This morning, ING Inc (VOYA) reported operating EPS from the ongoing business of $0.75, better than our $0.71 estimate and the consensus of $0.69. After stripping out DAC unlocks and better NII from some Lehman recoveries, we believe the company defines core of $0.68, in line with our expectation for core earnings for the quarter. The core beat vs. our expectations was driven by better earnings in Investment Management and Individual Life, offset by slightly weaker core results in Retirement and Corporate ISP.

While results were in line with expectations, the miss vs. our estimates in Retirement was somewhat surprising given the favorable markets during the quarter. However, the company did generate a solid amount of capital during the quarter as evidenced by the increase in the RBC ratio, although we await more detail on some potential one-time items that may have benefitted the ratio (note that LNC had a one-time 20 point RBC benefit from CMLs and RMBS/CMBS).

On the capital front, the company’s RBC ratio improved to 504% (note this does not include the CBVA book), and the CBVA book generated an operating gain during the quarter as hedge losses were less than the decrease in reserves on a statutory basis. On a GAAP basis, the CBVA net loss of $150mm was light of our $225mm loss estimate and below the company’s previously disclosed sensitivities to market movements. We think that this is primarily driven by a lower NPR loss and potentially a smaller amount of hedging, although we await color on this front during the conference call today at 10AM EST.

We also expect to get some formal commentary on the onshoring of the VA Captive to Arizona from the Cayman Islands. NAR decreased to $2.2b from $3b last quarter, while the annualized surrender rate slightly increased in the quarter to 10.8% from 10.2% last quarter. NAR as a percentage of Account Values fell to 5% from 7% last quarter. BVPS ex. AOCI increased to $43.65 vs. $41.49 last quarter, as the lower loss from the CBVA and a $405mm benefit from a post retirement benefit/pension change resulted in positive net income for the quarter.

Flows were solid during the quarter, especially in Retirement. Specifically, Retirement flows were good, at +$363mm, better than our estimate of $18mm, driven by FSAcorporate markets, which had $257mm of inflows. In Investment Management, net inflows in external AUM were +$1.3b, light of our estimate but better than $700mm last quarter.