UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

——————————————————————

FORM 10-Q



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

For the quarterly period ended ~~June~~September 30, 2016



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 001-32625

Voya Insurance and Annuity Company

(Exact name of registrant as specified in its charter)



Iowa	41-0991508
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1475 Dunwoody Drive
West Chester, Pennsylvania	19380-1478
(Address of principal executive offices)	(Zip Code)

(610) 425-3400

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

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



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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of ~~August~~November 87, 2016, 250,000 shares of Common Stock, $10 par value, were outstanding, all of which were directly owned by Voya Holdings Inc.

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



	1

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Form 10-Q for the period ended ~~June~~September 30, 2016

INDEX
		PAGE
PART I.	FINANCIAL INFORMATION (UNAUDITED)
Item 1.	Financial Statements:
	Condensed Balance Sheets	4
	Condensed Statements of Operations	6
	Condensed Statements of Comprehensive Income	7
	Condensed Statements of Changes in Shareholder's Equity	8
	Condensed Statements of Cash Flows	9
	Notes to Condensed Financial Statements	10
Item 2.	Management's Narrative Analysis of the Results of Operations and Financial Condition	6162
Item 4.	Controls and Procedures	8081
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	8182
Item 1A.	Risk Factors	8182
Item 6.	Exhibits	8182
Signature		8283
Exhibit Index		8384



	2

As used in this Quarterly Report on Form 10-Q, "VIAC," the "Company," "we," "our" and "us" refer to Voya Insurance and Annuity Company.

NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including "Risk Factors" and "Management’s Narrative Analysis of the Results of Operations and Financial Condition" contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements relating to future developments in our business or expectations for our future financial performance and any statement not involving a historical fact. Forward-looking statements use words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. Actual results, performance or events may differ materially from those projected in any forward-looking statement due to, among other things, (i) general economic conditions, particularly economic conditions in our core markets, (ii) performance of financial markets, including emerging markets, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels, (v) persistency and lapse levels, (vi) interest rates, (vii) currency exchange rates, (viii) general competitive factors, (ix) changes in laws and regulations, including those relating to insurance regulatory reform initiatives applicable to captive reinsurance entities and those made pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act or the U.S. Department of Labor's final rules and exemptions pertaining to the fiduciary status of providers of investment advice; and (x) changes in the policies of governments and/or regulatory authorities. Factors that may cause actual results to differ from those in any forward-looking statement also include those described under "Risk Factors" and "Management’s Narrative Analysis of the Results of Operations and Financial Condition" in the Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 001-32625) (the "Annual Report on Form 10-K") and "Risk Factors," in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (File No. 001-32625).

The risks included here are not exhaustive. Current reports on Form 8-K and other documents filed with the Securities and Exchange Commission ("SEC") include additional factors that could affect our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.



	3

PART I. FINANCIAL INFORMATION (UNAUDITED)

Item 1. Financial Statements

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Condensed Balance Sheets

~~June~~September 30, 2016 (Unaudited) and December 31, 2015

(In millions, except share and per share data)

	June 30, 2016		December 31, 2015
	September 30, 2016		December 31, 2015
Assets
Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost of $21,589.2 as of 2016 and $22,069.6 as of 2015)	$	23,214.3	$	22,458.4
Fixed maturities, available-for-sale, at fair value (amortized cost of $21,650.1 as of 2016 and $22,069.6 as of 2015)	$	23,373.3	$	22,458.4
Fixed maturities, at fair value using the fair value option	~~671~~679.72		547.4
Equity securities, available-for-sale, at fair value (cost of $15.3 as of 2016 and $15.4 as of 2015)	20.1		19.2
Equity securities, available-for-sale, at fair value (cost of $15.2 as of 2016 and $15.4 as of 2015)	20.2		19.2
Short-term investments	940.30		1,069.4
Mortgage loans on real estate, net of valuation allowance of $0.9 as of 2016 and $1.0 as of 2015	3,663.9		3,310.9
Mortgage loans on real estate, net of valuation allowance of $1.0 as of 2016 and 2015	3,804.8		3,310.9
Policy loans	7675.54		79.8
Limited partnerships/corporations	~~202~~215.63		186.3
Derivatives	1,~~885~~789.40		799.4
Other investments	4836.76		48.6
Securities pledged (amortized cost of $740.2 as of 2016 and $633.3 as of 2015)	837.6		672.4
Securities pledged (amortized cost of $679.0 as of 2016 and $633.3 as of 2015)	747.5		672.4
Total investments	31,~~561~~681.13		29,191.8
Cash and cash equivalents	~~1,335~~721.61		646.5
Short-term investments under securities loan agreements, including collateral delivered	~~634~~372.62		232.7
Accrued investment income	~~236~~248.65		239.3
Deposits and reinsurance recoverable	6,~~257~~843.45		5,645.9
Deferred policy acquisition costs, Value of business acquired and Sales inducements to contract owners	2,~~251~~049.35		2,576.4
Due from affiliates	2227.34		27.5
Deferred income taxes	—		94.8
Other assets	~~339~~347.27		337.5
Assets held in separate accounts	32,~~132~~104.2		33,355.5
Total assets	$	74,~~770~~395.34	$	72,347.9



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

	4

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Condensed Balance Sheets

~~June~~September 30, 2016 (Unaudited) and December 31, 2015

(In millions, except share and per share data)

	June 30, 2016			December 31, 2015
	September 30, 2016			December 31, 2015
Liabilities and Shareholder's Equity
Future policy benefits and contract owner account balances	$	28,~~742~~991.18		$	27,749.8
Payable for securities purchased	2366.91			108.1
Payables under securities loan agreements, including collateral held	1,~~853~~674.3			656.1
Long-term debt	435.0			435.0
Long-term debt with affiliates	435.0			435.0
Due to affiliates	5037.23			44.4
Funds held under reinsurance treaties with affiliates	7,~~832~~677.48			6,797.1
Derivatives	~~665~~402.4			204.6
Current income tax payable to Parent	6645.21			27.6
Deferred income taxes	8591.32			—
Other liabilities	~~137~~130.85			153.4
Liabilities related to separate accounts	32,~~132~~104.2			33,355.5
Total liabilities	7271,~~023~~655.87			69,531.6
Commitments and Contingencies (Note 9)
Shareholder's equity:
Common stock (250,000 shares authorized, issued and outstanding as of 2016 and 2015; $10 par value per share)	2.5			2.5
Additional paid-in capital	4,448.56			4,821.2
Accumulated other comprehensive income (loss)	~~618~~616.9			319.6
Retained earnings (deficit)	(2,~~323~~328.43		)	(2,327.0		)
Total shareholder's equity	2,~~746~~739.57			2,816.3
Total liabilities and shareholder's equity	$	74,~~770~~395.34		$	72,347.9



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

	5

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Condensed Statements of Operations

For the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2016 and 2015 (Unaudited)

(In millions)

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Revenues:
Net investment income	$	~~346~~336.98		$	~~318~~322.41		$	~~673~~1,010.31		$	~~638~~960.56
Fee income	~~157~~160.69			~~190~~175.02			~~311~~472.32			~~375~~550.13
Premiums	~~128~~125.93			~~127~~129.10			~~248~~373.03			~~245~~374.9
Net realized capital gains (losses):
Total other-than-temporary impairments	(13.57		)	(45.94		)	(37.63		)	(510.26		)
Less: Portion of other-than-temporary impairments recognized in Other comprehensive income (loss)	(0.82		)	0.3			1.31			1.03
Net other-than-temporary impairments recognized in earnings	(2.3.5		)	(5.27		)	(48.94		)	(611.29		)
Other net realized capital gains (losses)	(38292.10		)	~~168~~549.48			63(228.28		)	~~(55~~494.80		)
Total net realized capital gains (losses)	(40295.45		)	~~163~~544.21			58(237.32		)	~~(62~~482.01		)
Other revenue	4.61			64.12			913.56			1115.68
Total revenues	~~597~~331.6			~~804~~1,174.86			1,~~300~~632.40			12,~~209~~383.17
Benefits and expenses:
Interest credited and other benefits to contract owners/policyholders	~~610~~24.02			~~(210~~1,395.56		)	1,~~395~~419.46			~~221~~1,617.84
Operating expenses	~~115~~108.2			~~115~~127.84			~~235~~344.80			~~237~~364.04
Net amortization of Deferred policy acquisition costs and Value of business acquired	~~(175~~150.70		)	~~516~~27.04			(~~389~~239.4		)	~~371~~398.48
Interest expense	7.02			7.1			1421.02			1421.01
Other expense	1(2.90		)	63.51			64.3			1518.23
Total benefits and expenses	~~558~~287.46			~~434~~1,560.96			1,~~262~~549.17			~~859~~2,420.40
Income (loss) before income taxes	3944.20			~~369~~(386.90		)	3882.3			~~349~~(36.73		)
Income tax expense (benefit)	3548.09			4(47.7		)	3483.76			(250.41		)
Net income (loss)	$	(4.29	)	$	~~365~~(338.23	)	$	3(1.63	)	$	~~352~~13.18



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

	6

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Condensed Statements of Comprehensive Income

For the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2016 and 2015 (Unaudited)

(In millions)

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Net income (loss)	$	(4.29	)	$	~~365~~(338.23	)	$	3(1.63	)	$	~~352~~13.18
Other comprehensive income (loss), before tax:
Unrealized gains/losses on securities	~~220~~(3.91		)	(~~271~~88.02		)	~~458~~454.09			(~~188~~276.24		)
Other-than-temporary impairments	10.23			1.42			2.58			34.57
Pension and other postretirement benefits liability	—(0.2		)	—(0.1		)	(0.13		)	(0.12		)
Other comprehensive income (loss), before tax	~~222~~(3.10		)	(~~269~~87.61		)	~~460~~457.4			(~~184~~271.89		)
Income tax expense (benefit) related to items of other comprehensive income (loss)	~~102~~(1.30		)	(~~112~~30.06		)	~~161~~160.1			(6495.62		)
Other comprehensive income (loss), after tax	~~119~~(2.80		)	(~~157~~56.65		)	~~299~~297.3			(~~120~~176.27		)
Comprehensive income (loss)	$	~~124~~(6.09	)	$	~~207~~(394.68	)	$	~~302~~296.90		$	~~231~~(162.9	)



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

	7

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Condensed Statements of Changes in Shareholder’s Equity

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2016 and 2015 (Unaudited)

(In millions)

	Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings (Deficit)			Total Shareholder's Equity
Balance as of January 1, 2016	$	2.5	$	4,821.2		$	319.6		$	(2,327.0	)	$	2,816.3
Comprehensive income (loss):
Net income (loss)	—		—			—			3(1.63		)	3(1.63		)
Other comprehensive income (loss), after tax	—		—			~~299~~297.3			—			~~299~~297.3
Total comprehensive income (loss)												~~302~~296.90
Dividends paid and distributions of capital	—		(373.0		)	—			—			(373.0		)
Employee related benefits	—		0.34			—			—			0.34
Balance as of June 30, 2016	$	2.5	$	4,448.5		$	618.9		$	(2,323.4	)	$	2,746.5
Balance as of September 30, 2016	$	2.5	$	4,448.6		$	616.9		$	(2,328.3	)	$	2,739.7
Balance as of January 1, 2015	$	2.5	$	5,310.6		$	609.0		$	(2,301.9	)	$	3,620.2
Comprehensive income (loss):
Net income (loss)	—		—			—			~~352~~13.18			~~352~~13.18
Other comprehensive income (loss), after tax	—		—			(~~120~~176.27		)	—			(~~120~~176.27		)
Total comprehensive income (loss)												~~231~~(162.9		)
Dividends paid and distributions of capital	—		(492.0		)	—			—			(492.0		)
Employee related benefits	—		2.6			—			—			2.6
Balance as of June 30, 2015	$	2.5	$	4,821.2		$	488.8		$	(1,949.8	)	$	3,362.7
Balance as of September 30, 2015	$	2.5	$	4,821.2		$	432.3		$	(2,288.1	)	$	2,967.9



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

	8

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Condensed Statements of Cash Flows

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2016 and 2015 (Unaudited)

(In millions)

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2016			2015
Net cash provided by operating activities	$	~~519~~691.41		$	~~727~~1,262.1
Cash Flows from Investing Activities:
Proceeds from the sale, maturity, disposal or redemption of:
Fixed maturities	23,~~744~~299.84			12,~~525~~479.18
Equity securities, available-for-sale	0.2			—
Mortgage loans on real estate	~~280~~349.80			~~167~~229.61
Limited partnerships/corporations	1020.71			1524.3
Acquisition of:
Fixed maturities	(23,~~555~~117.73		)	(13,~~491~~668.52		)
Mortgage loans on real estate	(633.8		)	(429.4		)
Equity securities, available-for-sale	—			(12.4		)
Limited partnerships/corporations	(34.2		)	(24.2		)
Mortgage loans on real estate	(843.0		)	(672.8		)
Derivatives, net	(453.2		)	(132.1		)
Limited partnerships/corporations	(52.5		)	(38.0		)
Short-term investments, net	129.1			225.0
Derivatives, net	(1,038.2		)	417.6
Policy loans, net	3.3			4.1
Short-term investments, net	129.4			(394.6		)
Collateral received (delivered), net	795.3			(26.8		)
Policy loans, net	4.4			5.5
Other investments, net	0.2			0.3
Collateral received (delivered), net	878.7			463.4
Other investments, net	12.3			0.3
Other, net	(1.7		)	—
Net cash provided by (used in) investing activities	285.8			(166.6		)
Net cash used in investing activities	(359.2		)	(1,166.0		)
Cash Flows from Financing Activities:
Deposits received for investment contracts	12,~~423~~142.01			1,~~201~~838.0
Maturities and withdrawals from investment contracts	(12,~~165~~024.06		)	(1,~~128~~720.59		)
(Settlements) receipts on deposit contracts	(1.18		)	29564.43
Excess tax benefits on share-based compensation	—			0.4
Dividends paid and distributions of capital	(373.0		)	(492.0		)
Net cash used in financing activities	(116.1		)	(389.7		)
Net cash (used in) provided by financing activities	(257.3		)	189.8
Net increase in cash and cash equivalents	~~689~~74.16			~~170~~285.89
Cash and cash equivalents, beginning of period	646.5			362.4
Cash and cash equivalents, end of period	$	~~1,335~~721.61		$	~~533~~648.23



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

	9

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

1. Business, Basis of Presentation and Significant Accounting Policies

Business

Voya Insurance and Annuity Company ("VIAC" or "the Company"), is a stock life insurance company domiciled in the State of Iowa and provides financial products and services in the United States. VIAC is authorized to conduct its insurance business in all states, except New York, and in the District of Columbia.

Prior to May 2013, Voya Financial, Inc., together with its subsidiaries, including the Company, was an indirect, wholly-owned subsidiary of ING Groep N.V. ("ING Group" or "ING"), a global financial services holding company based in The Netherlands. In May 2013, Voya Financial, Inc., completed its initial public offering of common stock, including the issuance and sale of common stock by Voya Financial, Inc. and the sale of shares of common stock owned indirectly by ING Group. Between October 2013 and March 2015, ING Group completed the sale of its remaining shares of common stock of Voya Financial, Inc. in a series of registered public offerings. ING Group continues to hold certain warrants to purchase up to 26,050,846 shares of Voya Financial, Inc. common stock at an exercise price of $48.75, in each case subject to adjustments.

VIAC is a direct, wholly owned subsidiary of Voya Holdings Inc. ("Parent"), which is a direct, wholly owned subsidiary of Voya Financial, Inc.

The Company offers various insurance products, including fixed and indexed annuities, investment-only products and payout annuities for pre-retirement wealth accumulation and postretirement income management. The Company's annuity products are distributed by national and regional brokerage and securities firms, independent broker-dealers, banks, life insurance companies with captive agency sales forces, independent insurance agents, independent marketing organizations and affiliated broker-dealers. The Company's primary annuity customers are individual consumers. The Company stopped actively writing new retail variable annuity products with substantial guarantee features in early 2010, as part of a global business strategy and risk reduction plan. New amounts will continue to be deposited in VIAC variable annuities as add-on premiums to existing contracts.

The Company has historically issued guaranteed investment contracts and funding agreements (collectively referred to as "GICs"), primarily to institutional investors and corporate benefit plans. In 2009, the Company made a strategic decision to run-off the assets and liabilities in the GIC business over time. New GIC contracts may be issued on a limited basis to replace maturing contracts.

The Company has one operating segment.

Basis of Presentation

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

The accompanying Condensed Financial Statements reflect adjustments (including normal, recurring adjustments) necessary to present fairly the financial position of the Company as of ~~June~~September 30, 2016, and its results of operations and comprehensive income for the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015, and its changes in shareholder's equity and statements of cash flows for the ~~six~~nine months ended ~~June~~September 30, 2016 and 2015, in conformity with U.S. GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2015 Balance Sheet is from the audited Financial Statements included in the Company's Annual Report on Form 10-K, filed with the SEC. Therefore, these unaudited Condensed Financial Statements should be read in conjunction with the audited Financial Statements and related notes included in the Company's Annual Report on Form 10-K.



	10

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Adoption of New Pronouncements

Derivative Contract Novations

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-05, “Derivatives and Hedging (Accounting Standards Codification ("ASC") Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships” (“ASU 2016-05”), which clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under ASC Topic 815 does not, in and of itself, require dedesignation of that hedging relationship.

The provisions of ASU 2016-05 are effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016 with early adoption permitted, using either a prospective or modified retrospective approach. The Company elected to early adopt ASU 2016-05 as of January 1, 2016 on a prospective basis. The adoption had no effect on the Company's financial condition, results of operations, or cash flows.

Consolidation

In February 2015, the FASB issued ASU 2015-02, “Consolidation (ASC Topic 810): Amendments to the Consolidation Analysis” (“ASU 2015-02”), which:


•	Modifies the evaluation of whether limited partnerships and similar legal entities are Variable Interest Entities ("VIEs") or Voting Interest Entities ("VOEs"), including the requirement to consider the rights of all equity holders at risk to determine if they have the power to direct the entity's most significant activities.


•	Eliminates the presumption that a general partner should consolidate a limited partnership. Limited partnerships and similar entities will be VIEs unless the limited partners hold substantive kick-out rights in the participating rights.


•	Affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships.


•	Provides a new scope exception for registered money market funds and similar unregistered money market funds, and ends the deferral granted to investment companies from applying the VIE guidance.

The Company adopted the provisions of ASU 2015-02 on January 1, 2016 using a modified retrospective approach. The adoption had no effect on the Company's financial condition or results of operations, but impacted disclosures only. Investments in limited partnerships previously accounted for as VOEs became VIEs under the new guidance as the limited partners do not hold substantive kick-out rights or participating rights. See Variable Interest Entities ("VIEs") section of the Investments Note to these Condensed Financial Statements for additional information.

Hybrid Financial Instruments

In November 2014, the FASB issued ASU 2014-16, “Derivatives and Hedging (ASC Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity” (“ASU 2014-16”), which requires an entity to determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including all embedded derivative features.

The provisions of ASU 2014-16 were adopted by the Company on January 1, 2016. The adoption had no effect on the Company’s financial condition, results of operations or cash flows.



	11

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Future Adoption of Accounting Pronouncements

Statement of Cash Flows

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (ASC Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”), which addresses diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments provide guidance on eight specific cash flow issues.

The provisions of ASU 2016-15 are effective retrospectively for fiscal years beginning after December 15, 2017, including interim periods, with early adoption permitted. The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2016-15.

Financial Instruments - Credit Losses

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which:


•	Introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments,


•	Modifies the impairment model for available-for-sale debt securities, and


•	Provides a simplified accounting model for purchased financial assets with credit deterioration since their origination.

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The provisions of ASU 2016-13 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted for fiscal years beginning after December 15, 2018. Initial adoption of ASU 2016-13 is required to be reported on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption, except for certain provisions that are required to be applied prospectively. The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2016-13.

Debt Instruments

In March 2016, the FASB issued ASU 2016-06, “Derivatives and Hedging (ASC Topic 815): Contingent Put and Call Options in Debt Instruments” (“ASU 2016-06”), which clarifies that an entity is only required to follow the four-step decision sequence when assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts for purposes of bifurcating an embedded derivative. The entity does not need to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks.

The provisions of ASU 2016-06 are effective on a modified retrospective basis for fiscal years beginning after December 15, 2016, including interim periods, with early adoption permitted. The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2016-06.

Financial Instruments - Recognition and Measurement

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments-Overall (ASC Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”), which requires:


•	Equity investments (except those consolidated or accounted for under the equity method) to be measured at fair value with changes in fair value recognized in net income.


•	Elimination of the disclosure of methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost.


•	The use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes.


•	Separate presentation in other comprehensive income of the portion of the total change in fair value of a liability resulting from a change in own credit risk if the liability is measured at fair value under the fair value option.


•	Separate presentation on the balance sheet or financial statement notes of financial assets and financial liabilities by measurement category and form of financial asset.

The provisions of ASU 2016-01 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption only permitted for certain provisions. Initial adoption of ASU 2016-01 is required to be reported on a modified retrospective basis, with a cumulative-effect adjustment to the balance sheet as of the beginning of the year of adoption, ~~except for certain provisions that are required to be applied prospectively. The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2016-01.~~

Short-Duration Contracts

In May 2015, the FASB issued ASU 2015-09, "Financial Services - Insurance (ASC Topic 944): Disclosures about Short-Duration Contracts" ("ASU 2015-09"), which requires insurance entities to disclose for annual reporting periods information about the liability for unpaid claims and claim adjustment expenses and about significant changes in methodologies and assumptions used to calculate the liability for unpaid claims and claims adjustment expenses. The standard also requires entities to disclose, for annual and interim reporting periods, a rollforward of the liability for unpaid claims and claim adjustment expenses.

