485BPOS 1 vulcvregstmt.htm REGISTRATION STATEMENT ON FORM N-6 -- HTML vulcvregstmt.htm - Generated by SEC Publisher for SEC Filing
As filed with the Securities and Exchange  Registration No. 333-147534 
Commission on April 12, 2010  Registration No. 811-08292 
 
 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-6
 
         REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933  [X] 
                   Pre-Effective Amendment No.  [ ] 
                   Post-Effective Amendment No. 4  [X] 
 
         AMENDMENT TO REGISTRATION STATEMENT UNDER THE INVESTMENT 
         COMPANY ACT OF 1940  [X] 
(Check appropriate box or boxes.)
 
Security Life Separate Account L1
(Exact Name of Registrant)
 
Security Life of Denver Insurance Company
(Name of Depositor)
 
1290 Broadway
Denver, Colorado 80203-5699
(Address of Depositor’s Principal Executive Offices) (Zip Code)
 
(800) 525-9852
(Depositor’s Telephone Number, including Area Code)
 
J. Neil McMurdie, Senior Counsel
ING Americas (U.S. Legal Services)
One Orange Way, Windsor, Connecticut 06095-4774
(Name and Address of Agent for Service)
 
 
It is proposed that this filing will become effective (check appropriate box):   
[ ]                 immediately upon filing pursuant to paragraph (b) of Rule 485   
[X]                 on April 30, 2010, pursuant to paragraph (b) of Rule 485   
[ ]                 60 days after filing pursuant to paragraph (a)(1)   
[ ]                 on ____________, pursuant to paragraph (a)(1) of Rule 485.   
 
If appropriate, check the following box:   
[ ]                 This post-effective amendment designates a new effective date for a previously filed post- 
                 effective amendment.   


PART A

INFORMATION REQUIRED IN A PROSPECTUS


ING VUL-CV

A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
issued by
Security Life of Denver Insurance Company
and its
Security Life Separate Account L1

Supplement Dated April 30, 2010, to the Prospectus Dated April 30, 2010

This supplement updates certain information contained in your prospectus
dated April 30, 2010. Please read it carefully and keep it with your prospectus for future reference.
__________________________________________________________________________

NOTICE OF AN UPCOMING FUND MERGER

Effective on or about August 23, 2010 (the “Merger Effective Date”), the following Disappearing Fund will merge into and become part of the following Surviving Fund as follows:

Disappearing Fund  Surviving Fund 
ING Wells Fargo Small Cap Disciplined Portfolio
(Class S) 		 ING Small Company Portfolio (Class S) 

IMPORTANT INFORMATION REGARDING THE
UPCOMING FUND MERGER

  • Prior to the Merger Effective Date, you may transfer amounts allocated to the Subaccount that invests in the Disappearing Fund to any other available Subaccount or to the fixed account. See the “Transfers” section on page 60 of your policy prospectus for information about making Subaccount transfers, including applicable restrictions and limits on transfers.
  • On the Merger Effective Date, your investment in the Subaccount that invests in the Disappearing Fund will automatically become an investment in the Subaccount that invests in the Surviving Fund with an equal total net asset value. Unless you provide us with alternative allocation instructions, all future premiums received that would have been allocated to the Subaccount corresponding to the Disappearing Fund will be automatically allocated to the Subaccount corresponding to the Surviving Fund. You may give us alternative allocation instructions by contacting our ING Customer Service Center at P.O. Box 5065, Minot, ND 58702-5065, 1-877-253-5050 or www.ingservicecenter.com. See the “Transfers” section on page 60 of your policy prospectus for information about making fund allocation changes.
  • After the Merger Effective Date, the Subaccount that invests in the Disappearing Funds will no longer be available through your policy.
  • You will not incur any fees or charges or any tax liability because of the merger, and your Account Value immediately before the merger will equal your Account Value immediately after the merger.
  • There will be no further disclosure regarding the Disappearing Fund in future supplements to or prospectuses of the policy.
  • See “Appendix B” of your policy prospectus for information about the investment advisers/subadvisers and investment objectives of the Disappearing Fund and the Surviving Fund.
Page 1 of 2  April 2010 


MORE INFORMATION IS AVAILABLE

More information about the risks associated with investing in the ING Small Company Portfolio can be found in the current prospectus and Statement of Additional Information for that fund. You may obtain these documents by contacting us at our:

  ING Customer Service Center
P.O. Box 5065
Minot, ND 58702-5065
1-877-253-5050

If you received a summary prospectus for any of the funds available through your policy, you may obtain a full prospectus and other fund information free of charge by either accessing the internet address, calling the telephone number or sending an email request to the contact information shown on the front of the fund’s summary prospectus.

IMPORTANT INFORMATION REGARDING
FUND NAME CHANGES

Effective April 30, 2010, certain of the funds available through Security Life Separate Account L1 will change their names as follows:

Former Fund Name  Current Fund Name 
ING Evergreen Health Sciences Portfolio  ING Wells Fargo Health Care Portfolio 
ING Evergreen Omega Portfolio  ING Wells Fargo Omega Growth Portfolio 
ING Focus 5 Portfolio  ING DFA Global All Equity Portfolio 
ING Oppenheimer Strategic Income Portfolio  ING Oppenheimer Global Strategic Income Portfolio 
ING Stock Index Portfolio  ING U.S. Stock Index Portfolio 
M Fund – Frontier Capital Appreciation Fund *  M Capital Appreciation Fund * 
M Fund – Brandes International Equity Fund *  M International Equity Fund * 

*      This fund is only available through broker/dealers associated with the M Financial Group.
Page 2 of 2  April 2010 


ING VUL-CV

A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
issued by
Security Life of Denver Insurance Company and its Security Life Separate Account L1

The Policy
· Is issued by Security Life of Denver Insurance Company.
· Is returnable by you during the free look period if you are not satisfied.
Premium Payments
· Are flexible, so the premium amount and frequency may vary.
· Are allocated to the Separate Account and the Guaranteed Interest Division, based on your instructions.
· Are subject to specified fees and charges.
The Policy’s Account Value
· Is the sum of your Separate Account, Guaranteed Interest Division and Loan Division values.
· Has no guaranteed minimum value for amounts in the Separate Account. Thevalue varies with the value of the Subaccounts you select.
· Has a minimum guaranteed rate of return for amounts in the Guaranteed Interest Division.
· Is subject to specified fees and charges including possible surrender charges.
Death Benefit Proceeds
· Are paid if your policy is in force when the insured person dies.
· Are calculated under your choice of options:
     > Death Benefit Option 1 – the Base Death Benefit is the greater of the amount of your base insurance coverage or your Account Value multiplied by the appropriate factor from the definition of life insurance factors described in Appendix A;
     > Death Benefit Option 2 – the Base Death Benefit is the greater of the amount of your base insurance coverage plus the Account Value or your Account Value multiplied by the appropriate factor from the definition of life insurance factors described in Appendix A; or
     > Death Benefit Option 3 – the Base Death Benefit is the greater of the amount of your base insurance coverage plus premiums received minus partial withdrawals taken and the partial withdrawal fees or your Account Value multiplied by the appropriate factor from the definition of life
insurance factors described in Appendix A.
· Are equal to the Base Death Benefit plus any rider benefits minus any  outstanding loan and accrued but unpaid loan interest, accelerated benefit lien including accrued lien interest and unpaid fees and charges.
· Are generally not subject to federal income tax if your policy continues to meet the federal income tax definition of life insurance.
Sales Compensation
· We pay compensation to broker/dealers whose registered representatives sell the policy. See Distribution of the Policy, page 85, for further information about the amount of compensation we pay.

Fund Managers
Funds managed by the following
investment managers are available through
the policy:
· Artio Global Management, LLC
· BAMCO, Inc.
· BlackRock Advisors, LLC
· BlackRock Investment Management,  LLC
· Brandes Investment Partners, L.P.
· Capital Research and Management Company
· Columbia Management Advisors, LLC
· Dimensional Fund Advisors LP
· Directed Services LLC
· DSM Capital Partners LLC
· Fidelity Management & Research Company
· Frontier Capital Management Company, LLC
· ING Clarion Real Estate Securities LLC
· ING Investment Management Co.
· Iridian Asset Management LLC
· J.P. Morgan Investment Management Inc.
· Marsico Capital Management, LLC
· Massachusetts Financial Services Company
· Neuberger Berman, LLC
· Neuberger Berman Fixed Income LLC
· OppenheimerFunds, Inc.
· Pacific Investment Management Company LLC
· Pioneer Investment Management, Inc.
· T. Rowe Price Associates, Inc.
· UBS Global Asset Management (Americas) Inc.
· Van Kampen
· Wells Capital Management, Inc.

This prospectus describes what you should know before purchasing the ING VUL-CV variable universal life insurance policy. Please read it carefully and keep it for future reference. If you received a summary prospectus for any of the funds available through your policy, you may obtain a full prospectus and other fund information free of charge by either accessing the internet address, calling the telephone number or sending an email request to the contact information shown on the front of the fund’s summary prospectus.

Neither the Securities and Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The policy described in this prospectus is not a deposit with, obligation of or guaranteed or endorsed by any bank, nor is it insured or guaranteed by the FDIC, the Federal Reserve Board or any other government agency.

The date of this prospectus is April 30, 2010.


TABLE OF CONTENTS
 
  Page      Page 
POLICY SUMMARY  3  Special Features and Benefits    58 
The Policy’s Features and Benefits  3  Termination of Coverage    68 
Factors You Should Consider Before    TAX CONSIDERATIONS    70 
   Purchasing a Policy  6  Tax Status of the Company    70 
Fees and Charges  8  Tax Status of the Policy    71 
THE COMPANY, THE SEPARATE    Diversification and Investor Control Requirements  71 
   ACCOUNT AND THE GUARANTEED    Tax Treatment of Policy Death Benefits    72 
   INTEREST DIVISION  15  Distributions Other than Death Benefits    72 
Security Life of Denver Insurance Company  15  Other Tax Matters    74 
The Investment Options  17  ADDITIONAL INFORMATION    78 
DETAILED INFORMATION ABOUT    General Policy Provisions    78 
   THE POLICY  21  Distribution of the Policy    85 
Underwriting  22  Legal Proceedings    88 
Purchasing a Policy  23  Financial Statements    89 
Fees and Charges  28  APPENDIX A    A-1 
Death Benefits  35  APPENDIX B    B-1 
Additional Insurance Benefits  43  MORE INFORMATION IS AVAILABLE  Back Cover 
Account Value  56       

TERMS TO UNDERSTAND

The following is a list of some important terms used throughout this prospectus that have special meaning. It also provides a reference to where each term is defined and discussed more fully.

Term  Page  Term  Page 
Account Value  56  Net Account Value  4 
Accumulation Unit  56  Net Premium  3 
Accumulation Unit Value  56  Policy Date  23 
Base Death Benefit  1  Segment  36 
Death Benefit Proceeds  42  Separate Account  17 
Guaranteed Interest Division  21  Separate Account Value  56 
Guaranteed Interest Division Value  21  Subaccounts  17 
Loan Division  58  Surrender Value  5 
Loan Division Value  58  Total Death Benefit  46 
Monthly Processing Date  30  Valuation Date  56 

“Security Life,” “we,” “us,” “our” and the “company” refer to Security Life of Denver Insurance Company. “You” and “your” refer to the policy owner. The policy owner is the individual, entity, partnership, representative or party who may exercise all rights over the policy and receive the policy benefits during the insured person’s lifetime.

State Variations – State variations are covered in a special policy form used in that state. This prospectus provides a general description of the policy. Your actual policy and any riders are the controlling documents. If you would like to review a copy of the policy and riders, contact our Customer Service Center or your agent/registered representative.

You may contact us about the policy at our:  ING Customer Service Center 
  P.O. Box 5065 
  Minot, ND 58702-5065 
  1-877-253-5050 
  www.ingservicecenter.com 
 
 
 
  ING VUL-CV 
  2 


POLICY SUMMARY

This summary highlights the features and benefits of the policy, the risks that you should consider before purchasing a policy and the fees and charges associated with the policy and its benefits. More detailed information is included in the other sections of this prospectus that should be read carefully before you purchase the policy.

The Policy’s Features and Benefits

The Policy  · This prospectus describes our standard ING VUL-CV variable universal life insurance policy. The 
       policy provides death benefits, values and other features of traditional life insurance contracts. 
       There may be variations in policy features, benefits and charges because of requirements of the 
       state where we issue your policy. We describe all such differences in your policy. 
  · If you would like to know about state variations, please ask your agent/registered representative. 
       We can provide him/her with the list of variations that will apply to your policy. 
Temporary  · If you apply and qualify, we may issue temporary insurance equal to the total amount of insurance 
Insurance       coverage for which you applied. 
  · The maximum amount of temporary insurance is $1,000,000.00, which includes other in-force 
       coverage you have with us. 
See Temporary  · Temporary insurance may not be available in all states. 
Insurance, page 27.   
Premium Payments  · You choose when to pay and how much to pay. 
  · You will need to pay sufficient premiums to keep the policy in force. Failure to pay sufficient 
See Premium       premiums may cause your policy to lapse without value. 
Payments, page 24.  · You cannot pay additional premiums after age 121. 
  · We may refuse any premium that would disqualify your policy as life insurance under Section 
       7702 of the Internal Revenue Code or that would cause your policy to become a modified 
       endowment contract. 
  · We deduct a premium expense charge from each premium payment and credit the remaining 
       premium (the “Net Premium”) to the Separate Account or the Guaranteed Interest Division 
       according to your instructions. 
Investment Options  · You may allocate your Net Premiums to the Subaccounts of Security Life Separate Account L1 
(the “Separate Account”) and to our Guaranteed Interest Division.
See The Investment  · The Separate Account is one of our separate accounts and consists of Subaccounts that invest in 
Options, page 17.       corresponding funds. When you allocate premiums to a Subaccount, we invest any Net Premiums 
       in shares of the corresponding fund. 
  · Your Separate Account Value will vary with the investment performance of the funds in which the 
       Subaccounts invest and the charges we deduct from your Separate Account Value. 
  · The Guaranteed Interest Division is part of our general account. 
  · We credit interest of at least 3.00% per year on amounts allocated to the Guaranteed Interest 
       Division, and we may, in our sole discretion, credit interest in excess of this amount. 
Free Look Period  · During the free look period, you have the right to examine your policy and return it for a refund if 
       you are not satisfied for any reason. 
See Free Look Period,  · The free look period is generally ten days from your receipt of the policy, although certain states 
page 27.       may allow more than ten days. The length of the free look period that applies in your state will be 
       stated in your policy. 
  · Generally, there are two types of free look refunds: 
       > Some states require a return of all premium we have received; and 
       > Other states require that we return your Account Value plus a refund of all fees and charges 
               deducted. 
  · The free look refund that applies in your state will be state in your policy. 
  · See Allocation of Net Premium, page 26, for details about how Net Premium will be allocated 
       during the free look period. 

ING VUL-CV
3


Death Benefits  · Death Benefit Proceeds are paid if your policy is in force when the insured person dies. 
  · Until age 121, the amount of the Death Benefit Proceeds will depend on which death benefit 
See Death Benefits,       option is in effect when the insured person dies. 
page 35.  · There are three death benefit options available under your policy: 
 

> Death Benefit Option 1 – the Base Death Benefit is the greater of the amount of your base 

 

insurance coverage or your Account Value multiplied by the appropriate factor from the 

definition of life insurance factors described in Appendix A;

 

> Death Benefit Option 2 – the Base Death Benefit is the greater of the amount of your base 

 

insurance coverage plus your Account Value or your Account Value multiplied by the 

 

appropriate factor from the definition of life insurance factors described in Appendix A; or 

 

> Death Benefit Option 3 – the Base Death Benefit is the greater of the amount of your base 

 

insurance coverage plus premiums received minus partial withdrawals taken and the partial 

 

withdrawal fees or your Account Value multiplied by the appropriate factor from the 

definition of life insurance factors described in Appendix A.

  · After age 121, Death Benefit Option 1 will apply to all policies and the amount of base insurance 
        coverage selected will equal the amount of base insurance coverage in effect on the policy 
        anniversary nearest the insured person’s 121st birthday plus the amount of coverage, if any, under 
       the Adjustable Term Insurance Rider on that date. 
  · We reduce the Death Benefit Proceeds payable under any death benefit option by any outstanding 
        loan including accrued but unpaid loan interest, accelerated benefit lien including accrued lien 
       interest and unpaid fees and charges. 
  · The Death Benefit Proceeds are generally not subject to federal income tax if your policy 
       continues to meet the federal income tax definition of life insurance. 
Guaranteed Death  · Your policy will not lapse as long as your Account Value minus any outstanding loan amount 
Benefit Riders        including accrued but unpaid loan interest (the “Net Account Value”) is enough to pay the 
       periodic fees and charges when due. 
  · Even if your Net Account Value is not enough to pay the periodic fees and charges, when due, the 
See Guaranteed Death       policy has two optional Guaranteed Death Benefit Riders that can keep your policy from lapsing: 
Benefit Riders, page 42. 

> For issue ages 25-75, the 20-Year/Age 65 Guaranteed Death Benefit Rider is an optional rider 

 

benefit that may be available, but only when you apply for the policy. If you select this rider, 

 

your policy and any Adjustable Term Insurance Rider coverage is guaranteed not to lapse for 

 

the greater of 20 years or to age 65 provided: 

               -  Your cumulative premium payments minus any partial withdrawals and any outstanding 
    loan amount including accrued but unpaid loan interest are at least equal to the sum of the 
    20-Year/Age 65 death benefit guarantee premium payments to the next Monthly 
    Processing Date; and 
               -  Your Net Account Value meets certain diversification requirements. 
 

> For issue ages 25-75, the Lifetime Guaranteed Death Benefit Rider is an optional rider benefit 

 

that may be available, but only when you apply for the policy. If you select this rider, your 

 

policy and any Adjustable Term Insurance Rider coverage is guaranteed not to lapse for the 

 

lifetime of the insured person provided: 

               -  Your cumulative premium payments minus any partial withdrawals and any outstanding 
    loan amount and accrued loan interest are at least equal to the sum of the lifetime death 
    benefit guarantee premium payments to the next Monthly Processing Date; and 
               -  Your Net Account Value meets certain diversification requirements. 
  · There is a separate monthly charge for each of these riders. 
  · The Guaranteed Death Benefit Riders are subject to state approval and may not be available in 
       some states. 
Rider Benefits  · Your policy may include additional insurance benefits, attached by rider. There are two types of 
       rider benefits: 
See Additional       > Optional rider benefits that you must select before they are added to your policy; and 
Insurance Benefits,       > Rider benefits that automatically come with your policy. 
page 43.  · In many cases, we deduct an additional monthly charge for these benefits. 
  · Not all riders may be available under your policy or in your state. 

ING VUL-CV
4


Transfers  · You currently may make an unlimited number of transfers between the Subaccounts and to the 
       Guaranteed Interest Division. Transfers are, however, subject to limits, conditions and restrictions 
See Transfers, page 60.       that we or the funds whose shares are involved may impose. See Limits on Frequent or 
       Disruptive Transfers, page 62. 
  · There are certain restrictions on transfers from the Guaranteed Interest Division. 
  · We do not charge for transfers. 
Asset Allocation  · Dollar cost averaging is a systematic program of transferring Account Value to selected 
Programs       Subaccounts of the Separate Account. It is intended to help reduce the risk of investing too 
       much when the price of a fund’s shares is high. It also helps to reduce the risk of investing 
       too little when the price of a fund’s shares is low. 
See Dollar Cost  · Automatic rebalancing is a systematic program through which your Separate Account and 
Averaging, page 60.       Guaranteed Interest Division values are periodically reallocated among your selected 
       investment options to maintain the allocation percentages you have chosen. 
See Automatic  · There is no charge to participate in these asset allocation programs. There are, however, 
Rebalancing,       certain conditions on participation in these asset allocation programs. 
page 61.  · Neither of these asset allocation programs assures a profit nor do they protect you 
       against a loss in a declining market. 
Loans  · After the first policy month, you may take loans against your policy’s Surrender Value. 
  · A loan must be at least $100.00 and is generally limited to your Surrender Value less the 
See Loans, page 58.       periodic fees and charges to your next policy anniversary (or periodic fees and charges for 
       the next 13 months if you take a loan within the 30-day period before your next policy 
       anniversary). 
  · When you take a loan we transfer an amount equal to your loan to the Loan Division as 
       collateral for your loan. The Loan Division is part of our general account. 
  · We credit amounts held in the Loan Division with interest at an annual rate no less than 
       3.00%. 
  · We also charge interest on loans. Interest is due in arrears on each policy anniversary and 
       accrues daily at an annual rate of 3.75% in policy years one through five and at an annual 
       rate of 3.00% (guaranteed not to exceed 3.15%) in all years thereafter. 
  · Loans reduce your policy’s Death Benefit Proceeds and may cause your policy to lapse. 
  · Loans may have tax consequences, and you should consult with a qualified tax adviser 
       before taking a loan against your policy’s Surrender Value. 
Partial  · After the first policy year, you may take up to 12 partial withdrawals each policy year. In 
Withdrawals       certain circumstances you may take partial withdrawals during the first policy year. 
  · A partial withdrawal must be at least $100.00 and may not exceed the amount which leaves 
       your Surrender Value less than $500.00. 
See Partial  · We charge a fee of $10.00 for each partial withdrawal. 
Withdrawals,  · Partial withdrawals may reduce the amount of base and total insurance coverage under your 
page 66.       policy and will reduce your Account Value. 
  · Partial withdrawals may also have tax consequences, and you should consult with a 
       qualified tax adviser before taking a partial withdrawal from your policy. 
Surrenders  · You may surrender your policy for its Surrender Value at any time after the free look period 
       while the insured person is alive. 
See Surrender,  · Your Surrender Value is your Account Value minus any surrender charge and your 
page 68.       outstanding loan amount including accrued but unpaid loan interest. 
  · Surrender charges apply for the first ten years of each Segment of base insurance coverage. 
       The surrender charge rates shown are for the first Segment year. Surrender charge rates 
       generally decline beginning by the fourth Segment year and reach zero beginning in the 
       eleventh Segment year. 
  · Surrender charge rates vary by the insured person’s age at the time each base insurance 
       coverage Segment is established and gender. 
  · All insurance coverage ends on the date we receive your surrender request in good order. 
  · If you surrender your policy it cannot be reinstated. 
  · Surrendering the policy may have tax consequences, and you should consult with a qualified 
       tax adviser before surrendering your policy. 
 
  ING VUL-CV 
  5 


Reinstatement  · Before age 121 and within five years of lapse you may reinstate your policy and riders 
 

(other than the Guaranteed Death Benefit Riders or Guaranteed Minimum Accumulation 

See Reinstatement, 

Benefit Rider) if you did not surrender your policy and the insured person is alive and still 

page 69. 

insurable according to our normal underwriting rules for the applicable risk class and rating. 

  · You will need to pay the required reinstatement premium. 
  · If you had an outstanding loan when coverage lapsed, we will reinstate it with accrued but 
 

unpaid loan interest to the date of the lapse unless directed otherwise. 

  · When we reinstate your policy, we reinstate the surrender charges for the amount and time 
 

remaining when your policy lapsed. 

  · A policy that is reinstated more than 90 days after lapsing may be considered a modified 
 

endowment contract for tax purposes. 

  · Reinstating your policy may have tax consequences, and you should consult with a qualified 
 

tax adviser before reinstating your policy. 


Factors You Should Consider Before Purchasing a Policy

The decision to purchase a policy should be discussed with your agent/registered representative. Make sure you understand the policy’s investment options, its other features and benefits, its risks and the fees and charges you will incur when you consider purchasing the policy and investing in the Subaccounts of the Separate Account.

Life Insurance  · The policy is not a short-term savings vehicle and should be purchased only if you need life 
Coverage       insurance coverage. Evaluate your need for life insurance coverage before purchasing a 
       policy. 
  · You should purchase a policy only if you intend and have the financial capability to keep the 
       policy in force for a substantial period of time. 
Fees and Charges  · In the early policy years the surrender charge may exceed the Account Value because the 
       surrender charge may be more than the cumulative premiums minus policy fees and charges. 
See Fees and Charges,       Therefore, you should purchase a policy only if you intend and have the financial capability 
page 28.       to keep the policy in force for a substantial period of time. 
  · The policy’s fees and charges reflect the costs associated with its features and benefits, the 
       services we render, the expenses we expect to incur and the risks we assume under the 
       policy. 
  · We believe that the policy’s fees and charges, in the aggregate, are reasonable, but before 
       purchasing a policy you should compare the value that the policy’s various features and 
       benefits and the available services have to you, given your particular circumstances, with the 
       fees and charges associated with those features, benefits and services. 
Lapse  · Your policy may lapse and your insurance coverage under the policy may terminate if on any 
       Monthly Processing Date: 
See Lapse, page 68.       > A death benefit guarantee is not in effect; and 
       > Your Net Account Value is not enough to pay the periodic fees and charges when due. 
  · If you meet these conditions, we will send you notice and give you a 61 day grace period to 
       make a sufficient premium payment. 
  · If you do not make a sufficient premium payment by the end of the 61 day grace period, your 
       life insurance coverage will terminate and your policy will lapse without value. 
  · Partial withdrawals and loans have an adverse impact on your Net Account Value. Before 
       taking a partial withdrawal or loan consider its effect on your ability to keep your policy 
       from lapsing. 
Exchanges  · Replacing your existing life insurance policy(ies) and/or annuity contract(s) with the policy 
       described in this prospectus may not be beneficial to you. 
See Purchasing a  · Before purchasing a policy, determine whether your existing policy(ies) and/or contract(s) 
Policy, page 23.       will be subject to fees or penalties upon surrender or cancellation. 
  · Also compare the fees, charges, coverage provisions and limitations, if any, of your existing 
       policy(ies) and/or contract(s) with those of the policy described in this prospectus. 
 
 
  ING VUL-CV 
  6 


Investment Risk  · You should evaluate the policy’s long-term investment potential and risks before purchasing a 
       policy. 
See The Separate  · For amounts you allocate to the Subaccounts of the Separate Account: 
Account, page 17.       > Your values will fluctuate with the markets, interest rates and the performance of the 
               underlying funds; 
       > You assume the risk that your values may decline or may not perform to your 
               expectations; 
       > Your policy could lapse without value or you may be required to pay additional premium 
               because of poor fund performance; 
       > Each fund has various investment risks, and some funds are riskier than others; 
       > You should read each fund’s prospectus and understand the risks associated with the fund 
               before allocating your premiums to its corresponding Subaccount; and 
       > There is no assurance that any fund will achieve its stated investment objective. 
  · For amounts you allocate to the Guaranteed Interest Division: 
       > Interest rates we declare will change over time; and 
       > You assume the risk that interest rates may decline, although never below the guaranteed 
               minimum annual rate of 3.00%. 
Taxation  · Under current federal income tax law, death benefits of life insurance policies generally are 
       not subject to income tax. In order for this treatment to apply, the policy must qualify as a 
See TAX       life insurance contract. We believe it is reasonable to conclude that the policy will qualify as 
CONSIDERATIONS,       a life insurance contract. 
page 70.  · Assuming the policy qualifies as a life insurance contract under current federal income tax 
       law, your policy earnings are generally not subject to income tax as long as they remain 
       within your policy. Depending on your circumstances, however, the following events may 
       have tax consequences for you: 
       > Reduction in the amount of your insurance coverage; 
       > Partial withdrawals; 
       > Loans; 
       > Surrender; 
       > Lapse; and 
       > Reinstatement. 
  · In addition, if your policy is a modified endowment contract, a partial withdrawal, surrender 
       or a loan against or secured by the policy will be taxable to you to the extent of any gain in 
       the policy. A penalty tax may be imposed on a distribution from a modified endowment 
       contract as well. 
  · There is always the possibility that the tax treatment of the policy could be changed by 
       legislation or otherwise. You should consult a qualified tax adviser with respect to legislative 
       developments and their effect on the policy. 
  · Consult with a qualified legal or tax adviser before you purchase a policy. 
Sales  · We pay compensation to broker/dealers whose registered representatives sell the policy. 
Compensation  · Broker/dealers may be able to choose to receive their compensation under various payment 
       options, but their choice will not affect the fees and charges you will pay for the policy. 
See Distribution of the  · We generally pay more compensation on premiums paid for base insurance coverage than 
Policy, page 85.       we do on premiums paid for coverage under the Adjustable Term Insurance Rider. Talk to 
       your agent/registered representative about the right blend of base coverage and Adjustable 
       Term Insurance Rider coverage for you. 
Other Products  · We and our affiliates offer other insurance products that may have different features, 
       benefits, fees and charges. These other products may better meet your needs. 
  · Contact your agent/registered representative if you would like information about these other 
       products. 
 
 
 
 
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Fees and Charges

The following tables describe the fees and charges you will pay when buying, owning and surrendering the policy.

Transaction Fees and Charges. The following table describes the fees and charges deducted at the time you make a premium payment or make certain other transactions. See Transaction Fees and Charges, page 28.

    Amount Deducted 
Charge  When Deducted  Maximum Guaranteed Charges 
Premium Expense  · When you make  · 9.00% of premium up to target premium and 6.00% of premium in 
Charge       a premium       excess of target premium in Segment year 1, and lower thereafter. 
       payment.   
 
Partial Withdrawal  · When you take a  · $10.00. 
Fee       partial   
       withdrawal.   
 
Surrender Charge 1  · During the first  Range from 
       ten Segment  · $3.40 to $42.00 per $1,000.00 of base insurance coverage. 
       years when you   
       surrender your  Representative insured person 
       policy, decrease  · $20.00 per $1,000.00 of base insurance coverage. 
       your base  · The representative insured person is a male, age 40.  
       insurance   
       coverage, take a   
       partial   
       withdrawal that   
       decreases your   
       base insurance   
       coverage or allow   
       your policy to   
       lapse.   
 
Excess Illustration  · Each time you  · $25.00. 
Fee 2       request an   
       illustration after   
       the first each   
       policy year.   
 
Accelerated Benefit  · On the date the  · $300.00 per acceleration request. 
Rider Administrative       acceleration   
Charge       request is   
       processed.   

1      The surrender charge rates shown are for the first Segment year. Surrender charge rates generally decline beginning by the fourth Segment year and reach zero beginning in the eleventh Segment year. The rates vary based on the insured person’s age at the time each base insurance coverage Segment is established and gender. The rates shown for the representative insured person are for the first policy year, and you may get information about the charge that would apply to you by contacting your agent/registered representative for a personalized illustration.
2      We do not currently assess this charge.

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Transaction Fees and Charges (continued).

    Amount Deducted 
Charge  When Deducted  Maximum Guaranteed Charges 
Overloan Lapse  · On the Monthly  · 3.50% of the Account Value. 3 
Protection Rider       Processing Date   
       on or next   
       following the   
       date we receive   
       your request to   
       exercise this   
       rider’s benefit.   

Periodic Fees and Charges. The following table describes the maximum guaranteed charges that could be deducted each month on the Monthly Processing Date, not including fund fees and expenses. See Periodic Fees and Charges, page 30.

    Amount Deducted 
Charge  When Deducted  Maximum Guaranteed Charges 4 
Cost of Insurance  · On each Monthly  Range from 
Charge 5       Processing Date.  · $0.02 to $83.33 per $1,000.00 of net amount at risk. 
 
    Representative insured person 
    · $0.14 per $1,000.00 of net amount at risk for each Segment of 
         your base insurance coverage. 
    · The representative insured person is a male, age 40.  
 
Mortality and  · On each Monthly  · 0.025% (0.30% annually) of Account Value invested in the 
Expense Risk Charge       Processing Date.       Separate Account. 
 
Policy Charge 6  · On each Monthly  · $30.00. 
       Processing Date.   

3      Your Account Value is the sum of your Guaranteed Interest Division, Separate Account and Loan Division values.
4      This table shows the maximum guaranteed charges that may be assessed during any policy year. Current charges may be less than the maximum guaranteed charges shown and you may get information about the charges that would apply to you by contacting your agent/registered representative for a personalized illustration.
5      The cost of insurance rates vary based on policy duration and the insured person’s age, gender, underwriting type and risk class. Different rates will apply to each Segment of base insurance coverage. The rates shown for the representative insured person are for the first policy year and generally increase each year thereafter. The rates shown may have been rounded to the nearest penny, and you may get information about the charge that would apply to you by contacting your agent/registered representative for a personalized illustration.
6      The policy charge varies based on the amount of base insurance coverage, policy duration and underwriting type. See Policy Charge, page 31, for more detail about the policy charge rates.

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  Periodic Fees and Charges (continued).

    Amount Deducted 
Charge  When Deducted  Maximum Guaranteed Charges 7 
Administrative  · On each Monthly  Range from 
Charge 8       Processing Date.  · $0.03 to $3.85 per $1,000.00 of base insurance coverage. 
 
    Representative insured person 
    · $0.11 per $1,000.00 of base insurance coverage. 
    · The representative insured person is a male, age 40 in the super- 
    preferred no tobacco risk class and fully underwritten.  
 
Loan Interest Charge  · Accrues daily but  · 3.75% per annum of the amount held in the Loan Division in 
       is due in arrears       policy years 1–5, and lower thereafter. 
       on each policy   
       anniversary.   

Optional Rider Fees and Charges. The following tables describe the maximum guaranteed charges that could be deducted each month on the Monthly Processing Date for each of the optional rider benefits. See Rider Fees and Charges, page 32.

20-Year/Age 65 Guaranteed Death Benefit Rider

    Amount Deducted 
Charge  When Deducted  Maximum Guaranteed Charges 7 
20-Year/Age 65  · On each Monthly  Range from 
Guaranteed Death       Processing Date  · $0.001 to $0.02 per $1,000.00 of insurance coverage. 
Benefit Rider Charge 9       during the   
       guarantee period.  Representative insured person 
    · $0.004 per $1,000.00 of insurance coverage. 
    · The representative insured person is age 40.  

7      These tables show the maximum guaranteed charges that may be assessed during any policy year. Current charges may be less than the maximum guaranteed charges shown and you may get information about the charges that would apply to you by contacting your agent/registered representative for a personalized illustration.
8      The administrative charge rates vary based on the insured person’s age, gender, underwriting type and risk class and generally decrease after the fifth and tenth Segment years. The rates shown for the representative insured person are for the first policy year. The rates shown may have been rounded to the nearest penny and you may get information about the charge that would apply to you by contacting your agent/registered representative for a personalized illustration. See Administrative Charge, page 32, for information about how the amount of the administrative charge is determined.
9      The rates for this rider vary based on the insured person’s age at issue. The rates shown may have been rounded to the nearest penny, and you may get information about the charge that would apply to you by contacting your agent/registered representative for a personalized illustration.

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  Optional Rider Fees and Charges (continued).

Additional Insured Rider   
    Amount Deducted 
Charge  When Deducted  Maximum Guaranteed Charges 10 
Additional Insured  · On each Monthly  Range from 
Rider Charge 11       Processing Date.  · $0.02 to $83.33 per $1,000.00 of rider benefit. 
 
    Representative insured person 
    · $0.02 per $1,000.00 of rider benefit. 
    · The representative insured person is a female, age 10 in the no 
            tobacco risk class.  
 
 
Adjustable Term Insurance Rider   
    Amount Deducted 
Charge  When Deducted  Maximum Guaranteed Charges 10 
Adjustable Term  · On each Monthly  Range from 
Insurance Rider Cost       Processing Date.  · $0.02 to $83.33 per $1,000.00 of rider benefit. 
of Insurance Charge 12     
  Representative insured person 
    · $0.17 per $1,000.00 rider benefit. 
    · The representative insured person is a male, age 40.  
 
Adjustable Term  · On each Monthly  Range from 
Insurance Rider       Processing Date.  · $0.01 to $2.73 per $1,000.00 of the difference between total 
Administrative         coverage and base coverage. 
Charge 13     
    Representative insured person 
    · $0.06 per $1,000.00 rider benefit. 
    · The representative insured person is a male, age 40 in the super- 
         preferred no tobacco risk class and fully underwritten.  

10      These tables show the maximum guaranteed charges that may be assessed during any policy year. Current charges may be less than the guaranteed maximum charges shown and you may get information about the charges that would apply to you by contacting your agent/registered representative for a personalized illustration.
11      The rates for this rider vary based on the additional insured person’s age, gender and risk class and generally increase with age. The rates shown for the representative insured person are for the first rider year. The rates shown may have been rounded to the nearest penny, and you may get information about the charge that would apply to you by contacting your agent/registered for a personalized illustration.
12      The rates for this rider vary based on rider duration and the insured person’s age, gender, underwriting type and risk class and generally increase each year. The rates shown for the representative insured person are for the first rider year. The rates shown may have been rounded to the nearest penny, and you may get information about the charge that would apply to you by contacting your agent/registered for a personalized illustration.
13      The rates for this rider vary based on rider duration and the insured person’s gender, underwriting type and risk class and generally decrease after the fifth and tenth rider years. The rates shown for the representative insured person are for the first rider year. The rates shown may have been rounded to the nearest penny, and you may get information about the charge that would apply to you by contacting your agent/registered for a personalized illustration.

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Optional Rider Fees and Charges (continued).

Guaranteed Minimum Accumulation Benefit Rider

    Amount Deducted 
Charge  When Deducted  Maximum Guaranteed Charges 14 
Guaranteed  · On each Monthly  · 0.10% (1.15% on an annual basis) of the minimum accumulation 
Minimum       Processing Date       value. 15 
Accumulation       during the   
Benefit Rider Charge       guarantee period.   

Lifetime Guaranteed Death Benefit Rider

    Amount Deducted 
Charge  When Deducted  Maximum Guaranteed Charges 14 
Lifetime Death  · On each Monthly  Range from 
Benefit Guarantee         Processing Date  · $0.02 to $0.06 per $1,000.00 of guaranteed coverage. 
Charge 16         during the   
         guarantee period.  Representative insured person 
    · $0.02 per $1,000.00 of guaranteed coverage. 
    · The representative insured person is age 40.  
 
 
Waiver of Cost of Insurance Rider   
    Amount Deducted 
Charge  When Deducted  Maximum Guaranteed Charges 14 
Waiver of Cost of  · On each Monthly  Range from 
Insurance Rider       Processing Date.  · $3.82 to $19.48 per $100.00 of rider coverage. 
Charge 17     
    Representative insured person 
    · $7.04 per $100.00 of rider coverage. 
    · The representative insured person is age 35.  

14      These tables show the maximum guaranteed charges that may be assessed during any policy year. Current charges may be less than the maximum guaranteed charges shown and you may get information about the charges that would apply to you by contacting your agent/registered representative for a personalized illustration.
15      The minimum accumulation value equals the sum of all premium payments we have received for the policy and attached riders minus all partial withdrawals and all fees and charges deducted from your Account Value (or that may have been waived under the provisions of the policy or another rider), with the result accrued at an annual interest rate that may vary by policy year. The monthly percentage shown has been rounded up to the nearest tenth of one percent and the actual percentage charged is lower than this rounded amount. See Guaranteed Minimum Accumulation Benefit Rider, page 49, for more detail about the features and benefits of and charge for this rider, (including the unrounded monthly amount of the charge).
16      The rates for this rider vary based on the insured person’s age at issue. The rates shown for the representative insured person are for the first rider year and they generally increase thereafter. The rates shown may have been rounded to the nearest penny, and you may get information about the charge that would apply to you by contacting your agent/registered for a personalized illustration.
17      The rates for this rider vary based on several factors that may include rider duration and the insured person’s age. Rates generally increase each year after the first rider year until age 59 and generally decrease thereafter. The rates shown for the representative insured person are for the first rider year, and you may get information about the charge that would apply to you by contacting your agent/registered for a personalized illustration.

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  Optional Rider Fees and Charges (continued).

Waiver of Specified Premium Rider   
    Amount Deducted 
Charge  When Deducted  Maximum Guaranteed Charges 18 
Waiver of Specified  · On each Monthly  Range from 
Premium Rider  Processing Date.  · $1.70 to $25.40 per $100.00 of rider coverage. 
Charge 19     
    Representative insured person 
    · $2.20 per $100.00 of rider coverage. 
    · The representative insured person is age 35 and fully 
         underwritten.  

Fund Fees and Expenses. The following table shows the minimum and maximum total gross annual fund expenses that you may pay during the time you own the policy. Fund expenses vary from fund to fund and may change from year to year. For more detail about a fund’s fees and expenses, review the fund’s prospectus. See also Fund Fees and Expenses, page 33.

  Minimum  Maximum 
Total Gross Annual Fund Expenses (deducted from fund assets) 20  0.26%  1.26%  

Total gross annual fund expenses are deducted from amounts that are allocated to the fund. They include management fees and other expenses and may include distribution (12b-1) fees. Other expenses may include service fees that may be used to compensate service providers, including the company and its affiliates, for administrative and policy owner services provided on behalf of the fund. Distribution (12b-1) fees are used to finance any activity that is primarily intended to result in the sale of fund shares.

If a fund is structured as a “fund of funds,” total gross annual fund expenses also include the fees associated with the funds in which it invests. Because of this a fund that is structured as a “fund of funds” may have higher fees and expenses than a fund that invests directly in debt and equity securities. For a list of the “fund of funds” available through the policy, see the chart of funds available through the Separate Account on page 18.

18      This table shows the maximum guaranteed charges that may be assessed during any policy year. Current charges may be less than the maximum guaranteed charges shown and you may get information about the charges that would apply to you by contacting your agent/registered representative for a personalized illustration.
19      The rates for this rider vary based on various factors that may include the insured person’s age and/or underwriting type. Rates generally increase each year after the first rider year until age 59 and generally decrease thereafter. The rates shown for the representative insured person are for the first rider year and you may get information about the charges that would apply to you by contacting your agent/registered representative for a personalized illustration.
20      Some funds that are available through the policy have contractual arrangements to waive and/or reimburse certain fund fees and expenses. The minimum and maximum total gross annual fund expenses shown above do not reflect any of these waiver and/or reimbursement arrangements.

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How the Policy Works


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     THE COMPANY, THE SEPARATE ACCOUNT AND THE GUARANTEED
INTEREST DIVISION

Security Life of Denver Insurance Company

We are a stock life insurance company organized in 1929 and incorporated under the laws of the State of Colorado. We are admitted to do business in the District of Columbia and all states except New York. Our headquarters is at 1290 Broadway, Denver, Colorado 80203-5699.

We are a wholly owned indirect subsidiary of ING Groep N.V., a global financial institution active in the fields of insurance, banking and asset management. ING Groep N.V. is headquartered in Amsterdam, The Netherlands. Although we are an indirect subsidiary of ING Groep N.V., ING Groep N.V. is not responsible for the obligations under the policy. The obligations under the policy are solely the responsibility of Security Life of Denver Insurance Company.

As part of a restructuring plan approved by the European Commission, ING Groep N.V. has agreed to separate its banking and insurance businesses by 2013. ING Groep N.V. intends to achieve this separation over the next four years by divestment of its insurance and investment management operations, including the company. ING Groep N.V. has announced that it will explore all options for implementing the separation including initial public offerings, sales or a combination thereof.

We are also a member of the Insurance Marketplace Standards Association (“IMSA”). Companies that belong to IMSA subscribe to a rigorous set of standards that cover the various aspects of sales and service for individually sold life insurance and annuities. IMSA members have adopted policies and procedures that demonstrate a commitment to honesty, fairness and integrity in all customer contacts involving sales and service of individual life insurance and annuity products.

Regulatory Developments – The Company and the Industry

As with many financial services companies, the company and its affiliates have received 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 financial services industry. In each case, the company and its affiliates have been and are providing full cooperation.

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Insurance and Retirement Plan Products and Other Regulatory Matters. Federal and state regulators and self regulatory agencies are also conducting broad inquiries and investigations involving the insurance and retirement industries. These initiatives currently focus on, among other things, compensation, revenue sharing and other sales incentives; potential conflicts of interest; potential anti-competitive activity; reinsurance; sales and marketing practices (including sales to seniors); specific product types (including group annuities and indexed annuities); and disclosure. It is likely that the scope of these industry investigations will further broaden before they conclude. The company and certain of its U.S. affiliates have received formal and informal requests in connection with such investigations and have cooperated and are cooperating fully with each request for information. Some of these matters could result in regulatory action involving the company. These initiatives also may result in new legislation and regulation that could significantly affect the financial services industry, including businesses in which the company is engaged. In light of these and other developments, U.S. affiliates of ING, including the company, periodically review whether modifications to their business practices are appropriate.

Investment Product Regulatory Issues. Since 2002, there has been increased governmental and regulatory activity relating to mutual funds and variable insurance products. This activity has primarily focused on inappropriate trading of fund shares; directed brokerage; compensation; sales practices, suitability and supervision; arrangements with service providers; pricing; compliance and controls; adequacy of disclosure; and document retention.

In addition to responding to governmental and regulatory requests on fund trading issues, ING management, on its own initiative, conducted, through special counsel and a national accounting firm, an extensive internal review of mutual fund trading in ING insurance, retirement and mutual fund products. The goal of this review was to identify any instances of inappropriate trading in those products by third parties or by ING investment professionals and other ING personnel.

The internal review identified several isolated arrangements allowing third parties to engage in frequent trading of mutual funds within the variable insurance and mutual fund products of certain affiliates of the company and identified other circumstances where frequent trading occurred despite measures taken by ING intended to combat market timing. Each of the arrangements has been terminated and disclosed to regulators, to the independent trustees of ING Funds (U.S.) and in reports previously filed by affiliates of the company with the SEC pursuant to the Securities Exchange Act of 1934, as amended.

Action has been or may be taken by regulators with respect to the company or certain ING affiliates before investigations relating to fund trading are completed. The potential outcome of such action is difficult to predict but could subject the company or certain affiliates to adverse consequences, including, but not limited to, settlement payments, penalties and other financial liability. It is not currently anticipated, however, that the actual outcome of any such action will have a material adverse effect on ING or ING’s U.S. based operations, including the company.

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Product Regulation. Our products are subject to a complex and extensive array of state and federal tax, securities and insurance laws and regulations, which are administered and enforced by a number of governmental and self-regulatory authorities, including state insurance regulators, state securities administrators, the SEC, the Financial Industry Regulatory Authority (“FINRA”), the Department of Labor and the Internal Revenue Service (“IRS”). For example, U.S. federal income tax law imposes certain requirements relating to product design, administration and investments that are conditions for beneficial tax treatment of such products under the Internal Revenue Code. See TAX CONSIDERATIONS, page 70, for further discussion of some of these requirements. Failure to administer certain product features could affect such beneficial tax treatment. In addition, state and federal securities and insurance laws impose requirements relating to insurance product design, offering and distribution and administration. Failure to meet any of these complex tax, securities or insurance requirements could subject the company to administrative penalties imposed by a particular governmental or self regulatory authority and unanticipated claims and costs associated with remedying such failure. Additionally, such failure could harm the company’s reputation, interrupt the company’s operations or adversely impact profitability.

The Investment Options

You may allocate your premium payments to any of the available investment options. These options include Subaccounts of the Separate Account and the Guaranteed Interest Division. The investment performance of a policy depends on the performance of the investment options you choose.

The Separate Account

We established Security Life Separate Account L1 on November 3, 1993, as one of our separate accounts under the laws of the State of Colorado. It is registered with the SEC as a unit investment trust under the Investment Company Act of 1940, as amended (“1940 Act”).

We own all of the assets of the Separate Account and are obligated to pay all amounts due under a policy according to the terms of the policy. Income, gains and losses credited to, or charged against, the Separate Account reflect the investment experience of the Separate Account and not the investment experience of our other assets. Additionally, Colorado law provides that we cannot charge the Separate Account with liabilities arising out of any other business we may conduct. This means that if we ever became insolvent, the Separate Account assets will be used first to pay Separate Account policy claims. Only if Separate Account assets remain after these claims have been satisfied can these assets be used to pay owners of other policies and creditors.

The Separate Account is divided into Subaccounts. Each Subaccount invests in a corresponding fund. When you allocate premium payments to a Subaccount, you acquire Accumulation Units of that Subaccount. You do not invest directly in or hold shares of the funds when you allocate premium payments to the Subaccounts of the Separate Account.

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Funds Available Through the Separate Account. The following chart lists the funds that are available through the Separate Account.

Certain of these funds are structured as “fund of funds.” A “fund of funds” may have higher fees and expenses than a fund that invests directly in debt and equity securities because they also incur the fees and expenses of the underlying funds in which they invest. The “fund of funds” available through the policy are identified below.

Funds Available Through the Separate Account

· American Funds – Growth Fund (Class 2)  · ING Van Kampen Growth and Income Portfolio 
· American Funds – Growth-Income Fund (Class 2)     (Class S) 
· American Funds – International Fund (Class 2)  · ING Wells Fargo Health Care Portfolio (Class I) 
· BlackRock Global Allocation V.I. Fund (Class III)  · ING Wells Fargo Omega Growth Portfolio (Class I) 
· Fidelity® VIP Contrafund® Portfolio (Service  · ING Wells Fargo Small Cap Disciplined Portfolio 
   Class)     (Class S) 
· Fidelity® VIP Equity-Income Portfolio (Service  · ING Baron Small Cap Growth Portfolio (I Class) 
   Class)  · ING Columbia Small Cap Value Portfolio (I Class) 
· ING Artio Foreign Portfolio (Class I)  · ING JPMorgan Mid Cap Value Portfolio (I Class) 
· ING BlackRock Large Cap Growth Portfolio  · ING Oppenheimer Global Portfolio (I Class) 
   (Class I)  · ING Oppenheimer Global Strategic Income 
· ING Clarion Global Real Estate Portfolio (Class S)     Portfolio (S Class) 
· ING DFA Global All Equity Portfolio (Class I) 1  · ING Pioneer High Yield Portfolio (I Class) 
· ING DFA Global Allocation Portfolio (Class I) 1  · ING T. Rowe Price Diversified Mid Cap Growth 
· ING FMRSM Diversified Mid Cap Portfolio     Portfolio (I Class) 
   (Class I)  · ING UBS U.S. Large Cap Equity Portfolio (I Class) 
· ING Franklin Templeton Founding Strategy  · ING Van Kampen Comstock Portfolio (I Class) 
   Portfolio (Class I) 1  · ING Van Kampen Equity and Income Portfolio 
· ING Global Resources Portfolio (Class I)     (I Class) 
· ING JPMorgan Emerging Markets Equity  · ING Balanced Portfolio (Class I) 
   Portfolio (Class I)  · ING Intermediate Bond Portfolio (Class I) 
· ING JPMorgan Small Cap Core Equity Portfolio  · ING Growth and Income Portfolio (Class I) 
   (Class I)  · ING Index Plus LargeCap Portfolio (Class I) 
· ING Limited Maturity Bond Portfolio (Class S)  · ING Index Plus MidCap Portfolio (Class I) 
· ING Liquid Assets Portfolio (Class S)  · ING Index Plus SmallCap Portfolio (Class I) 
· ING MFS Total Return Portfolio (Class I)  · ING International Index Portfolio (Class S) 
· ING MFS Utilities Portfolio (Class S)  · ING RussellTM Large Cap Growth Index Portfolio 
· ING Marsico Growth Portfolio (Class I)     (Class I) 
· ING Marsico International Opportunities Portfolio  · ING RussellTM Large Cap Index Portfolio (Class I) 
   (Class I)  · ING RussellTM Large Cap Value Index Portfolio 
· ING PIMCO Total Return Bond Portfolio (Class I)     (Class I) 
· ING Pioneer Fund Portfolio (Class I)  · ING RussellTM Mid Cap Growth Index Portfolio 
· ING Pioneer Mid Cap Value Portfolio (Class I)     (Class I) 
· ING Retirement Growth Portfolio (Class I) 1  · ING RussellTM Small Cap Index Portfolio (Class I) 
· ING Retirement Moderate Growth Portfolio  · ING Small Company Portfolio (Class S) 
   (Class I) 1  · ING U.S. Bond Index Portfolio (Class I) 
· ING Retirement Moderate Portfolio (Class I) 1  · ING SmallCap Opportunities Portfolio (Class I) 
· ING T. Rowe Price Capital Appreciation Portfolio  · M Business Opportunity Value Fund 2 
   (Class I)  · M Capital Appreciation Fund 2 
· ING T. Rowe Price Equity Income Portfolio  · M International Equity Fund 2 
   (Class I)  · M Large Cap Growth Fund 2 
· ING U.S. Stock Index Portfolio (Class I)  · Neuberger Berman AMT Socially Responsive 
     Portfolio® (Class I)  

1      These funds are structured as “fund of funds.” See the Fund Fees and Expenses table on page 13 and the Fund Fees and Expenses section on page 33 for more information about “fund of funds.”
2      The M Funds are only available through broker/dealers associated with the M Financial Group.

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See Appendix B to this prospectus for more information about the funds available through the Separate Account, including information about each fund’s investment adviser/subadviser and investment objective. More detailed information about each fund, including information about their investment risks and fees and expenses, can be found in the fund’s current prospectus and Statement of Additional Information. You may obtain these documents by contacting us at our Customer Service Center.

A fund available through the Separate Account is not the same as a retail mutual fund with the same or similar name. Accordingly, the management, fees and expenses and performance of a fund available through the Separate Account is likely to differ from a similarly named retail mutual fund.

Voting Privileges. We invest each Subaccount’s assets in shares of a corresponding fund. We are the legal owner of the fund shares held in the Separate Account, and we have the right to vote on certain issues. Among other things, we may vote on issues described in the fund’s current prospectus or issues requiring a vote by shareholders under the 1940 Act.

Even though we own the shares, we give you the opportunity to tell us how to vote the number of shares attributable to your policy. We count fractional shares. If you have a voting interest, we send you proxy material and a form on which to give us your voting instructions.

Each fund share has the right to one vote. The votes of all fund shares are cast together on a collective basis, except on issues for which the interests of the funds differ. In these cases, voting is on a fund-by-fund basis.

Examples of issues that require a fund-by-fund vote are changes in the fundamental investment policy of a particular fund or approval of an investment advisory agreement.

We vote the shares in accordance with your instructions at meetings of the fund’s shareholders. We vote any fund shares that are not attributable to policies and any fund shares for which the owner does not give us instructions in the same proportion as we vote the shares for which we did receive voting instructions. This means that instructions from a small number of shareholders can determine the outcome of a vote. There is no minimum number of shares for which we must receive instructions before we vote the shares.

We reserve the right to vote fund shares without getting instructions from policy owners if the federal securities laws, regulations or their interpretations change to allow this.

You may instruct us only on matters relating to the funds corresponding to those Subaccounts in which you have invested assets as of the record date set by the fund’s Board for the shareholders meeting. We determine the number of fund shares in each Subaccount of your policy by dividing your Separate Account Value in that Subaccount by the net asset value of one share of the matching fund.

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Right to Change the Separate Account. Subject to state and federal law and the rules and regulations thereunder, we may, from time to time, make any of the following changes to our Separate Account with respect to some or all classes of policies:

· Change the investment objective; 
· Offer additional Subaccounts that will invest in funds we find appropriate for 
     policies we issue; 
· Eliminate Subaccounts; 
· Combine two or more Subaccounts; 
· Close Subaccounts. We will notify you in advance by a supplement to this 
     prospectus if we close a Subaccount. If a Subaccount is closed or otherwise is 
     unavailable for new investment, unless you provide us with alternative 
     allocation instructions, all future premiums directed to the Subaccount that 
     was closed or is unavailable may be automatically allocated among the other 
     available Subaccounts according to your most recent allocation instructions. 
     If your most recent allocation instructions do not include any available funds, 
     you must provide us with alternative allocation instructions or the premium 
     payment will be returned to you. You may give us alternative allocation 
     instructions by contacting our Customer Service Center. See also the 
     Transfers section of this prospectus, page 60, for information about making 
     Subaccount allocation changes; 
· Substitute a new fund for a fund in which a Subaccount currently invests. A 
     substitution may become necessary if, in our judgment: 
     > A fund no longer suits the purposes of your policy; 
     > There is a change in laws or regulations; 
     > There is a change in the fund’s investment objectives or restrictions; 
     > The fund is no longer available for investment; or 
     > Another reason we deem a substitution is appropriate. 
· In the case of a substitution, the new fund may have different fees and 
     charges than the fund it replaced; 
· Transfer assets related to your policy class to another Separate Account; 
· Withdraw the Separate Account from registration under the 1940 Act; 
· Operate the Separate Account as a management investment company under 
     the 1940 Act; 
· Cause one or more Subaccounts to invest in a fund other than, or in addition 
     to, the funds currently available; 
· Stop selling the policy; 
· End any employer or plan trustee agreement with us under the agreement’s 
     terms; 
· Limit or eliminate any voting rights for the Separate Account; or 
· Make any changes required by the 1940 Act or its rules or regulations. 

We will not make a change until the change is disclosed in an effective prospectus or prospectus supplement, authorized, if necessary, by an order from the SEC and approved, if necessary, by the appropriate state insurance department(s). We will notify you of changes. If you wish to transfer the amount you have in the affected Subaccount to another Subaccount or to the Guaranteed Interest Division, you may do so free of charge. Just notify us at our Customer Service Center.

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The Guaranteed Interest Division

You may allocate all or a part of your Net Premium and transfer your Net Account Value into the Guaranteed Interest Division. We declare the interest rate that applies to all amounts in the Guaranteed Interest Division. Although the interest rate will change over time, the interest rate will never be less than 3.00%. Additionally, we guarantee that the interest rate will not change more frequently than every policy anniversary. Interest compounds daily at an effective annual rate that equals the declared rate. We credit interest to the Guaranteed Interest Division on a daily basis. We pay interest regardless of the actual investment performance of our general account. We bear all of the investment risk for the Guaranteed Interest Division.

Your Guaranteed Interest Division Value equals the Net Premium you allocate to the Guaranteed Interest Division, plus interest earned, minus amounts you transfer out or withdraw. It may be reduced by fees and charges assessed against your Account Value.

The Guaranteed Interest Division guarantees principal and is part of our general account. The general account supports our non-variable insurance and annuity obligations. We have not registered interests in the Guaranteed Interest Division under the Securities Act of 1933, as amended (“1933 Act”). Also, we have not registered the Guaranteed Interest Division or the general account as an investment company under the 1940 Act (because of exemptive and exclusionary provisions). This means that the general account, the Guaranteed Interest Division and interests in it are generally not subject to regulation under these Acts.

The SEC staff has not reviewed the disclosures in this prospectus relating to the general account and the Guaranteed Interest Division. These disclosures, however, may be subject to certain requirements of the federal securities law regarding accuracy and completeness of statements made.

DETAILED INFORMATION ABOUT THE POLICY

This prospectus describes our standard ING VUL-CV variable universal life insurance policy. The policy provides death benefits, values and other features of traditional life insurance contracts. There may be variations in policy features, benefits and charges because of requirements of the state where we issue your policy. We describe all such differences in your policy.

If you would like to know about state variations, please ask your agent/registered representative. We can provide him/her with the list of variations that will apply to your policy.

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We and our affiliates offer various other products with different features and terms than the policy offered through this prospectus, and that may offer some or all of the same funds. These products have different benefits, fees and charges, and may or may not better match your needs. Please note that some of the company’s management personnel and certain other employees may receive a portion of their employment compensation based on the amount of Account Value allocated to funds affiliated with ING. You should be aware that there may be alternative products available, and if you are interested in learning more about these other products, contact our Customer Service Center or your agent/registered representative.

Underwriting

We offer policies using full, simplified issue or guaranteed issue underwriting.

On the fully underwritten application you will provide us with certain health and other necessary information. Upon receipt of an application, we will follow our underwriting procedures to determine whether the proposed insured person is insurable by us. Before we can make this determination, we may need to request and review medical examinations and other information about the proposed insured person. Through our underwriting process we also determine the risk class for the proposed insured person if the application is accepted. Risk class is based on such factors as the proposed insured person’s age, gender, health and occupation. Risk class will impact the cost of insurance rates you will pay and may also affect premiums and other policy fees, charges and benefits.

We offer policies using simplified issue or guaranteed issue underwriting up to a preset amount of coverage with reduced evidence of insurability as compared to fully underwritten policies. More evidence of insurability is required for policies using full underwriting than simplified issue underwriting and even less evidence is required for policies using guaranteed issue underwriting.

Simplified issue and guaranteed issue underwriting is available for policies covering certain individuals in group or sponsored arrangements. Eligibility requires that each proposed insured person:

  • Is actively at work at least 30 hours per week performing normal duties;
  • Has been currently employed and actively at work for the past 90 days;
  • Must answer certain health related questions and may be required to provide certain medical information;
  • Must indicate tobacco use, type and frequency. Tobacco use includes use of any substance in the past 12 months that contains nicotine; and
  • Must consent to be insured.

Policies using simplified issue or guaranteed issue underwriting are guaranteed issue policies. Whether a guaranteed issue policy will require simplified issue underwriting will depend on the nature of the individuals in the group or sponsored arrangement to be covered and such factors as the proposed insured person’s age and/or health and the amount of coverage. A proposed insured can be rated or excluded from coverage based on, among other things, serious illness, hospitalization, employment status and/or citizenship.

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All guaranteed issue policies carry different mortality risks compared to policies that are fully underwritten, and the cost of insurance, policy charge and administrative charge may be greater for guaranteed issue policies than fully underwritten policies. A guaranteed issue policy’s fees and charges do not vary, however, depending on whether simplified issue and guaranteed issue underwriting is used.

Generally, on a current basis, the overall charges are higher for a guaranteed issue policy than for a similar fully underwritten policy. This means that an insured person in a group or sponsored arrangement that uses guaranteed issue underwriting could get individual fully underwritten insurance coverage at a lower overall cost.

We reserve the right to reject an application for any reason permitted by law. If an application is rejected, any premium received will be returned without interest.

Purchasing a Policy

To purchase a policy you must submit an application to us. On that application you will, among other things, select:

  • The amount of your total insurance coverage (which generally must be at least $50,000.00);
  • Your initial death benefit option;
  • The death benefit qualification test to apply to your policy (we may limit the amount of coverage we will issue on the life of the insured person when the cash value accumulation test is chosen); and
  • Any riders or optional benefits.

On the date coverage under the policy begins (the “Policy Date”), the person on whose life we issue the policy (the “insured person”) generally can be no more than age 85 (70 for guaranteed issue policies). “Age” under the policy means the insured person’s age on the birthday nearest to the Policy Date. From time to time, we may accept an insured person who exceeds our normal maximum age limit. We will not unfairly discriminate in determining the maximum age at issue. All exceptions to our normal limits are dependent upon our ability to obtain acceptable reinsurance coverage for our risk with an older insured. We may also set a minimum age to issue a policy.

You may request that we back-date the policy up to six months to allow the insured person to give proof of a younger age for the purposes of your policy. Except for cash on delivery policies, we generally will not reissue a policy to change the Policy Date.

Important Information About the Adjustable Term Insurance Rider. It may be to your economic advantage to include part of your insurance coverage under the Adjustable Term Insurance Rider. Working with your agent/registered representative, consider the factors described in the Adjustable Term Insurance Rider section of this prospectus, page 45, when deciding whether to include coverage under the Adjustable Term Insurance Rider and in what proportion to the total amount of coverage under your policy.

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Premium Payments

Premium payments are flexible and you may choose the amount and frequency of premium payments, within limits, including:

  • We may refuse to accept any premium less than $25.00;
  • You cannot pay additional premiums after age 121 (except amounts required to keep the policy from lapsing);
  • We may refuse to accept any premium that would disqualify your policy as life insurance under Section 7702 of the Internal Revenue Code;
  • We may refuse to accept any premium that would cause your policy to become a modified endowment contract under Section 7702A of the Internal Revenue Code without your prior written acknowledgement accepting your policy as a modified endowment contract; and
  • We may refuse to accept any premium that does not comply with our anti- money laundering program. See Anti-Money Laundering, page 80.

After we deduct the premium expense charge from your premium payments, we apply the Net Premium to your policy as described below.

A premium payment is received by us when it is received at our offices. After you have paid your initial premium, we suggest you send payments directly to us, rather than through your agent/registered representative, to assure the earliest crediting date.

Your initial premium must be at least equal to the sum of the scheduled premium from the Policy Date through the investment date. The investment date is the date we apply the Net Premium to your policy.

Scheduled Premium. You may select your scheduled (planned) premium (within our limits) when you apply for your policy. The scheduled premium, shown in your policy and schedule, is the amount you choose to pay over a stated time period. This amount may or may not be enough to keep your policy in force. You may receive premium reminder notices for the scheduled premium on a quarterly, semi-annual or annual basis. You are not required to pay the scheduled premium.

You can change the amount of your scheduled premium within our minimum and maximum limits at any time. If you fail to pay your scheduled premium or if you change the amount of your scheduled premium, your policy performance will be affected.

If you have an optional Guaranteed Death Benefit Rider, your scheduled premium should not be less than the guarantee period annual premium shown in your policy. See Guaranteed Death Benefit Riders, page 42.

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Unscheduled Premium Payments. Generally speaking, you may make unscheduled premium payments at any time, however:

  • We may refuse to accept any premium less than $25.00;
  • You cannot pay additional premiums after age 121 (except amounts required to keep the policy from lapsing);
  • We may refuse to accept or limit the amount of an unscheduled premium payment if it would result in an increase in the amount of the Base Death Benefit required by the federal income tax law definition of life insurance.
    We may require satisfactory evidence that the insured person is insurable according to our normal underwriting rules for the applicable risk class and rating at the time that you make the unscheduled premium payment if the Base Death Benefit is increased due to an unscheduled premium payment;
  • We may require satisfactory evidence that the insured person is insurable according to our normal underwriting rules for the applicable risk class and rating at the time that you make the unscheduled premium payment if an unscheduled premium payment will cause the net amount at risk to increase;
  • We will return premium payments that would cause your policy to become a modified endowment contract, unless you have acknowledged in writing the new modified endowment contract status for your policy; and
  • Our acceptance of an unscheduled premium payment may be subject to certain issue limitations and conditioned on the availability of reinsurance coverage.

Satisfactory evidence of insurability may include receipt of an application and required medical information.

Target Premium. Target premium is not based on your scheduled premium. Target premium is actuarially determined based on the age and gender of the insured person. The target premium is used to determine your premium expense charge and the sales compensation we pay. It may or may not be enough to keep your policy in force. You are not required to pay the target premium and there is no penalty for paying more or less. The target premium for your policy and additional Segments is listed in your policy schedule pages.

Premium Payments Affect Your Coverage. Unless you have an optional Guaranteed Death Benefit Rider, your coverage lasts only as long as you have a positive Net Account Value that is enough to pay the periodic fees and charges due each month. If you do not meet this requirement, your policy will enter a 61-day grace period and you must make a sufficient premium payment to keep your policy from lapsing. See Lapse, page 68.

If you have an optional Guaranteed Death Benefit Rider, we guarantee that your policy will not lapse during the guarantee period provided your cumulative premium payments minus any partial withdrawals and any outstanding loan amount including accrued but unpaid loan interest are at least equal to the guarantee period annual premium and your Net Account Value meets certain diversification requirements. See Guaranteed Death Benefit Riders, page 42.

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Allocation of Net Premium. Until your initial Net Premium is allocated as described below, we hold premiums in a general suspense account. Premiums held in this suspense account do not earn interest.

We apply the initial Net Premium to your policy after all of the following conditions have been met:

  • We receive the required initial premium;
  • All issue requirements have been received by our Customer Service Center; and
  • We approve your policy for issue.

Amounts you designate for the Guaranteed Interest Division will be allocated to that division on the investment date. If your state requires return of your premium if you return your policy during the free look period, we initially invest amounts you have designated for the Subaccounts of the Separate Account in the Subaccount that invests in the ING Liquid Assets Portfolio. We later transfer these amounts from this Subaccount to the available Subaccounts that you have selected based on your most recent premium allocation instructions. This transfer occurs five days after the date we mailed your policy to you plus the length of your state’s free look period.

If your state provides for return of your Account Value if you return your policy during the free look period (or provides no free look period), we allocate amounts you designated for the Subaccounts of the Separate Account directly into those Subaccounts.

All Net Premiums we receive after the applicable period are allocated to your policy on the Valuation Date of their receipt in good order. We will allocate Net Premiums to the available Subaccounts using your most recent premium allocation instructions specified in percentages stated to the nearest tenth and totaling 100.00%. If your most recent premium allocation instructions includes a fund that corresponds to a Subaccount that is closed to new investment (we will notify you in advance by a supplement to this prospectus if we close a Subaccount) or is otherwise unavailable, Net Premium received that would have been allocated to the Subaccount corresponding to the closed or otherwise unavailable fund may be automatically allocated among the other available Subaccounts according to your most recent allocation instructions. If your most recent allocation instructions do not include any available funds, you must provide us with alternative allocation instructions or the premium payment will be returned to you. You may give us alternative allocation instructions by contacting our Customer Service Center. Your failure to provide us with alternative allocation instructions before we return your premium payment(s) may result in your policy entering the 61 day grace period and/or your policy lapsing without value. See Lapse, page 68, for more information about how to keep your policy from lapsing. See also Reinstatement, page 69, for more information about how to put your policy back in force if it has lapsed.

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Free Look Period

You have the right to examine your policy and return it to us (for any reason) within the period shown in the policy. The period during which you have this right is called the free look period and starts on the date you receive your policy. If you request a free look refund or return your policy to us within the free look period, we cancel it as of your Policy Date.

If you cancel your policy during the free look period, you will receive a refund as determined by state law. Generally, there are two types of free look refunds:

  • Refund of all premium we have received from you; or
  • Refund of your Account Value plus a refund of all charges deducted.

The type of refund that applies in your state will be specified in your policy. The type of free look refund will affect when premium received before the end of the free look period is allocated to the Subaccounts. See Allocation of Net Premium, page 26.

Temporary Insurance

If you apply and qualify, we may issue temporary insurance in an amount equal to the amount of insurance coverage for which you applied, up to $1,000,000.00, which includes other in-force coverage you have with us.

Temporary insurance coverage begins when all of the following events have occurred:

  • You have completed and signed our temporary insurance coverage form;
  • We have received and accepted a premium payment of at least your scheduled premium (selected on your application); and
  • The necessary parts of the application are complete.

Unless otherwise provided by state law, temporary insurance coverage ends on the earliest of:

  • Five days after we mail the premium refund to the address on your application;
  • Five days after we mail notice of termination to the address on your application;
  • Your Policy Date;
  • The date we refuse to issue a policy based on your application; or
  • 90 days after you sign our temporary life insurance coverage form.

There is no death benefit under the temporary insurance coverage if any of the following events occur:

  • There is a material misrepresentation in your answers on the temporary insurance coverage form;
  • There is a material misrepresentation in statements on your application;
  • The person or persons intended to be insured die by suicide or self-inflicted injury; or
  • The bank does not honor your premium check or authorized withdrawal.

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During the period of temporary insurance coverage your premium payments are held by us in a general suspense account until underwriting is completed and the policy is issued or the temporary insurance coverage otherwise ends. Premiums held in this suspense account do not earn interest and they are not allocated to the investment options available under the policy until a policy is issued. If a policy is not issued and temporary coverage ends, any premium received will be returned without interest. See Allocation of Net Premium, page 26.

Fees and Charges

We deduct fees and charges under the policy to compensate us for:

  • Providing the insurance benefits of the policy (including any rider benefits);
  • Administering the policy;
  • Assuming certain risks in connection with the policy; and
  • Incurring expenses in distributing the policy.

The amount of a fee or charge may be more or less than the cost associated with the service or benefit. Accordingly, excess proceeds from one fee or charge may be used to make up a shortfall on another fee or charge, and we may earn a profit on one or more of these fees and charges. We may use any such profits for any proper corporate purpose, including, among other things, payment of sales expenses.

Transaction Fees and Charges

We deduct the following transaction fees and charges from your Account Value each time you make certain transactions.

Premium Expense Charge. We deduct a premium expense charge from each premium payment we receive.

    Premium Expense 
  Premium Expense  Charge for Amounts 
  Charge for Amounts  in Excess of 
Segment Year  up to Target Premium  Target Premium 
             1  9.00%  6.00% 
           2 +  4.50%  3.00% 

This charge helps offset:

  • The expenses we incur in selling the policy;
  • The costs of various state and local taxes. We pay state and local taxes in almost all states. These taxes vary in amount from state to state and may vary from jurisdiction to jurisdiction within a state; and
  • The cost associated with the federal income tax treatment of our deferred acquisition costs. This cost is determined solely by the amount of life insurance premium we receive.

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Partial Withdrawal Fee. We deduct a partial withdrawal fee each time you take a partial withdrawal from your policy. The amount of this fee is $10.00. We deduct the partial withdrawal fee proportionately from your Guaranteed Interest Division and Separate Account values that remain after the partial withdrawal.

This fee helps offset the expenses we incur when processing a partial withdrawal.

Surrender Charge. We deduct a surrender charge during the first ten Segment years when you:

  • Surrender your policy;
  • Allow your policy to lapse;
  • Decrease your base insurance coverage; or
  • Take a partial withdrawal that decreases the amount of your base insurance coverage.

The amount of the surrender charge depends on the amount of base insurance coverage surrendered or decreased and the surrender charge rates.

When you purchase a policy or increase your base insurance coverage, we set surrender charge rates based on the gender and age of the insured person. Surrender charges apply for the first ten years of each Segment of base insurance coverage. Surrender charge rates generally decline beginning in the fourth Segment year and reach zero beginning in the eleventh Segment year. Each coverage Segment will have its own set of surrender charge rates which will apply only to that Segment. See Changes in the Amount of Your Insurance Coverage, page 36. The rates that apply to you will be set forth in your policy. See the Transaction Fees and Charges table beginning on page 8 for the minimum and maximum surrender charge rates and the rates for a representative insured person.

For full surrenders, you will receive the Surrender Value of your policy. For decreases in the amount of base insurance coverage, the surrender charge will reduce your Account Value. If there are multiple Segments of base insurance coverage, the coverage decreases and surrender charges assessed will be processed on a pro rata basis.

In the early policy years the surrender charge may exceed the Account Value because the surrender charge may be more than the cumulative premiums paid minus policy fees and charges. Therefore, you should purchase a policy only if you intend and have the financial capability to keep the policy in force for a substantial period of time.

The surrender charge helps offset the expenses we incur in issuing and distributing the policy.

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Excess Illustration Fee. We currently do not assess this fee, but we reserve the right to assess a fee of up to $25.00 for each illustration of your Account Values that you request after the first each policy year.

This fee helps offset the costs we incur when processing requests for excess illustrations.

Redemption Fees. If applicable, we may deduct the amount of any redemption fees imposed by the underlying mutual funds as a result of partial withdrawals, transfers or other fund transactions you initiate. Redemption fees, if any, are separate and distinct from any transaction charges or other charges deducted from your Account Value.

Periodic Fees and Charges

We deduct the following periodic fees and charges from your Account Value on the Monthly Processing Date. The Monthly Processing Date is the same date each month as your Policy Date. If that date is not a Valuation Date, then the Monthly Processing Date is the next Valuation Date.

At any time you may choose one investment option from which we will deduct your periodic fees and charges. If you do not choose the investment option or the amount in your chosen investment option is not enough to cover the periodic fees and charges, then your periodic fees and charges are taken from the Subaccounts and Guaranteed Interest Division in the same proportion that your value in each has to your Net Account Value.

Cost of Insurance. Each month we deduct a cost of insurance charge equal to our current monthly cost of insurance rates multiplied by the net amount at risk for each Segment of your base insurance coverage. The net amount at risk as calculated on each Monthly Processing Date equals the difference between:

  • Your current Base Death Benefit, discounted to take into account one month’s interest earnings at an assumed 3.00% annual interest rate; and
  • Your Account Value minus the periodic fees and charges due on that date, other than cost of insurance charges.

Monthly cost of insurance rates are based on the insured person’s age at issue and each date you increase your insurance coverage (a “Segment date”), gender, underwriting type, risk class and Segment year. They will not, however, be greater than the guaranteed cost of insurance rates shown in the policy, which are based on the 2001 Commissioner’s Standard Ordinary Sex Distinct Mortality Tables. We will apply unisex rates where appropriate under the law. This currently includes policies issued in the state of Montana and policies issued to employers or employee organizations in connection with employment related insurance or benefit programs. The rates that apply to you will be set forth in your policy. See the Periodic Fees and Charges table beginning on page 9 for the maximum guaranteed cost of insurance rates and the rates for a representative insured person.

Separate cost of insurance rates apply to each Segment of your base insurance coverage. The maximum rates for the initial Segment and each new Segment of your base insurance coverage will be printed in your policy schedule pages.

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The cost of insurance charge varies from month to month because of changes in your net amount at risk, changes in your death benefit and the increasing age of the insured person. The net amount at risk is affected by the same factors that affect your Account Value, namely:

  • The Net Premium applied to your policy;
  • The fees and charges we deduct;
  • Any partial withdrawals you take;
  • Interest earnings on the amounts allocated to the Guaranteed Interest Division;
  • Interest earned on amounts held in the Loan Division; and
  • The investment performance of the funds underlying the Subaccounts of the Separate Account.

We calculate the net amount at risk separately for each Segment of your base insurance coverage. We allocate the net amount at risk to Segments of the Base Death Benefit in the same proportion that each Segment has to the total Base Death Benefit for all insurance coverage as of the Monthly Processing Date.

There are no cost of insurance charges during the continuation of coverage period.

The cost of insurance charge compensates us for the ongoing costs of providing insurance coverage, including the expected cost of paying Death Benefit Proceeds that may be more than your Account Value.

Mortality and Expense Risk Charge. Each month we may deduct from your Account Value a mortality and expense risk charge based on the amount invested in the Separate Account according to the following rates:

Percentage of the Amount Invested in the Separate Account 
Current  Guaranteed 
  0.025% 
0.00%  (0.30% on an annual basis) 

This charge, if assessed, will help compensate us for the mortality and expense risks we assume when we issue a policy. The mortality risk is the risk that insured people, as a group, may live less time than we estimated. The expense risk is the risk that the costs of issuing and administering the policies and operating the Subaccounts of the Separate Account are greater than we estimated.

Policy Charge. Each month we deduct a policy charge. This charge varies based on underwriting type, duration and the amount of base insurance coverage. The current policy charge each month for policies with at least $100,000.00 in base insurance coverage is as follows:

  Fully  Regular  Select 
Policy  Underwritten  Guaranteed Issue  Guaranteed Issue 
Years  Current  Current  Current 
1-5  $30.00  $30.00  $30.00 
6-10  $15.00  $30.00  $15.00 
11-20  $10.00  $20.00  $15.00 
21+  $8.00  $20.00  $15.00 

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The guaranteed policy charge for all policies with at least $100,000.00 in base coverage and the current and guaranteed policy charge for all policies with less than $100,000.00 in base insurance coverage is $30.00 per month in all policy years.

This charge helps compensate us for the costs associated with:

  • Processing applications;
  • Conducting medical examinations;
  • Establishing policy records; and
  • Underwriting.

Administrative Charge. Each month we deduct an administrative charge equal to our current monthly administrative charge rates multiplied by the amount of your base insurance coverage divided by 1,000. The rates vary based on the insured person’s age, gender, underwriting type and risk class and generally decrease after the fifth and tenth Segment years. The rates that apply to you will be set forth in your policy. See the Periodic Fees and Charges table beginning on page 9 for the minimum and maximum administrative charge rates and the rates for a representative insured person.

