Good morning, and welcome to the ING U.S. First Quarter 2013 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Darin Arita, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Emily, and good morning, everyone. Welcome to ING U.S.'s First Quarter 2013 Conference Call. A slide presentation for this call is available on our website at investors.ing.us or via the webcast. Turning to Slide 2, on today's call, we will be making forward-looking statements. Except with respect to historical information, statements made in this conference call constitute forward-looking statements within the meaning of the federal securities laws, including statements relating to trends in the company's operations and financial results and the business and the products of the company and its subsidiaries. ING U.S.'s actual results may differ materially from the results anticipated in the forward-looking statements as a result of risks and uncertainties, including those from time to time in ING U.S.'s filings with the U.S. Securities and Exchange Commission. ING U.S. specifically disclaims any obligation to update or revise any forward-looking statements whether as a result of new information, future developments or otherwise. Slide 2 also notes that the call today includes non-GAAP financial measures. An explanation of how we calculate these measures and the reasons we believe they are useful can be found in the quarterly investor supplement available on our website at investors.ing.us. Reconciliations to the most directly comparable GAAP measures are included in the press release and the quarterly investor supplement. Joining me this morning on the call are Rod Martin, Chief Executive Officer of ING U.S.; Alain Karaoglan, Chief Operating Officer; and Ewout Steenbergen, Chief Financial Officer. After their prepared remarks, we will take your questions. With that, let's turn to Slide 3, and I'll turn the call over to Rod.

Thank you, Darin, and good morning, everyone. Today is a landmark day for us as we report results for the first time as a public company. On behalf of the entire ING U.S. management team, we look forward to building a productive relationship with the investment community. Our IPO was an exciting day for our organization and another important milestone in our transformation. As we look forward, our focus is on the execution of our Retirement Readiness strategy and our Return on Equity improvement plan. Turning to Slide 4. You'll see our first quarter results that we're making steady progress and are on track for our plans. Before we jump into the details of our quarter, I want to take a moment to update you on our progress in some of the key areas, including our recapitalization plan, which is nearly complete. While the IPO was a critical part of our recapitalization plan, our plan has many other components. For instance, we further termed out our debt maturity structuring by issuing $1 billion of senior notes in February and $750 million of junior subordinated debt on May 13. We used the proceeds of these offerings to repay amounts under our bank facility and other short-term debt. As a result of our IPO and other recapitalization activities, our debt-to-capital ratio has improved toward our target of 25%. On May 8, after our closing of the IPO, we received $1.4 billion in extraordinary distributions from our insurance company subsidiaries. And after receiving these distributions, we reset to 0 the negative unassigned surplus of our 3 principal insurance company subsidiaries following the IPO, setting the stage for these subsidiaries to pay ordinary distributions as they generate earnings in the future. Collectively, these actions have allowed us to make considerable progress with our recapitalization…

Thank you, Rod, and good morning, everyone. One of the central themes of our investment narrative is the execution of our comprehensive plan to increase our return on equity. As a reminder, our return on equity and return on capital improvement initiatives fall into 3 categories; margin initiatives, growth initiatives and capital initiatives. There are more than 30 specific initiatives and each initiative has an owner, each initiative has clear target, each initiative is actively monitored and tracked and we are constantly evaluating new opportunities to add to this program. We've planned the work. We are now intensely focused on executing our comprehensive Return on Equity improvement plan. And as you know, our goal is to make steady improvement every year as we did in 2012 and in the first quarter of this year. The majority of our initiatives are concentrated in the improvement of our businesses. Therefore, it is important that we look at both the return on equity and the return on capital. The reason we focus on the return on capital for the businesses is because we do not allocate that to each of the business units. And our target is to reach a return on capital on the Ongoing Business of 10% to 11% by 2016 or a 300 to 400 basis points improvement. Our return on capital improved 80 basis points in the first quarter from 7.2% to 8%. And the first quarter return on capital number benefited from a couple of positive developments that were factored into our plan. First, as of January 1, we reduced the capital required in our Ongoing Businesses by $766 million as a result of the execution of our recapitalization plan and investment portfolio restructuring. Second, we improved our operating and earnings in the quarter. And among other factors,…

Thank you, Alain. Good morning, everyone. I'd like to highlight some of our key business operating and balance sheet metrics for the first quarter. Turning to Slide 16. This slide reconciles operating earnings to net loss. Adjusted Ongoing Business operating earnings after-tax was $181 million, adjustments being DAC, VOBA and other intangible unlocking of $5 million. This gets us to a first quarter Ongoing Business operating earnings after-tax of $186 million. Adding corporate expenses of $33 million, and those are mostly interest expenses, and operating earnings of $14 million from the Closed Block Institutional Spread products and other Closed Blocks, we reached an after-tax operating earnings of $167 million. The Closed Block Variable Annuity result was an after-tax loss of $310 million, reflecting an accounting asymmetry between GAAP and statutory results. This included $69 million related to a decline in non-performance risk in the Closed Block Variable Annuity. Results were in line with expectations, given the 10% equity market depreciation in the first quarter. We also had some realized gains and other items, which brings us to a net loss available to our common shareholder of $212 million. Turning to Slide 17. We analyze our Ongoing Business based on what we call the margin analysis or sources of earnings. This presentation can be helpful in understanding the 3 main drivers of the earnings of our business being: First, the investment spreads and other investment income. This is the difference between the net investment income and what we credit in terms of interest to policyholder reserves and then we also add the investment income on capital supporting the business. Second, fee-based margin. These are fees we earn on assets under management and assets under administration and transaction-based recordkeeping fees. And the third, the net underwriting gain/loss and other revenue and this…

