**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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**FORM 10-Q**

 

**(Mark One)**

 
| **ý** | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                                                                                         |
|------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| ** ** | ** ** | **For the quarterly period ended June 30, 2005**                                                                                                                                                                                                                                                                                                                                                                                                     |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **OR**     |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **o**      | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                                                                                        |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| ** ** | ** ** | **For the  transition period from                                    to                                 ** |

 
| ** ** | **Commission  file number:     333-49581, 033-63657** |
|------------|---------------------------------------------------------------------------|

 

# **INGInsurance Company of America**

(Exact name of registrant as specified in its charter)

 
| **Florida**                                                                       | ** ** | **06-1286272**                    |
|-----------------------------------------------------------------------------------|------------|-----------------------------------|
| (State or other jurisdiction of  incorporation or organization)                   |       | (IRS employer identification no.) |
| ** **                                                                        |
| **Corporate Center One, 2202  North Westshore Boulevard, #350, Tampa, Florida**   | ** ** | **33607**                         |
| (Address of principal executive offices)                                          |       | (Zip code)                        |
|                                                                              |       |                              |
| Registrant’s telephone number, including area code **(813) 281-3773**        |
|                                                                              |
|                                                                              |
| Former name, former address and formal fiscal  year, if changed since last report |
|                                                                                   |            |                                   |  |  |

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

Yes ý     No o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theExchange Act).  Yes o     No ý

 

**APPLICABLE ONLY TO CORPORATE ISSUERS:**

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date: 25,500 shares of Common Stock as of August 11, 2005,all of which were directly owned by ING Life Insurance and Annuity Company.

 

NOTE:  WHEREAS ING INSURANCE COMPANY OF AMERICAMEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM10Q, THIS FORM IS BEING FILED WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TOGENERAL INSTRUCTION H(2).

 

 

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**ING INSURANCE COMPANY OF AMERICA**

**(A wholly-owned subsidiary of ING LifeInsurance and Annuity Company)**

**Form 10-Q for period ended June 30, 2005**

 

**INDEX**

 
| ** **    | ** **                                                                                 | **page**   |
|---------------|--------------------------------------------------------------------------------------------|------------|
| **PART I.**   | **FINANCIAL INFORMATION (Unaudited)**                                                      | ** ** |
|          |                                                                                       |       |
| Item 1.       | Financial Statements:                                                                      |       |
|          | Condensed Statements of Operations                                                         | 3          |
|          | Condensed  Balance Sheets                                                                  | 4          |
|          | Condensed Statements of Changes in Shareholder’s Equity                               | 5          |
|          | Condensed Statements of Cash Flows                                                         | 6          |
|          | Notes to Condensed Financial Statements                                                    | 7          |
|          |                                                                                       |       |
| Item 2.       | Management’s Narrative Analysis of the Results of Operations and  Financial Condition | 11         |
|          |                                                                                       |       |
| Item 4.       | Controls and Procedures                                                                    | 21         |
|          |                                                                                       |       |
| **PART  II.** | **OTHER  INFORMATION**                                                                     |       |
|          |                                                                                       |       |
| Item  1.      | Legal  Proceedings                                                                         | 22         |
|          |                                                                                       |       |
| Item 6.       | Exhibits                                                                                   | 22         |
|          |                                                                                       |       |
| Signatures    |                                                                                       | 24         |

 

2

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## **INGInsurance Company of America**

## **(Awholly-owned subsidiary of ING Life Insurance and Annuity Company)**

##  

**PART I. FINANCIAL INFORMATION (UNAUDITED)**

 

**Item 1.    FinancialStatements**

 