The provisions of ASU 2015-09 are effective, retrospectively, for annual periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016, with early adoption permitted. The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2015-09.

Revenue from Contracts with Customers



	12

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

~~when,~~except orfor ~~as,~~certain ~~the~~provisions ~~entity~~that ~~satisfies~~are arequired ~~performance~~to ~~obligation~~be ~~under~~applied ~~the contract~~prospectively. The ~~standard~~Company ~~also~~is ~~requires~~currently ~~disclosures~~in ~~regarding~~ the ~~nature,~~process ~~amount,~~of ~~timing~~determining ~~and~~the ~~uncertainty~~impact of ~~revenue~~adoption ~~and~~of ~~cash~~the ~~flows~~provisions ~~arising~~of ~~from~~ASU ~~contracts with customers~~2016-01.

Short-Duration Contracts

In May 2015, the FASB issued ASU 2015-09, "Financial Services - Insurance (ASC Topic 944): Disclosures about Short-Duration Contracts" ("ASU 2015-09"), which requires insurance entities to disclose, for annual reporting periods, information about the liability for unpaid claims and claim adjustment expenses and about significant changes in methodologies and assumptions used to calculate the liability for unpaid claims and claims adjustment expenses. The standard also requires entities to disclose, for annual and interim reporting periods, a rollforward of the liability for unpaid claims and claim adjustment expenses.

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (ASC Topic 606)" ("ASU 2014-09"), which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized when, or as, the entity satisfies a performance obligation under the contract. The standard also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

During 2016, the FASB issued the following amendments to clarify the provisions and implementation guidance of ASU 2014-09:


•	ASU 2016-08, “Principal versus Agent Considerations”


•	ASU 2016-10, “Identifying Performance Obligations and Licensing”


•	ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients”

In August 2015, the FASB issued ASU 2015-14 to amend the effective date of ASU 2014-09 to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted as of the original effective date, which is January 1, 2017. Initial adoption of ASU 2014-09 is required to be reported using either a retrospective or modified retrospective approach. The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2014-09 and its amendments.



	13

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

2. Investments

Fixed Maturities and Equity Securities

Available-for-sale and fair value option ("FVO") fixed maturities and equity securities were as follows as of ~~June~~September 30, 2016:

	AmortizedCost		GrossUnrealizedCapitalGains		GrossUnrealizedCapitalLosses		Embedded Derivatives(2)		Fair Value		OTTI(3)(4)
Fixed maturities:
U.S. Treasuries	$	~~943~~885.07	$	~~113~~101.64	$	—	$	—	$	~~1,056~~987.61	$	—
U.S. Government agencies and authorities	80.61		6.68		0.31		—		86.98		—
State, municipalities and political subdivisions	~~434~~471.29		3834.4		01.60		—		~~472~~505.03		—
U.S. corporate public securities	10,~~392~~261.17		~~935~~965.83		3215.25		—		11,~~295~~211.75		4.10
U.S. corporate private securities	2,~~444~~608.6		~~164~~171.20		1914.37		—		2,~~589~~764.59		—
Foreign corporate public securities and foreign governments(1)	2,~~658~~657.39		~~171~~193.42		3423.5		—		2,~~795~~827.26		—
Foreign corporate private securities(1)	2,~~606~~649.26		~~173~~171.59		106.19		—		2,~~769~~814.6		—
Residential mortgage-backed securities:
Agency	1,~~784~~744.83		9487.65		32.63		1514.64		1,~~891~~843.49		—
Non-Agency	~~292~~312.68		4446.38		34.7		65.38		~~339~~360.57		17.42
Total Residential mortgage-backed securities	2,~~077~~057.41		~~138~~134.93		7.30		2120.92		2,~~230~~204.96		17.42
Commercial mortgage-backed securities	1,~~142~~066.20		6056.4		21.48		—		1,~~200~~120.26		—
Other asset-backed securities	~~222~~269.57		911.65		54.12		—		~~227~~277.0		0.3
Total fixed maturities, including securities pledged	23,~~001~~008.13		1,~~812~~846.42		~~111~~74.87		2120.92		24,~~723~~800.60		21.85
Less: Securities pledged	~~740~~679.20		9970.04		1.69		—		~~837~~747.65		—
Total fixed maturities	22,~~260~~329.93		1,~~713~~775.48		~~110~~72.28		2120.92		2324,~~886~~052.05		21.85
Equity securities	15.32		45.80		—		—		20.12		—
Total fixed maturities and equity securities investments	$	22,~~276~~344.25	$	1,~~718~~780.28	$	~~110~~72.28	$	2120.92	$	2324,~~906~~072.17	$	21.85

⁽¹⁾ Primarily U.S. dollar denominated.

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

⁽³⁾ Represents Other-than-Temporary Impairments ("OTTI") reported as a component of Other comprehensive income (loss).

⁽⁴⁾ Amount excludes $174.4 of net unrealized gains on impaired available-for-sale securities.



	14

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Available-for-sale and FVO fixed maturities and equity securities were as follows as of December 31, 2015:

	AmortizedCost		GrossUnrealizedCapitalGains		GrossUnrealizedCapitalLosses		Embedded Derivatives(2)		FairValue		OTTI(3)(4)
Fixed maturities:
U.S. Treasuries	$	992.7	$	70.2	$	4.2	$	—	$	1,058.7	$	—
U.S. Government agencies and authorities	79.4		2.8		0.3		—		81.9		—
State, municipalities and political subdivisions	359.1		6.6		5.2		—		360.5		—
U.S. corporate public securities	10,718.9		389.2		236.2		—		10,871.9		4.5
U.S. corporate private securities	2,365.0		74.3		44.9		—		2,394.4		—
Foreign corporate public securities and foreign governments(1)	2,826.9		67.3		101.2		—		2,793.0		—
Foreign corporate private securities(1)	2,592.9		95.0		61.9		—		2,626.0		—
Residential mortgage-backed securities
Agency	1,525.4		81.2		5.8		14.9		1,615.7		—
Non-Agency	221.4		43.9		2.1		6.2		269.4		19.5
Total Residential mortgage-backed securities	1,746.8		125.1		7.9		21.1		1,885.1		19.5
Commercial mortgage-backed securities	1,311.0		35.8		3.4		—		1,343.4		—
Other asset-backed securities	257.6		11.3		5.6		—		263.3		0.3
Total fixed maturities, including securities pledged	23,250.3		877.6		470.8		21.1		23,678.2		24.3
Less: Securities pledged	633.3		52.2		13.1		—		672.4		—
Total fixed maturities	22,617.0		825.4		457.7		21.1		23,005.8		24.3
Equity securities	15.4		3.8		—		—		19.2		—
Total fixed maturities and equity securities investments	$	22,632.4	$	829.2	$	457.7	$	21.1	$	23,025.0	$	24.3

⁽¹⁾ Primarily U.S. dollar denominated.

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

⁽⁴⁾ Amount excludes $180.3 of net unrealized gains on impaired available-for-sale securities.



	15

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The amortized cost and fair value of fixed maturities, including securities pledged, as of ~~June~~September 30, 2016, are shown below by contractual maturity. Actual maturities may differ from contractual maturities as securities may be restructured, called or prepaid. Mortgage-backed securities ("MBS") and Other asset-backed securities ("ABS") are shown separately because they are not due at a single maturity date.

	AmortizedCost		FairValue
Due to mature:
One year or less	$	~~502~~665.70	$	~~508~~667.78
After one year through five years	5,~~274~~140.39		5,~~582~~449.90
After five years through ten years	8,~~181~~100.82		8,~~651~~585.12
After ten years	5,~~600~~709.24		6,~~322~~495.8
Mortgage-backed securities	3,~~219~~123.61		3,~~431~~325.12
Other asset-backed securities	~~222~~269.57		~~227~~277.0
Fixed maturities, including securities pledged	$	23,~~001~~008.13	$	24,~~723~~800.60

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

As of ~~June~~September 30, 2016 and December 31, 2015, 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 condensed Shareholder’s equity.

The following tables set forth the composition of the U.S. and foreign corporate securities within the fixed maturity portfolio by industry category as of the dates indicated:

	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Fair Value
June 30, 2016
September 30, 2016
Communications	$	1,088.71	$	~~122~~131.13	$	21.54	$	1,~~208~~218.30
Financial	2,~~854~~916.64		~~205~~218.90		1811.86		3,~~041~~122.78
Industrial and other companies	8,~~741~~721.43		~~680~~700.03		2013.92		9,~~400~~408.54
Energy	1,~~862~~850.39		~~112~~128.23		3921.29		1,~~935~~957.3
Utilities	2,~~613~~636.12		~~257~~250.17		98.6		2,~~860~~878.63
Transportation	~~585~~605.51		4950.40		1.90		~~633~~654.01
Total	$	17,~~745~~818.60	$	1,~~426~~478.76	$	9257.97	$	19,~~079~~238.49
December 31, 2015
Communications	$	1,147.2	$	64.9	$	17.9	$	1,194.2
Financial	2,798.2		108.8		22.1		2,884.9
Industrial and other companies	8,778.0		282.1		165.9		8,894.2
Energy	2,357.3		32.2		175.9		2,213.6
Utilities	2,500.6		113.6		31.2		2,583.0
Transportation	571.8		17.0		13.8		575.0
Total	$	18,153.1	$	618.6	$	426.8	$	18,344.9



	16

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Fixed Maturities and Equity Securities

The Company's fixed maturities and equity securities are currently designated as available-for-sale, except those accounted for using the FVO. Available-for-sale securities are reported at fair value and unrealized capital gains (losses) on these securities are recorded directly in Accumulated other comprehensive income (loss) ("AOCI") and presented net of related changes in Deferred policy acquisition costs ("DAC"), Value of business acquired ("VOBA") and Deferred income taxes. In addition, certain fixed maturities have embedded derivatives, which are reported with the host contract on the Condensed Balance Sheets.

The Company has elected the FVO for certain of its fixed maturities to better match the measurement of assets and liabilities in the Condensed Statements of Operations. Certain collateralized mortgage obligations ("CMOs"), primarily interest-only and principal-only strips, are accounted for as hybrid instruments and valued at fair value with changes in the fair value recorded in Other net realized capital gains (losses) in the Condensed Statements of Operations.

The Company invests in various categories of CMOs, including CMOs that are not agency-backed, that are subject to different degrees of risk from changes in interest rates and defaults. The principal risks inherent in holding CMOs are prepayment and extension risks related to significant decreases and increases in interest rates resulting in the prepayment of principal from the underlying mortgages, either earlier or later than originally anticipated. As of ~~June~~September 30, 2016 and December 31, 2015, approximately 4546.72% and 46.6%, respectively, of the Company’s CMO holdings, were invested in the above mentioned types of CMOs such as interest-only or principal-only strips, that are subject to more prepayment and extension risk than traditional CMOs.

Public corporate fixed maturity securities are distinguished from private corporate fixed maturity securities based upon the manner in which they are transacted. Public corporate fixed maturity securities are issued initially through market intermediaries on a registered basis or pursuant to Rule 144A under the Securities Act of 1933 (the "Securities Act") and are traded on the secondary market through brokers acting as principal. Private corporate fixed maturity securities are originally issued by borrowers directly to investors pursuant to Section 4(a)(2) of the Securities Act, and are traded in the secondary market directly with counterparties, either without the participation of a broker or in agency transactions.

Securities Lending

The Company engages in securities lending whereby certain securities from its portfolio are loaned to other institutions through a lending agent for short periods of time. The Company has the right to approve any institution with whom the lending agent transacts on its behalf. Initial collateral is required at a rate of 102% of the market value of the loaned securities. The lending agent retains the collateral and invests it in high quality liquid assets on behalf of the Company. 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. The lending agent indemnifies the Company against losses resulting from the failure of a counterparty to return securities pledged where collateral is insufficient to cover the loss. As of ~~June~~September 30, 2016 and December 31, 2015, the fair value of loaned securities was $~~246~~288.05 and $147.9, respectively, and is included in Securities pledged on the Condensed Balance Sheets.

If cash is received as collateral, the lending agent retains the cash collateral and invests it in short-term liquid assets on behalf of the Company. As of ~~June~~September 30, 2016 and December 31, 2015, cash collateral retained by the lending agent and invested in short-term liquid assets on the Company's behalf was $~~179~~142.95 and $153.6, respectively, and is recorded in Short-term investments under securities loan agreements, including collateral delivered on the Condensed Balance Sheets. As of ~~June~~September 30, 2016 and December 31, 2015, liabilities to return collateral of $~~179~~142.95 and $153.6, respectively, are included in Payables under securities loan agreements, including collateral held on the Condensed Balance Sheets.

During the first quarter of 2016 under an amendment to the securities lending program, the Company began accepting non-cash collateral in the form of securities. The securities retained as collateral by the lending agent may not be sold or re-pledged, except in the event of default, and are not reflected in the Company’s Condensed Consolidated Balance Sheets. This collateral generally consists of U.S. Treasury, U.S. Government agency securities and MBS pools. As of ~~June~~September 30, 2016, the fair value of securities retained as collateral by the lending agent on the Company’s behalf was $74156.49. As of December 31, 2015, the Company did not retain any securities as collateral.



	17

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table sets forth borrowings under securities lending transactions by class of collateral pledged for the dates indicated:

	June 30, 2016 (1)		December 31, 2015
	September 30, 2016 (1)		December 31, 2015
U.S. Treasuries	$	1922.98	$	—
U.S. corporate public securities	~~152~~215.25		73.5
Foreign corporate public securities and foreign governments	8261.21		80.1
Payables under securities loan agreements	$	~~254~~299.34	$	153.6

(1) Borrowings under securities lending transactions include both cash and non-cash collateral of $~~179~~142.95 and $74156.49, respectively.

The Company's securities lending activities are conducted on an overnight basis, and all securities loaned can be recalled at any time. The Company does not offset assets and liabilities associated with its securities lending program.

Variable Interest Entities ("VIEs")

The Company holds certain VIEs for investment purposes. VIEs may be in the form of private placement securities, structured securities, securitization transactions or limited partnerships. The Company has reviewed each of its holdings and determined that consolidation of these investments in the Company’s financial statements is not required, as the Company is not the primary beneficiary, because the Company does not have both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation or right to potentially significant losses or benefits for any of its investments in VIEs. The Company did not provide any non-contractual financial support and its carrying value represents the Company's exposure to loss. The carrying value of the investments in VIEs was $~~202~~215.63 and $1.2 as of ~~June~~September 30, 2016 and December 31, 2015, respectively; these investments are included in Limited partnerships/corporations on the Condensed Balance Sheets. Income and losses recognized on these investments are reported in Net investment income in the Condensed Statements of Operations.

Securitizations

The Company invests in various tranches of securitization entities, including Residential mortgage-backed securities ("RMBS"), Commercial mortgage-backed securities ("CMBS") and asset-backed securities ("ABS"). Through its investments, the Company is not obligated to provide any financial or other support to these entities. Each of the RMBS, CMBS and ABS entities are thinly capitalized by design and considered VIEs. The Company's involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer or investment manager, which are generally viewed to have the power to direct the activities that most significantly impact the securitization entities' economic performance, in any of these entities, nor does the Company function in any of these roles. The Company, through its investments or other arrangements, does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity. Therefore, the Company is not the primary beneficiary and will not consolidate any of the RMBS, CMBS and ABS entities in which it holds investments. These investments are accounted for as investments available-for-sale as described in the Fair Value Measurements Note to these Condensed Financial Statements and unrealized capital gains (losses) on these securities are recorded directly in AOCI, except for certain RMBS, which are accounted for under the FVO, for which changes in fair value are reflected in Other net realized gains (losses) in the Condensed Statements of Operations. The Company's maximum exposure to loss on these structured investments is limited to the amount of its investment.



	18

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Unrealized Capital Losses

Unrealized capital losses (including noncredit impairments), along with the fair value of fixed maturity securities, including securities pledged, by market sector and duration were as follows as of ~~June~~September 30, 2016:

	Six Months or Less Below Amortized Cost					More Than SixMonths and Twelve Months or Less Below Amortized Cost					More Than Twelve Months Below Amortized Cost				Total
	Fair Value		UnrealizedCapital Losses			Fair Value		UnrealizedCapital Losses			Fair Value		UnrealizedCapital Losses		Fair Value		UnrealizedCapital Losses
U.S. Treasuries	$	—2.0	$	—		$	—	$	—		$	—	$	—	$	—2.0	$	—
U.S. Government agencies and authorities	—		—			~~50.8~~—		~~0.3~~—			—50.6		—0.1		50.86		0.31
State, municipalities and political subdivisions	027.89		—0.4		*	—		—			12.7		0.6		1340.56		01.60
U.S. corporate public securities	93126.97		1.07			~~132~~71.81		90.75			~~416~~171.34		2113.53		~~643~~369.02		3215.25
U.S. corporate private securities	3977.12		01.42			194.58		0.82			~~123~~126.67		1813.13		~~182~~208.27		1914.37
Foreign corporate public securities and foreign governments	4782.30		1.98			8215.43		51.70			~~207~~142.87		2620.97		~~337~~240.50		3423.5
Foreign corporate private securities	056.30		—1.1		*	3811.39		40.24			8556.54		5.94		124.13		106.19
Residential mortgage-backed	~~173~~138.92		21.04			5966.04		01.53			86113.31		4.83		~~319~~317.27		7.30
Commercial mortgage-backed	1851.96		0.1			20.95		0.54			13.54		1.83		4175.35		21.48
Other asset-backed	0.25		—		*	~~11.7~~—		—		*	7180.58		54.12		8381.43		54.12
Total	$	~~374~~562.41	$	57.47		$	~~415~~190.40	$	213.78		$	~~1,005~~757.28	$	8463.72	$	1,~~795~~509.09	$	~~111~~74.87
* Less than $0.1.



	19

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



	Six Months or Less Below Amortized Cost					More Than Six Months and Twelve Months or Less Below Amortized Cost				More Than Twelve Months Below Amortized Cost				Total
	Fair Value		Unrealized Capital Losses			Fair Value		Unrealized Capital Losses		Fair Value		Unrealized Capital Losses		Fair Value		Unrealized Capital Losses
U.S. Treasuries	$	311.6	$	4.2		$	—	$	—	$	—	$	—	$	311.6	$	4.2
U.S. Government agencies and authorities	49.3		0.3			—		—		—		—		49.3		0.3
State, municipalities and political subdivisions	116.9		1.3			98.9		3.9		—		—		215.8		5.2
U.S. corporate public securities	1,973.2		63.0			2,250.3		140.7		136.1		32.5		4,359.6		236.2
U.S. corporate private securities	362.0		9.7			369.5		28.2		34.3		7.0		765.8		44.9
Foreign corporate public securities and foreign governments	815.3		28.0			416.3		45.7		134.0		27.5		1,365.6		101.2
Foreign corporate private securities	492.8		40.6			194.5		14.3		23.0		7.0		710.3		61.9
Residential mortgage-backed	145.8		1.0			94.1		1.7		150.8		5.2		390.7		7.9
Commercial mortgage-backed	236.2		1.9			25.2		0.8		0.7		0.7		262.1		3.4
Other asset-backed	13.5		—		*	—		—		76.7		5.6		90.2		5.6
Total	$	4,516.6	$	150.0		$	3,448.8	$	235.3	$	555.6	$	85.5	$	8,521.0	$	470.8
*Less than $0.1.

Of the unrealized capital losses aged more than twelve months, the average market value of the related fixed maturities was 92.23% and 86.6% of the average book value as of ~~June~~September 30, 2016 and December 31, 2015, respectively.



	20

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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

	Amortized Cost				Unrealized Capital Losses				Number of Securities
	< 20%		> 20%		< 20%		> 20%		< 20%	> 20%
June 30, 2016
September 30, 2016
Six months or less below amortized cost	$	~~758~~711.6	$	6410.89	$	3225.90	$	152.85	~~182~~159	136
More than six months and twelve months or less below amortized cost	~~372~~267.83		5741.70		157.98		1711.26		6667	1011
More than twelve months below amortized cost	~~651~~547.72		16.26		2925.1		02.97		~~195~~154	14
Total	$	1,~~783~~526.1	$	~~123~~58.75	$	7757.9	$	3316.98	~~443~~380	2421
December 31, 2015
Six months or less below amortized cost	$	4,611.3	$	468.6	$	131.4	$	131.5	758	93
More than six months and twelve months or less below amortized cost	3,445.1		—		171.2		—		524	—
More than twelve months below amortized cost	450.4		16.4		32.4		4.3		158	3
Total	$	8,506.8	$	485.0	$	335.0	$	135.8	1,440	96



	21

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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

	Amortized Cost					Unrealized Capital Losses					Number of Securities
	< 20%		> 20%			< 20%		> 20%			< 20%	> 20%
June 30, 2016
September 30, 2016
U.S. Treasuries	$	—2.0	$	—		$	—	$	—		—1	—
U.S. Government agencies and authorities	5150.17		—			0.31		—			1	—
State, municipalities and political subdivisions	1441.16		—			01.60		—			333	—
U.S. corporate public securities	~~663~~373.62		11.65			2912.6		2.69			~~149~~83	2
U.S. corporate private securities	~~180~~202.87		20.7			129.40		65.97			1720	2
Foreign corporate public securities and foreign governments	~~301~~241.32		7022.73			1617.62		176.93			7850	76
Foreign corporate private securities	~~118~~131.12		~~16.1~~—			56.9		~~4.2~~—			1417	42
Residential mortgage-backed	~~326~~324.03		0.54			76.29		0.1			~~137~~128	54
Commercial mortgage-backed	3974.63		43.10			0.21		21.27			712	4
Other asset-backed	8884.59		—0.6			54.1		—0.1			3735	—1
Total	$	1,~~783~~526.1	$	~~123~~58.75		$	7757.9	$	3316.98		~~443~~380	2421
December 31, 2015
U.S. Treasuries	$	315.8	$	—		$	4.2	$	—		8	—
U.S. Government agencies and authorities	49.6		—			0.3		—			1	—
State, municipalities and political subdivisions	221.0		—			5.2		—			117	—
U.S. corporate public securities	4,316.2		279.6			159.1		77.1			681	57
U.S. corporate private securities	769.5		41.2			33.3		11.6			90	4
Foreign corporate public securities and foreign governments	1,343.5		123.3			66.6		34.6			251	26
Foreign corporate private securities	734.2		38.0			50.4		11.5			81	5
Residential mortgage-backed	398.6		—		*	7.9		—		*	141	2
Commercial mortgage-backed	264.1		1.4			2.7		0.7			33	1
Other asset-backed	94.3		1.5			5.3		0.3			37	1
Total	$	8,506.8	$	485.0		$	335.0	$	135.8		1,440	96
*Less than $0.1.