This charge helps offset the costs we incur in administering the policy, including costs associated with:

  • Billing and collecting premiums;
  • Processing claims and policy transactions;
  • Keeping records;
  • Reporting and communicating with policy owners; and
  • Our overhead and other expenses.

Rider Fees and Charges

There are separate transaction charges if you choose to exercise any of the automatic rider benefits that come with your policy. See the Transaction Fees and Charges table beginning on page 8 and the Automatic Rider Benefits section on page 52 for more information about the transaction charges associated with the automatic rider benefits.

There are separate fees and charges for optional rider benefits. See the Optional Rider Fees and Charges table beginning on page 10, and the Optional Rider Benefits section on page 43 for more information about the optional rider benefits and the applicable fees and charges.

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Waiver and Reduction of Fees and Charges

We may waive or reduce any of the fees and charges under the policy, as well as the minimum amount of insurance coverage set forth in this prospectus. Any waiver or reduction will be based on expected economies that result in lower sales, administrative or mortality expenses. For example, we may expect lower expenses in connection with sales to:

  • Certain groups or sponsored arrangements (including our employees, employees of our affiliates, our appointed sales agents and certain family members of each of these groups of individuals);
  • Corporate or business policy owners/purchasers (including sales related to a corporate or business policy owner’s election to substitute one insured person who is an employee for another); or
  • Our policyholders or the policyholders of our affiliated companies.

Any variation in fees and charges will be based on differences in costs or services and our rules in effect at the time. We may change our rules from time to time, but we will not unfairly discriminate in any waiver or reduction.

Fund Fees and Expenses

As shown in the fund prospectuses and described in the Fund Fees and Expenses table on page 13 of this prospectus, each fund deducts management fees from the amounts allocated to the fund. In addition, each fund deducts other expenses, which may include service fees that may be used to compensate service providers, including the company and its affiliates, for administrative and policy owner services provided on behalf of the fund. Furthermore, certain funds deduct a distribution or 12b-1 fee, which is used to finance any activity that is primarily intended to result in the sale of fund shares. For a more complete description of the funds’ fees and expenses, review each fund’s prospectus.

You should evaluate the expenses associated with the funds available through this policy before making a decision to invest.

The company may receive substantial revenue from each of the funds or from the funds’ affiliates, although the amount and types of revenue vary with respect to each of the funds offered through the policy. This revenue is one of several factors we consider when determining the policy fees and charges and whether to offer a fund through our policies. Fund revenue is important to the company’s profitability, and it is generally more profitable for us to offer affiliated funds than to offer unaffiliated funds.

Assets allocated to affiliated funds, meaning funds managed by Directed Services LLC or another company affiliate, generate the largest dollar amount of revenue for the company. Affiliated funds may also be subadvised by a company affiliate or by an unaffiliated third party. Assets allocated to unaffiliated funds, meaning funds managed by an unaffiliated third party, generate lesser, but still substantial dollar amounts of revenue for the company. The company expects to earn a profit from this revenue to the extent it exceeds the company’s expenses, including the payment of sales compensation to our distributors.

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Types of Revenue Received from Affiliated Funds.

The types of revenue received by the company from affiliated funds may include:

  • A share of the management fee deducted from fund assets;
  • Service fees that are deducted from fund assets; and
  • Other revenues that may be based either on an annual percentage of average net assets held in the fund by the company or a percentage of the fund’s management fees.

These revenues may be received as cash payments or according to a variety of financial accounting techniques that are used to allocate revenue and profits across the organization. In the case of affiliated funds subadvised by unaffiliated third parties, any sharing of the management fee between the company and the affiliated investment adviser is based on the amount of such fee remaining after the subadvisory fee has been paid to the unaffiliated subadviser. Because subadvisory fees vary by subadviser, varying amounts of revenue may be retained by the affiliated investment adviser and ultimately shared with the company. The company receives additional amounts related to affiliated funds in the form of intercompany payments from the fund’s investment adviser or the investment adviser’s parent. These revenues provide the company with a financial incentive to offer affiliated funds through the policy rather than unaffiliated funds.

Types of Revenue Received from Unaffiliated Funds. Revenue received from each of the unaffiliated funds or their affiliates is based on an annual percentage of the average net assets held in that fund by the company. Some unaffiliated funds or their affiliates pay us more than others and some of the amounts we receive may be significant.

The types of revenues received by the company or its affiliates from unaffiliated funds include:

  • For certain funds, compensation paid from 12b-1 fees or service fees that are deducted from fund assets; and
  • Additional payments for administrative, recordkeeping or other services that we provide to the funds or their affiliates, such as processing purchase and redemption requests, and mailing fund prospectuses, periodic reports and proxy materials. These additional payments do not increase directly or indirectly the fees and expenses shown in each fund prospectus. These additional payments may be used by us to finance distribution of the policy.

These revenues are received as cash payments, and if the unaffiliated fund families currently offered through the policy that made cash payments to us were individually ranked according to the total amount they paid to the company or its affiliates in 2009 in connection with the registered variable life insurance policies issued by the company, that ranking would be as follows:

  • American Funds Insurance Series; and
  • Fidelity® Variable Insurance Product Portfolios.

If the revenues received from the affiliated funds were taken into account when ranking the funds according to the total dollar amount they paid to the company or its affiliates in 2009, the affiliated funds would be at the top of the list.

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In addition to the types of revenue received from affiliated and unaffiliated funds described above, affiliated and unaffiliated funds and their investment advisers, subadvisers or affiliates may participate at their own expense in company sales conferences or educational and training meetings. In relation to such participation, a fund’s investment adviser, subadviser or affiliate may help offset the cost of the meetings or sponsor events associated with the meetings. In exchange for these expense offset or sponsorship arrangements, the investment adviser, subadviser or affiliate may receive certain benefits and access opportunities to company sales representatives and wholesalers rather than monetary benefits. These benefits and opportunities may include, but are not limited to, co-branded marketing materials; targeted marketing sales opportunities; training opportunities at meetings; training modules for sales personnel; and opportunities to host due diligence meetings for representatives and wholesalers.

Certain funds may be structured as “fund of funds.” These funds may have higher fees and expenses than a fund that invests directly in debt and equity securities because they also incur the fees and expenses of the underlying funds in which they invest. These funds are affiliated funds, and the underlying funds in which they invest may be affiliated as well. The fund prospectuses disclose the aggregate annual operating expenses of each portfolio and its corresponding underlying fund or funds. These funds are identified in the list of funds available through the variable account on page 18.

Please note that certain management personnel and other employees of the company or its affiliates may receive a portion of their total employment compensation based on the amount of net assets allocated to affiliated funds. See Distribution of the Policy, page 85.

Death Benefits  In the policy the
amount of base
insurance
coverage you
select is
referred to as
the “Stated
Death Benefit”
and the amount
of total
insurance
coverage is
referred to as
the “Target
Death Benefit.” 
 
You decide the amount of life insurance protection you
need, now and in the future. The amount of your base
insurance coverage in effect on the Policy Date is your
initial coverage Segment. Generally, we require a
minimum of $50,000.00 of total insurance coverage to
issue your policy. We may lower this minimum for
certain group, sponsored or corporate purchasers. 
 
It may be to your economic advantage to include part of
your insurance coverage under the Adjustable Term
Insurance Rider. See Important Information About the
Adjustable Term Insurance Rider, page 23. 
 

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Changes in the Amount of Your Insurance Coverage

Subject to certain limitations, generally you may change the amount of your insurance coverage after the first policy year (first Monthly Processing Date for an increase). The change will be effective on the next Monthly Processing Date after we approve your written request, however changes scheduled for the future will be effective on the applicable policy anniversary.

There may be underwriting or other requirements that must be met before we will approve a change. If we approve your requested change we will send a new policy schedule page to you. You should attach it to your policy. We may ask you to return your policy to our Customer Service Center so that we may do this for you.

Changes in the amount of your insurance coverage must be for at least $1,000.00.

You may request an increase in the amount of your insurance coverage, subject to the following:

  • Increases after age 90 (age 75 for guaranteed issue and simplified issue policies) are not allowed; and
  • Increases are subject to underwriting approval and such approval may be conditioned on certain issue limitations and availability of reinsurance coverage.

See also, Adjustable Term Insurance Rider, page 45.

A requested increase in base insurance coverage will cause a new coverage Segment to be created. A Segment is a block of insurance coverage. Once we create a new Segment, it is permanent unless law requires differently.

Each new Segment will have:

  • A new premium expense charge;
  • New cost of insurance charges, guaranteed and current;
  • New administrative charges;
  • A new incontestability period;
  • A new suicide exclusion period;
  • A new target premium; and
  • A new surrender charge.

If a death benefit option change causes the amount of base insurance coverage to increase or decrease, no new Segment is created. Instead, the size of each existing Segment is changed.

In determining the net amount at risk for each coverage Segment we allocate the net amount at risk among the base coverage Segments in the same proportion that each Segment bears to the total amount of base insurance coverage.

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Refusal of a scheduled increase or your request to change the amount of your insurance coverage will terminate all future scheduled increases. Certain requests to increase the amount of your insurance coverage may also cancel all future scheduled increases.

You may decrease the amount of your insurance coverage, however, decreases below the minimum we require to issue you a policy are not allowed.

Decreases in insurance coverage may result in:

  • Surrender charges on the amount of the decrease;
  • Reduced target premium amounts; and
  • Reduced cost of insurance charges.

Decreases in the amount of insurance coverage will first reduce the amount of your total insurance coverage. We decrease your base insurance coverage amount only after your Adjustable Term Insurance Rider coverage is reduced to zero. If you have more than one Segment, we divide decreases in base coverage among your coverage Segments pro rata unless the law requires differently.

We reserve the right not to approve a requested change in your insurance coverage that would disqualify your policy as life insurance under Section 7702 of the Internal Revenue Code. In addition, we may refuse to approve a requested change in your insurance coverage that would cause your policy to become a modified endowment contract under Section 7702A of the Internal Revenue Code without your prior written acknowledgment accepting your policy as a modified endowment contract. Decreasing the amount of insurance coverage under your policy could cause your policy to be considered a modified endowment contract. If this happens, prior and subsequent distributions from the policy (including loans) may be subject to adverse tax treatment. You should consult a qualified tax adviser before changing your amount of insurance coverage. See Modified Endowment Contracts, page 72.

Continuation of Coverage

The continuation of coverage feature automatically continues your insurance coverage in force beyond the policy anniversary nearest the insured person’s 121st birthday (the “continuation of coverage period”), unless prohibited by state law. If you do not surrender your policy before this date, on this date:

  • The amount of your total insurance coverage becomes your base insurance coverage amount;
  • Death Benefit Options 2 and 3 are converted to Death Benefit Option 1, if applicable;
  • All riders are terminated;
  • Your Net Account Value is transferred into the Guaranteed Interest Division and subsequent transfers into the Subaccounts are not allowed; and
  • Dollar cost averaging and automatic rebalancing programs are terminated.

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Your insurance coverage continues in force until the death of the insured person, unless the policy lapses or is surrendered. However:

  • We accept no further premium payments (excepts amounts required to keep the policy from lapsing); and
  • We deduct no further fees and charges except transaction fees and charges, if applicable.

Partial withdrawals and loans are allowed during the continuation of coverage period. If you have an outstanding loan, interest continues to accrue. If you fail to make sufficient loan or loan interest payments, it is possible that the outstanding loan amount including accrued but unpaid loan interest may become greater than your Account Value and cause your policy to lapse. To avoid lapse, you may repay the loan and loan interest during the continuation of coverage period.

If you wish to stop coverage during the continuation of coverage period, you may surrender your policy and receive the Net Account Value. There is no surrender charge during this period. All other normal consequences of surrender apply. See Surrender, page 68.

The continuation of coverage feature is not available in all states. If a state has approved this feature, it is automatic under your policy. In certain states the death benefit during the continuation of coverage period is the Net Account Value. Contact your agent/registered representative or our Customer Service Center to find out if this feature is available in your state and which type of death benefit applies in your state.

The tax consequences of coverage continuing beyond the insured person’s 100th birthday are uncertain. You should consult a qualified tax adviser as to those consequences. See Continuation of a Policy, page 75.

Death Benefit Qualification Tests

The Death Benefit Proceeds are generally not subject to federal income tax if your policy continues to meet the federal income tax definition of life insurance. Your policy will meet this definition of life insurance provided that it meets the requirements of either the guideline premium test or the cash value accumulation test.

When you apply for a policy you must choose either the guideline premium test or the cash value accumulation test to make sure your policy complies with the Internal Revenue Code’s definition of “life insurance.” You cannot change this choice once the policy is issued.

Guideline Premium Test. The guideline premium test requires that premium payments do not exceed certain statutory limits and your death benefit is at least equal to your Account Value multiplied by a factor defined by law. The guideline premium test provides for a maximum amount of premium in relation to the death benefit and a minimum amount of death benefit in relation to Account Value. The factors for the guideline premium test can be found in Appendix A to this prospectus.

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Certain changes to a policy that uses the guideline premium test may allow the payment of premium in excess of the statutory limits in order to keep the policy from lapsing. In this circumstance, any such excess premium will be allocated to the Guaranteed Interest Division in order for the policy to continue to meet the federal income tax definition of life insurance.

Cash Value Accumulation Test. The cash value accumulation test requires a policy’s Account Value not to exceed at any time the net single premium necessary to fund the policy’s future benefits. Under the cash value accumulation test, there is generally no limit to the amount that may be paid in premiums as long as there is enough death benefit in relation to Account Value at all times. The death benefit at all times must be at least equal to an actuarially determined factor, depending on the insured person’s age and gender at any point in time, multiplied by the Account Value. A description of how the cash value accumulation test factors are determined can be found in Appendix A to this prospectus.

Which Death Benefit Qualification Test to Choose. The guideline premium test limits the amount of premium that may be paid into a policy. If you do not want to pay premiums in excess of the guideline premium test limitations, you should consider the guideline premium test.

The cash value accumulation test does not limit the amount of premium that may be paid into a policy. If you desire to pay premiums in excess of the guideline premium test limitations you should elect the cash value accumulation test. However, any premium that would increase the net amount at risk is subject to evidence of insurability satisfactory to us. Required increases in the death benefit due to growth in Account Value will generally be greater under the cash value accumulation test than under the guideline premium test. Required increases in the death benefit will increase the cost of insurance under the policy, thereby reducing the Account Value. We may limit the amount of coverage we will issue on the life of the insured person when the cash value accumulation test has been chosen.

Death Benefit Options

There are three death benefit options available under the policy. You choose the option you want when you apply for the policy. You may change that choice after your first Monthly Processing Date and before age 121.

Death Benefit Option 1. Under Death Benefit Option 1, the Base Death Benefit is the greater of:

  • The amount of base insurance coverage; or
  • Your Account Value multiplied by the appropriate factor from the definition of life insurance factors described in Appendix A.

Under this option your Base Death Benefit will remain level unless your Account Value multiplied by the appropriate factor described in Appendix A exceeds the amount of base insurance coverage. In this case, your death benefit will vary as the Account Value varies.

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With Death Benefit Option 1, positive investment performance generally reduces your net amount at risk, which lowers your policy’s cost of insurance charge. Option 1 also offers insurance coverage at a set amount with potentially lower cost of insurance charges over time.

Death Benefit Option 2. Under death benefit Option 2, the Base Death Benefit is the greater of:

  • The amount of base insurance coverage plus your Account Value; or
  • Your Account Value multiplied by the appropriate factor from the definition of life insurance factors described in Appendix A.

Under this option your Base Death Benefit will vary as the Account Value varies, and investment performance will be reflected in your insurance coverage.

Death Benefit Option 2 is not available after age 121. If Death Benefit Option 2 is in effect at age 121, it automatically converts to Death Benefit Option 1. See Continuation of Coverage, page 37.

Death Benefit Option 3. Under Death Benefit Option 3, the Base Death Benefit is the greater of:

  • The amount of base insurance coverage plus premiums received minus partial withdrawals taken and partial withdrawal fees; or
  • Your Account Value multiplied by the appropriate factor from the definition of life insurance factors described in Appendix A.

Under this option your Base Death Benefit will vary as you pay premiums and take partial withdrawals or if your Account Value multiplied by the appropriate factor described in Appendix A exceeds the amount of base insurance coverage plus premiums received minus partial withdrawals taken.

Death Benefit Option 3 is not available after age 121. If Death Benefit Option 3 is in effect at age 121, it automatically converts to Death Benefit Option 1. See Continuation of Coverage, page 37.

Which Death Benefit Option to Choose. If you are satisfied with the amount of your base insurance coverage and prefer to have premium payments and favorable investment performance reflected to the maximum extent in the Account Value and lower cost of insurance charges, you should choose Death Benefit Option 1. If you prefer to have premium payments and favorable investment performance reflected partly in the form of an increasing death benefit, you should choose Death Benefit Option 2. If you require a specific death benefit that would include a return of the premium paid, Death Benefit Option 3 may best meet your needs.

Changing Death Benefit Options. On or after the first Monthly Processing Date and before age 121 you may change death benefit options as described below. We may require evidence of insurability under our normal rules of underwriting for some death benefit option changes.

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Changing your death benefit option may reduce or increase your base and total insurance coverage amounts but it will not change the amount of your Base Death Benefit or Total Death Benefit. We may not approve a death benefit option change if it reduces the total amount of insurance coverage below the minimum we require to issue your policy. The following death benefit option changes are allowed, and on the effective date of the change the amount of your base insurance coverage will change as follows:

Change  Change   
From:  To:  Base Insurance Coverage Following the Change: 
Death  Death  · Your base insurance coverage before the change 
Benefit  Benefit 

minus your Account Value as of the effective 

Option 1  Option 2 

date of the change. 

Death  Death  · Your base insurance coverage before the change 
Benefit  Benefit 

plus your Account Value as of the effective date 

Option 2  Option 1 

of the change. 

    · Your base insurance coverage before the change 
Death  Death 

plus the sum of all premium payments we have 

Benefit  Benefit 

received minus all partial withdrawals and 

Option 3  Option 1 

partial withdrawal fees you have taken as of the 

   

effective date of the change. 


Your death benefit option change is effective on your next Monthly Processing Date after we approve it.

After we approve your request, we send a new policy schedule page to you. You should attach it to your policy. We may ask you to return your policy to our Customer Service Center so that we can make this change for you.

If a death benefit option change causes the amount of insurance coverage to change, no new coverage Segment is created. Instead, the size of each existing Segment is changed. If you change death benefit options, there is no change to the amount of term insurance coverage if you have the Adjustable Term Insurance Rider. See Adjustable Term Insurance Rider, page 45.

We do not impose a surrender charge if a death benefit option change results in a decrease in the amount of your base insurance coverage. Additionally, we do not adjust the target premium when you change your death benefit option. See Surrender Charge, page 29.

If your death benefit option is changed to Death Benefit Option 1 because you exercised the Overloan Lapse Protection Rider, notwithstanding any other information in this section your insurance coverage following the change will equal your Account Value immediately before the change minus the Overloan Lapse Protection Rider charge with the difference multiplied by the appropriate guideline premium test factor described in Appendix A.

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Changing your death benefit option may have tax consequences. You should consult a qualified tax adviser before making changes.

Death Benefit Proceeds

After the insured person’s death, if your policy is in force we pay the Death Benefit Proceeds to the beneficiaries. The beneficiaries are the people you name to receive the Death Benefit Proceeds from your policy. The Death Benefit Proceeds are equal to:

  • Your Total Death Benefit; plus
  • The amount of any rider benefits other than the Adjustable Term Insurance Rider; minus
  • Any outstanding loan amount including accrued but unpaid loan interest; minus
  • Any outstanding accelerated benefit lien including accrued lien interest; minus
  • Any outstanding fees and charges incurred before the insured person’s death.

The death benefit is calculated as of the date of the insured person’s death and will vary depending on the death benefit option you have chosen.

We will pay the Death Proceeds within seven days of when we receive due proof of the death claim. Due proof of the death claim means we have received:

  • Due proof of the Insured’s death;
  • Sufficient information to determine the amount of the Death Proceeds and the identity of the legally entitled beneficiary or beneficiaries; and
  • Sufficient evidence that any legal impediments to payment that depend on parties other than us are resolved. Such legal impediments include, but are not limited to, the establishment of guardianships and conservatorships, the appointment and qualification of trustees, executors and administrators and our receipt of information required to satisfy state and federal reporting requirements.

We will pay interest on the Death Proceeds from the date of the Insured's death to the date of payment. Interest will be at a rate we declare, or at a higher rate required by law.

Guaranteed Death Benefit Riders

The following optional Guaranteed Death Benefit Riders may be available and provide that the policy will not lapse even if the Net Account Value is not enough to pay the periodic fees and charges each month:

  • 20-Year/Age 65 Guaranteed Death Benefit Rider; and
  • Lifetime Guaranteed Death Benefit Rider.

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If available, these optional rider benefits may be selected only when you apply for the policy. There may be a separate monthly charge for these rider guarantees. See 20-Year/Age 65 Guaranteed Death Benefit Rider, page 43 and Lifetime Guaranteed Death Benefit Rider, page 50.

Additional Insurance Benefits

Your policy may include additional insurance benefits, attached by rider. There are two types of riders:

  • Those that provide optional benefits that you must select before they are effective; and
  • Those that automatically come with the policy.

The following information does not include all of the terms and conditions of each rider, and you should refer to the rider to fully understand its benefits and limitations. We may offer riders not listed here. Not all riders may be available under your policy. Contact your agent/registered representative for a list of riders and their availability.

Optional Rider Benefits

The following optional riders may have an additional cost, but each rider may be cancelled at any time. Adding or canceling riders may have tax consequences.

See Modified Endowment Contracts, page 72.

20-Year/Age 65 Guaranteed Death Benefit Rider. The 20-Year/Age 65 Guaranteed Death Benefit Rider provides a guarantee that your policy and any Adjustable Term Insurance Rider coverage will not lapse for the greater of 20 years or to age 65 provided:

  		•  Your cumulative premium payments minus any partial withdrawals and any outstanding  loan amount including accrued but unpaid loan interest are at least equal to the sum of the guarantee period monthly premium to the next Monthly Processing Date; and
  		• Your Net Account Value meets one of the following diversification requirements:
     
  		• Your Net Account Value is allocated to at least five investment options with no more than 35.00% invested in any one investment option; or
     
  		• At least 65.00% of your Net Account Value is allocated to one or more of the ING Retirement portfolios.

    Each month during the guarantee period we deduct a charge for this rider based on a rate that varies depending on the issue age of the insured person. See the Optional Rider Fees and Charges table beginning on page 10. The amount of this charge will be determined by dividing the amount of guaranteed coverage by 1,000 and multiplying the result by the rate set forth in your policy. The amount of guaranteed coverage equals the amount of your total insurance coverage minus your Account Value.

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    You should consider the following when deciding whether to add the 20-Year/Age 65 Guaranteed Death Benefit Rider to your policy:

    • This rider is available for issue ages 25-75;
    • You may add this rider only when you apply for the base policy and the guarantee period begins on the Policy Date;
    • The guarantee period annual premium required to keep this rider in effect will be set forth in your policy and will be based on monthly rates that vary according to the insured person’s gender, risk class, age, underwriting type and death benefit option selected;
    • If your policy benefits change, the guarantee period annual premium for this rider will also change;
    • Transfers between investment options that are made in response to our notice to you that your policy is not sufficiently diversified will not count as transfers for purposes of any limits or restrictions on transfers that we may impose (see Transfers, page 60);
    • This rider covers only your base policy and Adjustable Term Insurance Rider, if any. If your policy and any Adjustable Term Insurance Rider are kept in force because of the guarantee under this rider, coverage under all other riders may terminate;
    • This rider may not be available for certain risk classes or underwriting types;
    • This rider cannot be added to a policy with Death Benefit Option 3 or the Lifetime Guaranteed Death Benefit Rider;
    • You may terminate this rider at any time during the guarantee period upon written notice to us;
    • A loan may cause the termination of this guarantee because we deduct your outstanding loan amount including accrued interest from cumulative premiums paid when calculating whether you have paid sufficient premiums to keep the guarantee in effect; and
    • Even if this rider terminates, your policy will not necessarily lapse (see Lapse, page 68).

    We will notify you if on any Monthly Processing Date you have not paid enough premium to keep this rider in force or your policy is not sufficiently diversified. This notice will show the amount of premium required to maintain this rider benefit and, if applicable, explain the diversification requirement. If we do not receive the required premium payment or you do not adequately diversify your policy within 61 days from the date of our notice, this rider will terminate. If this rider terminates, it cannot be reinstated.

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    Additional Insured Rider. This rider provides death benefits upon the death of an insured person’s spouse or child (or the partner or child if required by the civil union/domestic partnership laws of the state in which your policy is delivered). The additional insured person under this rider can be no older than age 85. You may add up to five Additional Insured Riders to your policy. We require proof of insurability for each additional insured person. Minimum coverage for each additional insured person is $10,000.00 for ages 0 to 14 and $50,000.00 for ages 15 and older. Maximum coverage for all additional insured persons is five times your base insurance coverage. There is no defined premium for a given amount of Additional Insured Rider coverage. Instead, we deduct a separate monthly cost of insurance charge from your Account Value. The cost of insurance for this rider is calculated as the monthly cost of insurance rate for the rider coverage(s) multiplied by the Additional Insured Rider death benefit(s) in effect as of the Monthly Processing Date. The cost of insurance rates are determined by us from time to time. They are based on the issue age(s), gender(s) and risk class(es) of the additional insured person(s), as well as the length of time since the rider was added to your policy. Rates for this rider will not exceed the levels in the 2001 Commissioner’s Standard Ordinary Sex Distinct, Smoker Distinct Mortality Table. See the Optional Rider Fees and Charges table beginning on page 10 for the minimum rates, maximum rates and the rates for a representative additional insured person.

    In the policy
    “base insurance
    coverage” or
    “base coverage”
    is referred to as
    the “Stated
    Death Benefit”;
    the “total
    insurance
    coverage” or
    “total coverage”
    is referred to as
    the “Target
    Death Benefit.”
    Adjustable Term Insurance Rider. You may increase 
    the amount of your total insurance coverage under the 
    policy by adding coverage under the Adjustable Term 
    Insurance Rider. This rider allows you to schedule the 
    pattern of insurance coverage appropriate for your 
    anticipated needs. As the name suggests, the Adjustable 
    Term Insurance Rider adjusts over time to maintain your 
    desired level of total insurance coverage. 
     
    Generally, the minimum amount of total insurance 
    coverage under a policy is $50,000.00. Also, on the rider 
    effective date and on the effective date of any 
    unscheduled increase in the amount of your total 
    insurance coverage no more than 75.00% of your total 
    insurance coverage may be provided under the 
    Adjustable Term Insurance Rider. 

    On the date coverage under the Adjustable Term Insurance Rider begins (the “rider effective date”) the insured person generally can be no more than age 85 (70 for guaranteed issue policies). You specify your amount of total insurance coverage when you apply for this rider. The amount of total insurance coverage can be level for the life of your policy or can be scheduled to change at the beginning of selected policy years. If you schedule increases in your total insurance coverage, each increase must occur within five years of the rider effective date or the most recent previous increase. Scheduled increases generally must occur before age 85 (70 for guaranteed issue policies).

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    The Adjustable Term Insurance Rider benefit is the difference between the amount of your Total Death Benefit and your Base Death Benefit, but not less than zero. The rider’s benefit automatically adjusts daily as the amount of your Base Death Benefit changes. Your Death Benefit Proceeds depend on which death benefit option is in effect.

    Under Death Benefit Option 1, the Total Death Benefit is the greater of:

    • The amount of your total insurance coverage; or
    • Your Account Value multiplied by the appropriate factor from the definition of life insurance factors described in Appendix A.

    Under Death Benefit Option 2, the Total Death Benefit is the greater of:

    • The amount of your total insurance coverage plus your Account Value; or
    • Your Account Value multiplied by the appropriate factor from the definition of life insurance factors described in Appendix A.

    Under Death Benefit Option 3, the Total Death Benefit is the greater of:

    • The amount of your total insurance coverage plus the sum of the premium payments we have received minus partial withdrawals you have taken and partial withdrawal fees; or
    • Your Account Value multiplied by the appropriate factor from the definition of life insurance factors described in Appendix A.

    For example, under Death Benefit Option 1, assume your Base Death Benefit changes as a result of a change in your Account Value. The Adjustable Term Insurance Rider adjusts to provide Death Benefit Proceeds equal to your Total Death Benefit in each year:

      Total  Adjustable Term 
    Base Death Benefit  Insurance Coverage  Insurance Benefit 
    $201,500.00  $250,000.00  $48,500.00 
    $202,500.00  $250,000.00  $47,500.00 
    $202,250.00  $250,000.00  $47,750.00 

    It is possible that the amount of your adjustable term insurance benefit may be zero if your Base Death Benefit increases enough. Using the same example, if the Base Death Benefit under your policy grew to $250,000.00 or more, the adjustable term insurance benefit would be zero.

    Even when the adjustable term insurance benefit is reduced to zero, your rider remains in effect until you remove it from your policy. Therefore, if the Base Death Benefit later drops below the amount of your total insurance coverage, the Adjustable Term Insurance Rider coverage reappears to maintain the amount of your total insurance coverage.

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    Subject to the requirements outlined in the Changes in the Amount of Your Insurance Coverage section on page 36, once each policy year you may change the amount of your Adjustable Term Insurance Rider coverage (and thereby your total insurance coverage) provided:

    • The minimum incremental increase in rider coverage generally must be at least 2.00% of your initial total insurance coverage;
    • The maximum incremental increase in rider coverage may not exceed the lesser of 25.00% of the amount of your initial total insurance coverage or 200.00% of the most recent increase in rider coverage; and
    • All increases in rider coverage, in total, may not exceed the lesser of four times the amount of your initial base insurance coverage or $20,000,000.00.

    There may be underwriting or other requirements that must be met before we will approve a change in your Adjustable Term Insurance Rider coverage.

    In certain circumstances we may choose to waive one or more of the issue requirements for and/or limitations on changes in Adjustable Term Insurance Rider Coverage, including those in which the policy is issued in relation to certain deferred compensation arrangements and other company approved advanced sales concepts. We will not unfairly discriminate in any such waiver.

    Unless you request and we approve a new schedule of changes in the amount of your total insurance coverage, any request to change the amount of your total insurance coverage will automatically terminate all changes that were previously scheduled and after the change the amount of your total insurance coverage will remain level and be equal to the amount in effect immediately following the change.

    Partial withdrawals, changes from Death Benefit Option 1 to Death Benefit Option 2, and decreases in the amount of your base insurance coverage may reduce the amount of your total insurance coverage. See Partial Withdrawals, page 66; and Changes in the Amount of Your Insurance Coverage, page 36.

    There is no defined premium for a given amount of adjustable term insurance benefit. Instead, we deduct separate monthly cost of insurance and administrative charges from your Account Value. The cost of insurance for this rider is calculated as the monthly cost of insurance rate for the rider benefit multiplied by the amount of adjustable term insurance benefit in effect at the Monthly Processing Date. The cost of insurance rates are determined by us from time to time. They are based on the issue age, gender, underwriting type and risk class of the insured person, as well as the length of time since your rider effective date. As a general rule, the current cost of insurance rates for a rider based on simplified issue or guaranteed issue underwriting are higher than those for a rider which is fully underwritten. This means that a healthy individual could pay higher cost of insurance rates for this rider than they would pay for a substantially similar rider if they use simplified issue or guaranteed issue underwriting methods. See Underwriting, page 22.

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    Each month we deduct an administrative charge for this rider equal to our current monthly administrative charge rates multiplied by the difference between the amount of your total insurance coverage and your base insurance coverage divided by 1,000. The rates vary based on the insured person’s gender, underwriting type and risk class and generally decrease after the fifth and tenth Segment years. The rates that apply to you will be set forth in your policy. See the Optional Rider Fees and Charges table beginning on page 10 for the minimum and maximum administrative charge rates and the rates for a representative insured person.

    The total charges that you pay may be more or less if you have some coverage under an Adjustable Term Insurance Rider rather than just base insurance coverage. There are no premium expense charges or surrender charges for this coverage.

    If you increase the total insurance coverage after the rider effective date, we use the same cost of insurance rate schedule for the entire coverage for this rider. These rates are based on the original risk class even though satisfactory new evidence of insurability is required for the increase. Although the maximum cost of insurance rates for this rider are greater than the maximum cost of insurance rates for the base insurance coverage, the current rates for this rider are generally lower than current cost of insurance rates for the base insurance coverage. See Cost of Insurance, page 30.

    Not all policy features may apply to the Adjustable Term Insurance Rider. The rider does not contribute to the Account Value or to the Surrender Value. It does not affect investment performance and cannot be used for a loan. The Adjustable Term Insurance Rider provides benefits only at the insured person’s death.

    This rider will terminate on the earliest of the following dates:

    • The expiration date of the policy grace period;
    • The date the policy is terminated or surrendered;
    • The next Monthly Processing Date after we receive your written notice to cancel the rider; or
    • The policy anniversary nearest the insured’s 121st birthday.

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    Important Information About the Adjustable Term Insurance Rider. It may be to your economic advantage to include part of your insurance coverage under the Adjustable Term Insurance Rider. Working with your agent/registered representative, consider the following when deciding whether to include coverage under the Adjustable Term Insurance Rider and in what proportion to the total amount of coverage under your policy:

  		•  Cost of Insurance and Other Fees and Charges. The cost of insurance rates and other fees and charges affect the value of your policy. The lower the cost of insurance and other fees and charges, the greater the Account Value. Accordingly, please be aware that:
     
     
  		• The current cost of insurance rates for coverage under the Adjustable Term Insurance Rider are generally less than the current cost of insurance rates for coverage under the base policy;
     
  		• The guaranteed maximum cost of insurance rates for coverage under the Adjustable Term Insurance Rider are generally more than the guaranteed maximum cost of insurance rates for coverage under the base policy; and
     
  		• Some policy fees and charges that apply to coverage under the base policy may not apply to coverage under the Adjustable Term Insurance Rider.
  		• Features and Benefits. Certain features and benefits are limited or unavailable if you have Adjustable Term Insurance Rider coverage.
  		• Compensation. We generally pay more compensation to your agent/representative on premiums paid for coverage under the base policy than we do on premiums paid for coverage under the Adjustable Term Insurance Rider. See Distribution of the Policy, page 85.

    With these factors in mind, you should discuss with your agent/registered representative how the use of the Adjustable Term Insurance Rider will affect the costs, benefits, features and performance of your policy. You should also review illustrations based on different combinations of base policy and Adjustable Term Insurance Rider coverage so that you can decide what combination best meets your needs. The foregoing discussion does not contain all of the terms and conditions or limitations of coverage under the policy or the Adjustable Term Insurance Rider, and you should read them carefully to fully understand their benefits and limitations.

    Guaranteed Minimum Accumulation Benefit Rider. The Guaranteed Minimum Accumulation Benefit Rider provides a guarantee that at the end of the guarantee period your Account Value will not be less than the minimum accumulation value, provided:

    • Your Net Account Value is allocated to at least five investment options with no more than 35.00% invested in any one investment option; or
    • At least 65.00% of your Net Account Value is allocated to one or more of the ING Retirement portfolios.

    The guarantee period is 20 years from the Policy Date. The guaranteed minimum accumulation value is equal to the sum of all premium payments we have received minus all partial withdrawals you have taken and all fees and charges we have deducted from your Account Value (or that may have been waived under the provisions of your policy or another rider), accrued at an annual interest rate that may vary by policy year. That rate is currently 3.00% for all policy years.

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    At the end of the guarantee period we will compare your Account Value with the minimum accumulation value. If the Account Value is greater, then there will be no adjustment to your Account Value and this rider will terminate. If the minimum accumulation value is greater, then we will increase your Account Value by allocating an amount equal to the difference between the Account Value and the minimum accumulation value among the various investment options in which your Account Value is allocated, on a pro rata basis taking into account any outstanding Loan Division Value.

    Each month during the guarantee period we deduct a charge for this rider. See the Optional Rider Fees and Charges table beginning on page 10. The amount of this charge will be determined by multiplying minimum accumulation value by the amount shown in your policy. The current and maximum guaranteed amount of this charge is 0.09583% on a monthly basis (1.15% on an annual basis).

    You should consider the following when deciding whether to add the Guaranteed Minimum Accumulation Benefit Rider to your policy:

    • You may add this rider only when you apply for the base policy;
    • There is currently only one guarantee period available: 20 years;
    • The guarantee period is measured from the Policy Date;
    • Transfers between investment options that are made in response to our notice to you that your policy is not sufficiently diversified will not count as transfers for purposes of any limits or restrictions on transfers that we may impose (see Transfers, page 60);
    • This rider may not be available for certain risk classes;
    • You may terminate this rider at any time during the guarantee period upon written notice to us; and
    • If this rider terminates, it cannot be reinstated.

    We will notify you if on any Monthly Processing Date your policy is not sufficiently diversified. This notice will explain the diversification requirement. If you do not sufficiently diversify your policy within 61 days from the Monthly Processing Date on which your policy was not sufficiently diversified, this rider will terminate.

    Lifetime Guaranteed Death Benefit Rider. The Lifetime Guaranteed Death Benefit Rider provides a guarantee that your policy and any Adjustable Term Insurance Rider will not lapse during your lifetime provided:

  		•  Your cumulative premium payments minus any partial withdrawals and any outstanding loan amount including accrued but unpaid loan interest are at least equal to the sum of the guarantee period monthly premium to the next Monthly Processing Date; and
  		• Your Net Account Value meets one of the following diversification requirements:
     
  		• Your Net Account Value is allocated to at least five investment options with no more than 35.00% invested in any one investment option; or
     
  		• At least 65.00% of your Net Account Value is allocated to one or more of the ING Retirement portfolios.

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    Each month during the guarantee period we deduct a charge for this rider based on a rate that varies depending on the issue age of the insured person. See the Optional Rider Fees and Charges table beginning on page 10. The amount of this charge will be determined by dividing the amount of guaranteed coverage by 1,000 and multiplying the result by the rate set forth in your policy. The amount of guaranteed coverage equals the amount of your total insurance coverage minus your Account Value.

    You should consider the following when deciding whether to add the Lifetime Guaranteed Death Benefit Rider to your policy:

    • This rider is available for issue ages 25-75;
    • You may add this rider only when you apply for the base policy and the lifetime death benefit guarantee period begins on the Policy Date;
    • The guarantee period annual premium required to keep this rider in effect will be set forth in your policy and will be based on monthly rates that vary according to the insured person’s gender, risk class, age, underwriting type and death benefit option selected;
    • If your policy benefits change, the guarantee period annual premium for this rider will also change;
    • Transfers between investment options that are made in response to our notice to you that your policy is not sufficiently diversified will not count as transfers for purposes of any limits or restrictions on transfers that we may impose (see Transfers, page 60);
    • This rider covers only your base policy and Adjustable Term Insurance Rider, if any. If your policy and any Adjustable Term Insurance Rider are kept in force because of this rider, coverage under all other riders may terminate;
    • This rider may not be available for certain risk classes or underwriting types;
    • This rider cannot be added to a policy with Death Benefit Option 3 or the 20- year Guaranteed Death Benefit Rider;
    • You may terminate this rider at any time during the guarantee period upon written notice to us;
    • A loan may cause the termination of this guarantee because we deduct your outstanding loan amount including accrued but unpaid loan interest from cumulative premiums paid when calculating whether you have paid sufficient premiums to keep the guarantee in effect; and
    • Even if this rider terminates, your policy will not necessarily lapse (see Lapse, page 68).

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    We will notify you if on any Monthly Processing Date you have not paid enough premium to keep this rider in force or your policy is not sufficiently diversified. This notice will show the amount of premium required to maintain this rider guarantee and, if applicable, explain the diversification requirement. If we do not receive the required premium payment or you do not adequately diversify your policy by the second Monthly Processing Date following the notice, this rider will terminate. If this rider terminates, it cannot be reinstated.

    Waiver of Cost of Insurance Rider. If the insured person becomes totally disabled while your policy is in force, this rider provides that we waive the periodic fees and charges and rider charges during the disability period. The insured person must be no less than age 10 and no more than age 55. See the Optional Rider Fees and Charges table beginning on page 10 for the minimum rates, maximum rates and the rates for a representative insured person. The cost of this rider is included as part of the monthly cost of insurance charge.

    If you add this rider to your policy, you may not add the Waiver of Specified Premium Rider. This rider is not available if your policy is issued based on guaranteed issue underwriting.

    Waiver of Specified Premium Rider. If the insured person becomes totally disabled while your policy is in force, this rider provides that after a waiting period, we credit a specified premium amount monthly to your policy during the disability period. Subject to our underwriting, you specify this amount on the application for the policy. The insured person must be no less than age 10 and no more than age 55. The minimum coverage under this rider is $25.00 per month. See the Optional Rider Fees and Charges table beginning on page 10 for the minimum rates, maximum rates and the rates for a representative insured person.

    A policy may contain either the Waiver of Cost of Insurance Rider or the Waiver of Specified Premium Rider, but not both.

    Automatic Rider Benefits

    The following rider benefits may come with your policy automatically.

    Accelerated Benefit Rider. Under certain circumstances, the Accelerated Benefit Rider allows you to accelerate payment of a portion of the eligible death benefit that we otherwise would pay upon the insured person’s death.

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    Generally, we will provide an accelerated benefit under this rider if the insured person has one or more of the following:

  		•  A non-correctable illness or physical condition that, with a reasonable degree of medical certainty, will result in the death of the insured person in less than 12 months from the date of receipt of certification by a physician;
  		• A medical condition that has required or requires extraordinary medical intervention without which the insured person would die. Such conditions may include, but are not limited to:
     
  		• A major organ transplant; and
     
  		• Continuous artificial life support.
  		• A medical condition that usually requires continuous confinement in an eligible institution and in which the insured person is expected to remain for the rest of his or her life; or
  		• A medical condition that would, in the absence of extensive or extraordinary medical treatment, result in a drastically limited life span. Such conditions may include, but are not limited to:
     
  		• Coronary artery disease resulting in an acute infarction or requiring surgery;
     
  		• Permanent neurological deficit resulting from cerebral vascular accident; or
     
  		• End stage renal failure.

    Before we will pay an accelerated benefit under this rider we will require certification by a licensed physician that the insured person meets one or more of these conditions.

    The maximum accelerated benefit available under this rider is the lesser of 50.00% of the eligible death benefit that would be payable at the death of the insured person or $1,000,000.00. The minimum available accelerated benefit is $10,000.00.

    Consider the following when deciding whether to accelerate the death benefit under this rider:

    • Only one accelerated benefit may be paid per policy to which this rider is attached;
    • We assess an administrative charge of up to $300.00 when we pay the accelerated benefit (see Transaction Fees and Charges table, beginning on page 8);
    • The accelerated benefit will first be used to repay any outstanding policy loans and accrued but unpaid loan interest due. The remainder of the accelerated benefit (less the administrative charge) will be paid to you;
    • Accelerating the death benefit will not affect the amount of premium payable on the policy nor the cost of insurance or other charges due under the policy;

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  		•  The accelerated benefit requested plus any amounts we pay to keep the policy in force plus interest as described below will be a lien against the policy and any additional term insurance rider benefits that are part of the eligible death benefit. When there is a lien against your policy:
     
  		• The amount payable at the death of the insured under your policy and any additional term insurance rider benefits that are part of the eligible death benefit will be reduced by the amount of the lien;
     
  		• Your access to the value of your policy, if any, through surrender, withdrawal, or loan will be limited to the excess of the value of your policy over the amount of the lien;
     
  		• You may not make any changes to your policy that would reduce the proceeds payable at death without written permission from us. We reserve the right to require you to repay all or part of the lien before you make any changes to your policy;
     
  		• Any premiums or other payments required under the terms of the policy will continue to be due and payable and will be based upon the pre- accelerated benefit amount;
     
  		• Any payments required to keep the policy in force (not including scheduled premiums, minimum monthly premiums, or any other amount the payment of which will insure that the policy will not lapse notwithstanding the fact that the policy’s Net Account Value is zero or less) that are not paid by you will be paid by us, and the amount of any such payments will be added to the amount of the lien; and
     
  		• Interest on the amount of the lien accrues daily and is added to the amount of the lien. The maximum interest rate used will not be more than the greater of the current yield on 90 day treasury bills or the current maximum statutory adjustable policy loan interest rate.
  		• There may be tax consequences to requesting payment under this rider, and you should consult with a qualified tax adviser for further information. See Acce;erated Benefit Rider, page 75.

    Certain conditions, limitations, and restrictions on your receipt of an accelerated benefit payment under this rider are described in the rider. Additionally, the benefit may vary by state. You should consult your agent/registered representative as to whether and to what extent the rider is available in your particular state and on any particular policy.

    Overloan Lapse Protection Rider. The Overloan Lapse Protection Rider is a benefit which guarantees that your policy will not lapse even if your Surrender Value or Net Account Value, as applicable, is not enough to pay the periodic fees and charges when due. This rider may help you keep your policy in force and avoid tax consequences resulting from your policy lapsing with a loan outstanding. See Distributions Other than Death Benefits, page 72.

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    You may exercise this rider by written request if all of the following conditions are met:

    • You elected to have your policy meet the requirements of the guideline premium test (see Death Benefit Qualification Tests, page 38);
    • At least 15 years have elapsed since your Policy Date;
    • You are at least age 75;
    • Your outstanding loan amount including accrued but unpaid loan interest is equal to or greater than the amount of your base insurance coverage (or total insurance coverage, if greater);
    • Your outstanding loan amount excluding any unearned loan interest does not exceed your Account Value less the transaction charge for this rider (see Loan Division Value, page 58; see also Loan Interest, page 59);
    • Exercise of this rider does not cause your policy to become a modified endowment contract under Section 7702A of the Internal Revenue Code (see Modified Endowment Contracts, page 72); and
    • Exercise of this rider does not cause your policy to violate the statutory premium limits allowed under the guideline premium test (see Guideline Premium Test, page 38).

    We will notify you if you meet all of these conditions and explain the consequences of choosing to exercise this rider.

    You should consider the following consequences when deciding whether to exercise the Overloan Lapse Protection Rider:

  		•  On the Monthly Processing Date on or next following the date we receive your request to exercise this rider:
     
  		• We will assess a one time transaction charge. This charge equals 3.50% of your Account Value (see Transaction Fees and Charges table, beginning on page 8);
     
  		• If another death benefit option is in effect, the death benefit option will automatically be changed to Death Benefit Option 1 (see Death Benefit Options, page 39);
     
  		• The amount of insurance coverage after exercise of this rider will equal your Account Value (less the transaction charge) multiplied by the appropriate guideline premium test factor described in Appendix A;
     
  		• Amounts allocated to the Subaccounts of the Separate Account will be transferred to the Guaranteed Interest Division; and
     
  		• All other benefit riders will be terminated.
  		• Insurance coverage under your policy will continue in force, subject to the following limitations and restrictions:
     
  		• We will continue to deduct monthly periodic fees and charges (other than the Mortality and Expense Risk charge which will no longer apply);
     
  		• You may not make any further premium payments;
     
  		• Any unpaid loan interest will be added to your Loan Division Value;
     
  		• You may not make any future transfers from the Guaranteed Interest Division to the Subaccounts of the Separate Account;
     
  		• You may not add any additional benefits by rider in the future; and
     
  		• You may not increase or decrease the amount of insurance coverage, change the death benefit option or make any partial withdrawals.

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    This rider may not be available in all states. You should consult your agent/registered representative as to whether and to what extent the rider is available in your particular state.

    Account Value

    Your Account Value equals the sum of your Guaranteed Interest Division, Separate Account and Loan Division values. Your Account Value reflects:

    • The Net Premium applied to your policy;
    • Any rider benefits applied to your policy;
    • The fees and charges that we deduct;
    • Any partial withdrawals you take;
    • Interest earned on amounts allocated to the Guaranteed Interest Division;
    • The investment performance of the funds underlying the Subaccounts of the Separate Account; and
    • Interest earned on amounts held in the Loan Division.

    Guaranteed Interest Division Value

    Your Guaranteed Interest Division value equals the Net Premium you allocate to the Guaranteed Interest Division, plus any rider benefits allocated to the Guaranteed Interest Division, plus interest earned, minus amounts you transfer out or withdraw. It may be reduced by fees and charges assessed against your Account Value. See The Guaranteed Interest Division, page 21.

    Separate Account Value

    Your Separate Account Value equals your Account Value attributable to amounts invested in the Subaccounts of the Separate Account.

    Determining Values in the Subaccounts. The value of the amount invested in each Subaccount is measured by Accumulation Units and Accumulation Unit Values. The value of each Subaccount is the Accumulation Unit Value for that Subaccount multiplied by the number of Accumulation Units you own in that Subaccount. Each Subaccount has a different Accumulation Unit Value.

    The Accumulation Unit Value is the value determined on each Valuation Date. The Accumulation Unit Value of each Subaccount varies with the investment performance of its underlying fund. It reflects:

    • Investment income;
    • Realized and unrealized gains and losses;
    • Fund expenses (including fund redemption fees, if applicable); and
    • Taxes, if any.
    • Valuation Date is a date on which a fund values its shares and the New York

    Stock Exchange is open for business, except for days on which valuations are suspended by the SEC. Each Valuation Date ends at 4:00 p.m. Eastern time. We reserve the right to revise the definition of Valuation Date as needed in accordance with applicable federal securities laws and regulations.

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    You purchase Accumulation Units when you allocate premium or make transfers to a Subaccount (including transfers from the Loan Division) and when rider benefits are allocated to a Subaccount.

    We redeem Accumulation Units:

    • When amounts are transferred from a Subaccount (including transfers to the Loan Division);
    • For the monthly deduction of the periodic fees and charges from your Account Value;
    • For policy transaction fees (including fund redemption fees, if any);
    • When you take a partial withdrawal;
    • If you surrender your policy; and
    • To pay the Death Benefit Proceeds.

    To calculate the number of Accumulation Units purchased or sold we divide the dollar amount of your transaction by the Accumulation Unit Value for the Subaccount calculated at the close of business on the Valuation Date of the transaction.

    The date of a transaction is the date we receive your premium or transaction request at our Customer Service Center in good order, so long as the date of receipt is a Valuation Date. We use the Accumulation Unit Value that is next calculated after we receive your premium or transaction request and we use the number of Accumulation Units attributable to your policy on the date of receipt.

    We deduct the periodic fees and charges each month from your Account Value on the Monthly Processing Date. If your Monthly Processing Date is not a Valuation Date, the monthly deduction is processed on the next Valuation Date.

    The value of amounts allocated to the Subaccounts goes up or down depending on investment performance of the corresponding funds. There is no guaranteed minimum value of amounts invested in the Subaccounts of the Separate Account.

    How We Calculate Accumulation Unit Values. We determine the Accumulation Unit Value for each Subaccount on each Valuation Date.

    We generally set the Accumulation Unit Value for a Subaccount at $10.00 when the Subaccount is first opened. After that, the Accumulation Unit Value on any Valuation Date is:

    • The Accumulation Unit Value for the preceding Valuation Date; multiplied by
    • The Subaccount’s accumulation experience factor for the valuation period.

    Every valuation period begins at 4:00 p.m. Eastern time on a Valuation Date and ends at 4:00 p.m. Eastern time on the next Valuation Date. We reserve the right to revise the definition of valuation period as needed in accordance with applicable federal securities laws and regulations.

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    We calculate an accumulation experience factor for each Subaccount every Valuation Date as follows:

    • We take the net asset value of the underlying fund shares as reported to us by the fund managers as of the close of business on that Valuation Date;
    • We add dividends or capital gain distributions declared and reinvested by the fund during the current valuation period;
    • We subtract a charge for taxes, if applicable; and
    • We divide the resulting amount by the net asset value of the shares of the underlying fund at the close of business on the previous Valuation Date.

    Loan Division Value

    When you take a loan from your policy we transfer an amount equal to your loan to the Loan Division as collateral for your loan. The Loan Division is part of our general account and we credit interest to the amount held in the Loan Division. Your Loan Division Value on any Valuation Date is equal to:

    • The Loan Division Value on the prior Valuation Date; plus
    • Any loan interest credited to the Loan Division during the valuation period; plus
    • The amount of any new loan taken during the valuation period; minus
    • Any loan repayments, including the repayment of loan interest; plus
    • The amount of accrued and unpaid loan interest if the Valuation Date is a policy anniversary; minus
    • The amount of loan interest credited to the Loan Division during the prior policy year if the Valuation Date is a policy anniversary. See Loans, page 58.

    Special Features and Benefits

    Loans

    You may borrow money from us at any time after the first policy month, by using your policy as collateral for the loan. Unless state law requires otherwise, a new loan amount must be at least $100.00 and the maximum amount you may borrow is limited to the Surrender Value of your policy minus the monthly periodic fees and charges to your next policy anniversary or the monthly periodic fees and charges for the next thirteen months if you take a loan within thirty days before your next policy anniversary.

    Your loan request must be directed to our Customer Service Center. When you request a loan you may specify the investment options from which the loan collateral will be taken. If you do not specify the investment options, the loan collateral will be taken proportionately from each investment option in which your Net Account Value is allocated, including the Guaranteed Interest Division.

    If you request an additional loan, we add the new loan amount to your existing loan. This way, there is only one loan outstanding on your policy at any time.

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    Loan Interest. We credit amounts held in the Loan Division with interest at an annual rate of 3.00%. Interest that we credit to the Loan Division becomes part of your Loan Division Value until the next policy anniversary when it is transferred to the investment options according to your most recent allocation instructions.

    We also charge interest on loans you take. The annual interest rate charged is 3.75% in policy years one through five and currently 3.00% in all years thereafter (guaranteed not to exceed 3.15%). Loans with this reduced interest rate are called preferred loans. Interest accrues daily but is due in arrears on each policy anniversary. If you do not pay the interest when it is due, we add it to your outstanding loan amount.

    Loan Repayment. You may repay your loan at any time. We assume that payments you make, other than scheduled premium payments, are loan repayments. You must tell us if you want unscheduled payments to be premium payments.

    When you make a loan repayment, we transfer an amount equal to your payment from the Loan Division to the Subaccounts and Guaranteed Interest Division in the same proportion as your current premium allocation, unless you tell us otherwise.

    Effects of a Loan. Using your policy as collateral for a loan will affect your policy in various ways. You should carefully consider the following before taking a loan:

    • If you do not make loan repayments your policy could lapse if your outstanding loan amount including accrued but unpaid loan interest is greater than your Account Value, less any surrender charges;
    • A loan may cause the termination of the Guaranteed Death Benefit Riders because we deduct your outstanding loan amount including accrued but unpaid loan interest from cumulative premiums paid when calculating whether you have paid sufficient premiums to keep the Guaranteed Death Benefit Riders in effect;
    • Taking a loan reduces your opportunity to participate in the investment performance of the Subaccounts and the interest guarantees of the Guaranteed Interest Division;
    • Accruing loan interest will change your Account Value as compared to what it would have been if you did not take a loan;
    • Even if you repay your loan, it will have a permanent effect on your Account Value;
    • If you use the continuation of coverage feature and you have a loan, loan interest continues to accrue and could cause your policy to lapse;
    • If you do not repay your loan we will deduct any outstanding loan amount including accrued but unpaid loan interest from amounts payable under the policy; and
    • Loans may have tax consequences and if your policy lapses with a loan outstanding, you may have further tax consequences. See Distributions Other than Death Benefits, page 72.

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    Transfers

    You currently may make an unlimited number of transfers of your Separate Account Value between the Subaccounts and to the Guaranteed Interest Division. Transfers are subject to any conditions, limits or charges (including fund redemption fees) that we or the funds whose shares are involved may impose, including:

    • If your state requires a refund of premium during the free look period, you may not make transfers until after your free look period ends;
    • The minimum amount you may transfer is $100.00;
    • If the amount remaining in the investment option after a transfer will be less than $100.00, we will transfer the entire amount; and
    • We may limit the number of transfers or restrict or refuse transfers because of frequent or disruptive transfers, as described below.

    Any conditions or limits we impose on transfers between the Subaccounts or to the Guaranteed Interest Division will generally apply equally to all policy owners. However, we may impose different conditions or limits on policy owners or third parties acting on behalf of policy owners, such as market timing services, who violate our excessive trading policy. See Limits on Frequent and Disruptive Transfers, page 62.

    One transfer from the Guaranteed Interest Division to the Subaccounts of the Separate Account may be made only within 30 days after each policy anniversary. This transfer is limited to the greater of:

    • 25.00% of your Guaranteed Interest Division value at the time of the first such transfer;
    • The sum of the amounts transferred and partially withdrawn from the Guaranteed Interest Division during the prior policy year; or
    • $100.00.

    We reserve the right to liberalize these restrictions on transfers from the Guaranteed Interest Division, depending on market conditions. Any such liberalization will generally apply equally to all policy owners. However, we may impose different restrictions on third parties acting on behalf of policy owners, such as market timing services.

    We process all transfers and determine all values in connection with transfers on the Valuation Date we receive your request in good order, except as described below for the dollar cost averaging or automatic rebalancing programs.

    Dollar Cost Averaging. Anytime you have at least $10,000.00 invested in a Subaccount that invests in the ING Limited Maturity Bond Portfolio or the ING Liquid Assets Portfolio (the “source Subaccount”), you may elect dollar cost averaging. There is no charge for this feature.

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    Dollar cost averaging is a long-term investment program through which you direct us to automatically transfer at regular intervals a specific dollar amount or percentage of Subaccount value from the source Subaccount to one or more of the other Subaccounts. We do not permit transfers to the Guaranteed Interest Division or the Loan Division under this program. You may request that the dollar cost averaging transfers occur on a monthly, quarterly, semi-annual or annual basis.

    This systematic plan of transferring Account Values is intended to help reduce the risk of investing too much when the price of a fund’s shares is high. It also helps reduce the risk of investing too little when the price of a fund’s shares is low. Because you transfer the same dollar amount to the Subaccounts each period, you purchase more units when the unit value is low and you purchase fewer units when the unit value is high.

    You may add dollar cost averaging to your policy at any time. The first dollar cost averaging date must be at least one day after we receive your dollar cost averaging request. If your state requires a refund of all premium received during the free look period, dollar cost averaging begins after the end of your free look period.

    You may have both dollar cost averaging and automatic rebalancing at the same time. However, your dollar cost averaging source Subaccount cannot be included in your automatic rebalancing program.

    Dollar cost averaging does not assure a profit nor does it protect you against a loss in a declining market.

    You may discontinue your dollar cost averaging program at any time. We reserve the right to discontinue, modify or suspend this program, and dollar cost averaging will automatically terminate on:

    • The date you specify;
    • The date your balance in the source Subaccount reaches a dollar amount you set;
    • The date your balance in the source Subaccount is equal to or less than the amount to be transferred. In this situation we will transfer the entire balance of the source Subaccount to the other Subaccounts you have selected; or
    • Any date when dollar cost averaging transfers are scheduled and the policy is in the grace period.

    Automatic Rebalancing. Automatic rebalancing is a program for simplifying the process of asset allocation and maintaining a consistent allocation of your Separate Account and Guaranteed Interest Division values among your chosen investment options. There is no charge for this feature.

    If you elect automatic rebalancing, we periodically transfer amounts among the investment options to match the asset allocation percentages you have chosen. This action rebalances the amounts in the investment options that do not match your set allocation percentages. This mismatch can happen if an investment option outperforms another investment option over the time period between automatic rebalancing transfers.

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    Automatic rebalancing may occur on the same day of the month on a monthly, quarterly, semi-annual or annual basis. If you do not specify a frequency, automatic rebalancing will occur quarterly.

    The first transfer occurs on the date you select (after your free look period if your state requires return of premium during the free look period). If you do not request a date, processing is on the last Valuation Date of the calendar quarter in which we receive your request in good order.

    You may have both automatic rebalancing and dollar cost averaging at the same time. However, the source Subaccount for your dollar cost averaging program cannot be included in your automatic rebalancing program. You may not include the Loan Division.

    Automatic rebalancing does not assure a profit nor does it protect you against a loss in a declining market.

    You may change your allocation percentages for automatic rebalancing at any time. Your allocation change is effective on the Valuation Date that we receive it in good order at our Customer Service Center. If you reduce the amount allocated to the Guaranteed Interest Division, it is considered a transfer from that account. You must meet the requirements for the maximum transfer amount and time limitations on transfers from the Guaranteed Interest Division.

    If you have a death benefit guarantee and you ask for an automatic rebalancing allocation that does not meet the death benefit guarantee diversification requirements, we will notify you and ask you for revised instructions. If you have a death benefit guarantee and you terminate automatic rebalancing, you still must meet the diversification requirements for the guarantee period to continue. See Death Benefit Guarantee Riders, page 42.

    You may discontinue your automatic rebalancing program at any time. We reserve the right to discontinue, modify or suspend this program, and automatic rebalancing will automatically terminate if the policy is in the grace period on any date when automatic rebalancing transfers are scheduled.

    Limits on Frequent or Disruptive Transfers

    The policy is not designed to serve as a vehicle for frequent transfers. Frequent transfer activity can disrupt management of a fund and raise its expenses through:

    • Increased trading and transaction costs;
    • Forced and unplanned portfolio turnover;
    • Lost opportunity costs; and
    • Large asset swings that decrease the fund’s ability to provide maximum investment return to all policy owners.

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    This in turn can have an adverse effect on fund performance. Accordingly, individuals or organizations that use market-timing investment strategies or make frequent transfers should not purchase the policy.

    Excessive Trading Policy. We and the other members of the ING family of companies that provide multi-fund variable insurance and retirement products have adopted a common Excessive Trading Policy to respond to the demands of the various fund families that make their funds available through our products to restrict excessive fund trading activity and to ensure compliance with Rule 22c-2 of the 1940 Act.

    We actively monitor fund transfer and reallocation activity within our variable insurance products to identify violations of our Excessive Trading Policy. Our Excessive Trading Policy is violated if fund transfer and reallocation activity:

    • Meets or exceeds our current definition of Excessive Trading, as defined below; or
    • Is determined, in our sole discretion, to be disruptive or not in the best interests of other owners of our variable insurance and retirement products.

    We currently define Excessive Trading as:

    • More than one purchase and sale of the same fund (including money market funds) within a 60 calendar day period (hereinafter, a purchase and sale of the same fund is referred to as a “round-trip”). This means two or more round-trips involving the same fund within a 60 calendar day period would meet our definition of Excessive Trading; or
    • Six round-trips involving the same fund within a rolling twelve month period.

    The following transactions are excluded when determining whether trading activity is excessive:

    • Purchases or sales of shares related to non-fund transfers (for example, new purchase payments, partial withdrawals and loans);
    • Transfers associated with scheduled dollar cost averaging, scheduled rebalancing or scheduled asset allocation programs;
    • Purchases and sales of fund shares in the amount of $5,000.00 or less;
    • Purchases and sales of funds that affirmatively permit short-term trading in their fund shares, and movement between such funds and a money market fund; and
    • Transactions initiated by us, another member of the ING family of companies or a fund.

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    If we determine that an individual or entity has made a purchase of a fund within 60 days of a prior round-trip involving the same fund, we will send them a letter warning that another sale of that same fund within 60 days of the beginning of the prior round-trip will be deemed to be Excessive Trading and result in a six month suspension of their ability to initiate fund transfers or reallocations through the Internet, facsimile, Voice Response Unit (VRU), telephone calls to the ING Customer Service Center or other electronic trading medium that we may make available from time to time (“Electronic Trading Privileges”). Likewise, if we determine that an individual or entity has made five round-trips involving the same fund within a rolling 12 month period, we will send them a letter warning that another purchase and sale of that same fund within twelve months of the initial purchase in the first round-trip will be deemed to be Excessive Trading and result in a suspension of their Electronic Trading Privileges. According to the needs of the various business units, a copy of any warning letters may also be sent, as applicable, to the person(s) or entity authorized to initiate fund transfers or reallocations, the agent/registered representative or the investment adviser for that individual or entity. A copy of the warning letters and details of the individual’s or entity’s trading activity may also be sent to the fund whose shares were involved in the trading activity.

    If we determine that an individual or entity has violated our Excessive Trading Policy, we will send them a letter stating that their Electronic Trading Privileges have been suspended for a period of six months. Consequently, all fund transfers or reallocations, not just those that involve the fund whose shares were involved in the activity that violated our Excessive Trading Policy, will then have to be initiated by providing written instructions to us via regular U.S. mail. Suspension of Electronic Trading Privileges may also extend to products other than the product through which the Excessive Trading activity occurred. During the six month suspension period, electronic “inquiry only” privileges will be permitted where and when possible. A copy of the letter restricting future transfer and reallocation activity to regular U.S. mail and details of the individual’s or entity’s trading activity may also be sent, as applicable, to the person(s) or entity authorized to initiate fund transfers or reallocations, the agent/registered representative or investment adviser for that individual or entity and the fund whose shares were involved in the activity that violated our Excessive Trading Policy.

    Following the six month suspension period during which no additional violations of our Excessive Trading Policy are identified, Electronic Trading Privileges may again be restored. We will continue to monitor the fund transfer and reallocation activity, and any future violations of our Excessive Trading Policy will result in an indefinite suspension of Electronic Trading Privileges. A violation of our Excessive Trading Policy during the six month suspension period will also result in an indefinite suspension of Electronic Trading Privileges.

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    We reserve the right to suspend Electronic Trading Privileges with respect to any individual or entity, with or without prior notice, if we determine, in our sole discretion, that the individual’s or entity’s trading activity is disruptive or not in the best interests of other owners of our variable insurance and retirement products, regardless of whether the individual’s or entity’s trading activity falls within the definition of Excessive Trading set forth above.

    Our failure to send or an individual’s or entity’s failure to receive any warning letter or other notice contemplated under our Excessive Trading Policy will not prevent us from suspending that individual’s or entity’s Electronic Trading Privileges or taking any other action provided for in our Excessive Trading Policy.

    We do not allow exceptions to our Excessive Trading Policy. We reserve the right to modify our Excessive Trading Policy, or the policy as it relates to a particular fund, at any time without prior notice, depending on, among other factors, the needs of the underlying fund(s), the best interests of policy owners and fund investors and/or state or federal regulatory requirements. If we modify our policy, it will be applied uniformly to all policy owners or, as applicable, to all policy owners investing in the underlying fund.

    Our Excessive Trading Policy may not be completely successful in preventing market timing or excessive trading activity. If it is not completely successful, fund performance and management may be adversely affected, as noted above.

    Limits Imposed by the Funds. Each underlying fund available through the variable insurance and retirement products offered by us and/or the other members of the ING family of companies, either by prospectus or stated policy, has adopted or may adopt its own excessive/frequent trading policy, and orders for the purchase of fund shares are subject to acceptance or rejection by the underlying fund. We reserve the right, without prior notice, to implement fund purchase restrictions and/or limitations on an individual or entity that the fund has identified as violating its excessive/frequent trading policy and to reject any allocation or transfer request to a Subaccount if the corresponding fund will not accept the allocation or transfer for any reason. All such restrictions and/or limitations (which may include, but are not limited to, suspension of Electronic Trading Privileges and/or blocking of future purchases of a fund or all funds within a fund family) will be done in accordance with the directions we receive from the fund.

    Agreements to Share Information with Fund Companies. As required by Rule 22c-2 under the 1940 Act, we have entered into information sharing agreements with each of the fund companies whose funds are offered through the policy. Policy owner trading information is shared under these agreements as necessary for the fund companies to monitor fund trading and our implementation of our Excessive Trading Policy. Under these agreements, the company is required to share information regarding policy owner transactions, including, but not limited to, information regarding fund transfers initiated by you. In addition to information about policy owner transactions, this information may include personal policy owner information, including names and social security numbers or other tax identification numbers.

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    As a result of this information sharing, a fund company may direct us to restrict a policy owner’s transactions if the fund determines that the policy owner has violated the fund’s excessive/frequent trading policy. This could include the fund directing us to reject any allocations of premium or Account Value to the fund or all funds within the fund family.

    Conversion to a Guaranteed Policy

    During the first two policy years you may permanently convert your policy to a guaranteed policy, unless state law requires differently. If you elect to make this change, unless state law requires that we issue to you a new guaranteed policy, we will permanently transfer the amounts you have invested in the Subaccounts of the Separate Account to the Guaranteed Interest Division and allocate all future Net Premium to the Guaranteed Interest Division. After you exercise this right you may not allocate future premium payments or make transfers to the Subaccounts of the Separate Account. We do not charge for this change. Contact our Customer Service Center or your agent/registered representative for information about the conversion rights available in your state.

    Partial Withdrawals

    Beginning in the second policy year (or the first policy year for “in corridor” policies) you may withdraw part of your policy’s Surrender Value. Twelve partial withdrawals are currently allowed each policy year, and a partial withdrawal must be at least $100.00. The maximum partial withdrawal you may take is the amount which leaves $500.00 as your Surrender Value (or for in corridor policies during the first policy year, the amount that would cause your policy to no longer qualify as “in corridor”). If your partial withdrawal request is for more than the maximum, we will require you to surrender your policy or reduce the amount of the partial withdrawal.

    A policy is “in corridor” if:

    • Under Death Benefit Option 1, your Account Value multiplied by the appropriate factor from the definition of life insurance factors described in Appendix A is greater than the amount of your base insurance coverage;
    • Under Death Benefit Option 2, your Account Value multiplied by the appropriate factor from the definition of life insurance factors described in Appendix A is greater than your base insurance coverage plus your Account Value; or
    • Under Death Benefit Option 3, your Account Value multiplied by the appropriate factor from the definition of life insurance factors described in Appendix A is greater than your base insurance coverage plus the sum of your premium payments minus partial withdrawals.

    We charge a partial withdrawal fee of $10.00 for each partial withdrawal. See Partial Withdrawal Fee, page 29.

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    Unless you specify a different allocation, we will take partial withdrawals from the Guaranteed Interest Division and the Subaccounts of the Separate Account in the same proportion that your value in each has to your Net Account Value immediately before the partial withdrawal. We will determine these proportions at the end of the valuation period during which we receive your partial withdrawal request. However, amounts withdrawn from the Guaranteed Interest Division may not exceed the amount of the total partial withdrawal multiplied by the ratio of your Guaranteed Interest Division Value to your Net Account Value immediately before the partial withdrawal.

    Unless you request otherwise, proceeds from a partial withdrawal generally will be paid into an interest bearing account that you can access, without penalty, through a checkbook feature. See Transaction Processing, page 81.

    Effects of a Partial Withdrawal. We will reduce your Account Value by the amount of the partial withdrawal plus the partial withdrawal fee. Your Account Value may also be reduced by the amount of a surrender charge if you take a partial withdrawal which decreases your base insurance coverage.

    A partial withdrawal may also cause the termination of the death benefit guarantee because we deduct the amount of the partial withdrawal from the total premiums paid when calculating whether you have paid sufficient premiums in order to maintain the death benefit guarantee.

    The amount of your base insurance coverage is not reduced by the amount of a partial withdrawal when the Base Death Benefit has been increased to qualify your policy as life insurance under the Internal Revenue Code and the amount withdrawn is not greater than that which reduces your Account Value to the level which no longer requires that the Base Death Benefit be increased for Internal Revenue Code purposes. Otherwise, depending upon the death benefit option in effect, a partial withdrawal may reduce the amount of your base insurance coverage.

    Under Death Benefit Option 1, a partial withdrawal will reduce the amount of your base insurance coverage by the amount of the partial withdrawal.

    Under Death Benefit Option 2, a partial withdrawal will not reduce the amount of your base insurance coverage.

    Under Death Benefit Option 3, a partial withdrawal will reduce the amount of your base insurance coverage by the amount of a partial withdrawal in excess of the total premium we have received from you minus the sum of all your prior partial withdrawals.

    If a partial withdrawal reduces the amount of base insurance coverage, the total amount of insurance coverage will also be reduced for the current year and all future years by an equal amount. Therefore, a partial withdrawal can affect the amount of pure insurance protection under the policy.

    We will not allow a partial withdrawal if the amount of base insurance coverage after the partial withdrawal would be less than $50,000.00.

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    A reduction in the amount of base insurance coverage as a result of a partial withdrawal will be pro-rated among the existing coverage Segments, unless state law requires otherwise.

    A partial withdrawal may have adverse tax consequences depending on the circumstances. See Tax Status of the Policy, page 71.

    Termination of Coverage

    Your insurance coverage will continue under the policy until you surrender your policy or it lapses.

    Surrender

    You may surrender your policy for its Surrender Value at any time after the free look period while the insured person is alive. Your Surrender Value is your Account Value minus any surrender charge and any outstanding loan amount including accrued but unpaid loan interest.

    You may take your Surrender Value in other than one payment.

    We compute your Surrender Value as of the Valuation Date we receive your written surrender request in good order and policy at our Customer Service Center. All insurance coverage ends on the date we receive your surrender request and policy.

    Unless you request otherwise, we will deposit your Surrender Value into an interest bearing account that you can access, without penalty, through a checkbook feature. See Transaction Processing, page 81.

    If you surrender your policy we may deduct a surrender charge. See Surrender Charge, page 29. Surrender of your policy may have adverse tax consequences.

    See Distributions Other than Death Benefits, page 72.

    Lapse

    Your policy will not lapse and your insurance coverage under the policy will continue if on any Monthly Processing Date:

    • A death benefit guarantee is in effect;
    • Your Net Account Value is enough to pay the periodic fees and charges when due; or
    • During the continuation of coverage period, your Account Value exceeds your outstanding loan amount including accrued but unpaid loan interest.

    Grace Period. If on a Monthly Processing Date you do not meet any of these conditions, your policy will enter the 61-day grace period during which you must make a sufficient premium payment to avoid having your policy lapse and insurance coverage terminate.

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    We will notify you that your policy is in a grace period at least 30 days before it ends. We will send this notice to you (and a person to whom you have assigned your policy) at your last known address in our records. We will notify you of the premium payment necessary to prevent your policy from lapsing. This amount generally equals the past due charges, plus the estimated periodic fees and charges, and charges of any optional rider benefits for the next two months. If we receive payment of the required amount before the end of the grace period, we apply it to your policy in the same manner as your other premium payments, and then we deduct the overdue amounts from your Account Value.

    If you do not pay the full amount within the 61-day grace period, your policy and its riders lapse without value. We withdraw your remaining Separate Account and Guaranteed Interest Division values, deduct amounts you owe us and inform you that your coverage has ended.

    If the insured person dies during the grace period we pay Death Benefit Proceeds to your beneficiaries with reductions for your outstanding loan amount, accrued but unpaid loan interest and periodic fees and charges owed.

    During the early policy years your Net Account Value may not be enough to cover the periodic fees and charges due each month, and you may need to pay sufficient premium to keep the death benefit guarantee in force. See Premium Payments, page 24.

    If your policy lapses, any distribution of Account Value may be subject to current taxation. See Distributions Other than Death Benefits, page 72.

    Reinstatement

    Reinstatement means putting a lapsed policy back in force. You may reinstate a lapsed policy and its riders (other than a Guaranteed Death Benefit Rider or the Guaranteed Minimum Accumulation Benefit Rider) by written request any time within five years after it has lapsed and before the insured person reaches age 121. A policy that was surrendered may not be reinstated.

    To reinstate the policy and available riders, you must submit evidence of insurability satisfactory to us and pay a premium large enough to keep the policy and any rider benefits in force during the grace period and for at least two months after reinstatement. When we reinstate your policy, we reinstate the surrender charges for the amount and time remaining as if your coverage had not lapsed. If you had a loan existing when coverage lapsed, unless directed otherwise we will reinstate it with accrued but unpaid loan interest to the date of lapse.

    When a policy is reinstated, unless otherwise directed by you we will allocate the Net Premium received to the Subaccounts of the Separate Account and the Guaranteed Interest Division according to the premium allocation instructions in effect at the start of the grace period. Your Account Value on the reinstatement date will equal:

    • The Account Value at the end of the grace period; plus
    • The Net Premium paid on reinstatement; minus
    • Any unpaid fees and charges through the end of the grace period.

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    A policy that lapses and is reinstated more than 90 days after lapsing may be classified as a modified endowment contract for tax purposes. You should consult with a qualified tax adviser to determine whether reinstating a lapsed policy will cause it to be classified as a modified endowment contract. See Modified Endowment Contracts, page 72.

    TAX CONSIDERATIONS

    The following summary provides a general description of the federal income tax considerations associated with the policy and does not purport to be complete or to cover federal estate, gift and generation-skipping tax implications, state and local taxes or other tax situations. We have written this discussion to support the promotion and marketing of our products and we do not intend it as tax advice. This summary is not intended to and cannot be used to avoid any tax penalties that may be imposed upon you. Counsel or other qualified tax advisers should be consulted for more complete information. This discussion is based upon our understanding of the present federal income tax laws. No representation is made as to the likelihood of continuation of the present federal income tax laws or as to how they may be interpreted by the IRS.

    The following discussion generally assumes that the policy will qualify as a life insurance contract for federal tax purposes.

    Tax Status of the Company

    We are taxed as a life insurance company under the Internal Revenue Code. The Separate Account is not a separate entity from us. Therefore, it is not taxed separately as a “regulated investment company,” but is taxed as part of the company. We automatically apply investment income and capital gains attributable to the Separate Account to increase reserves under the policy. Because of this, under existing federal tax law we believe that any such income and gains will not be taxed to us. In addition, any foreign tax credits or deductions attributable to the Separate Account will first be used to reduce any income taxes imposed on the Separate Account before being used by the company.

    In summary, we do not expect that we will incur any federal income tax liability attributable to the Separate Account and we do not intend to make provisions for any such taxes. However, if changes in the federal tax laws or their interpretation result in our being taxed on income or gains attributable to the Separate Account, then we may impose a charge against the Separate Account (with respect to some or all of the policies) to set aside provisions to pay such taxes.

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    Tax Status of the Policy

    This policy is designed to qualify as a life insurance contract under the Internal Revenue Code. All terms and provisions of the policy shall be construed in a manner that is consistent with that design. In order to qualify as a life insurance contract for federal income tax purposes and to receive the tax treatment normally accorded life insurance contracts under federal tax law, a policy must satisfy certain requirements that are set forth in Section 7702 of the Internal Revenue Code. Specifically, the policy must meet the requirements of either the cash value accumulation test or the guideline premium test. See Death Benefit Qualification Tests, page 38. If your variable life policy does not satisfy one of these two alternate tests, it will not be treated as life insurance under Internal Revenue Code 7702. You would then be subject to federal income tax on your policy income as you earn it. While there is very little guidance as to how these requirements are applied, we believe it is reasonable to conclude that our policies satisfy the applicable requirements. If it is subsequently determined that a policy does not satisfy the applicable requirements, we will take appropriate and reasonable steps to bring the policy into compliance with such requirements and we reserve the right to restrict policy transactions or modify your policy in order to do so. See Tax Treatment of Policy Death Benefits, page 72. If we return premium in order to bring your policy into compliance with the requirements of Section 7702, it will be refunded on a last-in, first-out basis and may be taken from the investment options in which your Account Value is allocated based on your premium allocation in effect.