## **CondensedStatements of Operations**

## (Unaudited)

## (In millions)

 
| ** **                                              | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|---------------------------------------------------------|------------|---------------------------------|------------|-------------------------------|------------|
| ** **                                              | ** ** | **2005**                        | ** ** | **2004**                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Revenues:**                                           |       |                            |       |                          |       |   |   |   |   |
| Net investment income                                   |       | $                               | 1.9        |                          | $          | 2.5 |   | $ | 4.1 |   | $ | 4.9 |   |
| Fee income                                              |       | 2.3                             |       | 2.1                           |       | 4.5 |   | 4.2 |   |
| Net realized capital (losses) gains                     |       | (0.7                            | )          | (0.2                          | )          | (0.7 | ) | 0.2 |   |
| Total revenue                                           |       | 3.5                             |       | 4.4                           |       | 7.9 |   | 9.3 |   |
| **Benefits and expenses:**                              |       |                            |       |                          |       |   |   |   |   |
| Interest credited and other benefits to  contractowners |       | 1.1                             |       | 1.2                           |       | 3.2 |   | 2.3 |   |
| Operating expenses                                      |       | 0.8                             |       | 0.6                           |       | 1.6 |   | 1.4 |   |
| Amortization of value of business acquired              |       | 1.4                             |       | 1.4                           |       | 2.1 |   | 2.6 |   |
| Total benefits and expenses                             |       | 3.3                             |       | 3.2                           |       | 6.9 |   | 6.3 |   |
| Income before income taxes                              |       | 0.2                             |       | 1.2                           |       | 1.0 |   | 3.0 |   |
| Income tax expense                                      |       | —                          |       | 0.4                           |       | 0.2 |   | 0.9 |   |
| Net income                                              |       | $                               | 0.2        |                          | $          | 0.8 |   | $ | 0.8 |   | $ | 2.1 |   |

 

*The accompanying notes are an integral part of these financialstatements.*

 

3

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## **INGInsurance Company of America**

## **(Awholly-owned subsidiary of ING Life Insurance and Annuity Company)**

## ** **

## **Condensed Balance Sheets**

## (In millions,except share data)

 
| ** **                                                                                                 | ** ** | **As of**           | ** ** | **As of**        | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|---------------------|------------|------------------|------------|
| ** **                                                                                                 | ** ** | **June 30,**        | ** ** | **December 31,** | ** ** |
| ** **                                                                                                 | ** ** | **2005**            | ** ** | **2004**         | ** ** |
| ** **                                                                                                 | ** ** | **(Unaudited****)** | ** ** | ** **       | ** ** |
| **Assets**                                                                                                 | ** ** | ** **          |       |             |       |
| Investments:                                                                                               |       |                |       |             |       |
| Fixed maturities, available-for-sale, at  fair value (amortized cost of $148.6 at 2005 and $161.5 at 2004) |       | $                   | 150.1      |             | $          | 165.0 |   |
| Securities pledged (amortized cost of $3.7  at 2005 and $20.4 at 2004)                                     |       | 3.7                 |       | 20.2             |       |
| Total investments                                                                                          |       | 153.8               |       | 185.2            |       |
| Cash and cash equivalents                                                                                  |       | 32.5                |       | 11.4             |       |
| Short-term investments under securities  loan agreement                                                    |       | 3.7                 |       | 20.8             |       |
| Receivables for securities sold                                                                            |       | 6.2                 |       | —           |       |
| Value of business acquired                                                                                 |       | 26.6                |       | 28.2             |       |
| Other assets                                                                                               |       | 3.6                 |       | 4.9              |       |
| Assets held in separate accounts                                                                           |       | 484.7               |       | 540.3            |       |
| Total assets                                                                                               |       | $                   | 711.1      |             | $          | 790.8 |   |
|                                                                                                       |       |                |       |             |       |
| **Liabilities and Shareholder’s Equity**                                                              |       |                |       |             |       |
| Future policy benefits and claim reserves                                                                  |       | $                   | 111.6      |             | $          | 123.0 |   |
| Payables for securities                                                                                    |       | 1.6                 |       | —           |       |
| Payables under securities loan agreement                                                                   |       | 3.7                 |       | 20.8             |       |
| Due to affiliates                                                                                          |       | 1.6                 |       | 0.7              |       |
| Current income taxes                                                                                       |       | 2.2                 |       | 0.1              |       |
| Deferred income taxes                                                                                      |       | 7.9                 |       | 8.0              |       |
| Other liabilities                                                                                          |       | 0.7                 |       | 1.6              |       |
| Liabilities related to separate accounts                                                                   |       | 484.7               |       | 540.3            |       |
| Total liabilities                                                                                          |       | 614.0               |       | 694.5            |       |
|                                                                                                       |       |                |       |             |       |
| Shareholder’s equity:                                                                                 |       |                |       |             |       |
| Common stock (35,000 shares authorized;  25,500 issued and outstanding; $100 per share value)              |       | 2.5                 |       | 2.5              |       |
| Additional paid-in capital                                                                                 |       | 181.2               |       | 181.2            |       |
| Accumulated other comprehensive income  (loss)                                                             |       | —              |       | —           |       |
| Retained earnings (deficit)                                                                                |       | (86.6               | )          | (87.4            | )          |
| Total shareholder’s equity                                                                            |       | 97.1                |       | 96.3             |       |
| Total liabilities and shareholder’s equity                                                            |       | $                   | 711.1      |             | $          | 790.8 |   |