Investments with fair values less than amortized cost are included in the Company’s other-than-temporary impairments analysis. Impairments were recognized as disclosed in the "Evaluating Securities for Other-Than-Temporary Impairments" section below. The Company evaluates non-agency RMBS and ABS for "other-than-temporary impairments" each quarter based on actual and projected cash flows, after considering the quality and updated loan-to-value ratios reflecting current home prices of underlying collateral, forecasted loss severity, the payment priority within the tranche structure of the security and amount of any credit enhancements. The Company's assessment of current levels of cash flows compared to estimated cash flows at the time the securities were acquired (typically pre-2008) indicates the amount and the pace of projected cash flows from the underlying collateral has generally been lower and slower, respectively. However, since cash flows are typically projected at a trust level, the impairment review incorporates the security's position within the trust structure as well as credit enhancement remaining in the trust to determine whether an impairment is warranted. Therefore, while lower and slower cash flows will impact the trust, the effect on the valuation of a particular security within the trust will also be dependent upon the trust structure. Where the assessment continues to project



	22

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

full recovery of principal and interest on schedule, the Company has not recorded an impairment. Based on this analysis, the Company determined that the remaining investments in an unrealized loss position were not other-than-temporarily impaired and therefore no further other-than-temporary impairment was necessary.

Troubled Debt Restructuring

The Company invests in high quality, well performing portfolios of commercial mortgage loans and private placements. Under certain circumstances, modifications are granted to these contracts. Each modification is evaluated as to whether a troubled debt restructuring has occurred. A modification is a troubled debt restructuring when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the face amount or maturity amount of the debt as originally stated, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company considers the amount, timing and extent of the concession granted in determining any impairment or changes in the specific valuation allowance recorded in connection with the troubled debt restructuring. A valuation allowance may have been recorded prior to the quarter when the loan is modified in a troubled debt restructuring. Accordingly, the carrying value (net of the specific valuation allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment. For the ~~six~~nine months ended ~~June~~September 30, 2016 and the year ended December 31, 2015, the Company had no new troubled debt restructurings for private placement bonds or commercial mortgage loans.

As of ~~June~~September 30, 2016 and December 31, 2015, the Company did not have any commercial mortgage loans or private placements modified in a troubled debt restructuring with a subsequent payment default.

Mortgage Loans on Real Estate

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

The following table summarizes the Company’s investment in mortgage loans as of the dates indicated:

	June 30, 2016								December 31, 2015
	September 30, 2016								December 31, 2015
	Impaired		Non Impaired			Total			Impaired		Non Impaired			Total
Commercial mortgage loans	$	—	$	3,~~664~~805.8		$	3,~~664~~805.8		$	3.7	$	3,308.2		$	3,311.9
Collective valuation allowance for losses	N/A		(01.90		)	(01.90		)	N/A		(1.0		)	(1.0		)
Total net commercial mortgage loans	$	—	$	3,~~663~~804.98		$	3,~~663~~804.98		$	3.7	$	3,307.2		$	3,310.9

N/A - Not Applicable

There were no impairments taken on the mortgage loan portfolio for the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015.

The following table summarizes the activity in the allowance for losses for commercial mortgage loans for the periods indicated:

	June 30, 2016			December 31, 2015
	September 30, 2016			December 31, 2015
Collective valuation allowance for losses, balance at January 1	$	1.0		$	0.8
Addition to (reduction of) allowance for losses	~~(0.1~~—		)	0.2
Collective valuation allowance for losses, end of period	$	01.90		$	1.0



	23

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The carrying values and unpaid principal balances of impaired mortgage loans were as follows as of the dates indicated:

	June 30, 2016		December 31, 2015
	September 30, 2016		December 31, 2015
Impaired loans without allowances for losses	$	—	$	3.7
Less: Allowances for losses on impaired loans	—		—
Impaired loans, net	$	—	$	3.7
Unpaid principal balance of impaired loans	$	—	$	3.7

The following table presents information on restructured loans as of the dates indicated:

	June 30, 2016		December 31, 2015
	September 30, 2016		December 31, 2015
Troubled debt restructured loans	$	—	$	3.7

The Company defines delinquent mortgage loans consistent with industry practice as 60 days past due. The Company's policy is to recognize interest income until a loan becomes 90 days delinquent or foreclosure proceedings are commenced, at which point interest accrual is discontinued. Interest accrual is not resumed until the loan is brought current.

There were no mortgage loans in the Company's portfolio in process of foreclosure as of ~~June~~September 30, 2016 or December 31, 2015.

There were no loans 30 days or less in arrears, with respect to principal and interest as of ~~June~~September 30, 2016. There were two loans 30 days or less in arrears, with respect to principal and interest as of December 31, 2015, with a total amortized cost of $2.1.

Commercial loans are placed on non-accrual status when 90 days in arrears if the Company has concerns regarding the collectability of future payments, or if a loan has matured without being paid off or extended. Factors considered may include conversations with the borrower, loss of major tenant, bankruptcy of borrower or major tenant, decreased property cash flow, number of days past due, or various other circumstances. Based on an assessment as to the collectability of the principal, a determination is made to either apply against the book value or apply according to the contractual terms of the loan. Funds recovered in excess of book value would then be applied to recover expenses, impairments, and then interest. Accrual of interest resumes after factors resulting in doubts about collectability have improved.

The following tables present information on the average investment during the period in impaired loans and interest income recognized on impaired and troubled debt restructured loans for the periods indicated:

	Three Months Ended June 30,
	Three Months Ended September 30,
	2016		2015
Impaired loans, average investment during the period (amortized cost) (1)	$	—	$	97.84
Interest income recognized on impaired loans, on an accrual basis (1)	—		0.1
Interest income recognized on impaired loans, on a cash basis (1)	—		0.21
Interest income recognized on troubled debt restructured loans, on an accrual basis	—		0.1
(1) Includes amounts for Troubled debt restructured loans.
	Six Months Ended June 30,
	Nine Months Ended September 30,
	2016		2015
Impaired loans, average investment during the period (amortized cost) (1)	$	1.8	$	1311.40
Interest income recognized on impaired loans, on an accrual basis (1)	—		0.34
Interest income recognized on impaired loans, on a cash basis (1)	—		0.45
Interest income recognized on troubled debt restructured loans, on an accrual basis	—		0.34

⁽¹⁾ Includes amounts for Troubled debt restructured loans.



	24

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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

The following table presents the LTV ratios as of the dates indicated:

	June 30, 2016(1)		December 31, 2015(1)
	September 30, 2016(1)		December 31, 2015(1)
Loan-to-Value Ratio:
0% - 50%	$	~~430~~421.8	$	399.9
> 50% - 60%	1,~~001~~008.81		927.9
> 60% - 70%	12,~~897~~032.42		1,772.0
> 70% - 80%	~~330~~339.47		207.0
> 80% and above	4.40		5.1
Total Commercial mortgage loans	$	3,~~664~~805.8	$	3,311.9

⁽¹⁾Balances do not include collective valuation allowance for losses.

The following table presents the DSC ratios as of the dates indicated:

	June 30, 2016(1)		December 31, 2015(1)
	September 30, 2016(1)		December 31, 2015(1)
Debt Service Coverage Ratio:
Greater than 1.5x	$	2,~~879~~970.06	$	2,569.3
> 1.25x - 1.5x	~~604~~619.15		505.3
> 1.0x - 1.25x	~~123~~127.26		145.6
Less than 1.0x	2851.25		40.4
Commercial mortgage loans secured by land or construction loans	3036.36		51.3
Total Commercial mortgage loans	$	3,~~664~~805.8	$	3,311.9

⁽¹⁾Balances do not include collective valuation allowance for losses.



	25

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Properties collateralizing mortgage loans are geographically dispersed throughout the United States, as well as diversified by property type, as reflected in the following tables as of the dates indicated:

	June 30, 2016(1)				December 31, 2015(1)
	September 30, 2016(1)				December 31, 2015(1)
	GrossCarrying Value		% of Total		GrossCarrying Value		% of Total
Commercial Mortgage Loans by U.S. Region:
Pacific	$	~~870~~892.43	23.84	%	$	763.0	23.0	%
South Atlantic	~~909~~973.60		2425.86	%	792.5		23.9	%
Middle Atlantic	~~485~~471.17		1312.24	%	467.2		14.1	%
West South Central	~~426~~458.97		1112.61	%	388.8		11.7	%
Mountain	~~331~~345.46		9.01	%	334.1		10.1	%
East North Central	~~377~~385.45		10.31	%	324.2		9.8	%
New England	6064.6		1.7	%	58.2		1.8	%
West North Central	~~135~~141.28		3.7	%	117.6		3.6	%
East South Central	6872.26		1.9	%	66.3		2.0	%
Total Commercial mortgage loans	$	3,~~664~~805.8	100.0	%	$	3,311.9	100.0	%

⁽¹⁾ Balances do not include collective valuation allowance for losses.

	June 30, 2016(1)				December 31, 2015(1)
	September 30, 2016(1)				December 31, 2015(1)
	GrossCarrying Value		% of Total		GrossCarrying Value		% of Total
Commercial Mortgage Loans by Property Type:
Retail	$	1,~~085~~150.32	2930.62	%	$	1,125.1	33.9	%
Industrial	~~951~~970.46		2625.05	%	788.3		23.8	%
Apartments	~~753~~805.50		2021.62	%	615.2		18.6	%
Office	~~628~~640.47		1716.18	%	535.6		16.2	%
Hotel/Motel	8281.15		2.2	%	83.3		2.5	%
Mixed Use	31.42		0.98	%	29.9		0.9	%
Other	~~132~~126.76		3.63	%	134.5		4.1	%
Total Commercial mortgage loans	$	3,~~664~~805.8	100.0	%	$	3,311.9	100.0	%

⁽¹⁾ Balances do not include collective valuation allowance for losses.

The following table sets forth the breakdown of mortgages by year of origination as of the dates indicated:

	June 30, 2016(1)		December 31, 2015(1)
	September 30, 2016(1)		December 31, 2015(1)
Year of Origination:
2016	$	~~618~~819.59	$	—
2015	~~805~~796.25		810.1
2014	~~557~~553.14		557.9
2013	~~610~~605.6		624.7
2012	~~173~~170.59		232.8
2011	~~391~~365.1		460.4
2010 and prior	~~508~~494.84		626.0
Total Commercial mortgage loans	$	3,~~664~~805.8	$	3,311.9

⁽¹⁾ Balances do not include collective valuation allowance for losses.



	26

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Evaluating Securities for Other-Than-Temporary Impairments

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

The following tables identify the Company’s credit-related and intent-related impairments included in the Condensed Statements of Operations, excluding impairments included in Other comprehensive income (loss) by type for the periods indicated:

	Three Months Ended June 30,
	Three Months Ended September 30,
	2016				2015
	Impairment			No. ofSecurities	Impairment			No. ofSecurities
U.S. corporate public securities	$	—1.7		—1	$	—1.5		—1
Foreign corporate public securities and foreign governments(1)	~~0.9~~—			1—	43.28			23
Foreign corporate private securities(1)	0.1.4			1	~~0.4~~—			1—
Residential mortgage-backed	10.34			1817	0.42			128
Commercial mortgage-backed	—			—	0.2			1
Other asset-backed	—		*	1	—			—
Equity	—			—	—			—
Total	$	2.3.5		2120	$	5.27		1613
(1) Primarily U.S. dollar denominated.
* Less than $0.1.
	Six Months Ended June 30,
	Nine Months Ended September 30,
	2016				2015
	Impairment			No. ofSecurities	Impairment			No. ofSecurities
U.S. corporate public securities	$	01.29		12	$	—1.5		—1
Foreign corporate public securities and foreign governments(1)	2.7			2	48.42			24
Foreign corporate private securities(1)	0.1.5			12	0.4			1
Residential mortgage-backed	12.93			2630	1.24			1923
Commercial mortgage-backed	—			—	0.24			12
Other asset-backed	—		*	1	—			—
Equity	—			—	—		*	1
Total	$	48.94		3137	$	611.29		2432
(1) Primarily U.S. dollar denominated.
*Less than $0.1.

~~The above tables include $2.3 and $3.~~(1 ~~of write-downs related to credit impairments for the three and six months ended June~~) ~~30,~~Primarily ~~2016, respectively, in Other-than-temporary impairments, which are recognized in the Condensed Statements of Operations~~U. ~~The remaining zero and $1~~S.8 indollar ~~write-downs for the three and six months ended June 30, 2016, respectively, are related to intent impairments~~denominated.

~~The~~*Less ~~above~~than ~~tables include~~ $40.~~9 and $5~~1.7 of write-downs related to credit impairments for the three and six months ended June 30, 2015, respectively, in Other-than-temporary impairments, which are recognized in the Condensed Statements of Operations. The

The above tables include $1.8 and $4.9 of write-downs related to credit impairments for the three and nine months ended September 30, 2016, respectively, in Other-than-temporary impairments, which are recognized in the Condensed Statements of Operations. The remaining $1.7 and $3.5 in write-downs for the three and nine months ended September 30, 2016, respectively, are related to intent impairments.

The above tables include $0.2 and $5.9 of write-downs related to credit impairments for the three and nine months ended September 30, 2015, respectively, in Other-than-temporary impairments, which are recognized in the Condensed Statements of Operations. The remaining $5.5 and $6.0 in write-downs for the three and nine months ended September 30, 2015, respectively, are related to intent impairments.



	27

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

remaining $0.3 and $0.5 in write-downs for the three and six months ended June 30, 2015, respectively, are related to intent impairments.

The following tables summarize these intent impairments, which are also recognized in earnings, by type for the periods indicated:

	Three Months Ended June 30,
	Three Months Ended September 30,
	2016				2015
	Impairment			No. ofSecurities	Impairment			No. ofSecurities
Foreign corporate public securities and foreign governments(1)	$	—		—	$	0.1		1
U.S. corporate public securities	$	1.7		1	$	1.5		1
Residential mortgage-backed	—			—	—			—
Foreign corporate public securities and foreign governments(1)	—			—	3.7			3
Residential mortgage-backed	—		*	1	0.1			2
Commercial mortgage-backed	—			—	0.2			1
Total	$	—1.7		—2	$	05.35		27
(1) Primarily U.S. dollar denominated.
	Six Months Ended June 30,
* Less than $0.1.
	Nine Months Ended September 30,
	2016				2015
	Impairment			No. ofSecurities	Impairment			No. ofSecurities
Foreign corporate public securities and foreign governments(1)	$	1.8		1	$	0.3		1
U.S. corporate public securities	$	1.7		1	$	1.5		1
Residential mortgage-backed	—		*	2	—		*	1
Foreign corporate public securities and foreign governments(1)	1.8			1	4.0			3
Commercial mortgage-backed	—			—	0.2			1
Residential mortgage-backed	—		*	2	0.1			2
Total	$	1.8		3	$	0.5		3
Commercial mortgage-backed	—			—	0.4			2
Total	$	3.5		4	$	6.0		8
(1) Primarily U.S. dollar denominated.
*Less than $0.1.

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



	28

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following tables identify the amount of credit impairments on fixed maturities for which a portion of the OTTI loss was recognized in Other comprehensive income (loss) and the corresponding changes in such amounts for the periods indicated:

	Three Months Ended June 30,
	Three Months Ended September 30,
	2016			2015
Balance at April 1	$	26.9		$	32.3
Balance at July 1	$	26.8		$	29.7
Additional credit impairments:
On securities previously impaired	1.0.4			0.23
Reductions:
Increase in cash flows	—0.2			~~0.1~~—
Securities sold, matured, prepaid or paid down	(1.13		)	21.72
Balance at June 30	$	26.8		$	29.7
Balance at September 30	$	28.3		$	28.8
	Six Months Ended June 30,
	Nine Months Ended September 30,
	2016			2015
Balance at January 1	$	27.2		$	33.1
Additional credit impairments:
On securities previously impaired	12.82			1.03
Reductions:
Increase in cash flows	0.13			0.3
Securities sold, matured, prepaid or paid down	20.18			45.13
Balance at June 30	$	26.8		$	29.7
Balance at September 30	$	28.3		$	28.8

Net Investment Income

The following table summarizes Net investment income for the periods indicated:

	Three Months Ended June 30,					Six Months Ended June 30,
	Three Months Ended September 30,					Nine Months Ended September 30,
	2016			2015		2016		2015
Fixed maturities	$	~~303~~299.26		$	~~286~~290.71	$	~~602~~902.95	$	~~577~~867.01
Equity securities, available-for-sale	10.16			0.47		12.73		01.85
Mortgage loans on real estate	5042.59			3637.8		90133.10		73110.19
Policy loans	1.31			1.2		23.78		23.46
Short-term investments and cash equivalents	(0.12		)	—0.1		0.31		0.12
Other	57.59			65.78		512.09		1117.53
Gross investment income	~~361~~351.79			~~331~~335.87		~~702~~1,054.76		~~664~~1,000.96
Less: Investment expenses	1415.81			13.46		2944.45		2640.40
Net investment income	$	~~346~~336.98		$	~~318~~322.41	$	~~673~~1,010.31	$	~~638~~960.56

As of ~~June~~September 30, 2016 and December 31, 2015, the Company had $06.73 and $1.7 of investments in fixed maturities that did not produce net investment income. Fixed maturities are moved to a non-accrual status when the investment defaults.

Interest income on fixed maturities is recorded when earned using an effective yield method, giving effect to amortization of premiums and accretion of discounts. Such interest income is recorded in Net investment income in the Condensed Statements of Operations.



	29

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Net Realized Capital Gains (Losses)

Net realized capital gains (losses) comprise the difference between the amortized cost of investments and proceeds from sale and redemption, as well as losses incurred due to the credit-related and intent-related other-than-temporary impairment of investments. Realized investment gains and losses are also primarily generated from changes in fair value of embedded derivatives within products and fixed maturities, changes in fair value of fixed maturities recorded at FVO and changes in fair value including accruals on derivative instruments, except for effective cash flow hedges. The cost of the investments on disposal is generally determined based on first-in-first-out ("FIFO") methodology.

Net realized capital gains (losses) were as follows for the periods indicated:

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Fixed maturities, available-for-sale, including securities pledged	$	62.42		$	(29.56	)	$	35.68		$	(010.84	)
Fixed maturities, at fair value option	(2032.34		)	(2920.7		)	(3265.93		)	(3657.85		)
Derivatives	28.3			(384.2		)	172.8			(330.7		)
Equity securities, available-for-sale	0.1			—			0.1			—
Embedded derivatives - fixed maturities	—			(2.6		)	0.7			(3.1		)
Derivatives	(408.8		)	837.6			(236.0		)	506.9
Guaranteed benefit derivatives	(54.8		)	582.1			(86.0		)	309.3
Embedded derivatives - fixed maturities	(1.7		)	0.5			(1.0		)	(2.6		)
Other investments	—			0.1			0.1			0.1
Guaranteed benefit derivatives	145.2			(263.5		)	59.2			45.8
Net realized capital gains (losses)	$	(40.4	)	$	163.2		$	58.3		$	(62.0	)
Other investments	(0.1		)	(0.2		)	—			(0.1		)
After-tax net realized capital gains (losses)	$	(26.3	)	$	106.1		$	37.8		$	(40.3	)
Net realized capital gains (losses)	$	(295.5	)	$	544.1		$	(237.2	)	$	482.1
After-tax net realized capital gains (losses)	$	(192.0	)	$	353.6		$	(154.2	)	$	313.3

Proceeds from the sale of fixed maturities and equity securities, available-for-sale and the related gross realized gains and losses, before tax, were as follows for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Proceeds on sales	$	~~1,106~~201.3	$	~~515~~342.20	$	12,~~866~~067.25	$	~~715~~1,057.4
Gross gains	246.75		54.80		5461.72		711.4
Gross losses	190.54		18.49		5253.60		312.32

3. Derivative Financial Instruments

The Company enters into the following types of derivatives:

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

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



	30

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

~~counterparty at specified intervals. In~~ the ~~event~~exchange of aforeign ~~default~~currency oncash ~~the~~flows ~~underlying~~against ~~credit~~U.S. ~~exposure,~~dollar ~~the~~cash ~~Company~~flows ~~will~~at ~~either~~regular ~~receive~~periods, atypically ~~payment~~quarterly ~~(purchased credit protection)~~ or ~~will be required to make a payment (sold credit protection) equal to the par minus recovery value of the swap contract~~semi-annually. The Company utilizes these contracts in qualifying hedging relationships as well as non-qualifying hedging relationships.