Thank you, Ewout. Overall, we're pleased with the progress we're making in our transformation story. We're a premier franchise with leadership positions in the most attractive retirement, investment and insurance markets. Our experienced management team is executing a 400 to 500 basis point ROE improvement program. And as you've heard, we're making steady progress. We have a solid foundation based on a recapitalized and derisked balance sheet. We will continue to focus on the execution of our Retirement Readiness strategy and our ROE improvement program, which will allow us to create long-term value for our stakeholders. And with that, we'll turn it back to the operator and begin the question-and-answer period.

[Operator Instructions] And our first question will come from Nigel Dally of Morgan Stanley.

First, on the CBVA. We can see the overall lapses but hoping you can provide some color as to how the lapses are developing on the living benefit block, and in particular the income benefit annuities. Second, the RBC ratio seemed a little above your earlier projections. Was that just the impact of the market which drove the increase or were there other factors driving the improvement as well?

Nigel, it's Rod. Ewout will take those questions.

Nigel, with respect to the lapse -- actual lapse observations of our Closed Block Variable Annuity for the living benefits versus the death benefits, we're currently not disclosing those details. What we have said during the IPO material and road show is that the overall lapse assumption is approximately 5.6% for the IBs and the WBs for life on a statutory basis and our actual observations are a little bit higher than that. We are doing our actual annual assumption update always in the third quarter of every year. So we will update you after the third quarter if we found it needed to make an update in our assumption or not. But it is too early to give you any indication on that right now. With respect to the RBC ratio, so the 451% is after the extraordinary distributions of $1.4 billion that were taken out of our operating entities and were moved to the holding company. There was also a little bit of an additional effect on the admitted tax asset that we reduced as a consequence of this. So the 451% is above the 425% level target we have set for ourselves. It means an excess capital of approximately $380 million above the 425%. From our perspective, we are exactly where we plan to be after the first quarter. You know that we have a plan in place to generate excess capital between $1.2 billion and $1.4 billion between now and 2016 -- mostly in 2015 and 2016. So we're very comfortable where we are today with our RBC ratio and we are exactly line with the plan we have set for ourselves.

Our next question is from Steven Schwartz of Raymond James & Associates.

Could somebody tell me the takeover in Investment Management, how much maybe came from Retirement and how much maybe came from Annuities? It seems like it came from both.

Sure. Alain will take that question, Steven.

Steven, of the $600 million, approximately $400 million came from Retirement and $200 million from Annuities.

Okay. And then while I have you, Alain, the movement from recordkeeping to full service, that $1 billion, explain maybe how that happens, what you offer and then to the extent that maybe you can get your own assets in there for your own offerings?

So as you know, our goal is to improve our return on capital in all our businesses including the Retirement business. The recordkeeping business margins and return doesn't take a lot of capital, but the -- so the return on capital in that business isn't as profitable as you would like it to be and as the full service business. So our goal is to shift as much of that Retirement business -- recordkeeping business into the full service plans because they're more profitable. It's a small-to-mid migration from pure recordkeeping to full service retirement, which would generate higher fees and higher returns on capital.

Okay. And when you do this, do you immediately get your offerings in there? Does it switch to your offerings or is it still very, very wide open and you're just one of the offerings?

You mean in terms of our ING Investment -- our Investment Management offering?

Yes.

It will be included as part of it depending on the plans and depending on what we're doing, it could be more or less, but it's an open architecture.

Okay. And then going back to takeovers, is there anything pending that you can share?

We've done a tremendous amount of takeovers, $7 billion last year on top over $3 billion the year before. We've done $600 million. Eventually, you'll run out. There might be a little bit more to do. It depends and it will continue to depend on 2 things: our strong investment performance, which we expect and we want it to continue to be good, compared to the investment performance of other investment managers that are on platform and may not be performing as well.

Our next question is from Chris Giovanni of Goldman Sachs.

First question, the Investment Management, the sourced AUM net flows have been very strong here the past couple quarters in and around $3 billion or so versus sort of a neutral level the quarters before that. Just curious what's driving that sizable pickup there and kind of your thought around that going forward?

Chris, Alain will also take that.