    Diversification and Investor Control Requirements

    In addition to meeting the Internal Revenue Code Section 7702 tests, Internal Revenue Code Section 817(h) requires investments within a separate account, such as our Separate Account, to be adequately diversified. The Treasury has issued regulations that set the standards for measuring the adequacy of any diversification, and the IRS has published various revenue rulings and private letter rulings addressing diversification issues. To be adequately diversified, each Subaccount and its corresponding fund must meet certain tests. If these tests are not met your variable life policy will not be adequately diversified and not treated as life insurance under Internal Revenue Code Section 7702. You would then be subject to federal income tax on your policy income as you earn it. Each Subaccount’s corresponding fund has represented that it will meet the diversification standards that apply to your policy. Accordingly, we believe it is reasonable to conclude that the diversification requirements have been satisfied. If it is determined, however, that your variable life policy does not satisfy the applicable diversification regulations and rulings because a Subaccount’s corresponding fund fails to be adequately diversified for whatever reason, we will take appropriate and reasonable steps to bring your policy into compliance with such regulations and rulings and we reserve the right to modify your policy as necessary in order to do so.

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    In certain circumstances, owners of a variable life insurance policy have been considered, for federal income tax purposes, to be the owners of the assets of the separate account supporting their policies, due to their ability to exercise investment control over such assets. When this is the case, the policy owners have been currently taxed on income and gains attributable to the separate account assets. Your ownership rights under your policy are similar to, but different in some ways from those described by the IRS in rulings in which it determined that policy owners are not owners of separate account assets. For example, you have additional flexibility in allocating your premium payments and your Account Values. These differences could result in the IRS treating you as the owner of a pro rata share of the Separate Account assets. We do not know what standards will be set forth in the future, if any, in Treasury regulations or rulings. We reserve the right to modify your policy, as necessary, to try to prevent you from being considered the owner of a pro rata share of the Separate Account assets, or to otherwise qualify your policy for favorable tax treatment.

    Tax Treatment of Policy Death Benefits

    The death benefit, or an accelerated death benefit, under a policy is generally excludable from the gross income of the beneficiary(ies) under Section 101(a)(1) of the Internal Revenue Code. However, there are exceptions to this general rule. Additionally, ownership and beneficiary designations, including change of either, may have consequences under federal, state and local income, estate, inheritance, gift, generation-skipping and other tax laws. The individual situation of each policy owner or beneficiary will determine the extent, if any, of those taxes and you should consult a qualified tax adviser.

    Distributions Other than Death Benefits

    Generally, the policy owner will not be taxed on any of the Account Value until there is a distribution. When distributions from a policy occur, or when loan amounts are taken from or secured by a policy, the tax consequences depend on whether or not the policy is a “modified endowment contract.”

    Modified Endowment Contracts

    Under the Internal Revenue Code, certain life insurance contracts are classified as “modified endowment contracts” and are given less favorable tax treatment than other life insurance contracts. Due to the flexibility of the policies as to premiums and benefits, the individual circumstances of each policy will determine whether or not it is classified as a modified endowment contract. The rules are too complex to be summarized here, but generally depend on the amount of premiums we receive during the first seven policy years. Certain changes in a policy after it is issued, such as reduction or increase in benefits or policy reinstatement, could also cause it to be classified as a modified endowment contract or increase the period during which the policy must be tested. A current or prospective policy owner should consult with a qualified tax adviser to determine whether or not a policy transaction will cause the policy to be classified as a modified endowment contract.

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    If a policy becomes a modified endowment contract, distributions that occur during the policy year will be taxed as distributions from a modified endowment contract as described below. In addition, distributions from a policy within two years before it becomes a modified endowment contract will be taxed in this manner. This means that a distribution made from a policy that is not a modified endowment contract could later become taxable as a distribution from a modified endowment contract.

    Additionally, all modified endowment contracts that are issued by us (or our affiliates) to the same policy owner during any calendar year are treated as one modified endowment contract for purposes of determining the amount includible in the policy owner’s income when a taxable distribution occurs.

    Once a policy is classified as a modified endowment contract, the following tax rules apply both prospectively and to any distributions made in the prior two years:

    • All distributions other than death benefits, including distributions upon surrender and partial withdrawals, from a modified endowment contract will be treated first as distributions of gain, if any, and are taxable as ordinary income. Amounts will be treated as tax-free recovery of the policy owner’s investment in the policy only after all gain has been distributed. The amount of gain in the policy will be equal to the difference between the policy’s value, determined without regard to any surrender charges, and the investment in the policy;
    • Loan amounts taken from or secured by a policy classified as a modified endowment contract, and also assignments or pledges of such a policy (or agreements to assign or pledge such a policy), are treated first as distributions of gain, if any, and are taxable as ordinary income. Amounts will be treated as tax-free recovery of the policy owner’s investment in the policy only after all gain has been distributed; and
    • A 10.00% additional income tax penalty may be imposed on the distribution amount subject to income tax. This tax penalty generally does not apply to a policy owned by an individual where the distributions are (a) made on or after the date on which the taxpayer attains age 59½; (b) attributable to the taxpayer becoming disabled (as defined in the Internal Revenue Code); or (c) part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer and his or her beneficiary. Consult a qualified tax adviser to determine whether or not you may be subject to this penalty tax.

    If we discover that your policy has inadvertently become a modified endowment contract, unless you have indicated otherwise, we will assume that you do not want it to be classified as a modified endowment contract and attempt to fix this by refunding any excess premium with related interest. The excess gross premium will be refunded on a last-in, first-out basis and may be taken from the investment options in which your Account Value is allocated based on your premium allocation in effect.

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    Policies That Are Not Modified Endowment Contracts

    Distributions other than death benefits from a policy that is not classified as a modified endowment contract are generally treated first as a recovery of the policy owner’s investment in the policy. Only after the recovery of all investment in the policy is there taxable income. However, certain distributions made in connection with policy benefit reductions during the first 15 policy years may be treated in whole or in part as ordinary income subject to tax. Consult a qualified tax adviser to determine whether or not any distributions made in connection with a reduction in policy benefits will be subject to tax.

    Loan amounts from or secured by a policy that is not a modified endowment contract are generally not taxed as distributions. Finally, neither distributions from, nor loan amounts from or secured by, a policy that is not a modified endowment contract are subject to the 10.00% additional income tax penalty.

    Investment in the Policy

    Your investment in the policy is generally the total of your aggregate premiums. When a distribution is taken from the policy, your investment in the policy is reduced by the amount of the distribution that is tax free.

    Other Tax Matters

    Policy Loans

    In general, interest on a policy loan will not be deductible. A limited exception to this rule exists for certain interest paid in connection with certain “key person” insurance. You should consult a qualified tax adviser before taking out a loan to determine whether you qualify under this exception.

    Moreover, the tax consequences associated with a preferred loan (preferred loans are loans where the interest rate charged is less than or equal to the interest rate credited) available in the policy are uncertain. Before taking out a policy loan, you should consult a qualified tax adviser as to the tax consequences.

    If a loan from a policy is outstanding when the policy, other than a modified endowment contract, is surrendered or lapses, then the amount of the outstanding indebtedness will be added to the amount treated as a distribution from the policy and will be taxed accordingly. If your policy has large outstanding policy loans, you may have to choose between paying high premiums to keep the policy from lapsing and paying significant income tax if you allow the policy to lapse.

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    Accelerated Benefit Rider

    The benefit payments under the Accelerated Benefit Rider are intended to be fully excludable from the gross income of the recipient if the recipient is the insured under the policy, or is an individual who has no business or financial connection with the insured. (See Accelerated Benefit Rider, page 52, for more information about this rider.) However, you should consult a qualified tax adviser about the consequences of adding this rider to a policy or requesting payment under this rider.

    Continuation of a Policy

    The tax consequences of continuing the policy after an insured person reaches age 100 are unclear. For example, in certain situations it is possible that after an insured person reaches age 100 the IRS could treat you as being in constructive receipt of the Account Value if the Account Value becomes equal to the death benefit. If this happens, an amount equal to the excess of the Account Value over the investment in the policy would be includible in your income at that time. Because we believe the policy will continue to constitute life insurance at that time and the IRS has not issued any guidance on this issue, we do not intend to tax report any earnings due to the possibility of constructive receipt in this circumstance. You should consult a qualified tax adviser if you intend to keep the policy in force after an insured person reaches age 100.

    Section 1035 Exchanges

    Internal Revenue Code Section 1035 provides, in certain circumstances, that no gain or loss will be recognized on the exchange of one life insurance policy solely for another life insurance policy or an endowment, annuity or qualified long term care contract. We accept Section 1035 exchanges with outstanding loans. Special rules and procedures apply to Section 1035 exchanges. These rules can be complex, and if you wish to take advantage of Section 1035, you should consult a qualified tax adviser.

    Tax-exempt Policy Owners

    Special rules may apply to a policy that is owned by a tax-exempt entity. Tax-exempt entities should consult a qualified tax adviser regarding the consequences of purchasing and owning a policy. These consequences could include an effect on the tax-exempt status of the entity and the possibility of the unrelated business income tax.

    Tax Law Changes

    Although the likelihood of legislative action or tax reform is uncertain, there is always the possibility that the tax treatment of the policy could be changed by legislation or other means. It is also possible that any change may be retroactive (that is, effective before the date of the change). You should consult a qualified tax adviser with respect to legislative developments and their effect on the policy.

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    Policy Changes to Comply with the Law

    So that your policy continues to qualify as life insurance under the Internal Revenue Code, we reserve the right to return or refuse to accept all or part of your premium payments or to change your death benefit. We may reject any policy request, including a partial withdrawal request if it would cause your policy to fail to qualify as life insurance or would cause us to return premium to you. We also may make changes to your policy or its riders or make distributions from your policy to the degree that we deem necessary to qualify your policy as life insurance for tax purposes. Any increase in your death benefit will cause an increase in your cost of insurance charges.

    Policy Use in Various Plans and Arrangements

    Policy owners may use the policy in various arrangements, including:

    • Certain qualified plans;
    • Non-qualified deferred compensation or salary continuance plans;
    • Split dollar insurance arrangements;
    • Executive bonus plans;
    • Retiree medical benefit plans; and
    • Other plans or arrangements.

    The tax consequences of these arrangements may vary depending on the particular facts and circumstances of each arrangement. If you want to use your policy with any of these various arrangements, you should consult a qualified tax adviser regarding the tax issues of your particular arrangement.

    Life Insurance Owned by Businesses

    Congress has enacted rules relating to life insurance owned by businesses. For example, in the case of a policy issued to a nonnatural taxpayer, or held for the benefit of such an entity, a portion of the taxpayer’s otherwise deductible interest expenses may not be deductible as a result of ownership of a policy even if no loans are taken under the policy. (An exception to this rule is provided for certain life insurance contracts that cover the life of an individual who is a 20.00% owner, or an officer, director, or employee of a trade or business.) In addition, in certain instances, a portion of the death benefit payable under an employer-owned policy may be taxable. As another example, special rules apply if a business is subject to the alternative minimum tax. Any business contemplating the purchase of a new policy or a change in an existing policy should consult a qualified tax adviser.

    Income Tax Withholding

    The IRS requires us to withhold income taxes from any portion of the amounts individuals receive in a taxable transaction. However, if you reside in the U.S., we generally do not withhold income taxes if you elect in writing not to have withholding apply. If the amount withheld for you is insufficient to cover income taxes, you will have to pay additional income taxes and possibly penalties later. We will also report to the IRS the amount of any taxable distributions.

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    Life Insurance Purchases by Non-Resident Aliens

    If you are not a U.S. citizen or resident, you will generally be subject to U.S. Federal withholding tax on taxable distributions from life insurance policies at a 30.00% rate, unless a lower treaty rate applies. In addition, you may be subject to state and/or municipal taxes and taxes imposed by your country of citizenship or residence. You should consult a qualified tax adviser before purchasing a policy.

    Ownership and Beneficiary Designations

    Ownership and beneficiary designations, including change of either, may have consequences under federal, state and local income, estate, inheritance, gift, generation-skipping and other tax laws. The individual situation of each policy owner or beneficiary will determine the extent, if any, of these taxes and you should consult a qualified tax adviser.

    Same-Sex Relationships

    Currently, section 3 of the federal Defense of Marriage Act does not recognize same-sex relationships for purposes of federal law. Therefore, benefits afforded by federal tax law to an opposite-sex spouse under the Internal Revenue Code, such as the favorable income-deferral options afforded by federal tax law to an opposite-sex spouse under Internal Revenue Code section 401(a)(9) are currently NOT available to persons in a same-sex relationship. Persons in a same-sex relationship who are considering the purchase of a policy should consult a qualified tax adviser.

    Fair Value of Your Policy

    It is sometimes necessary for tax and other reasons to determine the “value” of your policy. The value can be measured differently for different purposes. It is not necessarily the same as the Account Value or the Net Account Value. You should consult with a qualified tax adviser for guidance as to the appropriate methodology for determining the fair market value of your policy.

    You should consult qualified legal or tax advisers for complete information on federal, state, local and other tax considerations.

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    ADDITIONAL INFORMATION

    General Policy Provisions

    Your Policy

    The policy is a contract between you and us and is the combination of:

    • Your policy;
    • A copy of your original application and applications for benefit increases or decreases;
    • Your riders;
    • Your endorsements;
    • Your policy schedule pages; and
    • Your reinstatement applications.

    If you make a change to your coverage, we give you a copy of your changed application and new policy schedules. If you send your policy to us, we attach these items to your policy and return it to you. Otherwise, you need to attach them to your policy.

    Unless there is fraud, we consider all statements made in an application to be representations and not guarantees. We use no statement to deny a claim, unless it is in an application.

    A president or other officer of our company and our secretary or assistant secretary must sign all changes or amendments to your policy. No other person may change its terms or conditions.

    Age

    We issue your policy at the insured person’s age (stated in your policy schedule) based on the nearest birthday to the Policy Date. On the Policy Date, the insured person can generally be no more than age 85 (age 70 for guaranteed issue policies).

    We often use age to calculate rates, charges and values. We determine the insured person’s age at a given time by adding the number of completed policy years to the age calculated at issue and shown in the schedule.

    Ownership

    The original owner is the person named as the owner in the policy application. The owner can exercise all rights and receive benefits during the life of the insured person. These rights include the right to change the owner, beneficiaries or the method designated to pay Death Benefit Proceeds.

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    As a matter of law, all rights of ownership are limited by the rights of any person who has been assigned rights under the policy and any irrevocable beneficiaries.

    You may name a new owner by giving us written notice. The effective date of the change to the new owner is the date the prior owner signs the notice. However, we will not be liable for any action we take before a change is recorded at our Customer Service Center. A change in ownership may cause the prior owner to recognize taxable income on gain under the policy.

    Beneficiaries

    You, as owner, name the beneficiaries when you apply for your policy. The primary beneficiaries who survive the insured person receive the Death Benefit Proceeds. Other surviving beneficiaries receive Death Benefit Proceeds only if there are no surviving primary beneficiaries. If more than one beneficiary survives the insured person, they share the Death Benefit Proceeds equally, unless you specify otherwise. If none of your policy beneficiaries has survived the insured person, we pay the Death Benefit Proceeds to you or to your estate, as owner. If a beneficiary is a minor, the Death Benefit Proceeds will be held in an interest bearing account until that beneficiary attains the age of majority.

    You may name new beneficiaries during the insured person’s lifetime. We pay Death Benefit Proceeds to the beneficiaries whom you have most recently named according to our records. We do not make payments to multiple sets of beneficiaries. The designation of certain beneficiaries may have tax consequences. See Other Tax Matters, page 74.

    Collateral Assignment

    You may assign your policy by sending written notice to us. After we record the assignment, your rights as owner and the beneficiaries’ rights (unless the beneficiaries were made irrevocable beneficiaries under an earlier assignment) are subject to the assignment. It is your responsibility to make sure the assignment is valid. The transfer or assignment of a policy may have tax consequences. See Other Tax Matters, page 74.

    Incontestability

    After your policy has been in force during the lifetime of the insured person for two years from your Policy Date, we will not contest it except for nonpayment of premium. Likewise, after your policy has been in force during the lifetime of the insured person for two years from the effective date of any new coverage segment or benefit or from the date of reinstatement, we will not contest it except for nonpayment of premium.

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    Misstatements of Age or Gender

    Notwithstanding the Incontestability provision above, if the insured person’s age or gender has been misstated, we adjust the death benefit to the amount that would have been purchased for the insured person’s correct age and gender. We base the adjusted death benefit on the cost of insurance charges deducted from your Account Value on the last Monthly Processing Date before the insured person’s death, or as otherwise required by law.

    If unisex cost of insurance rates apply, we do not make any adjustments for a misstatement of gender.

    Suicide

    If the insured person commits suicide (while sane or insane), within two years of your Policy Date, unless otherwise required by law, we limit Death Benefit Proceeds to:

    • The total premium we receive to the time of death; minus
    • Any outstanding loan amount, including accrued but unpaid loan interest; minus
    • Partial withdrawals taken.

    We make a limited payment to the beneficiaries for a new coverage Segment or other increase if the insured person commits suicide (while sane or insane), within two years of the effective date of a new coverage Segment or within two years of an increase in any other benefit, unless otherwise required by law. The limited payment is equal to the cost of insurance and periodic fees and charges which that deducted for the increase.

    Anti-Money Laundering

    In order to protect against the possible misuse of our products in money laundering or terrorist financing, we have adopted an anti-money laundering program satisfying the requirements of the USA PATRIOT Act. Among other things, this program requires us, our agents and customers to comply with certain procedures and standards that serve to assure that our customers’ identities are properly verified and that premiums are not derived from improper sources.

    Under our anti-money laundering program, we may require policy owners, insured persons and/or beneficiaries to provide sufficient evidence of identification, and we reserve the right to verify any information provided to us by accessing information databases maintained internally or by outside firms.

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    We may also refuse to accept certain forms of premium payments or loan repayments (traveler’s cheques, for example) or restrict the amount of certain forms of premium payments or loan repayments (money orders totaling more than $5,000.00, for example). In addition, we may require information as to why a particular form of payment was used (third party checks, for example) and the source of the funds of such payment in order to determine whether or not we will accept it. Use of an unacceptable form of payment may result in us returning the payment to you and your policy either entering the 61-day grace period or lapsing. See Lapse, page 68. See also Premium Payments Affect Your Coverage, page 25.

    Applicable laws designed to prevent terrorist financing and money laundering might, in certain circumstances, require us to block certain transactions until authorization is received from the appropriate regulator. We may also be required to provide additional information about you and your policy to government regulators.

    Our anti-money laundering program is subject to change without notice to take account of changes applicable in laws or regulations and our ongoing assessment of our exposure to illegal activity.

    Transaction Processing

    Generally, within seven days of when we receive all information required to process a payment, we pay:

    • Death Benefit Proceeds;
    • Surrender Value;
    • Partial withdrawals; and
    • Loan proceeds.

    We may delay processing these transactions if:

    • The New York Stock Exchange is closed for trading;
    • Trading on the New York Stock Exchange is restricted by the SEC;
    • There is an emergency so that it is not reasonably possible to sell securities in the Subaccounts or to determine the value of a Subaccount’s assets; and
    • A governmental body with jurisdiction over the Separate Account allows suspension by its order.

    SEC rules and regulations generally determine whether or not these conditions exist.

    We execute transfers among the Subaccounts as of the Valuation Date of our receipt of your request at our Customer Service Center.

    We determine the death benefit as of the date of the insured person’s death. The Death Benefit Proceeds are not affected by subsequent changes in the value of the Subaccounts.

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    We may delay payment from our Guaranteed Interest Division for up to six months, unless law requires otherwise, of surrender proceeds, partial withdrawal amounts or loan amounts. If we delay payment more than 30 days, we pay interest at our declared rate (or at a higher rate if required by law) from the date we receive your complete request.

    Unless you request otherwise, we generally pay Death Benefit Proceeds, Surrender Value and partial withdrawals into an interest bearing account that may be accessed by you or the beneficiary, as applicable, through a checkbook feature. This interest bearing account is backed by our general account, and the checkbook feature may be used to access the payment at any time without penalty. Interest credited under this account may be less than under other settlement options, and we seek to make a profit on this account.

    Notification and Claims Procedures

    Except for certain authorized telephone requests, we must receive in writing any election, designation, change, assignment or request made by the owner.

    You must use a form acceptable to us. We are not liable for actions taken before we receive and record the written notice. We may require you to return your policy for changes to your policy or if you surrender it.

    If the insured person dies while your policy is in force, please let us know as soon as possible. We will send you instructions on how to make a claim. As proof of the insured person’s death, we may require proof of the deceased insured person’s age and a certified copy of the death certificate.

    The beneficiaries and the deceased insured person’s next of kin may need to sign authorization forms. These forms allow us to get information such as medical records of doctors and hospitals used by the deceased insured person.

    Telephone Privileges

    Telephone privileges may be provided to you and your agent/registered representative and his/her assistant. You may request such privileges for yourself and you may authorize us to grant such privileges to your agent/registered representative and his/her assistant by making the appropriate election(s) on your application or by contacting our Customer Service Center.

    Telephone privileges allow you or your agent/registered representative and his/her assistant to call our Customer Service Center to:

    • Make transfers;
    • Change premium allocations;
    • Change your dollar cost averaging and automatic rebalancing programs; and
    • Request a loan.

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    Our Customer Service Center uses reasonable procedures to make sure that instructions received by telephone are genuine. These procedures may include:

    • Requiring some form of personal identification;
    • Providing written confirmation of any transactions; and
    • Tape recording telephone calls.

    By accepting telephone privileges, you authorize us to record your telephone calls with us. If we reasonably believe telephone instructions to be genuine, we are not liable for losses from unauthorized or fraudulent instructions. We may discontinue this privilege at any time. See Limits on Frequent or Disruptive Transfers, page 62.

    You may revoke these privileges at any time by writing to our Customer Service Center.

    Telephone and facsimile privileges may not always be available. Telephone or fax systems, whether yours, your service provider’s or your agent/registered representative’s, can experience outages or slowdowns for a variety of reasons. These outages or slowdowns may prevent or delay our receipt of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your request in writing.

    Non-participation

    Your policy does not participate in the surplus earnings of Security Life of Denver Insurance Company.

    Advertising Practices and Sales Literature

    We may use advertisements and sales literature to promote this product, including:

    • Articles on variable life insurance and other information published in business or financial publications;
    • Indices or rankings of investment securities; and
    • Comparisons with other investment vehicles, including tax considerations.

    We may use information regarding the past performance of the Subaccounts and funds. Past performance is not indicative of future performance of the Subaccounts or funds and is not reflective of the actual investment experience of policy owners.

    We may feature certain Subaccounts, the underlying funds and their managers, as well as describe asset levels and sales volumes. We may refer to past, current, or prospective economic trends and investment performance or other information we believe may be of interest to our customers.

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    Settlement Options

    You may elect to take the Surrender Value in other than one lump-sum payment. Likewise, you may elect to have the beneficiaries receive the Death Benefit Proceeds other than in one lump-sum payment, if you make this election during the insured person’s lifetime. If you have not made this election, the beneficiaries may do so within 60 days after we receive proof of the insured person’s death.

    The investment performance of the Subaccounts does not affect payments under these settlement options. Instead, interest accrues at a fixed rate based on the option you choose. The declared interest rate will never be less than 3.00%, and any declared interest rate will be in effect for at least 12 months. Payment options are subject to our rules at the time you make your selection. Currently, a periodic payment must be at least $20.00 and the total proceeds must be at least $2,000.00.

    The following settlement options are available:

    • Settlement Option 1 – The proceeds and interest are paid in equal installments for a specified period until the proceeds and interest are all paid;
    • Settlement Option 2 – The proceeds provide an annuity payment with a specified number of months. The payments are continued for the life of the primary payee. If the primary payee dies before the certain period is over, the remaining payments are paid to a contingent payee;
    • Settlement Option 3 – The proceeds are left with us to earn interest. Withdrawals and any changes are subject to our approval;
    • Settlement Option 4 – The proceeds and interest are paid in equal installments of a specified amount until the proceeds and interest are all paid; and
    • Settlement Option 5 – Other options we offer at the time we pay the benefit.

    If none of these settlement options have been elected, your Surrender Value or the Death Benefit Proceeds will be paid in one lump-sum payment.

    Unless you request otherwise, Death Benefit Proceeds generally will be paid into an interest bearing account that is backed by our general account and can be accessed by the beneficiary through a checkbook feature. The beneficiary may access the Death Benefit Proceeds at any time without penalty. Interest deducted on this account may be less than interest paid under other settlement options, and we seek to make a profit on this account. See Transaction Processing, page 81.

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    Reports

    Annual Statement. We will send you an annual statement once each policy year showing the amount of insurance coverage under your policy as well as your policy’s death benefit, Account and Surrender Values, the amount of premiums you have paid, the amounts you have withdrawn, borrowed or transferred and the fees and charges we have imposed since the last statement.

    We send semi-annual reports with financial information on the funds, including a list of investment holdings of each fund.

    We send confirmation notices to you throughout the year for certain policy transactions such as transfers between investment options, partial withdrawals and loans. You are responsible for reviewing the confirmation notices to verify that the transactions are being made as requested.

    Illustrations. To help you better understand how your Account Values will vary over time under different sets of assumptions, we will provide you with a personalized illustration projecting future results based on the age and risk classification of the insured person and other factors such as the amount of insurance coverage, death benefit option, planned premiums and rates of return (within limits) you specify. We may assess a charge not to exceed $25.00 for each illustration you request after the first in a policy year. See Excess Illustration Fee, page 30. Subject to regulatory approval, personalized illustrations may be based upon a weighted average rather than an arithmetic average of fund expenses.

    Other Reports. We will mail to you at your last known address of record at least annually a report containing such information as may be required by any applicable law. To reduce expenses, only one copy of most financial reports and prospectuses, including reports and prospectuses for the funds, will be mailed to your household, even if you or other persons in your household have more than one policy issued by us or an affiliate. Call our Customer Service Center toll-free at 1-877-253-5050 if you need additional copies of financial reports, prospectuses, historical account information or annual or semi-annual reports or if you would like to receive one copy for each policy in all future mailings.

    Distribution of the Policy

    We sell the policy through licensed insurance agents who are registered representatives of affiliated and unaffiliated broker/dealers. All broker/dealers who sell the policy have entered into selling agreements with ING America Equities, Inc., our affiliate and the principal underwriter and distributor of the policy. ING America Equities, Inc. is organized under the laws of the State of Colorado, registered with the SEC as a broker/dealer under the Securities Exchange Act of 1934, and a member of FINRA. Its principal office is located at 1290 Broadway, Denver, Colorado 80203-5699.

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    ING America Equities, Inc. offers the securities under the policies on a continuous basis. For the years ended December 31, 2009, 2008 and 2007, and 2006, the aggregate amount of underwriting commissions we paid to ING America Equities, Inc. was $23,513,844.00, $38,268,742.00 and $34,635,694.00 respectively.

    ING America Equities, Inc. does not retain any commissions or other amounts paid to it by us for sales of the policy. Rather, it pays all the amounts received from us to the broker/dealers for selling the policy, and part of that payment goes to your agent/registered representative.

    The following affiliated broker-dealers have entered into agreements with ING America Equities, Inc. for the sale of our variable life products.

    • ING Financial Advisers, LLC
    • ING Financial Partners, Inc.

    The amounts that we pay for the sale of the policy can generally be categorized as either commissions or other amounts. The commissions we pay can be further categorized as base commissions which may include a portion for wholesaling or supplemental commissions. However categorized, commissions paid will not exceed the total of the percentages shown below.

    Base commissions consist of a percentage of premium we receive for the policy up to the target premium amount and a percentage of premium we receive for the policy in excess of the target premium amount. We pay up to 90.00% of premium received up to target premium and 4.00% of premium received in excess of target premium received in the first policy year and 4.00% of premium received in renewal years two through five. These percentages may decrease thereafter.

    Supplemental or wholesaling commissions are paid based on a percentage of target premiums we receive for the policy and certain other designated insurance products sold during a calendar year. The percentages of such commissions that we pay may increase as the aggregate amount of premiums received for all products issued by the company and/or its affiliates during the calendar year increases. The maximum percentage of supplemental commissions that we may pay is 43.50%.

    Generally, the commissions paid on premiums for base coverage under the policy are greater than those paid on premiums for coverage under the Adjustable Term Insurance Rider. Be aware of this and discuss with your agent/registered representative the right blend of base coverage and Adjustable Term Insurance Rider coverage for you.

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    In addition to the sales compensation described above, ING America Equities, Inc. or the company, as appropriate, may also pay broker/dealers additional compensation or reimbursement of expenses for their efforts in selling the policy to you and other customers. These amounts may include:

    • Marketing/distribution allowances which may be based on the percentages of premium received, the aggregate commissions paid and/or the aggregate assets held in relation to certain types of designated insurance products issued by the company and/or its affiliates during the year;
    • Loans or advances of commissions in anticipation of future receipt of premiums (a form of lending to agents/registered representatives). These loans may have advantageous terms such as reduction or elimination of the interest charged on the loan and/or forgiveness of the principal amount of the loan, which terms may be conditioned on fixed insurance product sales;
    • Education and training allowances to facilitate our attendance at certain educational and training meetings to provide information and training about our products. We also hold training programs from time to time at our own expense;
    • Sponsorship payments or reimbursements for broker/dealers to use in sales contests and/or meetings for their agents/registered representatives who sell our products. We do not hold contests based solely on sales of this product;
    • Certain overrides and other benefits that may include cash compensation based on the amount of earned commissions, agent/representative recruiting or other activities that promote the sale of the policy; and
    • Additional cash or noncash compensation and reimbursements permissible under existing law. This may include, but is not limited to, cash incentives, merchandise, trips, occasional entertainment, meals and tickets to sporting events, client appreciation events, business and educational enhancement items, payment for travel expenses (including meals and lodging) to pre- approved training and education seminars and payment for advertising and sales campaigns.

    We may pay commissions, dealer concessions, wholesaling fees, overrides, bonuses, other allowances and benefits and the costs of all other incentives or training programs from our resources, which include the fees and charges imposed under the policy.

    The following is a list of the top 25 broker/dealers that, during 2009, received the most, in the aggregate, from us in connection with the sale of registered variable life insurance policies issued by us, ranked by total dollars received:

    • ING Financial Partners, Inc.
    • NFP Securities, Inc.
    • LPL Financial Corporation
    • Multi-Financial Securities Corporation
    • AXA Advisors, LLC
    • Financial Network Investment Corporation
    • Triad Advisors, Inc.
    • The Leaders Group, Inc.
    • National Planning Corporation
    • M Holdings Securities, Inc.

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    • SagePoint Financial, Inc.
    • ProEquities, Inc.
    • Centaurus Financial, Inc.
    • Raymond James Financial Services, Inc.
    • P.J. Robb Variable Corporation
    • Capital Analysts Inc.
    • QA3 Financial Corp.
    • First Heartland Capital, Inc.
    • Mutual Service Corporation
    • Ogilvie Security Advisors
    • Papalia Securities, Inc.
    • Commonweath Financial Network® Inc.
    • Ash Securities Wholesaling, Inc.
    • Morgan Stanley Smith Barney LLC
    • PlanMember Securities Corporation

    This is a general discussion of the types and levels of compensation paid by us for the sale of our variable life insurance policies. It is important for you to know that the payment of volume or sales-based compensation to a broker/dealer or registered representative may provide that registered representative a financial incentive to promote our policies over those of another company and may also provide a financial incentive to promote the policy offered by this prospectus over one of our other policies.

    Legal Proceedings

    We are not aware of any pending legal proceedings that involve the Separate Account as a party.

    The company is involved in threatened or pending lawsuits/arbitrations arising from the normal conduct of business. Due to the climate in insurance and business litigation/arbitration, suits against the company sometimes include claims for substantial compensatory, consequential or punitive damages and other types of relief. Moreover, certain claims are asserted as class actions, purporting to represent a group of similarly situated individuals. While it is not possible to forecast the outcome of such lawsuits/arbitrations, in light of existing insurance, reinsurance and established reserves, it is the opinion of management that the disposition of such lawsuits/arbitrations will not have a materially adverse effect on the company’s operations or financial position.

    ING America Equities, Inc., the principal underwriter and distributor of the policy, is a party to threatened or pending lawsuits/arbitration that generally arise from the normal conduct of business. Some of these suits may seek class action status and sometimes include claims for substantial compensatory, consequential or punitive damages and other types of relief. ING America Equities, Inc. is not involved in any legal proceeding that, in the opinion of management, is likely to have a material adverse effect on its ability to distribute the policy.

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    Financial Statements

    Financial statements of the Separate Account and the company are contained in the Statement of Additional Information. To request a free Statement of Additional Information, please contact our Customer Service Center at the address or telephone number on the back of this prospectus.

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    APPENDIX A
     
    Definition of Life Insurance Factors
     
    Guideline Premium Test Factors               
     
    Attained    Attained    Attained    Attained    Attained   
    Age  Factor  Age  Factor  Age  Factor  Age  Factor  Age  Factor 
    0-40  2.50  48  1.97  56  1.46  64  1.22  72  1.11 
    41  2.43  49  1.91  57  1.42  65  1.20  73  1.09 
    42  2.36  50  1.85  58  1.38  66  1.19  74  1.07 
    43  2.29  51  1.78  59  1.34  67  1.18  75 – 90  1.05 
    44  2.22  52  1.71  60  1.30  68  1.17  91  1.04 
    45  2.15  53  1.64  61  1.28  69  1.16  92  1.03 
    46  2.09  54  1.57  62  1.26  70  1.15  93  1.02 
    47  2.03  55  1.50  63  1.24  71  1.13  94  1.01 
                         95 +  1.00 

    Cash Value Accumulation Test Factors

    The cash value accumulation test factors vary depending on the age and gender of the insured person.

    Generally, the cash value accumulation test requires that a policy’s death benefit must be sufficient so that the Account Value does not at any time exceed the net single premium required to fund the policy’s future benefits. The net single premium for a policy is calculated using the greater of 4.00% or the rates of interest guaranteed in the Guaranteed Interest Division of the policy and the 2001 Commissioner’s Standard Ordinary Mortality Table and will vary according to the age and gender of the insured person. The factors for the cash value accumulation test are then equal to 1 divided by the net single premium per dollar of paid up whole life insurance for the applicable age and gender.

    A-1


    APPENDIX B

    Funds Available Through the Separate Account

    The following chart lists the funds that are currently available through the Subaccounts of the Separate Account, along with each fund’s investment adviser/subadviser and investment objective. More detailed information about the funds can be found in the current prospectus for each fund. If you received a summary prospectus for any of the funds available through your policy, you may obtain a full prospectus and other fund information free of charge by either accessing the internet address, calling the telephone number or sending an email request to the contact information shown on the front of the fund’s summary prospectus.

    There is no assurance that the stated investment objectives of any of the funds will be achieved. Shares of the funds will rise and fall in value and you could lose money by allocating Account Value to the Subaccounts that invest in the funds. Shares of the funds are not bank deposits and are not guaranteed, endorsed or insured by any financial institution, the Federal Deposit Insurance Corporation or any other government agency. Except as noted, all funds are diversified, as defined under the 1940 Act.

      Investment Adviser/   
    Fund Name  Subadviser  Investment Objective 
    American Funds – Growth Fund  Investment Adviser:  Seeks growth of capital by investing 
    (Class 2)  Capital Research and Management  primarily in common stocks. 
      Company   
    American Funds – Growth-Income  Investment Adviser:  Seeks capital growth and income over 
    Fund (Class 2)  Capital Research and Management  time by investing primarily in U.S. 
      Company  common stocks or other securities that 
        demonstrate the potential for 
        appreciation and/or dividends. 
    American Funds – International  Investment Adviser:  Seeks growth of capital over time by 
    Fund (Class 2)  Capital Research and Management  investing primarily in common stocks 
      Company  of companies located outside the 
        United States. 
    BlackRock Global Allocation V.I.  Investment Adviser:  The fund seeks to provide high total 
    Fund (Class III)  BlackRock Advisors, LLC  return through a fully managed 
      Subadvisers:  investment policy utilizing U.S. and 
      BlackRock Investment Management,  foreign equity, debt and money market 
      LLC; BlackRock Asset Management  instruments, the combination of which 
      U.K. Limited  will be varied from time to time both 
        with respect to types of securities and 
        markets in response to changing market 
        and economic trends. 
    Fidelity(R)  VIP Contrafund(R)  Portfolio  Investment Adviser:  Seeks long-term capital appreciation. 
    (Service Class)  Fidelity Management & Research   
      Company   
      Subadvisers:   
      FMR Co., Inc.; Fidelity Management &
    Research (U.K.) Inc.; Fidelity Research
    & Analysis Company; Fidelity         		  
      Investments Japan Limited; Fidelity   
      International Investment Advisors;   
      Fidelity International Investment   
      Advisors (U.K.) Limited   

    B-1


      Investment Adviser/   
    Fund Name  Subadviser  Investment Objective 
    Fidelity(R) VIP Equity-Income  Investment Adviser:  Seeks reasonable income. Also 
    Portfolio (Service Class)  Fidelity Management & Research  considers the potential for capital 
      Company  appreciation. Seeks to achieve a yield 
      Subadvisers:  which exceeds the composite yield on 
      FMR Co., Inc.; Fidelity Management &  the securities comprising the Standard 
      Research (U.K.) Inc.; Fidelity Research  & Poor's 500SM Index. 
      & Analysis Company; Fidelity   
      Investments Japan Limited; Fidelity   
      International Investment Advisors;   
      Fidelity International Investment   
      Advisors (U.K.) Limited   
    ING Artio Foreign Portfolio (Class I)  Investment Adviser:  Seeks long-term growth of capital. 
      Directed Services LLC   
      Subadviser:   
      Artio Global Management, LLC   
    ING BlackRock Large Cap Growth  Investment Adviser:  Seeks long-term growth of capital. 
    Portfolio (Class I)  Directed Services LLC   
      Subadviser:   
      BlackRock Investment Management,   
      LLC   
    ING Clarion Global Real Estate  Investment Adviser:  A non-diversified portfolio that seeks to 
    Portfolio (Class S)  ING Investments, LLC  provide investors with high total return, 
      Subadviser:  consisting of capital appreciation and 
      ING Clarion Real Estate Securities  current income. 
      LLC   
    ING DFA Global All Equity  Investment Adviser:  Seeks long-term capital appreciation. 
    Portfolio (Class I)  Directed Services LLC   
      Subadviser:   
      Dimensional Fund Advisors LP   
    ING DFA Global Allocation Portfolio  Investment Adviser:  Seeks high level of total return, 
    (Class I)  Directed Services LLC  consisting of capital appreciation and 
      Subadviser:  income. 
      Dimensional Fund Advisors LP   
    ING FMRSM Diversified Mid Cap  Investment Adviser:  Seeks long-term growth of capital. 
    Portfolio (Class I)  Directed Services LLC   
      Subadviser:   
      Fidelity Management & Research   
      Company   
    ING Franklin Templeton Founding  Investment Adviser:  Seeks capital appreciation and 
    Strategy Portfolio (Class I)  Directed Services LLC  secondarily, income. 
    ING Global Resources Portfolio  Investment Adviser:  A non-diversified portfolio that seeks 
    (Class I)  Directed Services LLC  long-term capital appreciation. 
      Subadviser:   
      ING Investment Management Co.   
    ING JPMorgan Emerging Markets  Investment Adviser:  Seeks capital appreciation. 
    Equity Portfolio (Class I)  Directed Services LLC   
      Subadviser:   
      J.P. Morgan Investment Management
    Inc.         		  
    ING JPMorgan Small Cap Core  Investment Adviser:  Seeks capital growth over the long 
    Equity Portfolio (Class I)  Directed Services LLC  term. 
      Subadviser:   
      J.P. Morgan Investment Management
    Inc.         		  

    B-2


      Investment Adviser/   
    Fund Name  Subadviser  Investment Objective 
    ING Limited Maturity Bond  Investment Adviser:  Seeks highest current income consistent 
    Portfolio (Class S)  Directed Services LLC  with low risk to principal and liquidity 
      Subadviser:  and secondarily, seeks to enhance its 
      ING Investment Management Co.  total return through capital appreciation 
        when market factors, such as falling 
        interest rates and rising bond prices, 
        indicate that capital appreciation may 
        be available without significant risk to 
        principal. 
    ING Liquid Assets Portfolio (Class S)  Investment Adviser:  Seeks high level of current income 
      Directed Services LLC  consistent with the preservation of 
      Subadviser:  capital and liquidity. 
      ING Investment Management Co.   
    ING MFS Total Return Portfolio  Investment Adviser:  Seeks above-average income 
    (Class I)  Directed Services LLC  (compared to a portfolio entirely 
      Subadviser:  invested in equity securities) consistent 
      Massachusetts Financial Services  with the prudent employment of 
      Company  capital. Secondarily seeks reasonable 
        opportunity for growth of capital and 
        income. 
    ING MFS Utilities Portfolio (Class S)  Investment Adviser:  Seeks total return. 
      Directed Services LLC   
      Subadviser:   
      Massachusetts Financial Services   
      Company   
    ING Marsico Growth Portfolio  Investment Adviser:  Seeks capital appreciation. 
    (Class I)  Directed Services LLC   
      Subadviser:   
      Marsico Capital Management, LLC   
    ING Marsico International  Investment Adviser:  Seeks long-term growth of capital. 
    Opportunities Portfolio (Class I)  Directed Services LLC   
      Subadviser:   
      Marsico Capital Management, LLC   
    ING PIMCO Total Return Bond  Investment Adviser:  Seeks maximum total return, consistent 
    Portfolio (Class I)  Directed Services LLC  with preservation of capital and prudent 
      Subadviser:  investment management. 
      Pacific Investment Management   
      Company LLC   
    ING Pioneer Fund Portfolio (Class I)  Investment Adviser:  Seeks reasonable income and capital 
      Directed Services LLC  growth. 
      Subadviser:   
                                                                             Pioneer Investment Management, Inc.
    ING Pioneer Mid Cap Value  Investment Adviser:  Seeks capital appreciation. 
    Portfolio (Class I)  Directed Services LLC   
      Subadviser:   
                                                                             Pioneer Investment Management, Inc.
    ING Retirement Growth Portfolio  Investment Adviser:  Seeks a high level of total return 
    (Class I)  Directed Services LLC  (consisting of capital appreciation and 
      Asset Allocation Consultants:  income) consistent with a level of risk 
      Asset Allocation Committee.  that can be expected to be greater than 
        that of ING Retirement Moderate 
        Growth Portfolio. 

    B-3


      Investment Adviser/   
    Fund Name  Subadviser  Investment Objective 
    ING Retirement Moderate Growth  Investment Adviser:  Seeks a high level of total return 
    Portfolio (Class I)  Directed Services LLC  (consisting of capital appreciation and 
      Asset Allocation Consultants:  income) consistent with a level of risk 
      Asset Allocation Committee  that can be expected to be greater than 
        that of ING Retirement Moderate 
        Portfolio but less than that of ING 
        Retirement Growth Portfolio. 
    ING Retirement Moderate Portfolio  Investment Adviser:  Seeks a high level of total return 
    (Class I)  Directed Services LLC  (consisting of capital appreciation and 
      Asset Allocation Consultants:  income) consistent with a level of risk 
      Asset Allocation Committee  that can be expected to be less than that 
        of ING Retirement Moderate Growth 
        Portfolio. 
    ING T. Rowe Price Capital  Investment Adviser:  Seeks, over the long-term, a high total 
    Appreciation Portfolio (Class I)  Directed Services LLC  investment return, consistent with the 
      Subadviser:  preservation of capital and prudent 
      T. Rowe Price Associates, Inc.  investment risk. 
    ING T. Rowe Price Equity Income  Investment Adviser:  Seeks substantial dividend income as 
    Portfolio (Class I)  Directed Services LLC  well as long-term growth of capital. 
      Subadviser:   
      T. Rowe Price Associates, Inc.   
    ING U.S. Stock Index Portfolio  Investment Adviser:  Seeks total return. 
    (Class I)  Directed Services LLC   
      Subadviser:   
      ING Investment Management Co.   
    ING Van Kampen Growth and  Investment Adviser:  Seeks long-term growth of capital and 
    Income Portfolio (Class S)  Directed Services LLC  income. 
      Subadviser:   
      Van Kampen   
    ING Wells Fargo Health Care  Investment Adviser:  A non-diversified portfolio that seeks 
    Portfolio (Class I)  Directed Services LLC  long-term capital growth. 
      Subadviser:   
      Wells Capital Management, Inc.   
    ING Wells Fargo Omega Growth  Investment Adviser:  Seeks long-term capital growth. 
    Portfolio (Class I)  Directed Services LLC   
      Subadviser:   
      Wells Capital Management, Inc.   
    ING Wells Fargo Small Cap  Investment Adviser:  Seeks long-term capital appreciation. 
    Disciplined Portfolio (Class S)  Directed Services LLC   
      Subadviser:   
      Wells Capital Management, Inc.   
    ING Baron Small Cap Growth  Investment Adviser:  Seeks capital appreciation. 
    Portfolio (Initial Class)  Directed Services LLC   
      Subadviser:   
      BAMCO, Inc.   
    ING Columbia Small Cap Value  Investment Adviser:  Seeks long-term growth of capital. 
    Portfolio (Initial Class)  Directed Services LLC   
      Subadviser:   
                                                                             Columbia Management Advisors, LLC

    B-4


      Investment Adviser/   
    Fund Name  Subadviser  Investment Objective 
    ING JPMorgan Mid Cap Value  Investment Adviser:  Seeks growth from capital appreciation. 
    Portfolio (Initial Class)  Directed Services LLC   
      Subadviser:   
      J. P. Morgan Investment Management
    Inc.         		  
    ING Oppenheimer Global Portfolio  Investment Adviser:  Seeks capital appreciation. 
    (Initial Class)  Directed Services LLC   
      Subadviser:   
      OppenheimerFunds, Inc.   
    ING Oppenheimer Global Strategic  Investment Adviser:  Seeks a high level of current income 
    Income Portfolio (Service Class)  Directed Services LLC  principally derived from interest on 
      Subadviser:  debt securities. 
      OppenheimerFunds, Inc.   
    ING Pioneer High Yield Portfolio  Investment Adviser:  Seeks to maximize total return through 
    (Initial Class)  Directed Services LLC  income and capital appreciation. 
      Subadviser:   
                                                                             Pioneer Investment Management, Inc.
    ING T. Rowe Price Diversified Mid  Investment Adviser:  Seeks long-term capital appreciation. 
    Cap Growth Portfolio (Initial Class)  Directed Services LLC   
      Subadviser:   
      T. Rowe Price Associates, Inc.   
    ING UBS U.S. Large Cap Equity  Investment Adviser:  Seeks long-term growth of capital and 
    Portfolio (Initial Class)  Directed Services LLC  future income. 
      Subadviser:   
      UBS Global Asset Management   
      (Americas) Inc.   
    ING Van Kampen Comstock  Investment Adviser:  Seeks capital growth and income. 
    Portfolio (Initial Class)  Directed Services LLC   
      Subadviser:   
      Van Kampen   
    ING Van Kampen Equity and  Investment Adviser:  Seeks total return, consisting of long- 
    Income Portfolio (Initial Class)  Directed Services LLC  term capital appreciation and current 
      Subadviser:  income. 
      Van Kampen   
    ING Balanced Portfolio (Class I)  Investment Adviser:  Prior to July 15, 2010, the portfolio 
      ING Investments, LLC  seeks to maximize investment return, 
      Subadviser:  consistent with reasonable safety of 
      ING Investment Management Co.  principal, by investing in a diversified 
        portfolio of one or more of the 
        following asset classes: stocks, bonds 
        and cash equivalents, based on the 
        judgment of the portfolio’s 
        management, of which of those sectors 
        or mix thereof offers the best 
        investment prospects. 
     
        Effective July 15, 2010, the portfolio 
        seeks total return consisting of capital 
        appreciation (both realized and 
        unrealized) and current income; the 
        secondary investment objective is long- 
        term capital appreciation. 

    B-5


      Investment Adviser/   
    Fund Name  Subadviser  Investment Objective 
    ING Intermediate Bond Portfolio  Investment Adviser:  Seeks to maximize total return 
    (Class I)  ING Investments, LLC  consistent with reasonable risk. The 
      Subadviser:  portfolio seeks its objective through 
      ING Investment Management Co.  investments in a diversified portfolio 
        consisting primarily of debt securities. 
        It is anticipated that capital 
        appreciation and investment income 
        will both be major factors in achieving 
        total return. 
    ING Growth and Income Portfolio  Investment Adviser:  Seeks to maximize total return through 
    (Class I)  ING Investments, LLC  investments in a diversified portfolio of 
      Subadviser:  common stocks and securities 
      ING Investment Management Co.  convertible into common stocks. It is 
        anticipated that capital appreciation and 
        investment income will both be major 
        factors in achieving total return. 
    ING Index Plus LargeCap Portfolio  Investment Adviser:  Seeks to outperform the total return 
    (Class I)  ING Investments, LLC  performance of the Standard & Poor’s 
      Subadviser:  500® Composite Stock Price Index, 
      ING Investment Management Co.  while maintaining a market level of 
        risk. 
    ING Index Plus MidCap Portfolio  Investment Adviser:  Seeks to outperform the total return 
    (Class I)  ING Investments, LLC  performance of the Standard & Poor’s 
      Subadviser:  MidCap 400 Index, while maintaining a 
      ING Investment Management Co.  market level of risk. 
    ING Index Plus SmallCap Portfolio  Investment Adviser:  Seeks to outperform the total return 
    (Class I)  ING Investments, LLC  performance of the Standard & Poor’s 
      Subadviser:  SmallCap 600 Index, while maintaining 
      ING Investment Management Co.  a market level of risk. 
    ING International Index Portfolio  Investment Adviser:  Seeks investment results (before fees 
    (Class S)  ING Investments, LLC  and expenses) that correspond to the 
      Subadviser:  total return of a widely accepted 
      ING Investment Management Co.  International Index. 
    ING RussellTM Large Cap Growth  Investment Adviser:  A non diversified portfolio that seeks 
    Index Portfolio (Class I)  ING Investments, LLC  investment results (before fees and 
      Subadviser:  expenses) that correspond to the total 
      ING Investment Management Co.  return of the Russell Top 200® Growth 
        Index. 
    ING RussellTM Large Cap Index  Investment Adviser:  Seeks investment results (before fees 
    Portfolio (Class I)  ING Investments, LLC  and expenses) that correspond to the 
      Subadviser:  total return of the Russell Top 200® 
      ING Investment Management Co.  Index. 
    ING RussellTM Large Cap Value  Investment Adviser:  A non diversified portfolio that seeks 
    Index Portfolio (Class I)  ING Investments, LLC  investment results (before fees and 
      Subadviser:  expenses) that correspond to the total 
      ING Investment Management Co.  return of the Russell Top 200® Value 
        Index. 
    ING RussellTM Mid Cap Growth  Investment Adviser:  A non-diversified portfolio that seeks 
    Index Portfolio (Class I)  ING Investments, LLC  investment results (before fees and 
      Subadviser:  expenses) that correspond to the total 
      ING Investment Management Co.  return of the Russell Midcap® Growth 
        Index. 

    B-6


      Investment Adviser/   
                                 Fund Name  Subadviser  Investment Objective 
    ING RussellTM Small Cap Index  Investment Adviser:  Seeks investment results (before fees 
    Portfolio (Class I)  ING Investments, LLC  and expenses) that correspond to the 
      Subadviser:  total return of the Russell 2000® Index. 
      ING Investment Management Co.   
    ING Small Company Portfolio  Investment Adviser:  Seeks growth of capital primarily 
    (Class S)  ING Investments, LLC  through investment in a diversified 
      Subadviser:  portfolio of common stocks of 
      ING Investment Management Co.  companies with smaller market 
        capitalizations. 
    ING U.S. Bond Index Portfolio  Investment Adviser:  Seeks investment results (before fees 
    (Class I)  ING Investments, LLC  and expenses) that correspond to the 
      Subadviser:  total return of the Barclays Capital U.S. 
      Neuberger Berman Fixed Income LLC  Aggregate Bond Index(R) . 
    ING SmallCap Opportunities  Investment Adviser:  Seeks long-term capital appreciation. 
    Portfolio (Class I)  ING Investments, LLC   
      Subadviser:   
      ING Investment Management Co.   
    M Business Opportunity Value  Investment Adviser:  Seeks to provide long-term capital 
    Fund *  M Financial Investment Advisers, Inc.  appreciation. 
      Subadviser:   
      Iridian Asset Management LLC   
    M Capital Appreciation Fund*  Investment Adviser:  Seeks to provide maximum capital 
      M Financial Investment Advisers, Inc.  appreciation. 
      Subadviser:   
      Frontier Capital Management   
      Company, LLC   
    M International Equity Fund*  Investment Adviser:  Seeks to provide long-term capital 
      M Financial Investment Advisers, Inc.  appreciation. 
      Subadviser:   
      Brandes Investment Partners, L.P.   
    M Large Cap Growth Fund*  Investment Adviser:  Seeks to provide long-term capital 
      M Financial Investment Advisers, Inc.  appreciation. 
      Subadviser:   
      DSM Capital Partners LLC   
    Neuberger Berman AMT Socially  Investment Adviser:  Seeks long-term growth of capital by 
    Responsive Portfolio® (Class I)  Neuberger Berman Management LLC  investing primarily in securities of 
      Subadviser:  companies that meet the portfolio’s 
      Neuberger Berman LLC  financial criteria and social policy. 

    * This fund is only available through broker/dealers associated with the M Financial Group.

    B-7


    MORE INFORMATION IS AVAILABLE

    If you would like more information about us, the Separate Account or the policy, the following documents are available free upon request:

    • Statement of Additional Information (“SAI”) – The SAI contains more specific information about the Separate Account and the policy, as well as the financial statements of the Separate Account and the company. The SAI is incorporated by reference into (made legally part of) this prospectus. The following is the Table of Contents for the SAI:
      Page 
    General Information and History  2 
    Performance Reporting and Advertising  2 
    Experts  4 
    Financial Statements  4 
    Financial Statements of Security Life Separate Account L1  1 
    Statutory Basis Financial Statements of Security Life of Denver Insurance Company  1 

    • A personalized illustration of policy benefits – A personalized illustration can help you understand how the policy works, given the policy’s fees and charges along with the investment options, features and benefits and optional benefits you select. A personalized illustration can also help you compare the policy’s death benefits, Account Value and Surrender Value with other life insurance policies based on the same or similar assumptions. We reserve the right to assess a fee of up to $25.00 for each personalized illustration you request after the first each policy year. See Excess Illustration Fee, page 30.

    To request a free SAI or personalized illustration of policy benefits or to make other inquiries about the policy, please contact us at our:

      ING Customer Service Center
    P.O. Box 5065
    Minot, ND 58702-5065
    1-877-253-5050
    www.ingservicecenter.com

    If you received a summary prospectus for any of the funds available through your policy, you may obtain a full prospectus and other fund information free of charge by either accessing the internet address, calling the telephone number or sending an email request to the contact information shown on the front of the fund’s summary prospectus. Additional information about us, the Separate Account or the policy (including the SAI) can be reviewed and copied from the SEC’s Internet website (www.sec.gov) or at the SEC’s Public Reference Branch in Washington, DC. Copies of this additional information may also be obtained, upon payment of a duplicating fee, by writing the SEC’s Public Reference Branch at 100 F Street, NE, Room 1580, Washington, DC 20549. More information about operation of the SEC’s Public Reference Branch can be obtained by calling 202-551-8090. When looking for information regarding the policy offered through this prospectus, you may find it useful to use the number assigned to the registration statement under the 1933 Act. This number is 333-147534.

    1940 Act File No. 811-08292
     1933 Act file No. 333-147534


    PART B

    INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION


    SECURITY LIFE SEPARATE ACCOUNT L1 OF

    SECURITY LIFE OF DENVER INSURANCE COMPANY

    Statement of Additional Information Dated April 30, 2010

    ING VUL-CV

    A Flexible Premium Variable Universal Life Insurance Policy

    This Statement of Additional Information is not a prospectus and should be read in conjunction with the current ING VUL-CV prospectus dated April 30, 2010. The policy offered in connection with the prospectus is a flexible premium variable universal life insurance policy funded through the Security Life Separate Account L1.

    A free prospectus is available upon request by contacting the Security Life of Denver Insurance Company’s Customer Service Center at P.O. Box 5065, Minot, ND 58702-5065, by calling 1-877-253-5050 or by accessing the SEC’s website at www.sec.gov.

    Read the prospectus before you invest. Unless otherwise indicated, terms used in this Statement of Additional Information shall have the same meaning as in the prospectus.

                                                                                                     TABLE OF CONTENTS   
     
      Page 
    General Information and History  2 
    Performance Reporting and Advertising  2 
    Experts  4 
    Financial Statements  4 
    Financial Statements of Security Life Separate Account L1  1 
    Statutory Basis Financial Statements of Security Life of Denver Insurance Company  1 


    GENERAL INFORMATION AND HISTORY

    Security Life of Denver Insurance Company (the “company,” “we,” “us,” “our”) issues the policy described in the prospectus and is responsible for providing each policy’s insurance benefits. We are a stock life insurance company organized in 1929 and incorporated under the laws of the State of Colorado and an indirect, wholly owned subsidiary of ING Groep N.V. (“ING”), a global financial institution active in the fields of insurance, banking and asset management. ING is headquartered in Amsterdam, The Netherlands. We are engaged in the business of issuing insurance policies. Our headquarters is at 1290 Broadway, Denver, Colorado 80203-5699.

    We established the Security Life Separate Account L1 (the “variable account”) on November 3, 1993, as one of our separate accounts under the laws of the State of Colorado for the purpose of funding variable life insurance policies issued by us. The variable account is registered with the Securities and Exchange Commission (“SEC”) as a unit investment trust under the Investment Company Act of 1940, as amended. Premium payments may be allocated to one or more of the available subaccounts of the variable account. Each subaccount invests in shares of a corresponding fund at net asset value. We may make additions to, deletions from or substitutions of available funds as permitted by law and subject to the conditions of the policy.

    Other than the policy owner fees and charges described in the prospectus, all expenses incurred in the operations of the variable account are borne by the company. We do, however, receive compensation for certain recordkeeping, administration or other services from the funds or affiliates of the funds available through the policies. See “Fees and Charges” in the prospectus.

    The company maintains custody of the assets of the variable account. As custodian, the company holds cash balances for the variable account pending investment in the funds or distribution. The funds in whose shares the assets of the subaccounts of the variable account are invested each have custodians, as discussed in the respective fund prospectuses.

    PERFORMANCE REPORTING AND ADVERTISING

    Information regarding the past, or historical, performance of the subaccounts of the variable account and the funds available for investment through the subaccounts of the variable account may appear in advertisements, sales literature or reports to policy owners or prospective purchasers. SUCH PERFORMANCE INFORMATION FOR THE SUBACCOUNTS WILL REFLECT THE DEDUCTION OF ALL FUND FEES AND CHARGES, INCLUDING INVESTMENT MANAGEMENT FEES, DISTRIBUTION (12B-1) FEES AND OTHER EXPENSES BUT WILL NOT REFLECT DEDUCTIONS FOR ANY POLICY FEES AND CHARGES. IF THE POLICY’S TAX, SALES, COST OF INSURANCE, MORTALITY AND EXPENSE RISK, POLICY AND ADMINISTRATIVE CHARGES AND THE OTHER TRANSACTION, PERIODIC OR OPTIONAL BENEFITS FEES AND CHARGES WERE DEDUCTED, THE PERFORMANCE SHOWN WOULD BE SIGNIFICANTLY LOWER.

    With respect to performance reporting it is important to remember that past performance does not guarantee future results. Current performance may be higher or lower than the performance shown and actual investment returns and principal values will fluctuate so that shares and/or units, at redemption, may be worth more or less than their original cost.

    2


    Performance history of the subaccounts of the variable account and the corresponding funds is measured by comparing the value at the beginning of the period to the value at the end of the period. Performance is usually calculated for periods of one month, three months, year-to-date, one year, three years, five years, ten years (if the fund has been in existence for these periods) and since the inception date of the fund (if the fund has been in existence for less than ten years). We may provide performance information showing average annual total returns for periods prior to the date a subaccount commenced operation. We will calculate such performance information based on the assumption that the subaccounts were in existence for the same periods as those indicated for the funds, with the level of charges at the variable account level that were in effect at the inception of the subaccounts. Performance information will be specific to the class of fund shares offered through the policy, however, for periods prior to the date a class of fund shares commenced operations, performance information may be based on a different class of shares of the same fund. In this case, performance for the periods prior to the date a class of fund shares commenced operations will be adjusted by the fund fees and expenses associated with the class of fund shares offered through the policy.

    We may compare performance of the subaccounts and/or the funds as reported from time to time in advertisements and sales literature to other variable life insurance issuers in general; to the performance of particular types of variable life insurance policies investing in mutual funds; or to investment series of mutual funds with investment objectives similar to each of the subaccounts, whose performance is reported by Lipper Analytical Services, Inc. (“Lipper”) and Morningstar. Inc. (“Morningstar”) or reported by other series, companies, individuals or other industry or financial publications of general interest, such as Forbes, Money, The Wall Street Journal, Business Week, Barron’s, Kiplinger’s and Fortune. Lipper and Morningstar are independent services that monitor and rank the performances of variable life insurance issuers in each of the major categories of investment objectives on an industry-wide basis.

    Lipper’s and Morningstar’s rankings include variable annuity issuers as well as variable life insurance issuers. The performance analysis prepared by Lipper and Morningstar ranks such issuers on the basis of total return, assuming reinvestment of distributions, but does not take sales charges, redemption fees or certain expense deductions at the separate account level into consideration. We may also compare the performance of each subaccount in advertising and sales literature to the Standard & Poor’s Index of 500 common stocks and the Dow Jones Industrials, which are widely used measures of stock market performance. We may also compare the performance of each subaccount to other widely recognized indices. Unmanaged indices may assume the reinvestment of dividends, but typically do not reflect any “deduction” for the expense of operating or managing an investment portfolio.

    To help you better understand how your policy’s death benefits, policy value and surrender value will vary over time under different sets of assumptions, we encourage you to obtain a personalized illustration. Personalized illustrations will assume deductions for fund expenses and policy and variable account charges. We will base these illustrations on the age and risk classification of the insured person and other factors such as the amount of insurance coverage, death benefit option, premiums and rates of return (within limits) you specify. These personalized illustrations will be based on either a hypothetical investment return of the funds of 0.00% and other percentages not to exceed 12.00% or on the actual historical experience of the funds as if the subaccounts had been in existence and a policy issued for the same periods as those indicated for the funds. Subject to regulatory approval, personalized illustrations may be based upon a weighted average of fund expenses rather than an arithmetic average. A personalized illustration is available upon request by contacting our Customer Service Center at P.O. Box 5065, Minot, ND 58702-5065 or by calling 1-877-253-5050.

    3


    EXPERTS

    The statements of assets and liabilities of Security Life Separate Account L1 as of December 31, 2009, and the related statements of operations and changes in net assets for the periods disclosed in the financial statements, and the statutory basis financial statements of Security Life of Denver Insurance Company as of December 31, 2009 and 2008, and for each of the three years in the period ended December 31, 2009, included in this Statement of Additional Information, have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

    FINANCIAL STATEMENTS

    The financial statements of the Separate Account reflect the operations of the Separate Account as of and for the year ended December 31, 2009, and have been audited by Ernst & Young LLP, independent registered public accounting firm.

    The statutory basis financial statements of the Company as of December 31, 2009 and 2008, and for each of the three years in the period ended December 31, 2009, have been audited by Ernst & Young LLP, independent registered public accounting firm. The financial statements of the Company should be distinguished from the financial statements of the Separate Account and should be considered only as bearing upon the ability of the Company to meet its obligations under the policies. They should not be considered as bearing on the investment performance of the assets held in the Separate Account. The statutory basis financial statements of the Company as of December 31, 2009 and 2008, and for each of the three years in the period ended December 31, 2009, have been prepared on the basis of statutory accounting practices prescribed or permitted by the State of Colorado Division of Insurance.

    The primary business address of Ernst & Young LLP is Suite 1000, 55 Ivan Allen Jr. Boulevard, Atlanta, GA 30308.

    4


    FINANCIAL STATEMENTS
    Security Life of Denver Insurance Company
    Security Life Separate Account L1
    Year ended December 31, 2009
    with Report of Independent Registered Public Accounting Firm

     


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    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Financial Statements
    Year ended December 31, 2009

    Contents
     
    Report of Independent Registered Public Accounting Firm  1 
     
    Audited Financial Statements   
     
    Statements of Assets and Liabilities  3 
    Statements of Operations  19 
    Statements of Changes in Net Assets  37 
    Notes to Financial Statements  60 


    This page intentionally left blank.


    Report of Independent Registered Public Accounting Firm

    The Board of Directors and Participants
    Security Life of Denver Insurance Company

    We have audited the accompanying statements of assets and liabilities of the investment divisions (the “Divisions”) constituting Security Life of Denver Insurance Company Security Life Separate Account L1 (the “Account”) as of December 31, 2009, and the related statements of operations and changes in net assets for the periods disclosed in the financial statements. These financial statements are the responsibility of the Account’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The Account is comprised of the following Divisions:

    AIM Variable Insurance Funds:
      AIM V.I. Core Equity Fund - Series I Shares
      American Funds Insurance Series:
      American Funds Insurance Series® Growth Fund - Class 2
      American Funds Insurance Series® Growth-Income Fund - Class 2
      American Funds Insurance Series® International Fund - Class 2
    BlackRock Variable Series Funds, Inc.:
      BlackRock Global Allocation V.I. Fund- Class III
    Fidelity® Variable Insurance Products:
      Fidelity® VIP Equity-Income Portfolio - Service Class
    Fidelity® Variable Insurance Products II:
      Fidelity® VIP Contrafund® Portfolio - Service Class
      Fidelity® Variable Insurance Products V:
      Fidelity® VIP Investment Grade Bond Portfolio - Initial Class
    ING Balanced Portfolio, Inc.:
      ING Balanced Portfolio - Class I
    ING Intermediate Bond Portfolio:
      ING Intermediate Bond Portfolio - Class I
    ING Investors Trust:
      ING AllianceBernstein Mid Cap Growth Portfolio - Institutional Class
      ING Artio Foreign Portfolio – Institutional Class
      ING BlackRock Large Cap Growth Portfolio - Institutional Class
      ING BlackRock Large Cap Value Portfolio - Institutional Class
      ING Clarion Global Real Estate Portfolio - Service Class
      ING Evergreen Health Sciences Portfolio - Institutional Class
      ING Evergreen Omega Portfolio - Institutional Class
      ING FMRSM Diversified Mid Cap Portfolio - Institutional Class
      ING Focus 5 Portfolio - Class I
      ING Franklin Templeton Founding Strategy Portfolio - Institutional Class
      ING Global Resources Portfolio - Institutional Class
      ING Growth and Income Portfolio II - Institutional Class
      ING Index Plus International Equity Portfolio - Service Class
      ING JPMorgan Emerging Markets Equity Portfolio - Institutional Class
      ING JPMorgan Small Cap Core Equity Portfolio - Institutional Class  
      ING JPMorgan Value Opportunities Portfolio - Institutional Class
      ING LifeStyle Aggressive Growth Portfolio - Institutional Class
      ING LifeStyle Growth Portfolio - Institutional Class
      ING LifeStyle Moderate Growth Portfolio - Institutional Class

    ING Investors Trust (continued):
      ING LifeStyle Moderate Portfolio - Institutional Class
      ING Limited Maturity Bond Portfolio - Service Class
      ING Liquid Assets Portfolio - Institutional Class
      ING Liquid Assets Portfolio - Service Class
      ING Lord Abbett Affiliated Portfolio - Institutional Class
      ING Marsico Growth Portfolio - Institutional Class
      ING Marsico International Opportunities Portfolio - Institutional Class
      ING MFS Total Return Portfolio - Institutional Class
      ING MFS Utilities Portfolio - Service Class
      ING Oppenheimer Main Street Portfolio® - Institutional Class
      ING PIMCO Total Return Bond Portfolio - Institutional Class
      ING Pioneer Fund Portfolio - Institutional Class
      ING Pioneer Mid Cap Value Portfolio - Institutional Class
      ING Retirement Growth Portfolio - Institutional Class
      ING Retirement Moderate Growth Portfolio - Institutional Class
      ING Retirement Moderate Portfolio - Institutional Class
      ING Stock Index Portfolio - Institutional Class
      ING T. Rowe Price Capital Appreciation Portfolio - Institutional Class
      ING T. Rowe Price Equity Income Portfolio - Institutional Class
      ING Van Kampen Capital Growth Portfolio - Institutional Class
      ING Van Kampen Growth and Income Portfolio - Service Class
      ING Wells Fargo Small Cap Disciplined Portfolio - Service Class
    ING Partners, Inc.:
      ING American Century Large Company Value Portfolio - Initial Class
      ING American Century Small-Mid Cap Value Portfolio - Initial Class
      ING Baron Small Cap Growth Portfolio - Initial Class
      ING Columbia Small Cap Value Portfolio - Initial Class
      ING JPMorgan Mid Cap Value Portfolio - Initial Class
      ING Legg Mason Partners Aggressive Growth Portfolio - Initial Class
      ING Neuberger Berman Partners Portfolio - Initial Class
      ING Oppenheimer Global Portfolio - Initial Class
      ING Oppenheimer Strategic Income Portfolio - Service Class
      ING PIMCO Total Return Portfolio - Initial Class
      ING Pioneer High Yield Portfolio - Initial Class
      ING T. Rowe Price Diversified Mid Cap Growth Portfolio - Initial Class
      ING UBS U.S. Large Cap Equity Portfolio - Initial Class


    ING Partners, Inc. (continued):
      ING Van Kampen Comstock Portfolio - Initial Class
      ING Van Kampen Equity and Income Portfolio - Initial Class
      ING Strategic Allocation Portfolios, Inc.:
      ING Strategic Allocation Conservative Portfolio - Class I
      ING Strategic Allocation Growth Portfolio - Class I
      ING Strategic Allocation Moderate Portfolio - Class I
    ING Variable Funds:
      ING Growth and Income Portfolio - Class I
      ING Variable Portfolios, Inc.:
      ING Index Plus LargeCap Portfolio - Class I
      ING Index Plus MidCap Portfolio - Class I
      ING Index Plus SmallCap Portfolio - Class I
      ING International Index Portfolio - Class S
      ING Opportunistic Large Cap Value Portfolio - Class I
      ING RussellTM Large Cap Growth Index Portfolio - Class I
      ING RussellTM Large Cap Index Portfolio - Class I
      ING RussellTM Large Cap Value Index Portfolio - Class I

    ING Variable Portfolios, Inc. (continued):
      ING RussellTM Mid Cap Growth Index Portfolio - Class
      ING RussellTM Small Cap Index Portfolio - Class I
      ING U.S. Bond Index Portfolio - Class I
      ING Variable Products Trust:
      ING MidCap Opportunities Portfolio - Class I
      ING SmallCap Opportunities Portfolio - Class I
    M Fund, Inc.:
      Brandes International Equity Fund
      Business Opportunity Value Fund
      Frontier Capital Appreciation Fund
      M Large Cap Growth Fund
    Neuberger Berman Advisers Management Trust:
      Neuberger Berman AMT Socially Responsive Portfolio® - Class I
    Van Eck Worldwide Insurance Trust:
      Van Eck Worldwide Hard Assets Fund

    We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Account’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Account’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the transfer agents. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the respective Divisions constituting Security Life of Denver Insurance Company Security Life Separate Account L1 at December 31, 2009, the results of their operations and changes in their net assets for the periods disclosed in the financial statements, in conformity with U.S. generally accepted accounting principles.

    /s/ Ernst & Young, LLP

    Atlanta, Georgia
    April 9, 2010


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

          American  American   
        American  Funds  Funds   
        Funds  Insurance  Insurance  BlackRock 
      AIM V.I. Core  Insurance  Series®  Series®  Global 
      Equity Fund -  Series® Growth  Growth-Income  International  Allocation V.I. 
      Series I Shares  Fund - Class 2  Fund - Class 2  Fund - Class 2  Fund - Class III 
    Assets           
    Investments in mutual funds           
       at fair value  $ 8,770  $ 49,315  $ 25,339  $ 46,093  $ 2,253 
    Total assets  8,770  49,315  25,339  46,093  2,253 
    Net assets  $ 8,770  $ 49,315  $ 25,339  $ 46,093  $ 2,253 
     
    Total number of mutual fund shares  351,941  1,069,746  812,674  2,693,904  167,888 
     
    Cost of mutual fund shares  $ 8,781  $ 60,104  $ 30,160  $ 52,916  $ 2,185 

    The accompanying notes are an integral part of these financial statements.

    3


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

          Fidelity® VIP     
      Fidelity® VIP  Fidelity® VIP  Investment    ING 
      Equity-Income  Contrafund®  Grade Bond  ING Balanced  Intermediate 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Bond Portfolio - 
      Service Class  Service Class  Initial Class  Class I  Class I 
    Assets           
    Investments in mutual funds           
       at fair value  $ 3,733  $ 18,036  $ 431  $ 11,250  $ 38,074 
    Total assets  3,733  18,036  431  11,250  38,074 
    Net assets  $ 3,733  $ 18,036  $ 431  $ 11,250  $ 38,074 
     
    Total number of mutual fund shares  222,869  877,672  34,549  1,079,651  3,290,764 
     
    Cost of mutual fund shares  $ 4,054  $ 19,679  $ 422  $ 13,802  $ 39,984 

    The accompanying notes are an integral part of these financial statements.

    4


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

        ING BlackRock  ING BlackRock     
      ING Artio  Large Cap  Large Cap  ING Clarion  ING Evergreen 
      Foreign  Growth  Value  Global Real  Health Sciences 
      Portfolio -  Portfolio -  Portfolio -  Estate  Portfolio - 
      Institutional  Institutional  Institutional  Portfolio -  Institutional 
      Class  Class  Class  Service Class  Class 
    Assets           
    Investments in mutual funds           
       at fair value  $ 16,305  $ 1,771  $ 6,835  $ 11,179  $ 5,253 
    Total assets  16,305  1,771  6,835  11,179  5,253 
    Net assets  $ 16,305  $ 1,771  $ 6,835  $ 11,179  $ 5,253 
     
    Total number of mutual fund shares  1,495,855  204,296  708,239  1,212,501  507,991 
     
    Cost of mutual fund shares  $ 20,913  $ 1,866  $ 8,464  $ 11,640  $ 4,787 

    The accompanying notes are an integral part of these financial statements.

    5


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

            ING Franklin   
            Templeton   
      ING Evergreen  ING FMRSM    Founding  ING Global 
      Omega  Diversified Mid    Strategy  Resources 
      Portfolio -  Cap Portfolio -  ING Focus 5  Portfolio -  Portfolio - 
      Institutional  Institutional  Portfolio -  Institutional  Institutional 
      Class  Class  Class I  Class  Class 
    Assets           
    Investments in mutual funds           
       at fair value  $ 24,431  $ 17,475  $ 102  $ 3,355  $ 13,899 
    Total assets  24,431  17,475  102  3,355  13,899 
    Net assets  $ 24,431  $ 17,475  $ 102  $ 3,355  $ 13,899 
     
    Total number of mutual fund shares  2,100,688  1,469,695  14,419  430,183  772,155 
     
    Cost of mutual fund shares  $ 19,163  $ 18,983  $ 85  $ 3,307  $ 11,006 

    The accompanying notes are an integral part of these financial statements.

    6


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

      ING JPMorgan  ING JPMorgan       
      Emerging  Small Cap Core    ING Liquid   
      Markets Equity  Equity  ING Limited  Assets  ING Liquid 
      Portfolio -  Portfolio -  Maturity Bond  Portfolio -  Assets 
      Institutional  Institutional  Portfolio -  Institutional  Portfolio - 
      Class  Class  Service Class  Class  Service Class 
    Assets           
    Investments in mutual funds           
       at fair value  $ 33,751  $ 22,778  $ 28,147  $ 67,860  $ 40,762 
    Total assets  33,751  22,778  28,147  67,860  40,762 
    Net assets  $ 33,751  $ 22,778  $ 28,147  $ 67,860  $ 40,762 
     
    Total number of mutual fund shares  1,656,075  2,177,594  2,701,277  67,859,514  40,762,022 
     
    Cost of mutual fund shares  $ 30,788  $ 27,923  $ 28,596  $ 67,860  $ 40,762 

    The accompanying notes are an integral part of these financial statements.

    7


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

      ING Lord    ING Marsico     
      Abbett  ING Marsico  International  ING MFS Total   
      Affiliated  Growth  Opportunities  Return  ING MFS 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Utilities 
      Institutional  Institutional  Institutional  Institutional  Portfolio - 
      Class  Class  Class  Class  Service Class 
    Assets           
    Investments in mutual funds           
       at fair value  $ 148  $ 6,273  $ 9,118  $ 6,126  $ 8,294 
    Total assets  148  6,273  9,118  6,126  8,294 
    Net assets  $ 148  $ 6,273  $ 9,118  $ 6,126  $ 8,294 
     
    Total number of mutual fund shares  19,190  432,293  871,705  448,429  691,162 
     
    Cost of mutual fund shares  $ 215  $ 6,799  $ 9,634  $ 6,942  $ 7,222 

    The accompanying notes are an integral part of these financial statements.

    8


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

              ING Retirement 
      ING PIMCO    ING Pioneer  ING Retirement  Moderate 
      Total Return  ING Pioneer  Mid Cap Value  Growth  Growth 
      Bond Portfolio -  Fund Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Institutional  Institutional  Institutional  Institutional  Institutional 
      Class  Class  Class  Class  Class 
    Assets           
    Investments in mutual funds           
       at fair value  $ 28,533  $ 1,590  $ 8,180  $ 26,501  $ 12,706 
    Total assets  28,533  1,590  8,180  26,501  12,706 
    Net assets  $ 28,533  $ 1,590  $ 8,180  $ 26,501  $ 12,706 
     
    Total number of mutual fund shares  2,336,857  163,380  871,117  2,813,318  1,322,170 
     
    Cost of mutual fund shares  $ 27,434  $ 1,275  $ 9,637  $ 25,987  $ 12,482 

    The accompanying notes are an integral part of these financial statements.

    9


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

          ING T. Rowe  ING T. Rowe  ING Van 
      ING Retirement  ING Stock  Price Capital  Price Equity  Kampen 
      Moderate  Index  Appreciation  Income  Growth and 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Income 
      Institutional  Institutional  Institutional  Institutional  Portfolio - 
      Class  Class  Class  Class  Service Class 
    Assets           
    Investments in mutual funds           
       at fair value  $ 7,498  $ 132,595  $ 54,665  $ 19,112  $ 6,631 
    Total assets  7,498  132,595  54,665  19,112  6,631 
    Net assets  $ 7,498  $ 132,595  $ 54,665  $ 19,112  $ 6,631 
     
    Total number of mutual fund shares  752,035  13,726,163  2,708,877  1,837,692  342,852 
     
    Cost of mutual fund shares  $ 7,379  $ 146,668  $ 59,503  $ 22,177  $ 7,156 

    The accompanying notes are an integral part of these financial statements.