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

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

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

Futures: Futures contracts are used to hedge against a decrease in certain equity indices. Such decreases may result in a decrease in variable annuity account values which would increase the possibility of the Company incurring an expense for guaranteed benefits in excess of account values. The Company also uses interest rate futures contracts to hedge its exposure to market risks due to changes in interest rates. The Company enters into exchange traded futures with regulated futures commissions that are members of the exchange. The Company also posts initial and variation margins, with the exchange, on a daily basis. The Company utilizes exchange-traded futures in non-qualifying hedging relationships. The Company also used futures contracts as a hedge against an increase in certain equity indices. Such increases may result in increased payments to the holders of fixed index annuity ("FIA") contracts. During the first quarter of 2016, the Company moved to a static hedging strategy for its FIA contracts and replaced futures contracts with equity options.

Swaptions: A swaption is an option to enter into a swap with a forward starting effective date. The Company uses swaptions to hedge the interest rate exposure associated with the minimum crediting rate and book value guarantees embedded in the retirement products that the Company offers. Increases in interest rates will generate losses on assets that are backing such liabilities. In certain instances, the Company locks in the economic impact of existing purchased swaptions by entering into offsetting written swaptions. The Company pays a premium when it purchases the swaption. The Company utilizes these contracts in non-qualifying hedging relationships.

Options: The Company uses options to manage the equity, interest rate and equity volatility risk of the economic liabilities associated with certain variable annuity minimum guaranteed benefits and/or to mitigate certain rebalancing costs resulting from increased volatility. The Company also uses equity options to hedge against an increase in various equity indices, and interest rate options to hedge against an increase in the interest rate benchmarked crediting strategies within FIA contracts. Such increases may result in increased payments to the holders of the FIA contracts. The Company pays an upfront premium to purchase these options. The Company utilizes these options in non-qualifying hedging relationships.

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

Embedded derivatives: The Company also invests in certain fixed maturity instruments and has issued certain products that contain embedded derivatives whose market value is at least partially determined by, among other things, levels of or changes in domestic and/or foreign interest rates (short-term or long-term), exchange rates, prepayment rates, equity rates, or credit ratings/spreads. In addition, the Company has entered into coinsurance with funds withheld arrangements, which contain embedded derivatives.

The Company's use of derivatives is limited mainly to economic hedging to reduce the Company's exposure to cash flow variability of assets and liabilities, interest rate risk, credit risk, exchange rate risk and equity market risk. Subsequent to June 30, 2016, the Company expanded its usage of derivative types by adding interest rate floors to manage its interest rate exposure. These derivative



	31

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

~~results~~Embedded ~~are~~derivatives: ~~ceded~~The toCompany ~~Security~~also ~~Life~~invests ofin ~~Denver~~certain ~~International~~fixed ~~Limited~~maturity ~~("SLDI")~~instruments ~~under the combined coinsurance~~ and ~~coinsurance~~has ~~funds~~issued ~~withheld~~certain ~~agreement. It~~products isthat ~~the~~contain ~~Company's~~embedded ~~policy~~derivatives ~~not~~whose tomarket ~~offset~~value ~~amounts~~is ~~recognized~~at ~~for~~least ~~derivative~~partially ~~instruments~~determined ~~and~~by, ~~amounts~~among ~~recognized~~other ~~for~~things, ~~the~~levels ~~right~~of toor ~~reclaim~~changes ~~cash~~in ~~collateral~~domestic and/or ~~the~~foreign ~~obligation~~interest torates ~~return~~(short-term ~~cash~~or ~~collateral~~long-term), ~~arising~~exchange ~~from~~rates, ~~derivative~~prepayment ~~instruments~~rates, ~~executed~~equity ~~with~~rates, ~~the~~or ~~same~~credit ~~counterparty~~ratings/spreads. ~~under~~In aaddition, ~~master~~the ~~netting~~Company ~~arrangement,~~has ~~which~~entered ~~provides~~into ~~the~~coinsurance ~~Company~~ with ~~the~~funds ~~legal~~withheld ~~right~~arrangements, ofwhich ~~offset~~contain embedded derivatives.

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

The notional amounts and fair values of derivatives were as follows as of the dates indicated:

	June 30, 2016						December 31, 2015
	September 30, 2016						December 31, 2015
	NotionalAmount		AssetFair Value		LiabilityFair Value		NotionalAmount		AssetFair Value			LiabilityFair Value
Derivatives: Qualifying for hedge accounting(1)
Cash flow hedges:
Interest rate contracts	$	18.2	$	1.74	$	—	$	18.2	$	0.5		$	—
Foreign exchange contracts	5768.13		87.3		—		57.1		11.7			—
Fair value hedges:
Interest rate contracts	~~248~~64.26		—		7.91		295.1		0.8			5.9
Derivatives: Non-qualifying for hedge accounting(1)
Interest rate contracts	2940,~~649~~354.68		1,~~507~~411.9		~~518~~307.09		27,139.0		529.5			114.9
Foreign exchange contracts	1,~~032~~489.29		3917.5		1412.76		967.0		30.9			12.3
Equity contracts	26,~~343~~380.91		~~326~~348.48		~~113~~63.38		19,062.4		223.7			65.6
Credit contracts	1,~~185~~077.0		12.61		11.50		1,230.0		2.3			5.9
Embedded derivatives:
Within fixed maturity investments	N/A		2120.92		—		N/A		21.1			—
Within products	N/A		—		3,~~814~~690.56		N/A		—			3,628.1
Within reinsurance agreements	N/A		1617.51		~~485~~499.67		N/A		(15.6		)	10.2
Total			$	1,~~923~~826.83	$	4,~~965~~592.57			$	804.9		$	3,842.9

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

N/A - Not Applicable

Based on the notional amounts, a substantial portion of the Company’s derivative positions was not designated or did not qualify for hedge accounting as part of a hedging relationship as of ~~June~~September 30, 2016 and December 31, 2015. The Company utilizes derivative contracts mainly to hedge exposure to variability in cash flows, interest rate risk, credit risk, foreign exchange risk and equity market risk. The majority of derivatives used by the Company are designated as product hedges, which hedge the exposure arising from insurance liabilities or guarantees embedded in the contracts the Company offers through various product lines. These derivatives do not qualify for hedge accounting as they do not meet the criteria of being "highly effective" as outlined in ASC Topic 815, but do provide an economic hedge, which is in line with the Company’s risk management objectives. The Company also uses derivatives contracts to hedge its exposure to various risks associated with the investment portfolio. The Company does not seek hedge accounting treatment for certain of these derivatives as they generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules outlined in ASC Topic 815. The Company also uses credit default swaps coupled with other investments in order to produce the investment characteristics of otherwise permissible investments that do not qualify as effective accounting hedges under ASC Topic 815.



	32

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Although the Company has not elected to net its derivative exposures, the notional amounts and fair values of Over-The-Counter ("OTC") and cleared derivatives excluding exchange traded contracts and forward contracts (To Be Announced mortgage-backed securities) are presented in the tables below as of the dates indicated:

	June 30, 2016
	September 30, 2016
	Notional Amount		Asset Fair Value			Liability Fair Value
Credit contracts	$	1,~~185~~077.0	$	12.61		$	11.50
Equity contracts	18,~~859~~994.56		~~326~~348.48			1523.3
Foreign exchange contracts	1,~~089~~558.32		4724.8			1412.76
Interest rate contracts	2636,~~825~~419.68		1,~~509~~412.56			~~525~~315.60
			1,885.3			567.1
			1,788.3			361.9
Counterparty netting(1)			(~~523~~332.90		)	(~~523~~332.90		)
Cash collateral netting(1)			(1,~~192~~289.63		)	(3526.75		)
Securities collateral netting(1)			(~~107~~116.19		)	(2.0		)
Net receivables/payables			$	6150.71		$	51.54

⁽¹⁾Represents the netting of receivable balances with payable balances, net of collateral, for the same counterparty under eligible netting agreements.



	December 31, 2015
	Notional Amount		Asset Fair Value			Liability Fair Value
Credit contracts	$	1,230.0	$	2.3		$	5.9
Equity contracts	11,528.3		167.5			53.9
Foreign exchange contracts	1,024.1		42.6			12.3
Interest rate contracts	24,030.4		530.8			120.1
			743.2			192.2
Counterparty netting⁽¹⁾			(184.6		)	(184.6		)
Cash collateral netting⁽¹⁾			(427.3		)	(5.9		)
Securities collateral netting⁽¹⁾			(12.5		)	(1.7		)
Net receivables/payables			$	118.8		$	—

⁽¹⁾Represents the netting of receivable balances with payable balances, net of collateral, for the same counterparty under eligible netting agreements.

Collateral

Under the terms of the OTC Derivative International Swaps and Derivatives Association, Inc. ("ISDA") agreements, the Company may receive from, or deliver to, counterparties, collateral to assure that terms of the ISDA agreements will be met with regard to the Credit Support Annex ("CSA"). The terms of the CSA call for the Company to pay interest on any cash received equal to the Federal Funds rate. To the extent cash collateral is received and delivered, it is included in Payables under securities loan agreements, including collateral held and Short-term investments under securities loan agreements, including collateral delivered, respectively, on the Condensed Balance Sheets and is reinvested in short-term investments. Collateral held is used in accordance with the CSA to satisfy any obligations. Investment grade bonds owned by the Company are the source of noncash collateral posted, which is reported in Securities pledged on the Condensed Balance Sheets. As of ~~June~~September 30, 2016, the Company held $1,~~236~~319.46 of net cash collateral and pledged $17.75 of net cash collateral related to OTC derivative contracts and cleared derivative contracts, respectively. As of December 31, 2015, the Company held $423.0 and $0.4 of net cash collateral related to OTC derivative contracts and cleared derivative contracts, respectively. In addition, as of ~~June~~September 30, 2016, the Company delivered $~~591~~459.60 of securities and held $~~109~~121.75 securities as collateral. As of December 31, 2015, the Company delivered $524.5 of securities and held $12.9 of securities as collateral.



	33

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Net realized gains (losses) on derivatives were as follows for the periods indicated:

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Derivatives: Qualifying for hedge accounting(1)
Cash flow hedges:
Interest rate contracts	$	~~0.1~~—		$	0.1		$	0.2		$	0.12
Foreign exchange contracts	0.32			0.21			0.57			0.45
Fair value hedges:
Interest rate contracts	(10.34		)	1(2.08		)	(4.3.9		)	(24.08		)
Derivatives: Non-qualifying for hedge accounting(2)
Interest rate contracts	~~238~~25.67			~~(337~~283.93		)	~~603~~628.29			~~(113~~169.58		)
Foreign exchange contracts	22(1.68		)	~~(28~~6.17		)	0(1.53		)	3138.41
Equity contracts	(~~229~~428.4		)	~~(21~~543.03		)	(~~421~~850.60		)	~~(245~~297.76		)
Credit contracts	(24.69		)	16.59			(510.76		)	(15.45		)
Embedded derivatives:
Within fixed maturity investments(2)	—(1.7		)	(20.65		)	0(1.70		)	(32.16		)
Within products(2)	~~(54~~145.82		)	~~582~~(263.15		)	~~(86~~59.02		)	~~309~~45.38
Within reinsurance agreements(3)	(~~222~~13.45		)	~~219~~(23.85		)	(~~443~~456.27		)	~~127~~104.50
Total	$	(~~248~~278.98	)	$	~~415~~551.1		$	(~~355~~634.75	)	$	~~103~~654.01

(1) Changes in value for effective fair value hedges are recorded in Other net realized capital gains (losses). Changes in fair value upon disposal for effective cash flow hedges are amortized through Net investment income and the ineffective portion is recorded in Other net realized capital gains (losses) in the Condensed Statements of Operations. For the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015, ineffective amounts were immaterial.

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

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

Credit Default Swaps

The Company has entered into various credit default swaps. When credit default swaps are sold, the Company assumes credit exposure to certain assets that it does not own. Credit default swaps may also be purchased to reduce credit exposure in the Company’s portfolio. Credit default swaps involve a transfer of credit risk from one party to another in exchange for periodic payments. As of ~~June~~September 30, 2016, the fair values of credit default swaps of $12.61 and $11.50 were included in Derivatives assets and Derivatives liabilities, respectively, on the Condensed Balance Sheets. As of December 31, 2015, the fair values of credit default swaps of $2.3 and $5.9 were included in Derivatives assets and Derivatives liabilities, respectively, on the Condensed Balance Sheets. As of ~~June~~September 30, 2016, the maximum potential future net exposure to the Company was $~~175~~217.0 in credit default swaps. As of December 31, 2015, the maximum potential future net exposure to the Company was $220.0 in credit default swaps. These instruments are typically written for a maturity period of 5 years and contain no recourse provisions. If the Company's 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.



	34

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)


4.	Fair Value Measurements

Fair Value Measurement

The Company categorizes its financial instruments into a three-level hierarchy based on the priority of the inputs to the valuation technique, pursuant to ASU 2011-04, "Fair Value Measurements (ASC Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP" ("ASU 2011-04"). 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.

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



	35

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of ~~June~~September 30, 2016:

	Level 1		Level 2		Level 3		Total
Assets:
Fixed maturities, including securities pledged:
U.S. Treasuries	$	~~1,047~~975.05	$	911.6	$	—	$	~~1,056~~987.61
U.S. Government agencies and authorities	—		86.98		—		86.98
State, municipalities and political subdivisions	—		~~472~~505.03		—		~~472~~505.03
U.S. corporate public securities	—		11,~~270~~204.76		256.09		11,~~295~~211.75
U.S. corporate private securities	—		2,~~253~~383.15		~~336~~381.4		2,~~589~~764.59
Foreign corporate public securities and foreign governments(1)	—		2,~~794~~827.82		0.4		2,~~795~~827.26
Foreign corporate private securities(1)	—		2,~~618~~664.42		~~151~~150.24		2,~~769~~814.6
Residential mortgage-backed securities	—		2,~~203~~180.98		2723.08		2,~~230~~204.96
Commercial mortgage-backed securities	—		1,~~190~~112.60		98.6		1,~~200~~120.26
Other asset-backed securities	—		~~195~~210.19		3166.91		~~227~~277.0
Total fixed maturities, including securities pledged	~~1,047~~975.05		23,~~095~~186.19		~~581~~637.56		24,~~723~~800.60
Equity securities, available-for-sale	12.8		—		7.34		20.12
Derivatives:
Interest rate contracts	0.17		1,~~509~~412.56		—		1,~~509~~413.63
Foreign exchange contracts	—		4724.8		—		4724.8
Equity contracts	—		~~312~~325.54		1323.94		~~326~~348.48
Credit contracts	—		12.61		—		12.61
Embedded derivative on reinsurance	—		1617.51		—		1617.51
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	2,~~910~~033.23		~~0.3~~—		—		2,~~910~~033.53
Assets held in separate accounts	32,~~132~~104.2		—		—		32,~~132~~104.2
Total assets	$	3635,~~102~~126.35	$	24,~~983~~968.39	$	~~602~~668.74	$	6160,~~688~~763.38
Liabilities:
Derivatives:
Guaranteed benefit derivatives:
FIA	$	—	$	—	$	1,~~604~~708.63	$	1,~~604~~708.63
GMAB/GMWB/GMWBL(2)	—		—		21,~~209~~982.93		21,~~209~~982.93
Other derivatives:
Interest rate contracts	~~0.4~~—		~~525~~315.50		—		~~525~~315.90
Foreign exchange contracts	—		1412.76		—		1412.76
Equity contracts	9740.95		1522.29		0.24		~~113~~63.38
Credit contracts	—		11.50		—		11.50
Embedded derivative on reinsurance	—		~~485~~499.67		—		~~485~~499.67
Total liabilities	$	9840.35	$	~~1,052~~861.52	$	3,~~814~~691.70	$	4,~~965~~592.57

⁽¹⁾Primarily U.S. dollar denominated.

⁽²⁾Guaranteed minimum accumulation benefits ("GMAB"), Guaranteed minimum withdrawal benefits ("GMWB") and Guaranteed minimum withdrawal benefits with life payouts ("GMWBL").



	36

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2015:

	Level 1		Level 2			Level 3		Total
Assets:
Fixed maturities, including securities pledged:
U.S. Treasuries	$	1,049.2	$	9.5		$	—	$	1,058.7
U.S. Government agencies and authorities	—		81.9			—		81.9
State, municipalities and political subdivisions	—		360.5			—		360.5
U.S. corporate public securities	—		10,871.2			0.7		10,871.9
U.S. corporate private securities	—		2,067.1			327.3		2,394.4
Foreign corporate public securities and foreign governments(1)	—		2,791.8			1.2		2,793.0
Foreign corporate private securities(1)	—		2,481.0			145.0		2,626.0
Residential mortgage-backed securities	—		1,856.5			28.6		1,885.1
Commercial mortgage-backed securities	—		1,331.3			12.1		1,343.4
Other asset-backed securities	—		252.0			11.3		263.3
Total fixed maturities, including securities pledged	1,049.2		22,102.8			526.2		23,678.2
Equity securities, available-for-sale	12.5		—			6.7		19.2
Derivatives:
Interest rate contracts	—		530.8			—		530.8
Foreign exchange contracts	—		42.6			—		42.6
Equity contracts	56.2		161.8			5.7		223.7
Credit contracts	—		2.3			—		2.3
Embedded derivative on reinsurance	—		(15.6		)	—		(15.6		)
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	1,947.2		1.4			—		1,948.6
Assets held in separate accounts	33,355.5		—			—		33,355.5
Total assets	$	36,420.6	$	22,826.1		$	538.6	$	59,785.3
Liabilities:
Derivatives:
Guaranteed benefit derivatives:
FIA	$	—	$	—		$	1,779.1	$	1,779.1
GMAB/GMWB/GMWBL(2)	—		—			1,849.0		1,849.0
GMAB/GMWB/GMWBL	—		—			1,849.0		1,849.0
Other derivatives:
Interest rate contracts	0.7		120.1			—		120.8
Foreign exchange contracts	—		12.3			—		12.3
Equity contracts	11.7		53.9			—		65.6
Credit contracts	—		5.9			—		5.9
Embedded derivative on reinsurance	—		10.2			—		10.2
Total liabilities	$	12.4	$	202.4		$	3,628.1	$	3,842.9

⁽¹⁾Primarily U.S. dollar denominated.

(2) Guaranteed minimum accumulation benefits ("GMAB"), Guaranteed minimum withdrawal benefits ("GMWB") and Guaranteed minimum withdrawal benefits with life payouts ("GMWBL").



	37

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Valuation of Financial Assets and Liabilities at Fair Value

Certain assets and liabilities are measured at estimated fair value on the Company’s Condensed Balance Sheets. The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The exit price and the transaction (or entry) price will be the same at initial recognition in many circumstances. However, in certain cases, the transaction price may not represent fair value. The fair value of a liability is based on the amount that would be paid to transfer a liability to a third-party with an equal credit standing. Fair value is required to be a market-based measurement that is determined based on a hypothetical transaction at the measurement date, from a market participant’s perspective. The Company considers three broad valuation techniques when a quoted price is unavailable: (i) the market approach, (ii) the income approach and (iii) the cost approach. The Company determines the most appropriate valuation technique to use, given the instrument being measured and the availability of sufficient inputs. The Company prioritizes the inputs to fair valuation techniques and allows for the use of unobservable inputs to the extent that observable inputs are not available.

The Company utilizes a number of valuation methodologies to determine the fair values of its financial assets and liabilities in conformity with the concepts of exit price and the fair value hierarchy as prescribed in ASC Topic 820. Valuations are obtained from third-party commercial pricing services, brokers and industry-standard, vendor-provided software that models the value based on market observable inputs. The valuations obtained from third-party commercial pricing services are non-binding. The Company reviews the assumptions and inputs used by third-party commercial pricing services for each reporting period in order to determine an appropriate fair value hierarchy level. The documentation and analysis obtained from third-party commercial pricing services are reviewed by the Company, including in-depth validation procedures confirming the observability of inputs. The valuations are reviewed and validated monthly through the internal valuation committee price variance review, comparisons to internal pricing models, back testing to recent trades or monitoring of trading volumes.

Fixed maturities: The fair values for actively traded marketable bonds are determined based upon the quoted market prices and are classified as Level 1 assets. Assets in this category primarily include certain U.S. Treasury securities.

For fixed maturities classified as Level 2 assets, fair values are determined using a matrix-based market approach, based on prices obtained from third-party commercial pricing services and the Company’s matrix and analytics-based pricing models, which in each case incorporate a variety of market observable information as valuation inputs. The market observable inputs used for these fair value measurements, by fixed maturity asset class, are as follows:

U.S. Treasuries: Fair value is determined using third-party commercial pricing services, with the primary inputs being stripped interest and principal U.S. Treasury yield curves that represent a U.S. Treasury zero-coupon curve.

U.S. government agencies and authorities, State, municipalities and political subdivisions: Fair value is determined using third-party commercial pricing services, with the primary inputs being U.S. Treasury yield curves, trades of comparable securities, credit spreads off benchmark yields and issuer ratings.

U.S. corporate public securities, Foreign corporate public securities and foreign governments: Fair value is determined using third-party commercial pricing services, with the primary inputs being benchmark yields, trades of comparable securities, issuer ratings, bids and credit spreads off benchmark yields.

U.S. corporate private securities and Foreign corporate private securities: Fair values are determined using a matrix and analytics-based pricing model. The model incorporates the current level of risk-free interest rates, current corporate credit spreads, credit quality of the issuer and cash flow characteristics of the security. The model also considers a liquidity spread, the value of any collateral, the capital structure of the issuer, the presence of guarantees, and prices and quotes for comparably rated publicly traded securities.

