-duration insurance contracts, and by FAS 97 as investment contracts.

SOP 05-1 was adopted by the Company on January 1, 2007, and is effective for internal replacements occurring on or after that date. As a result of implementing SOP 05-1, the Company recognized a cumulative effect of change in accounting principle of $43.4, before tax, or $28.2, net of $15.2 of income taxes, as a reduction to January 1, 2007 Retained earnings (deficit). In addition, the Company revised its accounting policy on the amortization of DAC and VOBA to include internal replacements.

Disclosures about Credit Derivatives and Certain Guarantees

In September 2008, the FASB issued FSP FAS No. 133-1 and FIN No. 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP FAS 133-1 and FIN 45-4”), which does the following:

§ Amends FAS 133, requiring additional disclosures by sellers of credit derivatives;

§ Amends FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”), requiring additional disclosure about the current status of the payment/performance risk of a guarantee; and

§ Clarifies the effective date of FAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”).

FSP FAS 133-1 and FIN 45-4 was adopted by the Company on December 31, 2008. In implementing FSP FAS 133-1 and FIN 45-4, the Company determined that its adoption had no financial statement impact. New disclosures are included in the Financial Instruments and Commitments and Contingent Liabilities footnotes set forth in Part II, Item 8. herein.

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The clarification in the FSP of the effective date of FAS 161 is consistent with the guidance in FAS 161 and the Company’s disclosure provided herein.

Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities

In December 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities” (“FSP FAS 140-4 and FIN 46(R)-8”), which requires additional disclosures regarding a transferor’s continuing involvement with financial assets transferred in a securitization or asset-backed financing arrangement and an enterprise’s involvement with variable interest entities (“VIEs”) and qualifying special purpose entities (“QSPEs”).

FSP FAS 140-4 and FIN 46(R)-8 was adopted by the Company on December 31, 2008. In implementing FSP FAS 140-4 and FIN 46(R)-8, the Company determined that its adoption has no financial statement impact. The Company does not have any QSPEs or continuing involvement with financial assets transferred in a securitization or asset-backed financing arrangement.

Amendments to Impairment Guidance

In January 2009, the FASB issued FSP EITF 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20” (“FSP EITF 99-20-1”), which amends EITF 99-20. FSP EITF 99-20-1 requires that an other-than-temporary impairment on investments that meet the criteria of EITF 99-20 be recognized as a realized loss through earnings when it is probable there has been an adverse change in the holder’s estimated cash flow, consistent with the impairment model in FAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.”

FSP EITF 99-20-1 was adopted by the Company on December 31, 2008, prospectively. In implementing FSP EITF 99-20-1, the Company determined there was a minimal effect on financial position, results of operations, and cash flows, as the structured securities held by the Company were highly rated at issue.

New Accounting Pronouncements

Disclosures about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued FAS 161, which requires enhanced disclosures about objectives and strategies for using derivatives, fair value amounts of and gains and losses on derivative instruments, and credit-risk-related contingent features in derivative agreements, including:

§ How and why derivative instruments are used;

§ How derivative instruments and related hedged items are accounted for under FAS 133 and its related interpretations; and

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

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The provisions of FAS 161 are effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is currently in the process of determining the impact of adoption of FAS 161 on its disclosures; however, as the pronouncement only pertains to additional disclosures, the Company has determined that the adoption of FAS 161 will have no financial statement impact. In addition, the Company’s derivatives are generally not accounted for using hedge accounting treatment under FAS 133, as the Company has not historically sought hedge accounting treatment.

Business Combinations

In December 2007, the FASB issued FAS No. 141 (revised 2007), “Business Combinations” (“FAS 141R”), which replaces FAS No. 141, “Business Combinations,” as issued in 2001. FAS 141R requires most identifiable assets, liabilities, noncontrolling interest, and goodwill acquired in a business combination to be recorded at full fair value as of the acquisition date, even for acquisitions achieved in stages. In addition, the statement requires:

§ Acquisition-related costs to be recognized separately and generally expensed;

§ Non-obligatory restructuring costs to be recognized separately when the liability is incurred;

§ Contractual contingencies acquired to be recorded at acquisition-date fair values;

§ A bargain purchase, which occurs when the fair value of net assets acquired exceeds the consideration transferred plus any non-controlling interest in the acquiree, to be recognized as a gain; and

§ The nature and financial effects of the business combination to be disclosed.

FAS 141R also amends or eliminates various other authoritative literature.

The provisions of FAS 141R are effective for fiscal years beginning on or after December 15, 2008 for all business combinations occurring on or after that date. As such, this standard will impact any Company acquisitions that occur on or after January 1, 2009.

Equity Method Investment Accounting

In November 2008, the EITF reached consensus on EITF 08-6, “Equity Method Investment Accounting Considerations” (“EITF 08-6”), which requires, among other provisions, that:

§ Equity method investments be initially measured at cost;

§ Contingent consideration only be included in the initial measurement;

§ An investor recognize its share of any impairment charge recorded by the equity investee; and

§ An investor account for a share issuance by an equity investee as if the investor had sold a proportionate share of its investment;

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The provisions of EITF 08-6 are effective in fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. As such, this standard will impact Company acquisitions or changes in ownership with regards to equity investments that occur on or after January 1, 2009. The Company is currently in the process of determining the impact of the other-than-temporary impairment provisions.

Legislative Initiatives

Legislative proposals, which have been or may again be considered by Congress, include changing the taxation on annuity benefits, changing the tax treatment of insurance products relative to other financial products, and changing life insurance company taxation. Some of these proposals, if enacted, could have a material adverse effect on life insurance, annuity, and other retirement savings product sales, while others could have a material beneficial effect. Legislation could be reintroduced to increase disclosure of 401(k) and other defined contribution plan fees charged by plan investment and service providers. In addition, it is possible that under the new Administration, the Department of Labor will revisit regulations concerning the fee disclosure obligations of defined contribution service providers. As a result of recent economic conditions, there has been an increase in legislative proposals to reform the structure and regulation of retirement plans, in some cases significantly. The timing and content of such proposed changes are uncertain. Legislative or regulatory action to change fee disclosure requirements could adversely impact the market for certain of the Company’s defined contribution retirement services products, but the timing and content of such changes are uncertain at this time. The IRS and the Treasury have published final regulations, effective in 2009, that update and consolidate the rules applicable to 403(b) tax deferred annuity arrangements. The final regulations impose broad written plan document and operational compliance requirements on all 403(b) programs and contain new restrictions on annuity exchanges. The final regulations have the potential to change the marketplace for 403(b) service providers in a fundamental way and could have a material beneficial effect on providers that position themselves to assist 403(b) sponsors with plan document and operational compliance or otherwise assist with streamlining overall plan administration. For a description of Revenue Ruling 2007-61 issued by the IRS in September of 2007, see the “Liquidity and Capital Resources, Income Taxes” section of “Management’s Narrative Analysis of the Results of Operations and Financial Condition” above.

Other Regulatory Matters

Regulatory Matters

As with many financial services companies, the Company and its affiliates have received informal and formal requests for information from various state and federal governmental agencies and self-regulatory organizations in connection with inquiries and investigations of the products and practices of the financial services industry. In each case, the Company and its affiliates have been and are providing full cooperation.

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Insurance and Retirement Plan Products and Other Regulatory Matters

Federal and state regulators, and self-regulatory agencies, are conducting broad inquiries and investigations involving the insurance and retirement industries. These initiatives currently focus on, among other things, compensation, revenue sharing, and other sales incentives; potential conflicts of interest; sales and marketing practices (including sales to seniors); specific product types (including group annuities and indexed annuities); and disclosure. The Company and certain of its U.S. affiliates have received formal and informal requests in connection with such investigations, and have cooperated and are cooperating fully with each request for information. Some of these matters could result in regulatory action involving the Company. These initiatives also may result in new legislation and regulation that could significantly affect the financial services industry, including businesses in which the Company is engaged. In light of these and other developments, U.S. affiliates of ING, including the Company, periodically review whether modifications to their business practices are appropriate.

Investment Product Regulatory Issues

Since 2002, there has been increased governmental and regulatory activity relating to mutual funds and variable insurance products. This activity has primarily focused on inappropriate trading of fund shares; directed brokerage; compensation; sales practices, suitability, and supervision; arrangements with service providers; pricing; compliance and controls; adequacy of disclosure; and document retention.

In addition to responding to governmental and regulatory requests on fund trading issues, ING management, on its own initiative, conducted, through special counsel and a national accounting firm, an extensive internal review of mutual fund trading in ING insurance, retirement, and mutual fund products. The goal of this review was to identify any instances of inappropriate trading in those products by third parties or by ING investment professionals and other ING personnel.

The internal review identified several isolated arrangements allowing third parties to engage in frequent trading of mutual funds within the variable insurance and mutual fund products of certain affiliates of the Company, and identified other circumstances where frequent trading occurred despite measures taken by ING intended to combat market timing. Each of the arrangements has been terminated and disclosed to regulators, to the independent trustees of ING Funds (U.S.) and in Company reports previously filed with the Securities and Exchange Commission (“SEC”) pursuant to the Securities Exchange Act of 1934, as amended.

Action has been or may be taken with respect to certain ING affiliates before investigations relating to fund trading are completed. The potential outcome of such action is difficult to predict but could subject certain affiliates to adverse consequences, including, but not limited to, settlement payments, penalties, and other financial liability. It is not currently anticipated, however, that the actual outcome of any such action will have a material adverse effect on ING or ING’s U.S.-based operations, including the Company.

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ING has agreed to indemnify and hold harmless the ING Funds from all damages resulting from wrongful conduct by ING or its employees or from ING’s internal investigation, any investigations conducted by any governmental or self-regulatory agencies, litigation or other formal proceedings, including any proceedings by the SEC. Management reported to the ING Funds Board that ING management believes that the total amount of any indemnification obligations will not be material to ING or ING’s U.S.-based operations, including the Company.

For further discussion of the risks to the Company as a result of recent regulatory inquiries and possible changes in U.S. regulation, see Part I, Item 1A. Risk Factors.

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Item 7A. Quantitative and Qualitative Disclosure About Market Risk

(Dollar amounts in millions, unless otherwise stated)

Asset/liability management is integrated into many aspects of the Company’s operations, including investment strategy, product development, and determination of crediting rates. As part of the risk management process, different economic scenarios are modeled, including cash flow testing required for insurance regulatory purposes, to determine that existing assets are adequate to meet projected liability cash flows. Key variables in the modeling process include interest rates, anticipated contractowner behavior, and variable separate account performance. Contractowners bear the investment risk related to variable annuity products, subject to the minimum guaranteed death benefits included in these contracts.

The fixed account liabilities are supported by a general account portfolio principally composed of fixed income investments that can generate predictable, steady rates of return. The duration and convexity profile of the portfolio is managed relative to the liabilities. The assets are classified as available-for-sale, which enables the Company to respond to changes in market interest rates, prepayment risk, relative values of asset sectors and individual securities and loans, credit quality outlook, and other relevant factors. The objective of portfolio management is to maximize returns, taking into account interest rate and credit risk, as well as other risks. The Company’s asset/liability management discipline includes strategies to minimize exposure to loss as interest rates and economic and market conditions change.

On the basis of these analyses, management believes there is currently no material solvency risk to the Company.

Interest Rate Risk

The Company defines interest rate risk as the risk of an economic loss due to adverse changes in interest rates. This risk arises from the Company’s primary activity of investing fixed annuity premiums received in interest-sensitive assets and carrying these funds as interest-sensitive liabilities. The Company manages the interest rate risk in its general account investments relative to the interest rate risk in its liabilities. The current product portfolio also includes products where interest rate risks are entirely or partially passed on to the contractowner, thereby reducing the Company’s exposure to interest rate movements. Changes in interest rates can impact present and future earnings, the levels of new sales, surrenders, or withdrawals.

The following schedule demonstrates the potential changes in the 2008 earnings from an instantaneous parallel increase/decrease in interest rates of 1% on December 31, 2008. These changes to income could relate to future investment income, interest paid to contractowners, market-value adjustments, amortization of DAC and VOBA, sales levels, or any other net income item that would be affected by interest rate changes. The effect of interest rate changes is different by product. A significant portion of the Company’s contracts are close to the minimum contractual guaranteed credited rates. In a down interest rate environment, the Company’s ability to reduce credited rates is limited, which will cause margin compression and accelerate the amortization of DAC and VOBA. In addition, the Company has estimated the impact to December 31, 2008 Shareholder’s equity from the same instantaneous change in interest rates. The effect on Shareholder’s equity includes the impact of interest rate

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fluctuations on income, unrealized capital gains (losses) on available-for-sale securities, and DAC and VOBA adjustments for unrealized capital gains (losses) on available-for-sale securities.

Interest rate sensitivity and effect on Net income and Shareholder’s equity:

				Effecton
				Shareholder's
		EffectonNet		Equityasof
		Incomefor		December31,
		2008		2008
Increase of 1%	$	43.6	$	43.6
Decrease of 1%		(10.3)		(10.3)

The above analysis includes the following changes in DAC and VOBA related to an instantaneous, parallel increase/decrease in interest rates.

Interest rate sensitivity and effect on DAC and VOBA:

		Effecton		Effecton
		Amortizationof		DACandVOBA
		DACandVOBA		Assetsasof
		for		December31,
		2008		2008
Increase of 1%	$	0.7	$	69.4
Decrease of 1%		(2.0)		(18.0)

Equity Market Risk

The Company’s operations are significantly influenced by changes in the equity markets. The Company’s profitability depends largely on the amount of assets under management (“AUM”), which is primarily driven by the level of sales, equity market appreciation and depreciation, and the persistency of the in force block of business.

Prolonged and precipitous declines in the equity markets can have a significant impact on the Company’s operations. As a result, sales of variable products may decline and surrender activity may increase, as contractowner sentiment towards the equity market turns negative. Lower AUM will have a negative impact on the Company’s financial results, primarily due to lower fee income on variable annuities. Furthermore, the Company may experience a reduction in profit margins if a significant portion of the assets held in the variable annuity separate account move to the general account and the Company is unable to earn an acceptable margin, particularly in light of the low interest rate environment and the presence of contractually guaranteed interest credited rates.

In addition, prolonged declines in the equity market may also decrease the Company’s expectations of future gross profits, which are utilized to determine the amount of DAC and VOBA to be amortized in a given financial statement period. A significant decrease in the Company’s estimated gross profits would require the Company to accelerate the amount of amortization of DAC and VOBA in a given period, potentially causing a material adverse deviation in the period’s Net income.

72

The following schedule demonstrates the potential changes in 2008 earnings resulting from an instantaneous increase/decrease in equity markets of 10% on December 31, 2008. These changes to income could relate to future fee income, unrealized or realized capital gains (losses), amortization of DAC and VOBA, sales levels, or any other net income item that would be affected by a substantial change to equity markets. In addition, the Company has estimated the impact to Shareholder’s equity as of December 31, 2008 from the same instantaneous change in equity markets. The effect on shareholder’s equity includes the impact of equity market fluctuations on income, unrealized capital gains (losses) on available-for-sale securities, and DAC and VOBA adjustments for unrealized capital gains (losses) on available-for-sale securities.

Equity sensitivity and effect on Net income and Shareholder’s equity:

				Effecton
				Shareholder's
		EffectonNet		Equityasof
		Incomefor		December31,
		2008		2008
Increase of 10%	$	22.4	$	22.4
Decrease of 10%		(23.1)		(23.1)

The above analysis includes the following changes in DAC and VOBA related to an instantaneous increase/decrease in equity markets.

Equity sensitivity and effect on DAC and VOBA:

		Effecton		Effecton
		Amortizationof		DACandVOBA
		DACandVOBA		Assetsasof
		for		December31,
		2008		2008
Increase of 10%	$	1.4	$	39.9
Decrease of 10%		(1.4)		(41.1)

Interest Rate Risk on Product Guarantees

As discussed in Part I, Item 1, certain of the Company’s products have guaranteed crediting rates. Credited rates are set either quarterly or annually. Most contracts have a zero percent minimum credited rate guarantee, although some contracts have minimum credited rate guarantees up to 3% and allow the contractholder to select either the market value of the account or the book value of the account at termination. The book value of the account is equal to deposits plus interest, less any withdrawals. Depending on the underlying product, the guarantee is treated as a stand-along derivative or an embedded derivative in accordance with Statement of Financial Accounting Standards (“FAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”). Beginning January 1, 2008, the Company began computing the fair value for these guarantees in accordance with FAS No. 157, “Fair Value Measurements” (“FAS 157”). The fair value is estimated using the income approach.

73

The income associated with the contracts is projected using relevant actuarial and capital market assumptions, including benefits and related contract charges, over the anticipated life of the related contracts. The cash flow estimates are produced by using stochastic techniques under a variety of risk neutral scenarios and other best estimate assumptions. Explicit risk margins in the actuarial assumptions underlying valuations are included, as well as an explicit recognition of all nonperformance risks as required by FAS 157. Nonperformance risk for product guarantees contains adjustments to the fair values of these contract liabilities related to the current credit standing of ING and the Company based on credit default swaps with similar term to maturity and priority of payment.

These products have risk in both low and high interest rate environments. In a low interest rate environment, reinvestment of asset cash flow and investment of new cash contract purchases could be below the minimum guarantee on contracts with minimum guarantees above 0%. In a rising rate environment, there is the risk that an increased level of contractholder withdrawals, especially those with book value guarantees, could result in greater losses than can be recovered through the crediting rates.

The following schedule demonstrates the potential change in the fair value of these guarantees and 2008 earnings from an instantaneous parallel increase/decrease in interest rates of 1% on December 31, 2008.

		Effecton		Effecton
		Reservesfor		NetIncomefor
		2008		2008
Increase of 1%	$	(90.3)	$	90.3
Decrease of 1%		139.6		(139.6)

74

 

Item 8. Financial Statements and Supplementary Data

IndextoConsolidatedFinancialStatements
			Page
Report of Independent Registered Public Accounting Firm			76
Consolidated Financial Statements:
	Consolidated Statements of Operations for the years ended
		December 31, 2008, 2007, and 2006	77
	Consolidated Balance Sheets as of
		December 31, 2008 and 2007	78
	Consolidated Statements of Changes in Shareholder's Equity
		For the years ended December 31, 2008, 2007, and 2006	80
	Consolidated Statements of Cash Flows for the years ended
		December 31, 2008, 2007, and 2006	81
Notes to Consolidated Financial Statements			83

75

Report of Independent Registered Public Accounting Firm

The Board of Directors

ING Life Insurance and Annuity Company

We have audited the accompanying consolidated balance sheets of ING Life Insurance and Annuity Company and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, changes in shareholder’s equity, and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of ING Life Insurance and Annuity Company and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.

/s/      Ernst & Young LLP

Atlanta, Georgia

March 26, 2009

ING Life Insurance and Annuity Company and Subsidiaries (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.) Consolidated Statements of Operations (In millions)
				YearEndedDecember31,
				2008		2007		2006
Revenue:
	Net investment income		$	1,083.7	$	1,054.7	$	1,029.7
	Fee income			612.9		769.9		714.8
	Premiums			46.9		46.8		37.5
	Broker-dealer commission revenue			622.5		568.4		429.2
	Net realized capital (losses) gains			(653.1)		(27.6)		3.0
	Other income			21.3		20.3		15.7
Total revenue				1,734.2		2,432.5		2,229.9
Benefitsandexpenses:
	Interest credited and other benefits
		to contractowners		1,432.4		802.8		783.7
	Operating expenses			687.5		652.2		568.3
	Broker-dealer commission expense			622.5		568.4		429.2
	Net amortization of deferred policy acquisition
		cost and value of business acquired		128.9		129.2		21.3
	Interest expense			1.4		5.5		2.9
Total benefits and expenses				2,872.7		2,158.1		1,805.4
(Loss) income before income taxes				(1,138.5)		274.4		424.5
Income tax (benefit) expense				(108.3)		56.0		122.7
Net (loss) income			$	(1,030.2)	$	218.4	$	301.8

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

77

ING Life Insurance and Annuity Company and Subsidiaries (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.) Consolidated Balance Sheets (In millions, except share data)
				AsofDecember31,
				2008		2007
Assets
Investments:
	Fixed maturities, available-for-sale, at fair value
		(amortized cost of $14,632.6 at 2008 and $13,374.7 at 2007)	$	13,252.2	$	13,316.3
	Equity securities, available-for-sale, at fair value
		(cost of $247.7 at 2008 and $440.1 at 2007)		240.3		446.4
	Short-term investments			41.9		167.9
	Mortgage loans on real estate			2,107.8		2,089.4
	Policy loans			267.8		273.4
	Limited partnerships/corporations			513.9		636.1
	Other investments			235.2		34.8
	Securities pledged (amortized cost of $1,160.5 at 2008 and $940.2 at 2007)			1,225.4		934.1
Total investments				17,884.5		17,898.4
Cash and cash equivalents				203.5		252.3
Short-term investments under securities loan agreement,
	including collateral delivered			483.9		202.7
Accrued investment income				205.8		168.3
Receivables for securities sold				5.5		5.6
Reinsurance recoverable				2,505.6		2,594.4
Deferred policy acquisition costs				865.5		728.6
Value of business acquired				1,832.5		1,253.2
Notes receivable from affiliate				175.0		175.0
Due from affiliates				13.8		10.6
Current income tax recoverable				38.6		-
Property and equipment				114.7		147.4
Other assets				233.3		112.1
Assets held in separate accounts				35,927.7		48,091.2
Total assets			$	60,489.9	$	71,639.8

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

78

ING Life Insurance and Annuity Company and Subsidiaries (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.) Consolidated Balance Sheets (In millions, except share data)
				AsofDecember31,
				2008		2007
LiabilitiesandShareholder'sEquity
Future policy benefits and claims reserves			$	20,782.1	$	18,569.1
Payables for securities purchased				1.6		0.2
Payables under securities loan agreement, including collateral held				488.3		183.9
Notes payable				17.9		9.9
Borrowed money				615.3		738.4
Due to affiliates				116.7		130.7
Current income taxes				-		56.8
Deferred income taxes				101.1		275.9
Other liabilities				874.7		542.7
Liabilities related to separate accounts				35,927.7		48,091.2
Total liabilities				58,925.4		68,598.8
Shareholder's equity
	Common stock (100,000 shares authorized; 55,000
		issued and outstanding; $50 per share value)		2.8		2.8
	Additional paid-in capital			4,161.3		4,159.3
	Accumulated other comprehensive loss			(482.1)		(33.8)
	Retained earnings (deficit)			(2,117.5)		(1,087.3)
Total shareholder's equity				1,564.5		3,041.0
Total liabilities and shareholder's equity			$	60,489.9	$	71,639.8