    10


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

      ING Wells  ING American  ING Baron  ING Columbia   
      Fargo Small  Century Small-  Small Cap  Small Cap  ING JPMorgan 
      Cap Disciplined  Mid Cap Value  Growth  Value  Mid Cap Value 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Service Class  Initial Class  Initial Class  Initial Class  Initial Class 
    Assets           
    Investments in mutual funds           
       at fair value  $ 11,757  $ 254  $ 9,381  $ 6,448  $ 12,046 
    Total assets  11,757  254  9,381  6,448  12,046 
    Net assets  $ 11,757  $ 254  $ 9,381  $ 6,448  $ 12,046 
     
    Total number of mutual fund shares  1,455,111  25,720  614,365  762,186  1,054,853 
     
    Cost of mutual fund shares  $ 14,179  $ 293  $ 7,981  $ 6,267  $ 13,546 

    The accompanying notes are an integral part of these financial statements.

    11


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

      ING Legg    ING     
      Mason Partners  ING  Oppenheimer     
      Aggressive  Oppenheimer  Strategic  ING PIMCO  ING Pioneer 
      Growth  Global  Income  Total Return  High Yield 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Initial Class  Initial Class  Service Class  Initial Class  Initial Class 
    Assets           
    Investments in mutual funds           
       at fair value  $ 85  $ 7,514  $ 16,156  $ 14,513  $ 23,386 
    Total assets  85  7,514  16,156  14,513  23,386 
    Net assets  $ 85  $ 7,514  $ 16,156  $ 14,513  $ 23,386 
     
    Total number of mutual fund shares  2,186  617,424  1,538,704  1,243,633  2,326,953 
     
    Cost of mutual fund shares  $ 100  $ 6,246  $ 15,844  $ 14,380  $ 17,954 

    The accompanying notes are an integral part of these financial statements.

    12


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

      ING T. Rowe         
      Price  ING UBS U.S.  ING Van  ING Van  ING Strategic 
      Diversified Mid  Large Cap  Kampen  Kampen Equity  Allocation 
      Cap Growth  Equity  Comstock  and Income  Conservative 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Initial Class  Initial Class  Initial Class  Initial Class  Class I 
    Assets           
    Investments in mutual funds           
       at fair value  $ 32,561  $ 5,909  $ 6,640  $ 2,366  $ 98 
    Total assets  32,561  5,909  6,640  2,366  98 
    Net assets  $ 32,561  $ 5,909  $ 6,640  $ 2,366  $ 98 
     
    Total number of mutual fund shares  4,852,579  733,151  740,259  76,251  9,952 
     
    Cost of mutual fund shares  $ 37,010  $ 6,223  $ 6,560  $ 2,666  $ 126 

    The accompanying notes are an integral part of these financial statements.

    13


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

      ING Strategic  ING Strategic       
      Allocation  Allocation  ING Growth  ING Index Plus  ING Index Plus 
      Growth  Moderate  and Income  LargeCap  MidCap 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Class I  Class I  Class I  Class I  Class I 
    Assets           
    Investments in mutual funds           
       at fair value  $ 439  $ 1,507  $ 4,434  $ 10,431  $ 10,716 
    Total assets  439  1,507  4,434  10,431  10,716 
    Net assets  $ 439  $ 1,507  $ 4,434  $ 10,431  $ 10,716 
     
    Total number of mutual fund shares  46,755  157,331  228,302  839,833  833,936 
     
    Cost of mutual fund shares  $ 568  $ 2,076  $ 4,081  $ 12,336  $ 12,842 

    The accompanying notes are an integral part of these financial statements.

    14


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

          ING    
        ING  Opportunistic  ING Russell™  ING Russell™ 
      ING Index Plus  International  Large Cap  Large Cap  Large Cap 
      SmallCap  Index  Value Growth Index  Index 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Class I  Class S  Class I  Class I  Class I 
    Assets             
    Investments in mutual funds             
       at fair value  $ 10,546  $ 22,654  $ 402  $ 38,213  $ 2,255 
    Total assets  10,546  22,654    402  38,213  2,255 
    Net assets  $ 10,546  $ 22,654  $ 402  $ 38,213  $ 2,255 
     
    Total number of mutual fund shares  915,412  2,772,797  41,888  2,976,089  252,810 
     
    Cost of mutual fund shares  $ 13,078  $ 20,823  $ 547  $ 32,517  $ 1,965 

    The accompanying notes are an integral part of these financial statements.

    15


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

      ING Russell™  ING Russell™  ING Russell™     
      Large Cap  Mid Cap  Small Cap  ING U.S. Bond  ING MidCap 
      Value Index  Growth Index  Index  Index  Opportunities 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Class I  Class I  Class I  Class I  Class I 
    Assets           
    Investments in mutual funds           
       at fair value  $ 4,862  $ 2,095  $ 1,159  $ 4,975  $ 2,639 
    Total assets  4,862  2,095  1,159  4,975  2,639 
    Net assets  $ 4,862  $ 2,095  $ 1,159  $ 4,975  $ 2,639 
     
    Total number of mutual fund shares  384,336  159,414  118,132  478,803  292,239 
     
    Cost of mutual fund shares  $ 4,153  $ 1,856  $ 917  $ 4,958  $ 2,776 

    The accompanying notes are an integral part of these financial statements.

    16


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

      ING SmallCap         
      Opportunities  Brandes  Business  Frontier Capital   
      Portfolio -  International  Opportunity  Appreciation  M Large Cap 
      Class I  Equity Fund  Value Fund  Fund  Growth Fund 
    Assets           
    Investments in mutual funds           
       at fair value  $ 7,675  $ 13,630  $ 2,426  $ 6,822  $ 2,644 
    Total assets  7,675  13,630  2,426  6,822  2,644 
    Net assets  $ 7,675  $ 13,630  $ 2,426  $ 6,822  $ 2,644 
     
    Total number of mutual fund shares  477,324  1,178,027  255,345  333,251  199,696 
     
    Cost of mutual fund shares  $ 7,476  $ 18,348  $ 2,600  $ 7,342  $ 2,824 

    The accompanying notes are an integral part of these financial statements.

    17


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Assets and Liabilities
    December 31, 2009
    (Dollars in thousands)

      Neuberger   
      Berman AMT   
      Socially  Van Eck 
      Responsive  Worldwide 
      Portfolio® -  Hard Assets 
      Class I  Fund 
    Assets     
    Investments in mutual funds     
       at fair value  $ 501  $ 6,613 
    Total assets  501  6,613 
    Net assets  $ 501  $ 6,613 
     
    Total number of mutual fund shares  41,405  226,021 
     
    Cost of mutual fund shares  $ 404  $ 6,812 

    The accompanying notes are an integral part of these financial statements.

    18


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

          American  American   
        American  Funds  Funds   
        Funds  Insurance  Insurance  BlackRock 
      AIM V.I. Core  Insurance  Series®  Series®  Global 
      Equity Fund -  Series® Growth  Growth-Income  International  Allocation V.I. 
      Series I Shares  Fund - Class 2  Fund - Class 2  Fund - Class 2  Fund - Class III 
    Net investment income (loss)           
    Income:           
       Dividends  $ 144  $ 277  $ 355  $ 648  $ 26 
    Total investment income  144  277  355  648  26 
    Expenses:           
       Mortality, expense risk           
    and other charges  54  139  78  141  1 
    Total expenses  54  139  78  141  1 
    Net investment income (loss)  90  138  277  507  25 
     
    Realized and unrealized gain (loss)           
       on investments           
    Net realized gain (loss) on investments  (335)  (4,087)  (2,100)  (4,706)  3 
    Capital gains distributions  -  -  -  199  - 
    Total realized gain (loss) on investments           
       and capital gains distributions  (335)  (4,087)  (2,100)  (4,507)  3 
    Net unrealized appreciation           
       (depreciation) of investments  2,234  17,846  7,959  17,756  68 
    Net realized and unrealized gain (loss)           
       on investments  1,899  13,759  5,859  13,249  71 
    Net increase (decrease) in net assets           
       resulting from operations  $ 1,989  $ 13,897  $ 6,136  $ 13,756  $ 96 

    The accompanying notes are an integral part of these financial statements.

    19


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

          Fidelity® VIP     
      Fidelity® VIP  Fidelity® VIP  Investment    ING 
      Equity-Income  Contrafund®  Grade Bond  ING Balanced  Intermediate 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Bond Portfolio - 
      Service Class  Service Class  Initial Class  Class I  Class I 
    Net investment income (loss)           
    Income:           
         Dividends  $ 79  $ 203  $ 36  $ 486  $ 2,425 
    Total investment income  79  203  36  486  2,425 
    Expenses:           
         Mortality, expense risk           
    and other charges  10  53  2  64  139 
    Total expenses  10  53  2  64  139 
    Net investment income (loss)  69  150  34  422  2,286 
     
    Realized and unrealized gain (loss)           
         on investments           
    Net realized gain (loss) on investments  (1,057)  (3,790)                           (1)  (1,172)  (2,271) 
    Capital gains distributions  -  4  2  -  - 
    Total realized gain (loss) on investments           
         and capital gains distributions  (1,057)  (3,786)  1  (1,172)  (2,271) 
    Net unrealized appreciation           
         (depreciation) of investments  1,844  8,533  24  2,537  3,919 
    Net realized and unrealized gain (loss)           
         on investments  787  4,747  25  1,365  1,648 
    Net increase (decrease) in net assets           
         resulting from operations  $ 856  $ 4,897  $ 59  $ 1,787  $ 3,934 

    The accompanying notes are an integral part of these financial statements.

    20


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

          ING BlackRock  ING BlackRock   
      ING  ING Artio  Large Cap  Large Cap  ING Clarion 
      AllianceBernstein  Foreign  Growth  Value  Global Real 
      Mid Cap Growth  Portfolio -  Portfolio -  Portfolio -  Estate 
      Portfolio -  Institutional  Institutional  Institutional  Portfolio - 
      Institutional Class  Class  Class  Class  Service Class 
    Net investment income (loss)           
    Income:           
         Dividends  $ -  $ 532  $ 9  $ 57  $ 216 
    Total investment income  -  532  9  57  216 
    Expenses:           
         Mortality, expense risk           
    and other charges  4  44  7  48  40 
    Total expenses  4  44  7  48  40 
    Net investment income (loss)  (4)  488  2  9  176 
     
    Realized and unrealized gain (loss)           
         on investments           
    Net realized gain (loss) on investments  (658)  (3,509)  (219)  (724)  (939) 
    Capital gains distributions  -  -  -  -  - 
    Total realized gain (loss) on investments           
         and capital gains distributions  (658)  (3,509)  (219)  (724)  (939) 
    Net unrealized appreciation           
         (depreciation) of investments  936  5,602  622  1,431  3,464 
    Net realized and unrealized gain (loss)           
         on investments  278  2,093  403  707  2,525 
    Net increase (decrease) in net assets           
         resulting from operations  $ 274  $ 2,581  $ 405  $ 716  $ 2,701 

    The accompanying notes are an integral part of these financial statements.

    21


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

                ING Franklin 
                Templeton 
      ING Evergreen  ING Evergreen  ING FMRSM      Founding 
      Health Sciences  Omega  Diversified Mid      Strategy 
      Portfolio -  Portfolio -  Cap Portfolio -  ING Focus 5  Portfolio - 
      Institutional  Institutional  Institutional  Portfolio -  Institutional 
      Class  Class  Class  Class I Class
    Net investment income (loss)               
    Income:               
         Dividends  $ -  $ 121  $ 105  $ -  $ 8 
    Total investment income  -  121  105    -    8 
    Expenses:               
         Mortality, expense risk               
    and other charges  14  135  86    -    1 
    Total expenses  14  135  86    -    1 
    Net investment income (loss)  (14)  (14)  19    -    7 
     
    Realized and unrealized gain (loss)               
         on investments               
    Net realized gain (loss) on investments  (560)  (4,045)  (1,052)    (9)    (14) 
    Capital gains distributions  -  -  -    -    3 
    Total realized gain (loss) on investments               
         and capital gains distributions  (560)  (4,045)  (1,052)    (9)    (11) 
    Net unrealized appreciation               
         (depreciation) of investments  1,149  12,461  5,680    29    72 
    Net realized and unrealized gain (loss)               
         on investments  589  8,416  4,628    20    61 
    Net increase (decrease) in net assets               
         resulting from operations  $ 575  $ 8,402  $ 4,647  $ 20  $ 68 

    The accompanying notes are an integral part of these financial statements.

    22


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

            ING JPMorgan  ING JPMorgan 
      ING Global  ING Growth  ING Index Plus  Emerging  Small Cap Core 
      Resources  and Income  International  Markets Equity  Equity 
      Portfolio -  Portfolio II -  Equity  Portfolio -  Portfolio - 
      Institutional  Institutional  Portfolio -  Institutional  Institutional 
      Class  Class  Service Class  Class  Class 
    Net investment income (loss)           
    Income:           
         Dividends  $ 67  $ 127  $ 1,209  $ 407  $ 153 
    Total investment income  67  127  1,209  407  153 
    Expenses:           
         Mortality, expense risk           
    and other charges  50  4  81  117  122 
    Total expenses  50  4  81  117  122 
    Net investment income (loss)  17  123  1,128  290  31 
     
    Realized and unrealized gain (loss)           
         on investments           
    Net realized gain (loss) on investments  (6,877)  (4,299)  (20,670)  (1,165)  (1,271) 
    Capital gains distributions  -  -  -  -  453 
    Total realized gain (loss) on investments           
         and capital gains distributions  (6,877)  (4,299)  (20,670)  (1,165)  (818) 
    Net unrealized appreciation           
         (depreciation) of investments  10,534  4,799  23,046  14,341  5,636 
    Net realized and unrealized gain (loss)           
         on investments  3,657  500  2,376  13,176  4,818 
    Net increase (decrease) in net assets           
         resulting from operations  $ 3,674  $ 623  $ 3,504  $ 13,466  $ 4,849 

    The accompanying notes are an integral part of these financial statements.

    23


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

      ING JPMorgan  ING LifeStyle    ING LifeStyle   
      Value  Aggressive  ING LifeStyle  Moderate  ING LifeStyle 
      Opportunities  Growth  Growth  Growth  Moderate 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Institutional  Institutional  Institutional  Institutional  Institutional 
      Class  Class  Class  Class  Class 
    Net investment income (loss)           
    Income:           
         Dividends  $ 243  $ 287  $ 825  $ 599  $ 397 
    Total investment income  243  287  825  599  397 
    Expenses:           
         Mortality, expense risk           
    and other charges  11  16  37  24  16 
    Total expenses  11  16  37  24  16 
    Net investment income (loss)  232  271  788  575  381 
     
    Realized and unrealized gain (loss)           
         on investments           
    Net realized gain (loss) on investments  (3,022)  (3,318)  (6,396)  (2,923)  (1,053) 
    Capital gains distributions  -  107  351  206  81 
    Total realized gain (loss) on investments           
         and capital gains distributions  (3,022)  (3,211)  (6,045)  (2,717)  (972) 
    Net unrealized appreciation           
         (depreciation) of investments  2,574  4,611  9,067  4,187  1,715 
    Net realized and unrealized gain (loss)           
         on investments  (448)  1,400  3,022  1,470  743 
    Net increase (decrease) in net assets           
         resulting from operations  $ (216)  $ 1,671  $ 3,810  $ 2,045  $ 1,124 

    The accompanying notes are an integral part of these financial statements.

    24


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

              ING Lord   
        ING Liquid      Abbett ING Marsico 
      ING Limited  Assets  ING Liquid  Affiliated  Growth 
      Maturity Bond  Portfolio -  Assets Portfolio -  Portfolio - 
      Portfolio -  Institutional  Portfolio -  Institutional  Institutional 
      Service Class  Class  Service Class  Class Class 
    Net investment income (loss)               
    Income:               
         Dividends  $ 1,181  $ 275  $ 38  $ 1  $ 65 
    Total investment income  1,181  275    38    1  65 
    Expenses:               
         Mortality, expense risk               
    and other charges  103  667    -    1  16 
    Total expenses  103  667    -    1  16 
    Net investment income (loss)  1,078  (392)    38    -  49 
     
    Realized and unrealized gain (loss)               
         on investments               
    Net realized gain (loss) on investments  (267)  -    -    (55)  (1,178) 
    Capital gains distributions  205  197    96    -  - 
    Total realized gain (loss) on investments               
         and capital gains distributions  (62)  197    96    (55)  (1,178) 
    Net unrealized appreciation               
         (depreciation) of investments  691  -    -    73  2,553 
    Net realized and unrealized gain (loss)               
         on investments  629  197    96    18  1,375 
    Net increase (decrease) in net assets               
         resulting from operations  $ 1,707  $ (195)  $ 134  $ 18  $ 1,424 

    The accompanying notes are an integral part of these financial statements.

    25


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

      ING Marsico      ING  
      International  ING MFS Total    Oppenheimer  ING PIMCO 
      Opportunities  Return  ING MFS  Main Street  Total Return 
      Portfolio -  Portfolio -  Utilities  Portfolio® -  Bond Portfolio - 
      Institutional  Institutional  Portfolio -  Institutional  Institutional 
      Class  Class  Service Class  Class  Class 
    Net investment income (loss)             
    Income:             
         Dividends  $ 124  $ 157  $ 403  $ 4  $ 833 
    Total investment income  124  157  403    4  833 
    Expenses:             
         Mortality, expense risk             
    and other charges  31  19  42    -  60 
    Total expenses  31  19  42    -  60 
    Net investment income (loss)  93  138  361    4  773 
     
    Realized and unrealized gain (loss)             
         on investments             
    Net realized gain (loss) on investments  (2,890)  (656)  (3,016)    (380)  449 
    Capital gains distributions  -  -  -    -  649 
    Total realized gain (loss) on investments             
         and capital gains distributions  (2,890)  (656)  (3,016)    (380)  1,098 
    Net unrealized appreciation             
         (depreciation) of investments  5,618  1,380  4,702    388  995 
    Net realized and unrealized gain (loss)             
         on investments  2,728  724  1,686    8  2,093 
    Net increase (decrease) in net assets             
         resulting from operations  $ 2,821  $ 862  $ 2,047  $ 12  $ 2,866 

    The accompanying notes are an integral part of these financial statements.

    26


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

            ING Retirement   
        ING Pioneer  ING Retirement  Moderate  ING Retirement 
      ING Pioneer  Mid Cap Value  Growth  Growth  Moderate 
      Fund Portfolio -  Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Institutional  Institutional  Institutional  Institutional  Institutional 
      Class  Class  Class  Class  Class 
    Net investment income (loss)           
    Income:           
         Dividends  $ 21  $ 109  $ -  $ -  $ - 
    Total investment income  21  109  -  -  - 
    Expenses:           
         Mortality, expense risk           
    and other charges  7  32  13  6  5 
    Total expenses  7  32  13  6  5 
    Net investment income (loss)  14  77  (13)  (6)  (5) 
     
    Realized and unrealized gain (loss)           
         on investments           
    Net realized gain (loss) on investments  96  (1,451)  1  8  9 
    Capital gains distributions  -  -  -  -  - 
    Total realized gain (loss) on investments           
         and capital gains distributions  96  (1,451)  1  8  9 
    Net unrealized appreciation           
         (depreciation) of investments  198  2,909  514  224  119 
    Net realized and unrealized gain (loss)           
         on investments  294  1,458  515  232  128 
    Net increase (decrease) in net assets           
         resulting from operations  $ 308  $ 1,535  $ 502  $ 226  $ 123 

    The accompanying notes are an integral part of these financial statements.

    27


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

        ING T. Rowe  ING T. Rowe  ING Van  ING Van 
      ING Stock  Price Capital  Price Equity  Kampen  Kampen 
      Index  Appreciation  Income  Capital Growth  Growth and 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Income 
      Institutional  Institutional  Institutional  Institutional  Portfolio - 
      Class  Class  Class  Class  Service Class 
    Net investment income (loss)           
    Income:           
         Dividends  $ 797  $ 1,036  $ 332  $ 292  $ 76 
    Total investment income  797  1,036  332  292  76 
    Expenses:           
         Mortality, expense risk           
    and other charges  725  172  64  120  15 
    Total expenses  725  172  64  120  15 
    Net investment income (loss)  72  864  268  172  61 
     
    Realized and unrealized gain (loss)           
         on investments           
    Net realized gain (loss) on investments  (6,829)  (3,452)  (2,470)  (20,573)  (1,043) 
    Capital gains distributions  -  -  -  -  - 
    Total realized gain (loss) on investments           
         and capital gains distributions  (6,829)  (3,452)  (2,470)  (20,573)  (1,043) 
    Net unrealized appreciation           
         (depreciation) of investments  34,160  16,055  5,890  27,491  2,187 
    Net realized and unrealized gain (loss)           
         on investments  27,331  12,603  3,420  6,918  1,144 
    Net increase (decrease) in net assets           
         resulting from operations  $ 27,403  $ 13,467  $ 3,688  $ 7,090  $ 1,205 

    The accompanying notes are an integral part of these financial statements.

    28


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

      ING Wells  ING American  ING American  ING Baron  ING Columbia 
      Fargo Small  Century Large  Century Small-  Small Cap  Small Cap 
      Cap Disciplined  Company Value  Mid Cap Value  Growth  Value 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Service Class  Initial Class  Initial Class  Initial Class  Initial Class 
    Net investment income (loss)           
    Income:           
         Dividends  $ 77  $ -  $ 4  $ -  $ 70 
    Total investment income  77  -  4  -  70 
    Expenses:           
         Mortality, expense risk           
    and other charges  44  -  1  33  19 
    Total expenses  44  -  1  33  19 
    Net investment income (loss)  33  -  3  (33)  51 
     
    Realized and unrealized gain (loss)           
         on investments           
    Net realized gain (loss) on investments  (1,108)  (10)  (97)  (3,149)  (1,303) 
    Capital gains distributions  -  -  -  -  - 
    Total realized gain (loss) on investments           
         and capital gains distributions  (1,108)  (10)  (97)  (3,149)  (1,303) 
    Net unrealized appreciation           
         (depreciation) of investments  3,766  9  151  5,746  2,276 
    Net realized and unrealized gain (loss)           
         on investments  2,658  (1)  54  2,597  973 
    Net increase (decrease) in net assets           
         resulting from operations  $ 2,691  $ (1)  $ 57  $ 2,564  $ 1,024 

    The accompanying notes are an integral part of these financial statements.

    29


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

        ING Legg      ING 
        Mason Partners ING Neuberger   ING  Oppenheimer 
      ING JPMorgan  Aggressive  Berman  Oppenheimer  Strategic 
      Mid Cap Value  Growth  Partners  Global  Income 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Initial Class  Initial Class  Initial Class  Initial Class  Service Class 
    Net investment income (loss)           
    Income:           
         Dividends  $ 160  $ -  $ 43  $ 221  $ 533 
    Total investment income  160  -  43  221  533 
    Expenses:           
         Mortality, expense risk           
    and other charges  33  -  2  26  65 
    Total expenses  33  -  2  26  65 
    Net investment income (loss)  127  -  41  195  468 
     
    Realized and unrealized gain (loss)           
         on investments           
    Net realized gain (loss) on investments  (2,987)  (13)  (611)  (1,510)  (797) 
    Capital gains distributions  158  -  -  159  - 
    Total realized gain (loss) on investments           
         and capital gains distributions  (2,829)  (13)  (611)  (1,351)  (797) 
    Net unrealized appreciation           
         (depreciation) of investments  5,016  35  675  4,049  2,860 
    Net realized and unrealized gain (loss)           
         on investments  2,187  22  64  2,698  2,063 
    Net increase (decrease) in net assets           
         resulting from operations  $ 2,314  $ 22 $  105  $ 2,893  $ 2,531 

    The accompanying notes are an integral part of these financial statements.

    30


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

          ING T. Rowe     
          Price  ING UBS U.S.  ING Van 
      ING PIMCO  ING Pioneer  Diversified Mid  Large Cap  Kampen 
      Total Return  High Yield  Cap Growth  Equity  Comstock 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Initial Class  Initial Class  Initial Class  Initial Class  Initial Class 
    Net investment income (loss)           
    Income:           
         Dividends  $ 500  $ 1,745  $ 115  $ 71  $ 189 
    Total investment income  500  1,745  115  71  189 
    Expenses:           
         Mortality, expense risk           
    and other charges  63  130  154  7  18 
    Total expenses  63  130  154  7  18 
    Net investment income (loss)  437  1,615  (39)  64  171 
     
    Realized and unrealized gain (loss)           
         on investments           
    Net realized gain (loss) on investments  197  (123)  (3,845)  (93)  (2,316) 
    Capital gains distributions  529  -  -  -  - 
    Total realized gain (loss) on investments           
         and capital gains distributions  726  (123)  (3,845)  (93)  (2,316) 
    Net unrealized appreciation           
         (depreciation) of investments  629  10,203  14,405  916  3,734 
    Net realized and unrealized gain (loss)           
         on investments  1,355  10,080  10,560  823  1,418 
    Net increase (decrease) in net assets           
         resulting from operations  $ 1,792  $ 11,695  $ 10,521  $ 887  $ 1,589 

    The accompanying notes are an integral part of these financial statements.

    31


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

      ING Van  ING Strategic  ING Strategic  ING Strategic   
      Kampen Equity  Allocation  Allocation  Allocation  ING Growth 
      and Income  Conservative  Growth  Moderate  and Income 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Initial Class  Class I Class I  Class I  Class I 
    Net investment income (loss)             
    Income:             
         Dividends  $ 42  $ 8  $ 70  $ 131  $ 59 
    Total investment income  42    8  70  131  59 
    Expenses:             
         Mortality, expense risk             
    and other charges  5    1  1  3  3 
    Total expenses  5    1  1  3  3 
    Net investment income (loss)  37    7  69  128  56 
     
    Realized and unrealized gain (loss)             
         on investments             
    Net realized gain (loss) on investments  (175)    (3)  (343)                         (87)  11 
    Capital gains distributions  -    -  38  43  - 
    Total realized gain (loss) on investments             
         and capital gains distributions  (175)    (3)  (305)                         (44)  11 
    Net unrealized appreciation             
         (depreciation) of investments  572    11  370  189  359 
    Net realized and unrealized gain (loss)             
         on investments  397    8  65  145  370 
    Net increase (decrease) in net assets             
         resulting from operations  $ 434  $ 15  $ 134  $ 273  $ 426 

    The accompanying notes are an integral part of these financial statements.
    32


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

            ING  ING
      ING Index Plus  ING Index Plus  ING Index Plus  International  Opportunistic 
      LargeCap  MidCap  SmallCap  Index  Large Cap 
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Class I  Class I  Class I  Class S  Class I 
    Net investment income (loss)             
    Income:             
         Dividends  $ 291  $ 167  $ 160  $ -  $ 28 
    Total investment income  291  167  160  -    28 
    Expenses:             
         Mortality, expense risk             
    and other charges  41  41  29  60    3 
    Total expenses  41  41  29  60    3 
    Net investment income (loss)  250  126  131  (60)    25 
     
    Realized and unrealized gain (loss)             
         on investments             
    Net realized gain (loss) on investments  (881)  (2,223)  (1,150)  111    (424) 
    Capital gains distributions  -  -  -  -    - 
    Total realized gain (loss) on investments             
         and capital gains distributions  (881)  (2,223)  (1,150)  111    (424) 
    Net unrealized appreciation             
         (depreciation) of investments  2,567  4,701  3,136  1,831    398 
    Net realized and unrealized gain (loss)             
         on investments  1,686  2,478  1,986  1,942    (26) 
    Net increase (decrease) in net assets             
         resulting from operations  $ 1,936  $ 2,604  $ 2,117  $ 1,882  $ (1) 

    The accompanying notes are an integral part of these financial statements.
    33


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

      ING Russell™  ING Russell™  ING Russell™  ING Russell™  ING Russell™ 
      Large Cap  Large Cap  Large Cap  Mid Cap  Small Cap 
      Growth Index  Index Value Index  Growth Index  Index
      Portfolio -  Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Class I  Class I  Class I  Class I  Class I 
    Net investment income (loss)               
    Income:               
         Dividends  $ -  $ -  $ -  $ -  $ - 
    Total investment income  -    -  -  -    - 
    Expenses:               
         Mortality, expense risk               
    and other charges  111    4  9  4    4 
    Total expenses  111    4  9  4    4 
    Net investment income (loss)  (111)    (4)  (9)  (4)    (4) 
     
    Realized and unrealized gain (loss)               
         on investments               
    Net realized gain (loss) on investments  236    49  115  7    23 
    Capital gains distributions  -    -  -  -    - 
    Total realized gain (loss) on investments               
         and capital gains distributions  236    49  115  7    23 
    Net unrealized appreciation               
         (depreciation) of investments  5,696    290  709  239    269 
    Net realized and unrealized gain (loss)               
         on investments  5,932    339  824  246    292 
    Net increase (decrease) in net assets               
         resulting from operations  $ 5,821  $ 335  $ 815  $ 242  $ 288 

    The accompanying notes are an integral part of these financial statements.
    34


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

      ING U.S. Bond  ING MidCap  ING SmallCap     
      Index  Opportunities  Opportunities  Brandes  Business 
      Portfolio -  Portfolio -  Portfolio -  International  Opportunity 
      Class I  Class I  Class I  Equity Fund  Value Fund 
    Net investment income (loss)           
    Income:           
         Dividends  $ 81  $ 6  $ -  $ 295  $ 21 
    Total investment income  81  6  -  295  21 
    Expenses:           
         Mortality, expense risk           
    and other charges  16  7  16  87  15 
    Total expenses  16  7  16  87  15 
    Net investment income (loss)  65  (1)  (16)  208  6 
     
    Realized and unrealized gain (loss)           
         on investments           
    Net realized gain (loss) on investments  76  40  (590)  (2,256)  (408) 
    Capital gains distributions  35  -  -  -  - 
    Total realized gain (loss) on investments           
         and capital gains distributions  111  40  (590)  (2,256)  (408) 
    Net unrealized appreciation           
         (depreciation) of investments  (14)  780  1,770  4,705  961 
    Net realized and unrealized gain (loss)           
         on investments  97  820  1,180  2,449  553 
    Net increase (decrease) in net assets           
         resulting from operations  $ 162  $ 819  $ 1,164  $ 2,657  $ 559 

    The accompanying notes are an integral part of these financial statements.
    35


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Operations
    For the year ended December 31, 2009
    (Dollars in thousands)

          Neuberger   
          Berman AMT   
          Socially  Van Eck 
      Frontier Capital    Responsive  Worldwide 
      Appreciation  M Large Cap  Portfolio® -  Hard Assets 
      Fund  Growth Fund  Class I  Fund 
    Net investment income (loss)         
    Income:         
         Dividends  $ 3  $ 16  $ 9  $ 17 
    Total investment income  3  16  9  17 
    Expenses:         
         Mortality, expense risk         
    and other charges  42  14  1  34 
    Total expenses  42  14  1  34 
    Net investment income (loss)  (39)  2  8  (17) 
     
    Realized and unrealized gain (loss)         
         on investments         
    Net realized gain (loss) on investments  (586)  (631)  (125)  (487) 
    Capital gains distributions  -  -  -  33 
    Total realized gain (loss) on investments         
         and capital gains distributions  (586)  (631)  (125)  (454) 
    Net unrealized appreciation         
         (depreciation) of investments  2,952  1,425  243  3,070 
    Net realized and unrealized gain (loss)         
         on investments  2,366  794  118  2,616 
    Net increase (decrease) in net assets         
         resulting from operations  $ 2,327  $ 796  $ 126  $ 2,599 

    The accompanying notes are an integral part of these financial statements.
    36


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)

          American  American 
        American  Funds  Funds 
        Funds  Insurance  Insurance 
      AIM V.I. Core  Insurance  Series®  Series® 
      Equity Fund -  Series® Growth  Growth-Income  International 
      Series I Shares  Fund - Class 2  Fund - Class 2  Fund - Class 2 
    Net Assets at January 1, 2008  $ 15,770  $ 61,155  $ 31,094  $ 61,314 
     
    Increase (decrease) in net assets         
    Operations:         
       Net investment income (loss)  162  250  404  797 
       Total realized gain (loss) on investments         
             and capital gains distributions  154  6,686  1,869  9,352 
       Net unrealized appreciation (depreciation)         
             of investments  (4,405)  (35,357)  (15,111)  (35,892) 
    Net increase (decrease) in net assets from operations  (4,089)  (28,421)  (12,838)  (25,743) 
    Changes from principal transactions:         
       Premiums  -  8,357  4,434  6,354 
       Surrenders and withdrawals  (1,030)  (2,255)  (661)  (1,977) 
       Cost of insurance and administrative charges  (734)  (2,561)  (1,613)  (2,288) 
       Benefit payments  -  -  -  - 
       Transfers between Divisions         
             (including fixed account), net  (1,440)  751  1,183  (2,510) 
    Increase (decrease) in net assets derived from         
       principal transactions  (3,204)  4,292  3,343  (421) 
    Total increase (decrease) in net assets  (7,293)  (24,129)  (9,495)  (26,164) 
    Net assets at December 31, 2008  8,477  37,026  21,599  35,150 
     
    Increase (decrease) in net assets         
    Operations:         
       Net investment income (loss)  90  138  277  507 
       Total realized gain (loss) on investments         
             and capital gains distributions  (335)  (4,087)  (2,100)  (4,507) 
       Net unrealized appreciation (depreciation)         
             of investments  2,234  17,846  7,959  17,756 
    Net increase (decrease) in net assets from operations  1,989  13,897  6,136  13,756 
    Changes from principal transactions:         
       Premiums  -  5,774  3,341  4,640 
       Surrenders and withdrawals  (372)  (2,791)  (1,591)  (2,558) 
       Cost of insurance and administrative charges  (666)  (2,658)  (1,648)  (2,387) 
       Benefit payments  -  -  -  - 
       Transfers between Divisions         
             (including fixed account), net  (658)  (1,933)  (2,498)  (2,508) 
    Increase (decrease) in net assets derived from         
       principal transactions  (1,696)  (1,608)  (2,396)  (2,813) 
    Total increase (decrease) in net assets  293  12,289  3,740  10,943 
    Net assets at December 31, 2009  $ 8,770  $ 49,315  $ 25,339  $ 46,093 

    The accompanying notes are an integral part of these financial statements.
    37


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
                Fidelity® VIP 
      BlackRock  Fidelity® VIP  Fidelity® VIP  Investment 
      Global  Equity-Income  Contrafund®  Grade Bond 
      Allocation V.I.  Portfolio -  Portfolio -  Portfolio - 
      Fund - Class III  Service Class  Service Class  Initial Class 
    Net Assets at January 1, 2008  $ -  $ 3,978  $ 16,998  $ 439 
     
    Increase (decrease) in net assets             
    Operations:             
       Net investment income (loss)  -    81    105  16 
       Total realized gain (loss) on investments             
             and capital gains distributions  -    (343)    (1,854)  (1) 
       Net unrealized appreciation (depreciation)             
             of investments  -    (1,677)    (7,345)  (31) 
    Net increase (decrease) in net assets from operations  -    (1,939)    (9,094)  (16) 
    Changes from principal transactions:             
       Premiums  -    527    3,286  - 
       Surrenders and withdrawals  -    (78)    (696)  (6) 
       Cost of insurance and administrative charges  -    (169)    (876)  (17) 
       Benefit payments  -    -    -  - 
       Transfers between Divisions             
             (including fixed account), net  -    355    3,165  (3) 
    Increase (decrease) in net assets derived from             
       principal transactions  -    635    4,879  (26) 
    Total increase (decrease) in net assets  -    (1,304)    (4,215)  (42) 
    Net assets at December 31, 2008  -    2,674    12,783  397 
     
    Increase (decrease) in net assets             
    Operations:             
       Net investment income (loss)  25    69    150  34 
       Total realized gain (loss) on investments             
             and capital gains distributions  3    (1,057)    (3,786)  1 
       Net unrealized appreciation (depreciation)             
             of investments  68    1,844    8,533  24 
    Net increase (decrease) in net assets from operations  96    856    4,897  59 
    Changes from principal transactions:             
       Premiums  445    447    2,425  - 
       Surrenders and withdrawals  -    (102)    (596)  (1) 
       Cost of insurance and administrative charges  (52)    (193)    (1,018)  (20) 
       Benefit payments  -    -    -  - 
       Transfers between Divisions             
             (including fixed account), net  1,764    51    (455)  (4) 
    Increase (decrease) in net assets derived from             
       principal transactions  2,157    203    356  (25) 
    Total increase (decrease) in net assets  2,253    1,059    5,253  34 
    Net assets at December 31, 2009  $ 2,253  $ 3,733  $ 18,036  $ 431 

    The accompanying notes are an integral part of these financial statements.
    38


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)

          ING  ING Artio- 
        ING  AllianceBernstein  Foreign 
      ING Balanced  Intermediate  Mid Cap Growth  Portfolio - 
      Portfolio -  Bond Portfolio -  Portfolio -  Institutional 
      Class I  Class I  Institutional Class  Class 
    Net Assets at January 1, 2008  $ 16,904  $ 22,504  $ 3,252  $ 21,963 
     
    Increase (decrease) in net assets         
    Operations:         
       Net investment income (loss)  418  2,158  (7)  (80) 
       Total realized gain (loss) on investments         
             and capital gains distributions  819  59  (119)  358 
       Net unrealized appreciation (depreciation)         
             of investments  (5,749)  (5,810)  (937)  (11,510) 
    Net increase (decrease) in net assets from operations  (4,512)  (3,593)  (1,063)  (11,232) 
    Changes from principal transactions:         
       Premiums  1,294  3,433  354  3,926 
       Surrenders and withdrawals  (713)  (1,418)  (189)  (455) 
       Cost of insurance and administrative charges  (851)  (1,905)  (150)  (1,097) 
       Benefit payments  -  -  -  - 
       Transfers between Divisions         
             (including fixed account), net  (1,374)  20,537  (1,042)  599 
    Increase (decrease) in net assets derived from         
       principal transactions  (1,644)  20,647  (1,027)  2,973 
    Total increase (decrease) in net assets  (6,156)  17,054  (2,090)  (8,259) 
    Net assets at December 31, 2008  10,748  39,558  1,162  13,704 
     
    Increase (decrease) in net assets         
    Operations:         
       Net investment income (loss)  422  2,286  (4)  488 
       Total realized gain (loss) on investments         
             and capital gains distributions  (1,172)  (2,271)  (658)  (3,509) 
       Net unrealized appreciation (depreciation)         
             of investments  2,537  3,919  936  5,602 
    Net increase (decrease) in net assets from operations  1,787  3,934  274  2,581 
    Changes from principal transactions:         
       Premiums  968  2,876  158  2,542 
       Surrenders and withdrawals  (428)  (2,076)  (27)  (401) 
       Cost of insurance and administrative charges  (860)  (2,332)  (95)  (829) 
       Benefit payments  -  -  -  - 
       Transfers between Divisions         
             (including fixed account), net  (965)  (3,886)  (1,472)  (1,292) 
    Increase (decrease) in net assets derived from         
       principal transactions  (1,285)  (5,418)  (1,436)  20 
    Total increase (decrease) in net assets  502  (1,484)  (1,162)  2,601 
    Net assets at December 31, 2009  $ 11,250  $ 38,074  $ -  $ 16,305 

    The accompanying notes are an integral part of these financial statements.
    39


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
      ING BlackRock  ING BlackRock       
      Large Cap  Large Cap  ING Clarion  ING Evergreen 
      Growth  Value  Global Real  Health Sciences 
      Portfolio -  Portfolio -  Estate  Portfolio - 
      Institutional  Institutional  Portfolio -  Institutional 
      Class  Class  Service Class  Class 
    Net Assets at January 1, 2008  $ 2,045  $ 20,672  $ -  $ 2,671 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  (5)  (18)    (16)  (5) 
       Total realized gain (loss) on investments           
             and capital gains distributions  14  713    (419)  (1,477) 
       Net unrealized appreciation (depreciation)           
             of investments  (702)  (6,479)    (3,925)  (883) 
    Net increase (decrease) in net assets from operations  (693)  (5,784)    (4,360)  (2,365) 
    Changes from principal transactions:           
       Premiums  -  -    158  - 
       Surrenders and withdrawals  -  (581)    (159)  - 
       Cost of insurance and administrative charges  -  (707)    (217)  - 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  (226)  (5,532)    13,494  2,283 
    Increase (decrease) in net assets derived from           
       principal transactions  (226)  (6,820)    13,276  2,283 
    Total increase (decrease) in net assets  (919)  (12,604)    8,916  (82) 
    Net assets at December 31, 2008  1,126  8,068    8,916  2,589 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  2  9    176  (14) 
       Total realized gain (loss) on investments           
             and capital gains distributions  (219)  (724)    (939)  (560) 
       Net unrealized appreciation (depreciation)           
             of investments  622  1,431    3,464  1,149 
    Net increase (decrease) in net assets from operations  405  716    2,701  575 
    Changes from principal transactions:           
       Premiums  -  -    226  - 
       Surrenders and withdrawals  -  (734)    (538)  - 
       Cost of insurance and administrative charges  -  (529)    (594)  - 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  240  (686)    468  2,089 
    Increase (decrease) in net assets derived from           
       principal transactions  240  (1,949)    (438)  2,089 
    Total increase (decrease) in net assets  645  (1,233)    2,263  2,664 
    Net assets at December 31, 2009  $ 1,771  $ 6,835  $ 11,179  $ 5,253 

    The accompanying notes are an integral part of these financial statements.
    40


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
            ING Franklin 
            Templeton 
      ING Evergreen  ING FMRSM    Founding 
      Omega  Diversified Mid    Strategy 
      Portfolio -  Cap Portfolio -  ING Focus 5  Portfolio - 
      Institutional  Institutional  Portfolio -  Institutional 
      Class  Class  Class I  Class 
    Net Assets at January 1, 2008  $ 32,429  $ 21,328  $ -  $ - 
     
    Increase (decrease) in net assets         
    Operations:         
       Net investment income (loss)  (27)  96  1  - 
       Total realized gain (loss) on investments         
             and capital gains distributions  1,550  (566)  -  - 
       Net unrealized appreciation (depreciation)         
             of investments  (11,299)  (8,420)  (12)  (24) 
    Net increase (decrease) in net assets from operations  (9,776)  (8,890)  (11)  (24) 
    Changes from principal transactions:         
       Premiums  2,294  2,408  9  31 
       Surrenders and withdrawals  (2,374)  (728)  -  - 
       Cost of insurance and administrative charges  (1,598)  (792)  (2)  (4) 
       Benefit payments  -  -  -  - 
       Transfers between Divisions         
             (including fixed account), net  2,453  (985)  36  92 
    Increase (decrease) in net assets derived from         
       principal transactions  775  (97)  43  119 
    Total increase (decrease) in net assets  (9,001)  (8,987)  32  95 
    Net assets at December 31, 2008  23,428  12,341  32  95 
     
    Increase (decrease) in net assets         
    Operations:         
       Net investment income (loss)  (14)  19  -  7 
       Total realized gain (loss) on investments         
             and capital gains distributions  (4,045)  (1,052)  (9)  (11) 
       Net unrealized appreciation (depreciation)         
             of investments  12,461  5,680  29  72 
    Net increase (decrease) in net assets from operations  8,402  4,647  20  68 
    Changes from principal transactions:         
       Premiums  1,917  1,449  20  74 
       Surrenders and withdrawals  (1,256)  (399)  (4)  (7) 
       Cost of insurance and administrative charges  (1,821)  (848)  (10)  (28) 
       Benefit payments  -  -  -  - 
       Transfers between Divisions         
             (including fixed account), net  (6,239)  285  44  3,153 
    Increase (decrease) in net assets derived from         
       principal transactions  (7,399)  487  50  3,192 
    Total increase (decrease) in net assets  1,003  5,134  70  3,260 
    Net assets at December 31, 2009  $ 24,431  $ 17,475  $ 102  $ 3,355 

    The accompanying notes are an integral part of these financial statements.
    41


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
              ING JPMorgan 
      ING Global  ING Growth  ING Index Plus  Emerging 
      Resources  and Income  International  Markets Equity 
      Portfolio -  Portfolio II -  Equity  Portfolio - 
      Institutional  Institutional  Portfolio -  Institutional 
      Class  Class  Service Class  Class 
    Net Assets at January 1, 2008  $ 17,858  $ 8,611  $ 44,640  $ 38,928 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  291    -  1,847  633 
       Total realized gain (loss) on investments           
             and capital gains distributions  1,389    (212)  8,297  2,958 
       Net unrealized appreciation (depreciation)           
             of investments  (9,782)    (4,853)  (28,498)  (23,694) 
    Net increase (decrease) in net assets from operations  (8,102)    (5,065)  (18,354)  (20,103) 
    Changes from principal transactions:           
       Premiums  2,547    713  2,042  2,858 
       Surrenders and withdrawals  (671)    (380)  (2,217)  (1,006) 
       Cost of insurance and administrative charges  (911)    (273)  (1,667)  (1,265) 
       Benefit payments  -    -  -  - 
       Transfers between Divisions           
             (including fixed account), net  1,512    152  (2,075)  494 
    Increase (decrease) in net assets derived from           
       principal transactions  2,477    212  (3,917)  1,081 
    Total increase (decrease) in net assets  (5,625)    (4,853)  (22,271)  (19,022) 
    Net assets at December 31, 2008  12,233    3,758  22,369  19,906 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  17    123  1,128  290 
       Total realized gain (loss) on investments           
             and capital gains distributions  (6,877)    (4,299)  (20,670)  (1,165) 
       Net unrealized appreciation (depreciation)           
             of investments  10,534    4,799  23,046  14,341 
    Net increase (decrease) in net assets from operations  3,674    623  3,504  13,466 
    Changes from principal transactions:           
       Premiums  1,693    394  893  2,339 
       Surrenders and withdrawals  (553)    (90)  (850)  (972) 
       Cost of insurance and administrative charges  (1,062)    (122)  (896)  (1,536) 
       Benefit payments  -    -  -  - 
       Transfers between Divisions           
             (including fixed account), net  (2,086)    (4,563)  (25,020)  548 
    Increase (decrease) in net assets derived from           
       principal transactions  (2,008)    (4,381)  (25,873)  379 
    Total increase (decrease) in net assets  1,666    (3,758)  (22,369)  13,845 
    Net assets at December 31, 2009  $ 13,899  $ -  $ -  $ 33,751 

    The accompanying notes are an integral part of these financial statements.
    42


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
      ING JPMorgan  ING JPMorgan  ING LifeStyle   
      Small Cap Core  Value  Aggressive  ING LifeStyle 
      Equity  Opportunities  Growth  Growth 
      Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Institutional  Institutional  Institutional  Institutional 
      Class  Class  Class  Class 
    Net Assets at January 1, 2008  $ 29,389  $ 8,547  $ 8,505  $ 21,355 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  50  315    118  286 
       Total realized gain (loss) on investments           
             and capital gains distributions  2,067  (1,214)    324  793 
       Net unrealized appreciation (depreciation)           
             of investments  (10,784)  (2,451)    (4,211)  (9,292) 
    Net increase (decrease) in net assets from operations  (8,667)  (3,350)    (3,769)  (8,213) 
    Changes from principal transactions:           
       Premiums  2,644  -    2,520  4,469 
       Surrenders and withdrawals  (1,914)  -    (205)  (1,058) 
       Cost of insurance and administrative charges  (1,375)  -    (526)  (1,060) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  (465)  2,965    (616)  (450) 
    Increase (decrease) in net assets derived from           
       principal transactions  (1,110)  2,965    1,173  1,901 
    Total increase (decrease) in net assets  (9,777)  (385)    (2,596)  (6,312) 
    Net assets at December 31, 2008  19,612  8,162    5,909  15,043 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  31  232    271  788 
       Total realized gain (loss) on investments           
             and capital gains distributions  (818)  (3,022)    (3,211)  (6,045) 
       Net unrealized appreciation (depreciation)           
             of investments  5,636  2,574    4,611  9,067 
    Net increase (decrease) in net assets from operations  4,849  (216)    1,671  3,810 
    Changes from principal transactions:           
       Premiums  1,933  -    1,409  2,569 
       Surrenders and withdrawals  (1,259)  -    (743)  (844) 
       Cost of insurance and administrative charges  (1,403)  -    (480)  (1,109) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  (954)  (7,946)    (7,766)  (19,469) 
    Increase (decrease) in net assets derived from           
       principal transactions  (1,683)  (7,946)    (7,580)  (18,853) 
    Total increase (decrease) in net assets  3,166  (8,162)    (5,909)  (15,043) 
    Net assets at December 31, 2009  $ 22,778  $ -  $ -  $ - 

    The accompanying notes are an integral part of these financial statements.
    43


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
      ING LifeStyle           
      Moderate  ING LifeStyle      ING Liquid 
      Growth  Moderate  ING Limited  Assets 
      Portfolio -  Portfolio -  Maturity Bond  Portfolio - 
      Institutional  Institutional  Portfolio -  Institutional 
      Class    Class  Service Class  Class 
    Net Assets at January 1, 2008  $ 10,404  $ 2,944  $ 24,785  $ 77,520 
     
    Increase (decrease) in net assets             
    Operations:             
       Net investment income (loss)  199    104    1,548  1,705 
       Total realized gain (loss) on investments             
             and capital gains distributions  84    95    119  - 
       Net unrealized appreciation (depreciation)             
             of investments  (4,264)    (1,707)    (1,892)  - 
    Net increase (decrease) in net assets from operations  (3,981)    (1,508)    (225)  1,705 
    Changes from principal transactions:             
       Premiums  3,026    954    1,967  11,503 
       Surrenders and withdrawals  (1,057)    (60)    (1,303)  (5,571) 
       Cost of insurance and administrative charges  (795)    (245)    (1,234)  (5,169) 
       Benefit payments  -    -    -  (1,362) 
       Transfers between Divisions             
             (including fixed account), net  3,202    3,285    226  15,485 
    Increase (decrease) in net assets derived from             
       principal transactions  4,376    3,934    (344)  14,886 
    Total increase (decrease) in net assets  395    2,426    (569)  16,591 
    Net assets at December 31, 2008  10,799    5,370    24,216  94,111 
     
    Increase (decrease) in net assets             
    Operations:             
       Net investment income (loss)  575    381    1,078  (392) 
       Total realized gain (loss) on investments             
             and capital gains distributions  (2,717)    (972)    (62)  197 
       Net unrealized appreciation (depreciation)             
             of investments  4,187    1,715    691  - 
    Net increase (decrease) in net assets from operations  2,045    1,124    1,707  (195) 
    Changes from principal transactions:             
       Premiums  1,776    660    2,103  6,240 
       Surrenders and withdrawals  (357)    (85)    (3,300)  (38,049) 
       Cost of insurance and administrative charges  (771)    (379)    (1,414)  (5,555) 
       Benefit payments  -    -    -  (9,007) 
       Transfers between Divisions             
             (including fixed account), net  (13,492)    (6,690)    4,835  20,315 
    Increase (decrease) in net assets derived from             
       principal transactions  (12,844)    (6,494)    2,224  (26,056) 
    Total increase (decrease) in net assets  (10,799)    (5,370)    3,931  (26,251) 
    Net assets at December 31, 2009  $ -  $ -  $ 28,147  $ 67,860 

    The accompanying notes are an integral part of these financial statements.

    44


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
        ING Lord      ING Marsico 
        Abbett  ING Marsico  International 
      ING Liquid  Affiliated  Growth  Opportunities 
      Assets  Portfolio -  Portfolio -  Portfolio - 
      Portfolio -  Institutional  Institutional  Institutional 
      Service Class  Class  Class  Class 
    Net Assets at January 1, 2008  $ 32,210  $ 302  $ 8,468  $ 22,067 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  961  7    34  132 
       Total realized gain (loss) on investments           
             and capital gains distributions  -  28    (270)  (1,084) 
       Net unrealized appreciation (depreciation)           
             of investments  -  (142)    (3,348)  (8,474) 
    Net increase (decrease) in net assets from operations  961  (107)    (3,584)  (9,426) 
    Changes from principal transactions:           
       Premiums  36,133  -    1,327  - 
       Surrenders and withdrawals  (2,064)  -    (195)  - 
       Cost of insurance and administrative charges  (2,947)  (12)    (419)  - 
       Benefit payments  (1,728)  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  (21,369)  (6)    (209)  (5,673) 
    Increase (decrease) in net assets derived from           
       principal transactions  8,025  (18)    504  (5,673) 
    Total increase (decrease) in net assets  8,986  (125)    (3,080)  (15,099) 
    Net assets at December 31, 2008  41,196  177    5,388  6,968 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  38  -    49  93 
       Total realized gain (loss) on investments           
             and capital gains distributions  96  (55)    (1,178)  (2,890) 
       Net unrealized appreciation (depreciation)           
             of investments  -  73    2,553  5,618 
    Net increase (decrease) in net assets from operations  134  18    1,424  2,821 
    Changes from principal transactions:           
       Premiums  21,782  -    1,179  - 
       Surrenders and withdrawals  (6,693)  (1)    (241)  - 
       Cost of insurance and administrative charges  (3,793)  (11)    (438)  - 
       Benefit payments  (3,922)  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  (7,942)  (35)    (1,039)  (671) 
    Increase (decrease) in net assets derived from           
       principal transactions  (568)  (47)    (539)  (671) 
    Total increase (decrease) in net assets  (434)  (29)    885  2,150 
    Net assets at December 31, 2009  $ 40,762  $ 148  $ 6,273  $ 9,118 

    The accompanying notes are an integral part of these financial statements.
    45


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
          ING   
      ING MFS Total    Oppenheimer  ING PIMCO 
      Return  ING MFS  Main Street  Total Return 
      Portfolio -  Utilities  Portfolio® -  Bond Portfolio - 
      Institutional  Portfolio -  Institutional  Institutional 
      Class  Service Class  Class  Class 
    Net Assets at January 1, 2008  $ 6,735  $ 20,837  $ 934  $ - 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  369  324    28  75 
       Total realized gain (loss) on investments           
             and capital gains distributions  311  434    (54)  (43) 
       Net unrealized appreciation (depreciation)           
             of investments  (2,156)  (6,434)    (399)  104 
    Net increase (decrease) in net assets from operations  (1,476)  (5,676)    (425)  136 
    Changes from principal transactions:           
       Premiums  573  1,193    120  612 
       Surrenders and withdrawals  (131)  (266)    (72)  - 
       Cost of insurance and administrative charges  (298)  (730)    (58)  (98) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  (254)  (7,168)    129  5,122 
    Increase (decrease) in net assets derived from           
       principal transactions  (110)  (6,971)    119  5,636 
    Total increase (decrease) in net assets  (1,586)  (12,647)    (306)  5,772 
    Net assets at December 31, 2008  5,149  8,190    628  5,772 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  138  361    4  773 
       Total realized gain (loss) on investments           
             and capital gains distributions  (656)  (3,016)    (380)  1,098 
       Net unrealized appreciation (depreciation)           
             of investments  1,380  4,702    388  995 
    Net increase (decrease) in net assets from operations  862  2,047    12  2,866 
    Changes from principal transactions:           
       Premiums  561  730    40  2,479 
       Surrenders and withdrawals  (186)  (572)    (78)  (1,045) 
       Cost of insurance and administrative charges  (275)  (597)    (34)  (1,180) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  15  (1,504)    (568)  19,641 
    Increase (decrease) in net assets derived from           
       principal transactions  115  (1,943)    (640)  19,895 
    Total increase (decrease) in net assets  977  104    (628)  22,761 
    Net assets at December 31, 2009  $ 6,126  $ 8,294  $ -  $ 28,533 

    The accompanying notes are an integral part of these financial statements.
    46


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
              ING Retirement 
        ING Pioneer  ING Retirement  Moderate 
      ING Pioneer  Mid Cap Value  Growth  Growth 
      Fund Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Institutional  Institutional  Institutional  Institutional 
      Class  Class  Class  Class 
    Net Assets at January 1, 2008  $ 1,580  $ 12,284  $ -  $ - 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  40    159  -  - 
       Total realized gain (loss) on investments           
             and capital gains distributions  (559)    447  -  - 
       Net unrealized appreciation (depreciation)           
             of investments  74    (4,638)  -  - 
    Net increase (decrease) in net assets from operations  (445)    (4,032)  -  - 
    Changes from principal transactions:           
       Premiums  -    325  -  - 
       Surrenders and withdrawals  -    (367)  -  - 
       Cost of insurance and administrative charges  -    (200)  -  - 
       Benefit payments  -    -  -  - 
       Transfers between Divisions           
             (including fixed account), net  (70)    (578)  -  - 
    Increase (decrease) in net assets derived from           
       principal transactions  (70)    (820)  -  - 
    Total increase (decrease) in net assets  (515)    (4,852)  -  - 
    Net assets at December 31, 2008  1,065    7,432  -  - 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  14    77  (13)  (6) 
       Total realized gain (loss) on investments           
             and capital gains distributions  96    (1,451)  1  8 
       Net unrealized appreciation (depreciation)           
             of investments  198    2,909  514  224 
    Net increase (decrease) in net assets from operations  308    1,535  502  226 
    Changes from principal transactions:           
       Premiums  -    -  1,118  319 
       Surrenders and withdrawals  -    (4)  (388)  (289) 
       Cost of insurance and administrative charges  -    -  (354)  (176) 
       Benefit payments  -    -  -  - 
       Transfers between Divisions           
             (including fixed account), net  217    (783)  25,623  12,626 
    Increase (decrease) in net assets derived from           
       principal transactions  217    (787)  25,999  12,480 
    Total increase (decrease) in net assets  525    748  26,501  12,706 
    Net assets at December 31, 2009  $ 1,590  $ 8,180  $ 26,501  $ 12,706 

    The accompanying notes are an integral part of these financial statements.
    47


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
          ING T. Rowe  ING T. Rowe 
      ING Retirement    Price Capital  Price Equity 
      Moderate  ING Stock  Appreciation  Income 
      Portfolio -  Index Portfolio -  Portfolio -  Portfolio - 
      Institutional  Institutional  Institutional  Institutional 
      Class  Class  Class  Class 
    Net Assets at January 1, 2008  $ -  $ 202,331  $ 50,881  $ 20,795 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  -  5,187    2,147  901 
       Total realized gain (loss) on investments           
             and capital gains distributions  -  3,095    5,141  922 
       Net unrealized appreciation (depreciation)           
             of investments  -  (82,977)    (22,519)  (10,146) 
    Net increase (decrease) in net assets from operations  -  (74,695)    (15,231)  (8,323) 
    Changes from principal transactions:           
       Premiums  -  12,724    6,396  2,894 
       Surrenders and withdrawals  -  (10,862)    (1,168)  (989) 
       Cost of insurance and administrative charges  -  (8,985)    (2,936)  (966) 
       Benefit payments  -  (44)    -  - 
       Transfers between Divisions           
             (including fixed account), net  -  3,430    2,051  1,518 
    Increase (decrease) in net assets derived from           
       principal transactions  -  (3,737)    4,343  2,457 
    Total increase (decrease) in net assets  -  (78,432)    (10,888)  (5,866) 
    Net assets at December 31, 2008  -  123,899    39,993  14,929 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  (5)  72    864  268 
       Total realized gain (loss) on investments           
             and capital gains distributions  9  (6,829)    (3,452)  (2,470) 
       Net unrealized appreciation (depreciation)           
             of investments  119  34,160    16,055  5,890 
    Net increase (decrease) in net assets from operations  123  27,403    13,467  3,688 
    Changes from principal transactions:           
       Premiums  200  8,974    5,367  2,050 
       Surrenders and withdrawals  (452)  (5,726)    (2,460)  (1,102) 
       Cost of insurance and administrative charges  (107)  (8,364)    (3,493)  (944) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  7,734  (13,591)    1,791  491 
    Increase (decrease) in net assets derived from           
       principal transactions  7,375  (18,707)    1,205  495 
    Total increase (decrease) in net assets  7,498  8,696    14,672  4,183 
    Net assets at December 31, 2009  $ 7,498  $ 132,595  $ 54,665  $ 19,112 

    The accompanying notes are an integral part of these financial statements.
    48


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
      ING Van  ING Van     
      Kampen Capital  Kampen  ING Wells  ING American 
      Growth  Growth and  Fargo Small  Century Large 
      Portfolio -  Income  Cap Disciplined  Company Value 
      Institutional  Portfolio -  Portfolio -  Portfolio - 
      Class  Service Class  Service Class  Initial Class 
    Net Assets at January 1, 2008  $ 4,189  $ 5,311  $ 16,153  $ 38 
     
    Increase (decrease) in net assets         
    Operations:         
       Net investment income (loss)  (196)  224  54  3 
       Total realized gain (loss) on investments         
             and capital gains distributions  (862)  144  1,150  (7) 
       Net unrealized appreciation (depreciation)         
             of investments  (28,606)  (2,633)  (6,056)  (9) 
    Net increase (decrease) in net assets from operations  (29,664)  (2,265)  (4,852)  (13) 
    Changes from principal transactions:         
       Premiums  3,883  1,000  878  - 
       Surrenders and withdrawals  (2,491)  (83)  (632)  - 
       Cost of insurance and administrative charges  (2,132)  (271)  (600)  (1) 
       Benefit payments  -  -  -  - 
       Transfers between Divisions         
             (including fixed account), net  57,389  1,296  (1,601)  (12) 
    Increase (decrease) in net assets derived from         
       principal transactions  56,649  1,942  (1,955)  (13) 
    Total increase (decrease) in net assets  26,985  (323)  (6,807)  (26) 
    Net assets at December 31, 2008  31,174  4,988  9,346  12 
     
    Increase (decrease) in net assets         
    Operations:         
       Net investment income (loss)  172  61  33  - 
       Total realized gain (loss) on investments         
             and capital gains distributions  (20,573)  (1,043)  (1,108)  (10) 
       Net unrealized appreciation (depreciation)         
             of investments  27,491  2,187  3,766  9 
    Net increase (decrease) in net assets from operations  7,090  1,205  2,691  (1) 
    Changes from principal transactions:         
       Premiums  2,084  810  794  - 
       Surrenders and withdrawals  (1,435)  (313)  (633)  - 
       Cost of insurance and administrative charges  (1,586)  (286)  (634)  - 
       Benefit payments  -  -  -  - 
       Transfers between Divisions         
             (including fixed account), net  (37,327)  227  193  (11) 
    Increase (decrease) in net assets derived from         
       principal transactions  (38,264)  438  (280)  (11) 
    Total increase (decrease) in net assets  (31,174)  1,643  2,411  (12) 
    Net assets at December 31, 2009  $ -  $ 6,631  $ 11,757  $ - 

    The accompanying notes are an integral part of these financial statements.
    49


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
      ING American  ING Baron  ING Columbia   
      Century Small-  Small Cap  Small Cap  ING JPMorgan 
      Mid Cap Value  Growth  Value  Mid Cap Value 
      Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Initial Class  Initial Class  Initial Class  Initial Class 
    Net Assets at January 1, 2008  $ 509  $ 11,303  $ 7,200  $ 16,098 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  2  (42)    (10)  345 
       Total realized gain (loss) on investments           
             and capital gains distributions  17  (94)    (514)  885 
       Net unrealized appreciation (depreciation)           
             of investments  (139)  (4,966)    (2,286)  (6,511) 
    Net increase (decrease) in net assets from operations  (120)  (5,102)    (2,810)  (5,281) 
    Changes from principal transactions:           
       Premiums  -  1,701    837  2,254 
       Surrenders and withdrawals  (4)  (279)    (250)  (831) 
       Cost of insurance and administrative charges  (22)  (438)    (313)  (801) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  (72)  69    477  631 
    Increase (decrease) in net assets derived from           
       principal transactions  (98)  1,053    751  1,253 
    Total increase (decrease) in net assets  (218)  (4,049)    (2,059)  (4,028) 
    Net assets at December 31, 2008  291  7,254    5,141  12,070 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  3  (33)    51  127 
       Total realized gain (loss) on investments           
             and capital gains distributions  (97)  (3,149)    (1,303)  (2,829) 
       Net unrealized appreciation (depreciation)           
             of investments  151  5,746    2,276  5,016 
    Net increase (decrease) in net assets from operations  57  2,564    1,024  2,314 
    Changes from principal transactions:           
       Premiums  -  1,278    562  1,492 
       Surrenders and withdrawals  (10)  (493)    (443)  (661) 
       Cost of insurance and administrative charges  (16)  (465)    (314)  (726) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  (68)  (757)    478  (2,443) 
    Increase (decrease) in net assets derived from           
       principal transactions  (94)  (437)    283  (2,338) 
    Total increase (decrease) in net assets  (37)  2,127    1,307  (24) 
    Net assets at December 31, 2009  $ 254  $ 9,381  $ 6,448  $ 12,046 

    The accompanying notes are an integral part of these financial statements.
    50


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
      ING Legg        ING 
      Mason Partners ING Neuberger   ING  Oppenheimer 
      Aggressive  Berman  Oppenheimer  Strategic 
      Growth  Partners  Global  Income 
      Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Initial Class  Initial Class  Initial Class  Service Class 
    Net Assets at January 1, 2008  $ 190  $ 1,029  $ 6,493  $ 9,232 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  -  (2)    123  632 
       Total realized gain (loss) on investments           
             and capital gains distributions  (1)  (253)    449  30 
       Net unrealized appreciation (depreciation)           
             of investments  (62)  (629)    (3,466)  (3,106) 
    Net increase (decrease) in net assets from operations  (63)  (884)    (2,894)  (2,444) 
    Changes from principal transactions:           
       Premiums  -  251    1,166  1,554 
       Surrenders and withdrawals  (6)  (6)    (239)  (577) 
       Cost of insurance and administrative charges  (9)  (42)    (371)  (687) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  (21)  528    3,756  5,009 
    Increase (decrease) in net assets derived from           
       principal transactions  (36)  731    4,312  5,299 
    Total increase (decrease) in net assets  (99)  (153)    1,418  2,855 
    Net assets at December 31, 2008  91  876    7,911  12,087 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  -  41    195  468 
       Total realized gain (loss) on investments           
             and capital gains distributions  (13)  (611)    (1,351)  (797) 
       Net unrealized appreciation (depreciation)           
             of investments  35  675    4,049  2,860 
    Net increase (decrease) in net assets from operations  22  105    2,893  2,531 
    Changes from principal transactions:           
       Premiums  -  131    1,036  1,532 
       Surrenders and withdrawals  (11)  (54)    (293)  (761) 
       Cost of insurance and administrative charges  (6)  (27)    (476)  (776) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  (11)  (1,031)    (3,557)  1,543 
    Increase (decrease) in net assets derived from           
       principal transactions  (28)  (981)    (3,290)  1,538 
    Total increase (decrease) in net assets  (6)  (876)    (397)  4,069 
    Net assets at December 31, 2009  $ 85  $ -  $ 7,514  $ 16,156 

    The accompanying notes are an integral part of these financial statements.
    51


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
            ING T. Rowe   
            Price  ING UBS U.S. 
      ING PIMCO  ING Pioneer  Diversified Mid  Large Cap 
      Total Return  High Yield  Cap Growth  Equity 
      Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Initial Class  Initial Class  Initial Class  Initial Class 
    Net Assets at January 1, 2008  $ 22,375  $ -  $ 44,992  $ 2,237 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  965    556  (49)  69 
       Total realized gain (loss) on investments           
             and capital gains distributions  683    (716)  5,448  (54) 
       Net unrealized appreciation (depreciation)           
             of investments  (1,923)    (4,771)  (24,519)  (1,268) 
    Net increase (decrease) in net assets from operations  (275)    (4,931)  (19,120)  (1,253) 
    Changes from principal transactions:           
       Premiums  1,120    159  3,036  255 
       Surrenders and withdrawals  (1,016)    (317)  (2,373)  (13) 
       Cost of insurance and administrative charges  (1,057)    (490)  (1,944)  (57) 
       Benefit payments  -    -  -  - 
       Transfers between Divisions           
             (including fixed account), net  (1,862)    23,622  (965)  1,062 
    Increase (decrease) in net assets derived from           
       principal transactions  (2,815)    22,974  (2,246)  1,247 
    Total increase (decrease) in net assets  (3,090)    18,043  (21,366)  (6) 
    Net assets at December 31, 2008  19,285    18,043  23,626  2,231 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  437    1,615  (39)  64 
       Total realized gain (loss) on investments           
             and capital gains distributions  726    (123)  (3,845)  (93) 
       Net unrealized appreciation (depreciation)           
             of investments  629    10,203  14,405  916 
    Net increase (decrease) in net assets from operations  1,792    11,695  10,521  887 
    Changes from principal transactions:           
       Premiums  5    583  2,284  552 
       Surrenders and withdrawals  (712)    (1,303)  (1,596)  (39) 
       Cost of insurance and administrative charges  (825)    (2,156)  (1,935)  (81) 
       Benefit payments  -    -  -  - 
       Transfers between Divisions           
             (including fixed account), net  (5,032)    (3,476)  (339)  2,359 
    Increase (decrease) in net assets derived from           
       principal transactions  (6,564)    (6,352)  (1,586)  2,791 
    Total increase (decrease) in net assets  (4,772)    5,343  8,935  3,678 
    Net assets at December 31, 2009  $ 14,513  $ 23,386  $ 32,561  $ 5,909 

    The accompanying notes are an integral part of these financial statements.
    52


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
      ING Van  ING Van  ING Strategic  ING Strategic 
      Kampen  Kampen Equity     Allocation  Allocation 
      Comstock  and Income  Conservative  Growth 
      Portfolio -  Portfolio -     Portfolio -  Portfolio - 
      Initial Class  Initial Class  Class I  Class I 
    Net Assets at January 1, 2008  $ 10,999  $ 3,112  $ 125  $ 1,938 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  341  130    4  33 
       Total realized gain (loss) on investments           
             and capital gains distributions  (247)  130    8  2 
       Net unrealized appreciation (depreciation)           
             of investments  (3,592)  (924)    (41)  (582) 
    Net increase (decrease) in net assets from operations  (3,498)  (664)    (29)  (547) 
    Changes from principal transactions:           
       Premiums  1,115  251    -  - 
       Surrenders and withdrawals  (669)  (37)    -  (389) 
       Cost of insurance and administrative charges  (442)  (167)    (5)  (74) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  (1,616)  (377)    (2)  (210) 
    Increase (decrease) in net assets derived from           
       principal transactions  (1,612)  (330)    (7)  (673) 
    Total increase (decrease) in net assets  (5,110)  (994)    (36)  (1,220) 
    Net assets at December 31, 2008  5,889  2,118    89  718 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  171  37    7  69 
       Total realized gain (loss) on investments           
             and capital gains distributions  (2,316)  (175)    (3)  (305) 
       Net unrealized appreciation (depreciation)           
             of investments  3,734  572    11  370 
    Net increase (decrease) in net assets from operations  1,589  434    15  134 
    Changes from principal transactions:           
       Premiums  778  154    -  - 
       Surrenders and withdrawals  (371)  (39)    (1)  (118) 
       Cost of insurance and administrative charges  (417)  (162)    (5)  (53) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  (828)  (139)    -  (242) 
    Increase (decrease) in net assets derived from           
       principal transactions  (838)  (186)    (6)  (413) 
    Total increase (decrease) in net assets  751  248    9  (279) 
    Net assets at December 31, 2009  $ 6,640  $ 2,366  $ 98  $ 439 

    The accompanying notes are an integral part of these financial statements.
    53


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
      ING Strategic       
      Allocation  ING Growth  ING Index Plus  ING Index Plus 
      Moderate  and Income  LargeCap  MidCap 
      Portfolio -  Portfolio -  Portfolio -  Portfolio - 
      Class I  Class I  Class I  Class I 
    Net Assets at January 1, 2008  $ 2,064  $ 16  $ 14,041  $ 15,574 
     
    Increase (decrease) in net assets         
    Operations:         
       Net investment income (loss)  51  -  175  119 
       Total realized gain (loss) on investments         
             and capital gains distributions  181  -  680  791 
       Net unrealized appreciation (depreciation)         
             of investments  (849)  (6)  (6,106)  (6,740) 
    Net increase (decrease) in net assets from operations  (617)  (6)  (5,251)  (5,830) 
    Changes from principal transactions:         
       Premiums  -  -  539  1,339 
       Surrenders and withdrawals  (9)  -  (110)  (268) 
       Cost of insurance and administrative charges  (77)  (1)  (441)  (689) 
       Benefit payments  -  -  -  - 
       Transfers between Divisions         
             (including fixed account), net  (3)  1  (74)  (547) 
    Increase (decrease) in net assets derived from         
       principal transactions  (89)  -  (86)  (165) 
    Total increase (decrease) in net assets  (706)  (6)  (5,337)  (5,995) 
    Net assets at December 31, 2008  1,358  10  8,704  9,579 
     
    Increase (decrease) in net assets         
    Operations:         
       Net investment income (loss)  128  56  250  126 
       Total realized gain (loss) on investments         
             and capital gains distributions  (44)  11  (881)  (2,223) 
       Net unrealized appreciation (depreciation)         
             of investments  189  359  2,567  4,701 
    Net increase (decrease) in net assets from operations  273  426  1,936  2,604 
    Changes from principal transactions:         
       Premiums  -  270  426  832 
       Surrenders and withdrawals  (28)  (33)  (321)  (595) 
       Cost of insurance and administrative charges  (93)  (80)  (474)  (574) 
       Benefit payments  -  -  -  - 
       Transfers between Divisions         
             (including fixed account), net  (3)  3,841  160  (1,130) 
    Increase (decrease) in net assets derived from         
       principal transactions  (124)  3,998  (209)  (1,467) 
    Total increase (decrease) in net assets  149  4,424  1,727  1,137 
    Net assets at December 31, 2009  $ 1,507  $ 4,434  $ 10,431  $ 10,716 

    The accompanying notes are an integral part of these financial statements.
    54


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
          ING   
          Opportunistic  ING Russell™ 
      ING Index Plus  ING  Large Cap  Large Cap 
      SmallCap  International  Value  Growth Index 
      Portfolio -  Index Portfolio -  Portfolio -  Portfolio - 
      Class I  Class S  Class I  Class I 
    Net Assets at January 1, 2008  $ 13,004  $ -  $ 1,748  $ - 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  62  -    20  - 
       Total realized gain (loss) on investments           
             and capital gains distributions  (449)  -    192  - 
       Net unrealized appreciation (depreciation)           
             of investments  (4,113)  -    (769)  - 
    Net increase (decrease) in net assets from operations  (4,500)  -    (557)  - 
    Changes from principal transactions:           
       Premiums  1,007  -    -  - 
       Surrenders and withdrawals  (381)  -    (69)  - 
       Cost of insurance and administrative charges  (483)  -    (44)  - 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  (430)  -    (165)  - 
    Increase (decrease) in net assets derived from           
       principal transactions  (287)  -    (278)  - 
    Total increase (decrease) in net assets  (4,787)  -    (835)  - 
    Net assets at December 31, 2008  8,217  -    913  - 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  131  (60)    25  (111) 
       Total realized gain (loss) on investments           
             and capital gains distributions  (1,150)  111    (424)  236 
       Net unrealized appreciation (depreciation)           
             of investments  3,136  1,831    398  5,696 
    Net increase (decrease) in net assets from operations  2,117  1,882    (1)  5,821 
    Changes from principal transactions:           
       Premiums  730  441    -  1,308 
       Surrenders and withdrawals  (267)  (713)    (31)  (1,168) 
       Cost of insurance and administrative charges  (497)  (607)    (30)  (1,245) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  246  21,651    (449)  33,497 
    Increase (decrease) in net assets derived from           
       principal transactions  212  20,772    (510)  32,392 
    Total increase (decrease) in net assets  2,329  22,654    (511)  38,213 
    Net assets at December 31, 2009  $ 10,546  $ 22,654  $ 402  $ 38,213 

    The accompanying notes are an integral part of these financial statements.
    55


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
        ING Russell™  ING Russell™   
      ING Russell™  Large Cap  Mid Cap  ING Russell™ 
      Large Cap  Value Index  Growth Index  Small Cap 
      Index Portfolio -  Portfolio -  Portfolio -  Index Portfolio - 
      Class I  Class I  Class I  Class I 
    Net Assets at January 1, 2008  $ -  $ -  $ -  $ - 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  -  -    -  2 
       Total realized gain (loss) on investments           
             and capital gains distributions  -  -    -  (1) 
       Net unrealized appreciation (depreciation)           
             of investments  -  -    -  (27) 
    Net increase (decrease) in net assets from operations  -  -    -  (26) 
    Changes from principal transactions:           
       Premiums  -  -    -  8 
       Surrenders and withdrawals  -  -    -  (2) 
       Cost of insurance and administrative charges  -  -    -  (2) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  -  -    -  261 
    Increase (decrease) in net assets derived from           
       principal transactions  -  -    -  265 
    Total increase (decrease) in net assets  -  -    -  239 
    Net assets at December 31, 2008  -  -    -  239 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  (4)  (9)    (4)  (4) 
       Total realized gain (loss) on investments           
             and capital gains distributions  49  115    7  23 
       Net unrealized appreciation (depreciation)           
             of investments  290  709    239  269 
    Net increase (decrease) in net assets from operations  335  815    242  288 
    Changes from principal transactions:           
       Premiums  73  140    84  59 
       Surrenders and withdrawals  (27)  (213)    (24)  (16) 
       Cost of insurance and administrative charges  (47)  (131)    (75)  (32) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  1,921  4,251    1,868  621 
    Increase (decrease) in net assets derived from           
       principal transactions  1,920  4,047    1,853  632 
    Total increase (decrease) in net assets  2,255  4,862    2,095  920 
    Net assets at December 31, 2009  $ 2,255  $ 4,862  $ 2,095  $ 1,159 

    The accompanying notes are an integral part of these financial statements.
    56


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
     
        ING MidCap  ING SmallCap   
      ING U.S. Bond  Opportunities  Opportunities  Brandes 
      Index Portfolio -  Portfolio -  Portfolio -  International 
      Class I  Class I  Class I  Equity Fund 
    Net Assets at January 1, 2008  $ -  $ 2,115  $ 4,826  $ 21,250 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  22  (9)    (24)  462 
       Total realized gain (loss) on investments           
             and capital gains distributions  (8)  105    (1,430)  1,305 
       Net unrealized appreciation (depreciation)           
             of investments  31  (1,639)    (2,474)  (10,372) 
    Net increase (decrease) in net assets from operations  45  (1,543)    (3,928)  (8,605) 
    Changes from principal transactions:           
       Premiums  41  -    779  727 
       Surrenders and withdrawals  (188)  (85)    (372)  (489) 
       Cost of insurance and administrative charges  (16)  (207)    (304)  (692) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  2,060  2,282    2,770  106 
    Increase (decrease) in net assets derived from           
       principal transactions  1,897  1,990    2,873  (348) 
    Total increase (decrease) in net assets  1,942  447    (1,055)  (8,953) 
    Net assets at December 31, 2008  1,942  2,562    3,771  12,297 
     
    Increase (decrease) in net assets           
    Operations:           
       Net investment income (loss)  65  (1)    (16)  208 
       Total realized gain (loss) on investments           
             and capital gains distributions  111  40    (590)  (2,256) 
       Net unrealized appreciation (depreciation)           
             of investments  (14)  780    1,770  4,705 
    Net increase (decrease) in net assets from operations  162  819    1,164  2,657 
    Changes from principal transactions:           
       Premiums  269  -    473  484 
       Surrenders and withdrawals  (145)  (96)    (235)  (302) 
       Cost of insurance and administrative charges  (248)  (231)    (305)  (615) 
       Benefit payments  -  -    -  - 
       Transfers between Divisions           
             (including fixed account), net  2,995  (415)    2,807  (891) 
    Increase (decrease) in net assets derived from           
       principal transactions  2,871  (742)    2,740  (1,324) 
    Total increase (decrease) in net assets  3,033  77    3,904  1,333 
    Net assets at December 31, 2009  $ 4,975  $ 2,639  $ 7,675  $ 13,630 

    The accompanying notes are an integral part of these financial statements.
    57


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)
     
                Neuberger 
                Berman AMT 
                Socially 
      Business  Frontier Capital      Responsive 
      Opportunity  Appreciation  M Large Cap  Portfolio® - 
      Value Fund  Fund  Growth Fund  Class I 
    Net Assets at January 1, 2008  $ 3,134  $ 10,708  $ 3,715  $ 268 
     
    Increase (decrease) in net assets             
    Operations:             
       Net investment income (loss)  (17)    (59)    (20)  6 
       Total realized gain (loss) on investments             
             and capital gains distributions  (63)    273    (78)  2 
       Net unrealized appreciation (depreciation)             
             of investments  (1,094)    (4,339)    (2,030)  (163) 
    Net increase (decrease) in net assets from operations  (1,174)    (4,125)    (2,128)  (155) 
    Changes from principal transactions:             
       Premiums  224    336    255  124 
       Surrenders and withdrawals  (249)    (209)    (302)  (2) 
       Cost of insurance and administrative charges  (171)    (272)    (166)  (25) 
       Benefit payments  -    -    -  - 
       Transfers between Divisions             
             (including fixed account), net  669    (931)    1,061  64 
    Increase (decrease) in net assets derived from             
       principal transactions  473    (1,076)    848  161 
    Total increase (decrease) in net assets  (701)    (5,201)    (1,280)  6 
    Net assets at December 31, 2008  2,433    5,507    2,435  274 
     
    Increase (decrease) in net assets             
    Operations:             
       Net investment income (loss)  6    (39)    2  8 
       Total realized gain (loss) on investments             
             and capital gains distributions  (408)    (586)    (631)  (125) 
       Net unrealized appreciation (depreciation)             
             of investments  961    2,952    1,425  243 
    Net increase (decrease) in net assets from operations  559    2,327    796  126 
    Changes from principal transactions:             
       Premiums  143    210    197  119 
       Surrenders and withdrawals  (178)    (213)    (116)  (3) 
       Cost of insurance and administrative charges  (154)    (299)    (163)  (40) 
       Benefit payments  -    -    -  - 
       Transfers between Divisions             
             (including fixed account), net  (377)    (710)    (505)  25 
    Increase (decrease) in net assets derived from             
       principal transactions  (566)    (1,012)    (587)  101 
    Total increase (decrease) in net assets  (7)    1,315    209  227 
    Net assets at December 31, 2009  $ 2,426  $ 6,822  $ 2,644  $ 501 

    The accompanying notes are an integral part of these financial statements.
    58


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Statements of Changes in Net Assets
    For the years ended December 31, 2009 and 2008
    (Dollars in thousands)

      Van Eck 
      Worldwide 
      Hard Assets 
      Fund 
    Net Assets at January 1, 2008  $ 12,940 
     
    Increase (decrease) in net assets   
    Operations:   
       Net investment income (loss)  (29) 
       Total realized gain (loss) on investments   
             and capital gains distributions  2,525 
       Net unrealized appreciation (depreciation)   
             of investments  (7,460) 
    Net increase (decrease) in net assets from operations  (4,964) 
    Changes from principal transactions:   
       Premiums  - 
       Surrenders and withdrawals  (192) 
       Cost of insurance and administrative charges  (362) 
       Benefit payments  - 
       Transfers between Divisions   
             (including fixed account), net  (2,101) 
    Increase (decrease) in net assets derived from   
       principal transactions  (2,655) 
    Total increase (decrease) in net assets  (7,619) 
    Net assets at December 31, 2008  5,321 
     
    Increase (decrease) in net assets   
    Operations:   
       Net investment income (loss)  (17) 
       Total realized gain (loss) on investments   
             and capital gains distributions  (454) 
       Net unrealized appreciation (depreciation)   
             of investments  3,070 
    Net increase (decrease) in net assets from operations  2,599 
    Changes from principal transactions:   
       Premiums  - 
       Surrenders and withdrawals  (112) 
       Cost of insurance and administrative charges  (311) 
       Benefit payments  - 
       Transfers between Divisions   
             (including fixed account), net  (884) 
    Increase (decrease) in net assets derived from   
       principal transactions  (1,307) 
    Total increase (decrease) in net assets  1,292 
    Net assets at December 31, 2009  $ 6,613 

    The accompanying notes are an integral part of these financial statements.
    59


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

    1. Organization

    Security Life of Denver Insurance Company Security Life Separate Account L1 (the “Account”) was established on November 3, 1993, by Security Life of Denver Insurance Company (“SLD” or the “Company”) to support the operations of variable universal life policies (“Policies”). The Company is a wholly owned subsidiary of ING America Insurance Holdings, Inc. (“ING AIH”), an insurance holding company domiciled in the State of Delaware. ING AIH is an indirect wholly owned subsidiary of ING Groep, N.V. (“ING”), a global financial services holding company based in The Netherlands.