RMBS, CMBS and ABS: Fair value is determined using third-party commercial pricing services, with the primary inputs being credit spreads off benchmark yields, prepayment speed assumptions, current and forecasted loss severity, debt service coverage ratios, collateral type, payment priority within tranche and the vintage of the loans underlying the security.



	38

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Transfers in and out of Level 1 and 2

There were no securities transferred between Level 1 and Level 2 for the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015. The Company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

Level 3 Financial Instruments

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



	39

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following tables summarize the change in fair value of the Company’s Level 3 assets and liabilities and transfers in and out of Level 3 for the periods indicated:

	Three Months Ended June 30, 2016
	Three Months Ended September 30, 2016
	Fair Value as of April 1			Total Realized/UnrealizedGains (Losses) Included in:					Purchases		Issuances			Sales			Settlements			TransfersintoLevel 3(3)		Transfersout ofLevel 3(3)			Fair Value as of June 30			Change inUnrealizedGains (Losses)Included inEarnings (4)
	Fair Value as of July 1			Total Realized/UnrealizedGains (Losses) Included in:					Purchases		Issuances			Sales			Settlements			TransfersintoLevel 3(3)		Transfersout ofLevel 3(3)			Fair Value as of September 30			Change inUnrealizedGains (Losses)Included inEarnings (4)
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. corporate public securities	$	025.60		$	~~(0.1~~—	)	$	~~0.6~~—	$	—	$	—		$	~~(0.7~~—	)	$	—		$	~~24.6~~—	$	—(18.1	)	$	256.09		$	—
U.S. corporate private securities	~~299~~336.74			~~(0.1~~—		)	74.20		2649.15		—			—			(28.45		)	~~5.9~~—		—			~~336~~381.4			~~(0.1~~—		)
Foreign corporate public securities and foreign governments(1)	10.24			~~(0.8~~—		)	—		—		—			—			—			—		—			0.4			~~(0.9~~—		)
Foreign corporate private securities(1)	~~160~~151.52			(1.24		)	43.68		—		—			~~(10.8~~—		)	(83.42		)	~~6.5~~—		—			~~151~~150.24			—(1.4		)
Residential mortgage-backed securities	27.60			(0.7		)	0.13		—		—			—(2.6		)	—(0.2		)	—		—			2723.08			(0.7		)
Commercial mortgage-backed securities	69.46			—			~~0.1~~—		—		—			—			(1.10		)	~~10.6~~—		~~(6.4~~—		)	98.6			—
Other asset-backed securities	1031.89			—			0.21		2147.27		—			—			(0.34		)	—7.4		—(20.6		)	3166.91			—
Total fixed maturities, including securities pledged:	506.8			(2.9		)	12.8		47.3		—			(11.5		)	(12.2		)	47.6		(6.4		)	581.5			(1.7		)
Total fixed maturities, including securities pledged	581.5			(2.1		)	8.2		97.2		—			(2.6		)	(13.3		)	7.4		(38.7		)	637.6			(2.1		)
Equity securities, available-for-sale	7.03			—			0.31		—		—			—			—			—		—			7.34			—
Derivatives:
Guaranteed benefit derivatives:
FIA(2)	(1,~~647~~604.76		)	37(119.65		)	—		—		(4538.61		)	—			5153.19			—		—			(1,~~604~~708.63		)	—
GMWB/GMAB/GMWBL(2)	(2,~~081~~209.09		)	~~(92~~264.47		)	—		—		(3637.72		)	—			0.21			—		—			(21,~~209~~982.93		)	—
Other derivatives, net	813.07			(14.3		)	—		76.03		—			—			—(1.3		)	—		—			1323.70			59.73
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	—			—			—		—		—			—			—			—		—			—			—
(1) Primarily U.S. dollar denominated.
(2) All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis. These amounts are included in Other net realized capital gains (losses) in the Condensed Statements of Operations.
(3) The Company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
(4) For financial instruments still held as of June 30, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Statements of Operations.
(4) For financial instruments still held as of September 30, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Statements of Operations.



	40

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

	Six Months Ended June 30, 2016
	Nine Months Ended September 30, 2016
	Fair Value as of January 1			Total Realized/UnrealizedGains (Losses) Included in:					Purchases		Issuances			Sales			Settlements			TransfersintoLevel 3(3)		Transfersout ofLevel 3(3)			Fair Value as of ~~June~~September 30			Change InUnrealizedGains (Losses)Included inEarnings (4)
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. corporate public securities	$	0.7		$	(0.21	)	$	1.0.5	$	—	$	—		$	(0.7	)	$	—		$	246.25	$	—		$	256.09		$	~~(0.1~~—	)
U.S. corporate private securities	327.3			(0.2		)	1418.2		3281.38		—			(14.0		)	(3443.61		)	18.6		(7.2		)	~~336~~381.4			(0.2		)
Foreign corporate public securities and foreign governments(1)	1.2			(0.8		)	—		—		—			—			—			—		—			0.4			(0.98		)
Foreign corporate private securities(1)	145.0			—(1.4		)	69.08		—		—			(0.1		)	(1720.02		)	20.5		(3.2		)	~~151~~150.24			—(1.4		)
Residential mortgage-backed securities	28.6			(12.74		)	0.14		—		—			—(2.6		)	—(0.2		)	—		—			2723.08			(12.72		)
Commercial mortgage-backed securities	12.1			—			0.2		—		—			—			(23.7		)	—		—			98.6			—
Other asset-backed securities	11.3			—(0.1		)	—0.2		2148.2		—			—			(01.68		)	—8.3		—			3166.91			—(0.1		)
Total fixed maturities, including securities pledged	526.2			(25.90		)	2129.53		53130.50		—			(1417.84		)	(5469.90		)	6353.39		(10.4		)	~~581~~637.56			(24.97		)
Equity securities, available-for-sale	6.7			—			0.67		—		—			—			—			—		—			7.34			—
Derivatives:
Guaranteed benefit derivatives:
FIA(2)	(1,779.1		)	~~201~~81.49			—		—		(~~122~~160.56		)	—			95149.65			—		—			(1,~~604~~708.63		)	—
GMWB/GMAB/GMWBL(2)	(1,849.0		)	(~~287~~22.47		)	—		—		(73111.80		)	—			0.34			—		—			(21,~~209~~982.93		)	—
Other derivatives, net	5.7			(62.86		)	—		1421.82		—			—			—(1.3		)	—		—			1323.70			817.03
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	—			—			—		—		—			—			—			—		—			—			—
(1) Primarily U.S. dollar denominated.
(2) All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis. These amounts are included in Other net realized capital gains (losses) in the Condensed Statements of Operations.
(3) The Company's policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
(4) For financial instruments still held as of June 30, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Statements of Operations.
(4) For financial instruments still held as of September 30, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Statements of Operations.



	41

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following tables summarize the change in fair value of the Company’s Level 3 assets and liabilities and transfers in and out of Level 3 for the periods indicated:

	Three Months Ended June 30, 2015
	Three Months Ended September 30, 2015
	Fair Value as of April 1			Total Realized/UnrealizedGains (Losses) Included in:						Purchases		Issuances			Sales		Settlements			TransfersintoLevel 3(3)		Transfersout ofLevel 3(3)			Fair Value as of June 30			Change inUnrealizedGains (Losses)Included inEarnings (4)
	Fair Value as of July 1			Total Realized/UnrealizedGains (Losses) Included in:						Purchases		Issuances			Sales		Settlements			TransfersintoLevel 3(3)		Transfersout ofLevel 3(3)			Fair Value as of September 30			Change inUnrealizedGains (Losses)Included inEarnings (4)
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. corporate public securities	$	5331.54		$	~~(0.1~~—	)	$	—		$	—53.3	$	—		$	—	$	—		$	—	$	(2230.08	)	$	3153.49		$	~~(0.1~~—	)
U.S. corporate private securities	~~292~~281.42			—(0.1		)	(60.6		)	2013.35		—			—		(244.96		)	—		—(8.9		)	281.27			—
Foreign corporate public securities and foreign governments(1)	14.32			~~(4.2~~—		)	~~0.1~~—			—		—			—		(03.50		)	~~8.8~~—		~~(1.3~~—		)	41.2			~~(4.2~~—		)
Foreign corporate private securities(1)	~~167~~149.48			~~(0.5~~—		)	0(1.71		)	—6.7		—			—		(207.36		)	~~2.5~~—		—(0.6		)	~~149~~147.82			~~(0.5~~—		)
Residential mortgage-backed securities	3228.48			(0.64		)	(0.1		)	—		—			—		(0.31		)	—		~~(2.6~~—		)	28.82			(0.64		)
Commercial mortgage-backed securities	—			—			—(0.1		)	—15.0		—			—		—(1.4		)	—		—			—13.5			—
Other asset-backed securities	011.69			—			—			~~11.9~~—		—			—		—(0.3		)	—		~~(0.6~~—		)	11.96			—
Total fixed maturities, including securities pledged:	547.6			(5.4		)	(5.9		)	32.2		—			—		(46.0		)	11.3		(26.5		)	507.3			(5.4		)
Total fixed maturities, including securities pledged	507.3			(0.5		)	(0.7		)	88.5		—			—		(17.0		)	—		(40.3		)	537.3			(0.4		)
Equity securities, available-for-sale	—			—			—			—6.5		—			—		—			—		—			—6.5			—
Derivatives:
Guaranteed benefit derivatives:
FIA(2)	(1,~~968~~907.86		)	57321.97			—			—		(5379.34		)	—		5639.64			—		—			(1,~~907~~625.69		)	—
GMWB/GMAB/GMWBL(2)	(1,~~833~~346.42		)	~~524~~(585.2		)	—			—		(37.12		)	—		0.1			—		—			(1,~~346~~968.25		)	—
Other derivatives, net	1811.0			(414.87		)	—			5.92		—			—		(80.15		)	—		—			111.0			(710.0		)
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	1.8			—			—			—		—			—		—(1.8		)	—		—			~~1.8~~—			—
(1) Primarily U.S. dollar denominated.
(2) All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis. These amounts are included in Other net realized capital gains (losses) in the Condensed Statements of Operations.
(3) The Company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
(4) For financial instruments still held as of June 30, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Statements of Operations.
(4) For financial instruments still held as of September 30, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Statements of Operations.



	42

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

	Six Months Ended June 30, 2015
	Nine Months Ended September 30, 2015
	Fair Value as of January 1			Total Realized/UnrealizedGains (Losses) Included in:						Purchases		Issuances			Sales		Settlements			TransfersintoLevel 3(3)		Transfersout ofLevel 3(3)			Fair Value as of ~~June~~September 30			Change inUnrealizedGains (Losses)Included inEarnings (4)
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. corporate public securities	$	53.8		$	~~(0.1~~—	)	$	~~(0.2~~—	)	$	—53.3	$	—		$	—	$	~~(0.1~~—	)	$	—	$	(2253.02	)	$	3153.49		$	~~(0.1~~—	)
U.S. corporate private securities	260.2			(0.1		)	(4.83		)	4752.84		—			—		(4954.84		)	27.9		—			281.27			(0.1		)
Foreign corporate public securities and foreign governments(1)	—			(4.2		)	(0.3		)	—		—			—		(25.1		)	10.8		—			41.2			(4.2		)
Foreign corporate private securities(1)	147.3			~~(0.3~~—		)	(0.1.0		)	29.64		—			—		(2330.70		)	2421.05		—			~~149~~147.82			(0.51		)
Residential mortgage-backed securities	31.3			(1.37		)	(0.23		)	—		—			—		(0.23		)	1.8		(2.6		)	28.82			(1.37		)
Commercial mortgage-backed securities	—			—			—(0.1		)	—15.0		—			—		—(1.4		)	—		—			—13.5			—
Other asset-backed securities	0.9			—			—			11.9		—			—		(0.14		)	—16.5		(017.83		)	11.96			—
Total fixed maturities, including securities pledged	493.5			(6.0		)	(5.6.0		)	62142.30		—			—		(7691.06		)	6478.5		(2573.41		)	~~507~~537.3			(6.21		)
Equity securities, available-for-sale	—			—			—			—6.5		—			—		—			—		—			—6.5			—
Derivatives:
Guaranteed benefit derivatives:
FIA(2)	(1,924.4		)	13335.85			—			—		(93173.71		)	—		96136.71			—		—			(1,~~907~~625.69		)	—
GMWB/GMAB/GMWBL(2)	(1,564.4		)	~~295~~(289.57		)	—			—		(77114.68		)	—		0.34			—		—			(1,~~346~~968.25		)	—
Other derivatives, net	31.2			(1429.41		)	—			1016.91		—			—		(1617.72		)	—		—			111.0			(2030.2		)
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	1.8			—			—			—		—			—		—(1.8		)	—		—			~~1.8~~—			—
(1) Primarily U.S. dollar denominated.
(2) All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis. These amounts are included in Other net realized capital gains (losses) in the Condensed Statements of Operations.
(3) The Company's policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
(4) For financial instruments still held as of June 30, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Statements of Operations.
(4) For financial instruments still held as of September 30, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Statements of Operations.



	43

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

For the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015, the transfers in and out of Level 3 for fixed maturities, were due to the variation in inputs relied upon for valuation each quarter. Securities that are primarily valued using independent broker quotes when prices are not available from one of the commercial pricing services are reflected as transfers into Level 3. When securities are valued using more widely available information, the securities are transferred out of Level 3 and into Level 1 or 2, as appropriate.

Significant Unobservable Inputs

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

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

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

Significant unobservable inputs used in the fair value measurements of FIAs include nonperformance risk and policyholder behavior assumptions, such as lapses and partial withdrawals. Such inputs are monitored quarterly.

Following is a description of selected inputs:

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

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

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

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



	44

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The following table presents the unobservable inputs for Level 3 fair value measurements as of ~~June~~September 30, 2016:

	Range(1)
Unobservable Input	GMWB / GMWBL			GMAB		FIA
Long-term equity implied volatility	15% to 25%			15% to 25%		—
Interest rate implied volatility	0.2% to 18%			0.2% to 18%		—
Correlations between:
Equity Funds	48-13% to 9899%			48-13% to 9899%		—
Equity and Fixed Income Funds	-38% to 62%			-38% to 62%		—
Interest Rates and Equity Funds	-32% to 26%			-32% to 26%		—
Nonperformance risk	0.2614% to 1.9%			0.2614% to 1.9%		0.2614% to 1.9%
Actuarial Assumptions:
Benefit Utilization	85% to 100%		(2)	—		—
Partial Withdrawals	~~0% to 10%~~—	%		0% to 103.4%		0% to 10%
Lapses	0.0806% to 229.6%		(3)(4)	0.0829% to 2517.7%	(3)(4)	0% to 60%	(3)
Mortality	—		(5)	—	(5)	—	(5)


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

(2) Those policyholders who have elected systematic withdrawals are assumed to continue taking withdrawals. As a percent of ~~account value~~policies, 3840% are taking systematic withdrawals. OfThe ~~those policyholders who are not taking withdrawals, the~~ Company assumes that 85% of all policies will begin systematic withdrawals either immediately or after a delay period, with 100% utilizing at age 100. The utilization function varies by policyholder age and policy duration. Interactions with lapse and mortality also affect utilization. The utilization rate for GMWB and GMWBL tends to be lower for younger contract owners and contracts that have not reached their maximum accumulated GMWB and GMWBL benefit amount. There is also a lower utilization rate, though indirectly, for contracts that are less "in the money" (i.e., where the notional benefit amount is in excess of the account value) due to higher lapses. Conversely, the utilization rate tends to be higher for contract owners near or beyond retirement age and contracts that have accumulated their maximum GMWB or GMWBL benefit amount. There is also a higher utilization rate, though indirectly, for contracts which are highly "in the money." The chart below provides the GMWBL account value by current age group and average expected delay times from the associated attained age group as of ~~June~~September 30, 2016 (account value amounts are in $ billions).

	Account Values
Attained Age Group	In the Money		Out of the Money			Total		Average Expected Delay (Years)**
< 60	$	2.0	$	—	*	$	2.0	810.80
60-69	5.8		0.1			5.9		35.90
70+	5.56		0.1			5.67		23.21
	$	13.34	$	0.2		$	13.56	45.67

* Less than $0.1.

** For population expected to withdraw in future. Excludes policies taking systematic ~~withdraws~~withdrawals and 15% of policies the Company assumes will never withdraw until age 100.

⁽³⁾Lapse rates tend to be lower during the contractual surrender charge period and higher after the surrender charge period ends; the highest lapse rates occur in the year immediately after the end of the surrender charge period.

(4) The Company makes dynamic adjustments to lower the lapse rates for contracts that are more "in the money." The table below shows an analysis of policy account values according to whether they are in or out of the surrender charge period or at the shock lapse period and to whether they are "in the money" or "out of the money" as of ~~June~~September 30, 2016 (account value amounts are in $ billions). Lapse ranges are based on weighted average ranges of underlying account value exposure.



	45

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

GMAB

GMWB/GMWBL

Moneyness

Account Value

Lapse Range

Account Value

Lapse Range

During Surrender Charge Period

In the Money**

—

0.084% to 76.29%

32.59

0.081% to 54.65%

Out of the Money

—

01.416% to 7.96%

—

0.366% to 54.97%

Shock Lapse Period

In the Money**

—

4.7% to 17.3%

2.7

2.3% to 11.6%

Out of the Money

—

17.3% to 19.1%

—

11.6% to 12.2%

After Surrender Charge Period

In the Money**

—

2.58% to 2210.56%

97.9

1.4% to 206.7%

Out of the Money

—0.1

1110.96% to 2411.87%

0.6

56.07% to ~~21.~~7.0%

*Less than $0.1.

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

(5) The mortality rate is based on the 2012 Individual Annuity Mortality Basic table with mortality improvements.

The following table presents the unobservable inputs for Level 3 fair value measurements as of December 31, 2015:



	Range⁽¹⁾
Unobservable Input	GMWB / GMWBL		GMAB		FIA
Long-term equity implied volatility	15% to 25%		15% to 25%		—
Interest rate implied volatility	0.1% to 18%		0.1% to 18%		—
Correlations between:
Equity Funds	48% to 98%		48% to 98%		—
Equity and Fixed Income Funds	-38% to 62%		-38% to 62%		—
Interest Rates and Equity Funds	-32% to 16%		-32% to 16%		—
Nonperformance risk	0.23% to 1.3%		0.23% to 1.3%		0.23% to 1.3%
Actuarial Assumptions:
Benefit Utilization	85% to 100%	⁽²⁾	—		—
Partial Withdrawals	0% to 10%		0% to 10%		0% to 10%
Lapses	0.08% to 22%	⁽³⁾⁽⁴⁾	0.08% to 25%	⁽³⁾⁽⁴⁾	0% to 60%	⁽³⁾
Mortality	—	⁽⁵⁾	—	⁽⁵⁾	—	⁽⁵⁾

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

⁽²⁾ Those policyholders who have elected systematic withdrawals are assumed to continue taking withdrawals. As a percent of account value, 36% are taking systematic withdrawals. Of those policyholders who are not taking withdrawals, the Company assumes that 85% will begin systematic withdrawals after a delay period. The utilization function varies by policyholder age and policy duration. Interactions with lapse and mortality also affect utilization. The utilization rate for GMWB and GMWBL tends to be lower for younger contract owners and contracts that have not reached their maximum accumulated GMWB and GMWBL benefit amount. There is also a lower utilization rate, though indirectly, for contracts that are less "in the money" (i.e., where the notional benefit amount is in excess of the account value) due to higher lapses. Conversely, the utilization rate tends to be higher for contract owners near or beyond retirement age and contracts that have accumulated their maximum GMWB or GMWBL benefit amount. There is also a higher utilization rate, though indirectly, for contracts which are highly "in the money." The chart below provides the GMWBL account value by current age group and average expected delay times from the associated attained age group as of December 31, 2015 (account value amounts are in $ billions).



	46

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)



	Account Values
Attained Age Group	In the Money		Out of the Money			Total		Average Expected Delay (Years)**
< 60	$	2.2	$	—	*	$	2.2	9.0
60-69	6.1		—		*	6.1		4.2
70+	5.4		—		*	5.4		2.4
	$	13.7	$	—	*	$	13.7	5.0

* Less than $0.1

** For population expected to withdraw in future. Excludes policies taking systematic ~~withdraws~~withdrawals and ~~15% of~~ policies the Company assumes will never withdraw.

⁽³⁾ Lapse rates tend to be lower during the contractual surrender charge period and higher after the surrender charge period ends; the highest lapse rates occur in the year immediately after the end of the surrender charge period.

(4) The Company makes dynamic adjustments to lower the lapse rates for contracts that are more "in the money." The table below shows an analysis of policy account values according to whether they are in or out of the surrender charge period or at the shock lapse period and to whether they are "in the money" or "out of the money" as of December 31, 2015 (account value amounts are in $ billions). The December 31, 2015 presentation and calculation of the lapse ranges has been made consistent with the current period. Lapse ranges are based on weighted average ranges of underlying account value exposure.

GMAB

GMWB/GMWBL

Moneyness

Account Value

Lapse Range

Account Value

Lapse Range

During Surrender Charge Period

In the Money**

—

0.084% to 76.29%

4.9

0.081% to 54.65%

Out of the Money

—

01.416% to 7.96%

—

0.366% to 54.97%

Shock Lapse Period

In the Money

—

5.4% to 22.3%

1.8

3.0% to 13.7%

Out of the Money

—

22.3% to 24.5%

—

13.7% to 14.4%

After Surrender Charge Period

In the Money**

—$

—

2.58% to 2212.51%

~~8.8~~$

7.1

1.48% to ~~20.~~7.9%

Out of the Money

—

1112.91% to 2413.83%

0.65

57.09% to 218.72%

*Less than $0.1.