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

79

ING Life Insurance and Annuity Company and Subsidiaries (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.) Consolidated Statements of Changes in Shareholder’s Equity (In millions)
									Accumulated
								Additional	Other			Retained	Total
						Common		Paid-In	Comprehensive			Earnings	Shareholder's
						Stock		Capital	Income(Loss)			(Deficit)	Equity
Balance at December 31, 2005					$	2.8	$	4,549.6	$	(5.3)	$	(1,576.4)	$	2,970.7
	Comprehensive income:
		Net income				-		-		-		301.8		301.8
		Other comprehensive loss, net of tax:
			Change in net unrealized capital gains (losses)
				on securities ($(23.4) pretax)		-		-		(10.7)		-		(10.7)
			Pension liability and FAS No. 158
				transition adjustment ($3.9 pretax)		-		-		2.5		-		2.5
	Total comprehensive income													293.6
	Cumulative effect of change in accounting
		principle ($(0.8) pretax)								(0.5)		-		(0.5)
	Dividends paid					-		(256.0)		-		-		(256.0)
	Employee share-based payments					-		5.9		-		-		5.9
Balance at December 31, 2006						2.8		4,299.5		(14.0)		(1,274.6)		3,013.7
	Cumulative effect of change in
		accounting principle				-		-		-		(31.1)		(31.1)
Balance at January 1, 2007						2.8		4,299.5		(14.0)		(1,305.7)		2,982.6
	Comprehensive income:
		Net income				-		-		-		218.4		218.4
		Other comprehensive loss, net of tax:
			Change in net unrealized capital gains (losses)
				on securities ($(27.7) pretax), including
				tax valuation allowance of $(6.4)		-		-		(24.4)		-		(24.4)
			Pension liability ($7.1 pretax)			-		-		4.6		-		4.6
	Total comprehensive income													198.6
	Dividends paid					-		(145.0)		-		-		(145.0)
	Employee share-based payments					-		4.8		-		-		4.8
Balance at December 31, 2007						2.8		4,159.3		(33.8)		(1,087.3)		3,041.0
	Comprehensive loss:
		Net loss				-		-		-		(1,030.2)		(1,030.2)
		Other comprehensive loss, net of tax:
			Change in net unrealized capital gains (losses)
				on securities ($(635.4) pretax), including
				tax valuation allowance of $6.4		-		-		(435.3)		-		(435.3)
			Pension liability ($18.7 pretax)			-		-		(13.0)		-		(13.0)
	Total comprehensive loss													(1,478.5)
	Dividends paid					-		-		-		-		-
	Employee share-based payments					-		2.0		-		-		2.0
Balance at December 31, 2008					$	2.8	$	4,161.3	$	(482.1)	$	(2,117.5)	$	1,564.5

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

80

ING Life Insurance and Annuity Company and Subsidiaries (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.) Consolidated Statements of Cash Flows (In millions)
						YearEndedDecember31,
						2008		2007		2006
CashFlowsfromOperatingActivities:
	Net (loss) income				$	(1,030.2)	$	218.4	$	301.8
	Adjustments to reconcile net income to
		net cash provided by operating activities:
			Capitalization of deferred policy acquisition costs, value
				of business acquired, and sales inducements		(205.1)		(193.4)		(191.0)
			Net amortization of deferred policy acquisition costs,
				value of business acquired, and sales inducements		128.3		133.9		25.9
			Net accretion/decretion of discount/premium			87.1		72.7		83.8
			Future policy benefits, claims reserves, and
				interest credited		1,296.8		579.6		662.5
			Provision for deferred income taxes			25.3		30.4		75.6
			Net realized capital losses (gains)			653.1		27.6		(3.0)
			Depreciation			56.7		18.2		12.6
			Change in:
				Accrued investment income		(37.5)		12.1		23.2
				Reinsurance recoverable		88.8		121.0		81.3
				Other receivable and assets accruals		(115.3)		(37.0)		(20.1)
				Due to/from affiliates		(17.2)		46.4		20.4
				Other payables and accruals		(120.3)		17.8		86.3
			Other, net			(44.0)		(16.4)		5.9
Net cash provided by operating activities						766.5		1,031.3		1,165.2
CashFlowsfromInvestingActivities:
	Proceeds from the sale, maturity, or redemption of:
		Fixed maturities, available-for-sale				9,039.7		10,235.6		10,355.2
		Equity securities, available-for-sale				135.0		113.8		91.7
		Mortgage loans on real estate				146.5		205.4		197.0
	Acquisition of:
		Fixed maturities, available-for-sale				(11,593.4)		(8,425.5)		(8,802.1)
		Equity securities, available-for-sale				(54.8)		(243.9)		(149.1)
		Mortgage loans on real estate				(168.0)		(415.1)		(680.3)
	Policy loans, net					5.6		(4.5)		(6.5)
	Derivatives, net					52.6		32.2		1.4
	Limited partnerships, net					81.5		(279.5)		(237.6)
	Short-term investments, net					126.0		(163.3)		-
	Purchases of property and equipment, net					(24.0)		(90.5)		(54.5)
	Collateral received (paid)					23.2		(18.8)		-
	Other investments					0.7		-		(4.0)
Net cash (used in) provided by investing activities						(2,229.4)		945.9		711.2

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

81

ING Life Insurance and Annuity Company and Subsidiaries (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.) Consolidated Statements of Cash Flows (In millions)
			YearEndedDecember31,
			2008		2007		2006
CashFlowsfromFinancingActivities:
	Deposits received for investment contracts		3,836.4		1,600.0		1,875.7
	Maturities and withdrawals from investment contracts		(2,312.2)		(3,451.2)		(3,420.7)
	Short-term loans to affiliates		13.0		45.0		86.0
	Short-term repayments		(123.1)		(94.8)		(107.9)
	Notes payable		-		9.9		-
	Dividends to Parent		-		(145.0)		(256.0)
Net cash provided by (used in) financing activities			1,414.1		(2,036.1)		(1,822.9)
Net (decrease) increase in cash and cash equivalents			(48.8)		(58.9)		53.5
Cash and cash equivalents, beginning of year			252.3		311.2		257.7
Cash and cash equivalents, end of year		$	203.5	$	252.3	$	311.2
Supplemental cash flow information:
	Income taxes (received) paid, net	$	(44.1)	$	45.1	$	37.6
	Interest paid	$	23.6	$	44.6	$	40.8

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

82

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

1. Organization and Significant Accounting Policies

Basis of Presentation

ING Life Insurance and Annuity Company (“ILIAC”) is a stock life insurance company domiciled in the state of Connecticut. ILIAC and its wholly-owned subsidiaries (collectively, the “Company”) are providers of financial products and services in the United States. ILIAC is authorized to conduct its insurance business in all states and in the District of Columbia.

The consolidated financial statements include ILIAC and its wholly-owned subsidiaries, ING Financial Advisers, LLC (“IFA”) and Directed Services LLC (“DSL”). ILIAC is a direct, wholly-owned subsidiary of Lion Connecticut Holdings Inc. (“Lion” or “Parent”), which is an indirect, wholly-owned subsidiary of ING Groep N.V. (“ING”). ING is a global financial services holding company based in The Netherlands, with American Depository Shares listed on the New York Stock Exchange under the symbol “ING.”

On December 1, 2006, Lion contributed to ILIAC, Directed Services, Inc. (“DSI”), a New York corporation registered as a broker-dealer under the Securities Exchange Act of 1934 and as an investment advisor under the Investment Advisors Act of 1940, whose primary functions were the distribution of variable insurance products and investment advisory services for open-end mutual funds. Additionally, on December 12, 2006, ILIAC organized DSL as a wholly-owned Delaware limited liability company. On December 31, 2006, DSI merged with and into DSL and ceased to exist. Upon merger, the operations and broker-dealer and investment advisor registrations of DSI were consolidated into DSL, the surviving company. Effective January 1, 2007, ILIAC’s investment advisory agreement with certain variable funds offered in Company products was assigned to DSL.

On May 11, 2006, ILIAC organized NWL as a wholly-owned subsidiary for the purpose of purchasing, constructing, developing, leasing, and managing a new corporate office facility to be located at One Orange Way, Windsor, Connecticut (the “Windsor Property”). Effective October 1, 2007, the principal executive office of ILIAC was changed to One Orange Way, Windsor, Connecticut.

On October 31, 2007, ILIAC’s subsidiary, NWL merged with and into ILIAC. As of the merger date, NWL ceased to exist, and ILIAC became the surviving corporation. The merger did not have an impact on ILIAC’s consolidated results of operations and financial position, as NWL was a wholly-owned subsidiary and already included in the consolidated financial statements for all periods presented since its formation.

Description of Business

The Company offers qualified and nonqualified annuity contracts that include a variety of funding and payout options for individuals and employer-sponsored retirement plans qualified under Internal Revenue Code Sections 401, 403, 408, and 457, as well as nonqualified deferred compensation plans and related services. The Company’s products

83

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

are offered primarily to individuals, pension plans, small businesses, and employer-sponsored groups in the health care, government, and education markets (collectively “not-for-profit” organizations) and corporate markets. The Company’s products are generally distributed through pension professionals, independent agents and brokers, third party administrators, banks, dedicated career agents, and financial planners.

Products offered by the Company include deferred and immediate (payout annuities) annuity contracts. Company products also include programs offered to qualified plans and nonqualified deferred compensation plans that package administrative and record-keeping services along with a variety of investment options, including affiliated and nonaffiliated mutual funds and variable and fixed investment options. In addition, the Company offers wrapper agreements entered into with retirement plans, which contain certain benefit responsive guarantees (i.e., liquidity guarantees of principal and previously accrued interest for benefits paid under the terms of the plan) with respect to portfolios of plan-owned assets not invested with the Company. The Company also offers pension and retirement savings plan administrative services.

The Company has one operating segment.

Recently Adopted Accounting Standards

Fair Value Measurements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“FAS”) No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 provides guidance for using fair value to measure assets and liabilities whenever other standards require (or permit) assets or liabilities to be measured at fair value. FAS 157 does not expand the use of fair value to any new circumstances.

Under FAS 157, the FASB clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, FAS 157 establishes a fair value hierarchy that prioritizes the information used to develop such assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. FAS 157 also requires separate disclosure of fair value measurements by level within the hierarchy and expanded disclosure of the effect on earnings for items measured using unobservable data.

FAS 157 was adopted by the Company on January 1, 2008. As a result of implementing FAS 157, the Company recognized $1.7, before tax, as an increase to Net income on the date of adoption related to the fair value measurements of the reserves for product guarantees. The impact of implementation was included in Interest credited and other benefits to contractholders on the Consolidated Statements of Operations.

84

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

In October 2008, the FASB issued FASB Staff Position (“FSP”) FAS No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (“FSP FAS 157-3”), which provides clarifying guidance on the application of FAS 157 to financial assets in a market that is not active and was effective upon issuance. FSP FAS 157-3 had no effect on the Company’s financial condition, results of operations, or cash flows upon adoption, as its guidance is consistent with that applied by the Company upon adoption of FAS 157.

The Company recognized no other adjustments to its financial statements related to the adoption of FAS 157, and new disclosures are included in the Financial Instruments footnote.

The Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“FAS 159”), which allows a company to make an irrevocable election, on specific election dates, to measure eligible items at fair value with unrealized gains and losses recognized in earnings at each subsequent reporting date. The election to measure an item at fair value may be determined on an instrument by instrument basis, with certain exceptions. If the fair value option is elected, any upfront costs and fees related to the item will be recognized in earnings as incurred. Items eligible for the fair value option include:

§ Certain recognized financial assets and liabilities;

§ Rights and obligations under certain insurance contracts that are not financial instruments;

§ Host financial instruments resulting from the separation of an embedded nonfinancial derivative instrument from a nonfinancial hybrid instrument; and

§ Certain commitments.

FAS 159 was adopted by the Company on January 1, 2008. In implementing FAS 159, the Company elected not to take the fair value option for any eligible assets or liabilities in existence on January 1, 2008, or in existence at the date of these Consolidated Financial Statements.

Offsetting of Amounts Related to Certain Contracts

On April 30, 2007, the FASB issued a FSP on FASB Interpretation (“FIN”) No. 39, “Offsetting of Amounts Related to Certain Contracts” (“FSP FIN 39-1”), which permits a reporting entity to offset fair value amounts recognized for the right to reclaim or the obligation to return cash collateral against fair value amounts recognized for derivative instruments under master netting arrangements. FSP FIN 39-1 had no effect on the financial condition, results of operations, or cash flows upon adoption by the Company on January 1, 2008, as it is the Company’s accounting policy not to offset such fair value amounts.

85

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Accounting for Uncertainty in Income Taxes

In June 2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which creates a single model to address the accounting for the uncertainty in income tax positions recognized in a company’s financial statements. FIN 48 prescribes a recognition threshold and measurement criteria that must be satisfied to recognize a financial statement benefit of tax positions taken, or expected to be taken, on an income tax return. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

FIN 48 was adopted by the Company on January 1, 2007. As a result of implementing FIN 48, the Company recognized a cumulative effect of change in accounting principle of $2.9 as a reduction to January 1, 2007 Retained earnings (deficit).

Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts

In September 2005, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 05-1, “Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts” (“SOP 05-1”), which states that when an internal replacement transaction results in a substantially changed contract, the unamortized deferred acquisition costs, unearned revenue liabilities, and deferred sales inducement assets, related to the replaced contract should not be deferred in connection with the new contract. Contract modifications that meet various conditions defined by SOP 05-1 and result in a new contract that is substantially unchanged from the replaced contract, however, should be accounted for as a continuation of the replaced contract.

SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverage that occurs by the exchange of a contract for a new contract, by amendment, endorsement, or rider, to a contract, or by the election of a feature or coverage within a contract. SOP 05-1 applies to internal replacements made primarily to contracts defined by FAS No. 60, “Accounting and Reporting by Insurance Enterprises” (“FAS 60”), as short-duration and long-duration insurance contracts, and by FAS No. 97, “Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments” (“FAS 97”), as investment contracts.

SOP 05-1 was adopted by the Company on January 1, 2007, and is effective for internal replacements occurring on or after that date. As a result of implementing SOP 05-1, the Company recognized a cumulative effect of change in accounting principle of $43.4, before tax, or $28.2, net of $15.2 of income taxes, as a reduction to January 1, 2007 Retained earnings (deficit). In addition, the Company revised its accounting policy on the amortization of deferred policy acquisition costs ("DAC") and value of business acquired ("VOBA") to include internal replacements.

86

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Disclosures about Credit Derivatives and Certain Guarantees

In September 2008, the FASB issued FSP FAS No. 133-1 and FIN No. 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP FAS 133-1 and FIN 45-4”), which does the following:

§ Amends FAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”), requiring additional disclosures by sellers of credit derivatives;

§ Amends FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”), requiring additional disclosure about the current status of the payment/performance risk of a guarantee; and

§ Clarifies the effective date of FAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”).

FSP FAS 133-1 and FIN 45-4 was adopted by the Company on December 31, 2008. In implementing FSP FAS 133-1 and FIN 45-4, the Company determined that its adoption had no financial statement impact. New disclosures are included in the Financial Instruments and Commitments and Contingent Liabilities footnotes.

The clarification in the FSP of the effective date of FAS 161 is consistent with the guidance in FAS 161 and the Company’s disclosure provided herein.

Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities

In December, 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities” (“FSP FAS 140-4 and FIN 46(R)-8”), which requires additional disclosures regarding a transferor’s continuing involvement with financial assets transferred in a securitization or asset-backed financing arrangement and an enterprise’s involvement with variable interest entities (“VIEs”) and qualifying special purpose entities (“QSPEs”).

FSP FAS 140-4 and FIN 46(R)-8 was adopted by the Company on December 31, 2008. In implementing FSP FAS 140-4 and FIN 46(R)-8, the Company determined that its adoption has no financial statement impact. The Company does not have any QSPEs or continuing involvement with financial assets transferred in a securitization or asset-backed financing arrangement.

87

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Amendments to Impairment Guidance

In January 2009, the FASB issued FSP Emerging Issues Task Force (“EITF”) 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20” (“FSP EITF 99-20-1”), which amends EITF 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets” (“EITF 99-20”). FSP EITF 99-20-1 requires that an other-than-temporary impairment on investments that meet the criteria of EITF 99-20 be recognized as a realized loss through earnings when it is probable there has been an adverse change in the holder’s estimated cash flow, consistent with the impairment model in FAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.”

FSP EITF 99-20-1 was adopted by the Company on December 31, 2008, prospectively. In implementing FSP EITF 99-20-1, the Company determined there was a minimal effect on financial position, results of operations, and cash flows, as the structured securities held by the Company were highly rated at issue.

New Accounting Pronouncements

Disclosures about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued FAS 161, which requires enhanced disclosures about objectives and strategies for using derivatives, fair value amounts of and gains and losses on derivative instruments, and credit-risk-related contingent features in derivative agreements, including:

§ How and why derivative instruments are used;

§ How derivative instruments and related hedged items are accounted for under FAS 133 and its related interpretations; and

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

The provisions of FAS 161 are effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is currently in the process of determining the impact of adoption of FAS 161 on its disclosures; however, as the pronouncement only pertains to additional disclosures, the Company has determined that the adoption of FAS 161 will have no financial statement impact. In addition, the Company’s derivatives are generally not accounted for using hedge accounting treatment under FAS 133, as the Company has not historically sought hedge accounting treatment.

88

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Business Combinations

In December 2007, the FASB issued FAS No. 141 (revised 2007), “Business Combinations” (“FAS 141R”), which replaces FAS No. 141, “Business Combinations,” as issued in 2001. FAS 141R requires most identifiable assets, liabilities, noncontrolling interest, and goodwill acquired in a business combination to be recorded at full fair value as of the acquisition date, even for acquisitions achieved in stages. In addition, the statement requires:

§ Acquisition-related costs to be recognized separately and generally expensed;

§ Non-obligatory restructuring costs to be recognized separately when the liability is incurred;

§ Contractual contingencies acquired to be recorded at acquisition-date fair values;

§ A bargain purchase, which occurs when the fair value of net assets acquired exceeds the consideration transferred plus any non-controlling interest in the acquiree, to be recognized as a gain; and

§ The nature and financial effects of the business combination to be disclosed.

FAS 141R also amends or eliminates various other authoritative literature.

The provisions of FAS 141R are effective for fiscal years beginning on or after December 15, 2008 for all business combinations occurring on or after that date. As such, this standard will impact any Company acquisitions that occur on or after January 1, 2009.

Equity Method Investment Accounting

In November 2008, the EITF reached consensus on EITF 08-6, “Equity Method Investment Accounting Considerations” (“EITF 08-6”), which requires, among other provisions, that:

§ Equity method investments be initially measured at cost;

§ Contingent consideration only be included in the initial measurement;

§ An investor recognize its share of any impairment charge recorded by the equity investee; and

§ An investor account for a share issuance by an equity investee as if the investor had sold a proportionate share of its investment;

The provisions of EITF 08-6 are effective in fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. As such, this standard will impact Company acquisitions or changes in ownership with regards to equity investments that occur on or after January 1, 2009. The Company is currently in the process of determining the impact of the other-than-temporary impairment provisions.

89

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“US GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from reported results using those estimates.

Reclassifications

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

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, money market instruments, and other debt issues with a maturity of 90 days or less when purchased.

Investments

All of the Company’s fixed maturities and equity securities are currently designated as available-for-sale. Available-for-sale securities are reported at fair value and unrealized capital gains (losses) on these securities are recorded directly in Shareholder’s equity, after adjustment, if any, for related changes in experience-rated contract allocations, DAC, VOBA, and deferred income taxes.

Other-Than-Temporary Impairments

The Company analyzes the general account investments to determine whether there has been an other-than-temporary decline in fair value below the amortized cost basis. Management considers the length of time and the extent to which fair value has been less than amortized cost, the issuer’s financial condition and near-term prospects, future economic conditions and market forecasts, and the Company’s intent and ability to retain the investment for a period of time sufficient to allow for recovery in fair value. If it is probable that all amounts due according to the contractual terms of a debt security will not be collected, an other-than-temporary impairment is considered to have occurred.

In addition, the Company invests in structured securities that meet the criteria of the EITF 99-20. Under EITF 99-20, a further determination of the required impairment is based on credit risk and the possibility of significant prepayment risk that restricts the Company’s ability to recover the investment. An impairment is recognized if the fair value of the security is less than amortized cost and there has been adverse change in cash flow since the last remeasurement date.

90

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

When a decline in fair value is determined to be other-than-temporary, the individual security is written down to fair value, and the loss is accounted for as a change in Net realized capital gains (losses).

Experience-Rated Products

Included in available-for-sale securities are investments that support experience-rated products. Experience-rated products are products where the customer, not the Company, assumes investment (including realized capital gains and losses) and other risks, subject to, among other things, minimum principal and interest guarantees. Unamortized realized capital gains (losses) on the sale of and unrealized capital gains (losses) on investments supporting these products are included in Future policy benefits and claims reserves on the Consolidated Balance Sheets. Net realized capital gains (losses) on all other investments were reflected in the Consolidated Statements of Operations. Unrealized capital gains (losses) on all other investments were reflected in Accumulated other comprehensive income (loss) in Shareholder’s equity, net of DAC and VOBA adjustments for unrealized capital gains (losses), and related income taxes. During 2008, due to the current economic environment, which resulted in significant realized and unrealized losses associated with assets supporting experience-rated contracts, the Company accelerated the amortization of realized losses and recorded such amounts in Interest credited and other benefits to contractowners in the Consolidated Statements of Operations and recorded unrealized losses in Accumulated other comprehensive income (loss) in Shareholder’s equity rather than Future policy benefits and claims reserves.

Purchases and Sales

Purchases and sales of fixed maturities and equity securities, excluding private placements, are recorded on the trade date. Purchases and sales of private placements and mortgage loans are recorded on the closing date.

Valuation

The fair values for the actively traded marketable fixed maturities are determined based upon the quoted market prices or dealer quotes. The fair values for marketable bonds without an active market are obtained through several commercial pricing services, which provide the estimated fair values. These services incorporate a variety of market observable information in their valuation techniques, including benchmark yields, broker-dealer quotes, credit quality, issuer spreads, bids, offers and other reference data. Valuations obtained from third party commercial pricing services are non-binding and are validated monthly through comparisons to internal pricing models, back testing to recent trades, and monitoring of trading volumes.

Fair values of privately placed bonds are determined using a matrix-based pricing model. The model considers the current level of risk-free interest rates, current corporate spreads, the credit quality of the issuer, and cash flow characteristics of the security. Also considered are factors such as the net worth of the borrower, the value of collateral,

91

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

the capital structure of the borrower, the presence of guarantees, and the Company’s evaluation of the borrower’s ability to compete in their relevant market. Using this data, the model generates estimated market values, which the Company considers reflective of the fair value of each privately placed bond.

The fair values for certain collateralized mortgage obligations (“CMO-Bs”) are determined by taking the average of broker quotes when more than one broker quote is provided. A few of the CMO-Bs are priced by the originating broker due to the complexity and unique characteristics of the asset.

The fair values for actively traded equity securities are based on quoted market prices.

Mortgage loans on real estate are reported at amortized cost, less impairment write-downs. If the value of any mortgage loan is determined to be impaired (i.e., when it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement), the carrying value of the mortgage loan is reduced to the present value of expected cash flows from the loan, discounted at the loan’s effective interest rate, or fair value of the collateral. If the loan is in foreclosure, the carrying value is reduced to the fair value of the underlying collateral, net of estimated costs to obtain and sell. The carrying value of the impaired loans is reduced by establishing a permanent write-down recorded in Net realized capital gains (losses).

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

Short-term investments, consisting primarily of money market instruments and other fixed maturity issues purchased with an original maturity of 91 days to one year, are considered available-for-sale and are carried at fair value.