 

*The accompanying notes are an integral part of thesefinancial statements.*

 

4

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## **INGInsurance Company of America**

## **(Awholly-owned subsidiary of ING Life Insurance and Annuity Company)**

## ** **

## **CondensedStatements of Changes in Shareholder’s Equity**

## (Unaudited)

## (In millions)

##  

| ** **                                         | ** ** | ** ** | ** ** | ** **     | ** ** | **Accumulated**   | ** ** | ** **    | ** ** | ** **             | ** ** |
|----------------------------------------------------|------------|------------|------------|----------------|------------|-------------------|------------|---------------|------------|------------------------|------------|
| ** **                                         | ** ** | ** ** | ** ** | **Additional** | ** ** | **Other**         | ** ** | **Retained**  | ** ** | **Total**              | ** ** |
| ** **                                         | ** ** | **Common** | ** ** | **Paid-In**    | ** ** | **Comprehensive** | ** ** | **Earnings**  | ** ** | **Shareholder’s** | ** ** |
| ** **                                         | ** ** | **Stock**  | ** ** | **Capital**    | ** ** | **Income (Loss)** | ** ** | **(Deficit)** | ** ** | **Equity**             | ** ** |
| Balance at December 31, 2003                       |       | $          | 2.5        |           | $          | 181.2             |       | $             | 2.2        |                   | $          | (93.3 | ) | $ | 92.6 |   |
| Comprehensive loss:                                |       |       |       |           |       |              |       |          |       |                   |       |
| Net income                                         |       |       |       |           |       |              |       | 2.1           |       | 2.1                    |       |
| Other comprehensive loss, net of tax:              |       |       |       |           |       |              |       |          |       |                   |       |
| Net unrealized loss on securities ($(3.7)  pretax) |       |       |       |           |       | (2.5              | )          |          |       | (2.5                   | )          |
| Total comprehensive loss                           |       |       |       |           |       |              |       |          |       | (0.4                   | )          |
| Balance at June 30, 2004                           |       | $          | 2.5        |           | $          | 181.2             |       | $             | (0.3       | )                      | $          | (91.2 | ) | $ | 92.2 |   |
|                                               |       |       |       |           |       |              |       |          |       |                   |       |
| Balance at December 31, 2004                       |       | $          | 2.5        |           | $          | 181.2             |       | $             | —     |                   | $          | (87.4 | ) | $ | 96.3 |   |
| Comprehensive income:                              |       |       |       |           |       |              |       |          |       |                   |       |
| Net income                                         |       |       |       |           |       |              |       | 0.8           |       | 0.8                    |       |
| Other comprehensive income, net of tax:            |       |       |       |           |       |              |       |          |       |                   |       |
| Net unrealized income on securities ($0.3  pretax) |       |       |       |           |       | —            |       |          |       | —                 |       |
| Total comprehensive income                         |       |       |       |           |       |              |       |          |       | 0.8                    |       |
| Balance at June 30, 2005                           |       | $          | 2.5        |           | $          | 181.2             |       | $             | —     |                   | $          | (86.6 | ) | $ | 97.1 |   |

