INVESTMENT SUBCOMMITTEE MEETING MINUTES

DRAFT - INVESTMENT SUBCOMMITTEE MEETING MINUTES

Matters Discussed:

Brian Comer, President of ING Life Insurance and Annuity Company (ILIAC) introduced David Prendergast who spoke about the Dutch government's infusion of 10? billion into ING Bank. Prior to the capital infusion, ING's ratio of debt to capital was 15%; it is now 10%. According to Prendergast, ING Groep views the infusion as a temporary measure and has the right to either prepay the amount or convert it to from preferred to common stock. So long as ING does not pay any dividends on its common stock it has no obligation to pay the Dutch government the 8.5% coupon rate on the preferred shares.

Although ILIAC is a direct subsidiary of ING Groep, the Dutch insurer, Prendergast said that ILIAC is a US company with its own capital and financial strength. Prendergast said that any issues with the Dutch parent would not affect ILIAC. According to Prendergast recent declines in the value of ING's stock were not the result of the Dutch government's actions, which the market viewed favorably.

Prendergast said that the financial ratings agencies, like Moody's and Best, have announced their plan to review ratings of ILIAC and other life insurance companies within the next several weeks. He believes that some downgrades of insurance companies are possible, but cannot identify which ones. He said the downgrades are not so much a reflection of an insurer's financial stability as a negative outlook for profitability in financial services firms.

Bud Hancock from ING's Fixed Income group commented on current financial conditions and securities in the Stable Value Fund. Bud answered questions from subcommittee members regarding the portfolio. Hancock stated that conditions in the credit market are challenging, but said he saw some early signs of improvement during October. For the month, the portfolio outperformed its benchmark index (the Lehman Brothers Aggregate Bond Index) by 57 bps. This was attributed to the fund's higher allocation to Treasury securities and a concentration in US Agency debt (FNMA, GNMA, etc.).

Subcommittee members asked about the portfolio's exposure to credit default swaps. Hancock said that the portfolio does have credit default swaps, but that these investments are primarily used for hedging purposes-to buy protection on individual securities or groups of securities in the portfolio. There is no counterparty exposure to Lehman Brothers.

Members inquired about the security for ING's guarantee of principal and interest and about the safety of that portion of the Stable Value Fund that remains in the general accounts of ILIAC and The Hartford.

Tom Roberts, ING's general counsel, explained that most of the Stable Value Fund's assets are held in a separate account, which is segregated from ILIAC's assets and would never be subject to creditor's claims. As to the portion of the Stable Value Fund that remains invested in the general accounts of ILIAC and The Hartford, the CT insurance guaranty fund established by the Department of Insurance provides up to $500,000 protection per participant in a governmental 401(a), 457 or 403(b) plan for losses incurred in an unallocated group annuity contract (which include amounts in the Stable Value Fund). While the guaranty fund does not insure against investment losses on stocks or mutual funds, it would be available to pay principal and interest if an insurer is unable to meet obligations guaranteed amounts by its general account.

Materials Reviewed:

The Subcommittee did not review any written materials in connection with the meeting.

Decisions voted upon:
The Subcommittee did not vote upon any matters at its meeting.

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