Derivative instruments are reported at fair value primarily using the Company’s derivative accounting system. The system uses key financial data, such as yield curves, exchange rates, Standard & Poor’s (“S&P”) 500 Index prices, and London Inter Bank Offered Rates (“LIBOR”), which are obtained from third party sources and uploaded into the system. For those derivatives that are unable to be valued by the accounting system, the Company typically utilizes values established by third party brokers. Embedded derivative instruments are reported at fair value based upon internally established valuations that are consistent with external valuation models or market quotations.

Repurchase Agreements

The Company engages in dollar repurchase agreements (“dollar rolls”) and repurchase agreements to increase the return on investments and improve liquidity. These transactions involve a sale of securities and an agreement to repurchase substantially the same securities as those sold. Company policies require a minimum of 95% of the fair value of securities pledged under dollar rolls and repurchase agreement transactions to be maintained as collateral. Cash collateral received is invested in fixed maturities, and

92

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

the carrying value of the securities pledged in dollar rolls and repurchase agreement transactions is included in Securities pledged on the Consolidated Balance Sheets. The repurchase obligation related to dollar rolls and repurchase agreements is included in Borrowed money on the Consolidated Balance Sheets.

The Company also enters into reverse repurchase agreements. These transactions involve a purchase of securities and an agreement to sell substantially the same securities as those purchased. Company policies require a minimum of 102% of the fair value of securities pledged under reverse repurchase agreements to be pledged as collateral. Reverse repurchase agreements are included in Cash and cash equivalents on the Consolidated Balance Sheets.

Securities Lending

The Company engages in securities lending whereby certain securities from its portfolio are loaned to other institutions for short periods of time. Initial collateral, primarily cash, is required at a rate of 102% of the market value of the loaned domestic securities. The collateral is deposited by the borrower with a lending agent, and retained and invested by the lending agent according to the Company’s guidelines to generate additional income. The market value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the market value of the loaned securities fluctuates.

Derivatives

The Company’s use of derivatives is limited mainly to hedging purposes to reduce the Company’s exposure to cash flow variability of assets and liabilities, interest rate risk, credit risk, and market risk. Generally, derivatives are not accounted for using hedge accounting treatment under FAS 133, as the Company has not historically sought hedge accounting treatment.

The Company enters into interest rate, equity market, credit default, and currency contracts, including swaps, 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. The Company also utilizes options and futures on equity indices to reduce and manage risks associated with its annuity products. Open derivative contracts are reported as either Other investments or Other liabilities, as appropriate, on the Consolidated Balance Sheets. Changes in the fair value of such derivatives are recorded in Net realized capital gains (losses) in the Consolidated Statements of Operations.

The Company also has investments in certain fixed maturity instruments, and has issued certain products with guarantees, 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- or long-term), exchange rates, prepayment rates, equity markets, or credit ratings/spreads.

93

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Embedded derivatives within fixed maturity instruments are included in Fixed maturities, available-for-sale, on the Consolidated Balance Sheets, and changes in fair value are recorded in Net realized capital gains (losses) in the Consolidated Statements of Operations.

Embedded derivatives within retail annuity products are included in Future policy benefits and claims reserves on the Consolidated Balance Sheets, and changes in the fair value are recorded in Interest credited and benefits to contractowners in the Consolidated Statements of Operations.

Deferred Policy Acquisition Costs and Value of Business Acquired

General

DAC represents policy acquisition costs that have been capitalized and are subject to amortization. Such costs consist principally of certain commissions, underwriting, contract issuance, and certain agency expenses, related to the production of new and renewal business.

VOBA represents the outstanding value of in force business capitalized in purchase accounting when the Company was acquired and is subject to amortization. The value is based on the present value of estimated net cash flows embedded in the Company’s contracts.

FAS 97 applies to universal life and investment-type products, such as fixed and variable deferred annuities. Under FAS 97, DAC and VOBA are amortized, with interest, over the life of the related contracts in relation to the present value of estimated future gross profits from investment, mortality, and expense margins, plus surrender charges.

Internal Replacements

Contractowners may periodically exchange one contract for another, or make modifications to an existing contract. Beginning January 1, 2007, these transactions are identified as internal replacements and are accounted for in accordance with SOP 05-1.

Internal replacements that are determined to result in substantially unchanged contracts are accounted for as continuations of the replaced contracts. Any costs associated with the issuance of the new contracts are considered maintenance costs and expensed as incurred. Unamortized DAC and VOBA related to the replaced contracts continue to be deferred and amortized in connection with the new contracts. For deferred annuities, the estimated future gross profits of the new contracts are treated as revisions to the estimated future gross profits of the replaced contracts in the determination of amortization.

94

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Internal replacements that are determined to result in contracts that are substantially changed are accounted for as extinguishments of the replaced contracts, and any unamortized DAC and VOBA related to the replaced contracts are written off to Net amortization of deferred policy acquisition costs and value of business acquired in the Consolidated Statements of Operations.

Unlocking

Changes in assumptions can have a significant impact on DAC and VOBA balances and amortization rates. Several assumptions are considered significant in the estimation of future gross profits associated with variable deferred annuity products. One of the most significant assumptions involved in the estimation of future gross profits is the assumed return associated with the variable account performance. To reflect the volatility in the equity markets, this assumption involves a combination of near-term expectations and long-term assumptions regarding market performance. The overall return on the variable account is dependent on multiple factors, including the relative mix of the underlying sub-accounts among bond funds and equity funds, as well as equity sector weightings. Other significant assumptions include surrender and lapse rates, estimated interest spread, and estimated mortality.

Due to the relative size and sensitivity to minor changes in underlying assumptions of DAC and VOBA balances, the Company performs quarterly and annual analyses of DAC and VOBA. The DAC and VOBA balances are evaluated for recoverability.

At each evaluation date, actual historical gross profits are reflected, and estimated future gross profits and related assumptions are evaluated for continued reasonableness. Any adjustment in estimated future gross profits requires that the amortization rate be revised (“unlocking”), retroactively to the date of the policy or contract issuance. The cumulative unlocking adjustment is recognized as a component of current period amortization. In general, sustained increases in investment, mortality, and expense margins, and thus estimated future gross profits, lower the rate of amortization. Sustained decreases in investment, mortality, and expense margins, and thus estimated future gross profits, however, increase the rate of amortization.

Property and Equipment

Property and equipment are carried at cost, less accumulated depreciation. Expenditures for replacements and major improvements are capitalized; maintenance and repair expenditures are expensed as incurred.

At December 31, 2008 and 2007, total accumulated depreciation and amortization was $103.0 and $120.7, respectively. Depreciation on property and equipment is provided on a straight-line basis over the estimated useful lives of the assets with the exception of land and artwork, which are not depreciated or amortized. The Company’s property and equipment are depreciated using the following estimated useful lives.

95

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

	Estimated Useful Lives
Buildings	40 years
Furniture and fixtures	5 years
Leasehold improvements	10 years, or the life of the lease, whichever is shorter
Equipment	3 years
Software	3 years

Reserves

The Company records as liabilities reserves to meet the Company’s future obligations under its variable annuity and fixed annuity products.

Future policy benefits and claims reserves include reserves for deferred annuities and immediate annuities with and without life contingent payouts.

Reserves for individual and group deferred annuity investment contracts and individual immediate annuities without life contingent payouts are equal to cumulative deposits, less charges and withdrawals, plus credited interest thereon, net of adjustments for investment experience that the Company is entitled to reflect in future credited interest. Credited interest rates vary by product and ranged from 1.6% to 7.8% for the years 2008, 2007, and 2006. Certain reserves may also include net unrealized gains and losses related to investments and unamortized net realized gains and losses on investments for experience-rated contracts. Reserves on experienced-rated contracts reflect the rights of contractowners, plan participants, and the Company. During 2008, given the current economic environment, which resulted in significant net realized and unrealized losses, the Company did not include net unrealized and unamortized realized losses associated with experience-rated contracts in Future policy benefits and claims reserves. The net unrealized losses are reflected in Accumulated other comprehensive (loss) income, and the amortization of the unamortized realized losses have been recorded in Interest credited and other benefits to contractholders. Reserves for group immediate annuities without life contingent payouts are equal to the discount value of the payment at the implied break-even rate.

Reserves for individual immediate annuities with life contingent payout benefits are computed on the basis of assumed interest discount rates, mortality, and expenses, including a margin for adverse deviations. Such assumptions generally vary by annuity type plan, year of issue, and policy duration. For the years 2008, 2007, and 2006, reserve interest rates ranged from 5.3% to 5.9%.

The Company records reserves for product guarantees, which can be either assets or liabilities, for annuity contracts containing guaranteed credited rates. The guarantee is treated as an embedded derivative or a stand-alone derivative (depending on the underlying product) and is required to be reported at fair value. The fair value of the obligation is calculated based on the income approach. The income associated with the contracts is projected using relevant actuarial and capital market assumptions, including

96

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

benefits and related contract charges, over the anticipated life of the related contracts. The cash flow estimates are produced by using stochastic techniques under a variety of risk neutral scenarios and other best estimate assumptions. Explicit risk margins in the actuarial assumptions underlying valuations are included, as well as an explicit recognition of all nonperformance risks beginning January 1, 2008 with the adoption of FAS 157. Nonperformance risk for product guarantees contains adjustments to the fair values of these contract liabilities related to the current credit standing of ING and the Company based on credit default swaps with similar term to maturity and priority of payment. The ING credit default spread is applied to the discount factors for product guarantees in the Company’s valuation model in order to incorporate credit risk into the fair values of these product guarantees.

The Company has a significant concentration of reinsurance arising from the disposition of its individual life insurance business. In 1998, the Company entered into an indemnity reinsurance arrangement with certain subsidiaries of Lincoln National Corporation (“Lincoln”). Effective March 1, 2007, the reinsurance agreements were assigned to a single subsidiary of Lincoln, and that subsidiary established a trust to secure its obligations to the Company under the reinsurance transaction. The Company includes an amount in Reinsurance recoverable on the Consolidated Balance Sheets, which equals the Company’s total individual life reserves. Individual life reserves are included in Future policy benefits and claims reserves on the Consolidated Balance Sheets.

Unpaid claims and claim expenses for all lines of insurance include benefits for reported losses and estimates of benefits for losses incurred but not reported.

Certain variable annuities offer guaranteed minimum death benefits (“GMDB”). The GMDB is accrued in the event the contractowner account value at death is below the guaranteed value and is included in reserves.

Revenue Recognition

For most annuity contracts, charges assessed against contractowner funds for the cost of insurance, surrenders, expenses, and other fees are recorded as revenue as charges are assessed. Other amounts received for these contracts are reflected as deposits and are not recorded as premiums or revenue. When annuity payments with life contingencies begin under contracts that were initially investment contracts, the accumulated balance in the account is treated as a single premium for the purchase of an annuity and reflected in both Premiums and Interest credited and other benefits to contractowners in the Consolidated Statements of Operations.

Premiums on the Consolidated Statements of Operations primarily represent amounts received for immediate annuities with life contingent payouts.

97

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Separate Accounts

Separate account assets and liabilities generally represent funds maintained to meet specific investment objectives of contractowners who bear the investment risk, subject, in limited cases, to certain minimum guarantees. Investment income and investment gains and losses generally accrue directly to such contractowners. The assets of each account are legally segregated and are not subject to claims that arise out of any other business of the Company or its affiliates.

Separate account assets supporting variable options under variable annuity contracts are invested, as designated by the contractowner or participant (who bears the investment risk subject, in limited cases, to minimum guaranteed rates) under a contract, in shares of mutual funds that are managed by the Company or its affiliates, or in other selected mutual funds not managed by the Company or its affiliates.

Separate account assets and liabilities are carried at fair value and shown as separate captions in the Consolidated Balance Sheets. Deposits, investment income, and net realized and unrealized capital gains (losses) of the separate accounts, however, are not reflected in the Consolidated Statements of Operations (with the exception of realized and unrealized capital gains (losses) on the assets supporting the guaranteed interest option). The Consolidated Statements of Cash Flows do not reflect investment activity of the separate accounts.

Assets and liabilities of separate account arrangements that do not meet the criteria for separate presentation in the Consolidated Balance Sheets (primarily the guaranteed interest option), and revenue and expenses related to such arrangements, are consolidated in the financial statements with the general account. At December 31, 2008 and 2007, unrealized capital losses of $53.2 and $11.0, respectively, after taxes, on assets supporting a guaranteed interest option are reflected in Shareholder’s equity.

Reinsurance

The Company utilizes indemnity reinsurance agreements to reduce its exposure to losses from GMDBs in its annuity insurance business. Reinsurance permits recovery of a portion of losses from reinsurers, although it does not discharge the Company’s primary liability as the direct insurer of the risks. The Company evaluates the financial strength of potential reinsurers and continually monitors the financial strength and credit ratings of its reinsurers. Only those reinsurance recoverable balances deemed probable of recovery are reflected as assets on the Company’s Consolidated Balance Sheets.

Of the Reinsurance recoverable on the Consolidated Balance Sheets, $2.5 billion and $2.6 billion at December 31, 2008 and 2007, respectively, is related to the reinsurance recoverable from certain subsidiaries of Lincoln arising from the disposal of the Company’s individual life insurance business in 1998 (see the Reinsurance footnote). Effective March 1, 2007, the reinsurance agreements were assigned to a single subsidiary of Lincoln, and that subsidiary established a trust to secure its obligations to the Company under the reinsurance transaction.

98

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Income Taxes

The Company is taxed at regular corporate rates after adjusting income reported for financial statement purposes for certain items. Deferred income tax expenses/benefits result from changes during the year in cumulative temporary differences between the tax basis and book basis of assets and liabilities.

2. Investments

Fixed Maturities and Equity Securities

Fixed maturities and equity securities, available-for-sale, were as follows as of December 31, 2008.

						Gross		Gross
						Unrealized		Unrealized
				Amortized		Capital		Capital		Fair
				Cost		Gains		Losses		Value
Fixed maturities:
	U.S. Treasuries		$	1,391.4	$	84.5	$	0.9	$	1,475.0
	U.S. government agencies and authorities			797.1		77.2		1.2		873.1
	State, municipalities, and political subdivisions			72.9		0.3		17.7		55.5
	U.S. corporate securities:
		Public utilities		1,112.4		4.4		117.6		999.2
		Other corporate securities		3,986.2		85.6		436.6		3,635.2
	Total U.S. corporate securities			5,098.6		90.0		554.2		4,634.4
	Foreign securities(1):
		Government		397.8		4.3		61.4		340.7
		Other		2,188.5		27.0		274.0		1,941.5
	Total foreign securities			2,586.3		31.3		335.4		2,282.2
	Residential mortgage-backed securities			3,412.6		153.6		266.7		3,299.5
	Commercial mortgage-backed securities			1,604.0		0.1		370.5		1,233.6
	Other asset-backed securities			830.2		9.0		214.9		624.3
	Total fixed maturities, including
		securities pledged		15,793.1		446.0		1,761.5		14,477.6
	Less: securities pledged			1,160.5		72.7		7.8		1,225.4
Total fixed maturities				14,632.6		373.3		1,753.7		13,252.2
Equity securities				247.7		1.0		8.4		240.3
Total investments, available-for-sale			$	14,880.3	$	374.3	$	1,762.1	$	13,492.5
(1) Primarily U.S. dollar denominated.

99

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Fixed maturities and equity securities, available-for-sale, were as follows as of December 31, 2007.

						Gross		Gross
						Unrealized		Unrealized
				Amortized		Capital		Capital		Fair
				Cost		Gains		Losses		Value
Fixed maturities:
	U.S. Treasuries		$	11.2	$	0.7	$	-	$	11.9
	U.S. government agencies and authorities			0.6		-		-		0.6
	State, municipalities, and political subdivisions			66.1		0.1		2.2		64.0
	U.S. corporate securities:
		Public utilities		1,049.1		10.8		15.6		1,044.3
		Other corporate securities		3,855.1		46.1		65.2		3,836.0
	Total U.S. corporate securities			4,904.2		56.9		80.8		4,880.3
	Foreign securities(1):
		Government		379.3		17.1		6.6		389.8
		Other		1,955.8		29.9		40.3		1,945.4
	Total foreign securities			2,335.1		47.0		46.9		2,335.2
	Residential mortgage-backed securities			4,146.1		101.8		63.5		4,184.4
	Commercial mortgage-backed securities			1,927.3		10.7		52.3		1,885.7
	Other asset-backed securities			924.3		5.5		41.5		888.3
	Total fixed maturities, including
		securities pledged		14,314.9		222.7		287.2		14,250.4
	Less: securities pledged			940.2		8.0		14.1		934.1
Total fixed maturities				13,374.7		214.7		273.1		13,316.3
Equity securities				440.1		13.8		7.5		446.4
Total investments, available-for-sale			$	13,814.8	$	228.5	$	280.6	$	13,762.7
(1) Primarily U.S. dollar denominated.

At December 31, 2008 and 2007, net unrealized losses were $1,322.9 and $58.2, respectively, on total fixed maturities, including securities pledged to creditors, and equity securities. During 2008, as a result of the current economic environment, which resulted in significant losses on investments supporting experience-rated contracts, the Company reflected all unrealized losses in Shareholder’s equity rather than Future policy benefits and claims reserves. At December 31, 2007, $16.4 of net unrealized capital gains (losses) was related to experience-rated contracts and was not reflected in Shareholder’s equity but in Future policy benefits and claim reserves.

100

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

The amortized cost and fair value of total fixed maturities as of December 31, 2008, are shown below by contractual maturity. Actual maturities may differ from contractual maturities as securities may be restructured, called, or prepaid.

			Amortized		Fair
			Cost		Value
Due to mature:
	One year or less	$	273.3	$	271.5
	After one year through five years		3,751.8		3,576.2
	After five years through ten years		3,546.6		3,344.4
	After ten years		2,374.6		2,128.1
	Mortgage-backed securities		5,016.6		4,533.1
	Other asset-backed securities		830.2		624.3
Less: securities pledged			1,160.5		1,225.4
Fixed maturities, excluding securities pledged		$	14,632.6	$	13,252.2

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 at December 31, 2008 or 2007.

At December 31, 2008 and 2007, fixed maturities with fair values of $14.2 and $13.9, respectively, were on deposit as required by regulatory authorities.

The Company invests in various categories of collateralized mortgage obligations (“CMOs”) that are subject to different degrees of risk from changes in interest rates and, for CMOs that are not agency-backed, defaults. The principal risks inherent in holding CMOs are prepayment and extension risks related to dramatic decreases and increases in interest rates resulting in the prepayment of principal from the underlying mortgages, either earlier or later than originally anticipated. At December 31, 2008 and 2007, approximately 13.0% and 11.3%, respectively, of the Company’s CMO holdings were invested in those types of CMOs which are subject to more prepayment and extension risk than traditional CMOs, such as interest-only or principal-only strips.

Transfer of Alt-A RMBS Participation Interest

On January 26, 2009, ING announced it reached an agreement, for itself and on behalf of certain ING affiliates including the Company, with the Dutch State on an Illiquid Assets Back-up Facility (the “Back-up Facility”) covering 80% of ING’s Alt-A residential mortgage-backed securities (“Alt-A RMBS”). Under the terms of the Back-up Facility, a full credit risk transfer to the Dutch State will be realized on 80% of ING’s Alt-A RMBS owned by ING Bank, FSB and ING affiliates within ING Insurance Americas with a book value of $36.0 billion portfolio, including book value of 775.1 of the Alt-A RMBS portfolio owned by the Company (with respect to the Company’s portfolio, the “Designated Securities Portfolio”) (the “ING-Dutch State Transaction”). As a result of the risk transfer, the Dutch State will participate in 80% of any results of the ING Alt-A RMBS portfolio. The risk transfer to the Dutch State will take place at a discount of

101

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

approximately 10% of par value. In addition, under the Back-up Facility, other fees will be paid both by the Company and the Dutch State. Each ING company participating in the ING-Dutch State Transaction, including the Company will remain the legal owner of 100% of its Alt-A RMBS portfolio and will remain exposed to 20% of any results on the portfolio. Subject to documentation and regulatory approvals, the ING-Dutch State Transaction is expected to close by the end of March 2009, with the affiliate participation conveyance and risk transfer to the Dutch State described in the succeeding paragraph to take effect as of January 26, 2009.

In order to implement that portion of the ING-Dutch State Transaction related to the Company’s Designated Securities Portfolio, the Company will enter into a participation agreement with its affiliates, ING Support Holding B.V. (“ING Support Holding”) and ING pursuant to which the Company will convey to ING Support Holding an 80% participation interest in its Designated Securities Portfolio and pay a periodic transaction fee, and will receive, as consideration for the participation, an assignment by ING Support Holding of its right to receive payments from the Dutch State under the Illiquid Assets Back-Up Facility related to the Company’s Designated Securities Portfolio among, ING, ING Support Holding and the Dutch State (the “Company Back-Up Facility”). Under the Company Back-Up Facility, the Dutch State will be obligated to pay certain periodic fees and make certain periodic payments with respect to the Company’s Designated Securities Portfolio, and ING Support Holding will be obligated to pay a periodic guarantee fee and make periodic payments to the Dutch State equal to the distributions it receives with respect to the 80% participation interest in the Company’s Designated Securities Portfolio.

In a second transaction, known as the Step 1 Cash Transfer, a portion of the Company’s Alt-A RMBS which has a book value of $4.2 will be sold for cash to an affiliate, Lion II Custom Investments LLC (“Lion II”). Immediately thereafter, Lion II will sell to ING Direct Bancorp the purchased securities (the “Step 2 Cash Transfer”). Contemporaneous with the Step 2 Cash Transfer, ING Direct Bancorp will include such purchased securities as part of its Alt-A RMBS portfolio sale to the Dutch State. Subject to documentation and regulatory approval, the Step 1 Cash Transfer is expected to close by the end of March 2009 contemporaneous with the closing of the ING-Dutch State Transaction.

Since the Company had the intent to sell a portion of its Alt-A RMBS through the 80% participation interest in its Designated Securities Portfolio or as part of the Step 1 Cash Transfer as of December 31, 2008, the Company recognized $253.2 in other-than-temporary impairments with respect to the 80% participation interest in its Designated Securities Portfolio that it expects to convey as part of the ING-Dutch State Transaction and the Step 1 Cash Transfer. The Company expects to recognize a gain in the estimated range of $220.0 to $240.0 upon the closing of the ING-Dutch State Transaction and the Step 1 Cash Transfer.

102

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Equity Securities

Equity securities, available-for-sale, included investments with fair values of $141.0 and $279.5 in ING proprietary funds as of December 31, 2008 and 2007, respectively.

Repurchase Agreements

The Company engages in dollar repurchase agreements (“dollar rolls”) and repurchase agreements to increase its return on investments and improve liquidity. These transactions involve a sale of securities and an agreement to repurchase substantially the same securities as those sold. Company policies require a minimum of 95% of the fair value of securities pledged under dollar rolls and repurchase agreement transactions to be maintained as collateral. Cash collateral received is invested in fixed maturities, and the offsetting collateral liability is included in Borrowed money on the Consolidated Balance Sheets. At December 31, 2008 and 2007, the carrying value of the securities pledged in dollar rolls and repurchase agreement transactions was $657.2 and $757.6, respectively. The carrying value of the securities pledged in dollar rolls and repurchase agreement transactions is included in Securities pledged on the Consolidated Balance Sheets. The repurchase obligation related to dollar rolls and repurchase agreements totaled $613.9 and $734.8 at December 31, 2008 and 2007, respectively. The repurchase obligation related to dollar rolls and repurchase agreements is included in Borrowed money on the Consolidated Balance Sheets.