    As part of a restructuring plan approved by the European Commission (“EC”), ING has agreed to separate its banking and insurance businesses by 2013. ING intends to achieve this separation over the next four years by divestment of its insurance and investment management operations, including the Account. ING has announced that it will explore all options for implementing the separation including initial public offerings, sales, or combinations thereof.

    The Account supports the operations of the FirstLine Variable Universal Life, FirstLine II Variable Universal Life, Variable Survivorship Universal Life, Corporate Benefits Variable Universal Life, Strategic Investor Variable Universal Life, Asset Portfolio Manager Variable Universal Life, Estate Designer Variable Universal Life, Asset Accumulator Variable Universal Life, ING Corporate Advantage Variable Universal Life, ING Corporate Variable Universal Life, ING VUL-CV, ING VUL-ECV, and ING SVUL-CV policies (collectively, “Policies”) offered by the Company.

    The Account is registered as a unit investment trust with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended. SLD provides for variable accumulation and benefits under the Policies by crediting annuity considerations to one or more divisions within the Account or the SLD fixed separate account, which is not part of the Account, as directed by the contractowners. The portion of the Account’s assets applicable to Policies will not be charged with liabilities arising out of any other business SLD may conduct, but obligations of the Account, including the promise to make benefit payments, are obligations of SLD. The assets and liabilities of the Account are clearly identified and distinguished from the other assets and liabilities of SLD.

    At December 31, 2009, the Account had 77 investment divisions (the “Divisions”), 14 of which invest in an independently managed mutual fund portfolio and 63 of which invest in a mutual fund portfolio managed by an affiliate, either Directed Services LLC (“DSL”), formerly Directed Services, Inc., or ING Investments, LLC (“IIL”). The assets in each Division are invested in shares of a designated Fund (“Fund”) of various investment trusts (the “Trusts”).

    60


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

    Investment Divisions with asset balances at December 31, 2009, and related Trusts are as follows:

    AIM Variable Insurance Funds:
      AIM V.I. Core Equity Fund - Series I Shares
    American Funds Insurance Series:
      American Funds Insurance Series® Growth Fund -  Class 2
      American Funds Insurance Series® Growth-Income Fund - Class 2
      American Funds Insurance Series® International Fund - Class 2
    BlackRock Variable Series Funds, Inc.:
      BlackRock Global Allocation V.I. Fund- Class III**
    Fidelity® Variable Insurance Products:
      Fidelity® VIP Equity-Income Portfolio - Service Class
    Fidelity® Variable Insurance Products II:
      Fidelity® VIP Contrafund® Portfolio - Service Class
      Fidelity® Variable Insurance Products V:
      Fidelity® VIP Investment Grade Bond Portfolio - Initial Class
    ING Balanced Portfolio, Inc.:
      ING Balanced Portfolio - Class I
      ING Intermediate Bond Portfolio:
      ING Intermediate Bond Portfolio - Class I
    ING Investors Trust:
      ING Artio Foreign Portfolio – Institutional Class
      ING BlackRock Large Cap Growth Portfolio - Institutional Class
      ING BlackRock Large Cap Value Portfolio - Institutional Class
      ING Clarion Global Real Estate Portfolio - Service Class*
      ING Evergreen Health Sciences Portfolio - Institutional Class
      ING Evergreen Omega Portfolio - Institutional Class
      ING FMRSM Diversified Mid Cap Portfolio - Institutional Class
      ING Focus 5 Portfolio - Class I*
      ING Franklin Templeton Founding Strategy Portfolio - Institutional Class*
      ING Global Resources Portfolio - Institutional Class
      ING JPMorgan Emerging Markets Equity Portfolio - Institutional Class
      ING JPMorgan Small Cap Core Equity Portfolio - Institutional Class
      ING Limited Maturity Bond Portfolio - Service Class
      ING Liquid Assets Portfolio - Institutional Class
      ING Liquid Assets Portfolio - Service Class
      ING Lord Abbett Affiliated Portfolio - Institutional Class
      ING Marsico Growth Portfolio - Institutional Class
      ING Marsico International Opportunities Portfolio -  Institutional Class
      ING MFS Total Return Portfolio - Institutional Class
      ING MFS Utilities Portfolio - Service Class
      ING PIMCO Total Return Bond Portfolio - Institutional Class*

    ING Investors Trust (continued): 
      ING Pioneer Fund Portfolio - Institutional Class
      ING Pioneer Mid Cap Value Portfolio - Institutional Class
      ING Retirement Growth Portfolio - Institutional Class**
      ING Retirement Moderate Growth Portfolio -  Institutional Class**
      ING Retirement Moderate Portfolio - Institutional Class**
      ING Stock Index Portfolio - Institutional Class
      ING T. Rowe Price Capital Appreciation Portfolio - Institutional Class
      ING T. Rowe Price Equity Income Portfolio - Institutional Class
      ING Van Kampen Growth and Income Portfolio - Service Class
      ING Wells Fargo Small Cap Disciplined Portfolio - Service Class
    ING Partners, Inc.:
      ING American Century Small-Mid Cap Value Portfolio - Initial Class
      ING Baron Small Cap Growth Portfolio - Initial Class
      ING Columbia Small Cap Value Portfolio - Initial Class
      ING JPMorgan Mid Cap Value Portfolio - Initial Class
      ING Legg Mason Partners Aggressive Growth Portfolio - Initial Class
      ING Oppenheimer Global Portfolio - Initial Class
      ING Oppenheimer Strategic Income Portfolio - Service Class
      ING PIMCO Total Return Portfolio - Initial Class
      ING Pioneer High Yield Portfolio - Initial Class*
      ING T. Rowe Price Diversified Mid Cap Growth Portfolio - Initial Class
      ING UBS U.S. Large Cap Equity Portfolio - Initial Class
      ING Van Kampen Comstock Portfolio - Initial Class
      ING Van Kampen Equity and Income Portfolio - Initial Class
    ING Strategic Allocation Portfolios, Inc.:
      ING Strategic Allocation Conservative Portfolio - Class I
      ING Strategic Allocation Growth Portfolio - Class I
      ING Strategic Allocation Moderate Portfolio - Class I
    ING Variable Funds:
      ING Growth and Income Portfolio - Class I
    ING Variable Portfolios, Inc.:
      ING Index Plus LargeCap Portfolio - Class I
      ING Index Plus MidCap Portfolio - Class I
      ING Index Plus SmallCap Portfolio - Class I
      ING International Index Portfolio - Class S**
      ING Opportunistic Large Cap Value Portfolio - Class I
      ING RussellTM Large Cap Growth Index Portfolio - Class I**
      ING RussellTM Large Cap Index Portfolio - Class I**
      ING RussellTM Large Cap Value Index Portfolio - Class I**

    61


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

    ING Variable Portfolios, Inc. (continued):
      ING RussellTM Mid Cap Growth Index Portfolio - Class**
      ING RussellTM Small Cap Index Portfolio - Class I*
      ING U.S. Bond Index Portfolio - Class I*
    ING Variable Products Trust:
      ING MidCap Opportunities Portfolio - Class I
      ING SmallCap Opportunities Portfolio - Class I
    M Fund, Inc.:
      Brandes International Equity Fund
      Business Opportunity Value Fund
      Frontier Capital Appreciation Fund
      M Large Cap Growth Fund

    Neuberger Berman Advisers Management Trust:
      Neuberger Berman AMT Socially Responsive Portfolio® - Class I
    Van Eck Worldwide Insurance Trust:
      Van Eck Worldwide Hard Assets Fund

    * Division added in 2008
    ** Division added in 2009

    The names of certain Divisions were changed during 2009. The following is a summary of current and former names for those Divisions:

    Current Name  Former Name 
    ING Balanced Portfolio, Inc.:  ING Balanced Portfolio, Inc.: 
       ING Balanced Portfolio - Class I     ING VP Balanced Portfolio - Class I 
    ING Intermediate Bond Portfolio:  ING Intermediate Bond Portfolio: 
       ING Intermediate Bond Portfolio - Class I       ING VP Intermediate Bond Portfolio - Class I 
    ING Investors Trust:  ING Investors Trust: 
       ING Artio Foreign Portfolio - Institutional Class       ING Julius Baer Foreign Portfolio - Institutional Class 
       ING Clarion Global Real Estate Portfolio - Service       ING Global Real Estate Portfolio - Service Class 
             Class   
       ING Growth and Income Portfolio II - Institutional       ING Legg Mason Value Portfolio - Institutional Class 
             Class   
       ING Index Plus International Equity Portfolio - Service       ING VP Index Plus International Equity Portfolio - 
             Class             Service Class 
       ING PIMCO Total Return Bond Portfolio -       ING PIMCO Core Bond Portfolio - Institutional Class 
             Institutional Class   
    ING Partners, Inc.:  ING Partners, Inc.: 
       ING Columbia Small Cap Value Portfolio - Initial       ING Columbia Small Cap Value II Portfolio - Initial 
             Class             Class 
    ING Strategic Allocation Portfolios, Inc.:  ING Strategic Allocation Portfolios, Inc.: 
       ING Strategic Allocation Conservative Portfolio -     ING VP Strategic Allocation Conservative Portfolio - 
    Class I             Class I 
       ING Strategic Allocation Growth Portfolio - Class I     ING VP Strategic Allocation Growth Portfolio - Class I 
       ING Strategic Allocation Moderate Portfolio - Class     ING VP Strategic Allocation Moderate Portfolio - 
                 Class I 
    ING Variable Funds:  ING Variable Funds: 
       ING Growth and Income Portfolio - Class I       ING VP Growth and Income Portfolio - Class I 
    ING Variable Portfolios, Inc.:  ING Variable Portfolios, Inc.: 
       ING Index Plus LargeCap Portfolio - Class I       ING VP Index Plus LargeCap Portfolio - Class I 
       ING Index Plus MidCap Portfolio - Class I       ING VP Index Plus MidCap Portfolio - Class I 
       ING Index Plus SmallCap Portfolio - Class I       ING VP Index Plus SmallCap Portfolio - Class I 
       ING Opportunistic Large Cap Portfolio - Class I       ING Opportunistic Large Cap Value Portfolio - Class I 
       ING U.S. Bond Index Portfolio - Class I       ING Lehman Brothers U.S. Aggregate Bond Index® 
                 Portfolio - Class I 
    ING Variable Products Trust:  ING Variable Products Trust: 
       ING MidCap Opportunities Portfolio - Class I       ING VP MidCap Opportunities Portfolio - Class I 
       ING SmallCap Opportunities Portfolio - Class I       ING VP SmallCap Opportunities Portfolio - Class I 
    M Fund, Inc.:  M Fund, Inc.: 
       M Large Cap Growth Fund       Turner Core Growth Fund 

    62


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

    During 2009, the following Divisions were closed to contractowners:

      ING Investors Trust:
      ING AllianceBernstein Mid Cap Growth Portfolio - Institutional Class
      ING Growth and Income Portfolio II – Institutional Class
      ING Index Plus International Equity Portfolio - Service Class
      ING JPMorgan Value Opportunities Portfolio - Institutional Class
      ING LifeStyle Aggressive Growth Portfolio - Institutional Class
      ING LifeStyle Growth Portfolio - Institutional Class
      ING LifeStyle Moderate Growth Portfolio - Institutional Class
      ING LifeStyle Moderate Portfolio - Institutional Class
      ING Oppenheimer Main Street Portfolio® - Institutional Class
      ING Van Kampen Capital Growth Portfolio - Institutional Class
    ING Partners, Inc.:
      ING American Century Large Company Value Portfolio - Initial Class
      ING Neuberger Berman Partners Portfolio - Initial Class

    There were no Divisions offered during 2009 that did not have any activity as of
    December 31, 2009.

    2. Significant Accounting Policies

    The following is a summary of the significant accounting policies of the Account:

    Use of Estimates

    The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from reported results using those estimates.

    Investments

    Investments are made in shares of a Fund and are recorded at fair value, determined by the net asset value per share of the respective Fund. Investment transactions in each Fund are recorded on the date the order to buy or sell is confirmed. Distributions of net investment income and capital gains from each Fund are recognized on the ex-distribution date. Realized gains and losses on redemptions of the shares of the Fund are determined on a first-in, first-out basis. The difference between cost and current market value of investments owned on the day of measurement is recorded as unrealized appreciation or depreciation of investments.

    63


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

    Federal Income Taxes

    Operations of the Account form a part of, and are taxed with, the total operations of SLD, which is taxed as a life insurance company under the Internal Revenue Code. Earnings and realized capital gains of the Account attributable to the contractowners are excluded in the determination of the federal income tax liability of SLD.

    Contractowner Reserves

    Contractowner reserves of the Account are represented by net assets on the Statements of Assets and Liabilities and are equal to the aggregate account values of the contractowners invested in the Account Divisions. To the extent that benefits to be paid to the contractowners exceed their account values, SLD will contribute additional funds to the benefit proceeds. Conversely, if amounts allocated exceed amounts required, transfers may be made to SLD.

    Subsequent Events

    The Account has evaluated subsequent events for recognition and disclosure through the date the financial statements as of December 31, 2009 and for the years ended December 31, 2009 and 2008, were issued.

    3. Recently Adopted Accounting Standards

    FASB Accounting Standards Codification

    In June 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2009-01, “Topic 105 - Generally Accepted Accounting Principles: amendments based on Statement of Financial Accounting Standards (“FAS”) No. 168 - The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles” (“ASU 2009-01”), which confirms that as of July 1, 2009, the “FASB Accounting Standards CodificationTM” (“the Codification” or “ASC”) is the single official source of authoritative, nongovernmental US GAAP. All existing accounting standard documents are superseded, and all other accounting literature not included in the Codification is considered nonauthoritative.

    The Account adopted the Codification as of July 1, 2009. There was no effect on the Account’s net assets and results of operations. The Account has revised its disclosures to incorporate references to the Codification topics.

    64


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

    Subsequent Events

    In May 2009, the FASB issued new guidance on subsequent events, included in ASC

    Topic 855, “Subsequent Events,” which establishes:

    §     

    The period after the balance sheet date during which an entity should evaluate events or transactions for potential recognition or disclosure in the financial statements;

    §     

    The circumstances under which an entity should recognize such events or transactions in its financial statements; and

    §     

    Disclosures regarding such events or transactions and the date through which an entity has evaluated subsequent events.

    These provisions, as included in ASC Topic 855, were adopted by the Account on June 30, 2009. In addition, in February 2010, the FASB issued ASU 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements,” which clarifies that an SEC filer should evaluate subsequent events through the date the financial statements are issued and eliminates the requirement for an SEC filer to disclose that date, effective upon issuance. The Account determined that there was no effect on the Account’s net assets and results of operations upon adoption, as the guidance is consistent with that previously applied by the Account under US auditing standards. The disclosure provisions included in ASC Topic 855, as amended, are presented in the Significant Accounting Policies footnote.

    Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly

    In April 2009, the FASB issued new guidance on determining fair value when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly, included in ASC Topic 820, “Fair Value Measurements and Disclosures,” which confirms that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. In addition, this guidance, as included in ASC Topic 820:

    §     

    Clarifies factors for determining whether there has been a significant decrease in market activity for an asset or liability;

    §     

    Requires an entity to determine whether a transaction is not orderly based on the weight of the evidence; and

    §     

    Requires an entity to disclose in interim and annual periods the input and valuation technique used to measure fair value and any change in valuation technique.

    65


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

    These provisions, as included in ASC Topic 820, were adopted by the Account on April 1, 2009. The Account determined, however, that there was no effect on the Account’s net assets and results of operations upon adoption, as its guidance is consistent with that previously applied by the Account under US GAAP.

    Fair Value Measurements

    In September 2006, the FASB issued new guidance on fair value measurements included in ASC Topic 820, “Fair Value Measurements and Disclosures,” which provides guidance for using fair value to measure assets and liabilities whenever other standards require (or permit) assets or liabilities to be measured at fair value. ASC Topic 820 does not expand the use of fair value to any new circumstances.

    ASC Topic 820 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, ASC Topic 820 establishes a fair value hierarchy that prioritizes the information used to develop such assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. ASC Topic 820 also requires separate disclosure of fair value measurements by level within the hierarchy and expanded disclosure of the effect on earnings for items measured using unobservable data.

    The adoption of ASC Topic 820 on January 1, 2008 did not have an impact on the Account’s net assets or results of operations. New disclosures are included in the Financial Instruments footnote.

    4. Financial Instruments

    The Account invests assets in shares of open-end mutual funds, which process orders to purchase and redeem shares on a daily basis at the fund's next computed net asset values (“NAV”). The fair value of the Account’s assets is based on the NAVs of mutual funds, which are obtained from the custodian and reflect the fair values of the mutual fund investments. The NAV is calculated daily upon close of the New York Stock Exchange and is based on the fair values of the underlying securities.

    The Account’s financial assets are recorded at fair value on the Statements of Assets and Liabilities and are categorized as Level 1 as of December 31, 2009 and 2008, respectively, based on the priority of the inputs to the valuation technique below. The Account had no financial liabilities as of December 31, 2009.

    66


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

    The ASC Topic 820 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.

    §

    Level 1 - Unadjusted quoted prices for identical assets or liabilities in an active market.

    §

    Level 2 - Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:

     

    a)     

    Quoted prices for similar assets or liabilities in active markets;

     

    b)     

    Quoted prices for identical or similar assets or liabilities in non-active markets;

     

    c)     

    Inputs other than quoted market prices that are observable; and

     

    d)     

    Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

    §

    Level 3 - Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. 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.

    5. Charges and Fees

    Under the terms of the Policies, certain charges are allocated to the Policies to cover SLD’s expenses in connection with the issuance and administration of the Policies. Following is a summary of these charges:

    Premium Expense Charge

    SLD deducts a premium charge for certain Policies ranging from 4.00% to 15.00% of each premium payment as defined in the Policies.

    Mortality, Expense Risk, and Other Charges

    For FirstLine, FirstLine II, Strategic Advantage, Variable Survivorship, Estate Designer Policies, and Strategic Investor (Class A Policies), charges are made directly against the assets of the Account Divisions and are reflected daily in the computation of the unit values of the Divisions. A daily deduction, at an annual rate of up to 0.75% of the average daily net asset value of each Division of the Account, is charged to cover these risks, as specified in the Policies.

    67


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

    For the Corporate Benefits, ING Corporate Advantage, Asset Portfolio Manager, Asset accumulator, ING Corporate Policies (Class B Policies), ING VUL-CV, ING VUL-ECV and ING SVUL-CV, mortality and expense charges result in the redemption of units rather than a deduction in the daily computation of unit values.

    • For Corporate Benefits Policies, a monthly deduction, at an annual rate of 0.20% of the contractowner account value, is charged.
    • For ING Corporate Advantage Policies, a monthly deduction, at an annual rate up to 0.35% of the contractowner account value, is charged.
    • For Asset Portfolio Manager Policies, a monthly deduction, at an annual rate of 0.90% and 0.45% of the contractowner account value, is charged during policy years 1 through 10 and 11 through 20, respectively. There is no mortality and expense charge after year 20 for Asset Portfolio Manager Policies.
    • For Asset Accumulator Policies, a monthly deduction, at an annual rate of 0.45% and 0.30% of the contractowner account value, is charged during policy years 1 through 5 and 6 through 10, respectively. There is no mortality and expense charge after year 10 for Asset Accumulator Policies.
    • For ING Corporate Policies, a monthly deduction is charged to the contractowner account value at an annual rate ranging from 0.55% to 0.60% for policy years 1 through 10, 0.35% to 0.60% for policy years 11 through 20, and 0.20% to 0.60% for policy years after year 20.
    • For ING VUL-CV and ING SVUL-CV policies, a monthly deduction at an annual rate of 0.30% of the contractowner account value is charged.
    • For ING VUL-ECV policies, a monthly deduction at an annual rate of 0.45% of the contractowner account value is charged.

    The monthly cost of insurance charge varies based on the insured’s sex, issue age, policy year, rate class, and the face amount of policies.

    The monthly administrative charge is based on an established amount per $1,000 of base insurance coverage or an established per month charge, as defined in the Policies.

    The monthly amount charged for optional insurance benefits varies based on a number of factors and is defined in the Policies.

    Other Policy Deductions

    The Variable Universal Life Policies provide for certain deductions for sales and tax loads from premium payments received from the contractowners and for surrender charges and taxes from amounts paid to contractowners. Such deductions are taken after the redemption of units in the Account and are not included in the Account financial statements.

    68


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

    Premium Taxes

    Premiums are subject to a charge for premium and other state and local taxes. The amount and timing of the payment by SLD depends on the state of residence and currently is up to 4.00% of premiums.

    6. Related Party Transactions

    During the year ended December 31, 2009, management and service fees were paid indirectly to DSL, an affiliate of the Company, in its capacity as investment manager to ING Investors Trust and ING Partners, Inc. The Trusts’ advisory agreements provide for fees at annual rates up to 1.25% of the average net assets of each respective Fund.

    Management fees were paid to IIL, an affiliate of the Company, in its capacity as investment advisor to ING Variable Products Trust, ING Intermediate Bond Portfolio, ING Strategic Allocation Portfolios, Inc., ING Balanced Portfolio, Inc., ING Variable Portfolios, Inc., and ING Variable Funds. The Trusts’ advisory agreement provides for fees at annual rates up to 0.75% of the average net assets of each respective Fund.

    69


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

    7. Purchases and Sales of Investment Securities

    The aggregate cost of purchases and proceeds from sales of investments follow:

        Year Ended December 31     
      2009  2008   
      Purchases         Sales  Purchases    Sales 
      (Dollars in thousands)
    AIM Variable Insurance Funds:           
         AIM V.I. Core Equity Fund - Series I Shares  $ 144  $ 1,750  $ 289  $ 3,331 
    American Funds Insurance Series:           
         American Funds Insurance Series® Growth Fund - Class 2  7,241  8,711  18,384    7,790 
         American Funds Insurance Series® Growth-Income Fund -           
             Class 2  3,325  5,444  7,330    1,709 
         American Funds Insurance Series® International Fund - Class 2  11,266  13,373  19,142    11,823 
    BlackRock Variable Series Funds, Inc.:           
         BlackRock Global Allocation V.I. Fund - Class III  2,208  26  -    - 
    Fidelity® Variable Insurance Products:           
         Fidelity® VIP Equity-Income Portfolio - Service Class  1,479  1,206  1,516    796 
    Fidelity® Variable Insurance Products II:           
         Fidelity® VIP Contrafund® Portfolio - Service Class  4,088  3,577  9,118    3,714 
    Fidelity® Variable Insurance Products V:           
         Fidelity® VIP Investment Grade Bond Portfolio - Initial Class  38  27  18    27 
    ING Balanced Portfolio, Inc.:           
         ING Balanced Portfolio - Class I  1,492  2,354  2,658    2,570 
    ING Intermediate Bond Portfolio:           
         ING Intermediate Bond Portfolio - Class I  11,102  14,233  33,207    9,555 
    ING Investors Trust:           
         ING AllianceBernstein Mid Cap Growth Portfolio - Institutional           
             Class  1,178  2,619  2,267    2,967 
         ING Artio Foreign Portfolio - Institutional Class  3,883  3,376  11,586    6,575 
         ING BlackRock Large Cap Growth Portfolio - Institutional Class  577  335  626    697 
         ING BlackRock Large Cap Value Portfolio - Institutional Class  57  1,998  671    6,938 
         ING Clarion Global Real Estate Portfolio - Service Class  1,827  2,090  14,826    1,566 
         ING Evergreen Health Sciences Portfolio - Institutional Class  4,486  2,411  5,849    3,405 
         ING Evergreen Omega Portfolio - Institutional Class  7,097  14,510  12,229    8,369 
         ING FMRSM Diversified Mid Cap Portfolio - Institutional Class  2,136  1,631  7,057    5,799 
         ING Focus 5 Portfolio - Class I  69  19  45    1 
         ING Franklin Templeton Founding Strategy Portfolio -           
             Institutional Class  3,239  37  121    2 
         ING Global Resources Portfolio - Institutional Class  8,444  10,435  17,419    11,297 
         ING Growth and Income Portfolio II - Institutional Class  766  5,024  3,214    1,364 
         ING Index Plus International Equity Portfolio - Service Class  2,236  26,981  13,681    5,971 
         ING JPMorgan Emerging Markets Equity Portfolio - Institutional           
             Class  7,774  7,105  10,865    7,387 
         ING JPMorgan Small Cap Core Equity Portfolio - Institutional           
             Class  1,922  3,122  6,472    5,110 
         ING JPMorgan Value Opportunities Portfolio - Institutional Class  2,760  10,475  7,225    3,202 
         ING LifeStyle Aggressive Growth Portfolio - Institutional Class  2,299  9,501  4,014    2,000 
         ING LifeStyle Growth Portfolio - Institutional Class  3,886  21,601  8,184    4,925 
         ING LifeStyle Moderate Growth Portfolio - Institutional Class  3,088  15,151  8,627    3,534 
         ING LifeStyle Moderate Portfolio - Institutional Class  3,142  9,174  4,941    719 

    70


    SECURITY LIFE OF DENVER INSURANCE COMPANY         
    SECURITY LIFE SEPARATE ACCOUNT L1           
    Notes to Financial Statements           
     
     
     
      Year Ended December 31
      2009  2008   
      Purchases         Sales  Purchases Sales 
      (Dollars in thousands)
                       ING Investors Trust (continued):           
                             ING Limited Maturity Bond Portfolio - Service Class  $ 12,610  $ 9,102  $ 7,432  $ 6,047 
                             ING Liquid Assets Portfolio - Institutional Class  88,122  114,373  65,409    48,818 
                             ING Liquid Assets Portfolio - Service Class  41,063  41,498  50,537    41,552 
                             ING Lord Abbett Affiliated Portfolio - Institutional Class  1  48  43    20 
                             ING Marsico Growth Portfolio - Institutional Class  1,580  2,071  2,952    2,415 
                             ING Marsico International Opportunities Portfolio - Institutional           
                                 Class  3,310  3,887  5,132    9,189 
                             ING MFS Total Return Portfolio - Institutional Class  1,526  1,274  2,528    1,703 
                             ING MFS Utilities Portfolio - Service Class  2,381  3,963  10,510    15,489 
                             ING Oppenheimer Main Street Portfolio® - Institutional Class  49  686  461    314 
                             ING PIMCO Total Return Bond Portfolio - Institutional Class  29,099  7,781  6,596    864 
                             ING Pioneer Fund Portfolio - Institutional Class  1,093  864  1,836    1,816 
                             ING Pioneer Mid Cap Value Portfolio - Institutional Class  1,955  2,666  3,163    3,199 
                             ING Retirement Growth Portfolio - Institutional Class  26,389  404  -    - 
                             ING Retirement Moderate Growth Portfolio - Institutional Class  13,086  612  -    - 
                             ING Retirement Moderate Portfolio - Institutional Class  8,069  700  -    - 
                             ING Stock Index Portfolio - Institutional Class  4,789  23,424  27,874    24,668 
                             ING T. Rowe Price Capital Appreciation Portfolio - Institutional           
                                 Class  10,759  8,691  17,777    6,574 
                             ING T. Rowe Price Equity Income Portfolio - Institutional Class  4,775  4,011  9,862    4,733 
                             ING Van Kampen Capital Growth Portfolio - Institutional Class  1,550  39,642  77,371    19,553 
                             ING Van Kampen Growth and Income Portfolio - Service Class  1,879  1,381  3,688    991 
                             ING Wells Fargo Small Cap Disciplined Portfolio - Service Class  1,500  1,747  2,420    2,570 
                       ING Partners, Inc.:           
                             ING American Century Large Company Value Portfolio - Initial           
                                 Class  -  12  15    12 
                             ING American Century Small-Mid Cap Value Portfolio - Initial           
                                 Class  15  107  56    101 
                             ING Baron Small Cap Growth Portfolio - Initial Class  6,538  7,007  3,816    2,471 
                             ING Columbia Small Cap Value Portfolio - Initial Class  2,986  2,651  3,338    2,538 
                             ING JPMorgan Mid Cap Value Portfolio - Initial Class  2,281  4,334  6,155    3,185 
                             ING Legg Mason Partners Aggressive Growth Portfolio - Initial           
                                 Class  -  27  -    36 
                             ING Neuberger Berman Partners Portfolio - Initial Class  448  1,388  1,259    530 
                             ING Oppenheimer Global Portfolio - Initial Class  8,739  11,676  5,506    567 
                             ING Oppenheimer Strategic Income Portfolio - Service Class  6,080  4,074  11,414    5,436 
                             ING PIMCO Total Return Portfolio - Initial Class  1,036  6,633  7,492    9,013 
                             ING Pioneer High Yield Portfolio - Initial Class  16,669  21,406  26,327    2,768 
                             ING T. Rowe Price Diversified Mid Cap Growth Portfolio - Initial           
                                 Class  6,519  8,145  14,077    10,529 
                             ING UBS U.S. Large Cap Equity Portfolio - Initial Class  3,139  284  1,638    322 
                             ING Van Kampen Comstock Portfolio - Initial Class  3,888  4,555  2,483    3,248 
                             ING Van Kampen Equity and Income Portfolio - Initial Class  252  401  738    794 

    71


    SECURITY LIFE OF DENVER INSURANCE COMPANY           
    SECURITY LIFE SEPARATE ACCOUNT L1             
    Notes to Financial Statements             
     
     
     
      Year Ended December 31
      2009 2008
      Purchases    Sales  Purchases  Sales 
      (Dollars in thousands)
                       ING Strategic Allocation Portfolios, Inc.:             
                             ING Strategic Allocation Conservative Portfolio - Class I  $ 8  $ 7  $ 14 $  7 
                             ING Strategic Allocation Growth Portfolio - Class I    108    414  247  677 
                             ING Strategic Allocation Moderate Portfolio - Class I    179    132  268  95 
                       ING Variable Funds:             
                             ING Growth and Income Portfolio - Class I    4,447    393  -  1 
                       ING Variable Portfolios, Inc.:             
                             ING Index Plus LargeCap Portfolio - Class I    1,606    1,565  2,082  1,188 
                             ING Index Plus MidCap Portfolio - Class I    1,553    2,895  4,116  2,508 
                             ING Index Plus SmallCap Portfolio - Class I    1,645    1,302  3,081  2,611 
                             ING International Index Portfolio - Class S  22,619    1,908  -  - 
                             ING Opportunistic Large Cap Value Portfolio - Class I    28    514  333  377 
                             ING Russell™ Large Cap Growth Index Portfolio - Class I  34,783    2,501  -  - 
                             ING Russell™ Large Cap Index Portfolio - Class I    2,382    465  -  - 
                             ING Russell™ Large Cap Value Index Portfolio - Class I    5,089    1,051  -  - 
                             ING Russell™ Mid Cap Growth Index Portfolio - Class I    2,016    168  -  - 
                             ING Russell™ Small Cap Index Portfolio - Class I    1,014    386  272  5 
                             ING U.S. Bond Index Portfolio - Class I    5,358    2,387  2,585  662 
                       ING Variable Products Trust:             
                             ING MidCap Opportunities Portfolio - Class I    6    749  2,432  451 
                             ING SmallCap Opportunities Portfolio - Class I    4,604    1,880  10,528  6,370 
                       M Fund, Inc.:             
                             Brandes International Equity Fund    2,005    3,122  5,985  4,439 
                             Business Opportunity Value Fund    451    1,011  1,413  862 
                             Frontier Capital Appreciation Fund    625    1,678  1,192  2,078 
                             M Large Cap Growth Fund    584    1,170  2,299  1,374 
                       Neuberger Berman Advisers Management Trust:             
                             Neuberger Berman AMT Socially Responsive Portfolio® - Class I    334    225  332  140 
                       Van Eck Worldwide Insurance Trust:             
                             Van Eck Worldwide Hard Assets Fund    144    1,435  2,127  2,970 

    72


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

    8. Changes in Units

    The changes in units outstanding were as follows:

          Year Ending December 31     
      2009 2008
      Units     Units  Net Increase     Units     Units  Net Increase 
      Issued  Redeemed  (Decrease)   Issued  Redeemed  (Decrease) 
    AIM Variable Insurance Funds:             
         AIM V.I. Core Equity Fund - Series I Shares  1,304  196,716  (195,412)  8,887  311,859  (302,972) 
    American Funds Insurance Series:             
         American Funds Insurance Series® Growth Fund - Class 2  992,769  1,134,873  (142,104)  1,120,535  871,660  248,875 
         American Funds Insurance Series® Growth-Income Fund - Class 2  476,590  680,792  (204,202)  531,354  321,333  210,021 
         American Funds Insurance Series® International Fund - Class 2  754,786  930,406  (175,620)  720,227  727,984  (7,757) 
    BlackRock Variable Series Funds, Inc.:             
         BlackRock Global Allocation V.I. Fund - Class III  189,346  5,121  184,225  -  -  - 
    Fidelity® Variable Insurance Products:             
         Fidelity® VIP Equity-Income Portfolio - Service Class  187,906  161,680  26,226  148,463  96,801  51,662 
    Fidelity® Variable Insurance Products II:             
         Fidelity® VIP Contrafund® Portfolio - Service Class  621,399  559,488  61,911  871,616  532,827  338,789 
    Fidelity® Variable Insurance Products V:             
         Fidelity® VIP Investment Grade Bond Portfolio - Initial Class  53  2,200  (2,147)  48  2,393  (2,345) 
    ING Balanced Portfolio, Inc.:             
         ING Balanced Portfolio - Class I  214,073  373,351  (159,278)  212,301  380,271  (167,970) 
    ING Intermediate Bond Portfolio:             
         ING Intermediate Bond Portfolio - Class I  992,474  1,427,361  (434,887)  2,565,687  1,005,888  1,559,799 
    ING Investors Trust:             
         ING AllianceBernstein Mid Cap Growth Portfolio - Institutional Class  156,060  306,612  (150,552)  178,914  254,129  (75,215) 
         ING Artio Foreign Portfolio - Institutional Class  491,956  509,955  (17,999)  788,341  658,196  130,145 
         ING BlackRock Large Cap Growth Portfolio - Institutional Class  75,134  46,289  28,845  51,506  65,816  (14,310) 
         ING BlackRock Large Cap Value Portfolio - Institutional Class  1,383  224,230  (222,847)  6,177  594,541  (588,364) 
         ING Clarion Global Real Estate Portfolio - Service Class  350,795  437,845  (87,050)  1,796,680  238,484  1,558,196 
         ING Evergreen Health Sciences Portfolio - Institutional Class  455,627  271,346  184,281  502,652  430,583  72,069 
         ING Evergreen Omega Portfolio - Institutional Class  907,606  1,547,246  (639,640)  1,011,002  1,012,344  (1,342) 

    73


    SECURITY LIFE OF DENVER INSURANCE COMPANY             
    SECURITY LIFE SEPARATE ACCOUNT L1             
    Notes to Financial Statements             
     
     
     
          Year Ending December 31     
        2009      2008   
         Units     Units  Net Increase     Units     Units  Net Increase 
       Issued  Redeemed  (Decrease)   Issued  Redeemed  (Decrease) 
                       ING Investors Trust (continued):             
                             ING FMRSM Diversified Mid Cap Portfolio - Institutional Class  402,271  366,135  36,136  780,041  867,663  (87,622) 
                             ING Focus 5 Portfolio - Class I  10,983  2,448  8,535  5,563  251  5,312 
                             ING Franklin Templeton Founding Strategy Portfolio - Institutional Class  374,801  8,133  366,668  14,603  597  14,006 
                             ING Global Resources Portfolio - Institutional Class  455,274  562,240  (106,966)  580,197  489,889  90,308 
                             ING Growth and Income Portfolio II - Institutional Class  162,878  861,484  (698,606)  239,666  255,704  (16,038) 
                             ING Index Plus International Equity Portfolio - Service Class  300,783  3,193,816  (2,893,033)  427,568  758,540  (330,972) 
                             ING JPMorgan Emerging Markets Equity Portfolio - Institutional Class  1,032,142  1,061,676  (29,534)  960,543  832,872  127,671 
                             ING JPMorgan Small Cap Core Equity Portfolio - Institutional Class  312,349  477,040  (164,691)  522,112  616,454  (94,342) 
                             ING JPMorgan Value Opportunities Portfolio - Institutional Class  378,534  1,444,150  (1,065,616)  864,951  474,773  390,178 
                             ING LifeStyle Aggressive Growth Portfolio - Institutional Class  286,455  968,341  (681,886)  322,026  210,431  111,595 
                             ING LifeStyle Growth Portfolio - Institutional Class  458,335  2,118,417  (1,660,082)  672,959  506,023  166,936 
                             ING LifeStyle Moderate Growth Portfolio - Institutional Class  319,559  1,471,031  (1,151,472)  765,425  372,944  392,481 
                             ING LifeStyle Moderate Portfolio - Institutional Class  291,046  836,332  (545,286)  520,109  195,503  324,606 
                             ING Limited Maturity Bond Portfolio - Service Class  1,021,012  886,304  134,708  585,429  657,351  (71,922) 
                             ING Liquid Assets Portfolio - Institutional Class  6,415,014  8,706,042  (2,291,028)  6,815,115  5,491,485  1,323,630 
                             ING Liquid Assets Portfolio - Service Class  4,288,108  4,331,516  (43,408)  4,989,250  4,376,693  612,557 
                             ING Lord Abbett Affiliated Portfolio - Institutional Class  2  4,526  (4,524)  10  1,232  (1,222) 
                             ING Marsico Growth Portfolio - Institutional Class  237,926  285,740  (47,814)  311,736  252,069  59,667 
                             ING Marsico International Opportunities Portfolio - Institutional Class  368,929  405,816  (36,887)  360,216  801,441  (441,225) 
                             ING MFS Total Return Portfolio - Institutional Class  129,570  125,813  3,757  128,361  137,397  (9,036) 
                             ING MFS Utilities Portfolio - Service Class  209,495  371,871  (162,376)  638,431  1,041,344  (402,913) 
                             ING Oppenheimer Main Street Portfolio® - Institutional Class  12,444  94,536  (82,092)  40,301  33,589  6,712 
                             ING PIMCO Total Return Bond Portfolio - Institutional Class  2,818,020  911,393  1,906,627  694,304  121,772  572,532 
                             ING Pioneer Fund Portfolio - Institutional Class  125,884  100,909  24,975  203,610  199,678  3,932 
                             ING Pioneer Mid Cap Value Portfolio - Institutional Class  258,070  360,711  (102,641)  290,156  380,342  (90,186) 
                             ING Retirement Growth Portfolio - Institutional Class  2,904,690  90,305  2,814,385  -  -  - 
                             ING Retirement Moderate Growth Portfolio - Institutional Class  1,406,902  84,235  1,322,667  -  -  - 
                             ING Retirement Moderate Portfolio - Institutional Class  827,496  75,086  752,410  -  -  - 
                             ING Stock Index Portfolio - Institutional Class  1,568,354  3,683,923  (2,115,569)  3,065,433  3,363,600  (298,167) 
                             ING T. Rowe Price Capital Appreciation Portfolio - Institutional Class  941,008  872,585  68,423  916,432  698,669  217,763 

    74


    SECURITY LIFE OF DENVER INSURANCE COMPANY             
    SECURITY LIFE SEPARATE ACCOUNT L1             
    Notes to Financial Statements             
     
     
     
          Year Ending December 31     
        2009      2008   
         Units     Units  Net Increase     Units     Units  Net Increase 
       Issued  Redeemed  (Decrease)   Issued  Redeemed  (Decrease) 
                       ING Investors Trust (continued):             
                             ING T. Rowe Price Equity Income Portfolio - Institutional Class  548,777  516,758  32,019  622,743  482,899  139,844 
                             ING Van Kampen Capital Growth Portfolio - Institutional Class  375,564  4,402,372  (4,026,808)  5,680,244  1,925,457  3,754,787 
                             ING Van Kampen Growth and Income Portfolio - Service Class  234,439  193,595  40,844  296,956  140,464  156,492 
                             ING Wells Fargo Small Cap Disciplined Portfolio - Service Class  337,870  378,266  (40,396)  172,095  389,918  (217,823) 
                       ING Partners, Inc.:             
                             ING American Century Large Company Value Portfolio - Initial Class  1  1,572  (1,571)  8  1,449  (1,441) 
                             ING American Century Small-Mid Cap Value Portfolio - Initial Class  1,372  12,618  (11,246)  348  9,008  (8,660) 
                             ING Baron Small Cap Growth Portfolio - Initial Class  822,932  863,734  (40,802)  404,268  325,214  79,054 
                             ING Columbia Small Cap Value Portfolio - Initial Class  457,136  451,435  5,701  442,546  385,143  57,403 
                             ING JPMorgan Mid Cap Value Portfolio - Initial Class  232,353  419,830  (187,477)  390,111  292,793  97,318 
                             ING Legg Mason Partners Aggressive Growth Portfolio - Initial Class  11  2,562  (2,551)  21  2,427  (2,406) 
                             ING Neuberger Berman Partners Portfolio - Initial Class  68,758  227,982  (159,224)  137,277  69,490  67,787 
                             ING Oppenheimer Global Portfolio - Initial Class  957,745  1,238,360  (280,615)  559,582  109,286  450,296 
                             ING Oppenheimer Strategic Income Portfolio - Service Class  720,240  589,728  130,512  1,133,819  696,356  437,463 
                             ING PIMCO Total Return Portfolio - Initial Class  4,641  527,460  (522,819)  552,645  802,111  (249,466) 
                             ING Pioneer High Yield Portfolio - Initial Class  1,848,082  2,405,646  (557,564)  2,930,058  391,641  2,538,417 
                             ING T. Rowe Price Diversified Mid Cap Growth Portfolio - Initial Class  932,304  1,090,237  (157,933)  940,997  1,162,813  (221,816) 
                             ING UBS U.S. Large Cap Equity Portfolio - Initial Class  321,382  35,486  285,896  147,281  35,299  111,982 
                             ING Van Kampen Comstock Portfolio - Initial Class  393,648  471,180  (77,532)  205,753  325,265  (119,512) 
                             ING Van Kampen Equity and Income Portfolio - Initial Class  26,866  44,281  (17,415)  43,558  68,309  (24,751) 
                       ING Strategic Allocation Portfolios, Inc.:             
                             ING Strategic Allocation Conservative Portfolio - Class I  25  681  (656)  4  558  (554) 
                             ING Strategic Allocation Growth Portfolio - Class I  27  41,269  (41,242)  191  59,644  (59,453) 
                             ING Strategic Allocation Moderate Portfolio - Class I  643  13,760  (13,117)  623  8,679  (8,056) 
                       ING Variable Funds:             
                             ING Growth and Income Portfolio - Class I  605,128  58,356  546,772  6  86  (80) 

    75


    SECURITY LIFE OF DENVER INSURANCE COMPANY             
    SECURITY LIFE SEPARATE ACCOUNT L1             
    Notes to Financial Statements             
     
     
     
          Year Ending December 31     
        2009      2008   
         Units     Units  Net Increase  Units     Units  Net Increase 
       Issued  Redeemed  (Decrease)  Issued  Redeemed  (Decrease) 
                       ING Variable Portfolios, Inc.:             
                             ING Index Plus LargeCap Portfolio - Class I  197,319  221,088  (23,769)  133,753  143,538  (9,785) 
                             ING Index Plus MidCap Portfolio - Class I  214,509  355,754  (141,245)  255,465  266,020  (10,555) 
                             ING Index Plus SmallCap Portfolio - Class I  206,120  181,686  24,434  223,865  263,590  (39,725) 
                             ING International Index Portfolio - Class S  1,869,916  185,338  1,684,578  -  -  - 
                             ING Opportunistic Large Cap Value Portfolio - Class I  33  74,943  (74,910)  8,184  35,666  (27,482) 
                             ING Russell™ Large Cap Growth Index Portfolio - Class I  3,308,216  319,764  2,988,452  -  -  - 
                             ING Russell™ Large Cap Index Portfolio - Class I  218,142  42,544  175,598  -  -  - 
                             ING Russell™ Large Cap Value Index Portfolio - Class I  482,683  97,366  385,317  -  -  - 
                             ING Russell™ Mid Cap Growth Index Portfolio - Class I  175,371  15,376  159,995  -  -  - 
                             ING Russell™ Small Cap Index Portfolio - Class I  147,699  50,564  97,135  34,780  714  34,066 
                             ING U.S. Bond Index Portfolio - Class I  525,112  255,128  269,984  258,294  70,261  188,033 
                       ING Variable Products Trust:             
                             ING MidCap Opportunities Portfolio - Class I  82  74,275  (74,193)  168,341  35,589  132,752 
                             ING SmallCap Opportunities Portfolio - Class I  595,832  305,769  290,063  950,752  865,496  85,256 
                       M Fund, Inc.:             
                             Brandes International Equity Fund  148,641  253,388  (104,747)  271,581  302,305  (30,724) 
                             Business Opportunity Value Fund  52,980  100,671  (47,691)  117,268  77,980  39,288 
                             Frontier Capital Appreciation Fund  60,115  139,822  (79,707)  95,178  154,459  (59,281) 
                             M Large Cap Growth Fund  74,613  138,194  (63,581)  207,046  136,701  70,345 
                       Neuberger Berman Advisers Management Trust:             
                             Neuberger Berman AMT Socially Responsive Portfolio® - Class I  54,936  42,088  12,848  27,995  14,570  13,425 
                       Van Eck Worldwide Insurance Trust:             
                             Van Eck Worldwide Hard Assets Fund  3,705  50,722  (47,017)  5,739  74,551  (68,812) 

    76


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

    9. Unit Summary

    A summary of units outstanding at December 31, 2009 follows:

    Division/Contract  Units  Unit Value  Extended Value 
    AIM V.I. Core Equity Fund - Series I Shares       
    Contracts in accumulation period:       
    Class A  744,456.221  $ 10.33  $ 7,690,233 
    Class B  101,706.992  10.62  1,080,128 
      846,163.213    $ 8,770,361 
    American Funds Insurance Series® Growth Fund - Class 2       
    Contracts in accumulation period:       
    Class A  1,348,021.772  $ 15.56  $ 20,975,219 
    Class B  1,724,976.706  16.37  28,237,869 
    ING Corporate Advantage VUL  8,841.369  11.56  102,206 
      3,081,839.847    $ 49,315,294 
    American Funds Insurance Series® Growth-Income Fund - Class 2       
    Contracts in accumulation period:       
    Class A  775,669.940  $ 14.23  $ 11,037,783 
    Class B  953,162.935  14.96  14,259,318 
    ING Corporate Advantage VUL  3,901.687  10.78  42,060 
      1,732,734.562    $ 25,339,161 
    American Funds Insurance Series® International Fund - Class 2       
    Contracts in accumulation period:       
    Class A  919,479.482  $ 22.71  $ 20,881,379 
    Class B  1,051,317.331  23.88  25,105,458 
    ING Corporate Advantage VUL  7,240.594  14.62  105,857 
      1,978,037.407    $ 46,092,694 
    BlackRock Global Allocation V.I. Fund - Class III       
    Contracts in accumulation period:       
    Class A  61,498.217  $ 12.19  $ 749,663 
    Class B  122,726.372  12.25  1,503,398 
      184,224.589    $ 2,253,061 
    Fidelity® VIP Equity-Income Portfolio - Service Class       
    Contracts in accumulation period:       
    Class A  151,957.045  $ 9.77  $ 1,484,620 
    Class B  219,237.890  10.13  2,220,880 
    ING Corporate Advantage VUL  2,780.557  9.91  27,555 
      373,975.492    $ 3,733,055 
    Fidelity® VIP Contrafund® Portfolio - Service Class       
    Contracts in accumulation period:       
    Class A  682,957.826  $ 11.94  $ 8,154,516 
    Class B  782,825.580  12.37  9,683,552 
    ING Corporate Advantage VUL  16,412.177  12.07  198,095 
      1,482,195.583    $ 18,036,163 

    77


    SECURITY LIFE OF DENVER INSURANCE COMPANY       
    SECURITY LIFE SEPARATE ACCOUNT L1       
    Notes to Financial Statements       
     
     
     
    Division/Contract  Units  Unit Value  Extended Value 
                       Fidelity® VIP Investment Grade Bond Portfolio - Initial Class       
                       Contracts in accumulation period:       
                       Class A  24,503.986  $ 12.00  $ 294,048 
                       Class B  11,032.120  12.43  137,129 
      35,536.106    $ 431,177 
                       ING Balanced Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  981,291.044  $ 9.34  $ 9,165,258 
                       Class B  217,156.918  9.60  2,084,706 
      1,198,447.962    $ 11,249,964 
                       ING Intermediate Bond Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  1,447,651.973  $ 13.25  $ 19,181,389 
                       Class B  1,341,227.912  14.05  18,844,252 
                       ING Corporate Advantage VUL  4,151.905  11.68  48,494 
      2,793,031.790    $ 38,074,135 
                       ING Artio Foreign Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  521,027.592  $ 11.84  $ 6,168,967 
                       Class B  821,020.825  12.26  10,065,715 
                       ING Corporate Advantage VUL  5,743.901  12.21  70,133 
      1,347,792.318    $ 16,304,815 
                       ING BlackRock Large Cap Growth Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  105,919.604  $ 10.35  $ 1,096,268 
                       Class B  62,964.129  10.72  674,975 
      168,883.733    $ 1,771,243 
                       ING BlackRock Large Cap Value Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  629,557.632  $ 10.00  $ 6,295,576 
                       Class B  51,671.131  10.43  538,930 
      681,228.763    $ 6,834,506 
                       ING Clarion Global Real Estate Portfolio - Service Class       
                       Contracts in accumulation period:       
                       Class A  897,202.143  $ 7.56  $ 6,782,848 
                       Class B  573,944.325  7.66  4,396,414 
      1,471,146.468    $ 11,179,262 
                       ING Evergreen Health Sciences Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  236,734.405  $ 11.35  $ 2,686,935 
                       Class B  218,054.321  11.76  2,564,319 
                       ING Corporate Advantage VUL  134.462  10.21  1,373 
      454,923.188    $ 5,252,627 

    78


    SECURITY LIFE OF DENVER INSURANCE COMPANY       
    SECURITY LIFE SEPARATE ACCOUNT L1       
    Notes to Financial Statements       
     
     
     
    Division/Contract  Units  Unit Value  Extended Value 
                       ING Evergreen Omega Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  1,430,773.821  $ 13.65  $ 19,530,063 
                       Class B  346,601.054  14.14  4,900,939 
      1,777,374.875    $ 24,431,002 
                       ING FMRSM Diversified Mid Cap Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  1,461,082.727  $ 9.46  $ 13,821,843 
                       Class B  372,786.312  9.73  3,627,211 
                       ING Corporate Advantage VUL  2,295.815  11.16  25,621 
      1,836,164.854    $ 17,474,675 
                       ING Focus 5 Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  1,318.313  $ 7.26  $ 9,571 
                       Class B  12,528.728  7.35  92,086 
      13,847.041    $ 101,657 
                       ING Franklin Templeton Founding Strategy Portfolio -       
                           Institutional Class       
                       Contracts in accumulation period:       
                       Class A  176,229.087  $ 8.75  $ 1,542,005 
                       Class B  204,444.793  8.87  1,813,425 
      380,673.880    $ 3,355,430 
                       ING Global Resources Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  261,400.846  $ 28.84  $ 7,538,800 
                       Class B  248,156.693  25.60  6,352,811 
                       ING Corporate Advantage VUL  413.524  17.38  7,187 
      509,971.063    $ 13,898,798 
                       ING JPMorgan Emerging Markets Equity Portfolio - Institutional       
                           Class       
                       Contracts in accumulation period:       
                       Class A  1,467,163.875  $ 13.04  $ 19,131,817 
                       Class B  1,085,297.182  13.41  14,553,835 
                       ING Corporate Advantage VUL  4,832.935  13.48  65,148 
      2,557,293.992    $ 33,750,800 
                       ING JPMorgan Small Cap Core Equity Portfolio - Institutional       
                           Class       
                       Contracts in accumulation period:       
                       Class A  1,491,426.721  $ 12.43  $ 18,538,434 
                       Class B  325,683.356  12.97  4,224,113 
                       ING Corporate Advantage VUL  1,309.518  11.52  15,086 
      1,818,419.595    $ 22,777,633 
                       ING Limited Maturity Bond Portfolio - Service Class       
                       Contracts in accumulation period:       
                       Class A  1,246,400.218  $ 11.48  $ 14,308,675 
                       Class B  868,456.733  15.82  13,738,986 
                       ING Corporate Advantage VUL  8,324.269  11.97  99,641 
      2,123,181.220    $ 28,147,302 

    79


    SECURITY LIFE OF DENVER INSURANCE COMPANY       
    SECURITY LIFE SEPARATE ACCOUNT L1       
    Notes to Financial Statements       
     
     
     
    Division/Contract  Units  Unit Value  Extended Value
                       ING Liquid Assets Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  5,978,811.807  $ 11.35  $ 67,859,514 
     
                       ING Liquid Assets Portfolio - Service Class       
                       Contracts in accumulation period:       
                       Class B  3,007,185.953  $ 13.46  $ 40,476,723 
                       ING Corporate Advantage VUL  24,701.261  11.55  285,300 
      3,031,887.214    $ 40,762,023 
                       ING Lord Abbett Affiliated Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  6,452.769  $ 13.52  $ 87,241 
                       Class B  4,258.928  14.21  60,519 
      10,711.697    $ 147,760 
                       ING Marsico Growth Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  154,971.291  $ 14.02  $ 2,172,697 
                       Class B  460,244.121  8.90  4,096,173 
                       ING Corporate Advantage VUL  346.297  10.69  3,702 
      615,561.709    $ 6,272,572 
                       ING Marsico International Opportunities Portfolio - Institutional       
                           Class       
                       Contracts in accumulation period:       
                       Class A  341,103.731  $ 12.70  $ 4,332,017 
                       Class B  361,548.654  13.16  4,757,980 
                       ING Corporate Advantage VUL  2,130.676  13.16  28,040 
      704,783.061    $ 9,118,037 
                       ING MFS Total Return Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  212,125.343  $ 13.68  $ 2,901,875 
                       Class B  201,277.438  16.00  3,220,439 
                       ING Corporate Advantage VUL  285.332  11.31  3,227 
      413,688.113    $ 6,125,541 
                       ING MFS Utilities Portfolio - Service Class       
                       Contracts in accumulation period:       
                       Class A  393,013.560  $ 15.31  $ 6,017,038 
                       Class B  143,328.774  15.86  2,273,194 
                       ING Corporate Advantage VUL  234.187  15.86  3,714 
      536,576.521    $ 8,293,946 
                       ING PIMCO Total Return Bond Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  1,336,102.042  $ 11.44  $ 15,285,007 
                       Class B  1,142,811.033  11.59  13,245,180 
                       ING Corporate Advantage VUL  245.873  11.52  2,832 
      2,479,158.948    $ 28,533,019 

    80


    SECURITY LIFE OF DENVER INSURANCE COMPANY     
    SECURITY LIFE SEPARATE ACCOUNT L1       
    Notes to Financial Statements       
     
     
     
    Division/Contract  Units  Unit Value  Extended Value 
                       ING Pioneer Fund Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  105,594.035  $ 10.73  $ 1,133,024 
                       Class B  41,067.098  11.12  456,666 
      146,661.133    $ 1,589,690 
                       ING Pioneer Mid Cap Value Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  443,748.957  $ 10.67  $ 4,734,801 
                       Class B  311,763.779  11.05  3,444,990 
      755,512.736    $ 8,179,791 
                       ING Retirement Growth Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  1,005,521.216  $ 9.41  $ 9,461,955 
                       Class B  1,800,324.014  9.42  16,959,052 
                       ING Corporate Advantage VUL  8,540.226  9.42  80,449 
      2,814,385.456    $ 26,501,456 
                       ING Retirement Moderate Growth Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  477,841.507  $ 9.60  $ 4,587,278 
                       Class B  818,778.595  9.61  7,868,462 
                       ING Corporate Advantage VUL  26,047.168  9.61  250,313 
      1,322,667.270    $ 12,706,053 
                       ING Retirement Moderate Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  373,276.685  $ 9.96  $ 3,717,836 
                       Class B  374,369.635  9.97  3,732,465 
                       ING Corporate Advantage VUL  4,763.281  9.97  47,490 
      752,409.601    $ 7,497,791 
                       ING Stock Index Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  9,975,008.016  $ 10.69  $ 106,632,836 
                       Class B  2,323,689.163  11.16  25,932,371 
                       ING Corporate Advantage VUL  2,823.238  10.46  29,531 
      12,301,520.417    $ 132,594,738 
                       ING T. Rowe Price Capital Appreciation Portfolio - Institutional       
                           Class       
                       Contracts in accumulation period:       
                       Class A  1,412,254.067  $ 18.55  $ 26,197,313 
                       Class B  1,435,749.590  19.81  28,442,199 
                       ING Corporate Advantage VUL  2,002.034  12.80  25,626 
      2,850,005.691    $ 54,665,138 
                       ING T. Rowe Price Equity Income Portfolio - Institutional Class       
                       Contracts in accumulation period:       
                       Class A  717,480.381  $ 14.51  $ 10,410,640 
                       Class B  621,350.187  14.00  8,698,903 
                       ING Corporate Advantage VUL  231.288  10.59  2,449 
      1,339,061.856    $ 19,111,992 

    81


    SECURITY LIFE OF DENVER INSURANCE COMPANY       
    SECURITY LIFE SEPARATE ACCOUNT L1       
    Notes to Financial Statements       
     
     
     
    Division/Contract  Units  Unit Value  Extended Value
                       ING Van Kampen Growth and Income Portfolio - Service Class       
                       Contracts in accumulation period:       
                       Class A  220,121.229  $ 10.84  $ 2,386,114 
                       Class B  375,724.238  11.23  4,219,383 
                       ING Corporate Advantage VUL  2,261.338  11.17  25,259 
      598,106.805    $ 6,630,756 
                       ING Wells Fargo Small Cap Disciplined Portfolio - Service Class       
                       Contracts in accumulation period:       
                       Class A  790,681.891  $ 8.64  $ 6,831,492 
                       Class B  554,575.920  8.88  4,924,634 
                       ING Corporate Advantage VUL  130.792  8.93  1,168 
      1,345,388.603    $ 11,757,294 
                       ING American Century Small-Mid Cap Value Portfolio - Initial       
                           Class       
                       Contracts in accumulation period:       
                       Class A  10,118.596  $ 12.49  $ 126,381 
                       Class B  9,831.721  12.94  127,222 
      19,950.317    $ 253,603 
                       ING Baron Small Cap Growth Portfolio - Initial Class       
                       Contracts in accumulation period:       
                       Class A  410,034.044  $ 10.55  $ 4,325,859 
                       Class B  458,820.535  10.93  5,014,908 
                       ING Corporate Advantage VUL  3,839.027  10.57  40,579 
      872,693.606    $ 9,381,346 
                       ING Columbia Small Cap Value Portfolio - Initial Class       
                       Contracts in accumulation period:       
                       Class A  425,686.972  $ 8.45  $ 3,597,055 
                       Class B  326,784.169  8.68  2,836,487 
                       ING Corporate Advantage VUL  1,676.581  8.68  14,553 
      754,147.722    $ 6,448,095 
                       ING JPMorgan Mid Cap Value Portfolio - Initial Class       
                       Contracts in accumulation period:       
                       Class A  309,078.251  $ 16.20  $ 5,007,068 
                       Class B  410,473.751  17.04  6,994,473 
                       ING Corporate Advantage VUL  4,068.662  11.03  44,877 
      723,620.664    $ 12,046,418 
                       ING Legg Mason Partners Aggressive Growth Portfolio - Initial       
                           Class       
                       Contracts in accumulation period:       
                       Class A  3,139.092  $ 13.03  $ 40,902 
                       Class B  3,215.690  13.70  44,055 
      6,354.782    $ 84,957 
                       ING Oppenheimer Global Portfolio - Initial Class       
                       Contracts in accumulation period:       
                       Class A  246,035.592  $ 12.23  $ 3,009,015 
                       Class B  354,776.386  12.67  4,495,017 
                       ING Corporate Advantage VUL  800.882  12.51  10,019 
      601,612.860    $ 7,514,051 

    82


    SECURITY LIFE OF DENVER INSURANCE COMPANY       
    SECURITY LIFE SEPARATE ACCOUNT L1       
    Notes to Financial Statements       
     
     
     
    Division/Contract  Units  Unit Value  Extended Value 
                       ING Oppenheimer Strategic Income Portfolio - Service Class       
                       Contracts in accumulation period:       
                       Class A  894,791.371  $ 11.82  $ 10,576,434 
                       Class B  452,740.091  12.25  5,546,066 
                       ING Corporate Advantage VUL  2,750.765  12.32  33,889 
      1,350,282.227    $ 16,156,389 
                       ING PIMCO Total Return Portfolio - Initial Class       
                       Contracts in accumulation period:       
                       Class A  540,967.967  $ 13.49  $ 7,297,658 
                       Class B  507,634.603  14.19  7,203,335 
                       ING Corporate Advantage VUL  914.424  13.34  12,198 
      1,049,516.994    $ 14,513,191 
                       ING Pioneer High Yield Portfolio - Initial Class       
                       Contracts in accumulation period:       
                       Class A  1,505,182.232  $ 11.77  $ 17,715,995 
                       Class B  475,177.416  11.92  5,664,115 
                       ING Corporate Advantage VUL  493.422  11.69  5,768 
      1,980,853.070    $ 23,385,878 
                       ING T. Rowe Price Diversified Mid Cap Growth Portfolio - Initial       
                           Class       
                       Contracts in accumulation period:       
                       Class A  2,054,865.060  $ 11.73  $ 24,103,567 
                       Class B  695,496.711  12.16  8,457,240 
      2,750,361.771    $ 32,560,807 
                       ING UBS U.S. Large Cap Equity Portfolio - Initial Class       
                       Contracts in accumulation period:       
                       Class A  108,754.637  $ 10.07  $ 1,095,159 
                       Class B  461,114.433  10.44  4,814,035 
      569,869.070    $ 5,909,194 
                       ING Van Kampen Comstock Portfolio - Initial Class       
                       Contracts in accumulation period:       
                       Class A  201,522.322  $ 11.67  $ 2,351,765 
                       Class B  343,941.132  12.36  4,251,112 
                       ING Corporate Advantage VUL  3,735.407  9.97  37,242 
      549,198.861    $ 6,640,119 
                       ING Van Kampen Equity and Income Portfolio - Initial Class       
                       Contracts in accumulation period:       
                       Class A  63,706.195  $ 12.37  $ 788,046 
                       Class B  118,821.778  13.11  1,557,754 
                       ING Corporate Advantage VUL  1,685.033  12.03  20,271 
      184,213.006    $ 2,366,071 
                       ING Strategic Allocation Conservative Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  7,656.777  $ 10.83  $ 82,923 
                       Class B  1,297.162  11.26  14,606 
      8,953.939    $ 97,529 

    83


    SECURITY LIFE OF DENVER INSURANCE COMPANY       
    SECURITY LIFE SEPARATE ACCOUNT L1       
    Notes to Financial Statements       
     
     
     
    Division/Contract  Units  Unit Value  Extended Value
                       ING Strategic Allocation Growth Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  15,804.308  $ 10.69  $ 168,948 
                       Class B  24,287.859  11.12  270,081 
      40,092.167    $ 439,029 
                       ING Strategic Allocation Moderate Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  33,291.182  $ 10.76  $ 358,213 
                       Class B  102,591.131  11.20  1,149,021 
      135,882.313    $ 1,507,234 
                       ING Growth and Income Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  113,351.769  $ 7.98  $ 904,547 
                       Class B  434,653.530  8.11  3,525,040 
                       ING Corporate Advantage VUL  312.295  12.92  4,035 
      548,317.594    $ 4,433,622 
                       ING Index Plus LargeCap Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  602,496.933  $ 10.32  $ 6,217,768 
                       Class B  384,558.824  10.94  4,207,074 
                       ING Corporate Advantage VUL  583.682  10.09  5,889 
      987,639.439    $ 10,430,731 
                       ING Index Plus MidCap Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  475,521.583  $ 12.78  $ 6,077,166 
                       Class B  341,528.561  13.54  4,624,297 
                       ING Corporate Advantage VUL  1,354.074  10.79  14,610 
      818,404.218    $ 10,716,073 
                       ING Index Plus SmallCap Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  375,446.219  $ 12.29  $ 4,614,234 
                       Class B  454,730.714  13.02  5,920,594 
                       ING Corporate Advantage VUL  1,086.573  9.86  10,714 
      831,263.506    $ 10,545,542 
                       ING International Index Portfolio - Class S       
                       Contracts in accumulation period:       
                       Class A  1,467,553.374  $ 13.44  $ 19,723,917 
                       Class B  215,898.827  13.50  2,914,634 
                       ING Corporate Advantage VUL  1,126.090  13.50  15,202 
      1,684,578.291    $ 22,653,753 
                       ING Opportunistic Large Cap Value Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  23,313.386  $ 8.53  $ 198,863 
                       Class B  23,097.750  8.80  203,260 
      46,411.136    $ 402,123 

    84


    SECURITY LIFE OF DENVER INSURANCE COMPANY       
    SECURITY LIFE SEPARATE ACCOUNT L1       
    Notes to Financial Statements       
     
     
     
    Division/Contract  Units  Unit Value  Extended Value
                       ING Russell™ Large Cap Growth Index Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  2,645,719.353  $ 12.78  $ 33,812,293 
                       Class B  342,732.464  12.84  4,400,685 
      2,988,451.817    $ 38,212,978 
                       ING Russell™ Large Cap Index Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  81,481.150  $ 12.81  $ 1,043,774 
                       Class B  93,831.193  12.87  1,207,607 
                       ING Corporate Advantage VUL  285.995  12.87  3,681 
      175,598.338    $ 2,255,062 
                       ING Russell™ Large Cap Value Index Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  206,823.383  $ 12.59  $ 2,603,906 
                       Class B  178,493.146  12.65  2,257,938 
      385,316.529    $ 4,861,844 
                       ING Russell™ Mid Cap Growth Index Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  109,101.878  $ 13.07  $ 1,425,962 
                       Class B  50,892.996  13.14  668,734 
      159,994.874    $ 2,094,696 
                       ING Russell™ Small Cap Index Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  80,165.129  $ 8.79  $ 704,651 
                       Class B  51,035.944  8.90  454,220 
      131,201.073    $ 1,158,871 
                       ING U.S. Bond Index Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  354,817.242  $ 10.83  $ 3,842,671 
                       Class B  103,199.379  10.97  1,132,097 
      458,016.621    $ 4,974,768 
                       ING MidCap Opportunities Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  68,783.534  $ 12.83  $ 882,493 
                       Class B  128,206.473  13.70  1,756,429 
      196,990.007    $ 2,638,922 
                       ING SmallCap Opportunities Portfolio - Class I       
                       Contracts in accumulation period:       
                       Class A  394,182.675  $ 9.12  $ 3,594,946 
                       Class B  416,524.286  9.74  4,056,947 
                       ING Corporate Advantage VUL  1,889.034  12.43  23,481 
      812,595.995    $ 7,675,374 

    85


    SECURITY LIFE OF DENVER INSURANCE COMPANY       
    SECURITY LIFE SEPARATE ACCOUNT L1       
    Notes to Financial Statements       
     
     
     
    Division/Contract  Units  Unit Value  Extended Value
                       Brandes International Equity Fund       
                       Contracts in accumulation period:       
                       Class A  827,786.146  $ 15.78  $ 13,062,465 
                       Class B  33,668.398  16.85  567,313 
      861,454.544    $ 13,629,778 
                       Business Opportunity Value Fund       
                       Contracts in accumulation period:       
                       Class A  159,184.164  $ 12.10  $ 1,926,128 
                       Class B  38,974.149  12.82  499,649 
      198,158.313    $ 2,425,777 
                       Frontier Capital Appreciation Fund       
                       Contracts in accumulation period:       
                       Class A  400,050.653  $ 16.26  $ 6,504,824 
                       Class B  18,239.759  17.37  316,825 
      418,290.412    $ 6,821,649 
                       M Large Cap Growth Fund       
                       Contracts in accumulation period:       
                       Class A  204,008.984  $ 10.43  $ 2,127,814 
                       Class B  46,333.617  11.14  516,156 
      250,342.601    $ 2,643,970 
                       Neuberger Berman AMT Socially Responsive Portfolio® - Class I       
                       Contracts in accumulation period:       
                       Class A  19,405.156  $ 10.75  $ 208,605 
                       Class B  25,916.702  11.14  288,712 
                       ING Corporate Advantage VUL  339.768  10.84  3,683 
      45,661.626    $ 501,000 
                       Van Eck Worldwide Hard Assets Fund       
                       Contracts in accumulation period:       
                       Class A  136,141.422  $ 36.67  $ 4,992,306 
                       Class B  44,657.305  36.30  1,621,060 
      180,798.727    $ 6,613,366 

    86


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

    10. Financial Highlights

    A summary of unit values, units outstanding and net assets for Policies, expense ratios, excluding expenses of underlying Funds, investment income ratios, and total return for the years ended December 31, 2009, 2008, 2007, 2006 and 2005, follows:

                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
    AIM V.I. Core Equity Fund - Series I Shares                         

    2009 

    		 846  $10.33  to  $10.62  $8,770  1.67%  0.00%  to  0.75%  27.22%  to  28.26% 

    2008 

    		 1,042  $8.12  to  $8.28  $8,477  2.01%  0.00%  to  0.75%  -30.66%  to  -30.13% 

    2007 

    		 1,345  $11.71  to  $11.85  $15,770  1.03%  0.00%  to  0.75%  7.33%  to  8.12% 

    2006 

    		 1,729  $10.91  to  $10.96  $18,879  (b)  0.00%  to  0.75%    (b)   

    2005 

    		 (b)    (b)    (b)  (b)    (b)      (b)   
    American Funds Insurance Series® Growth Fund - Class 2                         

    2009 

    		 3,082  $11.56  to  $16.37  $49,315  0.64%  0.00%  to  0.75%  38.31%  to  39.45% 

    2008 

    		 3,224  $8.29  to  $11.74  $37,026  0.91%  0.00%  to  0.75%  -44.39%  to  -43.96% 

    2007 

    		 2,975  $14.80  to  $20.95  $61,155  0.85%  0.00%  to  0.75%  11.52%  to  12.38% 

    2006 

    		 2,599  $13.17  to  $18.65  $47,749  0.88%  0.00%  to  0.75%  9.41%  to  10.22% 

    2005 

    		 2,000  $16.58  to  $16.92  $33,471  0.77%  0.00%  to  0.75%  15.30%  to  16.21% 
    American Funds Insurance Series® Growth-Income Fund - Class 2                         

    2009 

    		 1,733  $10.78  to  $14.96  $25,339  1.51%  0.00%  to  0.75%  30.31%  to  31.23% 

    2008 

    		 1,937  $8.22  to  $11.40  $21,599  1.93%  0.00%  to  0.75%  -38.34%  to  -37.82% 

    2007 

    		 1,727  $13.22  to  $18.35  $31,094  1.67%  0.00%  to  0.75%  4.24%  to  5.10% 

    2006 

    		 1,457  $12.58  to  $17.46  $25,076  1.66%  0.00%  to  0.75%  14.33%  to  15.17% 

    2005 

    		 1,223  $14.86  to  $15.16  $18,342  1.45%  0.00%  to  0.75%  5.09%  to  5.87% 
    American Funds Insurance Series® International Fund - Class 2                         

    2009 

    		 1,978  $14.62  to  $23.88  $46,093  1.60%  0.00%  to  0.75%  42.03%  to  43.08% 

    2008 

    		 2,154  $10.22  to  $16.69  $35,150  2.02%  0.00%  to  0.75%  -42.56%  to  -42.10% 

    2007 

    		 2,161  $17.65  to  $28.84  $61,314  1.62%  0.00%  to  0.75%  19.13%  to  20.02% 

    2006 

    		 1,886  $14.71  to  $24.03  $44,727  1.91%  0.00%  to  0.75%  18.09%  to  19.02% 

    2005 

    		 1,292  $19.79  to  $20.19  $25,807  1.72%  0.00%  to  0.75%  20.60%  to  21.48% 

    87


    SECURITY LIFE OF DENVER INSURANCE COMPANY                     
    SECURITY LIFE SEPARATE ACCOUNT L1                         
    Notes to Financial Statements                         
     
     
     
                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
                       BlackRock Global Allocation V.I. Fund - Class III                         
                                 2009  184  $12.19  to  $12.25  $2,253  (e)  0.00%  to  0.75%    (e)   
                                 2008  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2007  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2006  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2005  (e)    (e)    (e)  (e)    (e)      (e)   
                       Fidelity® VIP Equity-Income Portfolio - Service Class                         
                                 2009  374  $9.77  to  $10.13  $3,733  2.47%  0.00%  to  0.75%  29.06%  to  30.05% 
                                 2008  348  $7.57  to  $7.79  $2,674  2.86%  0.00%  to  0.75%  -43.17%  to  -42.68% 
                                 2007  296  $13.30  to  $13.59  $3,978  2.46%  0.00%  to  0.75%  0.68%  to  1.45% 
                                 2006  123  $13.11  to  $13.40  $1,640  3.02%  0.00%  to  0.75%  19.19%  to  20.07% 
                                 2005  10  $11.10  to  $11.16  $108  (a)  0.00%  to  0.75%    (a)   
                       Fidelity® VIP Contrafund® Portfolio - Service Class                         
                                 2009  1,482  $11.94  to  $12.37  $18,036  1.32%  0.00%  to  0.75%  34.61%  to  35.64% 
                                 2008  1,420  $8.87  to  $9.12  $12,783  1.12%  0.00%  to  0.75%  -43.03%  to  -42.58% 
                                 2007  1,081  $15.50  to  $15.89  $16,998  1.03%  0.00%  to  0.75%  16.63%  to  17.53% 
                                 2006  627  $13.19  to  $13.52  $8,408  1.29%  0.00%  to  0.75%  10.70%  to  11.55% 
                                 2005  170  $12.06  to  $12.12  $2,048  (a)  0.00%  to  0.75%    (a)   
                       Fidelity® VIP Investment Grade Bond Portfolio - Initial Class                        
                                 2009  36  $12.00  to  $12.43  $431  8.70%  0.00%  to  0.75%  14.83%  to  15.63% 
                                 2008  38  $10.45  to  $10.75  $397  4.31%  0.00%  to  0.75%  -3.95%  to  -3.24% 
                                 2007  40  $10.88  to  $11.11  $439  4.39%  0.00%  to  0.75%  3.52%  to  4.42% 
                                 2006  49  $10.51  to  $10.64  $518  3.88%  0.00%  to  0.75%  3.55%  to  4.31% 
                                 2005  44  $10.15  to  $10.20  $448  (a)  0.00%  to  0.75%    (a)   
                       ING Balanced Portfolio - Class I                         
                                 2009  1,198  $9.34  to  $9.60  $11,250  4.42%  0.00%  to  0.75%  18.38%  to  19.25% 
                                 2008  1,358  $7.89  to  $8.05  $10,748  3.67%  0.00%  to  0.75%  -28.66%  to  -28.12% 
                                 2007  1,526  $11.06  to  $11.20  $16,904  2.83%  0.00%  to  0.75%  4.83%  to  5.56% 
                                 2006  1,827  $10.55  to  $10.61  $19,280  (b)  0.00%  to  0.75%    (b)   
                                 2005  (b)    (b)    (b)  (b)    (b)      (b)   

