Income Taxes

Income taxes were different from the amount computed by applying the federal income tax rate to income (loss) before income taxes for the following reasons for the periods indicated:



	Three Months Ended September 30,
	2013			2012
Income (loss) before income taxes	$	133.3		$	126.7
Tax rate	35.0		%	35.0		%
Income tax expense (benefit) at federal statutory rate	46.7			44.3
Tax effect of:
Dividends received deduction	(9.0		)	(1.2		)
Valuation allowance	28.6			(10.0		)
IRS audit adjustment	—			—
Other	(0.6		)	0.3
Income tax expense (benefit)	$	65.7		$	33.4



	Nine Months Ended September 30,
	2013			2012
Income (loss) before income taxes	$	353.0		$	403.4
Tax rate	35.0		%	35.0		%
Income tax expense (benefit) at federal statutory rate	123.6			141.2
Tax effect of:
Dividends received deduction	(20.6		)	(13.3		)
Valuation allowance	30.5			—
IRS audit adjustment	(0.3		)	(0.3		)
Other	0.2			0.6
Income tax expense (benefit)	$	133.4		$	128.2

Valuation allowances are provided when it is considered unlikely that deferred tax assets will be realized. As of September 30, 2013 and December 31, 2012, the Company had a tax valuation allowance of $93.3 and $62.8, respectively, that was allocated to continuing operations and $(82.2) and $(51.7), respectively, that was allocated to Other comprehensive income. As of September 30, 2013 and December 31, 2012, the Company had a full valuation allowance of $11.1, related to foreign tax credits, the benefit of which is uncertain.

For the three months ended September 30, 2013 and 2012, there were no total increases (decreases) in the valuation allowance. With respect to 2013, $28.6 was allocated to continuing operations and $(28.6) was allocated to Other comprehensive income. With respect to 2012, $(10.0) was allocated to continuing operations and $10.0 was allocated to Other comprehensive income. For the nine months ended September 30, 2013 and 2012, there were no total increases (decreases) in the valuation allowance. With respect to 2013, $30.5 was allocated to continuing operations and $(30.5) was allocated to Other comprehensive income. With respect to 2012, there were no changes to continuing operations or Other comprehensive income.

Tax Sharing Agreement

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

Tax Regulatory Matters

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

The Company is currently under audit by the IRS for tax years 2012 and 2013 and it is expected that the examination of tax year 2012 will be finalized within the next twelve months. The Company and the IRS have agreed to participate in the Compliance Assurance Program for the tax years 2012 and 2013.