The Company also engages in reverse repurchase agreements. At December 31, 2008 and 2007, the Company did not have any reverse repurchase agreements.

The primary risk associated with short-term collateralized borrowings is that the counterparty will be unable to perform under the terms of the contract. The Company’s exposure is limited to the excess of the net replacement cost of the securities over the value of the short-term investments, an amount that was immaterial at December 31, 2008 and 2007. The Company believes the counterparties to the dollar rolls, repurchase, and reverse repurchase agreements are financially responsible and that the counterparty risk is minimal.

Securities Lending

The Company engages in securities lending whereby certain securities from its portfolio are loaned to other institutions for short periods of time. Initial collateral, primarily cash, is required at a rate of 102% of the market value of the loaned domestic securities. The collateral is deposited by the borrower with a lending agent, and retained and invested by the lending agent according to the Company’s guidelines to generate additional income. The market value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the market value of the loaned securities fluctuates. At December 31, 2008 and 2007, the fair value of loan securities was $474.8 and $176.5, respectively.

103

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Unrealized Capital Losses

Unrealized capital losses in fixed maturities at December 31, 2008 and 2007, were primarily related to the effects of interest rate movement or spread widening on mortgage and other asset-backed securities. Mortgage and other asset-backed securities include U.S. government-backed securities, principal protected securities, and structured securities, which did not have an adverse change in cash flows. The following table summarizes the unrealized capital losses by duration and reason, along with the fair value of fixed maturities, including securities pledged, in unrealized capital loss positions at December 31, 2008 and 2007.

			Lessthan		Morethan		Morethan
			Six		SixMonths		Twelve
			Months		andlessthan		Months		Total
			Below		TwelveMonths		Below		Unrealized
			Amortized		BelowAmortized		Amortized		Capital
2008			Cost		Cost		Costs		Loss
Interest rate or spread widening		$	144.2	$	381.7	$	383.5	$	909.4
Mortgage and other
	asset-backed securities		65.3		188.5		598.3		852.1
Total unrealized capital losses		$	209.5	$	570.2	$	981.8	$	1,761.5
Fair value		$	2,999.6	$	3,446.7	$	2,964.2	$	9,410.5

			Lessthan		Morethan		Morethan
			Six		SixMonths		Twelve
			Months		andlessthan		Months		Total
			Below		TwelveMonths		Below		Unrealized
			Amortized		BelowAmortized		Amortized		Capital
2007			Cost		Cost		Costs		Loss
Interest rate or spread widening		$	18.8	$	62.3	$	48.8	$	129.9
Mortgage and other
	asset-backed securities		30.1		69.0		58.2		157.3
Total unrealized capital losses		$	48.9	$	131.3	$	107.0	$	287.2
Fair value		$	2,256.2	$	2,217.7	$	3,612.1	$	8,086.0

Of the unrealized capital losses aged more than twelve months, the average market value of the related fixed maturities is 79.2% of the average book value. In addition, this category includes 1,243 securities, which have an average quality rating of AA-. No other-than-temporary impairment loss was considered necessary for these fixed maturities as of December 31, 2008. The value of the Company’s fixed maturities declined $534.2, before tax and DAC, from December 31, 2008 though February 28, 2009, due to further widening of credit spreads. This decline in fair value includes $81.7 related to the Company’s investments in commercial mortgage-backed securities.

104

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Other-Than-Temporary Impairments

The following table identifies the Company’s other-than-temporary impairments by type for the years ended December 31, 2008, 2007, and 2006.

		2008			2007			2006
			No.of			No.of			No.of
		Impairment	Securities		Impairment	Securities		Impairment	Securities
U.S. Treasuries	$	-	-	$	-	-	$	6.4	4
U.S. corporate		283.2	233		36.3	113		24.4	67
Foreign		108.9	94		19.1	54		4.2	10
Residential mortgage-backed		349.3	194		7.1	30		16.6	76
Other asset-backed		245.6	64		10.5	21		7.0	1
Equity securities		55.1	17		-	-		0.1	3
Limited partnerships		6.6	6		3.0	1		-	-
Mortgage loans on real estate		3.8	1		-	-		-	-
Total	$	1,052.5	609	$	76.0	219	$	58.7	161

The above schedule includes $235.8, $16.4, and $16.1 for the years ended December 31, 2008, 2007, and 2006, respectively, in other-than-temporary write-downs related to the analysis of credit-risk and the possibility of significant prepayment risk. The remaining $816.7, $59.6, and $42.6 in write-downs for the years ended December 31, 2008, 2007, and 2006, respectively, are related to investments that the Company does not have the intent to retain for a period of time sufficient to allow for recovery in fair value.

The following table summarizes these write-downs recognized by type for the years ended December 31, 2008, 2007, and 2006.

		2008			2007			2006
			No.of			No.of			No.of
		Impairment	Securities		Impairment	Securities		Impairment	Securities
U.S. Treasuries	$	-	-	$	-	-	$	6.4	4
U.S. corporate		204.5	180		31.6	102		24.4	67
Foreign		81.3	78		19.1	54		4.2	10
Residential mortgage-backed		291.8	128		2.6	2		0.6	1
Other asset-backed		239.1	43		6.3	16		7.0	1
Total	$	816.7	429	$	59.6	174	$	42.6	83

The remaining fair value of the fixed maturities with other-than-temporary impairments at December 31, 2008, 2007, and 2006 was $2,136.5, $1,210.8, and $704.4, respectively.

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.

105

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Net Investment Income

Sources of Net investment income were as follows for the years ended December 31, 2008, 2007, and 2006.

		2008		2007		2006
Fixed maturities, available-for-sale	$	1,020.6	$	895.5	$	969.0
Equity securities, available-for-sale		(13.2)		38.5		10.5
Mortgage loans on real estate		116.0		118.5		93.6
Real estate		9.0		-		-
Policy loans		14.2		14.1		13.2
Short-term investments and cash equivalents		4.5		2.2		2.4
Other		12.7		88.3		44.5
Gross investment income		1,163.8		1,157.1		1,133.2
Less: investment expenses		80.1		102.4		103.5
Net investment income	$	1,083.7	$	1,054.7	$	1,029.7

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 other-than-temporary impairment of investments and changes in fair value of derivatives. The cost of the investments on disposal is determined based on specific identification of securities. Net realized capital gains (losses) on investments were as follows for the years ended December 31, 2008, 2007, and 2006.

		2008		2007		2006
Fixed maturities, available-for-sale	$	(990.8)	$	(50.3)	$	(67.0)
Equity securities, available-for-sale		(81.0)		6.4		9.3
Derivatives		(187.0)		(123.0)		(3.9)
Other		(18.7)		(2.6)		-
Less: allocation to experience-rated contracts		624.4		141.9		64.6
Net realized capital (loss) gains	$	(653.1)	$	(27.6)	$	3.0
After-tax net realized capital (loss) gains	$	(424.5)	$	(17.9)	$	2.0

The increase in Net realized capital losses for the year ended December 31, 2008, was primarily due to higher credit and intent related impairments of fixed maturities driven by the widening of credit spreads. In addition, the Company experienced losses on equity securities mainly due to the poor market performance and losses on interest rate swaps due to lower LIBOR rates in 2008.

Net realized capital gains (losses) allocated to experience-rated contracts are deducted from Net realized capital gains (losses) and an offsetting amount was reflected in Future policy benefits and claim reserves on the Consolidated Balance Sheets. During 2008, as a result of the current economic environment, which resulted in significant realized losses associated with experience-rated contracts, the Company accelerated amortization of realized losses rather than reflect those losses in Future policy benefits and claims

106

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

reserves. During 2008, the Company fully amortized $624.4 of net unamortized realized capital losses allocated to experience-rated contractowners, which are reflected in Interest credited and other benefits to contractowners in the Consolidated Statements of Operations. Net unamortized realized capital gains allocated to experienced-rated contractowners were $53.8 and $164.5 at December 31, 2007 and 2006, respectively, and were reflected in Future policy benefits and claims reserves.

Proceeds from the sale of fixed maturities and equity securities, available-for-sale, and the related gross realized gains and losses, excluding those related to experience-related contracts, as appropriate, were as follows for the years ended December 31, 2008, 2007, and 2006.

		2008		2007		2006
Proceeds on sales	$	12,649.0	$	5,738.8	$	6,481.2
Gross gains		120.0		66.4		109.0
Gross losses		(234.4)		(101.2)		110.9

3. Financial Instruments

Fair Value Measurements

FAS 157 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements.

Fair Value Hierarchy

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

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

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

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

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

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

107

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

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

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

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

§ Level 3 - Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These valuations, whether derived internally or obtained from a third party, use critical assumptions that are not widely available to estimate market participant expectations in valuing the asset or liability.

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, 2008.

				Level1		Level2		Level3(1)		Total
Assets:
	Fixed maturities, available-for-sale, including
		securities pledged	$	1,481.7	$	10,704.3	$	2,291.6	$	14,477.6
	Equity securities, available-for-sale			240.3		-		-		240.3
	Other investments (primarily derivatives)			-		235.2		-		235.2
	Cash and cash equivalents, short-term
		investments, and short-term investments
		under securities loan agreement		729.3		-		-		729.3
	Assets held in separate accounts			30,547.6		5,380.1		-		35,927.7
Total			$	32,998.9	$	16,319.6	$	2,291.6	$	51,610.1
Liabilities:
	Product guarantees		$	-	$	-	$	220.0	$	220.0
	Other liabilities (primarily derivatives)			-		470.5		73.6		544.1
Total			$	-	$	470.5	$	293.6	$	764.1
(1)	Level 3 net assets and liabilities accounted for 3.9% of total net assets and liabilities measured at fair value on a recurring
	basis.  Excluding separate accounts assets for which the policyholder bears the risk, the Level 3 net assets and liabilities
	in relation to total net assets and liabilities measured at fair value on a recurring basis totaled 13.4%.

Valuation of Financial Assets and Liabilities

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 FAS 157. 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 the brokers are non-binding. The valuations are reviewed and validated monthly through comparisons to internal pricing models, back testing to recent trades, and monitoring of trading volumes.

108

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

All valuation methods and assumptions are validated at least quarterly to ensure the accuracy and relevance of the fair values. There were no material changes to the valuation methods or assumptions used to determine fair values.

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

Fixed maturities, available-for-sale: The fair values for the actively traded marketable bonds are determined based upon the quoted market prices or dealer quotes and are classified as Level 1 assets. The fair values for marketable bonds without an active market, excluding subprime and Alt-A mortgage-backed securities, are obtained through several commercial pricing services, which provide the estimated fair values, and are classified as Level 2 assets. These services incorporate a variety of market observable information in their valuation techniques, including benchmark yields, broker-dealer quotes, credit quality, issuer spreads, bids, offers and other reference data. Valuations obtained from third party commercial pricing services are non-binding and are validated monthly through comparisons to internal pricing models, back testing to recent trades, and monitoring of trading volumes.

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

The fair values for certain collateralized mortgage obligations (“CMO-Bs”) are determined by taking the average of broker quotes when more than one broker quote is provided. A few of the CMO-Bs are priced by the originating broker due to the complexity and unique characteristics of the asset. Due to the lack of corroborating evidence to support a higher level, these bonds are classified as Level 3 assets.

Trading activity for the Company’s Residential Mortgage-backed Securities (“RMBS”), particularly subprime and Alt-A mortgage-backed securities, has been declining during 2008 as a result of the dislocation of the credit markets. During 2008, the Company continued to obtain pricing information from commercial pricing services and brokers. However, the pricing for subprime and Alt-A mortgage-backed securities did not represent regularly occurring market transactions since the trading activity declined significantly in the second half of 2008. As a result, the Company concluded in the second half of 2008 that the market for subprime and Alt-A mortgage-backed securities was inactive. The Company did not change its valuation procedures, which are consistent with those used for Level 2 marketable bonds without an active market, as a result of determining that the classification within the valuation hierarchy should be transferred to Level 3 due to market inactivity.

109

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

At December 31, 2008, the fixed maturities valued using unadjusted broker quotes totaled $9,069.0.

Equity securities, available-for-sale: Fair values of these securities are based upon quoted market price and are classified as Level 1 assets.

Cash and cash equivalents, Short-term investments, and Short-term investments under securities loan agreement: The carrying amounts for cash reflect the assets’ fair values. The fair values for cash equivalents and short-term investments are determined based on quoted market prices. These assets are classified as Level 1.

Assets held in separate accounts: Assets held in separate accounts are reported at the quoted fair values of the underlying investments in the separate accounts. Mutual funds, short-term investments and cash are based upon a quoted market price and are included in Level 1. Bond valuations are obtained from third party commercial pricing services and brokers and are included in Level 2. The valuations obtained from brokers are non-binding. Valuations are validated monthly through comparisons to internal pricing models, back testing to recent trades, and monitoring of trading volumes.

Other financial instruments reported as assets and liabilities: The carrying amounts for these financial instruments (primarily derivatives) reflect the fair value of the assets and liabilities. Derivatives are carried at fair value (on the Consolidated Balance Sheets), which is determined using the Company’s derivative accounting system in conjunction with observable key financial data from third party sources or through values established by third party brokers. Counterparty credit risk is considered and incorporated in the Company’s valuation process through counterparty credit rating requirements and monitoring of overall exposure. It is the Company’s policy to deal only with investment grade counterparties with a credit rating of A- or better. These assets and liabilities are classified as Level 2.

Product guarantees: The Company records reserves for product guarantees, which can be either assets or liabilities, for annuity contracts containing guaranteed credited rates in accordance with FAS 133. The guarantee is treated as an embedded derivative or a stand-alone derivative (depending on the underlying product) and is required to be reported at fair value. The fair value of the obligation is calculated based on the income approach as described in FAS 157. The income associated with the contracts is projected using relevant actuarial and capital market assumptions, including benefits and related contract charges, over the anticipated life of the related contracts. The cash flow estimates are produced by using stochastic techniques under a variety of risk neutral scenarios and other best estimate assumptions. Explicit risk margins in the actuarial assumptions underlying valuations are included, as well as an explicit recognition of all nonperformance risks as required by FAS 157. Nonperformance risk for product guarantees contains adjustments to the fair values of these contract liabilities related to the current credit standing of ING and the Company based on credit default swaps with

110

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

similar term to maturity and priority of payment. The ING credit default spread is applied to the discount factors for product guarantees in the Company’s valuation model in order to incorporate credit risk into the fair values of these product guarantees. As of December 31, 2008, the credit ratings of ING and the Company changed in relation to prior periods, which resulted in substantial changes in the valuation of the reserves for product guarantees.

The following disclosures are made in accordance with the requirements of FAS No. 107, “Disclosures about Fair Value of Financial Instruments” (“FAS 107”). FAS 107 requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates, in many cases, could not be realized in immediate settlement of the instrument.

FAS 107 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:

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

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

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

With a fixed maturity: Fair value is estimated by discounting cash flows at interest rates currently being offered by, or available to, the Company for similar contracts.

Without a fixed maturity: Fair value is estimated as the amount payable to the contractowner upon demand. However, the Company has the right under such contracts to delay payment of withdrawals, which may ultimately result in paying an amount different than that determined to be payable on demand.

111

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

The carrying values and estimated fair values of certain of the Company’s financial instruments were as follows at December 31, 2008 and 2007.

				2008				2007
				Carrying		Fair		Carrying		Fair
				Value		Value		Value		Value
Assets:
	Fixed maturities, available-for-sale,
		including securities pledged	$	14,477.6	$	14,477.6	$	14,250.4	$	14,250.4
	Equity securities, available-for-sale			240.3		240.3		446.4		446.4
	Mortgage loans on real estate			2,107.8		2,027.9		2,089.4		2,099.3
	Policy loans			267.8		267.8		273.4		273.4
	Cash, cash equivalents, short-term
		investments, and short-term
		investments under securities
		loan agreement		729.3		729.3		622.9		622.9
	Other investments			749.1		749.1		670.9		670.9
	Assets held in separate accounts			35,927.7		35,927.7		48,091.2		48,091.2
Liabilities:
	Investment contract liabilities:
		With a fixed maturity		1,529.4		1,610.6		1,251.1		1,308.7
		Without a fixed maturity		15,611.8		17,237.9		13,421.9		13,379.1
	Derivatives			544.1		544.1		200.3		200.3

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.

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 FAS 157). 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 light of the methodologies employed to obtain the fair value of financial assets and liabilities classified as Level 3, additional information is presented below, with particular attention addressed to the reserves for product guarantees due to the impact on the Company’s results of operations.

112

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

The following table summarizes the change in fair value of the Company’s Level 3 assets and liabilities for the year ended December 31, 2008.

				Fixed					Product
				Maturities			Derivatives		Guarantees
Balance at January 1, 2008			$	1,737.6		$	-	$	(76.4)
	Capital gains (losses):
		Net realized capital gains (losses)		(72.6)	(1)		(29.3)		(139.6)	(3)
		Net unrealized capital (losses) gains(2)		71.8			-		-
	Total net realized and unrealized capital losses			(0.8)			(29.3)		(139.6)
		Purchases, sales, issuances, and settlements, net		(171.7)			21.5		(4.0)
		Transfer in (out) of Level 3		726.5			(65.8)		-
Balance at December 31, 2008			$	2,291.6		$	(73.6)	$	(220.0)
(1)	This amount is included in Net realized capital gains (losses) on the Consolidated Statements of Operations.
(2)	The amounts in this line are included in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets.
(3)	This amount is included in Interest credited and other benefits to contractowners on the Consolidated Statements of
	Operations. All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this
	disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis.

For the year ended December 31, 2008, the value of the liability increased due to increased credit spreads, increased interest rate volatility and decreased interest rates. As of December 31, 2008, the net realized gains attributable to credit risk were $107.9. The unrealized capital losses on fixed maturities were driven by the widening of credit spreads.

During 2008, the Company determined that the classification within the valuation hierarchy related to the subprime and Alt-A mortgage-backed securities within the RMBS portfolio should be changed due to market inactivity. This change is presented as transfers into Level 3 in the table above and discussed in more detail in the previous disclosure regarding RMBS.

113

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Derivative Financial Instruments

			NotionalAmount			FairValue
			2008	2007		2008		2007
InterestRateSwaps
	Interest rate swaps are used to manage the interest
		rate risk in the Company’s fixed maturities portfolio,
		as well as the Company’s liabilities.  Interest rate
		swaps represent contracts that require the exchange
		of cash flows at regular interim periods, typically
		monthly or quarterly.	7,207.2	7,680.0	$	(232.0)	$	(111.6)
ForeignExchangeSwaps
	Foreign exchange swaps are used to reduce the risk
		of a change in the value, yield, or cash flow with
		respect to invested assets.  Foreign exchange
		swaps represent contracts that require the
		exchange of foreign currency cash flows for
		U.S. dollar cash flows at regular interim periods,
		typically quarterly or semi-annually.	199.5	224.5		(18.6)		(45.3)
CreditDefaultSwaps
	Credit default swaps are used to reduce the credit loss
		exposure with respect to certain assets that the
		Company owns, or to assume credit exposure to
		certain assets that the Company does not own.
		Payments are made to or received from the
		counterparty at specified intervals and amounts
		for the purchase or sale of credit protection.
		In the event of a default on the underlying credit
		exposure, the Company will either receive
		an additional payment (purchased credit
		protection) or will be required to make an additional
		payment (sold credit protection) equal to the notional
		value of the swap contract.	341.1	335.9		(58.9)		(8.8)
Forwards
	Forwards are acquired to hedge the Company's
		inverse portfolio against movements in interest
		rates, particularly mortgage rates. On the
		settlement date, the Company will either receive
		a payment (interest rate drops on owned forwards
		or interest rate rises on purchased forwards) or
		will be required to make a payment (interest rate
		rises on owned forwards or interest rate drops
		on purchased forwards).	263.0	-		3.3		-

114

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

				NotionalAmount			FairValue
				2008	2007		2008		2007
Swaptions
	Swaptions are used to manage interest rate risk in the
		Company’s collateralized mortgage obligation portfolio.
		Swaptions are contracts that give the Company the
		option to enter into an interest rate swap at a specific
		future date.		2,521.5	542.3	$	5.1	$	0.2
Futures
	Futures contracts are used to hedge against a decrease
		in certain equity indices.  Such decrease 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.  A decrease in variable
		annuity account values would also result in lower
		fee income.  A decrease in equity markets may also
		negatively impact the Company's investment in
		equity securities.  The futures income would
		serve to offset these effects. Futures contracts
		are also used to hedge against an increase
		in certain equity indices.  Such increase may result
		in increased payments to contract holders of fixed
		indexed annuity contracts, and the futures income
		would serve to offset this increased expense.  The
		underlying reserve liabilities are valued under
		FAS 133 and FAS 157 (see discussion under
		“Reserves” section) and the change in reserve
		liability is recorded in Interest credited and other
		benefits to contractowners.  The gain or loss on
		futures is recorded in Net realized capital gains
		(losses).		580.6	-		(7.8)		-
EmbeddedDerivatives
	The Company also has investments in certain fixed
		maturity instruments, and has issued certain retail
		annuity products, that contain embedded derivatives
		whose market value is at least partially determined by,
		among other things, levels of or changes in domestic
		and/or foreign interest rates (short- or long-term),
		exchange rates, prepayment rates, equity rates, or
		credit ratings/spreads.
			Within securities	N/A*	N/A*		123.7		40.8
			Within annuity products	N/A*	N/A*		180.0		78.1
* N/A - not applicable.

115

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Credit Default Swaps

The Company has entered into various credit default swaps to assume credit exposure to certain assets that the Company does not own. Credit default swaps involve a transfer of credit risk from one party to another in exchange for periodic payments. These instruments are typically written for a maturity period of five years and do not contain recourse provisions, which would enable the seller to recover from third parties. The Company’s collateral positions are tracked by the International Swaps and Derivatives Associations, Inc. (“ISDA”). To the extent cash collateral was received, it was included in the Collateral held, including payables under securities loan agreement on the Balance Sheets and was reinvested in short-term investments. The source of non-cash collateral posted was investment grade bonds of the entity. Collateral held is used in accordance with the Credit Support Annex (“CSA”) to satisfy any obligations. In the event of a default on the underlying credit exposure, the Company will either receive an additional payment (purchased credit protection) or will be required to make an additional payment (sold credit protection) equal to the notional value of the swap contract. At December 31, 2008, the fair value of credit default swaps of $16.1 and $75.0 was included in Other investments and Other liabilities, respectively, on the Consolidated Balance Sheets. As of December 2008, the maximum potential future exposure to the Company on the sale of credit protection under credit default swaps was $161.0.

Embedded Derivative in Credit-Linked Note

The Company owns a 3-year credit-linked note arrangement, whereby the Company agrees to reimburse the guaranteed party upon payment default of the referenced obligation. Upon such default, the Company reimburses the guaranteed party for the loss under the reference obligation, and the Company receives that reference obligation in settlement. The Company can then seek recovery of any losses under the agreement by sale or collection of the received reference obligation. As of December 31, 2008, the maximum potential future exposure to the Company under the guarantee was $30.0.