Chris, thank you. In our return on capital initiative, which are really margin improvement initiatives, if you recall our Investment Management business is a scalable business and our goal is to get more growth into that businesses and more assets under management. And we have 3 ways to focus on: one is improving our sales productivity; two is increasing a part of our alternative assets or higher-fee assets in that platform, which will improve our margin; and third is winning more investment-only defined contribution mandates. And what you're seeing is our investment performance 5 years is coming into place. It's starting to have a meaningful impact with consultants, with outside constituencies that is being noticed. Our significant efforts on sales force productivity is being successful and they're improving their productivity. And we have been winning investment-only defined contribution mandate. There's a couple of areas in the market at any point in time that may be more in vogue or more attractive. Senior bank loan is one of the areas. We happen to have a fantastic senior bank loan team and it's providing us opportunities to capitalize on assets on generation on that end.

Okay. And then my follow-up is just on CBVA, I guess, the focus on NAR here. We see the change in NAR and then the resulted decline in stat reserves in 1Q versus year end. So but curious if you can talk about what's the stat capital behind that book and the change there. And then specifically, to the GMIB product. I guess, markets are up roughly 10% or so year-over-year and the account value for the GMIB product is down over that period, which I think is a good thing pointing to lapse acceleration, but the NAR for that GMIB is actually up. So I guess wondering how we should be thinking about who is lapsing and kind of why that NAR for GMIB actually accelerated year-over-year?

Chris, this is Ewout. Let me try to answer this question. First of all, if you look at the living benefit reserves, you saw a decline of $6.5 billion to $5.3 billion from year end to the end of the first quarter and a decline of the net amount of risk from $5.3 billion to $4.4 billion. So we sometimes looks at the ratio of one over the other and we are still covered by more than 120% of our living benefit statutory reserves over the living benefit net amount of risk. So we're very comfortable with the position we have there. You're right that the underlying movement of net amount of risk are quite complicated because they're influenced by the so-called roll-ups we still have in our income benefits. So these benefits are rolling up by 5% to 7% every year up to the moment they reach the maximum benefits. So despite that markets go up, you will see a net amount of risk movement that might be a little bit counterintuitive than what you might expect, but that is the main underlying reason. But clearly, if you look at the overall risk profile of this book, we are clearly helped by the markets that the risk profile is coming down. Some other numbers I would like to point out is that the -- in the money-ness of our contracts, so the percentage of contracts that are in the money for the IBs came down from 86% to 81% and for withdrawal benefits for life from 57% to 48%. So overall, I think we are, as you know, really focused on protecting regulatory rating agency capital around this book as we run this off. And with improvement of the markets, clearly the risk profile is diminishing over time.

Okay. And then just the stat – do you have a number for the stat capital that's behind the CBVA book and how it changed versus year end?

Yes, this is a complicated question. Let me try to explain that. So first of all, the most of the VA business is written out of our Iowa-domiciled entity called ING USA, so most of the business is written there. And ING USA has a statutory surplus of approximately $2 billion and that is covering most of our VA but also all our fixed annuity book. So it's basically co-mingled. Then the living benefits are reinsured offshore to our reinsurance captive at the Caymans. Statutory surplus there is not so meaningful because local requirement at the Caymans is rather different. So we look there at the total CTE(95) requirement, which is, as you know, both a reserve plus capital, a total asset requirement. So what we are doing offshore is to hold the full AG43 reserves plus the CTE(95) or the higher of the 2 requirements. So it's very hard to isolate a surplus number given the different moving parts and given different element and it is more co-mingled with the total assets we hold on this book. But overall, I think from our perspective, with our very significant reserves we have put aside on a statutory basis, we feel we are very well covered to deal with this book in the future.

Okay. And if I may, sorry, one follow-up just with that. Any thought of bringing that onshore similar to what one of your competitors announced earlier this week?

When we look at our offshore reinsurance captive, first of all, it's important to say that we hold hard assets in our reinsurance captive. So the living benefits are reinsured offshore and the full AG43 reserves are backed by hard assets. But from a perspective of the necessity to post collateral for our hedge programs, we are covered well because we hold the actual hard assets at our offshore reinsurance captives. So from that perspective, there is not a direct immediate need. Moreover, I would like to emphasize that our captives have all been established in full transparency and discretion with our regulators. So from that perspective, we also feel that our captives are established in a proper way.

[Operator Instructions] Showing no further questions, this concludes our question-and-answer session. I'd like to turn the conference back over to Rod Martin for any closing remarks.

Operator, thank you. We're pleased with a solid quarter and our progress in achieving our financial targets. I have one important closing thought: Preparing for retirement is the most daunting financial issue facing Americans today, and our mission is to make a secure financial future possible one person, one family and one institution at a time. It's a mission that aligns perfectly with our Retirement Solutions, Investment Management and Insurance Solutions business. Our employees are deeply committed to helping Americans address their asset accumulation, asset protection and asset distribution needs. Our passion for the customer will help us achieve our vision to be America's retirement company. And with that, thank you, and good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.