    88


    SECURITY LIFE OF DENVER INSURANCE COMPANY                     
    SECURITY LIFE SEPARATE ACCOUNT L1                         
    Notes to Financial Statements                         
     
     
     
                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
                       ING Intermediate Bond Portfolio - Class I                         
                                 2009  2,793  $11.68  to  $14.05  $38,074  6.25%  0.00%  to  0.75%  10.69%  to  11.60% 
                                 2008  3,228  $10.47  to  $12.59  $39,558  7.39%  0.00%  to  0.75%  -9.11%  to  -8.48% 
                                 2007  1,668  $11.44  to  $13.76  $22,504  3.96%  0.00%  to  0.75%  5.19%  to  6.09% 
                                 2006  1,552  $10.79  to  $12.97  $19,808  4.33%  0.00%  to  0.75%  3.30%  to  4.01% 
                                 2005  1,317  $12.12  to  $12.47  $16,251  4.84%  0.00%  to  0.75%  2.36%  to  3.14% 
                       ING Artio Foreign Portfolio - Institutional Class                         
                                 2009  1,348  $11.84  to  $12.26  $16,305  3.55%  0.00%  to  0.75%  19.72%  to  20.67% 
                                 2008  1,366  $9.89  to  $10.16  $13,704  -  0.00%  to  0.75%  -43.87%  to  -43.46% 
                                 2007  1,236  $17.62  to  $17.98  $21,963  0.31%  0.00%  to  0.75%  15.84%  to  16.75% 
                                 2006  903  $15.21  to  $15.40  $13,805  -  0.00%  to  0.75%  28.68%  to  29.63% 
                                 2005  198  $11.82  to  $11.88  $2,341  (a)  0.00%  to  0.75%    (a)   
                       ING BlackRock Large Cap Growth Portfolio - Institutional Class                        
                                 2009  169  $10.35  to  $10.72  $1,771  0.62%  0.00%  to  0.75%  29.70%  to  30.57% 
                                 2008  140  $7.98  to  $8.21  $1,126  0.19%  0.00%  to  0.75%  -39.41%  to  -38.91% 
                                 2007  154  $13.17  to  $13.44  $2,045  -  0.00%  to  0.75%  6.30%  to  7.09% 
                                 2006  73  $12.39  to  $12.55  $908  (b)  0.00%  to  0.75%    (b)   
                                 2005  (b)    (b)    (b)  (b)    (b)      (b)   
                       ING BlackRock Large Cap Value Portfolio - Institutional Class                         
                                 2009  681  $10.00  to  $10.43  $6,835  0.76%  0.00%  to  0.75%  12.36%  to  13.12% 
                                 2008  904  $8.90  to  $9.22  $8,068  0.57%  0.00%  to  0.75%  -35.65%  to  -35.16% 
                                 2007  1,492  $13.83  to  $14.22  $20,672  0.56%  0.00%  to  0.75%  3.75%  to  4.56% 
                                 2006  1,741  $13.33  to  $13.60  $23,235  0.76%  0.00%  to  0.75%  15.81%  to  16.64% 
                                 2005  2,242  $11.51  to  $11.66  $25,828  -  0.00%  to  0.75%  4.73%  to  5.62% 
                       ING Clarion Global Real Estate Portfolio - Service Class                         
                                 2009  1,471  $7.56  to  $7.66  $11,179  2.15%  0.00%  to  0.75%  32.40%  to  33.45% 
                                 2008  1,558  $5.71  to  $5.92  $8,916  (d)  0.00%  to  0.75%    (d)   
                                 2007  (d)    (d)    (d)  (d)    (d)      (d)   
                                 2006  (d)    (d)    (d)  (d)    (d)      (d)   
                                 2005  (d)    (d)    (d)  (d)    (d)      (d)   

    89


    SECURITY LIFE OF DENVER INSURANCE COMPANY                     
    SECURITY LIFE SEPARATE ACCOUNT L1                         
    Notes to Financial Statements                         
     
     
     
                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
                       ING Evergreen Health Sciences Portfolio - Institutional Class                         
                                 2009  455  $10.21  to  $11.76  $5,253  -  0.00%  to  0.75%  19.47%  to  20.40% 
                                 2008  271  $8.48  to  $9.77  $2,589  0.49%  0.00%  to  0.75%  -29.00%  to  -28.48% 
                                 2007  199  $11.86  to  $13.66  $2,671  0.35%  0.00%  to  0.75%  7.90%  to  8.76% 
                                 2006  197  $10.91  to  $12.56  $2,450  (b)  0.00%  to  0.75%    (b)   
                                 2005  (b)    (b)    (b)  (b)    (b)      (b)   
                       ING Evergreen Omega Portfolio - Institutional Class                         
                                 2009  1,777  $13.65  to  $14.14  $24,431  0.51%  0.00%  to  0.75%  41.74%  to  42.83% 
                                 2008  2,417  $9.63  to  $9.90  $23,428  0.49%  0.00%  to  0.75%  -27.92%  to  -27.37% 
                                 2007  2,418  $13.36  to  $13.63  $32,429  0.33%  0.00%  to  0.75%  11.15%  to  11.90% 
                                 2006  2,629  $12.02  to  $12.18  $31,669  -  0.00%  to  0.75%  5.07%  to  5.91% 
                                 2005  2,942  $11.44  to  $11.50  $33,687  (a)  0.00%  to  0.75%    (a)   
                       ING FMRSM Diversified Mid Cap Portfolio - Institutional Class                         
                                 2009  1,836  $9.46  to  $11.16  $17,475  0.70%  0.00%  to  0.75%  38.51%  to  39.67% 
                                 2008  1,800  $6.83  to  $7.99  $12,341  1.24%  0.00%  to  0.75%  -39.45%  to  -39.01% 
                                 2007  1,888  $11.28  to  $13.10  $21,328  0.27%  0.00%  to  0.75%  13.94%  to  14.87% 
                                 2006  1,918  $9.90  to  $11.41  $19,003  (b)  0.00%  to  0.75%    (b)   
                                 2005  (b)    (b)    (b)  (b)    (b)      (b)   
                       ING Focus 5 Portfolio - Class I                         
                                 2009  14  $7.26  to  $7.35  $102  -  0.00%  to  0.75%  21.20%  to  22.09% 
                                 2008  5  $5.99  to  $6.02  $32  (d)  0.00%  to  0.75%    (d)   
                                 2007  (d)    (d)    (d)  (d)    (d)      (d)   
                                 2006  (d)    (d)    (d)  (d)    (d)      (d)   
                                 2005  (d)    (d)    (d)  (d)    (d)      (d)   
                       ING Franklin Templeton Founding Strategy Portfolio - Institutional Class                         
                                 2009  381  $8.75  to  $8.87  $3,355  0.46%  0.00%  to  0.75%  29.63%  to  30.63% 
                                 2008  14  $6.75  to  $6.79  $95  (d)  0.00%  to  0.75%    (d)   
                                 2007  (d)    (d)    (d)  (d)    (d)      (d)   
                                 2006  (d)    (d)    (d)  (d)    (d)      (d)   
                                 2005  (d)    (d)    (d)  (d)    (d)      (d)   

    90


    SECURITY LIFE OF DENVER INSURANCE COMPANY                     
    SECURITY LIFE SEPARATE ACCOUNT L1                         
    Notes to Financial Statements                         
     
     
     
                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
                       ING Global Resources Portfolio - Institutional Class                         
                                 2009  510  $17.38  to  $28.84  $13,899  0.51%  0.00%  to  0.75%  36.75%  to  37.72% 
                                 2008  617  $12.62  to  $21.09  $12,233  2.43%  0.00%  to  0.75%  -41.27%  to  -40.80% 
                                 2007  527  $21.32  to  $35.91  $17,858  0.13%  0.00%  to  0.75%  32.61%  to  33.58% 
                                 2006  299  $15.96  to  $27.08  $7,648  0.43%  0.00%  to  0.75%  20.79%  to  21.75% 
                                 2005  162  $19.31  to  $22.42  $3,423  0.88%  0.00%  to  0.75%  37.04%  to  38.03% 
                       ING JPMorgan Emerging Markets Equity Portfolio -  Institutional Class                         
                                 2009  2,557  $13.04  to  $13.48  $33,751  1.52%  0.00%  to  0.75%  70.68%  to  72.16% 
                                 2008  2,587  $7.64  to  $7.83  $19,906  2.66%  0.00%  to  0.75%  -51.52%  to  -51.18% 
                                 2007  2,459  $15.76  to  $16.04  $38,928  1.15%  0.00%  to  0.75%  37.76%  to  38.90% 
                                 2006  2,679  $11.44  to  $11.55  $30,686  (b)  0.00%  to  0.75%    (b)   
                                 2005  (b)    (b)    (b)  (b)    (b)      (b)   
                       ING JPMorgan Small Cap Core Equity Portfolio - INstitutional Class                         
                                 2009  1,818  $11.52  to  $12.97  $22,778  0.72%  0.00%  to  0.75%  26.45%  to  27.43% 
                                 2008  1,983  $9.04  to  $10.18  $19,612  0.84%  0.00%  to  0.75%  -30.18%  to  -29.65% 
                                 2007  2,077  $12.86  to  $14.47  $29,389  0.34%  0.00%  to  0.75%  -2.29%  to  -1.56% 
                                 2006  2,362  $13.06  to  $14.70  $34,149  0.07%  0.00%  to  0.75%  16.12%  to  16.95% 
                                 2005  2,658  $12.41  to  $12.57  $33,048  -  0.00%  to  0.75%  3.16%  to  3.97% 
                       ING Limited Maturity Bond Portfolio - Service Class                         
                                 2009  2,123  $11.48  to  $15.82  $28,147  4.51%  0.00%  to  0.75%  6.39%  to  7.18% 
                                 2008  1,988  $10.79  to  $14.76  $24,216  6.80%  0.00%  to  0.75%  -1.01%  to  -0.18% 
                                 2007  2,060  $10.09  to  $14.80  $24,785  2.03%  0.00%  to  0.75%  5.01%  to  5.79% 
                                 2006  2,210  $10.38  to  $13.99  $25,152  6.59%  0.00%  to  0.75%  3.08%  to  3.86% 
                                 2005  232  $10.07  to  $13.47  $2,943  3.50%  0.00%  to  0.75%  1.58% 
                       ING Liquid Assets Portfolio - Institutional Class                         
                                 2009  5,979  $11.35  $67,860  0.34%             0.75%  -0.26% 
                                 2008  8,270  $11.38  $94,111  2.78%             0.75%  1.97% 
                                 2007  6,946  $11.16  $77,520  5.49%             0.75%  4.40% 
                                 2006  5,796  $10.69  $61,958  5.16%             0.75%  4.19% 
                                 2005  6,059  $10.26  $62,163  3.32%             0.75%  2.19% 

    91


    SECURITY LIFE OF DENVER INSURANCE COMPANY                     
    SECURITY LIFE SEPARATE ACCOUNT L1                         
    Notes to Financial Statements                         
     
     
     
                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
                       ING Liquid Assets Portfolio - Service Class                         
                                 2009  3,032  $11.55  to  $13.46  $40,762  0.09%    -    0.35%  to  0.37% 
                                 2008  3,075  $11.51  to  $13.41  $41,196  2.62%    -    2.40%  to  2.44% 
                                 2007  2,463  $11.24  to  $13.09  $32,210  4.58%    -    4.89%  to  4.95% 
                                 2006  2,050  $10.71  to  $12.48  $25,544  4.25%    -    4.70% 
                                 2005  2,957  $11.92  $35,249  2.53%    -    2.76% 
                       ING Lord Abbett Affiliated Portfolio - Institutional Class                         
                                 2009  11  $13.52  to  $14.21  $148  0.62%  0.00%  to  0.75%  18.18%  to  19.01% 
                                 2008  15  $11.44  to  $11.94  $177  3.34%  0.00%  to  0.75%  -36.87%  to  -36.39% 
                                 2007  16  $18.12  to  $18.77  $302  1.98%  0.00%  to  0.75%  3.54%  to  4.34% 
                                 2006  17  $17.50  to  $17.99  $305  0.57%  0.00%  to  0.75%  17.06%  to  17.89% 
                                 2005  65  $14.95  to  $15.26  $974  1.67%  0.00%  to  0.75%  4.91%  to  5.75% 
                       ING Marsico Growth Portfolio - Institutional Class                         
                                 2009  616  $8.90  to  $14.02  $6,273  1.11%  0.00%  to  0.75%  28.39%  to  29.36% 
                                 2008  663  $6.88  to  $10.92  $5,388  0.85%  0.00%  to  0.75%  -40.62%  to  -40.23% 
                                 2007  604  $11.51  to  $18.39  $8,468  0.01%  0.00%  to  0.75%  13.59%  to  14.53% 
                                 2006  502  $10.05  to  $16.19  $6,212  -  0.00%  to  0.75%  4.45%  to  5.13% 
                                 2005  379  $9.56  to  $15.50  $4,748  -  0.00%  to  0.75%  8.32%  to  9.13% 
                       ING Marsico International Opportunities Portfolio - Institutional Clas                         
                                 2009  705  $12.70  to  $13.16  $9,118  1.54%  0.00%  to  0.75%  37.00%  to  38.09% 
                                 2008  742  $9.27  to  $9.53  $6,968  1.20%  0.00%  to  0.75%  -49.73%  to  -49.34% 
                                 2007  1,183  $18.44  to  $18.81  $22,067  1.09%  0.00%  to  0.75%  19.97%  to  20.89% 
                                 2006  1,089  $15.37  to  $15.56  $16,842  (b)  0.00%  to  0.75%    (b)   
                                 2005  (b)    (b)    (b)  (b)    (b)      (b)   
                       ING MFS Total Return Portfolio - Institutional Class                         
                                 2009  414  $11.31  to  $16.00  $6,126  2.78%  0.00%  to  0.75%  17.22%  to  18.17% 
                                 2008  410  $9.58  to  $13.54  $5,149  6.60%  0.00%  to  0.75%  -22.72%  to  -22.11% 
                                 2007  419  $12.30  to  $17.40  $6,735  3.04%  0.00%  to  0.75%  3.42%  to  4.32% 
                                 2006  416  $14.60  to  $16.68  $6,425  2.59%  0.00%  to  0.75%  11.45%  to  12.17% 
                                 2005  388  $13.10  to  $14.87  $5,384  2.32%  0.00%  to  0.75%  2.34%  to  3.19% 

    92


    SECURITY LIFE OF DENVER INSURANCE COMPANY                     
    SECURITY LIFE SEPARATE ACCOUNT L1                         
    Notes to Financial Statements                         
     
     
     
                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
                       ING MFS Utilities Portfolio - Service Class                         
                                 2009  537  $15.31  to  $15.86  $8,294  4.89%  0.00%  to  0.75%  31.76%  to  32.83% 
                                 2008  699  $11.62  to  $11.94  $8,190  2.72%  0.00%  to  0.75%  -38.16%  to  -37.72% 
                                 2007  1,102  $18.79  to  $19.17  $20,837  0.74%  0.00%  to  0.75%  26.45%  to  27.38% 
                                 2006  1,010  $14.86  to  $15.05  $15,067  0.11%  0.00%  to  0.75%  29.78%  to  30.87% 
                                 2005  986  $11.45  to  $11.50  $11,302  (a)  0.00%  to  0.75%    (a)   
                       ING PIMCO Total Return Bond Portfolio - Institutional Class                         
                                 2009  2,479  $11.44  to  $11.59  $28,533  4.86%  0.00%  to  0.75%  13.83%  to  14.64% 
                                 2008  573  $10.05  to  $10.11  $5,772  (d)  0.00%  to  0.75%    (d)   
                                 2007  (d)    (d)    (d)  (d)    (d)      (d)   
                                 2006  (d)    (d)    (d)  (d)    (d)      (d)   
                                 2005  (d)    (d)    (d)  (d)    (d)      (d)   
                       ING Pioneer Fund Portfolio - Institutional Class                         
                                 2009  147  $10.73  to  $11.12  $1,590  1.58%  0.00%  to  0.75%  23.48%  to  24.52% 
                                 2008  122  $8.69  to  $8.93  $1,065  3.63%  0.00%  to  0.75%  -35.00%  to  -34.53% 
                                 2007  118  $13.37  to  $13.64  $1,580  1.22%  0.00%  to  0.75%  4.53%  to  5.33% 
                                 2006  95  $12.79  to  $12.95  $1,215  (b)  0.00%  to  0.75%    (b)   
                                 2005  (b)    (b)    (b)  (b)    (b)      (b)   
                       ING Pioneer Mid Cap Value Portfolio - Institutional Class                         
                                 2009  756  $10.67  to  $11.05  $8,180  1.40%  0.00%  to  0.75%  24.50%  to  25.43% 
                                 2008  858  $8.57  to  $8.81  $7,432  2.11%  0.00%  to  0.75%  -33.41%  to  -32.90% 
                                 2007  948  $12.87  to  $13.13  $12,284  0.98%  0.00%  to  0.75%  4.89%  to  5.72% 
                                 2006  1,451  $12.27  to  $12.42  $17,861  0.25%  0.00%  to  0.75%  11.95%  to  12.70% 
                                 2005  1,432  $10.96  to  $11.02  $15,714  (a)  0.00%  to  0.75%    (a)   
                       ING Retirement Growth Portfolio - Institutional Class                         
                                 2009  2,814  $9.41  to  $9.42  $26,501  (e)  0.00%  to  0.75%    (e)   
                                 2008  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2007  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2006  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2005  (e)    (e)    (e)  (e)    (e)      (e)   

    93


    SECURITY LIFE OF DENVER INSURANCE COMPANY                     
    SECURITY LIFE SEPARATE ACCOUNT L1                         
    Notes to Financial Statements                         
     
     
     
                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
                       ING Retirement Moderate Growth Portfolio - Institutional Class                         
                                 2009  1,323  $9.60  to  $9.61  $12,706  (e)  0.00%  to  0.75%    (e)   
                                 2008  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2007  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2006  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2005  (e)    (e)    (e)  (e)    (e)      (e)   
                       ING Retirement Moderate Portfolio - Institutional Class                         
                                 2009  752  $9.96  to  $9.97  $7,498  (e)  0.00%  to  0.75%    (e)   
                                 2008  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2007  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2006  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2005  (e)    (e)    (e)  (e)    (e)      (e)   
                       ING Stock Index Portfolio - Institutional Class                         
                                 2009  12,302  $10.46  to  $11.16  $132,595  0.62%  0.00%  to  0.75%  25.18%  to  26.24% 
                                 2008  14,417  $8.29  to  $8.84  $123,899  3.80%  0.00%  to  0.75%  -37.57%  to  -37.10% 
                                 2007  14,715  $13.18  to  $14.06  $202,331  1.71%  0.00%  to  0.75%  4.51%  to  5.32% 
                                 2006  16,860  $13.09  to  $13.35  $221,375  1.54%  0.00%  to  0.75%  14.72%  to  15.48% 
                                 2005  19,194  $11.41  to  $11.56  $219,406  -  0.00%  to  0.75%  3.73%  to  4.62% 
                       ING T. Rowe Price Capital Appreciation Portfolio - Institutional Class                         
                                 2009  2,850  $12.80  to  $19.81  $54,665  2.19%  0.00%  to  0.75%  32.59%  to  33.61% 
                                 2008  2,782  $9.58  to  $14.83  $39,993  5.16%  0.00%  to  0.75%  -27.89%  to  -27.31% 
                                 2007  2,564  $13.18  to  $20.41  $50,881  2.01%  0.00%  to  0.75%  3.91%  to  4.69% 
                                 2006  2,518  $12.59  to  $19.50  $47,838  1.47%  0.00%  to  0.75%  14.05%  to  14.91% 
                                 2005  2,311  $16.37  to  $16.97  $38,330  1.54%  0.00%  to  0.75%  7.20%  to  8.02% 
                       ING T. Rowe Price Equity Income Portfolio - Institutional Class                         
                                 2009  1,339  $10.59  to  $14.51  $19,112  1.95%  0.00%  to  0.75%  24.34%  to  25.34% 
                                 2008  1,307  $8.45  to  $11.67  $14,929  5.51%  0.00%  to  0.75%  -35.95%  to  -35.51% 
                                 2007  1,167  $13.11  to  $18.22  $20,795  1.67%  0.00%  to  0.75%  2.53%  to  3.39% 
                                 2006  1,047  $12.68  to  $17.77  $18,204  1.52%  0.00%  to  0.75%  18.55%  to  19.37% 
                                 2005  906  $14.04  to  $14.99  $13,295  1.43%  0.00%  to  0.75%  3.38%  to  4.15% 

    94


    SECURITY LIFE OF DENVER INSURANCE COMPANY                     
    SECURITY LIFE SEPARATE ACCOUNT L1                         
    Notes to Financial Statements                         
     
     
     
                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
                       ING Van Kampen Growth and Income Portfolio - Service Class                         
                                 2009  598  $10.84  to  $11.23  $6,631  1.31%  0.00%  to  0.75%  23.04%  to  23.95% 
                                 2008  557  $8.81  to  $9.06  $4,988  4.70%  0.00%  to  0.75%  -32.75%  to  -32.18% 
                                 2007  401  $13.10  to  $13.37  $5,311  1.51%  0.00%  to  0.75%  1.79%  to  2.61% 
                                 2006  285  $12.87  to  $13.03  $3,695  1.02%  0.00%  to  0.75%  15.12%  to  15.93% 
                                 2005  92  $11.18  to  $11.24  $1,028  (a)  0.00%  to  0.75%    (a)   
                       ING Wells Fargo Small Cap Disciplined Portfolio - Service Class                         
                                 2009  1,345  $8.64  to  $8.93  $11,757  0.73%  0.00%  to  0.75%  29.15%  to  30.17% 
                                 2008  1,386  $6.69  to  $6.86  $9,346  0.89%  0.00%  to  0.75%  -33.30%  to  -32.71% 
                                 2007  1,604  $10.03  to  $10.21  $16,153  -  0.00%  to  0.75%  -4.39%  to  -3.68% 
                                 2006  1,837  $10.49  to  $10.60  $19,303  (b)  0.00%  to  0.75%    (b)   
                                 2005  (b)    (b)    (b)  (b)    (b)      (b)   
                       ING American Century Small-Mid Cap Value Portfolio -Initial Class                         
                                 2009  20  $12.49  to  $12.94  $254  1.47%  0.00%  to  0.75%  35.03%  to  36.07% 
                                 2008  31  $9.25  to  $9.51  $291  1.00%  0.00%  to  0.75%  -26.94%  to  -26.39% 
                                 2007  40  $12.66  to  $12.92  $509  0.66%  0.00%  to  0.75%  -3.43%  to  -2.71% 
                                 2006  53  $13.11  to  $13.28  $699  0.02%  0.00%  to  0.75%  14.90%  to  15.78% 
                                 2005  78  $11.41  to  $11.47  $888  (a)  0.00%  to  0.75%    (a)   
                       ING Baron Small Cap Growth Portfolio - Initial Class                         
                                 2009  873  $10.55  to  $10.93  $9,381  -  0.00%  to  0.75%  34.57%  to  35.51% 
                                 2008  913  $7.80  to  $8.07  $7,254  -  0.00%  to  0.75%  -41.58%  to  -41.09% 
                                 2007  834  $13.24  to  $13.70  $11,303  -  0.00%  to  0.75%  5.50%  to  6.37% 
                                 2006  479  $12.45  to  $12.88  $6,123  -  0.00%  to  0.75%  14.70%  to  15.52% 
                                 2005  210  $11.09  to  $11.15  $2,330  (a)  0.00%  to  0.75%    (a)   
                       ING Columbia Small Cap Value Portfolio - Initial Class                         
                                 2009  754  $8.45  to  $8.68  $6,448  1.21%  0.00%  to  0.75%  24.08%  to  25.07% 
                                 2008  748  $6.81  to  $6.94  $5,141  0.28%  0.00%  to  0.75%  -34.27%  to  -33.90% 
                                 2007  691  $10.36  to  $10.50  $7,200  0.16%  0.00%  to  0.75%  2.37%  to  3.24% 
                                 2006  642  $10.12  to  $10.17  $6,507  (b)  0.00%  to  0.75%    (b)   
                                 2005  (b)    (b)    (b)  (b)    (b)      (b)   

    95


    SECURITY LIFE OF DENVER INSURANCE COMPANY                     
    SECURITY LIFE SEPARATE ACCOUNT L1                         
    Notes to Financial Statements                         
     
     
     
                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
                       ING JPMorgan Mid Cap Value Portfolio - Initial Class                         
                                 2009  724  $11.03  to  $17.04  $12,046  1.33%  0.00%  to  0.75%  24.90%  to  25.94% 
                                 2008  911  $8.76  to  $13.53  $12,070  2.77%  0.00%  to  0.75%  -33.35%  to  -32.87% 
                                 2007  814  $13.05  to  $20.16  $16,098  0.76%  0.00%  to  0.75%  1.83%  to  2.60% 
                                 2006  762  $12.72  to  $19.65  $14,756  0.02%  0.00%  to  0.75%  15.96%  to  16.89% 
                                 2005  608  $16.48  to  $16.81  $10,114  0.62%  0.00%  to  0.75%  7.92%  to  8.66% 
                       ING Legg Mason Partners Aggressive Growth Portfolio - Initial Class                         
                                 2009  6  $13.03  to  $13.70  $85  -  0.00%  to  0.75%  31.35%  to  32.37% 
                                 2008  9  $9.92  to  $10.35  $91  -  0.00%  to  0.75%  -39.66%  to  -39.22% 
                                 2007  11  $16.44  to  $17.03  $190  -  0.00%  to  0.75%  -2.32%  to  -1.62% 
                                 2006  15  $16.83  to  $17.31  $256  -  0.00%  to  0.75%  9.43%  to  10.33% 
                                 2005  46  $15.38  to  $15.69  $711  -  0.00%  to  0.75%  10.65%  to  11.43% 
                       ING Oppenheimer Global Portfolio - Initial Class                         
                                 2009  602  $12.23  to  $12.67  $7,514  2.87%  0.00%  to  0.75%  38.51%  to  39.62% 
                                 2008  882  $8.83  to  $9.08  $7,911  2.03%  0.00%  to  0.75%  -40.74%  to  -40.30% 
                                 2007  432  $14.90  to  $15.21  $6,493  1.13%  0.00%  to  0.75%  5.75%  to  6.59% 
                                 2006  377  $14.09  to  $14.27  $5,343  0.07%  0.00%  to  0.75%  17.12%  to  18.03% 
                                 2005  335  $12.03  to  $12.09  $4,031  (a)  0.00%  to  0.75%    (a)   
                       ING Oppenheimer Strategic Income Portfolio - Service Class                         
                                 2009  1,350  $11.82  to  $12.32  $16,156  3.77%  0.00%  to  0.75%  20.37%  to  21.29% 
                                 2008  1,220  $9.82  to  $10.16  $12,087  6.55%  0.00%  to  0.75%  -16.35%  to  -15.68% 
                                 2007  782  $11.74  to  $12.05  $9,232  4.46%  0.00%  to  0.75%  7.81%  to  8.61% 
                                 2006  579  $10.89  to  $11.10  $6,319  0.11%  0.00%  to  0.75%  7.40%  to  8.24% 
                                 2005  600  $10.14  to  $10.19  $6,094  (a)  0.00%  to  0.75%    (a)   
                       ING PIMCO Total Return Portfolio - Initial Class                         
                                 2009  1,050  $13.34  to  $14.19  $14,513  2.96%  0.00%  to  0.75%  12.04%  to  12.96% 
                                 2008  1,572  $11.81  to  $12.57  $19,285  5.12%  0.00%  to  0.75%  -0.66%  to  0.16% 
                                 2007  1,822  $11.80  to  $12.55  $22,375  3.52%  0.00%  to  0.75%  8.80%  to  9.61% 
                                 2006  1,608  $10.77  to  $11.45  $18,083  2.17%  0.00%  to  0.75%  3.44%  to  4.19% 
                                 2005  903  $10.77  to  $10.99  $9,777  2.18%  0.00%  to  0.75%  1.60%  to  2.42% 

    96


    SECURITY LIFE OF DENVER INSURANCE COMPANY                     
    SECURITY LIFE SEPARATE ACCOUNT L1                         
    Notes to Financial Statements                         
     
     
     
                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
                       ING Pioneer High Yield Portfolio - Initial Class                         
                                 2009  1,981  $11.69  to  $11.92  $23,386  8.42%  0.00%  to  0.75%  65.77%  to  67.18% 
                                 2008  2,538  $7.00  to  $7.13  $18,043  (d)  0.00%  to  0.75%    (d)   
                                 2007  (d)    (d)    (d)  (d)    (d)      (d)   
                                 2006  (d)    (d)    (d)  (d)    (d)      (d)   
                                 2005  (d)    (d)    (d)  (d)    (d)      (d)   
                       ING T. Rowe Price Diversified Mid Cap Growth Portfolio - Initial Class                         
                                 2009  2,750  $11.73  to  $12.16  $32,561  0.41%  0.00%  to  0.75%  45.35%  to  46.51% 
                                 2008  2,908  $8.05  to  $8.30  $23,626  0.48%  0.00%  to  0.75%  -43.61%  to  -43.15% 
                                 2007  3,130  $14.17  to  $14.60  $44,992  0.19%  0.00%  to  0.75%  12.50%  to  13.35% 
                                 2006  3,405  $12.72  to  $12.88  $43,418  -  0.00%  to  0.75%  8.35%  to  9.15% 
                                 2005  3,899  $11.74  to  $11.80  $45,813  (a)  0.00%  to  0.75%    (a)   
                       ING UBS U.S. Large Cap Equity Portfolio - Initial Class                         
                                 2009  570  $10.07  to  $10.44  $5,909  1.74%  0.00%  to  0.75%  30.78%  to  31.82% 
                                 2008  284  $7.70  to  $7.92  $2,231  3.40%  0.00%  to  0.75%  -40.22%  to  -39.77% 
                                 2007  172  $12.88  to  $13.15  $2,237  0.42%  0.00%  to  0.75%  0.39%  to  1.23% 
                                 2006  495  $12.83  to  $12.99  $6,389  0.52%  0.00%  to  0.75%  13.64%  to  14.45% 
                                 2005  6  $11.29  to  $11.35  $72  (a)  0.00%  to  0.75%    (a)   
                       ING Van Kampen Comstock Portfolio - Initial Class                         
                                 2009  549  $9.97  to  $12.36  $6,640  3.02%  0.00%  to  0.75%  27.96%  to  28.98% 
                                 2008  627  $7.73  to  $9.59  $5,889  4.37%  0.00%  to  0.75%  -36.84%  to  -36.32% 
                                 2007  746  $12.15  to  $15.06  $10,999  1.54%  0.00%  to  0.75%  -2.76%  to  -2.08% 
                                 2006  803  $12.41  to  $15.38  $12,130  1.10%  0.00%  to  0.75%  15.38%  to  16.25% 
                                 2005  762  $12.87  to  $13.23  $9,919  0.67%  0.00%  to  0.75%  2.96%  to  3.68% 
                       ING Van Kampen Equity and Income Portfolio - Initial                         
                           Class                         
                                 2009  184  $12.03  to  $13.11  $2,366  1.87%  0.00%  to  0.75%  21.75%  to  22.75% 
                                 2008  202  $9.81  to  $10.68  $2,118  5.20%  0.00%  to  0.75%  -23.90%  to  -23.36% 
                                 2007  226  $12.80  to  $13.94  $3,112  2.63%  0.00%  to  0.75%  2.77%  to  3.57% 
                                 2006  195  $12.36  to  $13.46  $2,601  2.54%  0.00%  to  0.75%  11.79%  to  12.64% 
                                 2005  97  $11.62  to  $11.95  $1,152  0.09%  0.00%  to  0.75%  7.29%  to  8.05% 

    97


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    SECURITY LIFE SEPARATE ACCOUNT L1
    Notes to Financial Statements

                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
    ING Strategic Allocation Conservative Portfolio - Class I                         
           2009  9  $10.83  to  $11.26  $98  8.56%  0.00%  to  0.75%  17.08%  to  17.91% 
           2008  10  $9.25  to  $9.55  $89  4.67%  0.00%  to  0.75%  -24.18%  to  -23.60% 
           2007  10  $12.20  to  $12.50  $125  2.61%  0.00%  to  0.75%  4.99%  to  5.84% 
           2006  16  $11.62  to  $11.81  $181  3.36%  0.00%  to  0.75%  7.59%  to  8.35% 
           2005  12  $10.80  to  $10.90  $132  2.14%  0.00%  to  0.75%  3.05%  to  3.81% 
    ING Strategic Allocation Growth Portfolio - Class I                         
           2009  40  $10.69  to  $11.12  $439  12.10%  0.00%  to  0.75%  24.30%  to  25.23% 
           2008  81  $8.60  to  $8.88  $718  2.79%  0.00%  to  0.75%  -36.53%  to  -36.07% 
           2007  141  $13.55  to  $13.89  $1,938  1.73%  0.00%  to  0.75%  4.23%  to  5.07% 
           2006  152  $13.00  to  $13.22  $1,994  2.32%  0.00%  to  0.75%  12.36%  to  13.18% 
           2005  354  $11.57  to  $11.68  $4,128  0.86%  0.00%  to  0.75%  5.37%  to  6.18% 
    ING Strategic Allocation Moderate Portfolio - Class I                         
           2009  136  $10.76  to  $11.20  $1,507  9.14%  0.00%  to  0.75%  20.90%  to  21.87% 
           2008  149  $8.90  to  $9.19  $1,358  3.16%  0.00%  to  0.75%  -31.01%  to  -30.48% 
           2007  157  $12.90  to  $13.22  $2,064  2.52%  0.00%  to  0.75%  4.71%  to  5.51% 
           2006  292  $12.32  to  $12.53  $3,645  2.14%  0.00%  to  0.75%  10.30%  to  11.18% 
           2005  394  $11.17  to  $11.27  $4,436  0.52%  0.00%  to  0.75%  3.91%  to  4.64% 
    ING Growth and Income Portfolio - Class I                         
           2009  548  $7.98  to  $12.92  $4,434  2.66%  0.00%  to  0.75%  29.34%  to  30.39% 
           2008  2  $6.17  to  $6.22  $10  -  0.00%  to  0.75%  -38.11%  to  -37.68% 
           2007  2  $9.97  to  $9.98  $16  (c)  0.00%  to  0.75%    (c)   
           2006  (c)    (c)    (c)  (c)    (c)      (c)   
           2005  (c)    (c)    (c)  (c)    (c)      (c)   
    ING Index Plus LargeCap Portfolio - Class I                         
           2009  988  $10.09  to  $10.94  $10,431  3.04%  0.00%  to  0.75%  22.27%  to  23.20% 
           2008  1,011  $8.19  to  $8.88  $8,704  2.01%  0.00%  to  0.75%  -37.67%  to  -37.19% 
           2007  1,021  $13.04  to  $14.14  $14,041  1.22%  0.00%  to  0.75%  4.23%  to  5.05% 
           2006  1,022  $12.99  to  $13.46  $13,429  0.60%  0.00%  to  0.75%  13.75%  to  14.55% 
           2005  429  $11.42  to  $11.75  $4,953  1.23%  0.00%  to  0.75%  4.58%  to  5.38% 

    98


    SECURITY LIFE OF DENVER INSURANCE COMPANY                     
    SECURITY LIFE SEPARATE ACCOUNT L1                         
    Notes to Financial Statements                         
     
     
     
                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
                       ING Index Plus MidCap Portfolio - Class I                         
                                 2009  818  $10.79  to  $13.54  $10,716  1.65%  0.00%  to  0.75%  30.67%  to  31.75% 
                                 2008  960  $8.19  to  $10.28  $9,579  1.40%  0.00%  to  0.75%  -37.98%  to  -37.58% 
                                 2007  970  $13.12  to  $16.47  $15,574  0.77%  0.00%  to  0.75%  4.64%  to  5.51% 
                                 2006  947  $12.44  to  $15.61  $14,470  0.47%  0.00%  to  0.75%  8.65%  to  9.47% 
                                 2005  1,326  $13.87  to  $14.26  $18,684  0.46%  0.00%  to  0.75%  10.34%  to  11.15% 
                       ING Index Plus SmallCap Portfolio - Class I                         
                                 2009  831  $9.86  to  $13.02  $10,546  1.71%  0.00%  to  0.75%  23.89%  to  24.83% 
                                 2008  807  $7.90  to  $10.43  $8,217  0.96%  0.00%  to  0.75%  -34.04%  to  -33.57% 
                                 2007  847  $15.04  to  $15.70  $13,004  0.43%  0.00%  to  0.75%  -6.93%  to  -6.27% 
                                 2006  888  $12.68  to  $16.75  $14,562  0.29%  0.00%  to  0.75%  12.93%  to  13.87% 
                                 2005  734  $14.31  to  $14.71  $10,591  0.32%  0.00%  to  0.75%  6.87%  to  7.61% 
                       ING International Index Portfolio - Class S                         
                                 2009  1,685  $13.44  to  $13.50  $22,654  (e)  0.00%  to  0.75%    (e)   
                                 2008  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2007  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2006  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2005  (e)    (e)    (e)  (e)    (e)      (e)   
                       ING Opportunistic Large Cap Value Portfolio - Class I                         
                                 2009  46  $8.53  to  $8.80  $402  4.26%  0.00%  to  0.75%  14.19%  to  15.03% 
                                 2008  121  $7.47  to  $7.65  $913  2.03%  0.00%  to  0.75%  -36.10%  to  -35.55% 
                                 2007  149  $11.69  to  $11.87  $1,748  1.71%  0.00%  to  0.75%  2.27%  to  2.95% 
                                 2006  174  $11.43  to  $11.53  $1,994  1.40%  0.00%  to  0.75%  15.11%  to  16.00% 
                                 2005  192  $9.93  to  $9.94  $1,911  (a)  0.00%  to  0.75%    (a)   
                       ING Russell™ Large Cap Growth Index Portfolio - Class I                         
                                 2009  2,988  $12.78  to  $12.84  $38,213  (e)  0.00%  to  0.75%    (e)   
                                 2008  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2007  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2006  (e)    (e)    (e)  (e)    (e)      (e)   
                                 2005  (e)    (e)    (e)  (e)    (e)      (e)   

    99


    SECURITY LIFE OF DENVER INSURANCE COMPANY                 
    SECURITY LIFE SEPARATE ACCOUNT L1                     
    Notes to Financial Statements                     
     
     
     
                Investment         
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
                       ING Russell™ Large Cap Index Portfolio - Class I                     
                                 2009  176  $12.81  to  $12.87  $2,255  (e)  0.00% to 0.75%    (e)   
                                 2008  (e)    (e)    (e)  (e)  (e)    (e)   
                                 2007  (e)    (e)    (e)  (e)  (e)    (e)   
                                 2006  (e)    (e)    (e)  (e)  (e)    (e)   
                                 2005  (e)    (e)    (e)  (e)  (e)    (e)   
                       ING Russell™ Large Cap Value Index Portfolio - Class I                     
                                 2009  385  $12.59  to  $12.65  $4,862  (e)  0.00% to 0.75%    (e)   
                                 2008  (e)    (e)    (e)  (e)  (e)    (e)   
                                 2007  (e)    (e)    (e)  (e)  (e)    (e)   
                                 2006  (e)    (e)    (e)  (e)  (e)    (e)   
                                 2005  (e)    (e)    (e)  (e)  (e)    (e)   
                       ING Russell™ Mid Cap Growth Index Portfolio - Class I                     
                                 2009  160  $13.07  to  $13.14  $2,095  (e)  0.00% to 0.75%    (e)   
                                 2008  (e)    (e)    (e)  (e)  (e)    (e)   
                                 2007  (e)    (e)    (e)  (e)  (e)    (e)   
                                 2006  (e)    (e)    (e)  (e)  (e)    (e)   
                                 2005  (e)    (e)    (e)  (e)  (e)    (e)   
                       ING Russell™ Small Cap Index Portfolio - Class I                     
                                 2009  131  $8.79  to  $8.90  $1,159  -  0.00% to 0.75%  25.75%  to  26.60% 
                                 2008     34  $6.99  to  $7.03  $239  (d)  0.00% to 0.75%    (d)   
                                 2007  (d)    (d)    (d)  (d)  (d)    (d)   
                                 2006  (d)    (d)    (d)  (d)  (d)    (d)   
                                 2005  (d)    (d)    (d)  (d)  (d)    (d)   
                       ING U.S. Bond Index Portfolio - Class I                     
                                 2009  458  $10.83  to  $10.97  $4,975  2.34%  0.00% to 0.75%  5.04%  to  5.89% 
                                 2008  188  $10.31  to  $10.36  $1,942  (d)  0.00% to 0.75%    (d)   
                                 2007  (d)    (d)    (d)  (d)  (d)    (d)   
                                 2006  (d)    (d)    (d)  (d)  (d)    (d)   
                                 2005  (d)    (d)    (d)  (d)  (d)    (d)   

    100


    SECURITY LIFE OF DENVER INSURANCE COMPANY                     
    SECURITY LIFE SEPARATE ACCOUNT L1                         
    Notes to Financial Statements                         
     
     
     
                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
                       ING MidCap Opportunities Portfolio - Class I                         
                                 2009  197  $12.83  to  $13.70  $2,639  0.23%  0.00%  to  0.75%  40.37%  to  41.53% 
                                 2008  271  $9.14  to  $9.68  $2,562  -  0.00%  to  0.75%  -38.08%  to  -37.63% 
                                 2007  138  $14.76  to  $15.52  $2,115  -  0.00%  to  0.75%  24.77%  to  25.67% 
                                 2006  208  $11.83  to  $12.35  $2,526  -  0.00%  to  0.75%  7.06%  to  7.86% 
                                 2005  240  $11.05  to  $11.45  $2,709  -  0.00%  to  0.75%  9.51%  to  10.31% 
                       ING SmallCap Opportunities Portfolio - Class I                         
                                 2009  813  $9.12  to  $12.43  $7,675  -  0.00%  to  0.75%  30.10%  to  31.09% 
                                 2008  523  $7.01  to  $9.49  $3,771  -  0.00%  to  0.75%  -34.97%  to  -34.46% 
                                 2007  437  $10.78  to  $14.48  $4,826  -  0.00%  to  0.75%  9.22%  to  10.10% 
                                 2006  386  $9.87  to  $13.16  $3,881  -  0.00%  to  0.75%  11.78%  to  12.57% 
                                 2005  405  $8.83  to  $9.15  $3,627  -  0.00%  to  0.75%  8.21%  to  9.06% 
                       Brandes International Equity Fund                         
                                 2009  861  $15.78  to  $16.85  $13,630  2.28%  0.00%  to  0.75%  24.35%  to  25.28% 
                                 2008  966  $12.69  to  $13.45  $12,297  3.47%  0.00%  to  0.75%  -40.28%  to  -39.85% 
                                 2007  997  $21.25  to  $22.36  $21,250  2.08%  0.00%  to  0.75%  7.16%  to  8.02% 
                                 2006  1,019  $19.83  to  $20.70  $20,249  1.45%  0.00%  to  0.75%  25.82%  to  26.76% 
                                 2005  944  $15.76  to  $16.33  $14,898  1.52%  0.00%  to  0.75%  9.75%  to  10.56% 
                       Business Opportunity Value Fund                         
                                 2009  198  $12.10  to  $12.82  $2,426  0.86%  0.00%  to  0.75%  23.60%  to  24.59% 
                                 2008  246  $9.79  to  $10.29  $2,433  0.04%  0.00%  to  0.75%  -34.95%  to  -34.50% 
                                 2007  207  $15.05  to  $15.71  $3,134  0.64%  0.00%  to  0.75%  4.66%  to  5.44% 
                                 2006  216  $14.38  to  $14.90  $3,118  0.49%  0.00%  to  0.75%  13.05%  to  13.91% 
                                 2005  228  $12.72  to  $13.08  $2,907  0.73%  0.00%  to  0.75%  6.98%  to  7.74% 
                       Frontier Capital Appreciation Fund                         
                                 2009  418  $16.26  to  $17.37  $6,822  0.05%  0.00%  to  0.75%  47.42%  to  48.59% 
                                 2008  498  $11.03  to  $11.69  $5,507  -  0.00%  to  0.75%  -42.43%  to  -42.01% 
                                 2007  557  $19.16  to  $20.16  $10,708  -  0.00%  to  0.75%  11.07%  to  11.94% 
                                 2006  574  $17.25  to  $18.01  $9,924  -  0.00%  to  0.75%  15.46%  to  16.34% 
                                 2005  509  $14.94  to  $15.48  $7,615  -  0.00%  to  0.75%  14.13%  to  14.92% 

    101


    SECURITY LIFE OF DENVER INSURANCE COMPANY                     
    SECURITY LIFE SEPARATE ACCOUNT L1                         
    Notes to Financial Statements                         
     
     
     
                Investment             
      Units  Unit Fair Value  Net Assets  Income  Expense RatioB  Total ReturnC 
      (000's)  (lowest to highest)  (000's)  RatioA  (lowest to highest)  (lowest to highest) 
                       M Large Cap Growth Fund                         
                                 2009  250  $10.43  to  $11.14  $2,644  0.63%  0.00%  to  0.75%  36.34%  to  37.36% 
                                 2008  314  $7.65  to  $8.11  $2,435  0.03%  0.00%  to  0.75%  -49.34%  to  -48.96% 
                                 2007  244  $15.10  to  $15.89  $3,715  0.35%  0.00%  to  0.75%  21.48%  to  22.42% 
                                 2006  289  $12.43  to  $12.98  $3,615  0.63%  0.00%  to  0.75%  7.71%  to  8.53% 
                                 2005  268  $11.54  to  $11.96  $3,106  0.43%  0.00%  to  0.75%  13.03%  to  13.90% 
                       Neuberger Berman AMT Socially Responsive Portfolio® - Class I                         
                                 2009  46  $10.75  to  $11.14  $501  2.32%  0.00%  to  0.75%  30.46%  to  31.39% 
                                 2008  33  $8.24  to  $8.48  $274  2.58%  0.00%  to  0.75%  -39.90%  to  -39.43% 
                                 2007  19  $13.62  to  $14.00  $268  -  0.00%  to  0.75%  6.78%  to  7.61% 
                                 2006  7  $12.84  to  $13.01  $89  0.13%  0.00%  to  0.75%  12.83%  to  13.72% 
                                 2005  4  $11.38  to  $11.44  $47  (a)  0.00%  to  0.75%    (a)   
                       Van Eck Worldwide Hard Assets Fund                         
                                 2009  181  $36.30  to  $36.67  $6,613  0.28%  0.00%  to  0.75%  56.38%  to  57.55% 
                                 2008  228  $23.04  to  $23.45  $5,321  0.37%  0.00%  to  0.75%  -46.53%  to  -46.13% 
                                 2007  297  $42.77  to  $43.86  $12,940  0.12%  0.00%  to  0.75%  44.28%  to  45.38% 
                                 2006  417  $29.42  to  $30.40  $12,593  0.08%  0.00%  to  0.75%  23.58%  to  24.50% 
                                 2005  566  $23.63  to  $24.60  $13,798  0.29%  0.00%  to  0.75%  50.55%  to  51.67% 

    (a)      As investment Division was not available until 2005, this data is not meaningful and is therefore not presented.
    (b)      As investment Division was not available until 2006, this data is not meaningful and is therefore not presented.
    (c)      As investment Division was not available until 2007, this data is not meaningful and is therefore not presented.
    (d)      As investment Division was not available until 2008, this data is not meaningful and is therefore not presented.
    (e)      As investment Division was not available until 2009, this data is not meaningful and is therefore not presented.
    A      The Investment Income Ratio represents dividends received by the Division, excluding capital gains distributions, divided by the average net assets. The recognition of investment income is determined by the timing of the declaration of dividends by the underlying fund in which the Division invests.
    B      The Expense Ratio considers only the expenses borne directly by the Account and is equal to the mortality and expense, administrative and other charges, as defined in Note 5. Certain items in this table are presented as a range of minimum and maximum values; however, such information is calculated independently for each column in the table.
    C      Total Return is calculated as the change in unit value for each Contract presented in the Statements of Assets and Liabilities. Certain items in this table are presented as a range of minimum and maximum values; however, such information is calculated independently for each column in the table.

    102


    FINANCIAL STATEMENTS — STATUTORY BASIS
    Security Life of Denver Insurance Company
    For the years ended December 31, 2009, 2008 and 2007
    with Report of Independent Registered Public Accounting Firm


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Financial Statements- Statutory Basis
    December 31, 2009

    Contents
     
    Report of Independent Registered Public Accounting Firm  1 
     
    Audited Financial Statements - Statutory Basis   
     
    Balance Sheets - Statutory Basis – as of December 31, 2009 and 2008  3 
    Statements of Operations - Statutory Basis – for the years ended December 31, 2009,   
       2008 and 2007  5 
    Statements of Changes in Capital and Surplus - Statutory Basis – for the years ended   
       December 31, 2009, 2008 and 2007  6 
    Statements of Cash Flows - Statutory Basis – for the years ended December 31, 2009,   
       2008 and 2007  7 
    Notes to Financial Statements - Statutory Basis  8 


    Report of Independent Registered Public Accounting Firm

    The Board of Directors and Stockholder
    Security Life of Denver Insurance Company

    We have audited the accompanying statutory basis balance sheets of Security Life of Denver Insurance Company (the “Company,” wholly owned direct subsidiary of ING America Insurance Holdings, Inc.), as of December 31, 2009 and 2008, and the related statutory basis statements of operations, changes in capital and surplus, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

    We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    As described in Note 1 to the financial statements, the Company presents its financial statements in conformity with accounting practices prescribed or permitted by the Division of Insurance of the Department of Regulatory Agencies of the State of Colorado (“Colorado Division of Insurance”), which practices differ from U.S. generally accepted accounting principles. The variances between such practices and U.S. generally accepted accounting principles are described in Note 1. The effects on the financial statements of these variances are not reasonably determinable but are presumed to be material.

    In our opinion, because of the effects of the matter described in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with U.S. generally accepted accounting principles, the financial position of Security Life of Denver Insurance Company at December 31, 2009 and 2008, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2009.


    However, in our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Security Life of Denver Insurance Company at December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting practices prescribed or permitted by the Colorado Division of Insurance.

    As discussed in Note 1 to the financial statements, the Company changed its method of accounting for loan-backed and structured securities and income taxes in 2009.

    /s/ Ernst & Young LLP

    Atlanta, Georgia
    April 1, 2010


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Balance Sheets - Statutory Basis
     
     
      December 31 
     

    2009 

    		 2008 
      (In Thousands) 
    Admitted Assets     
    Cash and invested assets:     
       Bonds  $ 12,962,785  $ 16,581,839 
       Preferred stocks  27,000  85,079 
       Common stocks  94,026  170,099 
       Subsidiaries  104,751  97,329 
       Mortgage loans  1,637,153  1,878,012 
       Contract loans  1,282,997  1,390,205 
       Other invested assets  932,071  863,193 
       Cash and short term investments  1,329,259  1,038,361 
    Total cash and invested assets  18,370,042  22,104,117 
    Deferred and uncollected premiums, less loading (2009-$1,002; 2008-$1,491)  (4,673)  254,204 
    Accrued investment income  165,155  130,621 
    Reinsurance balances recoverable  443,444  181,262 
    Tax recoverable (including $113,377 and $33,458 on realized     
       capital losses at December 31, 2009 and 2008, respectively)  10,796  31,196 
    Indebtedness from related parties  291,998  214,796 
    Net deferred tax asset  163,320  66,652 
    Separate account assets  1,300,951  1,121,298 
    Other assets  29,345  161,353 
    Total admitted assets  $ 20,770,378  $ 24,265,499 

    The accompanying notes are an integral part of these financial statements.
    3


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Balance Sheets - Statutory Basis
     
     
     
      December 31
      2009  2008 
      (In Thousands, 
      except share amounts) 
    Liabilities and Capital and Surplus         
    Liabilities:         
       Policy and contract liabilities:         
             Life and annuity reserves  $ 10,734,608  $ 11,545,062 
             Accident and health reserves    130,620    147,458 
             Deposit type contracts    3,819,514    7,126,976 
             Policy and contract claims    205,421    133,283 
       Total policy and contract liabilities    14,890,163    18,952,779 
     
       Interest maintenance reserve    -    11,590 
       Accounts payable and accrued expenses    64,837    64,756 
       Reinsurance balances    1,008,514    1,088,813 
       Indebtedness to related parties    34,382    41,818 
       Asset valuation reserve    19,422    48,503 
       Borrowed money    1,430,272    665,403 
       Net transfers to separate accounts    (64,406)    (55,353) 
       Other liabilities    388,771    886,938 
       Separate account liabilities    1,300,951    1,121,298 
    Total liabilities    19,072,906    22,826,545 
     
    Capital and surplus:         
       Common stock: authorized 149 shares of $20,000 par value;         
             144 shares issued and outstanding    2,880    2,880 
       Special surplus funds    74,195    - 
       Surplus notes    165,032    165,032 
       Paid in and contributed surplus    1,703,584    1,443,584 
       Unassigned deficit    (248,219)    (172,542) 
    Total capital and surplus    1,697,472    1,438,954 
    Total liabilities and capital and surplus  $ 20,770,378  $ 24,265,499 

    The accompanying notes are an integral part of these financial statements.
    4


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Statements of Operations – Statutory Basis
     
     
     
      Year ended December 31
      2009  2008  2007 
      (In Thousands)
    Premiums and other revenues:           
       Life, annuity, and accident and health premiums  $ 950,541  $ 1,347,952  $ 472,489 
       Net investment income  841,867    1,037,074    1,215,525 
       Amortization of interest maintenance reserve  (9,894)    (13,860)    (16,847) 
       Commissions, expense allowances and reserve adjustments           
              on reinsurance ceded  227,504    354,502    467,334 
       Other revenue  160,196    83,984    85,593 
    Total premiums and other revenues  2,170,214    2,809,652    2,224,094 
    Benefits paid or provided:           
       Death benefits  205,235    184,854    162,641 
       Annuity benefits  63,663    79,367    76,686 
       Disability benefits  277,212    96,725    85 
       Surrender benefits and withdrawals  1,706,010    1,061,380    1,496,996 
       Interest on policy or contract funds  (73,665)    184,013    567,458 
       Other benefits  739    753    963 
       (Decrease) increase in life and annuity reserves  (799,425)    398,004    (749,628) 
       Net transfers to (from) separate accounts  (15,204)    106,093    97,679 
    Total benefits paid or provided  1,364,565    2,111,189    1,652,880 
    Insurance expenses and other deductions:           
       Commissions  380,893    365,938    362,467 
       General expenses  95,315    113,340    125,767 
       Insurance taxes, licenses and fees  17,604    22,492    17,579 
       Other deductions  47,784    9,908    576 
    Total insurance expenses and other deductions  541,596    511,678    506,389 
    Gain from operations before policyholder dividends, federal income           
       taxes and net realized capital losses  264,053    186,785    64,825 
     
    Dividends to policyholders  2,196    2,603    3,326 
    Gain from operations before federal income taxes           
       and net realized capital losses  261,857    184,182    61,499 
     
    Federal income tax expense (benefit)  40,109    (37,012)    23,795 
    Gain from operations before net realized capital losses  221,748    221,194    37,704 
    Net realized capital losses  (198,013)    (183,629)    (7,101) 
    Net income  $ 23,735  $ 37,565  $ 30,603 

    The accompanying notes are an integral part of these financial statements.
    5


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Statements of Changes in Capital and Surplus—Statutory Basis
     
     
     
     
      Year ended December 31
      2009   2008  2007 
      (In Thousands)
    Common stock:         
       Balance at beginning and end of year  $ 2,880  $ 2,880  $ 2,880 
     
    Special surplus funds:         
       Balance at beginning of year  -  -    - 
       Admitted deferred tax asset per SSAP 10R  74,195  -     
       Balance at end of year  74,195  -    - 
     
    Surplus notes:         
       Balance at beginning and end of year  165,032  165,032    165,032 
     
    Paid in and contributed surplus:         
       Balance at beginning of year  1,443,584  1,233,584    1,233,584 
       Capital contributions  260,000  210,000    - 
       Balance at end of year  1,703,584  1,443,584    1,233,584 
     
    Unassigned (deficit) surplus:         
       Balance at beginning of year  (172,542)  (85,446)    193,848 
       Net income  23,735  37,565    30,603 
       Change in net unrealized capital (losses) gains  (74,134)  (90,385)    (101,184) 
       Change in nonadmitted assets  (31,415)  (60,226)    (86,307) 
       Change in liability for reinsurance in unauthorized companies  6,970  (7,293)    1,766 
       Change in asset valuation reserve  29,081  86,877    10,977 
       Change in surplus in separate account statements  2,213  -    - 
       Cumulative effect of change in accounting principle  (6,081)  -    - 
       Change in net deferred income tax  (39,559)  (2,109)    49,894 
       Deferred gain on reinsurance of existing business  -  -    33,236 
       Dividends to stockholder  -  -    (100,000) 
       Amortization of gain on reinsurance  (13,250)  (48,734)    (35,911) 
       Change in reserve on account of change in valuation basis  27,867  -    (82,910) 
       Additional minimum pension liability  (1,104)  (2,791)    542 
       Balance at end of year  (248,219)  (172,542)    (85,446) 
    Total capital and surplus  $ 1,697,472  $ 1,438,954  $ 1,316,050 

    The accompanying notes are an integral part of these financial statements.
    6


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Statements of Cash Flows—Statutory Basis
     
     
     
     
      Year ended December 31
      2009               2008  2007 
      (In Thousands)
    Operating Activities:         
    Premiums, policy proceeds, and other considerations received,         
       net of reinsurance paid  $ 1,211,683  $ 1,036,492  $ 511,209 
    Net investment income received  939,901  1,154,539    1,302,995 
    Commissions and expenses paid  (451,373)  (531,774)    (576,492) 
    Benefits paid  (2,441,351)  (1,492,358)    (2,332,436) 
    Net transfers from (to) separate accounts  8,363  (91,000)    (82,400) 
    Dividends paid to policyholders  (2,692)  (3,056)    (4,096) 
    Federal income taxes recovered (paid)  95,494  17,881    (33,502) 
    Miscellaneous income  265,468  339,760    441,819 
    Net cash (used in) provided by operations  (374,507)  430,484    (772,903) 
     
    Investment Activities         
    Proceeds from sales, maturities, or repayments of investments:         
       Bonds  5,305,769  6,780,514    8,180,183 
       Stocks  143,376  257,193    60,527 
       Mortgage loans  249,456  436,419    524,062 
       Real estate  -  6,138    708 
       Other invested assets  103,222  22,528,528    7,417,681 
       Net gain (loss) on cash and short term investments  19  726    (565) 
       Miscellaneous proceeds  61,270  90,535    58,867 
    Total proceeds from sales, maturities, or repayments of investments:  5,863,112  30,100,053    16,241,463 
     
    Cost of investments acquired:         
       Bonds  2,722,881  6,224,006    8,453,766 
       Stocks  38,614  249,393    132,191 
       Mortgage loans  11,298  320,779    55,915 
       Other invested assets  40,904  22,453,771    7,668,975 
       Miscellaneous applications  271,198  89,472    86,353 
    Total cost of investments acquired  3,084,895  29,337,421    16,397,200 
     
    Net decrease (increase) in contract loans  107,208  (43,481)    (83,302) 
    Net cash provided by (used in) investment activities  2,885,425  719,151    (239,039) 
     
    Financing and Miscellaneous Activities         
    Other cash (applied) provided:         
       Borrowed money  765,806  (101,488)    (22,890) 
       Net (withdrawals) deposits on deposit type contracts  (3,307,462)  (1,079,213)    1,165,804 
       Dividends paid to stockholder  -  -    (100,000) 
       Capital and paid in surplus  210,000  -    - 
       Other cash provided  111,636  615,353    149,740 
    Net cash (used in) provided by financing and miscellaneous activities  (2,220,020)  (565,348)    1,192,654 
    Net increase in cash and short term investments  290,898  584,287    180,712 
    Cash and short term investments:         
       Beginning of year  1,038,361  454,074    273,362 
       End of year  $ 1,329,259  $ 1,038,361  $ 454,074 

    7


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009

    (Dollar amounts in millions, unless otherwise stated)

    1. Organization and Significant Accounting Policies

    Security Life of Denver Insurance Company (the “Company”) is domiciled in Colorado and is a wholly owned direct subsidiary of ING America Insurance Holdings, Inc. (“ING AIH”), a Delaware domiciled non-insurance holding company. The Company’s ultimate parent is ING Groep, N.V. (“ING”), a global financial services company based in the Netherlands.

    Description of Business

    The Company focuses on two markets: the advanced market and the investment products market. The life insurance products offered for the advanced market include wealth transfer and estate planning, executive benefits, charitable giving and corporate owned life insurance. These products include universal life and variable life. Operations are conducted almost entirely on the general agency basis and the Company is presently licensed in all states (approved for reinsurance only in New York), the District of Columbia, Guam, the U.S. Virgin Islands, and Puerto Rico (approved for reinsurance only). In the investment products market, the Company offers guaranteed investment contracts, funding agreements, and trust notes to institutional buyers.

    Use of Estimates

    The preparation of the financial statements of the Company requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

    Recently Adopted Accounting Principles

    Effective July 1, 2009, the Company adopted SSAP No. 43R, Loan-backed and Structured Securities. This statement provides guidance on recording other-than-temporary impairments (“OTTI”) on loan-backed and structured securities. When the holder of a loan-backed or structured security with an unrealized loss position either has the intent to sell the security or does not have the intent and ability to hold the security for a period of time sufficient to recover the amortized cost basis, the security must be written down to fair value.

    When the holder of a loan-backed or structured security in an unrealized loss position does not intend to sell the security and has the intent and ability to hold the security for a period of time sufficient to recover the amortized cost, the holder of the security must compare the present value of the expected future cash flows for this security to its amortized cost. If the present value of the expected future cash flows for the security is lower than its amortized cost, the security is written down to its present value of the expected future cash flows.

    8


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    In both instances noted above, the total loss recorded is bifurcated between the interest related loss and the non-interest related loss. The interest related portion shall be recorded through the IMR and the non-interest related portion shall be recorded through the AVR. The effects on the Company's 2009 financial statements of adopting this change in accounting principle at July 1, 2009 were decreases in total admitted assets and capital and surplus of $6.1. This adoption had no impact on total liabilities and net income.

    Effective December 31, 2009, the Company adopted SSAP No. 10R, Income Taxes. This statement requires the Company to calculate admitted deferred tax assets based upon the gross admitted deferred asset to reverse within one year with a cap on the admitted portion of the deferred tax asset of 10% of capital and surplus for its most recently filed statement with the domiciliary state commissioner. If the Company’s risk-based capital levels (“RBC”), after reflecting the above limitations, exceeds 250% of the authorized control level, the statement increases the limitation on admitted deferred tax assets from what is expected to reverse in one year to what is expected to reverse over the next three years and increases the cap on the admitted portion of the deferred tax asset from 10% of capital and surplus for its most recently filed statement with the domiciliary state commissioner to 15% of capital and surplus for its most recently filed statement with the domiciliary state commissioner. Other revisions in the statement include requiring the Company to reduce the gross deferred tax asset by a statutory valuation allowance adjustment if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the gross deferred tax assets will not be realized. The effects on the Company's 2009 financial statements of adopting this change in accounting principle at December 31, 2009 were increases to total admitted assets and capital and surplus of $74.2. There was no change in net income or total liabilities. The increase in capital and surplus related to the cumulative effect of adopting this change in accounting principle is disclosed in a separate line in the Statements of Changes in Capital and Surplus.

    Reclassifications

    Certain amounts in the Company’s statutory basis financial statements have been reclassified to conform to the 2009 financial statement presentation. These reclassifications reflect presentational differences on the Balance Sheets. There were no changes to total capital and surplus or net income. A reconciliation of the more significant presentational differences for 2008 balances is as follows:

    9


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

      Balance per 2008    Balance per 2009 
      Audited Financial    Audited Finacial 
      Statements  Amount  Statements 
      December 31, 2008  Reclassified  December 31, 2008 
        (In Thousands)   
    Liabilities       
     Acccounts payable and accrued expenses  $ 72,717  $ (7,961)  $ 64,756 
     Reinsurance balances  1,080,852                 7,961  1,088,813 

    Basis of Presentation

    The accompanying financial statements of the Company have been prepared in conformity with accounting practices prescribed or permitted by the Colorado Division of Insurance, which practices differ from United States generally accepted accounting principles (“GAAP”). The more significant variances from GAAP are:

    Investments: Investments in bonds and mandatorily redeemable preferred stocks are reported at amortized cost or fair value based on the NAIC rating; for GAAP, such fixed maturity investments are designated at purchase as held to maturity, trading or available for sale. Held to maturity investments are reported at amortized cost, and the remaining fixed maturity investments are reported at fair value with unrealized capital gains and losses reported in operations for those designated as trading and as a separate component of other comprehensive income in stockholder’s equity for those designated as available for sale.

    Management regularly reviews the value of the Company’s investments in bonds and mandatorily redeemable preferred stocks. If the value of any investment falls below its cost basis, the decline is analyzed to determine whether it is an other than temporary decline in value. To make this determination for each security, the following are some of the factors considered:

    §     

    The length of time and the extent to which the fair value has been below cost.

    §     

    The financial condition and near-term prospects of the issuer of the security, including any specific events that may affect its operations or earnings potential.

    §     

    Management’s intent and ability to hold the security long enough for it to recover its value.

    Based on the analysis, management makes a judgment as to whether the loss is other than temporary. If the loss is other than temporary, an impairment charge is recorded within net realized investment gains (losses) in the Statements of Operation in the period the determination is made.

    The Company invests in structured securities including mortgage backed securities/ collateralized mortgage obligations, asset backed securities, collateralized debt

    10


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    obligations, and commercial mortgage backed securities. For these structured securities in unrealized loss positions in the periods after the adoption of SSAP No. 43R, management determines whether it has the intent and ability to hold the security for a period of time sufficient to recover the amortized cost. If management has the intent and ability to hold the security to recovery, the Company must compare the present value of the expected future cash flows for this security to its amortized cost. If the present value of the expected future cash flows for the security is lower than its amortized cost, the security is written down to its present value of the expected future cash flows.

    In both cases above, the total loss recorded is bifurcated between the interest related loss and the non-interest related loss. The interest related portion shall be recorded through the IMR and the non-interest related portion shall be recorded through the AVR.

    For these structured securities in periods prior the adoption of SSAP No. 43R, management compared the undiscounted projected future cash flows to the carrying value and an OTTI was considered to have occurred when the undiscounted cash flows were less than the carrying value.

    For GAAP, when a decline in fair value is determined to be other-than-temporary, the loss which is calculated as the difference between the securities carrying value and fair value is recorded in net realized capital gains (losses) in its entirety or bifurcated between net realized capital gains (losses) and accumulated other comprehensive income, as appropriate.

    Statement of Statutory Accounting Principles (“SSAP”) No. 31, Derivative Instruments applies to derivative transactions entered into prior to January 1, 2003. The Company also follows the hedge accounting guidance in SSAP No. 86, Accounting for Derivative Instruments and Hedging Activities for derivative transactions entered into or modified on or after January 1, 2003. Under SSAP No. 86, derivatives that are deemed effective hedges are accounted for entirely in a manner which is consistent with the underlying hedged item. Derivatives used in hedging transactions that do not meet the requirements of SSAP No. 86 as an effective hedge are carried at fair value with the change in value recorded in surplus as unrealized gains or losses. Embedded derivatives are not accounted for separately from the host contract. Under GAAP, the effective and ineffective portions of a single hedge are accounted for separately. An embedded derivative within a contract that is not clearly and closely related to the economic characteristics and risk of the host contract is accounted for separately from the host contract and valued and reported at fair value, and the change in fair value for cash flow hedges is credited or charged directly to a separate component of shareholder’s equity rather than to income as required for fair value hedges.

    Valuation Reserves: The asset valuation reserve (“AVR”) is intended to establish a reserve to offset potential credit related investment losses on most invested asset categories. AVR is determined by an NAIC prescribed formula and is reported as a

    11


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    liability rather than as a valuation allowance or an appropriation of surplus. The change in AVR is reported directly to unassigned surplus.

    Under a formula prescribed by the NAIC, the Company defers the portion of realized gains and losses on sales of fixed income investments, principally bonds and mortgage loans, attributable to changes in the general level of interest rates and amortizes those deferrals over the remaining period to maturity based on groupings of individual securities sold in five year bands. The Company’s net deferral of interest maintenance reserve (“IMR”) is negative and as such is reported as a component of other assets and completely nonadmitted in the accompanying Balance Sheets.

    Realized gains and losses on investments are reported in the Statements of Operations net of federal income tax and transfers to the IMR. Under GAAP, realized capital gains and losses are reported in the Statements of Operations on a pretax basis in the period that the asset giving rise to the gain or loss is sold. Realized losses due to impairment are recorded when there has been a decline in value deemed to be other than temporary, in which case the provision for such declines is charged to income, or bifurcated to other comprehensive income, as appropriate.

    Valuation allowances, if necessary, are established for mortgage loans based on the difference between the net value of the collateral, determined as the fair value of the collateral less estimated costs to obtain and sell, and the recorded investment in the mortgage loan. Under GAAP, such allowances are based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, if foreclosure is probable, on the estimated fair value of the collateral.

    The initial valuation allowance and subsequent changes in the allowance for mortgage loans as a result of a temporary impairment are charged or credited directly to unassigned surplus. Under GAAP, such allowances are included as a component of earnings.

    Policy Acquisition Costs: The costs of acquiring and renewing business are expensed when incurred. Under GAAP, acquisition costs related to traditional life insurance, to the extent recoverable from future policy revenues, are deferred and amortized over the premium paying period of the related policies using assumptions consistent with those used in computing policy benefit reserves. For universal life insurance and investment products, to the extent recoverable from future gross profits, acquisition costs are amortized generally in proportion to the present value of expected gross profits from surrender charges and investment, mortality, and expense margins.

    Premiums: Life premiums are recognized as revenue when due. Premiums for annuity policies with mortality and morbidity risk, except for guaranteed interest and group annuity contracts, are also recognized as revenue when due. Premiums received for annuity policies without mortality or morbidity risk and for guaranteed interest and group annuity contracts are recorded using deposit accounting.

    12


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    Under GAAP, premiums for traditional life insurance products, which include those products with fixed and guaranteed premiums and benefits and consist primarily of whole life insurance policies, are recognized as revenue when due. Group insurance premiums are recognized as premium revenue over the time period to which the premiums relate. Revenues for universal life, annuities and guaranteed interest contracts consist of policy charges for the cost of insurance, policy administration charges, amortization of policy initiation fees and surrender charges assessed during the period.

    Benefit and Contract Reserves: Life policy and contract reserves under statutory accounting practices are calculated based upon both the net level premium and Commissioners’ Reserve Valuation methods (“CRVM”) using statutory rates for mortality and interest. GAAP requires that policy reserves for traditional products be based upon the net level premium method utilizing reasonably conservative estimates of mortality, interest, and withdrawals prevailing when the policies were sold. For interest sensitive products, the GAAP policy reserve is equal to the policy fund balance plus an unearned revenue reserve which reflects the unamortized balance of early year policy loads over renewal year policy loads.

    Reinsurance: For business ceded to unauthorized reinsurers, statutory accounting practices require that reinsurance credits permitted by the treaty be recorded as an offsetting liability and charged against unassigned surplus. Under GAAP, an allowance for amounts deemed uncollectible would be established through a charge to earnings. Statutory income recognized on certain reinsurance treaties representing financing arrangements is not recognized on a GAAP basis.

    Policy and contract liabilities ceded to reinsurers have been reported as reductions of the related reserves rather than as assets as required under GAAP.

    Commissions allowed by reinsurers on business ceded are reported as income when received rather than being deferred and amortized with deferred policy acquisition costs as required under GAAP.

    Gains and losses generated in certain reinsurance transactions are deferred and amortized over the remaining life of the business for GAAP purposes. For statutory, losses are recognized immediately in income, with gains reported as a separate component of surplus and amortized over the remaining life of the business.

    Nonadmitted Assets: Certain assets designated as “nonadmitted,” principally disallowed deferred federal income tax assets, disallowed interest maintenance reserves, non operating software, past due agents’ balances, furniture and equipment, intangible assets, and other assets not specifically identified as an admitted asset within the NAIC

    Accounting Practices and Procedures Manual, are excluded from the accompanying Balance Sheets and are charged directly to unassigned surplus. Under GAAP, such assets are included in the Balance Sheets.

    13


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    Subsidiaries: The accounts and operations of the Company’s subsidiaries are not consolidated. Certain affiliated investments for which audited GAAP statements are not available or expected to be available are nonadmitted. Under GAAP, the accounts and operations of the Company’s subsidiaries are consolidated. All affiliated investments are included in the Consolidated Balance Sheets.

    Employee Benefits: For purposes of calculating the Company’s postretirement benefit obligation, only vested participants and current retirees are included in the valuation. Under GAAP, active participants not currently vested are also included.

    Universal Life and Annuity Policies: Revenues for universal life and annuity policies consist of the entire premium received and benefits incurred represent the total of death benefits paid and the change in policy reserves. Under GAAP, premiums received in excess of policy charges would not be recognized as premium revenue and benefits would represent the excess of benefits paid over the policy account value and interest credited to the account values.

    Policyholder Dividends: Policyholder dividends are recognized when declared. Under GAAP, dividends are recognized over the term of the related policies.

    Deferred Income Taxes: Deferred tax assets are provided for and admitted to an amount determined under a standard formula. This formula considers the amount of differences that will reverse over the next year, taxes paid in prior years that could be recovered through carrybacks, surplus limits, and the amount of deferred tax liabilities available for offset. For periods after the adoption of SSAP No. 10R and assuming certain minimum thresholds are met, the formula allows the Company to consider the amount that is expected to reverse over the next three years rather than the single year under SSAP No. 10. SSAP No. 10R also requires the Company to reduce the gross deferred tax asset by a statutory valuation allowance adjustment if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the gross deferred tax assets will not be realized. Any deferred tax assets not covered under the formula are nonadmitted. Deferred taxes do not include any amounts for state taxes. Under GAAP, a deferred tax asset is recorded for the amount of gross deferred tax assets that are expected to be realized in future years and a valuation allowance is established for the portion that is not realizable.

    Surplus Notes: Surplus notes are reported as a component of surplus and are recorded in other invested assets on the Balance Sheet. Under statutory accounting practices, no interest is recorded on the surplus notes until payment has been approved by the Colorado Division of Insurance. Under GAAP, surplus notes are reported as liabilities and the related interest is reported as a charge to earnings over the term of the notes.

    Statements of Cash Flows: Cash and short term investments in the Statements of Cash Flows represent cash balances, demand deposits, and short term fixed maturity

    14


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    investments with initial maturities of one year or less at the date of acquisition. Under GAAP, the corresponding caption of cash and cash equivalents includes cash balances and investments with initial maturities of three months or less. Other invested assets include cash loaned through the Company’s reciprocal loan program.

    Reconciliation to GAAP: The effects of the preceding variances from GAAP on the accompanying statutory basis financial statements have not been determined, but are presumed to be material.

    Other significant accounting practices are as follows:

    Investments: Investments are stated at values prescribed by the NAIC, as follows:

    Bonds not backed by other loans are principally stated at amortized cost using the effective interest method.

    Loan backed securities are stated at either amortized cost or the lower of amortized cost or fair market value. Amortized cost is determined using the effective interest method and includes anticipated prepayments. The retrospective adjustment method is used to determine the amortized cost for the majority of loan-backed and structured securities. For certain securities the prospective adjustment method is used, including interest only securities and securities that have experienced an other-than-temporary impairment.

    Redeemable preferred stocks rated as high quality or better are reported at cost or amortized cost. All other redeemable preferred stocks are reported at the lower of cost, amortized cost, or fair value and nonredeemable preferred stocks are reported at fair value or the lower of cost or fair value as determined by the Securities Valuation Office of the NAIC (“SVO”).

    Common stocks are reported at fair value as determined by the SVO and the related unrealized capital gains/losses are reported in unassigned surplus along with adjustment for federal income taxes.

    The Company’s use of derivatives is primarily for economic hedging purposes to reduce the Company’s exposure to cash flow variability of assets and liabilities, interest rate risk, credit risk, and market risk. For those derivatives in effective hedging relationships, the Company values all derivative instruments on a consistent basis with the hedged item. Upon termination, gains and losses on instruments are included in the carrying values of the underlying hedged items and are amortized over the remaining lives of the hedged items as adjustments to investment income or benefits from the hedged items. Any unamortized gains or losses are recognized when the underlying hedged items are sold. The unrealized gains and losses from derivatives not designated as accounting hedges are reported at fair value through surplus. Upon termination, interest related gains and losses are included in IMR and are amortized over the remaining lives of the derivatives; other

    15


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    gains and losses are added to the AVR. The Company enters into the following derivatives:

    • Interest rate caps and floors: Interest rate caps and floors are used to limit the effects of changing interest rates on yields of variable rate or short term assets or liabilities.
      The initial cost of any such agreement is amortized to net investment income over the life of the agreement. Periodic payments that are received as a result of the agreements are accrued as an adjustment of interest income or benefits from the hedged items.
    • Interest rate swaps: Interest rate swaps are used to manage the interest rate risk in the Company’s fixed maturity portfolio, as well as the Company’s liabilities. Interest rate swaps represent contracts that require the exchange of cash flows at regular interim periods, typically monthly or quarterly. The net interest effect of such swap transactions is reported as an adjustment of interest income from the hedged items as incurred.
    • Foreign exchange swaps: Foreign exchange swaps are used to reduce the risk of a change in the value, yield, or cash flow with respect to invested assets. Foreign exchange swaps represent contracts that require the exchange of foreign currency cash flows for U.S. dollar cash flows at regular interim periods, typically quarterly or semi-annually.

    Credit default swaps are utilized to replicate the investment characteristics of permissible investments using the derivative in conjunction with other investments. Replicated (synthetic) assets filed with the NAIC SVO result in both the derivative and cash instrument being carried at amortized cost. The replication practices are in accordance with SSAP No. 86 permissible investments using the derivative in conjunction with other investments.