Variable Interest Entities

The Company holds VIEs for investment purposes in the form of private placement securities, structured securities, securitization transactions, and limited partnerships. Consolidation of these investments in the Company’s financial statements is not required, as the Company is not the primary beneficiary for any of these VIEs. Rather, the VIEs are accounted for using the cost or equity method of accounting. Investments in limited partnerships are included in Limited partnerships/corporations on the Consolidated Balance Sheets.

116

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

4. Deferred Policy Acquisition Costs and Value of Business Acquired

Activity within DAC was as follows for the years ended December 31, 2008, 2007, and 2006.

Balance at January 1, 2006			$	511.4
	Deferrals of commissions and expenses			136.0
	Amortization:
		Amortization		(62.1)
		Interest accrued at 6% to 7%		37.5
	Net amortization included in the Consolidated Statements of Operations			(24.6)
	Change in unrealized capital gains (losses) on available-for-sale securities			(0.2)
Balance at December 31, 2006				622.6
	Deferrals of commissions and expenses			147.1
	Amortization:
		Amortization		(80.9)
		Interest accrued at 5% to 7%		44.8
	Net amortization included in the Consolidated Statements of Operations			(36.1)
	Change in unrealized capital gains (losses) on available-for-sale securities			1.0
	Implementation of SOP 05-1			(6.0)
Balance at December 31, 2007				728.6
	Deferrals of commissions and expenses			168.7
	Amortization:
		Amortization		(112.5)
		Interest accrued at 5% to 7%		50.6
	Net amortization included in the Consolidated Statements of Operations			(61.9)
	Change in unrealized capital gains (losses) on available-for-sale securities			30.1
Balance at December 31, 2008			$	865.5

The estimated amount of DAC to be amortized, net of interest, is $50.8, $59.0, $61.7, $59.6, and $58.5, for the years 2009, 2010, 2011, 2012 and 2013, respectively. Actual amortization incurred during these years may vary as assumptions are modified to incorporate actual results.

117

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Activity within VOBA was as follows for the years ended December 31, 2008, 2007, and 2006.

Balance at January 1, 2006			$	1,291.7
	Deferrals of commissions and expenses			46.2
	Amortization:
		Amortization		(82.4)
		Interest accrued at 5% to 7%		85.7
	Net amortization included in the Consolidated Statements of Operations			3.3
	Change in unrealized capital gains (losses) on available-for-sale securities			(1.0)
Balance at December 31, 2006				1,340.2
	Deferrals of commissions and expenses			40.5
	Amortization:
		Amortization		(177.3)
		Interest accrued at 5% to 7%		84.2
	Net amortization included in the Consolidated Statements of Operations			(93.1)
	Change in unrealized capital gains (losses) on available-for-sale securities			2.9
	Implementation of SOP 05-1			(37.3)
Balance at December 31, 2007				1,253.2
	Deferrals of commissions and expenses			33.3
	Amortization:
		Amortization		(144.2)
		Interest accrued at 5% to 7%		77.2
	Net amortization included in the Consolidated Statements of Operations			(67.0)
	Change in unrealized capital gains (losses) on available-for-sale securities			613.0
Balance at December 31, 2008			$	1,832.5

The estimated amount of VOBA to be amortized, net of interest, is $59.9, $69.9, $75.7, $73.7, and $71.8, for the years 2009, 2010, 2011, 2012 and 2013, respectively. Actual amortization incurred during these years may vary as assumptions are modified to incorporate actual results.

Analysis of DAC and VOBA

The increase in Net amortization of DAC and VOBA for the year ended December 31, 2008, was primarily driven by unfavorable unlocking of $63.0 resulting from unfavorable equity market performance and the revisions of certain assumptions used in the estimation of gross profits. The increase in Net amortization of DAC and VOBA for the year ended December 31, 2007, was primarily driven by unfavorable unlocking of $131.3 attributable to an increase in actual gross profits related to higher fee income and fixed margins in 2007.

The decrease in Net amortization of DAC and VOBA in 2006 is primarily driven by favorable unlocking of $83.3, resulting from the refinements of the Company’s estimates of persistency, expenses and other assumptions. In addition, the decrease in amortization reflects lower actual gross profits, primarily due to a legal settlement incurred in 2006.

118

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

5. Dividend Restrictions and Shareholder’s Equity

ILIAC’s ability to pay dividends to its parent is subject to the prior approval of insurance regulatory authorities of the State of Connecticut for payment of any dividend, which, when combined with other dividends paid within the preceding 12 months, exceeds the greater of (1) ten percent (10%) of ILIAC’s statutory surplus at the prior year end or (2) ILIAC’s prior year statutory net gain from operations.

During 2008, ILIAC did not pay any dividends to its Parent. During 2007 and 2006, ILIAC paid $145.0, and $256.0, respectively, in dividends on its common stock to its Parent.

During 2006, Lion contributed to ILIAC, DSI, which had $50.5 in equity on the date of contribution and was accounted for in a manner similar to a pooling-of-interests. During 2008, 2007, and 2006, ILIAC did not receive any cash capital contributions from its Parent.

On November 12, 2008, ING issued to the Dutch State non-voting Tier 1 securities for a total consideration of Euro 10 billion. On February 24, 2009, $2.2 billion was contributed to direct and indirect insurance company subsidiaries of ING America Insurance Holdings, Inc. (“ING AIH”), of which $365.0 was contributed to the Company. The contribution was comprised of the proceeds from the investment by the Dutch government and the redistribution of currently existing capital within ING.

The State of Connecticut Insurance Department (the “Department”) recognizes as net income and capital and surplus those amounts determined in conformity with statutory accounting practices prescribed or permitted by the Department, which differ in certain respects from accounting principles generally accepted in the United States. Statutory net (loss) income was $(428.4), $245.5, and $138.3, for the years ended December 31, 2008, 2007, and 2006, respectively. Statutory capital and surplus was $1,524.6 and $1,388.0 as of December 31, 2008 and 2007, respectively. As specifically permitted by statutory accounting policies, statutory surplus as of December 31, 2008 included the impact of the $365.0 capital contribution received on February 24, 2009.

During 2008, the Company received a permitted practice regarding deferred income taxes, which modified the accounting prescribed by the National Association of Insurance Commissioners by increasing the realization period for deferred tax assets from one year to three years and increasing the asset recognition limit from 10% to 15% of adjusted statutory capital and surplus. This permitted practice expires on December 15, 2009. This permitted practice increased admitted assets and statutory surplus by $58.4 for the year ended December 31, 2008. The benefits of this permitted practice may not be considered by the Company when determining surplus available for dividends.

The Department also has the ability to revise certain reserving requirements at its discretion. Due to the financial crisis and related federal government interest rate actions, the Department provided the Company and other domestic life insurers the opportunity to elect to use a formula for the discount rate for statutory reserve and reserve related calculations that resulted in the discount rate being floored at 3.25% for December 31, 2008; the formula stipulated by the Department was such that the discount rate was to equal the greater of 3.25% or 105% of the otherwise applicable spot rate; this reserve relief reduces statutory reserves and increases surplus by approximately $700.0. This reserve relief is available for the period from December 31, 2008 through September 30, 2009 and is not a permitted practice. The Company also discloses that, as in prior years, its asset adequacy analysis associated with these reserves is favorable.

119

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

6. Additional Insurance Benefits and Minimum Guarantees

The Company calculates an additional liability for certain GMDBs and other minimum guarantees in order to recognize the expected value of these benefits in excess of the projected account balance over the accumulation period based on total expected assessments.

The Company regularly evaluates estimates used to adjust the additional liability balance, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised.

As of December 31, 2008, the separate account liability for guaranteed minimum benefits and the additional liability recognized related to minimum guarantees were $6.5 billion and $181.2, respectively. As of December 31, 2007, the separate account liability for guaranteed minimum benefits and the additional liability recognized related to minimum guarantees were $7.1 billion and $80.4, respectively.

The aggregate fair value of equity securities, including mutual funds, supporting separate accounts with additional insurance benefits and minimum investment return guarantees as of December 31, 2008 and 2007, was $6.5 billion and $7.1 billion, respectively.

7. Income Taxes

Effective January 1, 2006, ILIAC files a consolidated federal income tax return with ING AIH and certain other subsidiaries of ING AIH that are eligible corporations qualified to file consolidated federal income tax returns as part of the ING AIH affiliated group. Effective January 1, 2006, ILIAC is party to a federal tax allocation agreement with ING AIH and its subsidiaries that are part of the group whereby ING AIH charges its subsidiaries for federal taxes each subsidiary would have incurred were it not a member of the consolidated group and credits each subsidiary for losses at the statutory federal tax rate.

				2008		2007		2006
Current tax expense (benefit):
	Federal		$	(121.8)	$	28.6	$	23.3
	State			(18.1)		(9.0)		20.0
		Total current tax (benefit) expense		(139.9)		19.6		43.3
Deferred tax expense:
	Federal			31.6		36.4		79.4
		Total deferred tax expense		31.6		36.4		79.4
Total income tax (benefit) expense			$	(108.3)	$	56.0	$	122.7

120

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Income taxes were different from the amount computed by applying the federal income tax rate to income before income taxes for the following reasons for the years ended December 31, 2008, 2007 and 2006:

			2008		2007		2006
(Loss) income before income taxes		$	(1,138.5)	$	274.4	$	424.5
Tax rate			35.0%		35.0%		35.0%
Income tax (benefit) expense at federal statutory rate			(398.5)		96.0		148.6
Tax effect of:
	Dividend received deduction		(15.5)		(26.2)		(36.5)
	IRS audit settlement		(10.1)		-		-
	State audit settlement		(12.6)		(21.8)		-
	State tax expense		1.3		-		13.0
	Tax valuation allowance		333.0		-		-
	Other		(5.9)		8.0		(2.4)
Income tax (benefit) expense		$	(108.3)	$	56.0	$	122.7

Temporary Differences

The tax effects of temporary differences that give rise to Deferred tax assets and Deferred tax liabilities at December 31, 2008 and 2007, are presented below.

					2008		2007
Deferred tax assets:
	Insurance reserves			$	217.2	$	216.6
	Net unrealized capital loss				503.8		8.5
	Unrealized losses allocable to experience-rated contracts				-		5.7
	Investments				294.7		6.7
	Postemployment benefits				67.4		65.5
	Compensation				42.5		37.7
	Other				3.9		32.9
		Total gross assets before valuation allowance			1,129.5		373.6
			Less: valuation allowance		(333.0)		(6.4)
		Assets, net of valuation allowance			796.5		367.2
Deferred tax liabilities:
	Value of business acquired				(653.3)		(438.5)
	Deferred policy acquisition costs				(244.3)		(204.6)
			Total gross liabilities		(897.6)		(643.1)
Net deferred income tax asset (liability)				$	(101.1)	$	(275.9)

Net unrealized capital gains and losses are presented as a component of other comprehensive income (loss) in Shareholder’s equity, net of deferred taxes. Due to changes in classification during 2008, the amount for the 2007 table above were reclassified in order to allow for more effective comparison.

121

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Valuation allowances are provided when it is considered unlikely that deferred tax assets will be realized. As of December 31, 2008 and 2007, the Company had a tax valuation allowance of $328.0 and $0, respectively, related to realized capital losses, which is included in Net (loss) income. The valuation allowance includes $106.7 related to impairments of securities designated in the ING-Dutch State Transaction, which has established pending uncertainties regarding the closing of the transaction. As of December 31, 2008 and 2007, the Company had a valuation allowance of $0 and $6.4, respectively, related to unrealized capital losses on investments, which is included in Accumulated Other Comprehensive Income (Loss). In 2008, the Company has also established a $5.0 tax valuation allowance against foreign tax credits, the benefit of which is uncertain.

Tax Sharing Agreement

ILIAC had a receivable of $38.6 and payable $56.8 to ING AIH at December 31, 2008 and 2007, respectively, for federal income taxes under the inter-company tax sharing agreement.

See Related Party Transactions footnote for more information.

Unrecognized Tax Benefits

Reconciliations of the change in the unrecognized income tax benefits for the years ended December 31, 2008 and 2007 are as follows:

		2008		2007
Balance at January 1	$	47.4	$	68.0
Additions for tax positions related to current year		2.4		2.9
Additions for tax positions related to prior years		2.2		-
Reductions for tax positions related to prior years		(20.7)		(23.5)
Reductions for settlements with taxing authorities		(9.2)		-
Balance at December 31	$	22.1	$	47.4

The Company had $23.1 and $42.6 of unrecognized tax benefits as of December 31, 2008 and 2007, respectively, that would affect the Company’s effective tax rate if recognized.

Interest and Penalties

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in Current income taxes and Income tax expense on the Consolidated Balance Sheets and the Consolidated Statements of Operations, respectively. The Company had accrued interest of $3.8 and $16.9 as of December 31, 2008 and 2007, respectively. The decrease in accrued interest during the year ended December 31, 2008 primarily related to the settlement of the 2002 and 2003 IRS audit and the 1995 through 2000 New York state audit.

122

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Tax Regulatory Matters

The Company is under audit by the IRS for tax years 2004 through 2008, and is subject to state audit in New York for years 2001 through 2006. It is anticipated that the IRS audit of tax years 2004 through 2008 will be finalized within the next twelve months. Upon finalization of the IRS and New York examinations, it is reasonably possible that the unrecognized tax benefits will decrease by up to $7.6. The timing of the payment of the remaining allowance of $14.5 can not be reliably estimated.

On September 25, 2007, the IRS issued Revenue Ruling 2007-61, which announced its intention to issue regulations with respect to certain computational aspects of the dividend received deduction (“DRD”) on separate account assets held in connection with variable annuity and life insurance contracts. Revenue Ruling 2007-61 suspended Revenue Ruling 2007-54 issued in August 2007 that purported to change accepted industry and IRS interpretations of the statutes governing these computational questions. Any regulations that the IRS ultimately proposes for issuance in this area will be subject to public notice and comment, at which time insurance companies and other members of the public will have the opportunity to raise legal and practical questions about the content, scope and application of such regulations. As a result, the ultimate timing, substance, and effective date of any such regulations are unknown, but they could result in the elimination of some or all of the separate account DRD tax benefit that the Company receives.

Under prior law, life insurance companies were allowed to defer from taxation a portion of income. Deferred income of $17.2 was accumulated in the Policyholders Surplus Account and would only become taxable under certain conditions, which management believed to be remote. In 2004, Congress passed the American Jobs Creation Act of 2004 allowing certain tax-free distributions from the Policyholders’ Surplus Account during 2005 and 2006. During 2006, the Company made a dividend distribution of $256.0, which eliminated the $17.2 balance in the Policyholders Surplus Account and, therefore, any potential tax on the accumulated balance.

8. Benefit Plans

Defined Benefit Plan

ING North America Insurance Corporation (“ING North America”) sponsors the ING Americas Retirement Plan (the “Retirement Plan”), effective as of December 31, 2001. Substantially all employees of ING North America and its affiliates (excluding certain employees) are eligible to participate, including the Company’s employees other than Company agents. However, effective January 1, 2009, the Retirement Plan was amended to provide that anyone hired or rehired by the Company on or after January 1, 2009, would not be eligible to participate in the Plan. The Retirement Plan was amended and restated effective July 1, 2008 related to the admission of the employees from the

123

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

acquisition of CitiStreet LLC (“CitiStreet”) by Lion, and ING North America filed a request for a determination letter on the qualified status of the Plan. The Retirement Plan is a tax-qualified defined benefit plan, the benefits of which are guaranteed (within certain specified legal limits) by the Pension Benefit Guaranty Corporation (“PBGC”). As of January 1, 2002, each participant in the Retirement Plan earns a benefit under a final average compensation formula. Subsequent to December 31, 2001, ING North America is responsible for all Retirement Plan liabilities. The costs allocated to the Company for its employees’ participation in the Retirement Plan were $14.0, $17.2, and $23.8, for 2008, 2007, and 2006, respectively, and are included in Operating expenses in the Consolidated Statements of Operations.

Defined Contribution Plan

ING North America sponsors the ING Americas Savings Plan and ESOP (the “Savings Plan”). Substantially all employees of ING North America and its affiliates (excluding certain employees, including but not limited to Career Agents) are eligible to participate, including the Company’s employees other than Company agents. Career Agents are certain, full-time insurance salespeople who have entered into a career agent agreement with the Company and certain other individuals who meet specified eligibility criteria. The Savings Plan is a tax-qualified defined contribution retirement plan, which includes an employee stock ownership plan (“ESOP”) component. The Savings Plan was amended and restated effective July 1, 2008 related to the admission of the employees from the acquisition of CitiStreet by Lion, and ING North America filed a request for a determination letter on the qualified status of the Plan. Savings Plan benefits are not guaranteed by the PBGC. The Savings Plan allows eligibleparticipants to defer into the Savings Plan a specified percentage of eligible compensation on a pre-tax basis. ING North America matches such pre-tax contributions, up to a maximum of 6% of eligible compensation. Matching contributions are subject to a 4-year graded vesting schedule (although certain specified participants are subject to a 5-year graded vesting schedule). All contributions made to the Savings Plan are subject to certain limits imposed by applicable law. Pre-tax charges to operations of the Company for the Savings Plan were $10.3, $10.1, and$9.7, for the years ended December 31, 2008, 2007, and 2006, respectively, and are included in Operating expenses in the Consolidated Statements of Operations.

Non-Qualified Retirement Plans

Through December 31, 2001, the Company, in conjunction with ING North America, offered certain eligible employees (other than Career Agents) a Supplemental Executive Retirement Plan and an Excess Plan (collectively, the “SERPs”). Benefit accruals under the SERPs ceased, effective as of December 31, 2001. Benefits under the SERPs are determined based on an eligible employee’s years of service and average annual compensation for the highest five years during the last ten years of employment.

124

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

The Company, in conjunction with ING North America, sponsors the Pension Plan for Certain Producers of ING Life Insurance and Annuity Company (formerly the Pension Plan for Certain Producers of Aetna Life Insurance and Annuity Company) (the “Agents Non-Qualified Plan”). This plan covers certain full-time insurance salespeople who have entered into a career agent agreement with the Company and certain other individuals who meet the eligibility criteria specified in the plan (“Career Agents”). The Agents Non-Qualified Plan was terminated effective January 1, 2002. In connection with the termination, all benefit accruals ceased and all accrued benefits were frozen.

The SERPs and Agents Non-Qualified Plan, are non-qualified defined benefit pension plans, which means all the SERPs benefits are payable from the general assets of the Company and Agents Non-Qualified Plan benefits are payable from the general assets of the Company and ING North America. These non-qualified defined benefit pension plans are not guaranteed by the PBGC.

Obligations and Funded Status

The following tables summarize the benefit obligations, fair value of plan assets, and funded status, for the SERPs and Agents Non-Qualified Plan, for the years ended December 31, 2008 and 2007.

			2008		2007
Change in Projected Benefit Obligation:
	Projected benefit obligation, January 1	$	85.6	$	97.7
	Interest cost		5.2		5.4
	Benefits paid		(11.6)		(9.3)
	Post service cost-unrecognized		0.2		-
	Actuarial gain (loss) on obligation		15.5		(8.2)
	Projected benefit obligation, December 31	$	94.9	$	85.6
Fair Value of Plan Assets:
	Fair value of plan assets, December 31	$	-	$	-

Amounts recognized in the Consolidated Balance Sheets consist of:

		2008		2007
Accrued benefit cost	$	(94.9)	$	(85.6)
Intangible assets		-		-
Accumulated other comprehensive income		20.0		4.9
Net amount recognized	$	(74.9)	$	(80.7)

At December 31, 2008 and 2007, the projected benefit obligation was $94.9 and $85.6, respectively.

125

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Assumptions

The weighted-average assumptions used in the measurement of the December 31, 2008 and 2007 benefit obligation for the SERPs and Agents Non-Qualified Plan, were as follows:

	2008	2007
Discount rate at end of period	6.50%	6.50%
Rate of compensation increase	4.00%	4.20%

In determining the discount rate assumption, the Company utilizes current market information provided by its plan actuaries (particularly the Citigroup Pension Discount Curve Liability Index), including a discounted cash flow analysis of the Company’s pension obligation and general movements in the current market environment. The discount rate modeling process involves selecting a portfolio of high quality, noncallable bonds that will match the cash flows of the Retirement Plan. Based upon all available information, it was determined that 6.0% was the appropriate discount rate as of December 31, 2008, to calculate the Company’s accrued benefit liability. Accordingly, as prescribed by FAS No. 87, “Employers’ Accounting for Pensions”, the 6.5% discount rate will also be used to determine the Company’s 2008 pension expense. December 31 is the measurement date for the SERP’s and Agents Non-Qualified Plan.

The weighted-average assumptions used in calculating the net pension cost were as follows:

	2008	2007	2006
Discount rate	6.50%	5.90%	6.00%
Rate of increase in compensation levels	4.00%	4.20%	4.00%

The weighted average assumptions used in calculating the net pension cost for 2008 were, as indicated above, a 6.0% discount rate and a 4.0% rate of compensation increase. Since the benefit plans of the Company are unfunded, an assumption for return on plan assets is not required.

Net Periodic Benefit Costs

Net periodic benefit costs for the SERPs and Agents Non-Qualified Plan, for the years ended December 31, 2008, 2007, and 2006, were as follows:

		2008		2007		2006
Interest cost	$	5.2	$	5.4	$	5.5
Net actuarial loss recognized in the year		-		0.7		2.0
Unrecognized past service cost recognized in the year		-		-		0.2
The effect of any curtailment or settlement		0.5		0.4		0.4
Net periodic benefit cost	$	5.7	$	6.5	$	8.1

126

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Cash Flows

In 2009, the employer is expected to contribute $4.3 to the SERPs and Agents Non-Qualified Plan. Future expected benefit payments related to the SERPs, and Agents Non-Qualified Plan, for the years ended December 31, 2009 through 2013, and thereafter through 2018, are estimated to be $4.3, $4.4, $5.0, $5.1, $5.1, and $26.4, respectively.

Other

On October 4, 2004, the President signed into law The Jobs Creation Act (“Jobs Act”). The Jobs Act affects nonqualified deferred compensation plans, such as the Agents Nonqualified Plan. ING North America has made changes to impacted nonqualified deferred compensation plans, as necessary to comply with the requirements of the Jobs Act.

Stock Option and Share Plans

ING sponsors the ING Group Long Term Equity Ownership Plan (“leo”), which provides employees of the Company who are selected by the ING Board of Directors to be granted options and/or performance shares. The terms applicable to an award under leo are set out in an award agreement, which is signed by the participant when he or she accepts the award.

Options granted under leo are nonqualified options on ING shares in the form of American Depository Receipts (“ADRs”). Leo options have a ten (10) year term and vest three years from the grant date. Options awarded under leo may vest earlier in the event of the participant’s death, permanent disability or retirement. Retirement for purposes of leo means a participant terminates service after attaining age 55 and completing 5 years of service. Early vesting in all or a portion of a grant of options may also occur in the event the participant is terminated due to redundancy or business divestiture. Unvested options are generally subject to forfeiture when a participant voluntarily terminates employment or is terminated for cause (as defined in leo). Upon vesting, participants generally have up to seven years in which to exercise their vested options. A shorter exercise period applies in the event of termination due to redundancy, business divestiture, voluntary termination or termination for cause. An option gives the recipient the right to purchase an ING share in the form of ADRs at a price equal to the fair market value of one ING share on the date of grant. On exercise, participant’s have three options (i) retain the shares and remit a check for applicable taxes due on exercise, (ii) request the administrator to remit a cash payment for the value of the options being exercised, less applicable taxes, or (iii) retain some of the shares and have the administrator liquidate sufficient shares to satisfy the participant’s tax obligation. The share price is in Euros and converted to U.S. dollars, as determined by ING.