 

*The accompanying notes are an integral part of thesefinancial statements.*

 

5

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## **INGInsurance Company of America**

## **(Awholly-owned subsidiary of ING Life Insurance and Annuity Company)**

##  

## **CondensedStatements of Cash Flows**

## (Unaudited)

## (In millions)

 
| ** **                                            | ** ** | **Six Months Ended June 30,** | ** ** |
|-------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                            | ** ** | **2005**                      | ** ** | **2004** | ** ** |
| ** **                                            | ** ** | ** **                    | ** ** | **(Restated)** | ** ** |
| Net cash provided by operating activities             |       | $                             | 7.3        |   | $ | 8.6 |   |
|                                                  |       |                          |       |   |   |
| Cash Flows from Investing Activities:                 |       |                          |       |   |   |
| Proceeds from the sale, maturity, or  redemption of:  |       |                          |       |   |   |
| Fixed maturities, available-for-sale                  |       | 128.1                         |       | 133.9 |   |
| Acquisition of:                                       |       |                          |       |   |   |
| Fixed maturities, available-for-sale                  |       | (102.6                        | )          | (125.7 | ) |
| Net cash provided by investing activities             |       | 25.5                          |       | 8.2 |   |
|                                                  |       |                          |       |   |   |
| Cash Flows from Financing Activities:                 |       |                          |       |   |   |
| Deposits received for investment contracts            |       | 2.3                           |       | 1.5 |   |
| Maturities and withdrawals from investment  contracts |       | (14.0                         | )          | (15.2 | ) |
| Net cash used for financing activities                |       | (11.7                         | )     | (13.7 | ) |
| Net increase in cash and cash equivalents             |       | 21.1                          |       | 3.1 |   |
| Cash and cash equivalents, beginning of  period       |       | 11.4                          |       | 4.8 |   |
| Cash and cash equivalents, end of period              |       | $                             | 32.5       |   | $ | 7.9 |   |

 

*The accompanying notes are an integral part of thesefinancial statements.*

 

6

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**INGInsurance Company of America**

**(Awholly-owned subsidiary of ING Life Insurance and Annuity Company)**

**Notes to Condensed Financial Statements (Unaudited)**

(Dollar amounts in millions, unlessotherwise stated)

 

**1.**                                      Organizationaland Significant Accounting Policies

 

***Basis of Presentation***

 

ING InsuranceCompany of America (“IICA” or the “Company,” as appropriate) is a stock lifeinsurance company domiciled in the state of Florida and provides financialproducts and services in the United States. IICA is authorized to conduct its insurance business in the District ofColumbia and all states except New York.

 

The Company is awholly-owned subsidiary of ING Life Insurance and Annuity Company (“ILIAC”).  ILIAC is a direct, wholly-owned subsidiary ofLion Connecticut Holdings Inc. (“Lion” or “Parent”), which is an indirect,wholly-owned subsidiary of ING Groep N.V. (“ING”).  ING is a global financial services holdingcompany based in The Netherlands, with American Depository Shares listed on theNew York Stock Exchange under the symbol “ING”.

 

The condensedfinancial statements and notes as of June 30, 2005 and December 31,2004, and for the three and six month periods ended June 30, 2005 and 2004(“interim periods”), have been prepared in accordance with generally acceptedaccounting principles in the United States and are unaudited.

 

The condensedfinancial statements reflect all adjustments (consisting only of normal,recurring accruals) which are, in the opinion of management, necessary for thefair presentation of the financial position, results of operations, and cashflows for the interim periods.  Thesecondensed financial statements and notes should be read in conjunction with thefinancial statements and related notes as presented in the Company’s 2004Annual Report on Form 10-K.  The resultsof operations for the interim periods may not be considered indicative ofresults to be expected for the full year.