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

⁽⁵⁾ The mortality rate is based on the 2012 Individual Annuity Mortality Basic table with mortality improvements.

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


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


•	An increase (decrease) in interest rate implied volatility


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


•	A decrease (increase) in nonperformance risk


•	A decrease (increase) in mortality


•	An increase (decrease) in benefit utilization


•	A decrease (increase) in lapses

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



	47

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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


•	A decrease (increase) in nonperformance risk


•	A decrease (increase) in lapses

The Company notes the following interrelationships:


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


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

4748

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Other Financial Instruments

The carrying values and estimated fair values of the Company’s financial instruments as of the dates indicated:

	June 30, 2016				December 31, 2015
	September 30, 2016				December 31, 2015
	CarryingValue		FairValue		CarryingValue			FairValue
Assets:
Fixed maturities, including securities pledged	$	24,~~723~~800.60	$	24,~~723~~800.60	$	23,678.2		$	23,678.2
Equity securities, available-for-sale	20.12		20.12		19.2			19.2
Mortgage loans on real estate	3,~~663~~804.98		3,~~775~~925.98		3,310.9			3,429.8
Policy loans	7675.54		7675.54		79.8			79.8
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	2,~~910~~033.53		2,~~910~~033.53		1,948.6			1,948.6
Derivatives	1,~~885~~789.40		1,~~885~~789.40		799.4			799.4
Other investments	4836.76		4836.76		48.6			48.6
Deposits from affiliates	~~156~~157.41		157.16		155.3			156.3
Embedded derivative on reinsurance	1617.51		1617.51		(15.6		)	(15.6		)
Assets held in separate accounts	32,~~132~~104.2		32,~~132~~104.2		33,355.5			33,355.5
Liabilities:
Investment contract liabilities:
Deferred annuities(1)	19,~~654~~555.28		19,~~956~~963.86		19,274.7			19,367.9
Funding agreements with fixed maturities and guaranteed investment contracts	~~1,106~~806.83		~~1,086~~793.05		1,105.7			1,083.1
Supplementary contracts, immediate annuities and other	12,~~987~~265.24		2,~~240~~558.39		1,766.5			1,955.3
Derivatives:
Guaranteed benefit derivatives:
FIA	1,~~604~~708.63		1,~~604~~708.63		1,779.1			1,779.1
GMAB/GMWB/GMWBL	21,~~209~~982.93		21,~~209~~982.93		1,849.0			1,849.0
Other derivatives	~~665~~402.4		~~665~~402.4		204.6			204.6
Long-term debt	435.0		~~562~~574.97		435.0			524.7
Embedded derivative on reinsurance	~~485~~499.67		~~485~~499.67		10.2			10.2

⁽¹⁾ Certain amounts included in Deferred annuities are also reflected within the Guaranteed benefit derivatives section of the table above.

The following disclosures are made in accordance with the requirements of ASC Topic 825, which requires disclosure of fair value information about financial instruments, whether or not recognized at fair value on the Condensed Balance Sheets, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates, in many cases, could not be realized in immediate settlement of the instrument.

ASC Topic 825 excludes certain financial instruments, including insurance contracts and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

4849

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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

Mortgage loans on real estate: The fair values for mortgage loans on real estate are estimated on a monthly basis using discounted cash flow analyses and rates currently being offered in the marketplace for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. Mortgage loans on real estate are classified as Level 3.

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

Other investments: Federal Home Loan Bank ("FHLB") stock is carried at cost and periodically evaluated for impairment based on ultimate recovery of par value and is classified as Level 12.

Deposits from affiliates: Fair value is estimated based on the fair value of the liabilities for the underlying contracts. Fair value is estimated by discounting cash flows, including associated expenses for maintaining the contracts, at rates, that are risk-free rates plus an adjustment for nonperformance risk. These liabilities are classified as Level 2.

Investment contract liabilities:

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

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

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

Long-term debt: Estimated fair value of the Company’s notes to affiliates is based upon discounted future cash flows using a discount rate approximating the current market rate, incorporating nonperformance risk and is classified as Level 2.

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

4950

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

5. Deferred Policy Acquisition Costs and Value of Business Acquired

The following tables present a rollforward of DAC and VOBA for the periods indicated:

	2016
	DAC			VOBA			Total
Balance as of January 1, 2016	$	2,100.2		$	44.6		$	2,144.8
Deferrals of commissions and expenses	6791.43			—			6791.43
Amortization:
Amortization(1)	~~366~~215.08			(3.7.0		)	~~362~~208.38
Interest accrued(2)	2528.9			1.27			2730.16
Net amortization included in the Condensed Statements of Operations	~~391~~244.97			(2.5.3		)	~~389~~239.4
Change due to unrealized capital gains/losses on available-for-sale securities	(~~647~~685.7		)	(1819.6		)	(~~666~~705.3		)
Balance as of June 30, 2016	$	1,911.8		$	23.5		$	1,935.3
Balance as of September 30, 2016	$	1,750.5		$	19.7		$	1,770.2

	2015
	DAC			VOBA			Total
Balance as of January 1, 2015	$	2,212.9		$	39.1		$	2,252.0
Deferrals of commissions and expenses	4677.4			—			4677.4
Amortization:
Amortization	(422.0		)	(5.2		)	(427.2		)
Amortization(3)	(456.5		)	(15.4		)	(471.9		)
Interest accrued(2)	5470.28			12.63			5573.81
Net amortization included in the Condensed Statements of Operations	(~~367~~385.87		)	(313.61		)	(~~371~~398.48		)
Change due to unrealized capital gains/losses on available-for-sale securities	~~269~~254.98			1112.47			~~281~~267.35
Balance as of June 30, 2015	$	2,161.4		$	46.9		$	2,208.3
Balance as of September 30, 2015	$	2,159.4		$	38.7		$	2,198.1

(1) Includes loss recognition of $~~102~~137.81 related to DAC and $0.56 related to VOBA.

⁽²⁾ Interest accrued at the following rates for VOBA: 3.9% to 5.8% during 2016 and 2.2% to 5.8% during 2015.

~~Loss~~(3) Includes loss recognition ~~related~~of to$275.7 ~~Sales~~related ~~inducements~~ to ~~contract~~DAC ~~owners for the three~~ and ~~six months ended June 30, 2016 was~~ $41.~~7 and $24.~~2, ~~respectively. There was no loss recognition~~ related to ~~Sales inducements to contract owners for the three and six months ended June 30, 2015~~VOBA.

50Loss recognition related to Sales inducements to contract owners for the three and nine months ended September 30, 2016 was $8.1 and $32.3, respectively. Loss recognition related to Sales inducements to contract owners for the three and nine months ended September 30, 2015 was $65.1.



	51

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

6. Accumulated Other Comprehensive Income (Loss)

Shareholder’s equity included the following components of Accumulated Other Comprehensive Income ("AOCI") as of the dates indicated:

	June 30,
	September 30,
	2016			2015
Fixed maturities, net of OTTI	$	1,~~700~~771.65		$	~~864~~793.98
Equity securities, available-for-sale	45.80			3.7
Derivatives	98.6			1011.91
DAC/VOBA, Sales inducements and Other intangibles adjustments on available-for-sale securities	(1,013.8		)	(378.6		)
DAC/VOBA, Sales inducements and other intangibles adjustments on available-for-sale securities	(1,086.7		)	(394.5		)
Other	(35.5		)	(35.46		)
Unrealized capital gains (losses), before tax	~~665~~662.79			~~465~~378.5
Deferred income tax asset (liability)	(4746.45		)	2253.61
Unrealized capital gains (losses), after tax	~~618~~616.34			~~488~~431.16
Pension and other postretirement benefits liability, net of tax	0.65			0.7
AOCI	$	~~618~~616.9		$	~~488~~432.83

5152

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Changes in AOCI, including the reclassification adjustments recognized in the Condensed Statements of Operations, were as follows for the periods indicated:

	Three Months Ended June 30, 2016
	Three Months Ended September 30, 2016
	Before-Tax Amount				Income Tax			After-Tax Amount
Available-for-sale securities:
Fixed maturities	$	~~607~~72.09			$	(~~237~~25.26	)	$	~~369~~47.83
Equity securities	10.3				(0.41		)	0.92
Other	~~0.2~~—				—			~~0.2~~—
OTTI	10.23				(0.41		)	0.82
Adjustments for amounts recognized in Net realized capital gains (losses) in the Condensed Statements of Operations	(62.4		)		20.29			(41.25		)
DAC/VOBA, Sales inducements and Other intangibles	(380.8		)		133.3			(247.5		)
DAC/VOBA, Sales inducements and other intangibles	(72.9		)		25.5			(47.4		)
Change in unrealized gains/losses on available-for-sale securities	~~222~~(1.58		)		~~(102~~0.56		)	~~120~~(1.02		)
Derivatives:
Derivatives	(01.40		)	(1)	0.23			(0.27		)
Adjustments for amounts recognized in Net investment income in the Condensed Statements of Operations	—				—			—
Change in unrealized gains/losses on derivatives	(01.40		)		0.23			(0.27		)
Pension and other postretirement benefits liability:
Amortization of prior service cost recognized in Operating expenses in the Condensed Statements of Operations	—(0.2		)		—0.1			—(0.1		)
Change in pension and other postretirement benefits liability	—(0.2		)		—0.1			—(0.1		)
Change in Other comprehensive income (loss)	$	~~222~~(3.10	)		$	~~(102~~1.30	)	$	~~119~~(2.80	)

⁽¹⁾ See the Derivative Financial Instruments Note to these Condensed Financial Statements for additional information.

5253

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

	Six Months Ended June 30, 2016
	Nine Months Ended September 30, 2016
	Before-Tax Amount				Income Tax			After-Tax Amount
Available-for-sale securities:
Fixed maturities	$	1,~~295~~367.09			$	(~~453~~478.28	)	$	~~841~~889.81
Equity securities	01.92				(0.34		)	0.68
Other	0.4				(0.1		)	0.3
OTTI	2.58				(01.90		)	1.68
Adjustments for amounts recognized in Net realized capital gains (losses) in the Condensed Statements of Operations	(3.6.0		)		1.2.1			(23.49		)
DAC/VOBA, Sales inducements and Other intangibles	(832.5		)	(1)	291.4			(541.1		)
DAC/VOBA, Sales inducements and other intangibles	(905.4		)	(1)	316.9			(588.5		)
Change in unrealized gains/losses on available-for-sale securities	~~462~~460.79				(161.93		)	~~300~~299.86
Derivatives:
Derivatives	(23.2		)	(2)	01.81			(12.41		)
Adjustments related to effective cash flow hedges for amounts recognized in Net investment income in the Condensed Statements of Operations	—				—			—
Change in unrealized gains/losses on derivatives	(23.2		)		01.81			(12.41		)
Pension and other postretirement benefits liability:
Amortization of prior service cost recognized in Operating expenses in the Condensed Statements of Operations	(0.13		)		—0.1			(0.12		)
Change in pension and other postretirement benefits liability	(0.13		)		—0.1			(0.12		)
Change in Other comprehensive income (loss)	$	~~460~~457.4			$	(~~161~~160.1	)	$	~~299~~297.3

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

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

5354

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

	Three Months Ended June 30, 2015
	Three Months Ended September 30, 2015
	Before-Tax Amount				Income Tax			After-Tax Amount
Available-for-sale securities:
Fixed maturities	$	(~~780~~81.9	)		$	~~291~~28.06		$	(~~489~~53.93	)
Equity securities	~~(0.1~~—		)		~~0.1~~—			—
Other	(0.12		)		—			(0.12		)
OTTI	1.42				(0.54		)	0.98
Adjustments for amounts recognized in Net realized capital gains (losses) in the Condensed Statements of Operations	29.46				(03.93		)	16.53
DAC/VOBA, Sales inducements and Other intangibles	508.8				(178.1		)	330.7
DAC/VOBA, Sales inducements and other intangibles	(15.9		)		5.6			(10.3		)
Change in unrealized gains/losses on available-for-sale securities	(~~268~~87.32		)		~~111~~30.65			(~~156~~56.7		)
Derivatives:
Derivatives	(10.32		)	(1)	~~0.4~~—			(0.92		)
Adjustments for amounts recognized in Net investment income in the Condensed Statements of Operations	—				—			—
Change in unrealized gains/losses on derivatives	(10.32		)		~~0.4~~—			(0.92		)
Pension and other postretirement benefits liability:
Amortization of prior service cost recognized in Operating expenses in the Condensed Statements of Operations	—(0.1		)		—0.1			—
Change in pension and other postretirement benefits liability	—(0.1		)		—0.1			—
Change in Other comprehensive income (loss)	$	(~~269~~87.61	)		$	~~112~~30.06		$	(~~157~~56.65	)

⁽¹⁾ See the Derivative Financial Instruments Note to these Condensed Financial Statements for additional information.

5455

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

	Six Months Ended June 30, 2015
	Nine Months Ended September 30, 2015
	Before-Tax Amount				Income Tax			After-Tax Amount
Available-for-sale securities:
Fixed maturities	$	(~~527~~609.98	)		$	~~184~~213.73		$	(~~343~~396.25	)
Equity securities	0.1				—			0.1
Other	(0.1		)		—			(0.1		)
OTTI	34.57				(1.26		)	2.3.1
Adjustments for amounts recognized in Net realized capital gains (losses) in the Condensed Statements of Operations	010.84				(0.3.6		)	06.58
DAC/VOBA, Sales inducements and Other intangibles	335.4			(1)	(117.4		)	218.0
DAC/VOBA, Sales inducements and other intangibles	319.5			(1)	(111.8		)	207.7
Change in unrealized gains/losses on available-for-sale securities	(~~188~~275.02		)		6596.83			(~~122~~178.29		)
Derivatives:
Derivatives	3.35			(2)	(1.2		)	2.13
Adjustments related to effective cash flow hedges for amounts recognized in Net investment income in the Condensed Statements of Operations	—				—			—
Change in unrealized gains/losses on derivatives	3.35				(1.2		)	2.13
Pension and other postretirement benefits liability:
Amortization of prior service cost recognized in Operating expenses in the Condensed Statements of Operations	(0.12		)		—0.1			(0.1		)
Change in pension and other postretirement benefits liability	(0.12		)		—0.1			(0.1		)
Change in Other comprehensive income (loss)	$	(~~184~~271.89	)		$	6495.62		$	(~~120~~176.27	)

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

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

5556

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

7. Income Taxes

The Company's effective tax rates for the three and ~~six~~nine months ended ~~June~~September 30, 2016 were 89111.43% and 90101.7%, respectively. ~~The~~These effective tax rates differed from the statutory rate of 35% ~~for the three and six months ended June 30, 2016~~ due to an increase in the tax valuation allowance and the effect of the dividends received deduction ("DRD").

The Company's effective tax rates for the three and ~~six~~nine months ended ~~June~~September 30, 2015 were 112.34% and (0138.7)0%, respectively. ~~The~~These effective tax rates differed from the statutory rate of 35% ~~for the three and six months ended June 30, 2015~~ due to aan ~~decrease~~increase in the tax valuation allowance and the effect of the DRD.

Tax Sharing Agreement

The results of the Company's operations are included in the consolidated tax return of Voya Financial, Inc. Generally, the Company's financial statements recognize the current and deferred income tax consequences that result from the Company's activities during the current and preceding periods pursuant to the provisions of Income Taxes (ASC Topic 740) as if the Company were a separate taxpayer rather than a member of Voya Financial, 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. If the Company instead were to follow a separate taxpayer approach without any exceptions, there would be no impact to income tax expense (benefit) for the periods indicated above. Also, any current tax benefit related to the Company's tax attributes realized by virtue of its inclusion in the consolidated tax return of Voya Financial, Inc. would have been recorded directly to equity rather than income. Under the tax sharing agreement, Voya Financial, 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

During April 2016, the Internal Revenue Service ("IRS") completed its examination of Voya Financial, Inc.'s consolidated return (including the Company) through tax year 2014. The 2014 audit settlement did not have a material impact on the Company. Voya Financial, Inc. (including the Company) is currently under audit by the IRS, and it is expected that the examination of tax year 2015 will be finalized within the next twelve months. Voya Financial, Inc. (including the Company) and the IRS have agreed to participate in the Compliance Assurance Process for the tax years 2015 and 2016.

8. Financing Agreements

Reciprocal Loan Agreement

The Company maintains a reciprocal loan agreement with Voya Financial, Inc., an affiliate, to facilitate the handling of unanticipated short-term cash requirements that arise in the ordinary course of business. Under this agreement, which became effective in January 2004 and based upon its renewal on January 14, 2014, expires on January 14, 2024, either party can borrow from the other up to 3.0% of the Company's statutory net admitted assets as of the preceding December 31. Effective January 2014, interest on any borrowing by either the Company or Voya Financial, Inc. is charged at a rate based on the prevailing market rate for similar third-party borrowings or securities.

Under this agreement, the Company ~~did~~incurred ~~not~~minimal ~~incur~~ interest expense for the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015. The Company ~~earned~~did not earn interest income offor ~~$0.6~~the three months ended September 30, 2016 and earned $0.8 ~~for~~ ~~the~~in ~~three~~interest ~~and~~income ~~six~~for the nine months ended ~~June~~September 30, 2016,. The ~~respectively,~~Company ~~and~~did ~~earned~~not earn interest income offor ~~$0.6~~the three months ended September 30, 2015 and earned $0.7 ~~for~~in ~~the~~interest ~~three~~income ~~and~~for ~~six~~the nine months ended ~~June~~September 30, 2015~~, respectively~~. As of ~~June~~September 30, 2016 and December 31, 2015, the Company did not have an outstanding receivable/payable from/to Voya Financial, Inc. under the reciprocal loan agreement.

For information on the Company's additional financing agreements, see the Related Party Transactions Note in the Financial Statements in Part II, Item 8. in the Company's Annual Report on Form 10-K.

5657

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

9. Commitments and Contingencies

Commitments

Through the normal course of investment operations, the Company commits to either purchase or sell securities, mortgage loans, or money market instruments, at a specified future date and at a specified price or yield. The inability of counterparties to honor these commitments may result in either a higher or lower replacement cost. Also, there is likely to be a change in the value of the securities underlying the commitments.

As of ~~June~~September 30, 2016 and December 31, 2015, the Company had off-balance sheet commitments to acquire mortgage loans of $~~219~~153.0 and $323.6, respectively, and purchase limited partnerships and private placement investments of $~~442~~456.9 and $285.9, respectively.

Federal Home Loan Bank Funding

The Company is a member of the FHLB of Des Moines and is required to maintain collateral to back funding agreements issued to the FHLB. As of ~~June~~September 30, 2016 and December 31, 2015, the Company had $~~950~~649.32 and $950.4, respectively, in non-putable funding agreements, including accrued interest, issued to the FHLB. These non-putable funding agreements are included in Future policy benefits and contract owner account balances on the Condensed Balance Sheets. As of ~~June~~September 30, 2016 and December 31, 2015, assets with a market value of $0.7 billion and $1.1 billion, respectively, collateralized the funding agreements to the FHLB. Assets pledged to the FHLB are included in Fixed maturities, available-for-sale, on the Condensed Balance Sheets.

Restricted Assets

The Company is required to maintain assets on deposit with various regulatory authorities to support its insurance operations. The Company may also post collateral in connection with certain securities lending, repurchase agreements, funding agreements, letter of credit ("LOC") and derivative transactions as described further in this note. The components of the fair value of the restricted assets were as follows as of the dates indicated:

	June 30, 2016		December 31, 2015
	September 30, 2016		December 31, 2015
Fixed maturity collateral pledged to FHLB	$	~~1,097~~720.60	$	1,096.0
FHLB restricted stock(1)	4836.0		48.0
Other fixed maturities-state deposits	11.56		11.5
Securities pledged(2)	~~837~~747.65		672.4
Total restricted assets	$	1,~~994~~515.71	$	1,827.9

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

(2) Includes the fair value of loaned securities of $~~246~~288.05 and $147.9 as of ~~June~~September 30, 2016 and December 31, 2015, respectively. In addition, as of ~~June~~September 30, 2016 and December 31, 2015, the Company delivered securities as collateral of $~~591~~459.60 and $524.5, respectively. Loaned securities and securities delivered as collateral are included in Securities pledged on the Condensed Balance Sheets.

Litigation, Regulatory Matters and Loss Contingencies

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

5758

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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

The outcome of a litigation or regulatory matter is difficult to predict and the amount or range of potential losses associated with these or other loss contingencies, requires significant management judgment. It is not possible to predict the ultimate outcome or to provide reasonably possible losses or ranges of losses for all pending regulatory matters, litigation, and other loss contingencies. While it is possible that an adverse outcome in certain cases could have a material adverse effect upon the Company's financial position, based on information currently known, management believes that neither the outcome of pending litigation and regulatory matters, nor potential liabilities associated with other loss contingencies, are likely to have such an effect. However, given the large and indeterminate amounts sought in certain litigation and the inherent unpredictability of all such matters, it is possible that an adverse outcome in certain of the Company's litigation or regulatory matters, or liabilities arising from other loss contingencies, could, from time to time, have a material adverse effect upon the Company's results of operations or cash flows in a particular quarterly or annual period.

For some matters, the Company is able to estimate a possible range of loss. For such matters in which a loss is probable, an accrual has been made. For matters where the Company, however, believes a loss is reasonably possible, but not probable, no accrual is required. For matters for which an accrual has been made, but there remains a reasonably possible range of loss in excess of the amounts accrued or for matters where no accrual is required, the Company develops an estimate of the unaccrued amounts of the reasonably possible range of losses. As of ~~June~~September 30, 2016, the Company estimates the aggregate range of reasonably possible losses, in excess of any amounts accrued for these matters as of such date, is not material to the Company.