127

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Awards of performance shares may also be made under leo. Performance shares are a contingent grant of ING stock, and, on vesting, the participant has the right to receive a cash amount equal to the closing price per ING share on the Euronext Amsterdam Stock Market on the vesting date times the number of vested Plan shares. Performance shares generally vest three years from the date of grant, with the amount payable based on ING’s share price on the vesting date. Payments made to participants on vesting are based on the performance targets established in connection with leo and payments can range from 0% to 200% of target. Performance is based on ING’s total shareholder return relative to a peer group as determined at the end of the vesting period. To vest, a participant must be actively employed on the vesting date, although vesting will continue to occur in the event of the participant’s death, disability or retirement. If a participant is terminated due to redundancy or business divestiture, vesting will occur but in only a portion of the award. Unvested shares are generally subject to forfeiture when an employee voluntarily terminates employment or is terminated for cause (as defined in leo). Upon vesting, participants have three options (i) retain the shares and remit a check for applicable taxes due on exercise, (ii) request the administrator to remit a cash payment for the value of the shares, less applicable taxes, or (iii) retain some of the shares and have the administrator liquidate sufficient shares to satisfy the participant’s tax obligation. The amount is converted from Euros to U.S. dollars based on the daily average exchange rate between the Euro and the U.S. dollar, as determined by ING.

The Company recognized compensation expense for the leo options and performance shares of $4.1, $4.5, and $10.1, for the years ended December 31, 2008, 2007, and 2006 respectively.

For leo, the Company recognized tax benefits of $0.7, $3.2, and $0.1, in 2008, 2007, and 2006, respectively.

Other Benefit Plans

In addition, the Company, in conjunction with ING North America, sponsors the following benefit plans:

§ The ING 401(k) Plan for ILIAC Agents, which allows participants to defer a specified percentage of eligible compensation on a pre-tax basis. Effective January 1, 2006, the Company match equals 60% of a participant’s pre-tax deferral contribution, with a maximum of 6% of the participant’s eligible pay.

§ The Producers’ Incentive Savings Plan, which allows participants to defer up to a specified portion of their eligible compensation on a pre-tax basis. The Company matches such pre-tax contributions at specified amounts.

§ The Producers’ Deferred Compensation Plan, which allows participants to defer up to a specified portion of their eligible compensation on a pre-tax basis.

128

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

§ Certain health care and life insurance benefits for retired employees and their eligible dependents. The post retirement health care plan is contributory, with retiree contribution levels adjusted annually. The life insurance plan provides a flat amount of noncontributory coverage and optional contributory coverage.

§ The ING Americas Supplemental Executive Retirement Plan, which is a non-qualified defined benefit restoration pension plan.

§ The ING Americas Deferred Compensation Savings Plan, which is a deferred compensation plan that includes a 401(k) excess component.

The benefit charges allocated to the Company related to these plans for the years ended December 31, 2008, 2007, and 2006, were $1.4, $0.4, and $1.4, respectively.

9. Related Party Transactions

Operating Agreements

ILIAC has certain agreements whereby it generates revenues and expenses with affiliated entities, as follows:

§ Investment Advisory agreement with ING Investment Management LLC (“IIM”), an affiliate, in which IIM provides asset management, administrative, and accounting services for ILIAC’s general account. ILIAC incurs a fee, which is paid quarterly, based on the value of the assets under management. For the years ended December 31, 2008, 2007, and 2006, expenses were incurred in the amounts of $58.4, $60.5, and $62.2, respectively.

§ Services agreement with ING North America for administrative, management, financial, and information technology services, dated January 1, 2001 and amended effective January 1, 2002. For the years ended December 31, 2008, 2007, and 2006, expenses were incurred in the amounts of $175.3, $167.9, and $175.3, respectively.

§ Services agreement between ILIAC and its U.S. insurance company affiliates dated January 1, 2001, and amended effective January 1, 2002 and December 31, 2007. For the years ended December 31, 2008, 2007, and 2006, net expenses related to the agreement were incurred in the amount of $19.6, $21.7, and $12.4, respectively.

Management and service contracts and all cost sharing arrangements with other affiliated companies are allocated in accordance with the Company’s expense and cost allocation methods.

DSL has certain agreements whereby it generates revenues and expenses with affiliated entities, as follows:

§ Underwriting and distribution agreements with ING USA Annuity and Life Insurance Company (“ING USA”) and ReliaStar Life Insurance Company of New York (“RLNY”), affiliated companies, whereby DSL serves as the principal underwriter for variable insurance products. In addition, DSL is authorized to enter into agreements

129

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

with broker-dealers to distribute the variable insurance products and appoint representatives of the broker-dealers as agents. For the years ended December 31, 2008, 2007, and 2006, commissions were collected in the amount of $622.5, $568.4, and $429.2. Such commissions are, in turn, paid to broker-dealers.

§ Services agreements with ING USA and RLNY, whereby DSL receives managerial and supervisory services and incurs a fee that is calculated as a percentage of average assets of each company’s variable separate accounts deposited in ING Investors Trust. On August 9, 2007, DSL and ING USA entered into an amendment to the service agreement effective July 31, 2007 to modify the method for calculating the compensation owed to ING USA under the service agreement. As a result of this amendment, DSL pays ING USA the total net revenue associated with ING USA deposits into ING Investors Trust. For the years ended December 31, 2008, 2007, and 2006, expenses were incurred under these services agreements in the amount of $156.2, $124.4, and $70.8, respectively.

§ Administrative and advisory services agreements with ING Investment LLC and IIM, affiliated companies, in which DSL receives certain services for a fee. The fee for these services is calculated as a percentage of average assets of ING Investors Trust. For the years ended December 31, 2008, 2007, and 2006, expenses were incurred in the amounts of $14.9, $13.1, and $8.8, respectively.

Investment Advisory and Other Fees

During 2006, ILIAC served as investment advisor to certain variable funds offered in Company products (collectively, the “Company Funds”). The Company Funds paid ILIAC, as investment advisor, daily fees that, on an annual basis, ranged, depending on the Fund, from 0.5% to 1.0% of their average daily net assets. Each of the Company Funds managed by ILIAC were subadvised by investment advisors, in which case ILIAC paid a subadvisory fee to the investment advisors, which included affiliates. Effective January 1, 2007, ILIAC’s investment advisory agreement with the Company Funds was assigned to DSL. ILIAC is also compensated by the separate accounts for bearing mortality and expense risks pertaining to variable life and annuity contracts. Under the insurance and annuity contracts, the separate accounts pay ILIAC daily fees that, on an annual basis are, depending on the product, up to 3.4% of their average daily net assets. The total amount of compensation and fees received by the Company from the Company Funds and separate accounts totaled $245.1, $312.7, and $289.9, (excludes fees paid to ING Investment Management Co.) in 2008, 2007, and 2006, respectively.

DSL has been retained by ING Investors Trust (the “Trust”), an affiliate, pursuant to a management agreement to provide advisory, management, administrative and other services to the Trust. Under the management agreement, DSL provides or arranges for the provision of all services necessary for the ordinary operations of the Trust. DSL earns a monthly fee based on a percentage of average daily net assets of the Trust. DSL has entered into an administrative services subcontract with ING Fund Services, LLC, an affiliate, pursuant to which ING Fund Services, LLC, provides certain management, administrative and other services to the Trust and is compensated a portion of the fees

130

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

received by DSL under the management agreement. For the years ended December 31, 2008, 2007, and 2006, revenue received by DSL under the management agreement (exclusive of fees paid to affiliates) was $323.8, $343.8, and $233.9, respectively. At December 31, 2008 and 2007, DSL had $18.6 and $26.7, respectively, receivable from the Trust under the management agreement.

Financing Agreements

ILIAC maintains a reciprocal loan agreement with ING AIH, an affiliate, to facilitate the handling of unanticipated short-term cash requirements that arise in the ordinary course of business. Under this agreement, which became effective in June 2001 and expires on April 1, 2011, either party can borrow from the other up to 3% of ILIAC’s statutory admitted assets as of the preceding December 31. Interest on any ILIAC borrowing is charged at the rate of ING AIH’s cost of funds for the interest period, plus 0.15%. Interest on any ING AIH borrowings is charged at a rate based on the prevailing interest rate of U.S. commercial paper available for purchase with a similar duration.

Under this agreement, ILIAC incurred interest expense of $0.2, $3.9, and $1.8, for the years ended December 31, 2008, 2007, and 2006, respectively, and earned interest income of $4.8, $1.7, and $3.3, for the years ended December 31, 2008, 2007, and 2006, respectively. Interest expense and income are included in Interest expense and Net investment income, respectively, on the Consolidated Statements of Operations. As of December 31, 2008, ILIAC had $13.0 due to ING AIH under the reciprocal loan agreement and no amounts due as of December 31, 2007. At December 31, 2008 and 2007, ILIAC had no amount due from ING AIH under the reciprocal loan agreement.

As of June 1, 2007, the State of Connecticut, acting by the Department of Economic and Community Development (“DECD”), loaned ILIAC $9.9 (the “DECD Loan”) in connection with the development of the Windsor Property. The loan has a term of twenty years and bears an annual interest rate of 1.00%. As long as no defaults have occurred under the loan, no payments of principal or interest are due for the initial ten years of the loan. For the second ten years of the DECD Loan term, ILIAC is obligated to make monthly payments of principal and interest.

The DECD Loan provides for loan forgiveness at varying amounts up to $5.0 if ILIAC and its affiliates meet certain employment thresholds at the Windsor Property during the term of the loan. ILIAC’s obligations under the DECD Loan are secured by an unlimited recourse guaranty from its affiliate, ING North America Insurance Corporation.

On December 1, 2008, the DECD determined that the Company met the employment thresholds for loan forgiveness and, accordingly, forgave $5.0 of the DECD Loan to the Company in accordance with the terms of the DECD Loan.

At December 31, 2008 and 2007, the amount of the loan outstanding was $4.9 and $9.9, which was reflected in Notes payable on the Consolidated Balance Sheets.

131

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Note with Affiliate

On December 29, 2004, ING USA issued a surplus note in the principal amount of $175.0 (the “Note”) scheduled to mature on December 29, 2034, to ILIAC, in an offering that was exempt from the registration requirements of the Securities Act of 1933. ILIAC’s $175.0 Note from ING USA bears interest at a rate of 6.26% per year. Any payment of principal and/or interest is subject to the prior approval of the Iowa Insurance Commissioner. Interest is scheduled to be paid semi-annually in arrears on June 29 and December 29 of each year, commencing on June 29, 2005. Interest income for the years ended December 31, 2008, 2007, and 2006 was $11.1.

Tax Sharing Agreements

Effective January 1, 2006, ILIAC is a party to a federal tax allocation agreement with ING AIH and its subsidiaries that are part of the ING AIH consolidated group. Under the federal tax allocation agreement, ING AIH charges its subsidiaries for federal taxes each subsidiary would have incurred were it not a member of the consolidated group and credits each subsidiary for losses at the statutory federal tax rate.

For the years ended December 31, 2006 and 2005, DSI, which merged with and into DSL on December 31, 2006, was party to the ING AIH federal tax allocation agreement, as described above. Income from DSL, a single member limited liability company, is taxed at the member level (ILIAC).

ILIAC has also entered into a state tax sharing agreement with ING AIH and each of the specific subsidiaries that are parties to the agreement. The state tax agreement applies to situations in which ING AIH and all or some of the subsidiaries join in the filing of a state or local franchise, income tax, or other tax return on a consolidated, combined, or unitary basis.

10. Financing Agreements

ILIAC maintains a $50.0 uncommitted, perpetual revolving note facility with the Bank of New York ("BONY"). Interest on any of ILIAC’s borrowing accrues at an annual rate equal to a rate quoted by BONY to ILIAC for the borrowing. Under this agreement, ILIAC incurred no interest expense for the year ended December 31, 2008, and minimal interest expense for the years ended December 31, 2007 and 2006. At December 31, 2008 and 2007, ILIAC had no amounts outstanding under the revolving note facility.

ILIAC also maintains a $100.0 uncommitted line-of-credit agreement with PNC Bank (“PNC”), effective December 19, 2005. Borrowings are guaranteed by ING AIH, with maximum aggregate borrowings outstanding at anytime to ING AIH and its affiliates of $100.0. Interest on any of ILIAC’s borrowing accrues at an annual rate equal to a rate quoted by PNC to ILIAC for the borrowing. Under this agreement, ILIAC incurred no interest expense for the year ended December 31, 2008, and minimal interest expense for

132

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

the years ended December 31, 2007 and 2006. At December 31, 2008 and 2007, ILIAC had no amounts outstanding under the line-of-credit agreement. As of October 31, 2008, the Company had not formally renewed this line-of-credit, which subsequently expired on this date.

ILIAC also maintains $100.0 uncommitted line-of-credit agreement with Svenska Handelsbanken AB (Publ.), effective June 2, 2006. Borrowings are guaranteed by ING AIH, with maximum aggregate borrowings outstanding at anytime to ING AIH and its affiliates of $100.0. Interest on any of the Company’s borrowing accrues at an annual rate equal to the rate quoted by Svenska to the Company for the borrowing. Under this agreement, the Company incurred no interest expense for the year ended December 31, 2008, and minimal interest expense for the years ended December 31, 2007 and 2006. At December 31, 2007, ILIAC had no amounts outstanding under the line-of-credit agreement. Effective November 19, 2008, the Company discontinued this line-of-credit.

Also see Financing Agreements in the Related Party Transactions footnote.

11. Reinsurance

At December 31, 2008, the Company had reinsurance treaties with 7 unaffiliated reinsurers covering a significant portion of the mortality risks and guaranteed death benefits under its variable contracts. At December 31, 2008, the Company did not have any outstanding cessions under any reinsurance treaties with affiliated reinsurers. The Company remains liable to the extent its reinsurers do not meet their obligations under the reinsurance agreements.

On, October 1, 1998, the Company disposed of its individual life insurance business under an indemnity reinsurance arrangement with certain subsidiaries of Lincoln for $1.0 billion in cash. Under the agreement, Lincoln contractually assumed from the Company certain policyholder liabilities and obligations, although the Company remains obligated to contractowners. Effective March 1, 2007, the reinsurance agreements were assigned to a single subsidiary of Lincoln, and that subsidiary established a trust to secure its obligations to the Company under the reinsurance transaction.

The Company assumed $25.0 of premium revenue from Aetna Life, for the purchase and administration of a life contingent single premium variable payout annuity contract. In addition, the Company is also responsible for administering fixed annuity payments that are made to annuitants receiving variable payments. Reserves of $11.0 and $16.1 were maintained for this contract as of December 31, 2008 and 2007, respectively.

133

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Reinsurance ceded in force for life mortality risks were $19.6 billion and $20.9 billion at December 31, 2008 and 2007, respectively. At December 31, 2008 and 2007, net receivables were comprised of the following:

		2008		2007
Claims recoverable from reinsurers	$	2,506.6	$	2,595.2
Payable for reinsurance premiums		(0.9)		(0.9)
Reinsured amounts due to reinsurer		(0.4)		(5.9)
Reserve credits		-		0.1
Other		0.3		5.9
Total	$	2,505.6	$	2,594.4

Premiums and Interest credited and other benefits to contractowners were reduced by the following amounts for reinsurance ceded for the years ended December 31, 2008, 2007, and 2006.

		2008		2007		2006
Deposits ceded under reinsurance	$	174.4	$	188.5	$	199.0
Premiums ceded under reinsurance		0.3		0.4		0.5
Reinsurance recoveries		309.0		419.7		359.0

12. Commitments and Contingent Liabilities

Leases

Prior to December 31, 2008, the Company leased certain office space and certain equipment under various operating leases, the longest term of which expires in 2014. However, all operating leases were terminated or consolidated by ING AIH during the fourth quarter of 2008, which resulted in the Company no longer being party to any operating leases.

For the years ended December 31, 2008, 2007, and 2006, rent expense for leases was $6.1, $17.7, and $17.8, respectively. The Company pays substantially all expenses associated with its leased and subleased office properties. Expenses not paid directly by the Company are paid for by an affiliate and allocated back to the Company. As of December 31, 2008, the Company’s expenses will be paid for by an affiliate and allocated back to the Company.

For more information on the lease terminations, see the Restructuring Charges footnote.

134

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

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.

At December 31, 2008, the Company had off-balance sheet commitments to purchase investments equal to their fair value of $353.3, $253.7 of which was with related parties. At December 31, 2007, the Company had off-balance sheet commitments to purchase investments equal to their fair value of $357.8, $226.6 of which was with related parties. During 2008 and 2007, $81.3 and $87.3, respectively, was funded to related parties under off-balance sheet commitments.

Financial Guarantees

The Company owns a 3-year credit-linked note arrangement, whereby the Company will reimburse the guaranteed party upon payment default of the referenced obligation. Upon such default, the Company reimburses the guaranteed party for the loss under the reference obligation, and the Company receives that reference obligation in settlement. The Company can then seek recovery of any losses under the agreement by sale or collection of the received reference obligation. As of December 31, 2008, the maximum liability to the Company under the guarantee was $30.0.

Cash Collateral

Under the terms of the Company’s Over-The-Counter Derivative ISDA Agreements (“ISDA Agreements”), the Company may receive from, or deliver to, counterparties, collateral to assure that all terms of the ISDA Agreements will be met with regard to the CSA. The terms of the CSA call for the Company to pay interest on any cash received equal to the Federal Funds rate. As of December 31, 2008, the Company held $4.4 of cash collateral, which was included in Collateral held, including payables under securities loan agreement. As of December 31, 2007, the Company delivered $18.8 of cash collateral, which was included in Short-term investments under securities loan agreement, including collateral delivered, on the Consolidated Balance Sheets.

Litigation

The Company is involved in threatened or pending lawsuits/arbitrations arising from the normal conduct of business. Due to the climate in insurance and business litigation/arbitrations, suits against the Company sometimes include claims for substantial compensatory, consequential, or punitive damages, and other types of relief. Moreover, certain claims are asserted as class actions, purporting to represent a group of similarly situated individuals. While it is not possible to forecast the outcome of such

135

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

lawsuits/arbitrations, in light of existing insurance, reinsurance, and established reserves, it is the opinion of management that the disposition of such lawsuits/arbitrations will not have a materially adverse effect on the Company’s operations or financial position.

Other Regulatory Matters

Regulatory Matters

As with many financial services companies, the Company and its affiliates have received informal and formal requests for information from various state and federal governmental agencies and self-regulatory organizations in connection with inquiries and investigations of the products and practices of the financial services industry. In each case, the Company and its affiliates have been and are providing full cooperation.

Insurance and Retirement Plan Products and Other Regulatory Matters

Federal and state regulators, and self-regulatory agencies, are conducting broad inquiries and investigations involving the insurance and retirement industries. These initiatives currently focus on, among other things, compensation, revenue sharing, and other sales incentives; potential conflicts of interest; sales and marketing practices (including sales to seniors); specific product types (including group annuities and indexed annuities); and disclosure. The Company and certain of its U.S. affiliates have received formal and informal requests in connection with such investigations, and have cooperated and are cooperating fully with each request for information. Some of these matters could result in regulatory action involving the Company. These initiatives also may result in new legislation and regulation that could significantly affect the financial services industry, including businesses in which the Company is engaged. In light of these and other developments, U.S. affiliates of ING, including the Company, periodically review whether modifications to their business practices are appropriate.

Investment Product Regulatory Issues

Since 2002, there has been increased governmental and regulatory activity relating to mutual funds and variable insurance products. This activity has primarily focused on inappropriate trading of fund shares; directed brokerage; compensation; sales practices, suitability, and supervision; arrangements with service providers; pricing; compliance and controls; adequacy of disclosure; and document retention.

In addition to responding to governmental and regulatory requests on fund trading issues, ING management, on its own initiative, conducted, through special counsel and a national accounting firm, an extensive internal review of mutual fund trading in ING insurance, retirement, and mutual fund products. The goal of this review was to identify any instances of inappropriate trading in those products by third parties or by ING investment professionals and other ING personnel.

136

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

The internal review identified several isolated arrangements allowing third parties to engage in frequent trading of mutual funds within the variable insurance and mutual fund products of certain affiliates of the Company, and identified other circumstances where frequent trading occurred despite measures taken by ING intended to combat market timing. Each of the arrangements has been terminated and disclosed to regulators, to the independent trustees of ING Funds (U.S.) and in Company reports previously filed with the Securities and Exchange Commission (“SEC”) pursuant to the Securities Exchange Act of 1934, as amended.

Action has been or may be taken with respect to certain ING affiliates before investigations relating to fund trading are completed. The potential outcome of such action is difficult to predict but could subject certain affiliates to adverse consequences, including, but not limited to, settlement payments, penalties, and other financial liability. It is not currently anticipated, however, that the actual outcome of any such action will have a material adverse effect on ING or ING’s U.S.-based operations, including the Company.

ING has agreed to indemnify and hold harmless the ING Funds from all damages resulting from wrongful conduct by ING or its employees or from ING’s internal investigation, any investigations conducted by any governmental or self-regulatory agencies, litigation or other formal proceedings, including any proceedings by the SEC. Management reported to the ING Funds Board that ING management believes that the total amount of any indemnification obligations will not be material to ING or ING’s U.S.-based operations, including the Company.

13. Restructuring Charges

2008 CitiStreet Integration

During the third quarter, integration initiatives related to the acquisition of CitiStreet by Lion, which provided significant operational and information technology efficiencies to ING’s U.S. retirement services businesses, including the Company, resulted in the recognition of integration and restructuring costs. In addition, the Company implemented an expense reduction program for the purpose of streamlining its overall operations. The restructuring charges related to these expense reduction and integration initiatives include severance and other employee benefits and lease abandonment costs, which are included in Operating Expenses on the Consolidated Statements of Operations.

137

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

The following table illustrates the restructuring reserves and charges for the period ended December 31, 2008.

Restructuring reserve at inception			$	-
	Restructuring charges:
		Employee severance and termination benefits		11.2	(1)
		Future rent on non-cancelable leases		1.5	(2)
	Total restructuring charges			12.7
	Other charges			-
	Intercompany charges and payments			(2.5)	(3)
	Payments applied against reserve			(1.9)	(4)
Restructuring reserve at December 31, 2008			$	8.3
(1)	Amounts represent charges to the Company for all severed employees that support the Company, including those
	within affiliates.
(2)	Amounts represent intercompany expense allocations from ING AIH.  The expenses were allocated to the Company
	based upon the department that used the space, and the cash settlement occurred in January 2009.
(3)	Amounts represent payments to ING affiliates for severance incurred by another ING entity for employees that supported
	the Company.  Payments were made through ING's intercompany cash settlement process.
(4)	Amounts represent payments to employees of the Company, as well as reversals of severance reserves.

The Company estimates the completion of these integration and restructuring activities by January 30, 2010.