 

***Description of Business***

 

The Companyprincipally offers variable annuity contracts in the retail market toindividuals, in the education market to individuals on a qualified andnon-qualified basis, and to employer-sponsored retirement plans qualified underInternal Revenue Code Sections 401, 403, and 408.  The Company’s products are generallydistributed through a managed network of broker/dealers and dedicated careeragents.

 

***Useof Estimates***

 

The preparation offinancial statements in conformity with accounting principles generally acceptedin the United States requires management to make estimates and assumptions thataffect the amounts reported in the financial statements and accompanyingnotes.  Actual results could differ fromreported results using those estimates.

 

7

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**INGInsurance Company of America**

**(Awholly-owned subsidiary of ING Life Insurance and Annuity Company)**

**Notes to Condensed Financial Statements (Unaudited)**

(Dollar amounts in millions,unless otherwise stated)

 

***Reclassifications***

 

Certainreclassifications have been made to prior year financial information to conformto the current year classifications (see footnote 7).

 

***Significant Accounting Policies***

 

For a descriptionof significant accounting policies, see Note 1 to the Financial Statementsincluded in the Company’s 2004 Annual Report on Form 10-K.

 

**2.**                                      DeferredPolicy Acquisition Costs and Value of Business Acquired

** **

Value of businessacquired (“VOBA”) represents the outstanding value of in force businesscapitalized and is subject to amortization in purchase accounting when theCompany was acquired.  The value is basedon the present value of estimated net cash flows embedded in the Company’scontracts.

 

The amortizationmethodology used for VOBA varies by product type.  Universal life and investment-type products’,such as fixed and variable deferred annuities, VOBA is amortized, withinterest, over the life of the related contracts (usually 25 years) in relationto the present value of estimated future gross profits from investment,mortality, and expense margins; asset-based fees, policy administration, andsurrender charges; less policy maintenance fees andnon-capitalized commissions, as well as realized gains and losses oninvestments.

 

Activity for thesix months ended June 30, 2005 and 2004 within VOBA, was as follows:

 
| ** **                   | ** ** | **2005** | ** ** | **2004**   | ** ** |
|------------------------------|------------|----------|------------|------------|------------|
| Balance at January 1         |       | $        | 28.2       | ** ** | 31.6       | ** ** |
| Adjustment for FAS No. 115   |       | 0.2      |       | 1.0        |       |
| Deferrals                    |       | —   |       | —     |       |
| Interest accrued at 5% to 7% |       | 0.8      |       | 0.9        |       |
| Amortization                 |       | (2.6     | )          | (3.3       | )          |
| Balance at June 30           |       | $        | 26.6       |       | 30.2       |   |

 

Deferred policyacquisition costs (“DAC”) represents policy acquisition costs that have beencapitalized and are subject to amortization. Such costs consist principally of certain commissions, underwriting,contract issuance, and agency expenses, related to the production of new andrenewal business.  DAC, in the amount of$0.9 as of June 30, 2005 and December 31, 2004, respectively, isincluded in other assets on the Condensed Balance Sheets, and the relatedamortization is included in amortization of VOBA on the Condensed Statements ofOperations.

 

8

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**INGInsurance Company of America**

**(Awholly-owned subsidiary of ING Life Insurance and Annuity Company)**

**Notes to Condensed Financial Statements (Unaudited)**

(Dollar amounts in millions,unless otherwise stated)

 

**3.**                                      Income Taxes

** **

The Company’seffective tax rates for the three months ended June 30, 2005 and 2004 were(18.6)% and 28.1%, respectively.  TheCompany’s effective tax rates for the six months ended June 30, 2005 and 2004were 16.4% and 29.3%, respectively.  Theeffective rate differs from the statutory rate, and the decrease in theeffective rate, are primarily due to a decrease in pretax income relative tothe amount allowed for the dividends received deduction.