    • Credit default swaps: Credit default swaps are used to reduce the 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 and amounts for the purchase or sale of credit protection. In the event of a default on the underlying credit exposure, the Company will either receive an additional payment (purchased credit protection) or will be required to make an additional payment (sold credit protection) equal to par minus recovery value of the swap contract.
    • Forwards: Forwards are acquired to hedge the Company’s inverse portfolio against movements in interest rates, particularly mortgage rates. On the settlement date, the Company will either receive a payment (interest rate drops on owned forwards or interest rate rises on purchased forwards) or will be required to make a payment (interest rate rises on owned forwards or interest rate drops on purchased forwards).

    16


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    • Swaptions: Swaptions are used to manage interest rate risk in the Company’s collateralized mortgage obligations portfolio. Swaptions are contracts that give the Company the option to enter into an interest rate swap at a specific future date.
    • Futures: The Company utilizes futures contracts in an anticipatory hedging program to hedge the effects of changes in interest rates related to commitments for future purchases of bonds.
    • Options: Call options are used to hedge against an increase in the various equity indices. Such increase may result in increased payments to contract holders of fixed indexed annuity contracts, and the options offset this increased expense. Put options are used to hedge the liability associated with embedded derivatives in certain variable annuity contracts and as part of a hedging program designed to mitigate the impact of potential declines in equity markets and their impact on regulatory capital.
      Options are reported at fair value.

    SSAP No. 97, Investments in Subsidiary, Controlled and Affiliated Entities (“SSAP 97”), applies to the Company’s subsidiaries, and controlled and affiliated entities (“SCA”). The Company’s insurance subsidiaries are reported at their underlying statutory basis net assets, and the Company’s non-insurance subsidiaries are reported at the GAAP basis of their net assets. Dividends from subsidiaries are included in net investment income. The remaining net change in the subsidiaries’ equity is included in the change in net unrealized capital gains or losses. SCA entities for which audited US GAAP statements are not available or expected to be available are nonadmitted. Management regularly reviews its SCA’s to determine if an other-than-temporary impairment has occurred. During this review, management makes a judgment as to whether it is probable that the reporting entity will be unable to recover the carrying amount of the investment or there is evidence indicating inability of the investee to sustain earnings.

    Mortgage loans are reported at amortized cost, less any write down for impairments.

    Contract loans are reported at unpaid principal balances.

    The Company engages in reverse repurchase agreements and reverse dollar repurchase agreements. Such arrangements typically meet the requirements to be accounted for as financings. For both reverse repurchase agreements and reverse dollar repurchase agreements, Company policies require that at all times during the respective agreement term, cash or other collateral types obtained is sufficient to allow the Company to fund substantially all of the cost of purchasing replacement assets from others. Cash collateral received is used for general liquidity purposes and the offsetting collateral liability is included in borrowed money on the Balance Sheets.

    The Company engages in securities lending whereby certain domestic bonds from its portfolio are loaned to other institutions for short periods of time. Collateral, primarily cash, which is in excess of the fair value of the loaned securities, is deposited by the

    17


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    borrower with a lending agent, and retained and invested by the lending agent to generate additional income for the Company. The Company does not have access to the collateral. The Company’s policy requires a minimum of 102% of the fair value of securities loaned to be maintained as collateral. The fair value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the fair value fluctuates.

    Short term investments are reported at amortized cost which approximates fair value. Short term investments include investments with maturities of one year or less at the date of acquisition.

    Partnership interests, which are included in other invested assets, are reported at the underlying audited GAAP equity of the investee. Changes in surplus from distributions are reported in investment income.

    Residual collateralized mortgage obligations, which are included in other invested assets on the Balance Sheets, are reported at amortized cost using the effective interest method.

    Realized capital gains and losses are determined using the first in first out method.

    Cash on hand includes cash equivalents. Cash equivalents are short term investments that are both readily convertible to cash and have an original maturity date of three months or less.

    Aggregate Reserve for Life Policies and Contracts: Life, annuity, and accident and health reserves are developed by actuarial methods and are determined based on published tables using statutorily specified interest rates and valuation methods that will provide, in the aggregate, reserves that are greater than or equal to the minimum or guaranteed policy cash value or the amounts required by law. Interest rates range from 1.5% to 11.3% for 2009.

    The Company waives the deduction of deferred fractional premiums upon the death of the insured. It is the Company’s practice to return a pro rata portion of any premium paid beyond the policy month of death, although it is not contractually required to do so for certain issues.

    The methods used in valuation of substandard policies are as follows:

    For life, endowment and term policies issued substandard, the standard reserve during the premium paying period is increased by 50% of the gross annual extra premium. Standard reserves are held on Paid-Up Limited Pay contracts.

    For reinsurance accepted with table rating, the reserve established is a multiple of the standard reserve corresponding to the table rating.

    18


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    For reinsurance with flat extra premiums, the standard reserve is increased by 50% of the flat extra.

    The amount of insurance in force for which the gross premiums are less than the net premiums, according to the standard of valuation required by the Colorado Division of Insurance, is $12.6 billion and $13.3 billion at December 31, 2009 and 2008, respectively. The amount of premium deficiency reserves for policies on which gross premiums are less than the net premiums is $270.9 and $302.8 at December 31, 2009 and 2008, respectively. The Company anticipates investment income as a factor in the premium deficiency calculation in accordance with SSAP No. 54, Individual and Group Accident and Health Contracts.

    The tabular interest has been determined from the basic data for the calculation of policy reserves for all direct ordinary life insurance and for the portion of group life insurance classified as group Section 79. The method of determination of tabular interest of funds not involving life contingencies is as follows: current year reserves, plus payments, less prior year reserves, less funds added.

    Reinsurance: Reinsurance premiums, commissions, expense reimbursements, and reserves related to reinsured business are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Reserves are based on the terms of the reinsurance contracts and are consistent with the risks assumed. Premiums and benefits ceded to other companies have been reported as a reduction of premium revenue and benefits expense. Amounts applicable to reinsurance ceded for reserves and unpaid claim liabilities have been reported as reductions of these items, and expense allowances received in connection with reinsurance ceded have been reflected in operations.

    Electronic Data Processing Equipment: Electronic data processing equipment is carried at cost less accumulated depreciation. Depreciation for major classes of such assets is calculated on a straight line basis over the estimated useful life of the asset.

    Participating Insurance: Participating business approximates less than 1% of the Company’s ordinary life insurance in force and less than 1% of premium income. The amount of dividends to be paid to participating policyholders is determined annually by the Board of Directors. Amounts allocable to participating policyholders are based on published dividend projections or expected dividend scales. Dividends expense of $2.2, $2.6 and $3.3 was incurred in 2009, 2008 and 2007, respectively.

    Benefit Plans: The Company provides noncontributory retirement plans for substantially all employees and certain agents. Pension costs are charged to operations as contributions are made to the plans. The Company also provides a contributory retirement plan for substantially all employees.

    19


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    Nonadmitted Assets: Nonadmitted assets are summarized as follows:

      December 31
      2009  2008 
      (In Thousands)
    Other invested assets  $ 15,671  $ 25,800 
    Net deferred tax asset  203,447    294,313 
    IMR (if negative)  66,959    - 
    Agents' debit balances  3,310    3,382 
    Furniture and equipment  -    11 
    Deferred and uncollected premium  2,248    1,128 
    Receivables from parent, subsidiaries and affiliates  272    81 
    Other  1,162    11,134 
    Total nonadmitted assets  $ 293,069  $ 335,849 

    Changes in nonadmitted assets are generally reported directly in unassigned surplus as an increase or decrease in nonadmitted assets.

    Claims and Claims Adjustment Expenses: Claims expenses represent the estimated ultimate net cost of all reported and unreported claims incurred through December 31, 2009. The Company does not discount claims and claims adjustment expense reserves. Such estimates are based on actuarial projections applied to historical claim payment data. Such liabilities are considered to be reasonable and adequate to discharge the Company’s obligations for claims incurred but unpaid as of December 31, 2009.

    Cash Flow Information: Cash and short term investments include cash on hand, demand deposits and short term fixed maturity instruments with a maturity of less than one year at date of acquisition. Other invested assets include cash loaned through the Company’s reciprocal loan program.

    Separate Accounts: Most separate account assets and liabilities held by the Company represent funds held for the benefit of the Company’s variable life and annuity policy and contract holders who bear all of the investment risk associated with the policies. Such policies are of a non-guaranteed nature. All net investment experience, positive or negative, is attributed to the policy and contract holders’ account values. The assets and liabilities of these accounts are carried at fair value and are legally segregated and are not subject to claims that arise out of any other business of the Company.

    Reserves related to the Company’s mortality risk are associated with life and annuity reserves. These reserves include reserves for guaranteed minimum death benefits (before reinsurance) that totaled $12.6 and $14.8 at December 31, 2009 and 2008, respectively. The operations of the separate accounts are not included in the accompanying financial statements.

    20


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    2. Permitted Statutory Basis Accounting Practices

    The financial statements of the Company are presented on the basis of accounting practices prescribed or permitted by the Colorado Division of Insurance. The Colorado Division of Insurance recognizes only statutory accounting practices prescribed or permitted by the State of Colorado for determining and reporting the financial condition and results of operations of an insurance company and for determining its solvency under the Colorado Insurance Laws. The NAIC Accounting Practices and Procedures Manual has been adopted as a component of prescribed or permitted practices by the State of Colorado. The Colorado Commissioner of Insurance has the right to permit other specific practices that deviate from prescribed practices.

    The Company is required to identify those significant accounting practices that are permitted, and obtain written approval of the practices from the Colorado Division of Insurance. As of December 31, 2009, 2008, and 2007, the Company had no such permitted accounting practices.

    21


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    3. Investments

    Fixed Maturities and Equity Securities

    The cost or amortized cost and fair value of bonds and equity securities are as follows:

         Cost or  Gross  Gross   
        Amortized  Unrealized  Unrealized  Fair 
        Cost  Gains  Losses  Value 
        (In Thousands)
    At December 31, 2009:           
    U.S. Treasury securities and           
       obligations of U.S. government           
       corporations and agencies  $ 742,076  $ 5,960  $ 64,988  $ 683,048 
    States, municipalities, and political           
       subdivisions    110,610  237  7,137  103,710 
    Foreign other (par value - $1,839,743)    1,806,957  101,583  37,319  1,871,221 
    Foreign government (par value - $135,086)  128,869  10,800  4,040  135,629 
    Public utilities securities    73,284  3,279  738  75,825 
    Corporate securities    3,612,729  175,590  82,753  3,705,566 
    Residential mortgage backed securities    4,141,499  351,698  979,807  3,513,390 
    Commercial mortgage backed           
       securities    2,416,046  9,739  680,433  1,745,352 
    Other asset backed securities    118,755  6,479  10,969  114,265 
    Total fixed maturities    13,150,825  665,365  1,868,184  11,948,006 
    Preferred stocks    28,925  2,050  5,526  25,449 
    Common stocks    86,487  8,426  887  94,026 
    Total equity securities    115,412  10,476  6,413  119,475 
    Total  $ 13,266,237  $ 675,841  $ 1,874,597  $ 12,067,481 
     
    At December 31, 2008:           
    U.S. Treasury securities and           
       obligations of U.S. government           
       corporations and agencies  $ 433,934  $ 43,855  $ 863  $ 476,926 
    States, municipalities, and political           
       subdivisions    46,084  355  5,527  40,912 
    Foreign other (par value - $2,192,380)    2,165,997  17,838  301,577  1,882,258 
    Foreign government (par value - $199,840)  196,549  4,982  33,268  168,263 
    Public utilities securities    140,866  1,215  7,703  134,378 
    Corporate securities    4,307,580  48,640  525,024  3,831,196 
    Residential backed securities    4,324,356  239,261  675,991  3,887,626 
    Commercial mortgage backed           
       securities    2,595,718  246  1,078,316  1,517,648 
    Other asset backed securities    2,372,996  1,132  841,271  1,532,857 
    Total fixed maturities    16,584,080  357,524  3,469,540  13,472,064 
    Preferred stocks    85,079  1  36,478  48,602 
    Common stocks    170,896  1,242  2,039  170,099 
    Total equity securities    255,975  1,243  38,517  218,701 
    Total  $ 16,840,055  $ 358,767  $ 3,508,057  $ 13,690,765 

    22


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    Reconciliation of bonds from amortized cost to carrying value is as follows:

      December 31
      2009  2008 
      (In Thousands) 
    Amortized cost  $ 13,150,825  $ 16,584,080 
    Adjustment for below investment grade bonds  (188,040)    (2,241) 
    Carrying value  $ 12,962,785  $ 16,581,839 

    Reconciliation of preferred stocks from amortized cost to carrying value is as follows:

      December 31
                       2009  2008 
      (In Thousands)
    Amortized cost  $ 28,925  $ 85,079 
    Adjustment for below investment grade PS                         (1,925)    - 
    Carrying value  $ 27,000  $ 85,079 

    The aggregate fair value of debt securities with unrealized losses and the time period that cost exceeded fair value are as follows:

        More than 6     
      Less than  Months and Less  More than   
      6 Months  than 12 Months           12 Months   
      Below Cost  Below Cost           Below Cost                 Total 
      (In Thousands)
    At December 31, 2009:         
    Fair value  $ 2,855,433  $ 634,581  $ 2,149,126  $ 5,639,140 
    Unrealized loss  780,418  159,794  927,972                 1,868,184 
     
    At December 31, 2008:         
    Fair value  $ 3,375,693  $ 2,683,894  $ 3,381,933  $ 9,441,520 
    Unrealized loss  1,107,017  664,779  1,697,744                 3,469,540 

    The amortized cost and fair value of investments in bonds at December 31, 2009, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

    23


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

      Amortized  Fair 
      Cost  Value 
      (In Thousands) 
    Maturity:     
       Due in 1 year or less  $ 170,665  $ 173,895 
       Due after 1 year through 5 years  1,637,805  1,718,791 
       Due after 5 years through 10 years  1,465,985  1,517,661 
       Due after 10 years  3,200,070  3,164,652 
      6,474,525  6,574,999 
    Residential mortgage backed securities  4,141,499  3,513,390 
    Commercial mortgage backed securities  2,416,046  1,745,352 
    Other asset backed securities  118,755  114,265 
    Total  $ 13,150,825  $ 11,948,006 

    At December 31, 2009 and 2008, investments in certificates of deposit and bonds with an admitted asset value of $26.0 and $26.4, respectively, were on deposit with state insurance departments to satisfy regulatory requirements.

    The Company is a member of the Federal Home Loan Bank of Topeka (“FHLB”) and is required to maintain a collateral deposit that backs funding agreements issued to the FHLB. At December 31, 2009 and 2008, the Company had $1.3 billion and $2.8 billion, respectively, in non-putable funding agreements, including accrued interest, issued to the FHLB. At December 31, 2009 and 2008, assets with a book value of $1.9 billion and $5.5 billion, respectively, collateralized the funding agreements to the FHLB.

    The Company does not originate or purchase subprime or Alt-A whole-loan mortgages. The Company does have exposure to Residential Mortgage-Backed Securities (“RMBS”) and asset-backed securities (“ABS”). Subprime lending is the origination of loans to customers with weaker credit profiles. The Company defines Alt-A loans to include residential mortgage loans to customers who have strong credit profiles but lack some element(s), such as documentation to substantiate income. Commencing in the fourth quarter of 2007, the Company expanded its definition of Alt-A loans to include residential mortgage loans to borrowers that would otherwise be classified as prime but whose loan structure provides repayment options to the borrower that increase the risk of default. Further, during the fourth quarter of 2007, the industry coalesced around classifying any securities backed by residential mortgage collateral not clearly identifiable as prime or subprime into the Alt-A category, and the Company is following that lead.

    The market for securities collateralized by subprime mortgages has been in a period of extended turbulence and uncertainty with regards to credit performance. Underlying collateral has continued to reflect the problems associated with a housing market that has seen substantial price declines and an employment market that has declined significantly. Credit spreads have widened meaningfully and rating agency downgrades have been widespread and severe within the sector. Over the course of 2009, price transparency and liquidity for bonds backed by subprime mortgages did improve with the stabilization

    24


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    across broader risk markets. In managing its risk exposure to subprime mortgages, ING takes into account collateral performance and structural characteristics associated with its various positions. It constructs various scenarios to project forward looking cashflows for each bond. ING’s views are updated quarterly to ensure other than temporary impairments are properly recorded and attempts to exit positions when perceived intrinsic values are in excess of market values.

    The following table summarizes the Company’s exposure to subprime mortgage backed holdings and Alt-A mortgage backed securities through other investments as of December 31, 2009:

            Other Than 
        Book/Adjusted    Temporary 
        Carrying Value    Impairment 
        (Excluding    Losses 
      Actual Cost  Interest)  Fair Value  Recognized 
      (In Thousands)
    Residential mortgage         
    backed securities  $ 153,637  $ 144,996  $ 95,444  $ 9,733 
     
    Structured securities  1,886,933  1,719,305  1,093,811  40,744 
    Total  $ 2,040,570  $ 1,864,301  $ 1,189,255  $ 50,477 

    The following table summarizes the Company’s exposure to subprime mortgage backed holdings and Alt-A mortgage backed securities through other investments as of December 31, 2008:

            Other Than 
        Book/Adjusted    Temporary 
        Carrying Value    Impairment 
        (excluding    Losses 
      Actual Cost  interest)  Fair Value  Recognized 
      (In Thousands)
    Residential mortgage         
    backed securities  $ 1,119,806  $ 1,116,175  $ 678,478  $ 9,045 
     
    Structured securities  2,053,810  2,053,406  1,287,485  - 
    Total  $ 3,173,616  $ 3,169,581  $ 1,965,963  $ 9,045 

    25


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    The following table summarizes the Company’s exposure to subprime mortgage backed holdings and Alt-A mortgage backed securities through other investments as of December 31, 2007:

            Other Than 
        Book/Adjusted    Temporary 
        Carrying Value    Impairment 
        (excluding    Losses 
      Actual Cost  interest)  Fair Value  Recognized 
      (In Thousands)
    Residential mortgage         
    backed securities  $ 1,286,907  $ 1,276,053  $ 1,249,963  $ 4,889 
     
    Structured securities  2,167,819  2,167,824               1,971,184  1,911 
    Total  $ 3,454,726  $ 3,443,877  $ 3,221,147  $ 6,800 

    The Company did not have underwriting exposure to subprime mortgage risk through investments in subprime mortgage loans, Mortgage Guaranty or Financial Guaranty insurance coverage as of December 31, 2009.

    Transfer of Alt-A RMBS Participation Interest

    On January 26, 2009, ING announced it reached an agreement, for itself and on behalf of certain ING affiliates including the Company, with the Dutch State on an Illiquid Assets Back-up Facility (the “Back-up Facility”) covering 80% of ING’s Alt-A residential mortgage-backed securities (“Alt-A RMBS”). Under the terms of the Back-up Facility, a full credit risk transfer to the Dutch State was realized on 80% of ING’s Alt-A RMBS owned by ING Bank, FSB and ING affiliates within ING Insurance Americas with a book value of $36.0 billion, including book value of approximately $683 of the Alt-A RMBS portfolio owned by the Company (with respect to the Company’s portfolio, the “Designated Securities Portfolio”) (the “ING-Dutch State Transaction”). As a result of the risk transfer, the Dutch State will participate in 80% of any results of the ING Alt-A RMBS portfolio. The risk transfer to the Dutch State took place at a discount of 10% of par value. In addition, under the Back-up Facility, other fees were paid both by the Company and the Dutch State. Each ING company participating in the ING-Dutch State Transaction, including the Company, remains the legal owner of 100% of its Alt-A RMBS portfolio and will remain exposed to 20% of any results on the portfolio. The ING-Dutch State Transaction closed on March 31, 2009, with the affiliate participation conveyance and risk transfer to the Dutch State described in the succeeding paragraph taking effect as of January 26, 2009.

    In order to implement that portion of the ING-Dutch State Transaction related to the Company’s Designated Securities Portfolio, the Company entered into a participation agreement with its affiliates, ING Support Holding B.V. (“ING Support Holding”) and ING pursuant to which the Company conveyed to ING Support Holding an 80% participation interest in its Designated Securities Portfolio and will pay a periodic transaction fee, and received, as consideration for the participation, an assignment by

    26


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    ING Support Holding of its right to receive payments from the Dutch State under the Illiquid Assets Back-Up Facility related to the Company’s Designated Securities Portfolio among, ING, ING Support Holding and the Dutch State (the “Company BackUp Facility”). Under the Company Back-Up Facility, the Dutch State is obligated to pay certain periodic fees and make certain periodic payments with respect to the Company’s Designated Securities Portfolio, and ING Support Holding is obligated to pay a periodic guarantee fee and make periodic payments to the Dutch State equal to the distributions it receives with respect to the 80% participation interest in the Company’s Designated Securities Portfolio. The Dutch State payment obligation to the Company under the Company Back-Up Facility is accounted for as an invested asset and is reported in other invested assets on the Balance Sheet. The amount of the obligation as of December 31, 2009 was $551.8.

    In a second transaction, known as the Step 1 Cash Transfer, a portion of the Company’s Alt-A RMBS which had a book value of approximately $237 was sold for cash to an affiliate, Lion II Custom Investments LLC (“Lion II”). Immediately thereafter, Lion II sold to ING Direct Bancorp the purchased securities (the “Step 2 Cash Transfer”). Contemporaneous with the Step 2 Cash Transfer, ING Direct Bancorp included such purchased securities as part of its Alt-A RMBS portfolio sale to the Dutch State. The Step 1 Cash Transfer closed on March 31, 2009 contemporaneous with the closing of the ING-Dutch Transaction.

    Since the Company had the intent to sell as of December 31, 2008, a portion of its Alt-A RMBS through the 80% participation interest in its Designated Securities Portfolio or as part of the Step 1 Cash Transfer, the Company evaluated the securities for impairment under INT 06-07: Definition of Phrase “Other Than Temporary” and SSAP No. 43, Loan-backed and Structured Securities. Per SSAP No. 43, the book value of the OTTI security must be written down to the estimated undiscounted future cash flows. In applying SSAP No. 43, the Company considered the estimated undiscounted future cash flows for the impairment test to be the remaining undiscounted cash flows on the security over its expected life. Since the estimated undiscounted future cash flow from these securities exceeded the carrying value of the securities at December 31, 2008, no impairment was recorded. The Company recorded a realized loss of $63.5 related to these transactions during the first quarter of 2009. See the ING Restructuring Plan disclosure in Commitments and Contingencies for more on this transaction.

    Mortgage Loans

    The maximum and minimum lending rates for long term mortgage loans during 2009 were 7.3% and 6.6%. Fire insurance is required on all properties covered by mortgage loans and must at least equal the excess of the loan over the maximum loan which would be permitted by law on the land without the buildings. Generally all risk coverage at replacement cost is required for a property securing real estate finance investments.

    27


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    The maximum percentage of any loan to the value of collateral at the time of the loan, exclusive of insured or guaranteed or purchase money mortgages, was 52.0% on commercial properties. As of December 31, 2009 and 2008, the Company held no mortgages with interest more than 180 days overdue. Minimal interest was past due as of December 31, 2009 and 2008.

    The average recorded investment in impaired loans was $1.1, $0 and $0 at December 31, 2009, 2008 and 2007, respectively. Interest income recognized during the period the loans were impaired was $0.2 and interest income recognized on a cash basis was $0.2 for 2009 and $0 at December 31, 2008.

    The Company recorded $2.0 and $0 in impairments on mortgage loans without an allowance for credit losses as of December 31, 2009 and 2008, respectively.

    Net Realized Capital Gains and Losses

    Realized capital losses are reported net of federal income taxes and amounts transferred to the IMR as follows:

      December 31
                     2009  2008                 2007 
      (In Thousands)
    Realized capital losses  $ (399,833)  $ (277,335)  $ (48,881) 
    Amount transferred to IMR (net of related taxes       
       of $(47,623) in 2009, $(32,441) in 2008       
       and $(14,576) in 2007)  88,443  60,248  27,069 
    Federal income tax benefit  113,377  33,458  14,711 
    Net realized capital losses  $ (198,013)  $ (183,629)  $ (7,101) 

    Realized capital losses include losses of $140.3, $186.6, and $27.5 related to securities that have experienced an other than temporary decline in value in 2009, 2008, and 2007, respectively.

    Proceeds from sales of investments in bonds and other fixed maturity interest securities were $3.6 billion, $2.2 billion and $3.4 billion in 2009, 2008 and 2007, respectively. Gross gains of $121.4, $40.6, and $31.5 and gross losses of $198.0, $122.6, and $43.3 during 2009, 2008 and 2007, respectively, were realized on those sales. A portion of the gains and losses realized in 2009, 2008, and 2007 has been deferred to future periods in the IMR.

    28


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    The following table discloses in aggregate the OTTI’s recognized by the Company in accordance with structured securities subject to SSAP No. 43R:

      Amortized Cost Basis  Other-than-Temporary
      Before Other-than-  Impairments
      Temporary         
      Impairments  Interest  Non-interest  Fair Value 
     
    Aggregate intent to sell  $ -  $ -  $ -  $ - 
    Aggregate inability or lack of intent  -  -    -                       - 
    to hold to recovery           
    Aggregate present value of expected           
    cash flows below amortized cost  507,285  -    54,472             223,256 
              Total  $ 507,285  $ -  $ 54,472  $ 223,256 

    29


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    The following table discloses in detail the OTTI’s recognized by the Company in accordance with structured securities subject to SSAP No. 43R:

      Amortized Cost       
      Before Current  Recognized  Amortized Cost   
    Cusip  Period OTTI  OTTI  After OTTI  Fair Value 
    (In Thousands)
    059515BA3  $ 1,316  $ 19  $ 1,297  $ 1,031 
    12465MAC8  38,880  6,634  32,246  14,033 
    12668BCJ0  1,810  83  1,727  1,227 
    17311YAB9  17,968  1,562  16,405  6,335 
    17311YAC7  34,894  2,989  31,905  12,979 
    22942JAB9  878  71  807  1,837 
    38374DTA7  454  215  238  645 
    38374L2N0  378  62  316  404 
    617505AD4  25,000  8,786  16,214  8,071 
    79548KXS2  449  107  342  285 
    83612LAD1  20,000  232  19,768  7,939 
    92926SAC0  50,000  2,425  47,575  17,903 
    93934FHD7  1,588  149  1,439  641 
    94985JCD0  6,138  178  5,960  4,072 
    05951FCH5  819  54  766  493 
    073882AC6  5,838  296  5,542  4,035 
    12465MAC8  32,539  2,322  30,217  13,628 
    12666PAC8  16,000  501  15,499  7,910 
    12668AKU8  7,617  273  7,344  3,634 
    12668BCH4  9,736  327  9,409  2,229 
    126694M70  422  40  382  215 
    17311YAB9  16,383  481  15,902  7,450 
    17311YAC7  31,863  922  30,940  12,718 
    31394A2W5  4,633  1,172  3,461  3,541 

    30


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    (Table continued from previous page)

      Amortized Cost       
      Before Current  Recognized  Amortized Cost   
    Cusip  Period OTTI  OTTI  After OTTI  Fair Value 
    (In Thousands)
    31394A4U7  $ 3,317  $ 818  $ 2,499  $ 1,830 
    31394AE44  2,028  510  1,518  1,319 
    31394AJ72  1,785  459  1,326  1,184 
    31394ANQ5  1,900  416  1,484  1,327 
    31394ANR3  9,522  2,626  6,896  5,793 
    31394AZQ2  1,665  434  1,231  990 
    31394AZS8  1,387  349  1,038  920 
    31395CFD8  6,788  1,772  5,015  4,284 
    31395LNW7  2,470  189  2,281  2,585 
    36185MAD4  4,959  640  4,319  3,056 
    362341S59  2,983  552  2,431  2,375 
    46629BAC3  25,510  722  24,787  17,016 
    46629QAD8  11,000  194  10,805  5,718 
    55312YAK8  3,011  2,625  386  368 
    59023XAD8  7,752  712  7,040  2,505 
    61915RBC9  712  84  628  213 
    74922RAH3  1,359  89  1,270  782 
    751155AN2  1,318  77  1,241  633 
    759676AK5  2,000  872  1,128  384 
    75970QAF7  5,986  339  5,647  2,959 
    761118RN0  1,382  253  1,129  532 
    761118VY1  1,607  108  1,499  811 
    77876QAL5  15  2  13  15 
    83612LAD1  19,771  3,312  16,458  7,817 
    92925DAA8  1,188  93  1,096  665 
    92926SAC0  47,857  5,022  42,835  17,423 
    933638AA6  1,790  153  1,637  993 
    93363CAD1  1,171  565  607  271 
    93363QAA6  1,553  99  1,454  776 
    93934FGJ5  623  8  615  475 
    93934FGN6  2,974  155  2,818  1,722 
    93934FHD7  1,385  89  1,296  633 
    93934FJR4  859  46  813  521 
    93934FQQ8  198  10  188  154 
    93934NAA3  1,857  178  1,683  952 
    Total  $ 507,285  $ 54,472  $ 452,812  $ 223,256 

    31


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    The following table discloses structured securities subject to SSAP No. 43R with book values greater than fair values, but other-than-temporary declines have not been recognized:

      December 31, 2009 
     
        Aggregate fair value of 
      Aggregate amount of  investments in 
      unrealized losses  unrealized loss position 
      (In Thousands) 
    Securities that have been in unrealized loss position     
    for less than 12 months  $ 823,915   $ 1,926,253 
     
    Securities that have been in unrealized loss position     
    for greater than 12 months  847,427  1,449,158 
      $ 1,671,342 $  3,375,411 

    For years ended December 31, 2009, 2008, and 2007, realized capital losses include $41.8, $50.1, and $4.9, respectively, related to Limited Partnerships that have experienced an other than temporary decline in value.

    Investment Income

    Major categories of net investment income are summarized as follows:

      Year ended December 31
      2009  2008  2007 
      (In Thousands)
    Income:         
       Equity securities  $ 9,250  $ 21,960  $ 18,835 
       Bonds  930,747  1,047,875    1,039,867 
       Mortgage loans  102,624  121,077    149,437 
       Derivatives  (250,930)  (143,745)    23,293 
       Contract loans  75,767  76,177    72,989 
       Real estate  -  912    66 
       Other  26,138  (4,450)    14,991 
    Total investment income  893,596  1,119,806    1,319,478 
    Investment expenses  (51,729)  (82,732)    (103,953) 
    Net investment income  $ 841,867  $ 1,037,074  $ 1,215,525 

    Repurchase Agreements

    The Company entered into reverse dollar repurchase transactions to increase its return on investments and improve liquidity. Reverse dollar repurchases involve a sale of securities and an agreement to repurchase substantially the same securities as those sold. The repurchase obligation totaled $0 and $258.0 at December 31, 2009 and 2008,

    32


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    respectively. The securities underlying these agreements are mortgage backed securities with a book value of $0 and $254.6 and fair value of $0 and $260.9 at December 31, 2009 and 2008, respectively. The primary risk associated with short term collateralized borrowings is that the counterparty may be unable to perform under the terms of the contract. The Company’s exposure is limited to the excess of the net replacement cost of the securities over the value of the short term investments, which was not material at December 31, 2009. The Company believes that the counterparties to the reverse dollar repurchase agreements are financially responsible and that counterparty risk is minimal based on counterparty and ongoing monitoring processes.

    The Company participates in reverse repurchase transactions. Such transactions include the sale of corporate securities to a major securities dealer and a simultaneous agreement to repurchase the same security in the near term. The proceeds used for general liquidity purposes. As of December 31, 2009 and 2008, the amount outstanding on these agreements was $172.6 and $381.4, respectively, and was included in borrowed money on the Balance Sheets. The securities underlying these agreements are mortgage backed securities with a book value of $183.3 and $434.0 and fair value of $175.6 and $441.3 at December 31, 2009 and 2008, respectively. The securities have a weighted average coupon rate of 6.68% with various maturity dates ending in May 15, 2067. In addition to the repurchase obligation, the Company holds $0 in collateral posted by the counterparty in connection with the increase in value of pledged securities that will be released upon settlement.

    Low-Income Housing Tax Credits

    The Company had a carrying value of $1.2 in Low-Income Housing Tax Credits (“LIHTC”) at December 31, 2009. The tax credits are projected to expire in 2017. The Company is indifferent to the holding period of the investments as the credits are guaranteed by a third party. The Company is unaware of any current regulatory reviews of the LIHTC property.

    Securities Lending

    The Company had loaned securities, which are reflected as invested assets on the Balance Sheets, with a fair value of approximately $1,277.9 and $55.2 at December 31, 2009 and 2008, respectively.

    4. Derivative Financial Instruments Held for Purposes Other than Trading

    Premiums paid for the purchase of interest rate contracts are included in other invested assets on the Balance Sheets and are being amortized to interest expense over the remaining terms of the contracts or in a manner consistent with the financial instruments being hedged.

    33


    SECURITY LIFE OF DENVER INSURANCE COMPANY Notes to Financial Statements – Statutory Basis December 31, 2009

    (Dollar amounts in millions, unless otherwise stated)

    Amounts paid or received, if any, from such contracts are included in interest expense or income on the statements of operations. Accrued amounts payable to or receivable from counterparties are included in other liabilities or other invested assets. Gains or losses realized as a result of early terminations of interest rate contracts are amortized to investment income over the remaining term of the items being hedged to the extent the hedge is considered to be effective; otherwise, they are recognized upon termination.

    Derivatives that are designated as being in an effective hedging relationship are reported in a manner that is consistent with the hedged asset or liability. Derivative contracts that are matched or otherwise designated to be associated with other financial instruments are recorded at fair value if the related financial instruments mature, are sold, or are otherwise terminated or if the interest rate contracts cease to be effective hedges. Changes in the fair value of derivatives not designated in effective hedging relationships are recorded as unrealized gains and losses in surplus.

    The Company is exposed to credit loss in the event of nonperformance by counterparties on certain derivative contracts; however, the Company does not anticipate nonperformance by any of these counterparties. The amount of such exposure is generally the unrealized gains in such contracts. The Company manages the potential credit exposure from interest rate contracts through careful evaluation of the counterparties’ credit standing, collateral agreements, and master netting agreements.

    Under the terms of the Company’s Over the Counter Derivative International Swaps and Derivatives Association, Inc. Agreements (“ISDA Agreements”), the Company may receive from, or deliver to, counterparties, collateral to assure that all 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 or receive interest on any cash delivered equal to the Federal Funds rate. The Company delivered $4.2 and $137.7 of collateral in the form of cash, for years ended December 31, 2009 and 2008.

    34


    SECURITY LIFE OF DENVER INSURANCE COMPANY     
    Notes to Financial Statements – Statutory Basis       
    December 31, 2009         
    (Dollar amounts in millions, unless otherwise stated)     
     
      The table below summarizes the Company’s derivative contracts included in other 
      invested assets at December 31, 2009 and 2008:     
     
     
          Notional  Carrying  Fair 
          Amount  Value  Value 
            (In Thousands)   
      December 31, 2009         
      Derivative contracts:         
           Swaps  $ 10,884,520  $ (171,433) $  (530,968) 
           Caps owned    473,419  1,219  963 
           Options owned    46,816  5,347  5,347 
      Total derivatives  $ 11,404,755  $ (164,867) $  (524,658) 
     
      December 31, 2008         
      Derivative contracts:         
           Swaps  $ 11,897,746  $ (231,294) $  (820,621) 
           Forwards    444,000  3,308  3,308 
           Caps owned    478,516  824  271 
           Floors owned    500,026  7,824  7,824 
           Futures    560,646  (14,175)  (14,175) 
           Options owned    1,501,466  4,335  4,335 
      Total derivatives  $ 15,382,400  $ (229,178) $  (819,058) 
     
     
       5.     Concentrations of Credit Risk         

    The Company held below investment grade corporate bonds with an aggregate book value of $1,733.5 and $1,191.0 and an aggregate fair value of $1,113.0 and $753.6 at December 31, 2009 and 2008, respectively. Those holdings amounted to 13.4% of the Company’s investments in bonds and 8.9% of total admitted assets at December 31, 2009. The holdings of below investment grade bonds are widely diversified and of satisfactory quality based on the Company’s investment policies and credit standards.

    The Company held unrated bonds of $2,634.8 and $71.9 with an aggregate NAIC fair value of $1,905.3 and $62.5 at December 31, 2009 and 2008, respectively. The carrying value of these holdings amounted to 20.3% of the Company’s investment in bonds and 13.5% of the Company’s total admitted assets at December 31, 2009.

    At December 31, 2009, the Company’s commercial mortgages involved a concentration of properties located in California (21.9%) and Pennsylvania (10.9%). The remaining commercial mortgages relate to properties located in 40 other states. The portfolio is well diversified, covering many different types of income producing properties on which the Company has first mortgage liens. The maximum mortgage outstanding on any individual property is $37.6.

    35


    SECURITY LIFE OF DENVER INSURANCE COMPANY Notes to Financial Statements – Statutory Basis December 31, 2009

    (Dollar amounts in millions, unless otherwise stated)

    6. Annuity Reserves

    At December 31, 2009 and 2008, the Company’s annuity reserves, including those held in separate accounts and deposit fund liabilities that are subject to discretionary withdrawal (with adjustment), subject to discretionary withdrawal (without adjustment), and not subject to discretionary withdrawal provisions are summarized as follows:

      Amount  Percent   
      (In Thousands)     
    December 31, 2009       
    Subject to discretionary withdrawal (with adjustment):       
       With market value adjustment  $ 1,878,483  29.9 % 
       At book value less surrender charge  96  0.0   
       At fair value  10,519  0.2   
    Subtotal  1,889,098  30.1   
    Subject to discretionary withdrawal (without adjustment):       
       At book value with minimal or no charge or adjustment  122,873  2.0   
    Not subject to discretionary withdrawal  4,261,670  67.9   
    Total annuity reserves and deposit fund liabilities       
         before reinsurance  6,273,641  100.0  % 
    Less reinsurance ceded  -     
    Net annuity reserves and deposit fund liabilities  $ 6,273,641     
     
    December 31, 2008       
    Subject to discretionary withdrawal (with adjustment):       
       With market value adjustment  $ 2,094,113  21.3  % 
       At book value less surrender charge  461  0.0   
       At fair value  9,796  0.1   
    Subtotal  2,104,370  21.4   
    Subject to discretionary withdrawal (without adjustment):       
       At book value with minimal or no charge or adjustment  202,022  2.1   
    Not subject to discretionary withdrawal  7,531,687  76.6   
    Total annuity reserves and deposit fund liabilities       
         before reinsurance  9,838,079  100.0  % 
    Less reinsurance ceded  -     
    Net annuity reserves and deposit fund liabilities  $ 9,838,079     

    Of the total net annuity reserves and deposit fund liabilities of $6,273.6 at December 31, 2009, $6,263.1 is included in the general account, and $10.5 is included in the separate account. Of the total net annuity reserves and deposit fund liabilities of $9,838.1 at December 31, 2008, $9,828.3 is included in the general account, and $9.8 is included in the separate account.

    36


    SECURITY LIFE OF DENVER INSURANCE COMPANY Notes to Financial Statements – Statutory Basis December 31, 2009

    (Dollar amounts in millions, unless otherwise stated)

    7. Employee Benefit Plans

    Defined Benefit Plan: ING North America Insurance Corporation (“ING North America”) sponsors the ING Americas Retirement Plan (the “Qualified Plan”), effective as of December 31, 2001. Effective January 1, 2009, the Qualified Plan is no longer available to new employees or re-hires. Employees of ING North America and its subsidiaries and affiliates (excluding certain employees) hired by December 31, 2008 will continue to be eligible to participate in the Qualified Plan.

    The Qualified Plan is a tax qualified defined benefit plan, the benefits of which are guaranteed (within certain specified legal limits) by the Pension Benefit Guaranty Corporation (“PBGC”). As of January 1, 2002, each participant in the Qualified Plan (except for certain specified employees) earns a benefit under a final average compensation formula. The costs allocated to the Company for its employees’ participation in the Qualified Plan were $4.0, $2.3 and $2.6 for 2009, 2008 and 2007, respectively. ING North America is responsible for all Qualified Plan liabilities.

    Defined Contribution Plans: ING North America sponsors the ING Savings Plan and ESOP (the “Savings Plan”). Substantially all employees of ING North America and its subsidiaries and affiliates (excluding certain employees) are eligible to participate, including the Company’s employees other than Company agents. The Savings Plan is a tax qualified profit sharing and stock bonus plan, which includes an employee stock ownership plan (“ESOP”) component. Savings Plan benefits are not guaranteed by the PBGC. The Savings Plan allows eligible participants to defer into the Savings Plan a specified percentage of eligible compensation on a pretax basis. ING North America matches such pretax contributions, up to a maximum of 6% of eligible compensation. All matching contributions are subject to a 4 year graded vesting schedule (although certain specified participants are subject to a 5 year graded vesting schedule). All contributions made to the Savings Plan are subject to certain limits imposed by applicable law. Amounts allocated to the Company for the Savings Plan were $1.6, $2.0 and $2.2 for 2009, 2008 and 2007, respectively.

    Other Benefit Plans: In addition to providing retirement plan benefits, the Company, in conjunction with ING North America, provides certain supplemental retirement benefits to eligible employees and health care and life insurance benefits to retired employees and other eligible dependents. The supplemental retirement plan includes a nonqualified defined benefit pension plan, and a nonqualified defined contribution plan, which means all benefits are payable from the general assets of the Company. The postretirement health care plan is contributory, with retiree contribution levels adjusted annually. The life insurance plan provides a flat amount of noncontributory coverage and optional contributory coverage.

    Beginning August 1, 2009, the Company moved from self-insuring these costs and began to use a private-fee-for-service Medicare Advantage program for post-Medicare eligible retired participants. The Company subsidizes a portion of the monthly per-participant

    37


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    premium for retirees age 65 and older. This change had a minimal impact to the financial statements.

    In addition, effective October 1, 2009, the Company no longer subsidizes medical premium costs for early retirees. This change does not impact any participant currently retired and receiving coverage under the plan or any employee who is eligible for coverage under the plan and whose employment ended before October 1, 2009. The Company continues to offer access to medical coverage until retirees become eligible for Medicare. The discontinued subsidy resulted in a release of a previously accrued immaterial liability for any active employees age 50 or older. This change had a minimal impact to the financial statements.

    As of August 1, 2009, ING's Post Retirement Welfare (“PRW”) Plans are no longer eligible for the Medicare Drug Subsidy (RDS) that was being shared with retirees and beneficiaries. The 2010 expected benefit reduction in the net postretirement benefit cost for the subsidy related to benefits attributed to former employees is $0.

    38


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    A summary of assets, obligations and assumptions of the pension and other postretirement benefit plans are as follows:

      Pension Benefits Other Benefits
      2009  2008  2007   2009  2008  2007 
      (In Thousands)
    Change in benefit obligation               
    Benefit obligation at beginning of year  $ 17,964  $ 15,996  $ 17,561  $ 3,642  $ 4,037  $ 5,003 
    Service cost  -  -  -    135  -  (172) 
    Interest cost  1,028  1,002  1,003    162  225  273 
    Contribution by plan participants  -  -  -    196  408  361 
    Actuarial (gain) loss  1,354  2,253  (1,436)    (343)  (277)  (579) 
    Benefits paid  (1,387)  (1,350)  (1,132)    (420)  (751)  (849) 
    Plan amendments  -  63  -  (1,323)  -  - 
    Curtailment  1  -  -    24  -  - 
    Benefit obligation at end of year  $ 18,960  $ 17,964  $ 15,996  $ 2,073  $ 3,642  $ 4,037 
     
    Change in plan assets               
    Fair value of plan assets at beginning of year  $ -  $ -  $ -  $ -  $ -  $ - 
    Employer contributions  1,387  1,350  1,132    224  343  487 
    Plan participants' contributions  -  -  -    196  408  361 
    Benefits paid  (1,387)  (1,350)  (1,132)    (420)  (751)  (848) 
    Fair value of plan assets at end of year  $ -  $ -  $ -  $ -  $ -  $ - 
     
    Funded status  $ (18,960)  $ (17,964)  $ (15,996)  $ (2,073)  $ (3,642)  $ (4,037) 
    Unrecognized prior service cost  (128)  (162)  (260)  (1,413)  (370)  (685) 
    Unrecognized net (loss) gain  5,495  4,523  2,380  (2,924)  (2,790)  (2,654) 
    Remaining net transition obligation  6,686  7,735  8,380    -  -  - 
    Total funded status  $ (6,907)  $ (5,868)  $ (5,496)  $ (6,410)  $ (6,802)  $ (7,376) 
     
    Amounts recognized in the balance sheets               
       consist of:               
    Accrued benefit cost  $ (18,960)  $ (17,866)  $ (15,348)  $ (6,410)  $ (6,802)  $ (7,376) 
    Intangible assets  6,686  7,735  8,380    -  -  - 
    Unassigned surplus - minimum               
       pension liability  5,367  4,263  1,472    -  -  - 
    Net amount recognized  $ (6,907)  $ (5,868)  $ (5,496)  $ (6,410)  $ (6,802)  $ (7,376) 
    Component of net periodic benefit cost               
    Service cost  $ -  $ -  $ -  $ 135  $ -  $ (172) 
    Interest cost  1,028  1,002  1,003    162  225  273 
    Amount of recognized gains (losses)  382  110  323    (184)  (174)  (142) 
    Amount of prior service cost recognized  (25)  (36)  (36)    (294)  (282)  (282) 
    Amortization of unrecognized transition               
       obligation to transition asset  618  645  645    -  -  - 
    Amount of gain or loss recognized due to               
       a settlement or curtailment  424  -  -    (18)  -  - 
    Total net periodic benefit cost (income)  $ 2,427  $ 1,721  $ 1,935  $ (199)  $ (231)  $ (323) 
     
    Benefit obligation for nonvested employees  $ -  $ -  $ -  $ -  $ 265  $ 253 
    Accumulated benefit obligation               
       for vested participants  $ 18,960  $ 17,866  $ 15,348  $ 2,073  $ 3,641  $ 4,037 

    39


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    Assumptions used in determining year-end liabilities for the defined benefit plans and other benefit plan as of December 31, 2009, 2008 and 2007 were as follows:

      2009 2008 2007
    Weighted average discount rate       6.0  %  6.0  %       6.5  % 
    Rate of increase in compensation level       1.5  %  4.0  %       4.2  % 

    For 2009 expense, the Company used the assumptions used in determining 2008 year-end liabilities. For 2008 expense, the Company used the assumptions used in determining 2007 year-end liabilities. For 2007 expense, the company used 5.9% for the weighted average discount rate and 4.0% for the rate of increase in compensation level.

    The annual assumed rate of increase in the per capita cost of covered benefits (i.e. health care cost trend rate) for the medical plan is 7.8%, decreasing gradually to 6.0% over five years. Increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation for the medical plan as of December 31, 2009 by $0.1. Decreasing the assumed health care cost trend rates by one percentage point in each year would decrease the accumulated postretirement benefit obligation for the medical plan as of December 31, 2009 by $0.1.

    The Company expects to pay the following benefits:

    Year ending   
    December 31,  Benefits 
      (In Thousands) 
    2010  $ 1,532 
    2011                                     1,506 
    2012                                     1,566 
    2013                                     1,517 
    2014                                     1,548 
    Thereafter                                     7,769 

    The Company’s expected future contributions are equal to its expected future benefit payments. The Company’s 2010 future expected contribution is $1.5.

    The measurement date used for postretirement benefits is December 31, 2009.

    8. Separate Accounts

    Separate account assets and liabilities represent funds segregated by the Company for the benefit of certain policy and contract holders who bear the investment risk. Revenues and expenses on the separate account assets and related liabilities equal the benefits paid to the separate account policy and contract holders.

    40


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    The general nature and characteristics of the separate accounts business follows:

      Non-Guaranteed 
      Separate 
      Accounts 
      (In Thousands) 
    December 31, 2009   
    Premium, consideration or deposits for the year  $ 128,978 
     
    Reserves for separate accounts with assets at:   
       Fair value  $ 1,236,545 
       Amortized cost  - 
    Total reserves  $ 1,236,545 
     
    Reserves for separate accounts by withdrawal characteristics:   
       Subject to discretionary withdrawal:   
             With market value adjustment  $ - 
             At book value without market value adjustment   
                   and with current surrender charge of 5% or more  353,763 
             At market value  10,519 
             At book value without market value adjustment   
                   and with current surrender charge less than 5%  872,263 
       Subtotal  1,236,545 
       Not subject to discretionary withdrawal  - 
    Total separate account aggregate reserves  $ 1,236,545 
     
    December 31, 2008   
    Premium, consideration or deposits for the year  $ 186,834 
     
    Reserves for separate accounts with assets at:   
       Fair value  $ 1,065,944 
       Amortized cost  - 
    Total reserves  $ 1,065,944 
     
    Reserves for separate accounts by withdrawal characteristics:   
       Subject to discretionary withdrawal:   
             With market value adjustment  $ - 
             At book value without market value adjustment   
                   and with current surrender charge of 5% or more  392,656 
             At market value  9,796 
             At book value without market value adjustment   
                   and with current surrender charge less than 5%  663,492 
       Subtotal  1,065,944 
       Not subject to discretionary withdrawal  - 
    Total separate account aggregate reserves  $ 1,065,944 

    41


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    A reconciliation of the amounts transferred to and from the separate accounts is presented below:

      Year ended December 31
                     2009  2008  2007 
        (In Thousands)     
    Transfers as reported in the Summary of Operations         
       of the Separate Accounts Statement:         
       Transfers to separate accounts  $ 129,012       $ 186,906  $ 200,528 
       Transfers from separate accounts               (144,216)                           (80,813)    (102,849) 
    Transfers as reported in the statements of operations  $ (15,204)       $ 106,093  $ 97,679 

    The separate account liabilities subject to minimum guaranteed benefits, the gross amount of reserve and the reinsurance reserve credit related to minimum guarantees, by type, at December 31, 2009 and 2008 were as follows:

      Guaranteed Minimum 
      Death Benefit (GMDB) 
      (In Thousands) 
    December 31, 2009   
    Separate account liability  $ 10,750 
    Gross amount of reserve  404 
    Reinsurance reserve credit  - 
     
    December 31, 2008   
    Separate account liability  $ 10,370 
    Gross amount of reserve  399 
    Reinsurance reserve credit  - 

    42


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    9. Federal Income Taxes

    The Company files a consolidated federal income tax return with its parent ING AIH, a Delaware corporation, and other U.S. affiliates. The Company has a written tax sharing agreement that provides that each member of the consolidated return shall reimburse ING AIH for its respective share of the consolidated federal income tax liability and shall receive a benefit for its losses at the statutory rate. The following is a list of all affiliated companies that participate in the filing of this consolidated federal income tax return:

    ALICA Holdings, Inc.
    Australia Retirement Services Holding, LLC
    Bancnorth Investment Group, Inc.
    Branson Insurance Agency, Inc.
    Compulife Investor Services, Inc.
    Compulife, Inc.
    Directed Services, LLC
    Financial Network Investment Corporation
    Financial Network Investment Corporation of Puerto Rico, Inc.
    FN Insurance Agency of Kansas, Inc.
    FN Insurance Agency of New Jersey, Inc.
    FN Insurance Services of Nevada, Inc.
    FN Insurance Services, Inc.
    FNI International, Inc.
    ING Furman Selz (SBIC) Investments LLC
    Furman Selz Investments, LLC
    Guaranty Brokerage Services, Inc.
    IB Holdings, LLC
    IIPS of Florida, LLC
    ILICA, Inc.
    ING America Insurance Holdings, Inc.
    ING Alternative Asset Management, LLC
    ING America Equities, Inc.
    ING Brokers Network, LLC
    ING Capital Corporation, LLC
    ING Equity Holdings, Inc.
    ING Financial Advisors, LLC
    ING Financial Partners, Inc.
    ING Financial Products Company, Inc.
    ING Funds Distributor, LLC
    ING Funds Services, LLC
    ING Ghent Asset Management, LLC
    ING Institutional Plan Services, LLC
    ING Insurance Agency of Texas, Inc.
    ING Insurance Agency, Inc.
    ING Insurance Services Holding Company, Inc.
    ING Insurance Services of Alabama, Inc.
    ING Insurance Services of Massachusetts, Inc.
    ING Insurance Services, Inc.
    ING International Insurance Holdings, Inc.
    ING International Nominee Holdings, Inc.
    ING Investment Advisors, LLC
    ING Investment Management Alternative Assets, LLC

    ING Investment Management Co.
    ING Investment Management Services, LLC
    ING Investment Management, LLC
    ING Investment Trust Co.
    ING Investments, LLC
    ING Life Insurance and Annuity Company
    ING National Trust
    ING North America Insurance Corporation
    ING Payroll Management, Inc.
    ING Pilgrim Funding, Inc.
    ING Pomona Holdings LLC
    ING Retail Holding Company, Inc.
    ING Services Holding Company, Inc.
    ING USA Annuity and Life Insurance Company
    ING Wealth Solutions, LLC
    Lion Connecticut Holdings Inc.
    Lion Custom Investments, LLC
    Lion II Custom Investments, LLC
    MFSC Insurance Agency of Nevada, Inc.
    MFSC Insurance Services, Inc.
    Midwestern United Life insurance Company
    Multi-Financial Group, LLC
    Multi-Financial Securities Corporation
    Pomona Management LLC
    PrimeVest Financial Services, Inc.
    PrimeVest Insurance Agency of Alabama, Inc.
    PrimeVest Insurance Agency of Nevada, Inc.
    PrimeVest Insurance Agency of New Mexico, Inc.
    PrimeVest Insurance Agency of Ohio, Inc.
    PrimeVest Insurance Agency of Oklahoma, Inc.
    PrimeVest Insurance Agency of Texas, Inc.
    PrimeVest Insurance Agency of Wyoming, Inc.
    ReliaStar Life Insurance Company
    ReliaStar Life Insurance Company of New York
    Roaring River, LLC
    Security Life Assignment Corp.
    Security Life of Denver Insurance Company
    Security Life of Denver International, Ltd.
    SLDI Georgia Holdings, Inc.
    Systematized Benefits Administrators, Inc.
    Whisperingwind I, LLC
    Whisperingwind II, LLC
    Whisperingwind III, LLC

    43


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    Current income taxes incurred consisted of the following major components:

      Year ended December 31
                     2009  2008  2007 
      (In Thousands)
    Federal tax expense (benefit) on operations  $ 40,109  $ (37,012)  $ 23,795 
    Federal tax benefit on capital losses  (113,377)  (33,458)    (14,711) 
    Total current tax (benefit) expense incurred  $ (73,268)  $ (70,470)  $ 9,084 

    The Company adopted SSAP 10R effective December 31, 2009. The December 31, 2009 balances and related disclosures are calculated and presented pursuant to SSAP 10R. The December 31, 2008 balances and related disclosures are calculated and presented pursuant to SSAP 10 prior to its modification by SSAP 10R.

    The decrease in total deferred tax assets that were nonadmitted including the tax valuation allowance was $90.9 for 2009.

    The Company has elected to admit deferred tax assets pursuant to paragraph 10.e. of SSAP 10R for the year ended December 31, 2009. The year ended December 31, 2009 election differs from the December 31, 2008 year-end reporting period.

    The amount of admitted adjusted gross deferred tax assets admitted under each component of SSAP 10R:

        December 31, 2009   
      Ordinary  Capital  Total 
      (In Thousands)
    Admitted under paragraph 10.a.  $ -  $ -  $ - 
       Paragraph 10.b., lesser of:       
       Admitted under paragraph 10.b.i  54,588  34,537  89,125 
       Admitted under paragraph 10.b.ii  125,635  N/A  125,635 
    Admitted under paragraph 10.b. (lesser of b.i. or b.ii)  54,588  34,537  89,125 
    Admitted under paragraph 10.c.  44,238  290  44,528 
    Total admitted from the application of paragraph 10.a - 10.c.  98,826  34,827  133,653 
    Admitted under paragraph 10.e.i.  -  -  - 
       Paragraph 10.e.ii., lesser of:       
       Admitted under paragraph 10.e.ii.a  128,783  34,537  163,320 
       Admitted under paragraph 10.e.ii.b  188,452  N/A  188,452 
    Admitted under paragraph 10.e.ii. (lesser of e.ii.a or e.ii.b)  128,783  34,537  163,320 
    Admitted under paragraph 10.e.iii.  44,238  290  44,528 
    Total admitted from the application of paragraph 10.e.  173,021  34,827  207,848 
     
    The increased amount by tax character, and the change in such, of       
    admitting adjusted gross DTAs as the result of the application of       
    paragraph 10e:  74,195  -  74,195 
    Total admitted adjusted gross deferred tax assets  $ 173,021  $ 34,827  $ 207,848 

    44


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    The amount of admitted adjusted gross deferred tax assets admitted under each component of SSAP 10R:

      December 31
      2009  2008 
      (In Thousands)
    Admitted under paragraph 10.a.  $ -  $ - 
       Paragraph 10.b., lesser of:       
       Admitted under paragraph 10.b.i  89,125    66,651 
       Admitted under paragraph 10.b.ii  125,635    105,746 
    Admitted under paragraph 10.b. (lesser of b.i. or b.ii)  89,125    66,651 
    Admitted under paragraph 10.c.  44,528    45,016 
    Total admitted from the application of paragraph 10.a - 10.c.  133,653    111,667 
     
    Admitted under paragraph 10.e.i.  -    - 
       Paragraph 10.e.ii., lesser of:       
       Admitted under paragraph 10.e.ii.a  163,320    - 
       Admitted under paragraph 10.e.ii.b  188,452    - 
    Admitted under paragraph 10.e.ii. (lesser of e.ii.a or e.ii.b)  163,320    - 
    Admitted under paragraph 10.e.iii.  44,528    - 
    Total admitted from the application of paragraph 10.e.  207,848    - 
     
    The increased amount by tax character, and the change in such,       
    of admitting adjusted gross DTAs as the result of the application       
    of paragraph 10e:  74,195    - 
     
    Total admitted adjusted gross deferred tax assets  $ 207,848  $ 111,667 

    Admittance testing under paragraph 10.e was implemented as part of the adoption of SSAP 10R effective December 31, 2009.

    45


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    The main components of deferred tax assets and deferred tax liabilities are as follows:

      December 31, 2009
      Ordinary  Capital  Total 
      (In Thousands)
    Deferred tax assets resulting from differences in:       
       Deferred acquisition costs  $ 74,594  $ -  $ 74,594 
       Insurance reserves  93,132  -  93,132 
       Investments  3,544  79,279  82,823 
       Compensation and benefits  22,521  -  22,521 
       Policyholder dividends  2,479  -  2,479 
       Reinsurance with unauthorized companies  959  -  959 
       OCI pension  1,879  -  1,879 
       Unrealized losses on investments  49,725  69,102  118,827 
       Nonadmitted assets  7,837  -  7,837 
       Other  6,244  -  6,244 
    Total gross deferred tax assets  262,914  148,381  411,295 
       Valuation allowance adjustment  -  (113,553)  (113,553) 
    Total adjusted gross deferred tax assets  262,914  34,828  297,742 
       Deferred tax assets nonadmitted  (89,894)  -  (89,894) 
    Admitted deferred tax assets  173,020  34,828  207,848 
     
    Deferred tax liabilities resulting from differences in:       
       Investments  18,182  291  18,473 
       Insurance reserves  17,335  -  17,335 
       Deferred and uncollected premium  5,927  -  5,927 
       Other  2,793  -  2,793 
    Total deferred tax liabilities  44,237  291  44,528 
    Net admitted deferred tax asset  $ 128,783  $ 34,537  $ 163,320 

    46


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    The change in the tax assets and deferred tax liabilities by main component are as follows:

      December 31
      2009  2008  Change 
      (In Thousands)
    Deferred tax assets resulting from differences in:       
       Deferred acquisition costs  $ 74,595  $ 79,074  $ (4,479) 
       Insurance reserves  93,132  134,183  (41,051) 
       Investments  82,823  67,743  15,080 
       Compensation and benefits  22,521  21,967  554 
       Policyholder dividends  2,479  2,655  (176) 
       Reinsurance with unauthorized companies  959  3,398  (2,439) 
       OCI pension  1,879  1,492  387 
       Unrealized losses on investments  118,827  74,913  43,914 
       Nonadmitted assets  7,837  14,509  (6,672) 
       Other  6,244  6,047  197 
    Total gross deferred tax assets  411,296  405,981  5,315 
       Valuation allowance adjustment  (113,554)  -  (113,554) 
    Total adjusted gross deferred tax assets  297,742  405,981  (108,239) 
       Deferred tax assets nonadmitted  (89,894)  (294,313)  204,419 
    Admitted deferred tax assets  207,848  111,668  96,180 
     
    Deferred tax liabilities resulting from differences in:       
       Investments  18,473  21,670  (3,197) 
       Insurance reserves  17,335  10,870  6,465 
       Deferred and uncollected premium  5,927  9,227  (3,300) 
       Other  2,793  3,249  (456) 
    Total deferred tax liabilities  44,528  45,016  (488) 
    Net admitted deferred tax asset  $ 163,320  $ 66,652  $ 96,668 

    The valuation allowance adjustment to gross deferred tax assets of December 31, 2009 was $113.6. The net change in the total valuation allowance adjustment for the year ended December 31, 2009 was an increase of $113.6 due to the application of SSAP 10R. The valuation allowance adjustment at 2009 is necessary as it is unlikely that the Company will realize sufficient taxable capital gain income to offset taxable capital losses.

    47


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    The change in deferred income taxes reported in surplus before the consideration of nonadmitted assets is comprised of the following components:

      December 31
      2009   2008  Change 
      (In Thousands)
    Net deferred tax asset  $ 366,768  $ 360,965  $ 5,803 
    Valuation allowance adjustment    (113,554)  -  (113,554) 
       Net deferred tax asset    253,214  360,965  (107,751) 
    Remove unrealized losses    118,827  74,913  43,914 
       Net tax effect without unrealized gains and losses  $ 134,387  $ 286,052  (151,665) 
     
    Remove other items in surplus:         
       Additional minimum pension liability        386 
       Current year change in nonadmitted assets        (6,672) 
       Unauthorized reinsurance        (2,439) 
       Accounting method change for statutory reserves        (10,528) 
     
    Remove current year change in valuation allowance adjustment      (113,554) 
       Change in deferred taxes for rate reconciliation        $ (18,858) 

    The Company has no unrecorded tax liabilities as of December 31, 2009.

    The provision for federal income tax expense and change in deferred taxes differs from the amount which would be obtained by applying the statutory federal income tax rate to income (including capital items) before income taxes for the following reasons:

      Year ended December 31
      2009  2008  2007 
      (In Thousands)
    Current income taxes incurred  $ (73,268)  $ (70,470)  $ 9,084 
    Change in deferred income tax **  18,858  13,478    (19,714) 
    Total income tax reported  $ (54,410)  $ (56,992)  $ (10,630) 
     
    Ordinary income  $ 261,857  $ 184,182  $ 61,499 
    Capital losses  (311,390)  (217,087)    (21,812) 
    Total pre tax book (loss) income  $ (49,533)  $ (32,905)  $ 39,687 
     
    Provision computed at statutory rate  $ (17,337)  $ (11,517)  $ 13,890 
    Dividends received deduction  (3,212)  (2,515)    (3,305) 
    Interest maintenance reserve  (27,492)  (16,236)    (3,692) 
    Prior year taxes  (1)  (8,608)    (12,936) 
    Reinsurance  (4,637)  (17,057)    (4,567) 
    Other  (1,731)  (1,059)    (20) 
    Total  $ (54,410)  $ (56,992)  $ (10,630) 
     
    ** (excluding tax on unrealized gains/losses and other surplus items)       

    48


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    The Company's risk-based capital level used for purposes of paragraph 10.d. is based on authorized control level risk based capital of $224.8 and total adjusted capital of $1,647.4. The amount of admitted deferred tax assets, admitted assets, statutory surplus and total adjusted capital in the risk-based capital calculation and the increased amount of deferred tax assets, admitted assets and surplus as the result of the application of paragraph 10.e:

      December 31, 2009 
      (In Thousands) 
          Increase After 
      After Application of  Application of 
      paragraph 10.a, b, c  paragraph 10.e 
    Admitted net DTAs  $ 89,126  $ 163,320 
    Admitted assets  20,696,183    20,770,378 
    Statutory surplus  1,623,278    1,697,472 
    Total adjusted capital  1,647,366    1,721,561 

    There is no operating loss or tax credit carryforward available for tax purposes as of December 31, 2009.

    There are no federal income taxes incurred that will be available for recoupment in the event of future net losses from 2009, 2008 and 2007.

    There were no deposits admitted under Section 6603 of the Internal Revenue Service Code as of December 31, 2009.

    Under the intercompany tax sharing agreement, the Company has a receivable from ING AIH, an affiliate, of $10.8 and $31.2 for federal income taxes as of December 31, 2009 and 2008, respectively.

    49


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    The Company’s transferable state tax credit assets are as follows:

    Method of Estimating Utilization of
    Remaining Transferrable State Tax
    Credit     		 State Carrying Value at
    December 31, 2009    		 Unused Credit
    Remaining at
    December 31, 2009 
        (In Thousands) 
    December 31, 2009       
    Estimated credit based on investment in       
               motion picture/film production  CT  $ 494  $ 564 
    Estimated credit based on investment in       
               low income housing investment  GA  1,170  1,428 
    Total state tax credits    $ 1,664  $ 1,992 
     
    December 31, 2008       
    Estimated credit based on investment in       
               motion picture/film production  CT  $ 397  $ 450 
    Estimated credit based on investment in       
               low income housing investment  GA  812  1,639 
    Total state tax credits    $ 1,209  $ 2,089 

    A reconciliation of the change in the unrecognized income tax benefits for the years is as follows:

      2009  2008  2007 
      (In Thousands)
    Balance at the beginning of year  $ 6,600  $ 15,300  $ 33,300 
    Additions for tax positions related to current year  200  300  200 
    Additions for tax positions related to prior years  200                       -  - 
    Reduction for tax positions related to prior years  (400)  (8,600)  (12,800) 
    Reduction for tax positions settled with taxing authorities  -  (400)  (5,400) 
    Balance at the end of year  $ 6,600  $ 6,600  $ 15,300 

    The Company had $6.6, $6.6 and $15.3 of unrecognized tax benefits that would affect the Company’s effective tax rate if recognized as of December 31, 2009, 2008 and 2007, respectively.

    The Company recognizes accrued interest and penalties related to unrecognized tax benefits in Federal income taxes and Federal income tax expense on the Balance Sheets and Statements of Operations, respectively. The Company had accrued interest of $0.2 as of December 31, 2009 and 2008.

    The Company is under audit by the Internal Revenue Service (“IRS”) for tax years 2004 through 2009. It is anticipated that the IRS audits of tax years 2004 through 2008 will be finalized within the next twelve months. Upon finalization of the IRS exams, it is reasonably possible that the unrecognized tax benefits will decrease by up to $1.1. The timing of the payment of the remaining allowance of $5.5 can not be reliably estimated.

    50


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    The Company and the IRS have agreed to participate in the Compliance Assurance Program (“CAP”) for the tax years 2008 and 2009.

    10. Investment in and Advances to Subsidiaries

    The Company has two wholly owned insurance subsidiaries at December 31, 2009, Midwestern United Life Insurance Company (“Midwestern”) and Whisperingwind III, LLC (“WWIII”). The Company also has one wholly owned non-insurance subsidiary, ING America Equities, Inc. (“IAE”).

    Amounts invested in and advanced to the Company’s subsidiaries are summarized as follows:

      December 31
                       2009  2008 
      (In Thousands)
    Common stock (cost - $41,246 in 2009 and $41,246 in 2008)  $ 104,751  $ 97,329 

    Summarized financial information as of and for the year ended December 31 for these subsidiaries is as follows:

        December 31   
      2009                 2008                 2007 
        (In Thousands)   
    Revenues  $ 85,587  $ 166,087  $ 564,984 
    Income (loss) before net realized gains on investments  20,486                   (14,276)  (209,360) 
    Net income (loss)  19,513                   (16,265)  (208,722) 
    Admitted assets  667,115                 664,879  639,103 
    Liabilities  451,270                 457,086  454,093 

    Asset and liability amounts for WWIII are included in the above table, however the Company’s carrying amount for WWIII is zero as of December 31, 2009 and 2008.

    The Company did not receive dividends from any of its subsidiaries during the years ended December 31, 2009, 2008 and 2007.

    Effective March 27, 2008, the Company dissolved its wholly owned subsidiary Draft Funding, LLC, a non-insurance entity. There was no impact to the Company’s financial statements as a result of this transaction.

    Effective August 27, 2008, the Company dissolved its wholly owned subsidiary First Secured Mortgage Deposit Corporation, a non-insurance entity. There was no impact to the Company’s financial statements as a result of this transaction.

    51


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    On October 27, 2006, the Company created WWIII, a special purpose financial captive reinsurance company (“SPFC”), under the laws of the State of South Carolina. WWIII was not licensed by the South Carolina Department of Insurance as of December 31, 2006. Consequently, WWIII did not commence writing insurance business until 2007. On June 25, 2007, WWIII received its licensure as a SPFC from the Director of the South Carolina Department of Insurance. The Company contributed capital to WWIII of $0.0, $0.0 and $37.4 during the years ended December 31, 2009, 2008 and 2007. During 2009, the Company ceded premium and ceded reserves to WWIII of $23.6 and $462.4, respectively. The amount of insurance in force ceded to WWIII was $2.1 billion at December 31, 2009. During 2008, the Company ceded premium and ceded reserves to WWIII of $71.2 and $434.5, respectively. The amount of insurance in force ceded to WWIII was $1.7 billion at December 31, 2008. During 2007, the Company ceded premium and ceded reserves to WWIII of $288.4 and $357.8, respectively. The amount of insurance in force ceded to WWIII was $1.4 billion at December 31, 2007.

    11. Reinsurance

    The Company is involved in both ceded and assumed reinsurance with other companies for the purpose of diversifying risk and limiting exposure on larger risks. To the extent that the assuming companies become unable to meet their obligations under these treaties, the Company remains contingently liable to its policyholders for the portion reinsured. To minimize its exposure to significant losses from retrocessionaire insolvencies, the Company evaluates the financial condition of the retrocessionaire and monitors concentrations of credit risk.

    Assumed premiums amounted to $1.9 billion, $1.6 billion and $1.4 billion for 2009, 2008 and 2007, respectively.

    The Company’s ceded reinsurance arrangements reduced certain items in the accompanying financial statements by the following amounts:

      December 31
                     2009  2008               2007 
      (In Thousands)
    Premiums  $ 1,927,818  $ 1,675,116  $ 1,879,093 
    Benefits paid or provided             1,689,842  1,448,588           1,235,280 
    Policy and contract liabilities at year end             8,656,338  8,142,243           7,516,909 

    The net amount of the reduction in surplus at December 31, 2009, if all reinsurance agreements were cancelled, is $7.5 billion.

    52


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    12. Capital and Surplus

    Under Colorado insurance regulations, the Company is required to maintain a minimum total capital and surplus of $1.5. Additionally, the amount of dividends which can be paid by the Company to its shareholder without prior approval of the Colorado Division of Insurance is limited to the greater of the net gain from operations excluding realized capital gains or 10% of surplus at December 31 of the preceding year.

    On January 1, 2001, Lion Connecticut Holdings, Inc., an affiliate of the Company, issued two surplus notes for $65.0 and $100.0. These notes represent the cumulative cash draws on two $100.0 commitments issued by ING AIH through December 31, 2009, less principal payments. The surplus notes bear interest at a variable rate equal to the prevailing rate for 10 year U.S. Treasury bonds plus 0.25%, adjusted annually. The principal sum plus accrued interest shall be repaid in five annual installments beginning April 15, 2017 and continuing through April 15, 2021 (“Repayment Period”). The repayment amount shall be determined and adjusted annually on the last day of December, commencing December 31, 2016, and shall be an amount calculated to amortize any unpaid principal plus accrued interest over the years remaining in the Repayment Period. Payment of the notes and related accrued interest is subordinate to payments due to policyholders, claimant and beneficiary claims, as well as debts owed to all other classes of debtors, other than surplus note holders, of the Company in the event of (a) the institution of bankruptcy, reorganization, insolvency, or liquidation proceedings by or against the Company, or (b) the appointment of a Trustee, receiver or other conservator for a substantial part of the Company’s properties. Any payment of principal and/or interest made is subject to the prior approval of the Colorado Insurance Commissioner. There were no principal or interest payments in 2009, 2008 or 2007.

    On February 19, 2010, AIH contributed $260 million to the Company. The Company received permission from the Colorado Insurance Department to count this contribution as a receivable at December 31, 2009. On November 12, 2008, ING issued to the Dutch State non-voting Tier 1 securities for a total consideration of Euro 10 billion. On February 24, 2009, $2.2 billion was contributed to direct and indirect insurance company subsidiaries of ING AIH, of which $210.0 was contributed to the Company, effective December 31, 2008. The contribution was comprised of the proceeds from the investment by the Dutch government and the redistribution of currently existing capital within ING. The Company did not receive a capital contribution during 2007. The Company did not pay dividends to ING AIH during 2009 or 2008. The Company paid an ordinary dividend to ING AIH of $100.0 on December 28, 2007. Timely notice was given for this dividend payment to the Colorado Insurance Department. The Colorado Insurance Department does not require approval for ordinary dividends.

    Life and health insurance companies are subject to certain Risk Based Capital (“RBC”) requirements as specified by the NAIC. Under those requirements, the amount of capital and surplus maintained by a life and health insurance company is to be determined based

    53


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    on the various risk factors related to it. At December 31, 2009, the Company meets the RBC requirements.

    13. Fair Values of Financial Instruments

    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 cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the financial instrument. Accordingly, the aggregate fair value amounts presented herein do not represent the underlying value of the Company.

    Life insurance liabilities that contain mortality risk and all nonfinancial instruments have been excluded from the disclosure requirements. However, the fair values of liabilities under all insurance contracts are taken into consideration in the Company’s overall management of interest rate risk, such that the Company’s exposure to changing interest rates is minimized through the matching of investment maturities with amounts due under insurance contracts.

    The carrying amounts and fair values of the Company’s financial instruments are summarized as follows:

      December 31
        2009      2008   
      Carrying         Fair           Carrying    Fair 
      Amount       Value           Amount    Value 
      (In Thousands)
    Assets:             
       Bonds  $ 12,962,785  $ 11,948,006  $ 16,581,839  $ 13,472,064 
       Preferred stocks  27,000    25,449  85,079    48,602 
       Unaffiliated common stocks  94,026    94,026  170,099    170,099 
       Mortgage loans  1,637,153    1,601,803  1,878,012    1,838,181 
       Contract loans  1,282,997    1,282,997  1,390,205    1,390,205 
       Derivative securities  72,369    82,715  209,781    227,247 
       Cash, cash equivalents and             
    short term investments  1,329,259    1,329,259  1,038,361    1,038,361 
       Separate account assets  1,300,951    1,300,951  1,121,298    1,121,298 
       Receivable for securities  3,017    3,017  29,719    29,719 
    Liabilities:             
       Derivative securities  237,236    607,373  438,959    1,046,305 
       Deposit type contracts  3,819,514    3,819,514  7,126,976    7,126,976 
       Payable for securities  350    350  284    284 

    54


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    The following methods and assumptions were used by the Company in estimating the fair value disclosures for financial instruments in the accompanying financial statements and notes thereto:

    Cash, cash equivalents and short term investments: The carrying amounts reported in the accompanying Balance Sheets for these financial instruments approximate their fair values.

    Bonds and equity securities: The fair values for bonds, preferred stocks and common stocks reported herein are based on quoted market prices, where available. For securities not actively traded, fair values are estimated using values obtained from independent pricing services or, in the case of private placement investments, are estimated by discounting the expected future cash flows. The discount rates used vary as a function of factors such as yield, credit quality, and maturity, which fall within a range between .78% and 53.2% over the total portfolio. Fair values determined on this basis can differ from values published by the SVO. Fair value as determined by the SVO as of December 31, 2009 and 2008 is $12.0 billion and $13.8 billion, respectively.

    Mortgage loans: Estimated fair values for commercial real estate loans were generated using a discounted cash flow approach. Loans in good standing are discounted using interest rates determined by U.S. Treasury yields on December 31 and spreads applied on new loans with similar characteristics. The amortizing features of all loans are incorporated in the valuation. Where data on option features is available, option values are determined using a binomial valuation method, and are incorporated into the mortgage valuation. Restructured loans are valued in the same manner; however, these loans were discounted at a greater spread to reflect increased risk.

    Derivative financial instruments: Fair values for derivative financial instruments are based on broker/dealer valuations or on internal discounted cash flow pricing models, taking into account current cash flow assumptions and the counterparties’ credit standing.

    The carrying value of all other financial instruments approximates their fair value.

    Included in various investment related line items in the financial statements are certain financial instruments carried at fair value. Other financial instruments are periodically measured at fair value, such as when impaired, or, for certain bonds and preferred stock, when carried at the lower of cost or market.

    The fair value of an asset is the amount at which that asset could be bought or sold in a current transaction between willing parties, that is, other than in a forced or liquidation sale. The fair value of a liability is the amount at which that liability could be incurred or

    55


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    settled in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

    Fair values are based on quoted market prices when available. When market prices are not available, fair value is generally estimated using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality (matrix pricing). In instances where there is little or no market activity for the same or similar instruments, the Company estimates fair value using methods, models and assumptions that management believes market participants would use to determine a current transaction price. These valuation techniques involve some level of management estimation and judgment which becomes significant with increasingly complex instruments or pricing models. Where appropriate, adjustments are included to reflect the risk inherent in a particular methodology, model or input used.

    The Company's financial assets and liabilities carried at fair value have been classified, for disclosure purposes, based on a hierarchy defined by Subtopic 820-10, formerly FASB Statement No. 157, Fair Value Measurements.

    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. Financial assets and liabilities recorded at fair value on the Balance Sheets are categorized as follows:

    · Level 1 - Unadjusted quoted prices for identical assets or liabilities in an active market.

    · Level 2 - Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.

    Level 2 inputs include the following: a) Quoted prices for similar assets or liabilities in active markets; b) Quoted prices for identical or similar assets or liabilities in non-active markets; c) Inputs other than quoted market prices that are observable; and d) Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

    · Level 3 - Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. 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.

    56


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (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, 2009:

      Level 1  Level 2  Level 3(1)  Total 
      (In Thousands)
    At December 31, 2009:         
    Assets:         
       Bonds  $ -  $ 29,694  $ 106,921  $ 136,615 
       Preferred stock  -  5,010  102  5,112 
       Common stock  77,700  -  16,326  94,026 
       Derivatives  -  66,145  5,347  71,492 
       Cash, cash equivalents and         
             short term investments  1,329,259  -  -  1,329,259 
       Separate account assets  1,300,951  -  -  1,300,951 
    Total assets  $ 2,707,910  $ 100,849  $ 128,696  $ 2,937,455 
     
    Liabilities:         
    Derivatives  -  236,045  -  236,045 
    Total liabilities  $ -  $ 236,045  $ -  $ 236,045 

    (1) Level 3 net assets and liabilities accounted for 4.8% of total net assets and liabilities measured at fair value on a recurring basis. Excluding separate accounts assets for which the policyholder bears the risk, the Level 3 net assets and liabilities in relation to total net assets and liabilities measured at fair value on a recurring basis totaled 10.2%.