2009 Expense and Staff Reductions

On January 12, 2009, ING announced expense and staff reductions across all U.S. operations, which resulted in the elimination of 87 current and open positions in the Company. Due to the staff reductions, curtailment of pension benefits shall occur during the first quarter of 2009, which will result in the recognition of a loss related to unrecognized prior service costs. The effect of the curtailment on the Company’s earnings is anticipated to be less than $0.1. The Company anticipates that these restructuring activities in regards to its operations will be complete by February 10, 2010 with total estimated costs of $5.8.

138

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

14. Accumulated Other Comprehensive Income (Loss)

Shareholder’s equity included the following components of Accumulated other comprehensive income (loss) as of December 31, 2008, 2007, and 2006.

				2008		2007		2006
Net unrealized capital gains (losses):
	Fixed maturities, available-for-sale		$	(1,315.5)	$	(64.5)	$	(44.6)
	Equity securities, available-for-sale			(7.4)		6.3		18.1
	DAC/VOBA adjustment on
		available-for-sale securities		650.9		7.8		3.9
	Sales inducements adjustment on
		available-for-sale securities		2.4		0.2		0.1
	Premium deficiency reserve adjustment			-		-		(37.5)
	Other investments			(0.3)		(0.7)		0.8
	Less: allocation to experience-rated contracts			-		(16.4)		(52.4)
Unrealized capital gains (losses), before tax				(669.9)		(34.5)		(6.8)
Deferred income tax asset (liability)				205.8		12.1		2.4
Asset valuation allowance				-		(6.4)		-
Net unrealized capital gains (losses)				(464.1)		(28.8)		(4.4)
Pension liability, net of tax				(18.0)		(5.0)		(9.6)
Accumulated other comprehensive
	(loss) income		$	(482.1)	$	(33.8)	$	(14.0)

During 2008, as a result of the current market conditions, the Company reflected net unrealized capital losses allocated to experience-rated contracts in Shareholder’s equity on the Consolidated Balance Sheets rather than Future policy benefits and claims reserves. At December 31, 2008, there are no net unrealized losses allocated to experience-rated contracts. Net unrealized capital gains (losses) allocated to experience-rated contracts of $(16.4) at December 31, 2007, are reflected on the Consolidated Balance Sheets in Future policy benefits and claims reserves and are not included in Shareholder’s equity.

139

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

Changes in Accumulated other comprehensive income (loss), net of DAC, VOBA, and tax (excluding the tax valuation allowance), related to changes in unrealized capital gains (losses) on securities, including securities pledged and excluding those related to experience-rated contracts, as appropriate, were as follows for the years ended December 31, 2008, 2007, and 2006.

			2008		2007		2006
Fixed maturities, available-for-sale		$	(1,251.0)	$	(19.9)	$	(26.6)
Equity securities, available-for-sale			(13.7)		(11.8)		14.9
DAC/VOBA adjustment on
	available-for-sale securities		643.1		3.9		(1.2)
Sales inducements adjustment on
	available-for-sale securities		2.2		0.1		-
Premium deficiency reserve adjustment			-		37.5		(13.9)
Other investments			0.4		(1.5)		(0.4)
Less: allocation to experience-rated contracts			16.4		36.0		(3.8)
Unrealized capital gains (losses), before tax			(635.4)		(27.7)		(23.4)
Deferred income tax asset (liability)			193.7		9.7		12.7
Net change in unrealized capital gains (losses)		$	(441.7)	$	(18.0)	$	(10.7)

			2008		2007		2006
Net unrealized capital holding gains (losses) arising
	during the year (1)	$	(1,192.0)	$	(66.9)	$	(43.6)
Less: reclassification adjustment for gains (losses)
	and other items included in Net (loss) income(2)		(750.3)		(48.9)		(32.9)
Net change in unrealized capital gains (losses) on securities		$	(441.7)	$	(18.0)	$	(10.7)

 

⁽¹⁾ Pretax unrealized holding gains (losses) arising during the year were $(1,714.8), $(102.9), and $(95.4), for the years ended December 31, 2008, 2007, and 2006, respectively.

⁽²⁾ Pretax reclassification adjustments for gains (losses) and other items included in Net (loss) income were and $(1,079.4), $(75.2), and $(72.0), for the years ended December 31, 2008, 2007, and 2006, respectively.

 

140

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Consolidated Financial Statements

(Dollar amount in millions, unless otherwise stated)

15. Changes to Prior Years Presentation

Consolidated Statements of Operations Presentational Changes

During 2008, certain changes were made to the Consolidated Statements of Operations for the year ended 2007 to more accurately reflect the correct balances, primarily related to surrenders on market value adjusted contracts. As the Company has determined these changes to be immaterial, the Consolidated Statements of Operations for the year ended December 31, 2007, has not been labeled as restated. The following table summarizes the adjustments:

		Previously
		Reported		Reclassification		Adjusted
2007
Fee income	$	789.3	$	(19.4)	$	769.9
Net realized capital gains (losses)		(8.2)		(19.4)		(27.6)
Other income		0.9		19.4		20.3
Total revenue		2,451.9		(19.4)		2,432.5
Interest credited and other benefits to contractowners		822.2		(19.4)		802.8
Total benefits and expenses		2,177.5		(19.4)		2,158.1

141

QUARTERLY DATA (UNAUDITED)

(Dollar amounts in millions, unless otherwise stated)

			First
2008			(Restated)*		Second		Third		Fourth
Total revenue		$	560.4	$	538.4	$	469.3	$	166.1
Income (loss) before income taxes			(98.4)		25.1		(391.3)		(673.9)
Income tax expense (benefit)			(53.8)		1.9		(25.1)		(31.3)
Net income		$	(44.6)	$	23.2	$	(366.2)	$	(642.6)
2007			First		Second		Third		Fourth
Total revenue		$	579.1	$	594.9	$	601.4	$	657.1
Income (loss) before income taxes			100.7		115.8		85.8		(27.9)
Income tax expense (benefit)			28.5		33.6		22.3		(28.4)
Net income		$	72.2	$	82.2	$	63.5	$	0.5
*The Company has restated its previously issued unaudited interim financial statements for the three months
	ended March 31, 2008 due to an error in the calculation of the fair value of the reserves for product guarantees
	for annuity contracts containing guaranteed credited rates.  The effect of the restatement on these prior period
	interim financial statements for the three months ended March 31, 2008 was to increase the net loss by $18.9.

142

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 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.

Management’s Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for the Company. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements of the Company in accordance with U.S. generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:

§ pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

§ provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and

§ provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

143

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. In making its assessment, management has used the criteria set forth in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon its assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2008.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Remediation of Material Weakness in Internal Control Over Financial Reporting

In the course of determining the required fair value of the reserves for product guarantees for annuity contracts containing guaranteed credited rates for the three months ended March 31, 2008, an error was made in the calculation of the fair value of reserves for such product guarantees. This error had no impact on customer accounts. However, this error resulted, for the three months ended March 31, 2008, in the understatement of Interest credited and other benefits to contractowners by $39.4, overstatement of net amortization of deferred policy acquisition costs and value of business acquired by $10.4 and understatement of net loss of $(18.9). The error was identified by the Company in the course of a review by the Company of its product guarantee reserves valuation methodology undertaken during the preparation of the Company’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2008. Restated unaudited condensed consolidated financial statements of the Company reflecting the correction of this first quarter 2008 error were included in Amendment No. 1 to the Company's Quarterly Report of Form 10-Q for the quarter ended March 31, 2008. See also Quarterly Data within Item 8. for a further discussion of the calculation error associated with the reserves for product guarantees, which was identified in the Company’s previously issued unaudited interim financial statements for the three months ended March 31, 2008, and resulted in a restatement of such prior period interim financial statements.

In connection with the restatement of the Company’s first quarter 2008 unaudited condensed consolidated financial statements, the Company concluded that the error was attributable to a material weakness in the Company's internal controls over financial reporting. Specifically, the Company implemented a new model in 2008 for the calculation of the fair value of the reserves for product guarantees. This model, which was performed using an end-user computing tool, contained an error in the discount rate conversion process. Such discount rates are used in the determination of the fair value of the reserves for product guarantees. In addition, the secondary review of the results did not identify that incorrect discount rates were used.

To address the material weakness, during the third quarter of 2008, the Company implemented enhancements to its internal controls over financial reporting to provide reasonable assurance that errors of this type will not recur. Remediation included correction of the identified model errors, the implementation of additional monitoring controls to be performed on a quarterly basis, additional in-depth internal review of assumptions, and full implementation of the Company’s existing policies related to

144

end-user computing tools. In addition, the Company implemented definitive standards for detailed documentation supporting the product guarantee reserves valuation methodology. This included the implementation of a formalized change control process and logic inspection to be completed for each change of the model, and additional in-depth internal review on the converted rates. The Company completed these enhancements by September 30, 2008.

Changes in Internal Control over Financial Reporting

No changes in the Company's internal controls over financial reporting occurred during the quarter ended December 31, 2008 that materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

Item 9B. Other Information

None.

145

PART III

Item 10. Directors, Executive Officers, and Corporate Governance

Omitted pursuant to General Instruction I(2) of Form 10-K, except with respect to compliance with Sections 406 and 407 of the Sarbanes-Oxley Act of 2002.

a) Code of Ethics for Financial Professionals

The Company has approved and adopted a Code of Ethics for Financial Professionals (which was filed as Exhibit 14 to the Company’s Form 10-K, as filed with the Securities and Exchange Commission on March 29, 2004, File No. 033-23376), pursuant to the requirements of Section 406 of the Sarbanes-Oxley Act of 2002. Any waiver of the Code of Ethics will be disclosed by the Company by way of a Form 8-K filing.

b) Designation of Board Financial Expert

The Company has designated David A. Wheat, Director, Executive Vice President and Chief Financial Officer of the Company, as its Board Financial Expert, pursuant to the requirements of Section 407 of the Sarbanes-Oxley Act of 2002. Because the Company is not subject to the requirements of Exchange Act Rule 10A-3, it does not have any outside directors sitting on its board.

Item 11. Executive Compensation

Omitted pursuant to General Instruction I(2) of Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Omitted pursuant to General Instruction I(2) of Form 10-K.

Item 13. Certain Relationships, Related Transactions, and Director Independence

Omitted pursuant to General Instruction I(2) of Form 10-K.

146

Item 14. Principal Accounting Fees and Services

(Dollar amounts in millions, unless otherwise stated)

In 2008 and 2007, Ernst & Young LLP (“Ernst & Young”) served as the principal external auditing firm for ING, including ILIAC. ING subsidiaries, including ILIAC, are allocated Ernst & Young fees attributable to services rendered by Ernst & Young to each subsidiary. Ernst & Young fees allocated to the Company for the years ended December 31, 2008 and 2007 are detailed below, along with a description of the services rendered by Ernst & Young to the Company.

		2008			2007
Audit fees	$	2.3		$	3.3
Audit-related fees		0.7			0.2
Tax fees		-	*		-	*
All other fees		0.1			-	*
	$	3.1		$	3.5
*Less than $0.1.

Audit Fees

Fees for audit services include fees associated with professional services rendered by the auditors for the audit of the annual financial statements of the Company and review of the Company’s interim financial statements.

Audit-related Fees

Audit-related fees were allocated to ILIAC for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements and are not reported under the audit fee item above. These services consisted primarily of the audit of SEC product filings.

Tax Fees

There were minimal tax fees allocated to ILIAC in 2008 and 2007. Tax fees allocated to ILIAC were primarily for tax compliance and accounting for income taxes. These services consist of tax compliance, including the review of tax disclosures and proper completion of tax forms, assistance with questions regarding tax audits, and tax planning and advisory services relating to common forms of domestic taxation (i.e., income tax and capital tax).

All Other Fees

There were minimal fees allocated to ILIAC in 2008 and 2007 under the category “all other fees.” Other fees allocated to ILIAC under this category typically include fees paid for products and services other than the audit fees, audit-related fees, and tax fees described above, and consist primarily of non-recurring support and advisory services.

147

Pre-approval Policies and Procedures

ILIAC has adopted the pre-approval policies and procedures of ING. Audit, audit-related, and non-audit services provided to the Company by ING’s independent auditors are pre-approved by ING’s audit committee. Pursuant to ING’s pre-approval policies and procedures, the ING audit committee is required to pre-approve all services provided by ING’s independent auditors to ING and its affiliates, including the Company. The ING pre-approval policies and procedures distinguish five types of services: (1) audit services, (2) audit-related services, (3) tax services, (4) other services that are not audit, audit-related, tax, or prohibited services, and (5) prohibited services (as described in the Sarbanes-Oxley Act).

The ING pre-approval procedures consist of a general pre-approval procedure and a specific pre-approval procedure.

General Pre-approval Procedure

ING’s audit committee pre-approves audit, audit-related, tax, and other, services to be provided by ING’s external audit firms on an annual basis. The audit committee also sets the maximum annual amount for such pre-approved services. Throughout the year, ING’s audit committee receives from ING’s external audit firms an overview of all services provided, including related fees and supported by sufficiently detailed information. ING’s audit committee evaluates this overview periodically on a retrospective basis during the year. Additionally, ING’s Group Finance and Control monitors the amounts paid versus the pre-approved amounts throughout the year.

Specific Pre-approval Procedure

In addition to the general pre-approval procedures, each proposed independent auditor engagement that is expected to generate fees in excess of the pre-approved amounts, must be approved by the audit committee after recommendation of local management on a case-by-case basis.

In 2008 and 2007, 100% of each of the audit-related services, tax services, and all other services were pre-approved by ING’s audit committee.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of this report:

1. Financial statements. See Item 8. on page 75.

2. Financial statement schedules. See Index to Consolidated Financial Statement Schedules on page 150.

3. Exhibits. See Exhibit Index on page 155.

149

Index to Consolidated Financial Statement Schedules
		Page
Report of Independent Registered Public Accounting Firm		151
I.	Summary of Investments - Other than Investments in Affiliates as of
	December 31, 2008	152
IV.	Reinsurance Information as of and for the years ended
	December 31, 2008, 2007, and 2006	153
Schedules other than those listed above are omitted because they are not required
or not applicable.

150

Report of Independent Registered Public Accounting Firm

The Board of Directors

ING Life Insurance and Annuity Company

We have audited the consolidated financial statements of ING Life Insurance and Annuity Company as of December 31, 2008 and 2007, and for each of the three years in the period ended December 31, 2008, and have issued our report thereon dated March 26, 2009. Our audits also included the financial statement schedules listed in Item 15. These schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits.

In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/    Ernst & Young LLP

Atlanta, Georgia

March 26, 2009

ING Life Insurance and Annuity Company and Subsidiaries (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.) Schedule I Summary of Investments – Other than Investments in Affiliates As of December 31, 2008 (In millions)
									Amount
									Shownon
									Consolidated
TypeofInvestments					Cost		Value*		BalanceSheets
Fixed maturities, available-for-sale:
	U.S. Treasuries			$	1,391.4	$	1,475.0	$	1,475.0
	U.S. government agencies and authorities				797.1		873.1		873.1
	State, municipalities, and political subdivisions				72.9		55.5		55.5
	Public utilities securities				1,112.4		999.2		999.2
	Other U.S. corporate securities				3,986.2		3,635.2		3,635.2
	Foreign securities (1)				2,586.3		2,282.2		2,282.2
	Residential mortgage-backed securities				3,412.6		3,299.5		3,299.5
	Commercial mortgage-backed securities				1,604.0		1,233.6		1,233.6
	Other asset-backed securities				830.2		624.3		624.3
		Total fixed maturities, available-for-sale, including
			securities pledged to creditors	$	15,793.1	$	14,477.6	$	14,477.6
Equity securities, available-for-sale				$	247.7	$	240.3	$	240.3
Mortgage loans on real estate				$	2,107.8	$	2,027.9	$	2,107.8
Policy loans					267.8		267.8		267.8
Other investments					576.1		791.0		791.0
		Total investments		$	18,992.5	$	17,804.6	$	17,884.5

* See Notes 2 and 3 of Notes to Consolidated Financial Statements.

⁽¹⁾ The term “foreign” includes foreign governments, foreign political subdivisions, foreign public utilities, and all other bonds of foreign issuers. Substantially all of the Company’s foreign securities are denominated in U.S. dollars.

 

152

ING Life Insurance and Annuity Company and Subsidiaries (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.) Schedule IV Reinsurance Information As of and for the years ended December 31, 2008, 2007, and 2006 (In millions)
										Percentage
										ofAssumed
			Gross		Ceded		Assumed		Net	toNet
YearEndedDecember31,2008
Life insurance in force		$	19,086.0	$	19,603.2	$	517.2	$	-	NM
Premiums:
	Accident and health insurance		0.3		0.3		-		-
	Annuities		46.7		-		0.2		46.9
Total premiums		$	47.0	$	0.3	$	0.2	$	46.9
YearEndedDecember31,2007
Life insurance in force		$	20,379.0	$	20,938.9	$	559.9	$	-	NM
Premiums:
	Life		1.2		-		-		1.2
	Accident and health insurance		0.4		0.4		-		-
	Annuities		45.4		-		0.2		45.6
Total premiums		$	47.0	$	0.4	$	0.2	$	46.8
YearEndedDecember31,2006
Life insurance in force		$	21,844.6	$	22,450.5	$	605.9	$	-	NM
Premiums:
	Accident and health insurance		0.5		0.5		-		-
	Annuities		37.3		-		0.2		37.5
Total premiums		$	37.8	$	0.5	$	0.2	$	37.5

153

SIGNATURES

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.

March 24, 2009 (Date)	ING Life Insurance and Annuity Company         (Registrant)
	By: /s/	David A. Wheat
		David A. Wheat Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on or before March 24, 2009.

Signatures		Title
/s/	David A. Wheat	Director, Executive Vice President and
	David A. Wheat	Chief Financial Officer
/s/	Bridget M. Healy	Director
	Bridget M. Healy
/s/	Robert G. Leary	Director
	Robert G. Leary
/s/	Thomas J. McInerney	Director and Chairman
	Thomas J. McInerney
/s/	Catherine H. Smith	Director
	Catherine H. Smith
/s/	Richard T. Mason	President
	Richard T. Mason
/s/	Steven T. Pierson	Senior Vice President and
	Steven T. Pierson	Chief Accounting Officer

154

ING LIFE INSURANCE AND ANNUITY COMPANY
FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 2008
Exhibit Index
Exhibit Number	Description of Exhibit
3.1	Certificate of Incorporation as amended and restated October 1, 2007, incorporated by reference to the ILIAC Form 10-K, as filed with the SEC on March 31, 2008 (File No. 33-23376).
3.2	Amended and Restated ING Life Insurance and Annuity Company By-Laws, effective October 1, 2007, incorporated by reference to the ILIAC Form 10-K, as filed with the SEC on March 31, 2008 (File No. 33-23376).
4.1	Incorporated by reference to Post-Effective Amendment No. 14 to Registration Statement on Form N-4 (File No. 33-75964), as filed on July 29, 1997.
4.2	Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-75980), as filed on February 12, 1997.
4.3	Incorporated by reference to Post-Effective Amendment No. 12 to Registration Statement on Form N-4 (File No. 33-75964), as filed on February 11, 1997.
4.4	Incorporated by reference to Post-Effective Amendment No. 5 to Registration Statement on Form N-4 (File No. 33-75986), as filed on April 12, 1996.
4.5	Incorporated by reference to Post-Effective Amendment No. 12 to Registration Statement on Form N-4 (File No. 333-01107), as filed on February 4, 1999.
4.6	Incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement on Form N-4 (File No. 33-75988), as filed on April 15, 1996.
4.7	Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File No. 33-81216), as filed on April 17, 1996.
4.8	Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File No. 33-91846), as filed on April 15, 1996.
4.9	Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-91846), as filed on August 6, 1996.
4.10	Incorporated by reference to Registration Statement on Form N-4 (File No. 333-01107), as filed on February 21, 1996.
4.11	Incorporated by reference to Post-Effective Amendment No. 12 to Registration Statement on Form N-4 (File No. 33-75982), as filed on February 20, 1997.
4.12	Incorporated by reference to Post-Effective Amendment No. 7 to Registration Statement on Form N-4 (File No. 33-75992), as filed on February 13, 1997.
4.13	Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-75974), as filed on February 28, 1997.
4.14	Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-75962), as filed on April 17, 1996.
4.15	Incorporated by reference to Post-Effective Amendment No. 14 to Registration Statement on Form N-4 (File No. 33-75962), as filed on April 17, 1998.
4.16	Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-75982), as filed on April 22, 1996.

155

4.17	Incorporated by reference to Post-Effective Amendment No. 8 to Registration Statement on Form N-4 (File No. 33-75980), as filed on August 19, 1997.
4.18	Incorporated by reference to Registration Statement on Form N-4 (File No. 333-56297), as filed on June 8, 1998.
4.19	Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File No. 33-79122), as filed on August 16, 1995.
4.20	Incorporated by reference to Post-Effective Amendment No. 32 to Registration Statement on Form N-4 (File No. 33-34370), as filed on December 16, 1997.
4.21	Incorporated by reference to Post-Effective Amendment No. 30 to Registration Statement on Form N-4 (File No. 33-34370), as filed on September 29, 1997.
4.22	Incorporated by reference to Post-Effective Amendment No. 26 to Registration Statement on Form N-4 (File No. 33-34370), as filed on February 21, 1997.
4.23	Incorporated by reference to Post-Effective Amendment No. 35 to Registration Statement on Form N-4 (File No. 33-34370), as filed on April 17, 1998.
4.24	Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 33-87932), as filed on September 19, 1995.
4.25	Incorporated by reference to Post-Effective Amendment No. 8 to Registration Statement on Form N-4 (File No. 33-79122), as filed on April 17, 1998.
4.26	Incorporated by reference to Post-Effective Amendment No. 7 to Registration Statement on Form N-4 (File No. 33-79122), as filed on April 22, 1997.
4.27	Incorporated by reference to Post-Effective Amendment No. 21 to Registration Statement on Form N-4 (File No. 33-75996), as filed on February 16, 2000.
4.28	Incorporated by reference to Post-Effective Amendment No. 13 to Registration Statement on Form N-4 (File No. 333-01107), as filed on April 7, 1999.
4.29	Incorporated by reference to Post-Effective Amendment No. 37 to Registration Statement on Form N-4 (File No. 33-34370), as filed on April 9, 1999.
4.30	Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 333-87305), as filed on December 13, 1999.
4.31	Incorporated by reference to Post-Effective Amendment No. 18 to Registration Statement on Form N-4 (File No. 33-56297), as filed on August 30, 2000.
4.32	Incorporated by reference to Post-Effective Amendment No.17 to Registration Statement on Form N-4 (File No. 33-75996), as filed on April 7, 1999.
4.33	Incorporated by reference to Post-Effective Amendment No. 19 to Registration Statement on From N-4 (File No. 333-01107), as filed on February 16, 2000.
4.34	Incorporated by reference to the Registration Statement on Form S-2 (File No. 33- 64331), as filed on November 16, 1995.
4.35	Incorporated by reference to Pre-Effective Amendment No. 2 to the Registration Statement on Form S-2 (File No. 33-64331), as filed on January 17, 1996.
4.36	Incorporated by reference to Post-Effective Amendment No. 30 to Registration Statement on Form N-4 (File No. 33-75988), as filed on December 30, 2003.
4.37	Incorporated by reference to Post-Effective Amendment No. 18 to Registration Statement on Form N-4 (File No. 33-75980), as filed on April 16, 2003.

