A.M. Best Affirms Ratings of the Key Life Insurance Entities of ING USA

OLDWICK, N.J. - (BUSINESS WIRE) - A.M. Best Co. affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a+” of the key life insurance entities of the U.S. operations of ING Groep N.V. (ING) (Netherlands) [NYSE: ING], collectively known as ING USA (Atlanta, GA). Concurrently, A.M. Best has affirmed the debt ratings of “a+” on the two funding agreement-backed securities programs sponsored by ING USA and the notes issued thereunder. The outlook for the FSR has been revised to stable from negative, while the outlook for the ICRs and debt ratings is negative. (See below for a detailed listing of companies and ratings.)

The rating actions primarily reflect ING USA’s strategic importance within ING’s global insurance segment as well as its solid business profile, adequate risk-adjusted capital, renewed focus on core business lines, improved operating performance and strong market presence within the U.S. life and retirement savings arena. A.M. Best notes that operating performance has improved for most of ING USA’s business segments, due primarily to lower deferred acquisition costs unlocking within individual and group annuities, which reflects the favorable equity market conditions experienced in 2009. However, profitability remains dampened by ongoing credit impairments—primarily within the group’s structured asset portfolio, which remains outsized relative to U.S. peers. A.M. Best notes that a substantial portion of realized losses are non-economic and reflect losses on derivatives used for product and capital hedging.

ING USA’s mixed operating performance is muted by reduced top line growth, some uncertainty of market acceptance for new retirement annuity products, which offer guarantees to the group retirement services market, high correlation of earnings to U.S. equity market performance, and the potential for additional credit losses and downward rating migration within ING USA’s investment portfolios. The group’s unrealized loss position as of March 31, 2010 is still material, but has narrowed substantially from December 31, 2008 and December 31, 2009. Additionally, ING USA’s ratings recognize the evolving nature of the organization’s ownership structure—part of an overall restructuring plan between ING and the European Commission—that requires ING to divest its global insurance, ING Direct (U.S. only) and asset management operations by 2013 through sale, initial public offering or some combination thereof.

The current outlook reflects the potential for reduced financial flexibility should additional capital infusions become necessary, as well as the uncertainty regarding the persistency of ING USA’s core business lines should its divestment be materially delayed. A.M. Best notes ongoing earnings volatility and capital usage embedded in its legacy variable annuity lines and the need to secure longer-term funding solutions for a portion of Regulation XXX and AXXX reserve redundancies. Additionally, ING USA’s capital structure remains heavily supported by internal loans from ING, although progress has been made in reducing intercompany loans over the last several quarters.

The general account portfolios of ING USA’s major life subsidiaries still maintain high concentrations of structured securities—including prime and subprime residential mortgage- backed securities (RMBS), asset-backed securities and commercial mortgage-backed securities (CMBS)—net of the risk mitigated via participation in an Illiquid Asset Back-up Facility, where 80% economic ownership of a portfolio of Alt-A RMBS held by ING USA’s insurers was transferred to the Netherlands. These exposures, coupled with direct commercial mortgage loan exposure exceeding $9 billion, represent roughly 35% of general account assets at year-end 2009.

Nevertheless, ING USA has demonstrated diversified earnings sources and stable capital trends, which have historically benefited from organic earnings growth and parental support. ING USA has developed a strong U.S. franchise, with well-established market positions in retirement services and retail annuities, supplemented by a strong presence in life insurance. A.M. Best believes that ING USA is strategically well-positioned to benefit from its increased focus on the higher growth segments of the maturing U.S. market, namely retirement services and rollover annuities.

The FSR of A (Excellent) and ICRs of “a+” have been affirmed for the following ING USA life/health insurance entities:

ING Life Insurance and Annuity CompanyING USA Annuity and Life Insurance CompanyReliaStar Life Insurance CompanyReliaStar Life Insurance Company of New YorkSecurity Life of Denver Insurance Company

The FSR of A- (Excellent) and ICR of “a-” have been affirmed for Midwestern United Life Insurance Company, ING USA’s non-group rated entity.

The following debt ratings have been affirmed:

ING USA Global Funding Trusts — program rating of “a+”

-- “a+” on all outstanding notes issued under the program

ING Security Life Institutional Funding — program rating of “a+”

-- “a+” on all outstanding notes issued under the program

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

A.M. Best Company Analysts Ken Johnson, CFA, 908- 439-2200,        ext. 5056 [email protected] or Rosemarie        Mirabella, CFA, CPA, 908-439-2200, ext. 5892 [email protected] or Public        Relations Rachelle Morrow, 908-439-2200, ext. 5378 [email protected] or Jim        Peavy, 908-439-2200, ext. 5644 [email protected]