 

**4.**                                      FinancingAgreements

** **

The Companymaintains an uncommitted revolving note facility with SunTrust Bank, Atlanta (“theBank”) to meet short-term cash requirements that arise in the ordinary courseof business.  Under this agreement, whichis due on demand, the Company can borrow up to $30.0 from the Bank.  Interest on any borrowing accrues at arate quoted by the Bank to the Company for the borrowing.  Under this agreement, the Company incurredminimal interest expense for the three and six month periods endedJune 30, 2005 and 2004, respectively. The Company had no outstanding balances payable to the Bank for theperiods ended June 30, 2005 and December 31, 2004.

 

**5.**                                      Commitmentsand Contingent Liabilities

** **

***Commitments***

 

At June 30,2005 and December 31, 2004, the Company had no commitments or contingentliabilities.

 

***Litigation***

 

The Company is aparty to threatened or pending lawsuits/arbitrations arising from the normalconduct of business.  Due to the climatein insurance and business litigation/arbitration, suits against the Companysometimes include claims for substantial compensatory, consequential, orpunitive damages, and other types of relief. Moreover, certain claims are asserted as class actions, purporting torepresent a group of similarly situated individuals.  While it is not possible to forecast theoutcome of such lawsuits/arbitrations, in light of existing insurance,reinsurance, and established reserves, it is the opinion of management that thedisposition of such lawsuits/arbitrations will not have a materially adverseeffect on the Company’s operations or financial position.

 

9

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**INGInsurance Company of America**

**(Awholly-owned subsidiary of ING Life Insurance and Annuity Company)**

**Notes to Condensed Financial Statements (Unaudited)**

(Dollar amounts in millions,unless otherwise stated)

 

**6.**                                      AccumulatedOther Comprehensive Income

** **

Shareholder’sequity included the following components of accumulated other comprehensive income(loss) as of June 30:

 
| ** **                                 | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|
| Net unrealized capital gains (losses):     |       |     |       |     |       |
| Fixed maturities                           |       | $        | 0.6        |     | $          | 0.3 |   |
| DAC/VOBA                                   |       | (0.4     | )          | (0.7     | )          |
| Subtotal                                   |       | 0.2      |       | (0.4     | )          |
| Less: deferred income taxes                |       | 0.2      |       | (0.1     | )          |
| Net accumulated other comprehensive income |       | $        | —     |     | $          | (0.3 | ) |

 

Net unrealizedcapital gains (losses) allocated to experience-rated contracts of $0.9 and$2.1, at June 30, 2005 and 2004, respectively, are reflected on theCondensed Balance Sheets in future policy benefits and claim reserves and arenot included in shareholder’s equity.

 

Changes in accumulated other comprehensive income related to changes innet unrealized gains (losses) on securities, including securities pledged andexcluding those related to experience-rated contractowners, were as follows:

 
| ** **                                                                             | ** ** | **Six Months Ended June 30,** | ** ** |
|----------------------------------------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                                                             | ** ** | **2005**                      | ** ** | **2004** | ** ** |
| Unrealized holding losses arising during  the period(1)                                |       | $                             | —     |   | $ | (2.0 | ) |
| Less: reclassification adjustment for gains  and other items included in net income(2) |       | —                        |       | 0.5 |   |
| Net unrealized losses on securities                                                    |       | $                             | —     |   | $ | (2.5 | ) |

 

(1)          Pretaxunrealized holding gains (losses) arising during the period were $1.1 and $(3.0),for the six months ended June 30, 2005 and 2004, respectively.

(2)          Pretaxreclassification adjustments for gains and other items included in net incomewere $0.8 and $0.7, for the six months ended June 30, 2005 and 2004,respectively.