156

4.38	Incorporated by reference to Post-Effective Amendment No. 30 to Registration Statement on Form N-4 (File No. 333-01107), as filed on April 10, 2002.
4.39	Incorporated by reference to Post-Effective Amendment No. 24 to Registration Statement on Form N-4 (File No. 33-81216), as filed on April 11, 2003.
4.40	Incorporated by reference to Registration Statement on Form N-4 (File No. 333-109860), as filed on October 21, 2003.
4.41	Incorporated by reference to Post-Effective Amendment No. 39 to Registration Statement on Form N-4 (File No. 33-75962), as filed on December 17, 2004.
4.42	Incorporated by reference to Initial Registration Statement on Form N-4 (File No. 333-130822), as filed on January 3, 2006.
4.43	Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 333-87131), as filed on December 15, 1999.
4.44	Incorporated by reference to Registration Statement on Form N-4 (File No. 33-59749), as filed on June 1, 1995.
4.45	Incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement on Form N-4 (File No. 33-59749), as filed on April 16, 1997.
4.46	Incorporated by reference to Post-Effective Amendment No. 9 to Registration Statement on Form N-4 (File No. 33-80750), as filed on April 17, 1998.
4.47	Incorporated by reference to Post-Effective Amendment No. 8 to Registration Statement on Form N-4 (File No. 33-80750), as filed on April 23, 1997.
4.48	Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-59749), as filed on November 26, 1997.
4.49	Incorporated by reference to Registration Statement on Form S-2 (File No. 33-63657), as filed on October 25, 1995.
4.50	Incorporated by reference to Pre-Effective Amendment No. 3 to Registration Statement on Form S-2 (File No. 33-63657), as filed on January 17, 1996.
4.51	Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form S-2 (File No. 33-63657), as filed on November 24, 1997.
4.52	Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form S-2 (File No. 33-64331), as filed on November 24, 1997.
4.53	Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-59749), as filed on November 26, 1997.
4.54	Incorporated by reference to Registration Statement on Form N-4 (File No. 33-59749), as filed on June 1, 1995.
4.55	Incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement on Form N-4 (File No. 33-59749), as filed on April 16, 1997.
10.1	Tax Sharing Agreement, dated as of December 13, 2000, among Aetna Inc. renamed Lion, Aetna U.S. Healthcare, Inc. renamed Aetna Inc. and ING America Insurance Holdings, Inc., incorporated by reference to the Company’s Form 10-K filed on March 30, 2001 (File No. 33-23376).

157

10.2	Lease Agreement, dated as of December 13, 2000, by and between Aetna Life Insurance Company and ILIAC, incorporated by reference to the Company’s Form 10-K filed on March 30, 2001 (File No. 33-23376).
10.3	Real Estate Services Agreement, dated as of December 13, 2000, between Aetna Inc. and ILIAC, incorporated by reference to the Company’s Form 10-K filed on March 30, 2001 (File No. 33-23376).
10.4	Tax Sharing Agreement between ILIAC, ING America Insurance Holdings, Inc. and affiliated companies, effective January 1, 2001, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.5	Investment Advisory Agreement between ILIAC and ING Investment Management LLC, dated March 31, 2001, as amended effective January 1, 2003, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.6	Reciprocal Loan Agreement between ILIAC and ING America Insurance Holdings, Inc., effective June 1, 2001, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.7	Services Agreement between ILIAC and the affiliated companies listed in Exhibit B to the Agreement, dated as of January 1, 2001, as amended effective January 1, 2002, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.8	Services Agreement between ILIAC and ING North America Insurance Corporation, dated as of January 1, 2001, as amended effective January 1, 2002, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.9	Services Agreement between ILIAC and ING Financial Advisers, LLC., effective June 1, 2002, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.10	Administrative Services Agreement between ILIAC, ReliaStar Life Insurance Company of New York and the affiliated companies specified in Exhibit A to the Agreement, effective March 1, 2003, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.11	First Amendment to the Administrative Services Agreement between ILIAC, RLNY and the affiliated companies specified in Exhibit A to the Agreement, effective as of August 1, 2004, incorporated by reference to the Company’s Form 10-K filed on March 31, 2005 (File No. 033-23376).
10.12	Amendment to Investment Advisory Agreement between ILIAC and ING Investment Management LLC, effective October 14, 2003, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.13	Surplus Note for $175,000,000 aggregate principal amount, dated December 29, 2004 issued by ING USA Annuity and Life Insurance Company to its affiliate, ILIAC, incorporated by reference to the Company’s Form 10-K filed on March 31, 2005 (File No. 033-23376).
10.14	Joinder Number 2006-1 to Tax Sharing Agreement, dated January 20, 2006, between ILIAC and ING America Insurance Holdings, Inc. and its subsidiaries, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2006 (File No. 033-23376).
10.15	Amendment Number 2006-1 to Services Agreement, dated as of September 11, 2006, between ILIAC and ING North America Insurance Corporation, incorporated by reference to the Company’s Form 10-Q filed on November 13, 2006 (File No. 033-22376).

158

10.16	First Amendment, dated August 14, 2006, to Lease Agreement, dated as of December 13, 2000, between Aetna Life Insurance Company and ILIAC, incorporated by reference to the Company’s Form 10-Q filed on November 13, 2006 (File No. 033-23376).
10.17	Second Amendment, dated October 13, 2006, to the Lease Agreement, dated as of December 13, 2000, between Aetna Life Insurance Company and ILIAC, incorporated by reference to the Company’s Form 10-K filed on April 2, 2007 (File No. 033-23376).
10.18	Agreement A1A document A111-1997 Standard Form of Agreement between Owner and Contractor, as modified, dated September 6, 2006 between Northfield Windsor LLC and John Moriarty & Associates, Inc., incorporated by reference to the Company’s Form 8-K filed on September 11, 2006 (File/Film No. 033-23376/061083829).
10.19	Form of Agreement, titled Assurance of Discontinuance Pursuant to Executive Law Sec. 63(15), between the Attorney General of the State of New York and ING Life Insurance and Annuity Company dated October 10, 2006, incorporated by reference to the Company’s Form 8-K filed on October 11, 2006 (File No. 033-23376).
10.20	Form of Agreement, titled Consent Agreement among the State of New Hampshire, Department of State, Bureau of Securities Regulation, ING Life Insurance and Annuity Company, and ING Financial Advisors, LLC dated October 10, 2006, incorporated by reference to the Company’s Form 8-K filed on October 11, 2006 (File No. 033-23376).
10.21	Amendment Number 2007-1 to Reciprocal Loan Agreement, dated as of December 31, 2007, between ILIAC and ING America Insurance Holdings, Inc., incorporated by reference to the Company’s Form 10-K filed on March 31, 2008 (File No. 033-23376).
10.22	Amendment Number 2007-1 to Services Agreement, dated as of December 31, 2007, between ILIAC and affiliated insurance companies listed on Exhibit B to the Agreement, incorporated by reference to the Company’s Form 10-K filed on March 31, 2008 (File No. 033-23376).
10.23	Administrative Services Agreement, dated as of October 1, 1998, among Aetna Life Insurance and Annuity Company (nka ILIAC), Aetna Life Insurance Company and The Lincoln National Life Insurance Company, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.24	Administrative Services Agreement, dated as of October 1, 1998, among Aetna Life Insurance and Annuity Company (nka ILIAC), Aetna Life Insurance Company and Lincoln Life & Annuity Company of New York, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.25	Coinsurance Agreement, dated as of October 1, 1998, between Aetna Life Insurance and Annuity Company (nka ILIAC) and The Lincoln National Life Insurance Company, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.26	Coinsurance Agreement, dated as of October 1, 1998, between Aetna Life Insurance and Annuity Company (nka ILIAC) and Lincoln Life & Annuity Company of New York, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.27	Modified Coinsurance Agreement, dated as of October 1, 1998, between Aetna Life Insurance and Annuity Company (nka ILIAC) and The Lincoln National Life Insurance Company, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.28	Modified Coinsurance Agreement, dated as of October 1, 1998, between Aetna Life Insurance and Annuity Company (nka ILIAC) and Lincoln Life & Annuity Company of New York, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).

159

10.29	Assignment and Assumption Agreement, dated as of March 19, 2007, effective as of March 1, 2007, between ILIAC, The Lincoln National Life Insurance Company and Lincoln Life & Annuity Company of New York, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.30	Amendment No. 1 to Coinsurance Agreement, effective March 1, 2007, between ILIAC and Lincoln Life & Annuity Company of New York, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.31	Amendment No. 1 to Coinsurance Agreement, effective March 1, 2007, between ILIAC and Lincoln Life & Annuity Company of New York, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.32	Grantor Trust Agreement, dated as of March 19, 2007 and effective as of March 1, 2007, among ILIAC, Lincoln Life & Annuity Company of New York and The Bank of New York, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.33	Services Agreement, effective as of January 1, 1994 and dated March 7, 1995, as amended March 7, 1995 and as amended July 31, 2007, between Golden American Life Insurance Company (nka ING USA Annuity and Life Insurance Company) & Directed Services Inc. (nka Directed Services LLC), incorporated by reference to the Company’s Form 10-K filed on March 31, 2008 (File No. 033-23376).
10.34+	Amendment Number 2008-1 to Services Agreement, effective October 1, 2008, among ILIAC and affiliated companies listed on Exhibit B to the Agreement.
14.	ING Code of Ethics for Financial Professionals, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
31.1+	Certificate of David A. Wheat pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2+	Certificate of Richard T. Mason pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1+	Certificate of David A. Wheat pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2+	Certificate of Richard T. Mason pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

⁺ Filed herewith. 

160

Exhibit 31.1

CERTIFICATION

I, David A. Wheat, certify that:

1.	I have reviewed this annual report on Form 10-K of ING Life Insurance and Annuity Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: By: /s/	March 24, 2009 David A. Wheat David A. Wheat
	Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)

Exhibit 31.2

CERTIFICATION

I, Richard T. Mason, certify that:

1.	I have reviewed this annual report on Form 10-K of ING Life Insurance and Annuity Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: By: /s/ March 24, 2009 Richard T. Mason Richard T. Mason President (Duly Authorized Officer and Principal Officer)

Exhibit 32.1

CERTIFICATION

Pursuant to 18 U.S.C. §1350, the undersigned officer of ING Life Insurance and Annuity Company
(the “Company”) hereby certifies that, to the officer’s knowledge, the Company’s Annual Report
on Form 10-K for the year ended December 31, 2008 (the “Report”) fully complies with the
requirements of Section 13 or 15(d), as applicable, of the Securities Exchange Act of 1934 and
that the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.

March 24, 2009	By: /s/	David A. Wheat
(Date)		David A. Wheat
		Executive Vice President and
		Chief Financial Officer

Exhibit 32.2

CERTIFICATION

Pursuant to 18 U.S.C. §1350, the undersigned officer of ING Life Insurance and Annuity Company
(the “Company”) hereby certifies that, to the officer’s knowledge, the Company’s Annual Report
on Form 10-K for the year ended December 31, 2008 (the “Report”) fully complies with the
requirements of Section 13 or 15(d), as applicable, of the Securities Exchange Act of 1934 and
that the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.

March 24, 2009	By: /s/	Richard T. Mason
(Date)		Richard T. Mason
		President

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

Not Applicable.

Item 14. Indemnification of Directors and Officers

Section 33-779 of the Connecticut General Statutes (“CGS”) provides that a corporation may provide
indemnification of or advance expenses to a director, officer, employee or agent only as permitted by Sections 33-
770 to 33-778, inclusive, of the CGS. Reference is hereby made to Section 33-771(e) of the CGS regarding
indemnification of directors and Section 33-776(d) of CGS regarding indemnification of officers, employees and
agents of Connecticut corporations. These statutes provide in general that Connecticut corporations incorporated
prior to January 1, 1997 shall, except to the extent that their certificate of incorporation expressly provides
otherwise, indemnify their directors, officers, employees and agents against “liability” (defined as the obligation to
pay a judgment, settlement, penalty, fine, including an excise tax assessed with respect to an employee benefit plan,
or reasonable expenses incurred with respect to a proceeding) when (1) a determination is made pursuant to Section
33-775 that the party seeking indemnification has met the standard of conduct set forth in Section 33-771 or (2) a
court has determined that indemnification is appropriate pursuant to Section 33-774. Under Section 33-775, the
determination of and the authorization for indemnification are made (a) by two or more disinterested directors, as
defined in Section 33-770(3); (b) by special legal counsel; (c) by the shareholders; or (d) in the case of
indemnification of an officer, agent or employee of the corporation, by the general counsel of the corporation or
such other officer(s) as the board of directors may specify. Also, Section 33-772 with Section 33-776 provide that a
corporation shall indemnify an individual who was wholly successful on the merits or otherwise against reasonable
expenses incurred by him in connection with a proceeding to which he was a party because he is or was a director,
officer, employee, or agent of the corporation. Pursuant to Section 33-771(d), in the case of a proceeding by or in
the right of the corporation or with respect to conduct for which the director, officer, agent or employee was
adjudged liable on the basis that he received a financial benefit to which he was not entitled, indemnification is
limited to reasonable expenses incurred in connection with the proceeding against the corporation to which the
individual was named a party.

A corporation may procure indemnification insurance on behalf of an individual who is or was a director of the
corporation. Consistent with the laws of the State of Connecticut, ING America Insurance Holdings, Inc. maintains
a Professional Liability and fidelity bond insurance policy issued by an international insurer. The policy covers ING
America Insurance Holdings, Inc. and any company in which ING America Insurance Holdings, Inc. has a
controlling financial interest of 50% or more. These policies include the principal underwriter, as well as the
depositor. Additionally, the parent company of ING America Insurance Holdings, Inc., ING Groep N.V., maintains
excess umbrella coverage with limits in excess of €125,000,000. The policies provide for the following types of
coverage: errors and omissions/professional liability, directors and officers, employment practices, fiduciary and
fidelity.

Section 20 of the ING Financial Advisers, LLC Limited Liability Company Agreement executed as of November
28, 2000 provides that ING Financial Advisers, LLC will indemnify certain persons against any loss, damage, claim
or expenses (including legal fees) incurred by such person if he is made a party or is threatened to be made a party to
a suit or proceeding because he was a member, officer, director, employee or agent of ING Financial Advisers, LLC,
as long as he acted in good faith on behalf of ING Financial Advisers, LLC and in a manner reasonably believed to
be within the scope of his authority. An additional condition requires that no person shall be entitled to indemnity if
his loss, damage, claim or expense was incurred by reason of his gross negligence or willful misconduct. This

indemnity provision is authorized by and is consistent with Title 8, Section 145 of the General Corporation Law of
the State of Delaware.

Item 15. Recent Sales of Unregistered Securities

Not Applicable.

Item 16. Exhibits and Financial Statement Schedules

(a)	Furnish the exhibits as required by Item 601 of Regulation S-K (§229.601):
	(1)(a)	Underwriting Agreement dated November 17, 2000 between Aetna Life Insurance and
		Annuity Company and Aetna Investment Services, LLC ·Incorporated by reference to Pre-
		Effective Amendment No. 34 to Registration Statement on Form N-4 (File No. 033-75996), as
		filed on December 20, 2006.
	(1)(b)	Confirmation of Underwriting Agreement ·Incorporated by reference to Registration
		Statement on Form S-1 (File No. 333-133158, Accession No. 0000836687-06-000199), as
		filed on April 10, 2006.
	(3)(a)	Restated Certificate of Incorporation (amended and restated as of October 1, 2007) of ING
		Life Insurance and Annuity Company ·Incorporated by reference to ING Life Insurance and
		Annuity Company annual report on Form 10-K (File No. 033-23376), as filed on March 31,
		2008.
	(3)(b)	Amended and Restated By-Laws of ING Life Insurance and Annuity Company, effective
		October 1, 2007 ·Incorporated by reference to the ING Life Insurance and Annuity Company
		annul report on Form 10-K (File No. 033-23376), as filed on March 31, 2008.
	(4)(a)	Group Annuity Contract (Form No. G1-MGA-95) ·Incorporated by reference to the
		Registration Statement on Form S-2 (File No. 033-64331), as filed on November 16, 1995.
	(4)(b)	Individual Annuity Contract (Form No. I1-MGA-95) ·Incorporated by reference to Pre-
		Effective Amendment No. 2 to Registration Statement on Form S-2 (File No. 033-64331), as
		filed on January 17, 1996.
	(4)(c)	Certificate (G1CC-MGA-95) to Group Annuity Contract Form No. G1-MGA-95 ·
		Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on
		Form S-2 (File No. 033-64331), as filed on November 24, 1997.
	(4)(d)	Endorsement (E1-MGAIRA-95-2) to Group Annuity Contract Form No. G1-MGA-95 and
		Certificate No. G1CC-MGA-95 ·Incorporated by reference to Post-Effective Amendment No.
		3 to Registration Statement on Form S-2 (File No. 033-64331), as filed on November 24, 1997.
	(4)(e)	Endorsement (E1-MGAROTH-97) to Group Annuity Contract Form No. G1-MGA-95 and
		Certificate No. G1CC-MGA-95 ·Incorporated by reference to Post-Effective Amendment No.
		3 to Registration Statement on Form S-2 (File No. 033-64331), as filed on November 24, 1997.
	(4)(f)	Endorsement ENMCHGI (5/02) (Name Change) ·Incorporated by reference to the
		Registration Statement on Form S-2 (File No. 333-86276), as filed on April 15, 2002.
	(5)	Opinion as to Legality, attached.

	(10)	Material contracts are listed under Item 15 in the Company’s Form 10-K for the fiscal year
		ended December 31, 2008 (File No. 033-23376), as filed with the commission on March 31,
		2009. Each of the Exhibits so listed is incorporated by reference as indicated in the Form 10-K.
	(21)	Subsidiaries of the Registrant · Incorporated herein by reference to Item 26 in Post-Effective
		Amendment No. 26 to Registration Statement on Form N-6 for Select*Life Variable Account
		of ReliaStar Life Insurance Company (File No. 033-57244), as filed with the Securities and
		Exchange Commission on April 7, 2009.
	(23)(a)	Consent of Independent Registered Public Accounting Firm, attached.
	(23)(b)	Consent of Legal Counsel (included in Exhibit (5) above).
	(24)(a)	Powers of Attorney, attached.
	(24)(b)	Certificate of Resolution Authorizing Signature by Power of Attorney ·Incorporated by
		reference to Post-Effective Amendment No. 5 to Registration Statement on Form N-4 (File No.
		033-75986), as filed on April 12, 1996.
(b)	ING Life Insurance and Annuity Company Form 10-K for the fiscal year ended December 31, 2008 is
	incorporated in Part I within the Prospectus.

Exhibits other than these listed are omitted because they are not required or are not applicable.

Item 17. Undertakings

The undersigned registrant hereby undertakes as follows, pursuant to Item 512 of Regulation S-K:

(a)	Rule 415 offerings:
	(1)	To file, during any period in which offers or sales of the registered securities are being made, a
		post-effective amendment to this registration statement:
		(i)	To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
		(ii)	To reflect in the prospectus any facts or events arising after the effective date of the
			registration statement (or the most recent post-effective amendment thereof) which,
			individually or in the aggregate, represent a fundamental change in the information set
			forth in the registration statement; and
		(iii)	To include any material information with respect to the plan of distribution not previously
			disclosed in the registration statement or any material changes to such information in the
			registration statement.
	(2)	That, for the purpose of determining any liability under the Securities Act of 1933, each such
		post-effective amendment shall be deemed to be a new registration statement relating to the
		securities offered therein, and the offering of such securities at that time shall be deemed to be
		the initial bona fide offering thereof.
	(3)	To remove from registration by means of a post-effective amendment any of the securities being
		registered which remain unsold at the termination of the offering.

	(5)(ii)	That for, the purpose of determining liability under the Securities Act of 1933 to any purchaser,
		each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an
		offering, other than registration statements relying on Rule 430B or other than prospectuses
		filed in reliance on Rule 430A shall be deemed to be part of and included in the registration
		statement as of the date it is first used after effectiveness. Provided, however, that no statement
		made in a registration statement or prospectus that is part of the registration statement or made
		in a document incorporated or deemed incorporated by reference into the registration statement
		or prospectus that is part of the registration statement will, as to a purchaser with a time of
		contract of sale prior to such first use, supersede or modify any statement that was made in the
		registration statement or prospectus that was part of the registration statement or made in any
		such document immediately prior to such date of first use.
	(6)	That, for the purpose of determining liability of the registrant under the Securities Act of 1933
		to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes
		that in a primary offering of securities of the undersigned registrant pursuant to this registration
		statement, regardless of the underwriting method used to sell the securities to the purchaser, if
		the securities are offered or sold to such purchaser by means of any of the following
		communications, the undersigned registrant will be a seller to the purchaser and will be
		considered to offer or sell such securities to such purchaser: (i) any preliminary prospectus or
		prospectus of the undersigned registrant relating to the offering required to be filed pursuant to
		Rule 424; (ii) any free writing prospectus relating to the offering prepared by or on behalf of the
		undersigned registrant or used or referred to by the undersigned registrant; (iii) the portion of
		any other free writing prospectus relating to the offering containing material information about
		the undersigned registrant or its securities provided by or on behalf of the undersigned
		registrant; and (iv) any other communication that is an offer in the offering made by the
		undersigned registrant to the purchaser.
(h)	Request for Acceleration of Effective Date:
	Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to
	directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or
	otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission
	such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In
	the event that a claim for indemnification against such liabilities (other than the payment by the registrant
	of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful
	defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in
	connection with the securities being registered, the registrant will, unless in the opinion of its counsel the
	matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question
	whether such indemnification by it is against public policy as expressed in the Act and will be governed by
	the final adjudication of such issue.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Post-Effective
Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-133158) to be signed on its behalf by
the undersigned, thereunto duly authorized in the Town of Windsor, State of Connecticut, on this 29th day of April,
2009.

By:	ING LIFE INSURANCE AND ANNUITY COMPANY
	(REGISTRANT)
By:	/s/ Richard T. Mason
	Richard T. Mason*
	President (Principal Executive Officer)
By:	/s/ J. Neil McMurdie
	J. Neil McMurdie as
	Attorney-in-Fact

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 3 to the Registration
Statement has been signed by the following persons in the capacities and on April 29, 2009.

Signature	Title
/s/ Richard T. Mason
Richard T. Mason*	President
	(Principal Executive Officer)
/s/ Thomas J. McInerney
Thomas J. McInerney*	Director and Chairman
/s/ Catherine H. Smith
Catherine H. Smith*	Director and Senior Vice President
/s/ Bridget M. Healy
Bridget M. Healy*	Director
/s/ Robert G. Leary
Robert G. Leary*	Director
/s/David A. Wheat
David A. Wheat*	Director, Executive Vice President and Chief Financial Officer
/s/ Steven T. Pierson
Steven T. Pierson*	Senior Vice President and Chief Accounting Officer

By:	/s/ J. Neil McMurdie
	J. Neil McMurdie as
	Attorney-in-Fact

*Executed by J. Neil McMurdie on behalf of those indicated pursuant to Powers of Attorney.

	EXHIBIT INDEX
Exhibit No.	Exhibit
16(5)	Opinion as to Legality	EX-5
16(23)(a)	Consent of Independent Registered Public Accounting Firm	EX-23.A
16(23)(b)	Consent of Legal Counsel	*
16(24)(a)	Powers of Attorney	EX-24.A
*Included in Exhibit (5) above