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

5859

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

10. Related Party Transactions

Operating Agreements

For the three and ~~six~~nine months ended ~~June~~September 30, 2016, revenues with affiliated entities related to the operating agreements disclosed in the Related Party Transactions Note in the Financial Statements in Part II, Item 8. in the Company's Annual Report on Form 10-K were $3536.71 and $70106.89, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2015, revenues with affiliated entities related to the aforementioned operating agreements were $4139.96 and $84123.17, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2016, expenses with affiliated entities related to the aforementioned operating agreements were $9399.65 and $~~190~~289.49, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2015, expenses with affiliated entities related to the aforementioned operating agreements were $~~102~~99.93 and $~~208~~307.25, respectively.

Reinsurance Agreements

Reinsurance Ceded

As of ~~June~~September 30, 2016 and December 31, 2015, total reserves ceded to affiliates were $56,~~474~~027.2 and $5,019.9, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2016, premiums ceded to affiliates were $94158.05 and $~~198~~357.72, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2015, premiums ceded to affiliates were $~~161~~75.39 and $~~249~~325.54, respectively.

Guaranteed Living Benefit — Coinsurance and Coinsurance Funds Withheld

~~The~~Prior to July 1, 2016, the Company ~~has~~had an amended and restated automatic reinsurance agreement with an affiliate, SLDI, on a combined coinsurance and coinsurance funds withheld basis. ~~The impacts of this agreement on the Condensed Balance Sheets as of the dates indicated are as follows:~~

	June 30, 2016		December 31, 2015
Assets on deposit in trust	$	7,665.7	$	6,632.1
Funds withheld liability to SLDI(1)	7,186.0		6,616.3
Embedded derivative(1)	479.7		15.8
Reserves ceded(2)	5,261.6		4,795.7
Deferred loss(3)	275.4		283.3

Effective July 1, 2016, SLDI acquired Roaring River II, Inc. ("RRII"), a Missouri life reinsurance captive, from its affiliate, ReliaStar Life Insurance Company and also effective July 1, 2016, RRII redomesticated from the State of Missouri to the State of Arizona. Effective July 1, 2016, the Company, SLDI and RRII entered into release, consent and novation agreements pursuant to which RRII assumed the variable annuity guaranteed living benefits previously reinsured to SLDI under the automatic reinsurance agreement; the services agreement from SLDI under which the Company provides certain actuarial risk modeling consulting services to SLDI with respect to hedge positions undertaken by SLDI in connection with the automatic reinsurance agreement; and SLDI's obligation to serve as asset manager for the funds withheld account under the asset management services agreement.

The impacts of these agreements on the Condensed Balance Sheets as of the dates indicated are as follows:



	September 30, 2016		December 31, 2015
Assets on deposit in trust	$	7,515.8	$	6,632.1
Funds withheld liability⁽¹⁾	7,022.1		6,616.3
Embedded derivative⁽¹⁾	493.7		15.8
Reserves ceded⁽²⁾	5,821.1		4,795.7
Deferred loss⁽³⁾	277.4		283.3

⁽¹⁾ Included in Funds held under reinsurance treaties with affiliates on the Condensed Balance Sheets.

⁽²⁾ Included in Deposits and reinsurance recoverable on the Condensed Balance Sheets.

⁽³⁾ Included in Other assets on the Condensed Balance Sheets.

Voya Insurance and Annuity Company

(A wholly owned subsidiary of Voya Holdings Inc.)

Notes to the Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Reinsurance Assumed

As of ~~June~~September 30, 2016 and December 31, 2015, total reserves assumed from affiliates were $~~426~~424.62 and $438.7, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2016, premiums assumed from affiliates were $111.59 and $~~214~~326.87, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2015, premiums assumed from affiliates were $~~109~~107.61 and $~~211~~318.12, respectively.

Deposits Receivable

As of ~~June~~September 30, 2016 and December 31, 2015, deposits receivable from affiliates were $~~156~~157.41 and $155.3, respectively.

For further information regarding the Company’s reinsurance agreements with affiliates, refer to the Related Party Transactions Note in the Financial Statements in Part II, Item 8. in the Company's Annual Report on Form 10-K.

6061

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

(Dollar amounts in millions, unless otherwise stated)

For the purposes of the discussion in this Quarterly Report on Form 10-Q, the terms "Company," "we," "our," "us" and "VIAC" refer to Voya Insurance and Annuity Company. We are a direct, wholly owned subsidiary of Voya Holdings Inc. ("Parent"), which is a direct, wholly owned subsidiary of Voya Financial, Inc.

The following discussion and analysis presents a review of our results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2016 and 2015 and financial condition as of ~~June~~September 30, 2016 and December 31, 2015. This item should be read in its entirety and in conjunction with the Condensed Financial Statements and related notes contained in Part I., Item 1. of this Quarterly Report on Form 10-Q, as well as "Management's Narrative Analysis of the Results of Operations and Financial Condition" section contained in our Annual Report on Form 10-K for the year ended December 31, 2015 ("Annual Report on Form 10-K").

In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Actual results may differ materially from those discussed in the forward-looking statements as a result of various factors. See "Note Concerning Forward-Looking Statements."

Basis of Presentation

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

Products currently offered by us include fixed and indexed annuities, and payout annuities, designed to address customer needs for tax-advantaged savings, retirement needs and wealth-protection concerns. We also offer guaranteed investment contracts and funding agreements (collectively referred to as "GICs"). We stopped actively writing new retail annuity products with substantial guarantee features in early 2010.

We have one operating segment.

Impact of New Accounting Pronouncements

For information regarding the impact of new accounting pronouncements, see the Business, Basis of Presentation and Significant Accounting Policies Note in our Condensed Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q.

Critical Accounting Judgments and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical estimates and assumptions are evaluated on an on-going basis based on historical developments, 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 affected by the need to make future accounting adjustments to reflect changes in these estimates and assumptions from time to time.

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


•	Reserves for future policy benefits;


•	Deferred policy acquisition costs ("DAC"), value of business acquired ("VOBA") and deferred sales inducements ("DSI");


•	Valuation of investments and derivatives;


•	Impairments;


•	Income taxes; and


•	Contingencies.

6162

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

The above critical accounting estimates are described in the Business, Basis of Presentation and Significant Accounting Policies Note in our Financial Statements in Part II, Item 8. of our Annual Report on Form 10-K.

Assumptions and Periodic Review

Changes in assumptions can have a significant impact on DAC, VOBA, DSI, amortization rates, reserve levels and results of operations. Assumptions are management's best estimates of future outcome. We periodically review these assumptions against actual experience and, based on additional information that becomes available, update our assumptions.

WeDuring ~~also review~~ the ~~recoverability~~third quarter of ~~DAC,~~2016 ~~VOBA~~ and ~~DSI~~2015, ~~balances~~we ~~each~~conducted ~~period.~~our ~~These~~annual ~~assets~~review ~~are~~of ~~deemed~~assumptions, toincluding beprojection ~~unrecoverable~~model ifinputs. ~~the~~As ~~estimated~~a ~~gross~~result ~~profits~~of ~~do not exceed~~ these ~~balances~~reviews, ~~and~~in ~~a write-down is recorded as loss recognition. During~~ the three ~~and six~~ months ended ~~June~~September 30, 2016 and 2015, we ~~recognized~~made ~~loss~~a ~~recognition~~number of ~~$24.7~~changes, ~~million~~which ~~and~~resulted ~~$127.5~~in ~~million,~~favorable/(unfavorable) ~~respectively,~~impacts on Income (loss) before income taxes, of ~~which~~ $20102.07 million and $~~103~~(34.3) million, respectively, ~~was recorded to Net amortization~~ of ~~DAC~~which ~~and VOBA, and~~ $434.7 million and $24(83.20) million, ~~respectively,~~ was ~~recorded~~related to ~~Interest~~DAC/VOBA ~~credited~~ and other ~~benefits~~intangibles to contract owners, in the Condensed Statements of Operations, with a corresponding decrease on the Condensed Balance Sheets to Deferred policy acquisition costs, Value of business acquired, and Sales inducements to contract ownersunlocking. During the three and six months ended June 30, 2016, we also established premium deficiency reserves of $4.5 million and $10.7 million, respectively, before tax related to certain payout annuity contracts, which was recorded as an increase in Policyholder benefits and contract owner balances with a corresponding increase in Deposits and reinsurance recoverable, as the reserves are ceded to an affiliate on a 100% coinsurance and coinsurance funds withheld basis. As a result, the establishment of these premium deficiency reserves had no impact on the Condensed Statements of Operations for the three and six months ended June 30, 2016.

We also review the recoverability of DAC, VOBA and DSI balances each period. These assets are deemed to be unrecoverable if the estimated gross profits do not exceed these balances and a write-down is recorded as loss recognition. During the three and nine months ended September 30, 2016, we recognized loss recognition of $42.5 million and $170.0 million, respectively, before income taxes, of which $34.4 million and $137.7 million, respectively, was recorded to Net amortization of DAC and VOBA, and $8.1 million and $32.3 million, respectively, was recorded to Interest credited and other benefits to contract owners, in the Condensed Statements of Operations, with a corresponding decrease on the Condensed Balance Sheets to Deferred policy acquisition costs, Value of business acquired, and Sales inducements to contract owners. During the three and nine months ended September 30, 2015, we recognized loss recognition of $342.0 million before income taxes, of which $276.9 million was recorded to Net amortization of DAC and VOBA, and $65.1 million was recorded to Interest credited and other benefits to contract owners.

During the three and nine months ended September 30, 2016, we established premium deficiency reserves of $25.6 million and $36.3 million, respectively, before tax related to certain payout annuity contracts. During the three and nine months ended September 30, 2015, we established a premium deficiency reserve of $126.0 million. The premium deficiency reserves established for the three and nine months ended September 30, 2016 and 2015 were recorded as increases in Policyholder benefits and contract owner account balances with a corresponding increase in Deposits and reinsurance recoverable, as the reserves are ceded to an affiliate on a 100% coinsurance and coinsurance funds withheld basis. As a result, the establishment of these premium deficiency reserves had no impact on the Condensed Statements of Operations for the three and nine months ended September 30, 2016 and 2015.

Income Taxes

Our effective tax rates for the three and ~~six~~nine months ended ~~June~~September 30, 2016 were 89111.43% and 90101.7%, respectively. ~~The~~These effective tax rates differed from the statutory rate of 35% ~~for the three and six months ended June 30, 2016~~ due to an increase in the tax valuation allowance and the effect of the dividends received deduction ("DRD").

Our effective tax rates for the three and ~~six~~nine months ended ~~June~~September 30, 2015 were 112.34% and (0138.7)0%, respectively. ~~The~~These effective tax rates differed from the statutory rate of 35% ~~for~~ ~~the three and six months ended June 30, 2015~~ due to aan ~~decrease~~increase in the tax valuation allowance and the effect of the DRD.

62GMIB Buyout Offer

The focus in managing our closed block of variable annuity products continues to be on protecting regulatory and rating agency capital, and our hedging program is primarily designed to mitigate the impacts of market movements on capital resources, rather than mitigating earnings volatility. Additionally, we continue to judiciously seek opportunities to accelerate the run-off of the block, such as through our recent offerings of enhanced income for eligible guaranteed minimum income benefit ("GMIB") policyholders which allowed for optional early annuitization. In October 2016, we filed a GMIB enhanced surrender value offer with the SEC which, if we decide to proceed with, would provide certain GMIB policyholders an option to surrender their contracts in exchange for an enhancement to their contract’s surrender value.



	63

Results of Operations

($ in millions)	Three Months Ended ~~June~~September 30,						~~Six~~Nine Months Ended ~~June~~September 30,
	2016			2015			2016			2015
Revenues:
Net investment income	$	~~346~~336.98		$	~~318~~322.41		$	~~673~~1,010.31		$	~~638~~960.56
Fee income	~~157~~160.69			~~190~~175.02			~~311~~472.32			~~375~~550.13
Premiums	~~128~~125.93			~~127~~129.10			~~248~~373.03			~~245~~374.9
Net realized capital gains (losses):
Total other-than-temporary impairments	(13.57		)	(45.94		)	(37.63		)	(510.26		)
Less: Portion of other-than-temporary impairments recognized in Other comprehensive income (loss)	(0.82		)	0.3			1.31			1.03
Net other-than-temporary impairments recognized in earnings	(2.3.5		)	(5.27		)	(48.94		)	(611.29		)
Other net realized capital gains (losses)	(38292.10		)	~~168~~549.48			63(228.28		)	~~(55~~494.80		)
Total net realized capital gains (losses)	(40295.45		)	~~163~~544.21			58(237.32		)	~~(62~~482.01		)
Other revenue	4.61			64.12			913.56			1115.68
Total revenues	~~597~~331.6			~~804~~1,174.86			1,~~300~~632.40			12,~~209~~383.17
Benefits and expenses:
Interest credited and other benefits to contract owners/policyholders	~~610~~24.02			~~(210~~1,395.56		)	1,~~395~~419.46			~~221~~1,617.84
Operating expenses	~~115~~108.2			~~115~~127.84			~~235~~344.80			~~237~~364.04
Net amortization of Deferred policy acquisition costs and Value of business acquired	~~(175~~150.70		)	~~516~~27.04			(~~389~~239.4		)	~~371~~398.48
Interest expense	7.02			7.1			1421.02			1421.01
Other expense	1(2.90		)	63.51			64.3			1518.23
Total benefits and expenses	~~558~~287.46			~~434~~1,560.96			1,~~262~~549.17			~~859~~2,420.40
Income (loss) before income taxes	3944.20			~~369~~(386.90		)	3882.3			~~349~~(36.73		)
Income tax expense (benefit)	3548.09			4(47.7		)	3483.76			(250.41		)
Net income (loss)	$	(4.29	)	$	~~365~~(338.23	)	$	3(1.63	)	$	~~352~~13.18

Three Months Ended ~~June~~September 30, 2016 compared to Three Months Ended ~~June~~September 30, 2015

Our Net ~~income~~loss for the three months ended ~~June~~September 30, 2016 ~~decreased~~improved $~~361~~333.04 million from a loss of $~~365~~338.23 million to a loss of $4.29 million primarily due to ~~unfavorable~~decreases ~~changes~~ in Interest credited and other benefits to contract owners/policyholders and ~~Total~~Operating ~~net realized capital gains (losses)~~expenses, an increase in ~~Income~~Net ~~tax~~investment ~~expense~~income and a ~~decrease~~favorable change in ~~Fee~~Other ~~Income~~expense, partially offset by aan ~~favorable~~unfavorable change in Total net realized capital gains (losses), an increase in Net amortization of DAC and VOBA, an ~~increase~~unfavorable change in ~~Net~~Income ~~investment~~tax ~~income~~expense (benefit), and a decrease in ~~Other~~Fee ~~expense~~income.

Revenues

Total revenues decreased $~~207~~843.20 million from $~~804~~1,174.86 million to $~~597~~331.6 million primarily due to unfavorable changes in Total net realized capital gains (losses) and a decrease in Fee income, partially offset by an increase in Net investment income.

Net investment income increased $2814.57 million from $~~318~~322.41 million to $~~346~~336.98 million primarily due to growth in the general account assets, driven by positive net flows, higher alternative investment income and higher prepayment fee income, partially offset by ~~lower alternative investment income and~~ the impact of the continued low interest rate environment on reinvestment rates.

Fee income decreased $3214.43 million from $~~190~~175.02 million to $~~157~~160.69 million primarily due to lower average separate account assets under management resulting from the continued runoff of our closed block of variable annuity business.

6364

Total net realized capital gains (losses) changed $~~203~~839.6 million from a gain of $~~163~~544.21 million to a loss of $40295.45 million primarily due to an unfavorable ~~changes~~change in ~~the~~annuity ~~fair~~hedging ~~value~~derivatives of ~~embedded~~$1,257.5 ~~derivatives on product guarantees~~million, partially offset by a favorable ~~changes~~change in ~~annuity hedging derivatives. The unfavorable changes of $636.9 million in~~ the fair value of embedded derivatives on ~~variable annuity and fixed indexed annuity~~ product guarantees ~~(from a gain~~ of $~~582~~408.17 million ~~in the prior period to a loss of $54~~.8 million in the current period) were primarily due to unfavorable impacts from changes in interest rates and implied volatility, partially offset by favorable impacts resulting from nonperformance risk and equity market movements. Under the variable annuity and fixed indexed annuity hedge programs, changes in equity and interest markets during the current period resulted in net ~~favorable~~unfavorable changes in equity, interest and foreign exchange derivatives offrom ~~$412.5~~a ~~million compared to the prior period (~~net ~~gains~~gain of $28846.3 million in the ~~current~~prior period ~~compared~~ to a net ~~losses~~loss of $~~384~~411.2 million ~~during~~in the ~~prior~~current period). A portion of these derivative gains (losses) were ceded ~~to SLDI~~ under the combined coinsurance and coinsurance funds withheld agreement (~~gains~~from a gain of $63932.7 million ~~for~~in the ~~current~~prior period ~~compared~~ to ~~losses~~a loss of $~~367~~423.78 million ~~for~~in the ~~prior~~current period) and an offset was recorded to Interest credited and other benefits to contract owners/policyholders. See the Related Party Transactions Footnote in our Condensed Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for further information on the combined coinsurance and coinsurance funds withheld agreement. The favorable changes in the fair value of embedded derivatives on product guarantees from a loss of $263.5 million in the prior period to a gain of $145.2 million in the current period were primarily due to favorable impacts from changes in interest rates, annual assumption impacts, implied volatility and equity market movements, partially offset by an unfavorable impact resulting from nonperformance risk.

Benefits and Expenses

Total benefits and expenses ~~increased~~decreased $~~123~~1,273.50 million from $~~434~~1,560.96 million to $~~558~~287.46 million primarily due to anlower ~~increase in~~ Interest credited and other benefits to contract owners/policyholders, ~~partially~~and ~~offset~~Operating byexpenses and a favorable change in ~~Net~~Other ~~amortization~~expense, ofpartially ~~DAC~~offset ~~and~~by ~~VOBA~~an ~~and~~increase ain ~~decrease~~Net inamortization ~~Other~~of ~~expense~~DAC and VOBA.

Interest credited and other benefits to contract owners/policyholders ~~changed~~decreased $~~820~~1,371.54 million from ~~a benefit of~~ $~~210~~1,395.56 million to ~~an expense of~~ $~~610~~24.02 million primarily due to the change in the amount of equity and interest rate derivative gains/losses transferred under the combined coinsurance and coinsurance funds withheld agreement ~~with SLDI~~ (the corresponding offsetting amount is reported in Total net realized capital gains (losses)), ~~and~~lower ~~the~~ unfavorable ~~change~~impact infrom ~~the~~annual ~~embedded~~assumptions ~~derivative~~updates, onequity ~~the~~market ~~coinsurance~~movements ~~funds~~and ~~withheld~~lower ~~arrangements~~loss ~~resulting~~recognition ~~from~~on ~~interest~~sales ~~rate movements~~inducements. These ~~increases~~decreases were partially offset by ~~favorable~~higher amortization of sales inducements on ~~lower~~higher gross profits ~~and lower interest credited due to the continued run-off of our closed block of variable annuity business~~.

~~Net~~Operating ~~amortization~~expenses ofdecreased ~~DAC and VOBA changed~~ $~~691~~19.72 million from ~~an expense of~~ $~~516~~127.04 million to ~~a benefit of~~ $~~175~~108.72 million primarily due to ~~favorable~~lower ~~amortization~~commission asexpense aon ~~result of~~ lower ~~gross~~average ~~profits~~separate ~~(negative~~account ~~gross~~assets ~~profits~~under inmanagement, ~~the~~lower ~~current~~operating ~~period~~expenses ~~compared~~due to ~~positive gross profits in~~ the ~~prior~~continued ~~period),~~runoff ~~partially~~of ~~offset~~our byclosed ~~unfavorable~~block ~~DAC/VOBA~~of ~~unlocking,~~variable ~~including~~annuity ~~loss~~business ~~recognition in the current period. See Critical Accounting Judgments~~ and ~~Estimates~~lower ~~for~~consulting ~~further~~expenses, ~~detail~~partially onoffset ~~the~~by ~~loss~~higher ~~recognition~~employee-related ~~of DAC and VOBA~~expenses.

~~Other~~Net ~~expense~~amortization ~~decreased~~of DAC and VOBA increased $4122.6 million from $627.54 million to $1150.90 million primarily due to ~~lower~~higher amortization ofas ~~deferred~~a ~~reinsurance~~result ~~losses.~~of ~~Additionally~~higher gross profits, ~~expenses~~partially ~~incurred~~offset inby ~~the~~favorable ~~prior~~DAC/VOBA ~~period~~unlocking ~~related~~due to the ~~multi-year~~annual ~~guaranteed~~assumptions ~~fixed~~updates ~~annuity~~and ~~contracts~~lower ~~coinsurance~~loss ~~agreement~~recognition ~~did not reoccur~~ in the current period. ~~due~~See toCritical ~~the~~Accounting ~~recapture~~Judgments ofand ~~this~~Estimates ~~agreement~~for infurther detail on the ~~third~~loss ~~quarter~~recognition of ~~2015~~DAC and VOBA.

Other expense decreased $5.1 million from $3.1 million to a benefit of $2.0 million primarily due to lower amortization of deferred reinsurance losses and expenses incurred in the prior period related to the multi-year guaranteed fixed annuity contracts coinsurance agreement that did not reoccur due to the recapture of this agreement in the third quarter of 2015.

Income Taxes

Income tax expense ~~increased~~(benefit) changed $3096.36 million from a benefit of $447.7 million to an expense of $3548.09 million primarily due to an increase in ~~the~~income ~~tax~~before ~~valuation~~income ~~allowance~~taxes, inpartially ~~the~~offset ~~current~~by ~~period compared to~~ a decrease in the tax valuation allowance ~~in the prior period offset by a decrease in income before income taxes~~.