    57


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (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, 2008:

      Level 1  Level 2  Level 3(1)  Total 
      (In Thousands)
    At December 31, 2008:         
    Assets:         
       Bonds  $ -  $ 9,619  $ -  $ 9,619 
       Preferred stock  126  -  -  126 
       Common stock  170,099  -  -  170,099 
       Derivatives  -  206,820  1,379  208,199 
       Cash, cash equivalents and         
             short term investments  1,038,361  -  -  1,038,361 
       Separate account assets  1,121,298  -  -  1,121,298 
    Total assets  $ 2,329,884  $ 216,439  $ 1,379  $ 2,547,702 
     
    Liabilities:         
    Derivatives  -  404,515  14,175  418,690 
    Total liabilities  $ -  $ 404,515  $ 14,175  $ 418,690 

    (1) Level 3 net liabilities accounted for 0.6% of total net assets and liabilities measured at fair value on a recurring basis. Excluding separate accounts assets for which the policyholder bears the risk, the Level 3 net liabilities in relation to total net assets and liabilities measured at fair value on a recurring basis totaled 1.3%.

    Bonds: Securities that are carried at fair value on the balance sheet are classified as Level 2 or Level 3. Level 2 bond prices are obtained through several commercial pricing services, which incorporate a variety of market observable information in their valuation techniques, including benchmark yields, broker-dealer quotes, credit quality, issuer spreads, bids, offers and other reference data to provide estimated fair values. Privately placed bond fair value are determined using a matrix-based pricing model and are classified as Level 2 assets. The market for subprime RMBS remains largely inactive, and as such these securities are categorized in Level 3 of the valuation hierarchy.

    Preferred and Common Stock: Fair values of publicly traded equity securities are based upon quoted market price and are classified as Level 1 assets. Certain preferred stock prices are obtained through commercial pricing services and are classified as Level 2 assets. Other equity securities, typically private equities or equity securities not traded on an exchange, are valued by other sources such as analytics or brokers and are classified as Level 3 assets.

    Cash and cash equivalents and short-term investments: The carrying amounts for cash reflect the assets’ fair values. The fair values for cash equivalents and short-term investments are determined based on quoted market prices. These assets are classified as Level 1.

    58


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    Derivatives: The carrying amounts for these financial instruments, which can be assets or liabilities, reflect the fair value of the assets and liabilities. Certain derivatives are carried at fair value (on the Balance Sheets), which is determined using the Company’s derivative accounting system in conjunction with observable key financial data, such as yield curves, exchange rates, Standard & Poor’s (“S&P”) 500 Index prices, and London Inter Bank Offered Rates (“LIBOR”), which are obtained from third party sources and uploaded into the system. For those derivatives that are unable to be valued by the accounting system, the Company typically utilizes values established by third party brokers. Counterparty credit risk is considered and incorporated in the Company’s valuation process through counterparty credit rating requirements and monitoring of overall exposure. It is the Company’s policy to transact only with investment grade counterparties with a credit rating of A- or better. Valuations for the Company’s futures contracts are based on unadjusted quoted prices from an active exchange and, therefore, are classified as Level 1. The Company also has certain CDS and Options that are priced using models that primarily use market observable inputs, but contain inputs that are not observable to market participants, which have been classified as Level 3. However, all other derivative instruments are valued based on market observable inputs and are classified as Level 2.

    Assets held in separate accounts: Assets held in separate accounts are reported at the quoted fair values of the underlying investments in the separate accounts. Mutual funds, short-term investments and cash are based upon a quoted market price and are included in Level 1.

    The following table summarizes the change in fair value of the Company’s Level 3 assets and liabilities for the year ended December 31, 2009.

        Preferred  Common   
      Bonds  Stock  Stock  Derivatives 
    Balance at January 1, 2009  $ -  $ -  $ -  $ (12,796) 
       Capital gains (losses):         
             Net realized capital losses  (1,591)  -  -  (238) 
             Net unrealized capital         
                   (losses) gains  (172,657)  -  5,441  3,029 
    Total net realized and unrealized         
                   (losses) capital gains  (174,248)  -  5,441  2,791 
             Purchases, sales, issuances, and         
    settlements, net  (219)  -  940  1,176 
             Transfer in Level 3  281,389  102  9,945  14,175 
    Balance at December 31, 2009  $ 106,922  $ 102  $ 16,326  $ 5,346 

    14. Commitments and Contingencies

    Guarantee Agreements: The Company guarantees certain contractual policy claims of its subsidiary, Midwestern. In the unlikely event that Midwestern was unable to fulfill its

    59


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    obligations to policyholders, the Company would be obligated to assume the guaranteed policy obligations. Any ultimate contingent losses in connection with such guarantees will not have a material adverse impact on the Company’s future operations or financial position.

    The Company, effective January 2002, entered into a Guarantee Agreement with two other ING affiliates whereby it is jointly and severally liable for $250.0 obligation of SLDI. The Company’s Board of Directors approved this transaction on April 25, 2002. The other two affiliated life insurers were ReliaStar Life Insurance Company and Security Connecticut Life Insurance Company (subsequently merged into ReliaStar Life Insurance Company on October 1, 2003). The joint and several guarantees of the two remaining insurers are capped at $250.0. The States of Colorado and Minnesota did not disapprove the guarantee.

    Investment Purchase Commitments: As part of its overall investment strategy, the Company has entered into agreements to purchase securities of $20.6 and $34.2 at December 31, 2009 and 2008, respectively. The Company is also committed to provide additional capital contributions to partnerships of $313.1 and $351.8 at December 31, 2009 and 2008, respectively.

    Operating Leases: The Company is party to certain cost sharing agreements with other affiliated ING United States companies. Included in these cost sharing arrangements is rent expense, which is allocated to the Company in accordance with systematic cost allocation arrangements. The Company incurred minimal rent expense during years ended December 31, 2009, 2008 and 2007 under this cost sharing methodology.

    The Company does not have any minimum aggregate rental commitments under the cost sharing arrangements and service agreements. The Company does not have any future minimum lease payment receivables under the cost sharing arrangements and service agreements.

    The Company is not involved in any sale leaseback transactions.

    Legal Proceedings: The Company is involved in threatened or pending lawsuits/arbitrations arising from the normal conduct of business. Due to the climate in insurance and business litigation/arbitration, suits against the Company sometimes include claims for substantial compensatory, consequential or punitive damages and other types of relief. Moreover, certain claims are asserted as class actions, purporting to represent a group of similarly situated individuals. While it is not possible to forecast the outcome of such lawsuits/arbitrations, in light of existing insurance, reinsurance and established reserves, it is the opinion of management that the disposition of such lawsuits/arbitrations will not have a materially adverse effect on the Company’s operations or financial position.

    60


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    Regulatory Matters: As with many financial services companies, the Company and its affiliates have received 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 financial services industry. In each case, the Company and its affiliates have been and are providing full cooperation.

    Insurance and Retirement Plan Products and Other Regulatory Matter: Federal and state regulators and self regulatory agencies are also conducting broad inquiries and investigations involving the insurance and retirement industries. These initiatives currently focus on, among other things, compensation, revenue sharing, and other sales incentives; potential conflicts of interest; potential anti-competitive activity; reinsurance; sales and marketing practices (including sales to seniors); specific product types (including group annuities and indexed annuities); and disclosure. It is likely that the scope of these industry investigations will further broaden before they conclude. The Company and certain of its U.S. affiliates have received formal and informal requests in connection with such investigations, and are cooperating fully with each request for information. Some of these matters could result in regulatory action involving the Company. These initiatives also may result in new legislation and regulation that could significantly affect the financial services industry, including businesses in which the Company is engaged. In light of these and other developments, U.S. affiliates of ING, including the Company, periodically review whether modifications to their business practices are appropriate.

    Investment Product Regulatory Issues: Since 2002, there has been increased governmental and regulatory activity relating to mutual funds and variable insurance products. This activity has primarily focused on inappropriate trading of fund shares; directed brokerage; compensation; sales practices, suitability, and supervision; arrangements with service providers; pricing; compliance and controls; adequacy of disclosure; and document retention.

    In addition to responding to governmental and regulatory requests on fund trading issues, ING management, on its own initiative, conducted, through special counsel and a national accounting firm, an extensive internal review of mutual fund trading in ING insurance, retirement, and mutual fund products. The goal of this review was to identify any instances of inappropriate trading in those products by third parties or by ING investment professionals and other ING personnel.

    The internal review identified several isolated arrangements allowing third parties to engage in frequent trading of mutual funds within the variable insurance and mutual fund products of certain affiliates of the Company, and identified other circumstances where frequent trading occurred despite measures taken by ING intended to combat market timing. Each of the arrangements has been terminated and disclosed to regulators, to the independent trustees of ING Funds (U.S.) and in reports previously filed by affiliates of

    61


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    the Company with the Securities and Exchange Commission (“SEC”) pursuant to the Securities Exchange Act of 1934, as amended.

    Action may be taken by regulators with respect to the Company or certain ING affiliates before investigations relating to fund trading are completed. The potential outcome of such action is difficult to predict but could subject the Company or certain affiliates to adverse consequences, including, but not limited to, settlement payments, penalties, and other financial liability. It is not currently anticipated, however, that the actual outcome of any such action will have a material adverse effect on ING or ING’s U.S. based operations, including the Company.

    Liquidity: The Company’s principal sources of liquidity are product charges, investment income, premiums, proceeds from the maturity and sale of investments, and capital contributions. Primary uses of these funds are payments of commissions and operating expenses, interest credits, investment purchases, and contract maturities, withdrawals, and surrenders.

    The Company’s liquidity position is managed by maintaining adequate levels of liquid assets, such as cash, cash equivalents, and short-term investments. Asset/liability management is integrated into many aspects of the Company’s operations, including investment decisions, product development, and determination of crediting rates. As part of the risk management process, different economic scenarios are modeled, including cash flow testing required for insurance regulatory purposes, to determine that existing assets are adequate to meet projected liability cash flows. Key variables in the modeling process include interest rates, anticipated contract owner behavior, and variable separate account performance. Contract owners bear the investment risk related to variable annuity products, subject, in limited cases, to certain minimum guaranteed rates.

    The fixed account liabilities are supported by a general account portfolio principally composed of fixed rate investments with matching duration characteristics that can generate predictable, steady rates of return. The portfolio management strategy for the fixed account considers the assets available-for-sale. This strategy enables the Company to respond to changes in market interest rates, prepayment risk, relative values of asset sectors and individual securities and loans, credit quality outlook, and other relevant factors. The Company’s asset/liability management discipline includes strategies to minimize exposure to loss as interest rates and economic and market conditions change. In executing this strategy, the Company uses derivative instruments to manage these risks. The Company’s derivative counterparties are of high credit quality.

    During 2009, the Company has taken certain actions to reduce its exposure to interest rate and market risks. These actions included reducing guaranteed interest rates for new business, reducing credited rates on existing business, curtailing sales of some products, reassessment of the investment strategy with a focus on U.S. Treasury and investment grade assets, as well as hedging certain funds which previously were not hedged and continuing a hedging program to mitigate the impact of potential declines in equity

    62


      SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    markets and their impact on regulatory capital. During 2010, the Company will be monitoring these initiatives and their impacts on earnings, capital, and liquidity, and will determine whether further actions are necessary.

    ING Restructuring Plan: On October 26, 2009, ING announced the key components of the final Restructuring Plan ING submitted to the EC as part of the process to receive EC approval for the state aid granted to ING by the Dutch State in the form of EUR 10 billion Core Tier 1 securities issued on November 12, 2008 and the ING-Dutch State Transaction. As part of the Restructuring Plan, ING has agreed to separate its banking and insurance businesses by 2013. ING intends to achieve this separation over the next four years by divestment of its insurance and investment management operations, including the Company. ING has announced that it will explore all options for implementing the separation including initial public offerings, sales or combinations thereof. In November 2009, the Restructuring Plan received formal EC approval and the separation of insurance and banking operations and other components of the Restructuring Plan were approved by ING shareholders. ING also reached an agreement with the Dutch State to alter the repayment terms of the Core Tier 1 securities in order to facilitate early repayment and ING repurchased in December 2009 EUR 5 billion of the total EUR 10 billion Core Tier 1 securities issued to the Dutch State. As part of the Restructuring Plan, ING also agreed to make additional payments to the Dutch State corresponding to an adjustment of fees for the Back-Up Facility. In total, these extra payments amounted to a net present value of EUR 1.3 billion, and were recorded by ING as a one-time pre-tax charge in the fourth quarter of 2009. The terms of the ING-Dutch State Transaction which closed on March 31, 2009, including the transfer price of the Alt-A RMBS securities, remained unaltered and the additional payments were not borne by the Company or any other ING U.S. subsidiaries. In order to finance the repayment of EUR 5 billion Core Tier 1 securities and the associated costs as well as to mitigate the capital impact of the additional payments for the Back-Up Facility, ING launched a capital increase without preferential subscription rights for holders of (bearer depositary receipts for) ordinary shares of up to EUR 7.5 billion in November 2009. The rights issue was completed in December 2009. Proceeds of the issue in excess of the above amounts will be used to strengthen ING’s capital position.

    On October 27, 2009, subsequent to the announcement of the Restructuring Plan, the insurance financial strength ratings of the Company and ING’s other primary U.S. insurance companies were downgraded by Moody’s Investors Service, Inc. to A2 from A1 and by Fitch Ratings Ltd to A- from A.

    15. Financing Agreements

    The Company maintains a revolving loan agreement with Bank of New York Mellon, (“Mellon"). Under this agreement, the Company can borrow up to $50.0 from Mellon. Interest on any borrowing accrues at an annual rate equal to: (1) the cost of funds for Mellon for the period applicable for the advance plus 0.4% or (2) a rate quoted by Mellon

    63


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    to the Company for the borrowing. Under this agreement, the Company incurred minimal interest expense for the years ended December 31, 2009, 2008 and 2007, respectively. Additionally, there were no amounts payable to Mellon at December 31, 2009 and 2008.

    The Company maintains a reciprocal loan agreement with ING AIH to promote efficient management of cash and liquidity and to provide for unanticipated short-term cash requirements. Under this agreement, which expires July 1, 2015, the Company and ING AIH can borrow up to 3% of the Company's admitted assets excluding separate accounts as of December 31 of the preceding year from one another. Interest on any Company borrowing is charged at the rate of ING AIH’s cost of funds for the interest period plus 0.15%. Interest on any ING AIH borrowings is charged at a rate based on the prevailing interest rate of U.S. commercial paper available for purchase with a similar duration. Under this agreement, the Company received interest income of $0.7, $3.5 and $2.4 for the years ended December 31, 2009, 2008 and 2007, respectively.

    Through this reciprocal loan agreement, the Company borrowed $5.1 billion and repaid $5.1 billion in 2009, borrowed $20.6 billion and repaid $20.6 billion in 2008 and borrowed $13.8 billion and repaid $13.9 billion in 2007. These borrowings were on a short term basis, at an interest rate that approximated current money market rates and excludes borrowings from reverse dollar repurchase transactions. Interest expense on borrowed money was $0.1, $2.3 and $3.7 during 2009, 2008 and 2007, respectively.

    The Company is the beneficiary of letters of credit totaling $2.8 billion; terms of the letters of credit provide for automatic renewal for the following year at December 31, unless otherwise canceled or terminated by either party to the financing. The letters were unused during both 2009 and 2008.

    16. Related Party Transactions

    Cost Sharing Arrangements: Management and services contracts and all cost sharing arrangements with other affiliated ING United States companies are allocated among companies in accordance with systematic cost allocation methods.

    Investment Management: The Company has entered into an investment advisory agreement with ING Investment Management, LLC (“IIM”) under which IIM provides the Company with investment management services. The Company has entered into an administrative services agreement with IIM under which IIM provides the Company with asset liability management services. Total fees under the agreement were approximately $32.8, $60.7, and $61.6 for the years ended December 31, 2009, 2008 and 2007, respectively.

    Services Agreements: The Company has entered into an inter-insurer services agreement with certain of its affiliated insurance companies in the United States (“affiliated

    64


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    insurers”) whereby the affiliated insurers provide certain administrative, management, professional, advisory, consulting, and other services to each other. The Company has entered into a services agreement with ING North America whereby ING North America provides certain administrative, management, professional, advisory, consulting and other services to the Company. The Company has entered into a services agreement with ReliaStar Life Insurance Company of New York (“RLNY”) whereby the Company provides certain administrative, management, professional, advisory, consulting and other services to RLNY. The Company has entered into a services agreement with ING Financial Advisers, LLC (“ING FA”) to provide certain administrative, management, professional advisory, consulting, and other services to the Company for the benefit of its customers. Charges for these services are determined in accordance with fair and reasonable standards with neither party realizing a profit nor incurring a loss as a result of the services provided to the Company. The Company will reimburse ING FA for direct and indirect costs incurred on behalf of the Company. The total net income earned/expenses incurred for all of these services were $90.0, $100.9 and $101.8 for the years ended December 31, 2009, 2008 and 2007, respectively.

    Tax Sharing Agreements: The Company has entered into federal tax sharing agreement with members of an affiliated group as defined in Section 1504 of the Internal Revenue Code of 1986, as amended. The agreement provides for the manner of calculation and the amounts/timing of the payments between the parties as well as other related matters in connection with the filing of consolidated federal income tax returns. The Company has also entered into a state tax sharing agreement with ING AIH and each of the specific subsidiaries that are parties to the agreement. The state tax agreement applies to situations in which ING AIH and all or some of the subsidiaries join in the filing of a state or local franchise, income tax, or other tax return on a consolidated, combined or unitary basis.

    The Company and Directed Services LLC (“DSL”), an affiliate, are parties to a service agreement, effective January 1, 1994, as amended by a first amendment, effective March 7, 1995 by which the Company provides DSL with certain managerial and supervisory services and DSL provides the Company with certain sales and marketing services.

    Global Medium Term Note Program: In December 2002, the Company established a Global Medium Term Note program secured by funding agreements issued by the Company. The notes, which are offered by ING Security Life Institutional Funding, a special purpose statutory trust, are offered only to U.S. qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933 (the “Securities Act”) or to foreign buyers pursuant to Regulation S of the Securities Act. The program has issued notes with an aggregate outstanding principal balance of $732.3 million as of December 31, 2009.

    The Company has assumed an SEC registered medium term note, issued by an affiliated company, ING USA Annuity and Life Insurance Company, secured by a funding agreement issued by ING USA Annuity and Life Insurance Company. As of

    65


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    December 31, 2009, the note has an aggregate outstanding principal balance of $7.2 million.

    Interest Rate Swap: Effective June 29, 2007 the Company entered into an interest rate swap agreement (“IRSA”) with ING AIH. The IRSA is in conjunction with a combined coinsurance and modified coinsurance agreement effective June 30, 2007 with WWIII. The duration of the agreement is 30 years. The notional value of this interest rate swap is $72.5 with this transaction having minimal impact to the income statement.

    Asset Transfers: On September 27, 2007, the Company transferred to ING USA financial assets (the “Transferred Assets”) with a total book value plus accrued interest of $444.1 in exchange for a cash payment from ING USA in an amount equal to total market value plus accrued interest of the Transferred Assets. The Transferred Assets were primarily AAA rated collateralized mortgage obligations. At the time of the transfer, the Transferred Assets total market value plus accrued interest was $435.0. The Company realized a loss of $9.2 on the transaction.

    Property and Equipment: During the second quarter of 2009, ING’s U.S. life insurance companies, including the Company, sold a portion of its property and equipment to an affiliate, ING North America. The fixed assets involved in the sale were capitalized assets generally depreciated over the expected useful lives and software in development. Since the assets were being depreciated using expected useful lives, the current net book value reasonably approximated the current fair value of the assets being transferred. The fixed assets sold to ING North America by the Company totaled $0.2 which resulted in a decrease in nonadmitted assets.

    17. Guaranty Fund Assessments

    Insurance companies are assessed the costs of funding the insolvencies of other insurance companies by the various state guaranty associations, generally based on the amount of premium companies collect in that state. The Company accrues the cost of future guaranty fund assessments based on estimates of insurance company insolvencies provided by the National Organization of Life and Health Insurance Guaranty Associations and the amount of premiums written in each state. The Company has estimated this liability to be $5.2 and $5.6 as of December 31, 2009 and 2008, respectively, and has recorded a liability in accounts payable and accrued expenses on the Balance Sheets. The Company has also recorded an asset in other assets on the Balance Sheets of $4.2 and $4.0 as of December 31, 2009 and 2008, respectively, for future credits to premium taxes for assessments already paid.

    66


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    18. Unpaid Accident and Health Claims

    The change in the liability for unpaid accident and health claims and claim adjustment expenses is summarized as follows:

      2009  2008 
      (In Thousands) 
    Balance at January 1  $ 246,036  $ 2,402 
    Less reinsurance recoverables  2,133  2,402 
    Net balance at January 1  243,903  - 
     
    Incurred related to:     
       Current year  351,828  230,958 
       Prior years  (91,571)  12,945 
    Total incurred  260,257  243,903 
     
    Paid related to:     
       Current year  111,233  - 
       Prior years  117,524  - 
    Total paid  228,757  - 
     
    Net balance at December 31  275,403  243,903 
    Plus reinsurance recoverables  1,924  2,133 
    Balance at December 31  $ 277,327  $ 246,036 

    The liability for unpaid accident and health claims and claim adjustment expenses is included in accident and health reserves and unpaid claims on the Balance Sheets.

    19. 19. Reconciliation to the Annual Statement

    At December 31, 2007, differences in amounts reported in the Annual Statement and amounts in the accompanying statutory basis financial statements are due to the following (in thousands):

      Total Capital   
      and Surplus  Net Income 
    2007:     
    Amounts as reported in the 2008 Annual Statement  $ 1,305,671  $ 20,224 
    Release of accrued liability related to Scottish Re that was     
       recorded in the Annual Statement  10,379                   10,379 
    Amounts as reported in the accompanying statutory     
       basis financial statements  $ 1,316,050  $ 30,603 

    67


    SECURITY LIFE OF DENVER INSURANCE COMPANY
    Notes to Financial Statements – Statutory Basis
    December 31, 2009
    (Dollar amounts in millions, unless otherwise stated)

    20. Subsequent Events

    ING Restructuring Plan: On January 28, 2010, ING announced the filing of its appeal with the General Court of the European Union against specific elements of the EC’s decision regarding the ING Restructuring Plan. Despite the appeal, ING is committed to executing the formal separation of banking and insurance and the divestment of the latter as announced on October 26, 2009. In its appeal, ING contests the state aid calculation the EC applied to the reduction in repayment premium agreed upon by ING and the Dutch State in connection with ING’s December 2009 repayment of the first EUR 5 billion of Core Tier 1 securities. ING is also appealing the disproportionality of the price leadership restrictions imposed on ING with respect to the European financial sector.

    Other subsequent events: The Company is not aware of any other events occurring subsequent to the close of business of the books of this statement that may have a material effect on the Company’s financial statements. The company evaluated events subsequent to the close of business of the books of this statement through April 1, 2010, the date the statutory financial statements were available to be issued.

    68


    333-147534  April 2010 


        Part C 
        OTHER INFORMATION 
     
    Item 26  Exhibits 
     
    (a)  (1)  Resolution of the Executive Committee of the Board of Directors of Security Life of Denver Insurance 
        Company ("Security Life of Denver") authorizing the establishment of the Registrant. (Incorporated 
        herein by reference to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of 
        Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 
        27, 1998; File No. 33-74190.) 
     
    (b)  Not Applicable. 
     
    (c)  (1)  Security Life of Denver Distribution Agreement. (Incorporated herein by reference to Post-Effective 
        Amendment No. 7 to the Form S-6 Registration Statement of Security Life of Denver Insurance 
        Company and its Security Life Separate Account L1, filed on April 27, 1998; File No. 33-74190.) 
      (2)  First Amendment to Security Life of Denver Insurance Company Distribution Agreement. (Incorporated 
        herein by reference to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of 
        Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 9, 
        2002; File No. 33-74190.) 
      (3)  Amendment to Security Life of Denver Insurance Company Distribution Agreement. (Incorporated 
        herein by reference to Pre-Effective Amendment No. 2 to the Form S-6 Registration Statement of 
        Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on May 10, 
        1999; File No. 333-72753.) 
      (4)  Amendment to Security Life of Denver Insurance Company Distribution Agreement. (Incorporated 
        herein by reference to the Pre-Effective Amendment No. 1 to the Form S-6 Registration Statement of 
        Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on January 
        30, 2001; File No. 333-50278.) 
      (5)  Amendment to Security Life of Denver Insurance Company Distribution Agreement. (Incorporated 
        herein by reference to the Post-Effective Amendment No. 14 to the Form S-6 Registration Statement of 
        Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 
        19, 2001; File No. 33-74190.) 
      (6)  Amendment to Security Life of Denver Insurance Company Distribution Agreement. (Incorporated 
        herein by reference to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of 
        Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 9, 
        2002; File No. 33-74190.) 
      (7)  Specimen Broker/Dealer Supervisory and Selling Agreement for Variable Contracts with Compensation 
        Schedule. (Incorporated herein by reference to Post-Effective Amendment No. 6 to the Form S-6 
        Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate 
        Account L1, filed on March 2, 1998; File No. 33-74190.) 
      (8)  Broker/Dealer Supervisory and Selling Agreement for Variable Contracts with Paine Webber 
        Incorporated. (Incorporated herein by reference to Post-Effective Amendment No. 4 to the Form S-6 
        Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate 
        Account L1, filed on April 30, 1997; File No. 33-88148.) 
      (9)  Compensation Schedule. (Incorporated herein by reference to the Post-Effective Amendment No. 2 to 
        the Form S-6 Registration Statement of Security Life of Denver Insurance Company and its Security 
        Life Separate Account L1, filed on April 10, 2002; File No. 333-50278.) 
      (10)  Commission Schedule for Policies. (Incorporated herein by reference to the Pre-Effective Amendment 
        No. 1 to the Form S-6 Registration Statement of Security Life of Denver Insurance Company and its 
        Security Life Separate Account L1, filed on January 30, 2001; File No. 333-50278.) 
      (11)  Specimen Master Sales and Supervisory Agreement with Compensation Schedule. (Incorporated herein 
        by reference to the Post-Effective Amendment No. 12 to the Form S-6 Registration Statement of 
        Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 
        25, 2000; File No. 33-74190.) 
      (12)  Administrative Services Agreement between Security Life of Denver and Financial Administrative 
        Services Corporation. (Incorporated herein by reference to Post-Effective Amendment No. 7 to the Form 
        S-6 Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate 
        Account L1, filed on April 27, 1998; File No. 33-74190.) 


      (13)  Amendment to Administrative Services Agreement between Security Life of Denver and Financial 
        Administrative Services Corporation. (Incorporated herein by reference to Post-Effective Amendment 
        No. 7 to the Form S-6 Registration Statement of Security Life of Denver Insurance Company and its 
        Security Life Separate Account L1, filed on April 27, 1998; File No. 33-74190.) 
     
    (d)  (1)  Variable Universal Life Insurance Policy (2517(VUL)-03/08). (Incorporated herein by reference to Pre- 
        Effective Amendment No. 2 to the Form N-6 Registration Statement of Security Life of Denver 
        Insurance Company and its Security Life Separate Account L1, filed on January 31, 2008; File No. 333- 
        147534.) 
      (2)  Accelerated Benefit Rider (R2030-03/08). (Incorporated herein by reference to Pre-Effective 
        Amendment No. 1 to the Form N-6 Registration Statement of Security Life of Denver Insurance 
        Company and its Security Life Separate Account L1, filed on January 31, 2008; File No. 333-147534.) 
      (3)  Additional Insured Rider. (Incorporated herein by reference to the Pre-Effective Amendment No. 1 to 
        the Form S-6 Registration Statement of Security Life of Denver Insurance Company and its Security 
        Life Separate Account L1, filed on January 30, 2001; File No. 333-50278.) 
      (4)  Adjustable Term Insurance Rider (R2031-03/08). (Incorporated herein by reference to Pre-Effective 
        Amendment No. 1 to the Form N-6 Registration Statement of Security Life of Denver Insurance 
        Company and its Security Life Separate Account L1, filed on January 31, 2008; File No. 333-147534.) 
      (5)  Guaranteed Death Benefit Rider. (Form No. R2025-4/04). (Incorporated by reference to Initial 
        Registration Statement on Form N-6, File No. 333-117329, as filed on July 1, 2004.) 
      (6)  Guaranteed Minimum Accumulation Benefit Rider (R2032-03/08). (Incorporated herein by reference to 
        Pre-Effective Amendment No. 1 to the Form N-6 Registration Statement of Security Life of Denver 
        Insurance Company and its Security Life Separate Account L1, filed on January 31, 2008; File No. 333- 
        147534.) 
      (7)  Overloan Lapse Protection Rider. (Incorporated herein by reference to Pre-Effective Amendment No. 1 
        to the Form N-6 Registration Statement of Security Life of Denver Insurance Company and its Security 
        Life Separate Account L1, filed on September 7, 2007; File No. 333-143973.) 
      (8)  Waiver of Cost of Insurance Rider (Form No. R-1505). (Incorporated herein by reference to the Pre- 
        Effective Amendment No. 1 to the Form S-6 Registration Statement of Security Life of Denver 
        Insurance Company and its Security Life Separate Account L1, filed on January 30, 2001; File No. 333- 
        50278.) 
      (9)  Waiver of Specified Premium Total Disability Rider (Form No. R-1506). (Incorporated herein by 
        reference to the Pre-Effective Amendment No. 1 to the Form S-6 Registration Statement of Security Life 
        of Denver Insurance Company and its Security Life Separate Account L1, filed on January 30, 2001; 
        File No. 333-50278.) 
     
    (e)  (1)  Specimen Variable Life Insurance Application (Form No. Q-2006-9/97). (To be used on or before May 
        1, 1998.) (Incorporated herein by reference to the Post-Effective Amendment No. 5 to the Form S-6 
        Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate 
        Account L1, filed on October 29, 1997; File No. 33-74190.) 
      (2)  Variable Life Application Insert. (Incorporated herein by reference to the Pre-Effective Amendment No. 
        1 to the Form S-6 Registration Statement of Security Life of Denver Insurance Company and its Security 
        Life Separate Account L1, filed on January 30, 2001; File No. 333-50278.) 
      (3)  Investment Feature Selection Form (Form No. V-166-00 Rev. 5/1/03). (Incorporated herein by reference 
        to the Post-Effective Amendment No. 5 to the Form N-6 Registration Statement of Security Life of 
        Denver Insurance Company and its Security Life Separate Account L1, filed on April 14, 2003; File No. 
        333-50278.) 
      (4)  Investment Feature Selection Form (Form No. V-175-01 Rev. 5/1/03). (Incorporated herein by reference 
        to the Post-Effective Amendment No. 5 to the Form N-6 Registration Statement of Security Life of 
        Denver Insurance Company and its Security Life Separate Account L1, filed on April 14, 2003; File No. 
        333-50278.) 
      (5)  Specimen Application for Life Insurance Fixed and Variable Products (Form No. 110945). (Incorporated 
        herein by reference to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of 
        Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 9, 
        2002; File No. 33-74190.) 


    (f)  (1)  Security Life of Denver's Restated Articles of Incorporation. (Incorporated herein by reference to Post- 
        Effective Amendment No. 7 to the Form S-6 Registration Statement of Security Life of Denver 
        Insurance Company and its Security Life Separate Account L1, filed on April 27, 1998; File No. 33- 
         74190.) 
      (2)  Amendments to Articles of Incorporation through June 12, 1987. (Incorporated herein by reference to 
        Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security Life of Denver 
        Insurance Company and its Security Life Separate Account L1, filed on April 27, 1998; File No. 33- 
         74190.) 
      (3)  Amendments to Articles of Incorporation through November 12, 2001. (Incorporated herein by reference 
        to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of Security Life of 
        Denver Insurance Company and its Security Life Separate Account L1, filed on April 9, 2002; File No. 
         33-74190.) 
      (4)  Security Life of Denver's By-Laws. (Incorporated herein by reference to Post-Effective Amendment No. 
        7 to the Form S-6 Registration Statement of Security Life of Denver Insurance Company and its Security 
         Life Separate Account L1, filed on April 27, 1998; File No. 33-74190.) 
      (5)  Bylaws of Security Life of Denver Insurance Company (Restated with Amendments through September 
        30, 1997). (Incorporated herein by reference to Post-Effective Amendment No. 5 to the Form S-6 
        Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate 
         Account L1, filed on October 29, 1997; File No. 33-74190.) 
     
    (g)  Not Applicable. 
     
    (h)  (1)  (a)  Participation Agreement by and among AIM Variable Insurance Funds, Inc., Security Life of 
          Denver Insurance Company, on Behalf of Itself and its Separate Accounts. and ING America 
          Equities, Inc. (Incorporated herein by reference to Post-Effective Amendment No. 6 to the Form S-6 
          Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate 
          Account L1, filed on March 2, 1998; File No. 033-74190.) 
        (b)  Amendment No. 1 to Participation Agreement among AIM Variable Insurance Funds, Inc., Security 
          Life of Denver Insurance Company and ING America Equities, Inc. (Incorporated herein by 
          reference to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of 
          Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
          April 9, 2002; File No. 033-74190.) 
        (c)  Amendment No. 2 to Participation Agreement among AIM Variable Insurance Funds, Inc., Security 
          Life of Denver Insurance Company and ING America Equities, Inc. (Incorporated herein by 
          reference to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of 
          Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
          April 9, 2002; File No. 033-74190.) 
        (d)  Amendment No. 3 to Participation Agreement among AIM Variable Insurance Funds, Inc., Security 
          Life of Denver Insurance Company and ING America Equities, Inc. (Incorporated herein by 
          reference to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security 
          Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 27, 
          1998; File No. 033-74190.) 
        (e)  Amendment No. 4 to Participation Agreement among AIM Variable Insurance Funds, Inc., Security 
          Life of Denver Insurance Company and ING America Equities, Inc. (Incorporated herein by 
          reference to the Post-Effective Amendment No. 1 to the Form S-6 Registration Statement of 
          Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
          February 29, 2000; File No. 333-72753.) 
        (f)  Amendment No. 5 to Participation Agreement among AIM Variable Insurance Funds, Inc., Security 
          Life of Denver Insurance Company and ING America Equities, Inc. (Incorporated herein by 
          reference to the Pre-Effective Amendment No. 1 to the Form S-6 Registration Statement of Security 
          Life of Denver Insurance Company and its Security Life Separate Account L1, filed on January 30, 
          2001; File No. 333-50278.) 
        (g)  Amendment No. 6 to Participation Agreement among AIM Variable Insurance Funds, Inc., Security 
          Life of Denver Insurance Company and ING America Equities, Inc. (Incorporated herein by 
          reference to the Pre-Effective Amendment No. 1 to the Form S-6 Registration Statement of Security 
          Life of Denver Insurance Company and its Security Life Separate Account L1, filed on December 
          19, 2001; File No. 333-73464.) 


      (h)  Expense Allocation Agreement between A I M Advisors, Inc., A I M Distributors, Inc. and Security 
        Life of Denver. (Incorporated herein by reference to the Post-Effective Amendment No. 11 to the 
        Form S-6 Registration Statement of Security Life of Denver Insurance Company and its Security 
        Life Separate Account L1, filed on April 29, 1999; File No. 33-74190.) 
      (i)  Amendment No. 1 to Expense Allocation Agreement between A I M Advisors, Inc., A I M 
        Distributors, Inc. and Security Life of Denver. (Incorporated herein by reference to the Pre-Effective 
        Amendment No. 1 to the Form S-6 Registration Statement of Security Life of Denver Insurance 
        Company and its Security Life Separate Account L1, filed on December 19, 2001; File No. 333- 
        73464.) 
    (2)  (a)  Sales Agreement by and among The Alger American Fund, Fred Alger Management, Inc., and 
        Security Life of Denver Insurance Company. (Incorporated herein by reference to Post-Effective 
        Amendment No. 7 to the Form S-6 Registration Statement of Security Life of Denver Insurance 
        Company and its Security Life Separate Account L1, filed on April 27, 1998; File No. 033-74190.) 
      (b)  First Amendment to Sales Agreement by and among The Alger American Fund, Fred Alger 
        Management, Inc., Security Life of Denver Insurance Company. (Incorporated herein by reference 
        to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security Life of 
        Denver Insurance Company and its Security Life Separate Account L1, filed on April 27, 1998; File 
        No. 033-74190.) 
      (c)  Addendum to Alger Sales Agreement. (Incorporated herein by reference to Post-Effective 
        Amendment No. 7 to the Form S-6 Registration Statement of Security Life of Denver Insurance 
        Company and its Security Life Separate Account L1, filed on April 27, 1998; File No. 033-74190.) 
      (d)  Amendment to Sales Agreement by and among The Alger American Fund, Fred Alger Management, 
        Inc., Security Life of Denver Insurance Company. (Incorporated herein by reference to the Post- 
        Effective Amendment No. 15 to the Form S-6 Registration Statement of Security Life of Denver 
        Insurance Company and its Security Life Separate Account L1, filed on April 9, 2002; File No. 033- 
        74190.) 
      (e)  Service Agreement between Fred Alger Management, Inc. and Security Life of Denver Insurance 
        Company. (Incorporated herein by reference to Post-Effective Amendment No. 7 to the Form S-6 
        Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate 
        Account L1, filed on April 27, 1998; File No. 033-74190.) 
    (3)  (a)  Participation Agreement among Golden American Life Insurance Company, ReliaStar Life 
        Insurance Company, ReliaStar Life Insurance Company of New York, Security Life of Denver 
        Insurance Company, Southland Life Insurance Company, ING Life Insurance and Annuity 
        Company, ING Insurance Company of America, American Funds Insurance Series and Capital 
        Research and Management Company. (Incorporated herein by reference to the Pre-Effective 
        Amendment No. 1 to the Registration Statement on Form N-6, File No. 333-105319, as filed on July 
        17, 2003.) 
      (b)  Business Agreement among Golden American Life Insurance Company, ReliaStar Life Insurance 
        Company, ReliaStar Life Insurance Company of New York, Security Life of Denver Insurance 
        Company, Southland Life Insurance Company, ING Life Insurance and Annuity Company, ING 
        Insurance Company of America, ING America Equities, Inc., Directed Services, Inc., American 
        Funds Distributors, Inc. and Capital Research and Management Company. (Incorporated herein by 
        reference to the Pre-Effective Amendment No. 1 to the Registration Statement on Form N-6, File 
        No. 333-105319, as filed on July 17, 2003.) 
      (c)  Amendment No. 1 to the Business Agreement by and among ING USA Annuity and Life Insurance 
        Company (fka Golden American Life Insurance Company), ReliaStar Life Insurance Company, 
        ReliaStar Life Insurance Company of New York, Security Life of Denver Insurance Company 
        (individually and as the survivor and successor in interest following a merger with Southland Life 
        Insurance Company), ING Life Insurance and Annuity Company (individually and as the survivor 
        and successor in interest following a merger with ING Insurance Company of America), ING 
        America Equities, Inc., ING Financial Advisers, LLC, Directed Services LLC (fka Directed Services, 
        Inc.), American Funds Distributors, Inc. and Capital Research and Management Company. 
        (Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Form N-6 Registration 
        Statement of Security Life of Denver Insurance Company and its Security Life Separate Account L1, 
        File No. 333-153337, as filed on November 14, 2008.) 


      (d)  Rule 22C-2 Agreement, effective April 16, 2007, and to become operational on October 16, 2007, 
        by and between American Funds Service Company, ING Life Insurance and Annuity Company, 
        ING National Trust, ING USA Annuity and Life Insurance Company, ReliaStar Life Insurance 
        Company, ReliaStar Life Insurance Company of New York, Security Life of Denver Insurance 
        Company and Systematized Benefits Administrators Inc. (Incorporated herein by reference to Post- 
        Effective Amendment No. 12 to Registration Statement on Form N-6, File Number 333-47527, as 
        filed on April 9, 2007.) 
    (4)  (a)  Participation Agreement dated April 25, 2008, by and among BlackRock Variable Series Funds, 
        Inc., BlackRock Distributors, Inc., ING USA Annuity and Life Insurance Company and ReliaStar 
        Life Insurance Company of New York. (Incorporated herein by reference to Post-Effective 
        Amendment No. 26 to the Form N-6 Registration Statement of ReliaStar Life Insurance Company 
        and its Select*Life Separate Account, filed on April 7, 2009; file No. 033-57244.) 
      (b)  Amendment No. 1, dated as of April 24, 2009, and effective as of May 1, 2009, to the Participation 
        Agreement dated April 25, 2008, by and between BlackRock Variable Series Funds, Inc., 
        BlackRock Investments, LLC., ING USA Annuity and Life Insurance Company and ReliaStar Life 
        Insurance Company of New York. (Incorporated herein by reference to Post-Effective Amendment 
        No. 27 to the Form N-6 Registration Statement of ReliaStar Life Insurance Company and its 
        Select*Life Separate Account, filed on August 18, 2009; file No. 033-57244.) 
      (c)  Administrative Services Agreement dated April 25, 2008, by and among BlackRock Advisors, LLC 
        and ING USA Annuity and Life Insurance Company and ReliaStar Life Insurance Company of New 
        York. (Incorporated herein by reference to Post-Effective Amendment No. 26 to the Form N-6 
        Registration Statement of ReliaStar Life Insurance Company and its Select*Life Separate Account, 
        filed on April 7, 2009; file No. 033-57244.) 
      (d)  Amendment No. 1, dated as of April 24, 2009, and effective as of May 1, 2009, to Administrative 
        Services Agreement dated April 25, 2008, by and among BlackRock Advisors, LLC and ING USA 
        Annuity and Life Insurance Company and ReliaStar Life Insurance Company of New York. 
        (Incorporated herein by reference to Post-Effective Amendment No. 27 to the Form N-6 
        Registration Statement of ReliaStar Life Insurance Company and its Select*Life Separate Account, 
        filed on August 18, 2009; file No. 033-57244.) 
      (e)  Rule 22C-2 Agreement, dated no later than April 16, 2007, and effective as of October 16, 2007, 
        between BlackRock Distributors, Inc., on behalf of and as distributor for the BlackRock Funds and 
        the Merrill Lynch family of funds and ING Life Insurance and Annuity Company, ING National 
        Trust, ING USA Annuity and Life Insurance Company, ReliaStar Life Insurance Company, 
        ReliaStar Life Insurance Company of New York, Security Life of Denver Insurance Company and 
        Systematized Benefits Administrators Inc. (Incorporated herein by reference to Post-Effective 
        Amendment No. 43 to Registration Statement on form N-4, File No. 333-28755, as filed on April 7, 
        2008.) 
    (5)  (a)  Participation Agreement among Variable Insurance Products Fund, Fidelity Distributors 
        Corporation and Security Life of Denver Insurance Company. (Incorporated herein by reference to 
        Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security Life of Denver 
        Insurance Company and its Security Life Separate Account L1, filed on April 27, 1998; File No. 
        033-74190.) 
      (b)  First Amendment to Participation Agreement among Variable Insurance Products Fund, Fidelity 
        Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
        reference to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security 
        Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 27, 
        1998; File No. 033-74190.) 
      (c)  Second Amendment to Participation Agreement among Variable Insurance Products Fund, Fidelity 
        Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
        reference to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security 
        Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 27, 
        1998; File No. 033-74190.) 
      (d)  Third Amendment to Participation Agreement among Variable Insurance Products Fund, Fidelity 
        Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
        reference to the Post-Effective Amendment No. 11 to the Form S-6 Registration Statement of 
        Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
        April 29, 1999; File No. 033-74190.) 


    (e)  Fourth Amendment to Participation Agreement among Variable Insurance Products Fund, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      April 9, 2002; File No. 033-74190.) 
    (f)  Fifth Amendment to Participation Agreement among Variable Insurance Products Fund, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security 
      Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 27, 
      1998; File No. 033-74190.) 
    (g)  Sixth Amendment to Participation Agreement among Variable Insurance Products Fund, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      April 9, 2002; File No. 033-74190.) 
    (h)  Seventh Amendment to Participation Agreement among Variable Insurance Products Fund, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Post-Effective Amendment No. 12 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      April 25, 2000; File No. 033-74190.) 
    (i)  Eighth Amendment to Participation Agreement among Variable Insurance Products Fund, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Post-Effective Amendment No. 13 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      October 13, 2000; File No. 033-74190.) 
    (j)  Ninth Amendment to Participation Agreement among Variable Insurance Products Fund, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Post-Effective Amendment No. 14 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      April 19, 2001; File No. 033-74190.) 
    (k)  Amendment to Participation Agreement among Variable Insurance Products Fund, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Form S-6 Initial Registration Statement of Security Life of Denver Insurance 
      Company and its Security Life Separate Account L1, filed on November 15, 2001; File No. 333- 
      73464.) 
    (l)  Amendment to Participation Agreement among Variable Insurance Products Fund, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Pre-Effective Amendment No. 1 to the Form S-6 Registration Statement of Security 
      Life of Denver Insurance Company and its Security Life Separate Account L1, filed on December 
      19, 2001; File No. 333-73464.) 
    (m)  Amendment to Participation Agreement among Variable Insurance Products Fund, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      April 9, 2002; File No. 033-74190.) 
    (n)  Amendment to Participation Agreement among Variable Insurance Products Fund, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Post-Effective Amendment No. 9 to the Form N-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      February 27, 2004; File No. 333-50278.) 
    (o)  Participation Agreement among Variable Insurance Products Fund II, Fidelity Distributors 
      Corporation and Security Life of Denver Insurance Company. (Incorporated herein by reference to 
      Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security Life of Denver 
      Insurance Company and its Security Life Separate Account L1, filed on April 27, 1998; File No. 
      033-74190.) 


    (p)  First Amendment to Participation Agreement among Variable Insurance Products Fund II, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security 
      Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 27, 
      1998; File No. 033-74190.) 
    (q)  Second Amendment to Participation Agreement among Variable Insurance Products Fund II, 
      Fidelity Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated 
      herein by reference to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      April 27, 1998; File No. 033-74190.) 
    (r)  Third Amendment to Participation Agreement among Variable Insurance Products Fund II, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Post-Effective Amendment No. 11 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      April 29, 1999; File No. 033-74190.) 
    (s)  Fourth Amendment to Participation Agreement among Variable Insurance Products Fund II, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      April 9, 2002; File No. 033-74190.) 
    (t)  Fifth Amendment to Participation Agreement among Variable Insurance Products Fund II, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security 
      Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 27, 
      1998; File No. 033-74190.) 
    (u)  Sixth Amendment to Participation Agreement among Variable Insurance Products Fund II, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      April 9, 2002; File No. 033-74190.) 
    (v)  Seventh Amendment to Participation Agreement among Variable Insurance Products Fund II, 
      Fidelity Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated 
      herein by reference to the Post-Effective Amendment No. 13 to the Form S-6 Registration Statement 
      of Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      October 13, 2000; File No. 033-74190.) 
    (w)  Eighth Amendment to Participation Agreement among Variable Insurance Products Fund II, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Post-Effective Amendment No. 14 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      April 19, 2001; File No. 033-74190.) 
    (x)  Amendment to Participation Agreement among Variable Insurance Products Fund II, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Form S-6 Initial Registration Statement of Security Life of Denver Insurance 
      Company and its Security Life Separate Account L1, filed on November 15, 2001; File No. 333- 
      73464.) 
    (y)  Amendment to Participation Agreement among Variable Insurance Products Fund II, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Pre-Effective Amendment No. 1 to the Form S-6 Registration Statement of Security 
      Life of Denver Insurance Company and its Security Life Separate Account L1, filed on December 
      19, 2001; File No. 333-73464.) 
    (z)  Amendment to Participation Agreement among Variable Insurance Products Fund II, Fidelity 
      Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
      reference to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      April 9, 2002; File No. 033-74190.) 


      (aa)  Amendment to Participation Agreement among Variable Insurance Products Fund II, Fidelity 
        Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
        reference to the Post-Effective Amendment No. 9 to the Form N-6 Registration Statement of 
        Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
        February 27, 2004; File No. 333-50278.) 
      (bb)  Amendment to Participation Agreement among Variable Insurance Products Fund II, Fidelity 
        Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
        reference to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of 
        Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
        April 9, 2002; File No. 033-74190.) 
      (cc)  Amendment to Participation Agreement among Variable Insurance Products Fund II, Fidelity 
        Distributors Corporation and Security Life of Denver Insurance Company. (Incorporated herein by 
        reference to the Post-Effective Amendment No. 9 to the Form N-6 Registration Statement of 
        Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
        February 27, 2004; File No. 333-50278.) 
      (dd)  Service Agreement between Fidelity Investments Institutional Operations Company, Inc. and 
        Security Life of Denver Insurance Company. (Incorporated herein by reference to the Post-Effective 
        Amendment No. 15 to the Form S-6 Registration Statement of Security Life of Denver Insurance 
        Company and its Security Life Separate Account L1, filed on April 9, 2002; File No. 033-74190.) 
      (ee)  Rule 22C-2 Agreement, effective April 16, 2007, and to become operational on October 16, 2007, 
        by and between Fidelity Distributors Corporation, ING Life Insurance and Annuity Company, ING 
        National Trust, ING USA Annuity and Life Insurance Company, ReliaStar Life Insurance 
        Company, ReliaStar Life Insurance Company of New York, Security Life of Denver Insurance 
        Company and Systematized Benefits Administrators Inc. (Incorporated herein by reference to Post- 
        Effective Amendment No. 12 to Registration Statement on Form N-6, File Number 333-47527, as 
        filed on April 9, 2007.) 
    (6)  (a)  Participation Agreement among Security Life of Denver Insurance Company, ING VP Bond 
        Portfolio and ING Funds Distributor, Inc. (Incorporated herein by reference to the Post-Effective 
        Amendment No. 3 to the Form N-6 Registration Statement of Security Life of Denver Insurance 
        Company and its Security Life Separate Account L1, filed on February 7, 2003; File No. 333- 
        50278.) 
    (7)  (a)  Participation Agreement among Security Life of Denver Insurance Company, The GCG Trust and 
        Directed Services, Inc. (Incorporated herein by reference to the Post-Effective Amendment No. 15 
        to the Form S-6 Registration Statement of Security Life of Denver Insurance Company and its 
        Security Life Separate Account L1, filed on April 9, 2002; File No. 033-74190.) 
      (b)  Amendment to Participation Agreement among Security Life of Denver Insurance Company, The 
        GCG Trust and Directed Services, Inc. (Incorporated herein by reference to the Pre-Effective 
        Amendment No. 1 to the Form S-6 Registration Statement of Security Life of Denver Insurance 
        Company and its Security Life Separate Account L1, filed on January 30, 2001; File No. 333- 
        50278.) 
      (c)  Form of Amendment to Participation Agreement among Security Life of Denver Insurance 
        Company, The GCG Trust and Directed Services, Inc. (Incorporated herein by reference to the Post- 
        Effective Amendment No. 14 to the Form S-6 Registration Statement of Security Life of Denver 
        Insurance Company and its Security Life Separate Account L1, filed on April 19, 2001; File No. 
        033-74190.) 
      (d)  Administrative and Shareholder Service Agreement between Directed Services, Inc. and Security 
        Life of Denver Insurance Company. (Incorporated herein by reference to the Post-Effective 
        Amendment No. 14 to the Form S-6 Registration Statement of Security Life of Denver Insurance 
        Company and its Security Life Separate Account L1, filed on April 19, 2001; File No. 033-74190.) 
    (8)  (a)  Participation Agreement among Security Life of Denver Insurance Company, ING Partners, Inc., 
        ING Life Insurance and Annuity Company and ING Financial Advisers, LLC. (Incorporated herein 
        by reference to the Post-Effective Amendment No. 3 to the Form N-6 Registration Statement of 
        Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
        February 7, 2003; File No. 333-50278.) 


    (b)  Amendment to Participation Agreement among ING Partners, Inc., ING Life Insurance and Annuity 
      Company, and ING Financial Advisers, LLC and Security Life of Denver Insurance Company. 
      (Incorporated herein by reference to the Post-Effective Amendment No. 5 to the Form N-6 
      Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate 
      Account L1, filed on April 14, 2003; File No. 333-50278.) 
    (c)  Amendment to Participation Agreement among ING Partners, Inc., ING Life Insurance and Annuity 
      Company, and ING Financial Advisers, LLC and Security Life of Denver Insurance Company, 
      dated November 1, 2004. (Incorporated herein by reference to the Post-Effective Amendment No. 
      16 to the Form N-6 Registration Statement of Security Life of Denver Insurance Company and its 
      Security Life Separate Account L1, filed on April 12, 2006; File No. 333-50278.) 
    (d)  Amendment to Participation Agreement among ING Partners, Inc., ING Life Insurance and Annuity 
      Company, and ING Financial Advisers, LLC and Security Life of Denver Insurance Company, 
      dated April 29, 2005. (Incorporated herein by reference to the Post-Effective Amendment No. 16 to 
      the Form N-6 Registration Statement of Security Life of Denver Insurance Company and its 
      Security Life Separate Account L1, filed on April 12, 2006; File No. 333-50278.) 
    (e)  Amendment to Participation Agreement among ING Partners, Inc., ING Life Insurance and Annuity 
      Company, and ING Financial Advisers, LLC and Security Life of Denver Insurance Company, 
      dated August 31, 2005. (Incorporated herein by reference to the Post-Effective Amendment No. 16 
      to the Form N-6 Registration Statement of Security Life of Denver Insurance Company and its 
      Security Life Separate Account L1, filed on April 12, 2006; File No. 333-50278.) 
    (f)  Form of Amendment to Participation Agreement among ING Partners, Inc., ING Life Insurance and 
      Annuity Company, and ING Financial Advisers, LLC and Security Life of Denver Insurance 
      Company, dated April 28, 2006. (Incorporated herein by reference to the Post-Effective Amendment 
      No. 16 to the Form N-6 Registration Statement of Security Life of Denver Insurance Company and 
      its Security Life Separate Account L1, filed on April 12, 2006; File No. 333-50278.) 
    (g)  Service Agreement, effective as of May 1, 2002, between ING Life Insurance and Annuity 
      Company and Security Life of Denver Insurance Company. (Incorporated herein by reference to the 
      Post-Effective Amendment No. 3 to the Form N-6 Registration Statement of Security Life of Denver 
      Insurance Company and its Security Life Separate Account L1, filed on February 7, 2003; File No. 
      333-50278.) 
    (9) (a)  Participation Agreement among Security Life of Denver Insurance Company, ING Variable 
      Portfolios, Inc. and ING Funds Distributor, Inc. (Incorporated herein by reference to the Post- 
      Effective Amendment No. 3 to the Form N-6 Registration Statement of Security Life of Denver 
      Insurance Company and its Security Life Separate Account L1, filed on February 7, 2003; File No. 
      333-50278.) 
    (10) (a)  Participation Agreement among Security Life of Denver Insurance Company, Pilgrim Variable 
      Products Trust and ING Pilgrim Investments, LLC. (Incorporated herein by reference to the Post- 
      Effective Amendment No. 15 to the Form S-6 Registration Statement of Security Life of Denver 
      Insurance Company and its Security Life Separate Account L1, filed on April 9, 2002; File No. 033- 
      74190.) 
    (b)  Amendment to Participation Agreement among Security Life of Denver Insurance Company, 
      Pilgrim Variable Products Trust and ING Pilgrim Securities, Inc. (Incorporated herein by reference 
      to the Pre-Effective Amendment No. 1 to the Form S-6 Registration Statement of Security Life of 
      Denver Insurance Company and its Security Life Separate Account L1, filed on December 19, 2001; 
      File No. 333-73464.) 
    (c)  Amendment to Participation Agreement among ING Variable Products Trust, ING Funds 
      Distributor, Inc. and Security Life of Denver Insurance Company. (Incorporated herein by reference 
      to the Post-Effective Amendment No. 3 to the Form N-6 Registration Statement of Security Life of 
      Denver Insurance Company and its Security Life Separate Account L1, filed on February 7, 2003; 
      File No. 333-50278.) 
    (d)  Administrative and Shareholder Service Agreement between ING Pilgrim Group, LLC and Security 
      Life of Denver Insurance Company. (Incorporated herein by reference to the Pre-Effective 
      Amendment No. 1 to the Form S-6 Registration Statement of Security Life of Denver Insurance 
      Company and its Security Life Separate Account L1, filed on December 19, 2001; File No. 333- 
      73464.) 


    (e)  Amendment to Administrative and Shareholder Services Agreement between Security Life of 
      Denver Insurance Company and ING Funds Services, LLC. (Incorporated herein by reference to the 
      Post-Effective Amendment No. 3 to the Form N-6 Registration Statement of Security Life of Denver 
      Insurance Company and its Security Life Separate Account L1, filed on February 7, 2003; File No. 
      333-50278.) 
    (11) (a)  Rule 22C-2 Agreement, effective April 16, 2007, and to become operational on October 16, 2007, by 
      and between ING Funds Services, LLC, ING Life Insurance and Annuity Company, ING National 
      Trust, ING USA Annuity and Life Insurance Company, ReliaStar Life Insurance Company, 
      ReliaStar Life Insurance Company of New York, Security Life of Denver Insurance Company and 
      Systematized Benefits Administrators Inc. (Incorporated herein by reference to Post-Effective 
      Amendment No. 12 to Registration Statement on Form N-6, File Number 333-47527, as filed on 
      April 9, 2007.) 
    (12) (a)  Participation Agreement among INVESCO Variable Investment Funds, Inc., INVESCO Funds 
      Group, Inc., and Security Life of Denver Insurance Company. (Incorporated herein by reference to 
      Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security Life of Denver 
      Insurance Company and its Security Life Separate Account L1, filed on April 27, 1998; File No. 
      033-74190.) 
    (b)  First Amendment to Participation Agreement among Security Life of Denver Insurance Company, 
      INVESCO Variable Investment Funds, Inc. and INVESCO Funds Group, Inc. (Incorporated herein 
      by reference to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security 
      Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 27, 
      1998; File No. 033-74190.) 
    (c)  Second Amendment to Participation Agreement among Security Life of Denver Insurance 
      Company, INVESCO Variable Investment Funds, Inc. and INVESCO Funds Group, Inc. 
      (Incorporated herein by reference to the Post-Effective Amendment No. 15 to the Form S-6 
      Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate 
      Account L1, filed on April 9, 2002; File No. 033-74190.) 
    (d)  Third Amendment to Participation Agreement among Security Life of Denver Insurance Company, 
      INVESCO Variable Investment Funds, Inc. and INVESCO Funds Group, Inc. (Incorporated herein 
      by reference to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      April 9, 2002; File No. 033-74190.) 
    (e)  Fourth Amendment to Participation Agreement among Security Life of Denver Insurance Company, 
      INVESCO Investment Funds, Inc. and INVESCO Funds Group, Inc. (Incorporated herein by 
      reference to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security 
      Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 27, 
      1998; File No. 033-74190.) 
    (f)  Fifth Amendment to Participation Agreement among Security Life of Denver Insurance Company, 
      INVESCO Variable Investment Funds, Inc. and INVESCO Funds Group, Inc. (Incorporated herein 
      by reference to the Post-Effective Amendment No. 1 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      February 29, 2000; File No. 333-72753.) 
    (g)  Sixth Amendment to Participation Agreement among Security Life of Denver Insurance Company, 
      INVESCO Variable Investment Funds, Inc. and INVESCO Funds Group, Inc. (Incorporated herein 
      by reference to the Post-Effective Amendment No. 15 to the Form S-6 Registration Statement of 
      Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      April 9, 2002; File No. 033-74190.) 
    (h)  Seventh Amendment to Participation Agreement among Security Life of Denver Insurance 
      Company, INVESCO Variable Investment Funds, Inc. and INVESCO Funds Group, Inc. 
      (Incorporated herein by reference to the Pre-Effective Amendment No. 1 to the Form S-6 
      Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate 
      Account L1, filed on December 19, 2001; File No. 333-73464.) 
    (i)  Service Agreement between INVESCO Funds Group, Inc. and Security Life of Denver Insurance 
      Company. (Incorporated herein by reference to the Post-Effective Amendment No. 11 to the Form 
      S-6 Registration Statement of Security Life of Denver Insurance Company and its Security Life 
      Separate Account L1, filed on April 29, 1999; File No. 033-74190.) 


    (j)  First Amendment to Service Agreement between Security Life of Denver Insurance Company and 
      INVESCO Funds Group, Inc. (Incorporated herein by reference to the Post-Effective Amendment 
      No. 15 to the Form S-6 Registration Statement of Security Life of Denver Insurance Company and 
      its Security Life Separate Account L1, filed on April 9, 2002; File No. 033-74190.) 
    (13) (a)  Fund Participation Agreement between Janus Aspen Series and Security Life of Denver Insurance 
      Company. (Incorporated herein by reference to the Post-Effective Amendment No. 13 to the Form 
      S-6 Registration Statement of Security Life of Denver Insurance Company and its Security Life 
      Separate Account L1, filed on October 13, 2000; File No. 033-74190.) 
    (b)  Amendment to Janus Aspen Series Fund Participation Agreement. (Incorporated herein by reference 
      to the Pre-Effective Amendment No. 1 to the Form S-6 Registration Statement of Security Life of 
      Denver Insurance Company and its Security Life Separate Account L1, filed on December 19, 2001; 
      File No. 333-73464.) 
    (c)  Distribution and Shareholder Services Agreement between Janus Distributors, Inc. and Security Life 
      of Denver Insurance Company. (Incorporated herein by reference to the Post-Effective Amendment 
      No. 15 to the Form S-6 Registration Statement of Security Life of Denver Insurance Company and 
      its Security Life Separate Account L1, filed on April 9, 2002; File No. 033-74190.) 
    (d)  Letter of Agreement between Security Life of Denver and Janus Capital Corporation. (Incorporated 
      herein by reference to the Pre-Effective Amendment No. 1 to the Form S-6 Registration Statement 
      of Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
      December 19, 2001; File No. 333-73464.) 
    (14) (a)  Participation Agreement among M Fund, Inc., M Financial Advisers, Inc. and Security Life of 
      Denver Insurance Company. (Incorporated herein by reference to the Post-Effective Amendment 
      No. 14 to the Form S-6 Registration Statement of Security Life of Denver Insurance Company and 
      its Security Life Separate Account L1, filed on April 19, 2001; File No. 033-74190.) 
    (b)  Amendment to Participation Agreement among M Fund, Inc., M Financial Advisers, Inc. and 
      Security Life of Denver Insurance Company. (Incorporated herein by reference to the Post-Effective 
      Amendment No. 14 to the Form S-6 Registration Statement of Security Life of Denver Insurance 
      Company and its Security Life Separate Account L1, filed on April 19, 2001; File No. 033-74190.) 
    (c)  Amendment to Participation Agreement among M Fund, Inc., M Financial Advisers, Inc. and 
      Security Life of Denver Insurance Company. (Incorporated herein by reference to the Post-Effective 
      Amendment No. 15 to the Form S-6 Registration Statement of Security Life of Denver Insurance 
      Company and its Security Life Separate Account L1, filed on April 9, 2002; File No. 033-74190.) 
    (d)  Amendment to Participation Agreement among M Fund, Inc., M Financial Advisers, Inc. and 
      Security Life of Denver Insurance Company. (Incorporated herein by reference to the Post-Effective 
      Amendment No. 5 to the Form N-6 Registration Statement of Security Life of Denver Insurance 
      Company and its Security Life Separate Account L1, filed on April 14, 2003; File No. 333-50278.) 
    (e)  Shareholder Information Agreement (Rule 22C-2 Agreement), dated April 16, 2007, and to be 
      effective on October 16, 2007, by and between M Fund, Inc., M Financial Advisers, Inc. and 
      Security Life of Denver Insurance Company. (Incorporated herein by reference to the Post-Effective 
      Amendment No. 6 to the Form N-6 Registration Statement of Security Life of Denver Insurance 
      Company and its Security Life Separate Account L1, filed on April 19, 2007; File No. 333-117329.) 
    (15) (a)  Assignment and Modification Agreement between Neuberger & Berman Advisers Management 
      Trust, Neuberger & Berman Management Incorporated, Neuberger & Berman Advisers 
      Management Trust, Advisers Managers Trust and Security Life of Denver Insurance Company. 
      (Incorporated herein by reference to Post-Effective Amendment No. 6 to the Form S-6 Registration 
      Statement of Security Life of Denver Insurance Company and its Security Life Separate Account 
      L1, filed on March 2, 1998; File No. 033-74190.) 
    (b)  Addendum to Fund Participation Agreement among Security Life of Denver Insurance Company, 
      Neuberger Berman Advisers Management Trust, Advisers Managers Trust and Neuberger Berman 
      Management Inc. (Incorporated herein by reference to the Post-Effective Amendment No. 13 to the 
      Form S-6 Registration Statement of Security Life of Denver Insurance Company and its Security 
      Life Separate Account L1, filed on October 13, 2000; File No. 033-74190.) 
    (c)  Service Agreement between Neuberger & Berman Management Incorporated and Security Life of 
      Denver Insurance Company. (Incorporated herein by reference to the Post-Effective Amendment 
      No. 11 to the Form S-6 Registration Statement of Security Life of Denver Insurance Company and 
      its Security Life Separate Account L1, filed on April 29, 1999; File No. 033-74190.) 


               (d)  Sales Agreement by and among Neuberger & Berman Advisers Management Trust, Neuberger & 
        Berman Management Incorporated, and Security Life of Denver Insurance Company. (Incorporated 
        herein by reference to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of 
        Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
        April 27, 1998; File No. 033-74190.) 
               (e)  Rule 22C-2 Agreement, effective April 16, 2007, and to become operational on October 16, 2007, 
        by and between Neuberger Berman Management Inc., ING Life Insurance and Annuity Company, 
        ING National Trust, ING USA Annuity and Life Insurance Company, ReliaStar Life Insurance 
        Company, ReliaStar Life Insurance Company of New York, Security Life of Denver Insurance 
        Company and Systematized Benefits Administrators Inc. (Incorporated herein by reference to Post- 
        Effective Amendment No. 12 to Registration Statement on Form N-6, filed on April 9, 2007, File 
        No. 333-47527.) 
      (16) (a)  Participation Agreement among Security Life of Denver Insurance Company, Pioneer Variable 
        Contracts Trust, Pioneer Investment Management, Inc. and Pioneer Funds Distributor, Inc. 
        (Incorporated herein by reference to the Post-Effective Amendment No. 3 to the Form N-6 
        Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate 
        Account L1, filed on February 7, 2003; File No. 333-50278.) 
      (17) (a)  Participation Agreement among Security Life of Denver Insurance Company and Southland Life 
        Insurance Company, Putnam Variable Trust and Putnam Retail Management, Inc. (Incorporated 
        herein by reference to the Post-Effective Amendment No. 1 to the Form S-6 Registration Statement 
        of Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
        April 19, 2001; File No. 333-50278.) 
               (b)  Amendment to Participation Agreement among Security Life of Denver Insurance Company and 
        Southland Life Insurance Company, Putnam Variable Trust and Putnam Retail Management, L.P. 
        (Incorporated herein by reference to the Post-Effective Amendment No. 3 to the Form N-6 
        Registration Statement of Security Life of Denver Insurance Company and its Security Life Separate 
        Account L1, filed on February 7, 2003; File No. 333-50278.) 
      (18) (a)  Participation Agreement between Van Eck Investment Trust and the Trust's investment adviser, Van 
        Eck Associates Corporation, and Security Life of Denver Insurance Company. (Incorporated herein 
        by reference to Post-Effective Amendment No. 7 to the Form S-6 Registration Statement of Security 
        Life of Denver Insurance Company and its Security Life Separate Account L1, filed on April 27, 
        1998; File No. 033-74190.) 
               (b)  First Amendment to Fund Participation Agreement between Security Life of Denver, Van Eck 
        Investment Trust and Van Eck Associates Corporation. (Incorporated herein by reference to Post- 
        Effective Amendment No. 6 to the Form S-6 Registration Statement of Security Life of Denver 
        Insurance Company and its Security Life Separate Account L1, filed on March 2, 1998; File No. 
        033-74190.) 
               (c)  Second Amendment to Fund Participation Agreement between Security Life of Denver, Van Eck 
        Worldwide Insurance Trust and Van Eck Associates Corporation. (Incorporated herein by reference 
        to Post-Effective Amendment No. 6 to the Form S-6 Registration Statement of Security Life of 
        Denver Insurance Company and its Security Life Separate Account L1, filed on March 2, 1998; File 
        No. 033-74190.) 
               (d)  Side Letter between Van Eck Worldwide Insurance Trust and Security Life of Denver. (Incorporated 
        herein by reference to the Post-Effective Amendment No. 11 to the Form S-6 Registration Statement 
        of Security Life of Denver Insurance Company and its Security Life Separate Account L1, filed on 
        April 29, 1999; File No. 033-74190.) 
     
    (i)  Not Applicable. 
     
    (j)  Not Applicable. 
     
    (k)  Opinion and Consent of Counsel. 
     
    (l)  Not Applicable. 
     
    (m)  Not Applicable. 
     
    (n)  Consent of Independent Registered Public Accounting Firm. 


    (o)   All financial statements are included in the Statement of Additional Information, as indicated therein. 
     
    (p)   Not Applicable.   
     
    (q)   Not Applicable.   
     
    (r)   Powers of Attorney.   
     
     Item 27  Directors and Officers of the Depositor   
     
    Name and Principal Business Address                       Positions and Offices with Depositor 
     Donald W. Britton, 5780 Powers Ferry Road, NW,  Director and President 
      Atlanta, GA 30327   
     Thomas J. McInerney, One Orange Way, Windsor, CT  Director and Chairman 
      06095-4774   
     Ewout L. Steenbergen, 230 Park Avenue, New York, NY  Director, Executive Vice President and Chief Financial 
      10169       Officer 
     Catherine H. Smith, One Orange Way, Windsor, CT  Director and Senior Vice President 
      06095-4774   
     Robert G. Leary, 230 Park Avenue, New York, NY  Director 
      10169   
     Michael S. Smith, 1475 Dunwoody Drive, West Chester,  Director 
      PA 19380-1478   
     Boyd G. Combs, 5780 Powers Ferry Road, NW, Atlanta,  Senior Vice President, Tax 
      GA 30327   
     Timothy T. Matson, One Orange Way, Windsor, CT  Senior Vice President 
      06095-4774   
     Daniel P. Mulheran, Sr. 20 Washington Avenue South,  Senior Vice President 
      Minneapolis, MN 55401   
     David S. Pendergrass, 5780 Powers Ferry Road, NW,  Senior Vice President and Treasurer 
      Atlanta, GA 30327   
     Steven T. Pierson, 5780 Powers Ferry Road, NW,  Senior Vice President and Chief Accounting Officer 
      Atlanta, GA 30327   
     Stephen J. Preston, 1475 Dunwoody Drive, West  Senior Vice President 
      Chester, PA 19380-1478   
     Pamela S. Anson, 2001 21st Avenue NW, Minot, ND  Vice President 
      58703   
     Kimberly M. Curley, 1290 Broadway, Denver, CO  Vice President and Illustration Actuary 
      80203   
     Chad M. Eslinger, 2001 21st Avenue NW, Minot, ND  Vice President, Compliance 
      58703   
     Deborah C. Hancock, 1290 Broadway, Denver, CO  Vice President 
      80203   
     Carol S. Stern, 601 13th Street NW, Suite 550 N,  Vice President and Chief Compliance Officer 
      Washington DC 20005   
     Joy M. Benner, 20 Washington Avenue South,  Secretary 
      Minneapolis, MN 55401   
     
     Item 28  Persons Controlled by or Under Common Control with the Depositor or the Registrant 
     
     Incorporated herein by reference to Item 28 in Post-Effective Amendment No. 28 to Registration Statement on Form 
     N-6 for Select*Life Variable Account of ReliaStar Life Insurance Company (File No. 033-57244), as filed with the 
     Securities and Exchange Commission on April 6, 2010.   


    Item 29  Indemnification 

    Under its Bylaws, Sections 1 through 8, Security Life of Denver Insurance Company ("Security Life") indemnifies, to the full extent permitted by the laws of the State of Colorado, any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the corporation), by reason of the fact that he or she is or was a director, member of a committee appointed by the Board of Directors, officer, salaried employee, or fiduciary of Security Life or is or was serving at the request of Security Life (whether or not as a representative of Security Life) as a director, officer, employee, or fiduciary of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorney fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit, or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to in the best interest of the corporation, or at least not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

    Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Security Life pursuant to such provisions of the bylaws or statutes or otherwise, Security Life has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in said Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Security Life of expenses incurred or paid by a director or officer or controlling person of Security Life in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person of Security Life in connection with the securities being registered, Security Life will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether or not such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

    A corporation may procure indemnification insurance on behalf of an individual who is or was a director of the corporation. Consistent with the laws of the State of Colorado, ING America Insurance Holdings, Inc. maintains Professional Liability and fidelity bond insurance policies issued by an international insurer. The policies cover ING America Insurance Holdings, Inc. and any company in which ING America Insurance Holdings, Inc. has a controlling financial interest of 50.00% or more. These policies include the principal underwriter, as well as, the depositor and any/all assets under the care, custody and control of ING America Insurance Holdings, Inc. and/or its subsidiaries. The policies provide for the following types of coverage: errors and omissions/professional liability, employment practices liability and fidelity/crime.

    Additionally, Section 13 of the Security Life Distribution Agreement with ING America Equities, Inc. (INGAE) generally provides that each party will indemnify and hold harmless the officers, directors and employees of the other party (and the variable account with respect to indemnity by INGAE) against any expenses (including legal expenses), losses, claims, damages, or liabilities arising out of or based on certain claims or circumstances in connection with the offer or sale of the policies. Under this agreement neither party is entitled to indemnity if the expenses (including legal expenses), losses, claims, damages, or liabilities resulted from their own willful misfeasance, bad faith, negligence, misconduct or wrongful act.

    Item 30  Principal Underwriters   
    (a)  Other Activity. ING America Equities, Inc., the principal underwriter for the policies, is also the principal 
      underwriter for policies issued by ReliaStar Life Insurance Company of New York and ReliaStar Life 
      Insurance Company.   
     
    (b)  Management of ING America Equities, Inc.   
     
    Name and Principal Business Address                     Positions and Offices with Underwriter 
    Margaret B. Wall, 20 Washington Avenue South,  Director, President and Chief Executive Officer 
             Minneapolis MN 55401   
    Laurie J. Rasanen, 2001 21st Avenue NW, Minot, ND  Director, Vice President and Chief Operating Officer 
             58703   
    Daniel P. Mulheran, Sr., 20 Washington Avenue South,  Director 
             Minneapolis, MN 55401   


    Cynthia A. Grimm, 100 Deerfield lane, Suite 300,  Chief Financial Officer/Financial and Operations 
             Malvern, PA 19355      Principal     
    William Wilcox, One Orange Way, Windsor, CT 06095-  Chief Compliance Officer   
             4774             
    David S. Pendergrass, 5780 Powers Ferry Road, NW,  Vice President and Treasurer   
             Atlanta, GA 30327           
    Pamela S. Anson, 2001 21st Avenue NW, Minot, ND  Vice President   
             58703             
    Spencer T. Shell, 5780 Powers Ferry Road, NW, Atlanta,  Vice President and Assistant Treasurer 
             GA 30327           
    Deborah C. Hancock, 1290 Broadway, Denver, CO  Assistant Vice President   
             80203             
    Terry L. Owens, 5780 Powers Ferry Road, NW, Atlanta,  Tax Officer     
             GA 30327           
    James H. Taylor, 5780 Powers Ferry Road, NW, Atlanta,  Tax Officer     
             GA 30327           
    Joy M. Benner, 20 Washington Avenue South,  Secretary     
             Minneapolis, MN 55401         
    Tina M. Nelson, 20 Washington Avenue South,  Assistant Secretary   
             Minneapolis, MN 55401         
    Melissa A. O’Donnell, 20 Washington Avenue South,  Assistant Secretary   
             Minneapolis, MN 55401         
    Randall K. Price, 20 Washington Avenue South,  Assistant Secretary   
             Minneapolis, MN 55401         
    Susan M. Vega, 20 Washington Avenue South,  Assistant Secretary   
             Minneapolis, MN 55401         
     
    (c) Compensation From the Registrant.         
     
    (1)
    Name of Principal
    Underwriter     		 (2)
    2009 Net
    Underwriting
    Discounts and
    Commissions     		 (3)
    Compensation on
    Events Occasioning
    the Deduction of a
    Deferred Sales Load     		 (4)
    Brokerage
    Commissions     		 (5)
    Other Compensation* 
    ING America           
    Equities, Inc.          $23,513,844.00 
    * Compensation shown in column 5 includes: marketing allowances.     
     
     
    Item 31  Location of Accounts and Records       
    Accounts and records are maintained by Security Life of Denver Insurance Company at 1290 Broadway, Denver, CO 
    80203-5699 and by ING Americas Finance Shared Services, an affiliate, at 5780 Powers Ferry Road, NW, Atlanta, 
    GA 30327.             
     
    Item 32  Management Services         
    None             
     
    Item 33  Fee Representations         
     
    Security Life of Denver Insurance Company represents that the fees and charges deducted under the variable life 
    insurance policy described in this registration statement, in the aggregate, are reasonable in relation to the services 
    rendered, expenses expected to be incurred, and the risks assumed by Security Life of Denver Insurance Company 
    under the policies. Security Life of Denver Insurance Company bases this representation on its assessment of such 
    factors as the nature and extent of such services, expenses and risks, the need for the Security Life of Denver 
    Insurance Company to earn a profit and the range of such fees and charges within the insurance industry. 


    SIGNATURES

    Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, Security Life Separate Account L1, certifies that it meets all the requirements for effectiveness of this Registration Statement under Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 4 to this Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the Town of Windsor, and State of Connecticut on the 12th day of April, 2010.

      SECURITY LIFE SEPARATE ACCOUNT L1
    (Registrant)

    By: SECURITY LIFE OF DENVER INSURANCE COMPANY
    (Depositor)

    By: /s/ Donald W. Britton*
    Donald W. Britton
    President
    (principal executive officer)

    Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 4 has been signed below by the following persons in the capacities indicated and on the date indicated.

    Signature  Title  Date 
     
    /s/ Donald W. Britton*   Director and President   
    Donald W. Britton   (principal executive officer)   
     
    /s/ Robert G. Leary*   Director   
    Robert G. Leary     
     
    /s/ T. J. McInerney*   Director and Chairman   
    Thomas J. McInerney    April 
        12, 2010 
    /s/ Catherine H. Smith*   Director and Senior Vice President   
    Catherine H. Smith     
     
    /s/ Michael S. Smith*   Director   
    Michael S. Smith     
     
    /s/ Ewout L. Steenbergen*   Director, Executive Vice President and Chief Financial Officer   
    Ewout L. Steenbergen   (principal financial officer)   
     
    /s/ Steven T. Pierson*   Senior Vice President and Chief Accounting Officer   
    Steven T. Pierson   (principal accounting officer)   
     
     
    By: /s/ J. Neil McMurdie     
    J. Neil McMurdie     
    * Attorney-in-Fact     


      SECURITY LIFE SEPARATE ACCOUNT L1 
      EXHIBIT INDEX 
    Exhibit No.  Exhibit 
    26(k)  Opinion and Consent of Counsel 
    26(n)  Consent of Independent Registered Public Accounting Firm 
    26(r)  Powers of Attorney