6465

~~Six~~Nine Months Ended ~~June~~September 30, 2016 compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2015

Our Net income (loss) for the ~~six~~nine months ended ~~June~~September 30, 2016 decreased $~~348~~15.51 million from income of $~~352~~13.18 million to loss of $31.63 million primarily due to anunfavorable ~~increase~~changes in ~~Interest~~Total ~~credited~~net ~~and~~realized ~~other~~capital ~~benefits~~gains to(losses) ~~contract~~and ~~owners/policyholders, an unfavorable change in~~ Income tax expense (benefit) and a decrease in Fee ~~Income~~income, partially offset by a favorable ~~changes~~change in Net amortization of DAC and VOBA, ~~and~~a ~~Total~~decrease ~~net~~in ~~realized~~Interest ~~capital~~credited ~~gains~~and ~~(losses)~~other benefits to contract owners/policyholders, an increase in Net investment income, and adecreases ~~decrease~~ in Operating expenses and Other expense.

Revenues

Total revenues ~~increased~~decreased $91751.37 million from $12,~~209~~383.17 million to $1,~~300~~632.40 million primarily due to aunfavorable ~~favorable~~changes ~~change~~ in Total net realized capital gains (losses) and ana ~~increase~~decrease in ~~Net~~Fee ~~investment~~ income, partially offset by aan ~~decrease~~increase in ~~Fee~~Net investment income.

Net investment income increased $3449.85 million from $~~638~~960.56 million to $~~673~~1,010.31 million primarily due to growth in the general account assets, driven by positive net flows, and higher prepayment fee income, partially offset by lower alternative investment income and the impact of the continued low interest rate environment on reinvestment rates.

Fee income decreased $6378.81 million from $~~375~~550.13 million to $~~311~~472.32 million primarily due to lower average separate account assets under management resulting from the continued runoff of our closed block of variable annuity business.

Total net realized capital gains (losses) changed $~~120~~719.3 million from a ~~loss~~gain of $62482.01 million to a ~~gain~~loss of $58237.32 million primarily due to ~~favorable~~an ~~changes~~unfavorable change in annuity hedging derivatives of $749.6 million, partially offset by ~~unfavorable~~a ~~changes~~favorable change in the fair value of embedded derivatives on product guarantees of $13. 4 million. Under the variable annuity and fixed indexed annuity hedge programs, changes in equity and interest markets during the current period resulted in net ~~favorable~~unfavorable changes in equity, interest and foreign exchange derivatives offrom ~~$503.5~~a ~~million compared to the prior period (~~net ~~gains~~gain of $~~172~~524.82 million in the ~~current~~prior period ~~compared~~ to a net ~~losses~~loss of $~~330~~225.74 million ~~during~~in the ~~prior~~current period). A portion of these derivative gains (losses) were ceded ~~to SLDI~~ under the combined coinsurance and coinsurance funds withheld agreement (~~gains~~from a gain of $~~302~~651.93 million in the ~~current~~prior period ~~compared~~ to ~~losses~~a loss of $~~281~~120.39 million in the ~~prior~~current period) and an offset was recorded to Interest credited and other benefits to contract owners/policyholders. The ~~unfavorable~~favorable ~~changes~~change ~~of $395.3 million~~ in the fair value of embedded derivatives on ~~variable annuity and fixed indexed annuity~~ product guarantees (from a gain of $~~309~~45.38 million in the prior period to a ~~loss~~gain of $8659.02 million) ~~were~~in the current period was primarily due to ~~unfavorable~~favorable impacts resulting from ~~changes~~nonperformance inrisk, ~~interest~~annual ~~rates~~assumption updates and ~~implied~~equity ~~volatility~~market movements, partially offset by ~~favorable~~unfavorable impacts ~~resulting~~ from ~~nonperformance~~interest ~~risk~~rate movements.

Benefits and Expenses

Total benefits and expenses ~~increased~~decreased $~~402~~870.73 million from $~~859~~2,420.40 million to $1,~~262~~549.17 million primarily due to ana ~~increase~~favorable change in Net amortization of DAC and VOBA and decreases in Interest credited and other benefits to contract owners/policyholders, ~~partially~~Operating ~~offset~~expenses ~~by a favorable change in Net amortization of DAC~~ and ~~VOBA and a decrease in~~ Other expense.

Interest credited and other benefits to contract owners/policyholders ~~increased~~decreased $~~1,173~~197.68 million from $~~221~~1,617.84 million to $1,~~395~~419.46 million primarily due to the change in the ~~embedded~~amount ~~derivative~~of ~~on the coinsurance funds withheld arrangements resulting from interest rate movements and the change in the~~ equity and interest rate derivative gains transferred under the combined coinsurance and coinsurance funds withheld agreement ~~with SLDI~~ (the corresponding offsetting amount is reported in Total net realized capital gains (losses)) lower unfavorable impacts from annual assumptions updates, equity market movements and lower loss recognition on sales inducements. These ~~increases~~decreases were partially offset by ~~favorable~~the ~~amortization~~unfavorable ofchange ~~sales~~in ~~inducements~~the ~~due~~embedded toderivative ~~lower~~on ~~gross~~the ~~profits~~coinsurance ~~and~~funds ~~lower~~withheld ~~interest~~arrangements ~~credited~~resulting ~~due~~from tointerest ~~the~~rate ~~continued~~movements ~~run-off~~and ofhigher ~~our~~amortization ~~closed block~~ of ~~variable~~sales ~~annuity business~~inducements.

~~Net~~Operating ~~amortization~~expenses ofdecreased ~~DAC and VOBA changed~~ $~~760~~20.84 million from ~~an expense of~~ $~~371~~364.4 million to ~~a benefit of~~ $~~389~~344.40 million primarily due to ~~favorable~~lower ~~amortization~~commission asexpense aon ~~result of~~ lower ~~gross~~average ~~profits~~separate ~~(negative~~account ~~gross~~assets ~~profits~~under inmanagement ~~the~~and ~~current~~lower ~~period~~operating ~~compared~~expenses due to ~~positive gross profits in~~ the ~~prior~~continued ~~period),~~runoff ~~partially~~of ~~offset by unfavorable DAC/VOBA unlocking, including loss recognition in~~ the ~~current~~closed ~~period.~~block ~~See Critical Accounting Judgments and Estimates for further detail on the loss recognition~~ of ~~DAC~~variable ~~and~~annuity ~~VOBA~~products.

~~Other~~Net ~~expense~~amortization ~~decreased~~of DAC and VOBA changed $8638.92 million from an expense of $15398.28 million to a benefit of $6239.34 million primarily due to ~~lower~~favorable amortization as a result of ~~deferred~~lower ~~reinsurance~~gross ~~losses.~~profits ~~Additionally,~~(negative ~~expenses~~gross ~~incurred~~profits in the ~~prior~~current period ~~related~~compared to positive gross profits in the ~~multi-year~~prior ~~guaranteed~~period), ~~fixed~~favorable ~~annuity~~DAC/VOBA ~~contracts~~unlocking ~~coinsurance~~due ~~agreement~~to ~~did~~the ~~not~~annual ~~reoccur~~assumptions updates and lower loss recognition in the current period. ~~due~~See toCritical ~~the~~Accounting ~~recapture~~Judgments ofand ~~this~~Estimates ~~agreement~~for infurther detail on the ~~third~~loss ~~quarter~~recognition of ~~2015~~DAC and VOBA.

65Other expense decreased $14.0 million from $18.3 million to $4.3 million primarily due to lower amortization of deferred reinsurance losses and expenses incurred in the prior period related to the multi-year guaranteed fixed annuity contracts coinsurance agreement that did not reoccur due to the recapture of this agreement in the third quarter of 2015.



	66

Income Taxes

Income tax expense ~~increased~~(benefit) changed $37133.17 million from a benefit of $250.41 million to an expense of $3483.76 million primarily due to an increase in ~~the~~income ~~tax~~before ~~valuation~~income ~~allowance~~taxes inand ~~the~~an ~~current~~increase ~~period compared to a decrease~~ in the tax valuation allowance ~~in the prior period offset by a decrease in income before income taxes~~.

Financial Condition

Investments

See the Management’s Narrative Analysis of the Results of Operations and Financial Condition in our Financial Statements in Part II, Item. 7. of our Annual Report on Form 10-K for information on our investment strategy.

See the Investments Note in our Condensed Financial Statements in Part I., Item 1. of this Quarterly Report on Form 10-Q for more information on investments.

Portfolio Composition

The following table presents the investment portfolio as of the dates indicated:

	June 30, 2016				December 31, 2015
	September 30, 2016				December 31, 2015
($ in millions)	CarryingValue		% ofTotal		CarryingValue		% ofTotal
Fixed maturities, available-for-sale, excluding securities pledged	$	23,~~214~~373.3	73.58	%	$	22,458.4	76.9	%
Fixed maturities, at fair value using the fair value option	~~671~~679.72		2.1	%	547.4		1.9	%
Equity securities, available-for-sale	20.12		0.1	%	19.2		0.1	%
Short-term investments(1)	940.30		3.0	%	1,069.4		3.7	%
Mortgage loans on real estate	3,~~663~~804.98		1112.60	%	3,310.9		11.3	%
Policy loans	7675.54		0.2	%	79.8		0.3	%
Limited partnerships/corporations	~~202~~215.63		0.67	%	186.3		0.6	%
Derivatives	1,~~885~~789.40		65.06	%	799.4		2.7	%
Other investments	4836.76		0.21	%	48.6		0.2	%
Securities pledged	~~837~~747.65		2.74	%	672.4		2.3	%
Total investments	$	31,~~561~~681.13	100.0	%	$	29,191.8	100.0	%

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

6667

Fixed Maturities

Total fixed maturities by market sector, including securities pledged, were as presented below as of the dates indicated:

	June 30, 2016
	September 30, 2016
($ in millions)	AmortizedCost		% ofTotal		Fair Value		% ofTotal
Fixed maturities:
U.S. Treasuries	$	~~943~~885.07	43.19	%	$	~~1,056~~987.61	4.30	%
U.S. Government agencies and authorities	80.61		0.3	%	86.98		0.35	%
State, municipalities and political subdivisions	~~434~~471.29		12.91	%	~~472~~505.03		12.90	%
U.S. corporate public securities	10,~~392~~261.17		4544.26	%	11,~~295~~211.75		45.72	%
U.S. corporate private securities	2,~~444~~608.6		1011.63	%	2,~~589~~764.59		1011.51	%
Foreign corporate public securities and foreign governments(1)	2,~~658~~657.39		11.6	%	2,~~795~~827.26		11.34	%
Foreign corporate private securities(1)	2,~~606~~649.26		11.35	%	2,~~769~~814.6		11.23	%
Residential mortgage-backed securities	2,~~077~~057.41		98.09	%	2,~~230~~204.96		98.09	%
Commercial mortgage-backed securities	1,~~142~~066.20		54.06	%	1,~~200~~120.26		4.95	%
Other asset-backed securities	~~222~~269.57		1.02	%	~~227~~277.0		01.91	%
Total fixed maturities, including securities pledged	$	23,~~001~~008.13	100.0	%	$	24,~~723~~800.60	100.0	%
(1) Primarily U.S. dollar denominated.
	December 31, 2015
($ in millions)	AmortizedCost		% ofTotal		Fair Value		% ofTotal
Fixed maturities:
U.S. Treasuries	$	992.7	4.3	%	$	1,058.7	4.5	%
U.S. Government agencies and authorities	79.4		0.3	%	81.9		0.3	%
State, municipalities and political subdivisions	359.1		1.5	%	360.5		1.5	%
U.S. corporate public securities	10,718.9		46.1	%	10,871.9		45.9	%
U.S. corporate private securities	2,365.0		10.2	%	2,394.4		10.1	%
Foreign corporate public securities and foreign governments(1)	2,826.9		12.2	%	2,793.0		11.8	%
Foreign corporate private securities(1)	2,592.9		11.2	%	2,626.0		11.1	%
Residential mortgage-backed securities	1,746.8		7.5	%	1,885.1		8.0	%
Commercial mortgage-backed securities	1,311.0		5.6	%	1,343.4		5.7	%
Other asset-backed securities	257.6		1.1	%	263.3		1.1	%
Total fixed maturities, including securities pledged	$	23,250.3	100.0	%	$	23,678.2	100.0	%
(1) Primarily U.S. dollar denominated.

As of ~~June~~September 30, 2016, the average duration of our fixed maturities portfolio, including securities pledged, is between 6.5 and 7.0 years.

Fixed Maturities Credit Quality - Ratings

For information regarding our fixed maturities credit quality ratings, see the Management’s Narrative Analysis of the Results of Operations and Financial Condition in our Financial Statements in Part II, Item. 7. of our Annual Report on Form 10-K.

The following tables present credit quality of fixed maturities, including securities pledged, using NAIC designations as of the dates indicated:

($ in millions)	June 30, 2016
NAIC Quality Designation	1			2			3			4			5			6			Total Fair Value
U.S. Treasuries	$	1,056.6		$	—		$	—		$	—		$	—		$	—		$	1,056.6
U.S. Government agencies and authorities	86.9			—			—			—			—			—			86.9
State, municipalities and political subdivisions	441.7			30.0			0.3			—			—			—			472.0
U.S. corporate public securities	6,278.8			4,605.4			335.9			65.0			2.3			8.3			11,295.7
U.S. corporate private securities	1,161.5			1,249.7			137.6			33.4			4.9			2.4			2,589.5
Foreign corporate public securities and foreign governments(1)	1,544.2			1,056.1			168.5			26.0			—			0.4			2,795.2
Foreign corporate private securities(1)	346.5			2,274.5			125.1			9.3			8.7			5.5			2,769.6
Residential mortgage-backed securities	2,141.5			23.6			3.4			15.5			18.3			28.6			2,230.9
Commercial mortgage-backed securities	1,198.5			—			—			1.7			—			—			1,200.2
Other asset-backed securities	185.9			22.8			12.4			3.0			1.2			1.7			227.0
Total fixed maturities	$	14,442.1		$	9,262.1		$	783.2		$	153.9		$	35.4		$	46.9		$	24,723.6
% of Fair Value	58.4		%	37.5		%	3.2		%	0.6		%	0.1		%	0.2		%	100.0		%
(1) Primarily U.S. dollar denominated.
($ in millions)	December 31, 2015
NAIC Quality Designation	1			2			3			4			5			6			Total Fair Value
U.S. Treasuries	$	1,058.7		$	—		$	—		$	—		$	—		$	—		$	1,058.7
U.S. Government agencies and authorities	81.9			—			—			—			—			—			81.9
State, municipalities and political subdivisions	340.3			19.9			0.3			—			—			—			360.5
U.S. corporate public securities	5,854.3			4,568.0			346.1			93.9			—			9.6			10,871.9
U.S. corporate private securities	1,118.2			1,160.5			98.0			17.7			—			—			2,394.4
Foreign corporate public securities and foreign governments(1)	1,528.0			1,086.2			168.2			8.4			1.0			1.2			2,793.0
Foreign corporate private securities(1)	319.3			2,205.5			86.5			14.2			—			0.5			2,626.0
Residential mortgage-backed securities	1,812.3			7.0			3.8			15.8			18.0			28.2			1,885.1
Commercial mortgage-backed securities	1,339.7			—			1.1			2.6			—			—			1,343.4
Other asset-backed securities	237.1			8.3			5.4			11.3			1.2			—			263.3
Total fixed maturities	$	13,689.8		$	9,055.4		$	709.4		$	163.9		$	20.2		$	39.5		$	23,678.2
% of Fair Value	57.8		%	38.2		%	3.0		%	0.7		%	0.1		%	0.2		%	100.0		%
(1) Primarily U.S. dollar denominated.



	68

The following tables present credit quality of fixed maturities, including securities pledged, using ~~ARO~~NAIC ~~ratings~~designations as of the dates indicated:

($ in millions)	~~June~~September 30, 2016
ARO Quality Ratings	AAA			AA			A			BBB			BB and Below			Total Fair Value
NAIC Quality Designation	1			2			3			4			5			6			Total Fair Value
U.S. Treasuries	$	~~1,056~~987.61		$	—		$	—		$	—		$	—		$	~~1,056.6~~—		$	987.1
U.S. Government agencies and authorities	86.98			—			—			—			—			~~86.9~~—			86.8
State, municipalities and political subdivisions	47471.51			~~294~~33.29			~~100.~~0.3			~~30.0~~—			~~0.3~~—			~~472.0~~—			505.3
U.S. corporate public securities	~~213~~6,134.82			~~910~~4,668.13			~~5,135~~336.13			~~4,605~~61.43			~~431.~~3.4			~~11,295~~8.70			11,211.5
U.S. corporate private securities	921,272.78			641,311.06			~~896~~140.62			~~1,399~~35.83			~~136~~2.46			2~~,589~~.54			2,764.9
Foreign corporate public securities and foreign governments(1)	371,525.8			~~352~~1,108.23			~~1,164~~166.34			~~1,046~~26.07			~~194.9~~—			~~2,795~~0.24			2,827.6
Foreign corporate private securities(1)	—383.7			92,224.70			~~435~~185.0			~~2,223~~9.46			~~101~~6.54			~~2,769~~5.69			2,814.6
Residential mortgage-backed securities	12,~~882~~103.95			240.42			23.52			1315.10			~~330~~16.08			~~2,230~~25.9			2,204.6
Commercial mortgage-backed securities	~~817~~1,119.3			~~95.6~~—			~~70.2~~—			~~44.~~1.3			~~173.0~~—			~~1,200.2~~—			1,120.6
Other asset-backed securities	73233.59			524.42			1812.23			443.20			851.72			~~227~~2.04			277.0
Total fixed maturities	$	414,~~309~~318.02		$	19,~~733~~410.65		$	~~7,821~~843.97		$	~~9,406~~152.02		$	~~1,453~~30.14		$	~~24,723~~45.60		$	24,800.0
% of Fair Value	1757.47		%	738.0		%	313.64		%	380.16		%	50.91		%	~~100.~~0.2		%	100.0		%
(1) Primarily U.S. dollar denominated.
($ in millions)	December 31, 2015
ARO Quality Ratings	AAA			AA			A			BBB			BB and Below			Total Fair Value
NAIC Quality Designation	1			2			3			4			5			6			Total Fair Value
U.S. Treasuries	$	1,058.7		$	—		$	—		$	—		$	—		$	~~1,058.7~~—		$	1,058.7
U.S. Government agencies and authorities	81.9			—			—			—			—			~~81.9~~—			81.9
State, municipalities and political subdivisions	40340.03			~~221~~19.19			790.23			~~19.9~~—			~~0.3~~—			~~360.5~~—			360.5
U.S. corporate public securities	~~224~~5,854.43			~~775~~4,568.30			~~4,834~~346.31			~~4,568~~93.09			~~469.9~~—			~~10,871.~~9.6			10,871.9
U.S. corporate private securities	~~116~~1,118.2			501,160.95			~~867~~98.90			~~1,280~~17.17			~~79.3~~—			~~2,394.4~~—			2,394.4
Foreign corporate public securities and foreign governments(1)	361,528.60			~~456~~1,086.82			~~1,046~~168.12			~~1,074~~8.64			~~178~~1.90			~~2,793~~1.02			2,793.0
Foreign corporate private securities(1)	—319.3			92,205.85			~~411~~86.75			~~2,095~~14.62			~~108.9~~—			~~2,626.~~0.5			2,626.0
Residential mortgage-backed securities	1,~~604~~812.13			67.60			23.98			1715.98			~~253~~18.60			~~1,885~~28.12			1,885.1
Commercial mortgage-backed securities	~~853~~1,339.07			~~148.8~~—			991.31			522.06			~~190.3~~—			~~1,343.4~~—			1,343.4
Other asset-backed securities	~~115~~237.61			68.53			185.34			2311.03			991.92			~~263.3~~—			263.3
Total fixed maturities	$	413,~~130~~689.58		$	19,~~675~~055.84		$	~~7,359~~709.74		$	~~9,131~~163.19		$	~~1,381~~20.12		$	~~23,678~~39.25		$	23,678.2
% of Fair Value	1757.48		%	738.12		%	313.10		%	380.67		%	50.81		%	~~100.~~0.2		%	100.0		%
(1) Primarily U.S. dollar denominated.



	69

The following tables present credit quality of fixed maturities, including securities pledged, using ARO ratings as of the dates indicated:



($ in millions)	September 30, 2016
ARO Quality Ratings	AAA		AA		A		BBB		BB and Below		Total Fair Value
U.S. Treasuries	$	987.1	$	—	$	—	$	—	$	—	$	987.1
U.S. Government agencies and authorities	86.8		—		—		—		—		86.8
State, municipalities and political subdivisions	51.4		309.6		110.0		34.0		0.3		505.3
U.S. corporate public securities	213.7		917.9		4,981.3		4,672.4		426.2		11,211.5
U.S. corporate private securities	121.4		75.4		961.4		1,453.5		153.2		2,764.9
Foreign corporate public securities and foreign governments⁽¹⁾	36.8		364.3		1,134.7		1,081.9		209.9		2,827.6
Foreign corporate private securities⁽¹⁾	—		—		459.5		2,253.9		101.2		2,814.6
Residential mortgage-backed securities	1,843.1		2.1		2.3		14.7		342.4		2,204.6
Commercial mortgage-backed securities	768.5		77.8		131.4		20.0		122.9		1,120.6
Other asset-backed securities	103.3		23.2		19.1		45.3		86.1		277.0
Total fixed maturities	$	4,212.1

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