 

**7.**                                      Reclassificationsand Changes to Prior Year Presentation

** **

During 2005,certain changes were made to the Condensed Statement of Cash Flows for the sixmonths ended June 30, 2004, to reflect the correct balances, primarilyrelated to interest credited to contractowners for investment typecontracts.  As a result of theseadjustments, the Company has labeled the Condensed Statement of Cash Flows forthe six months ended June 30, 2004, as restated.  The following summarizes the adjustments:

 
| ** **                                            | ** ** | **Previously** | ** ** | ** **     | ** ** | ** **   | ** ** |
|-------------------------------------------------------|------------|----------------|------------|----------------|------------|--------------|------------|
| ** **                                            | ** ** | **Reported**   | ** ** | **Adjustment** | ** ** | **Restated** | ** ** |
| **Six Months Ended June 30, 2004**                    | ** ** | ** **     | ** ** | ** **     | ** ** | ** **   | ** ** |
| Net cash (used for) provided by operating             |       | $              | (5.2       | )              | $          | 13.8         |       | $ | 8.6 |   |
| Net cash provided by (used for) financing  activities |       | 0.1            |       | (13.8          | )     | (13.7        | )          |
|                                                       |            |                |            |                |            |              |            |  |  |  |

 

10

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# **Item 2.**           Management’s Narrative Analysis of theResults of Operations and Financial Condition

(Dollar amounts in millions, unlessotherwise stated)

 

# **Overview**

 

The following narrative analysispresents a review of the results of operations of ING Insurance Company ofAmerica (“IICA” or the “Company”) for the three and six month periods endedJune 30, 2005 and 2004, and of the financial condition as of June 30,2005 and December 31, 2004.  Thisitem should be read in its entirety and in conjunction with the condensedfinancial statements and related notes, which can be found under Part I, Item 1contained herein, as well as the “Management’s Narrative Analysis of theResults of Operations and Financial Condition” section contained in the Company’s2004 Annual Report on Form 10-K.

 

**Forward-LookingInformation/Risk Factors**

 

In connection with the “safe harbor”provisions of the Private Securities Litigation Reform Act of 1995, the Companycautions readers regarding certain forward-looking statements contained in thisreport and in any other statements made by, or on behalf of, the Company,whether or not in future filings with the Securities Exchange Commission (“SEC”).Forward-looking statements are statements not based on historical informationand which relate to future operations, strategies, financial results, or otherdevelopments. Statements using verbs such as “expect,” “anticipate,” “believe”or words of similar import generally involve forward-looking statements.Without limiting the foregoing, forward-looking statements include statementswhich represent the Company’s beliefs concerning future levels of sales andredemptions of the Company’s products, investment spreads and yields, or theearnings and profitability of the Company’s activities.

 

Forward-looking statements arenecessarily based on estimates and assumptions that are inherently subject tosignificant business, economic, and competitive uncertainties andcontingencies, many of which are beyond the Company’s control and many of whichare subject to change. These uncertainties and contingencies could cause actualresults to differ materially from those expressed in any forward-lookingstatements made by, or on behalf of, the Company.  Whether or not actual results differmaterially from forward-looking statements may depend on numerous foreseeableand unforeseeable developments. Some may be national in scope, such as generaleconomic conditions, changes in tax law, and changes in interest rates. Somemay be related to the insurance industry generally, such as pricingcompetition, regulatory developments, and industry consolidation. Others mayrelate to the Company specifically, such as litigation, regulatory action, andrisks associated with the Company’s investment portfolio, such as changes incredit quality, price volatility, and liquidity. Investors are also directed toconsider other risks and uncertainties discussed in documents filed by theCompany with the SEC.  Except as may berequired by the federal securities laws, the Company disclaims any obligationto update forward-looking information.

 

11

----

** **

**Critical Accounting Policies**

 

Therehave been no material changes to the Company’s critical accounting policiessince the filing of the Company’s 2004 Form 10-K Annual Report.

 

**Results of Operations**

 

*Overview*

 

The Company’sresults of operations for the three and six months ended June 30, 2005,and changes therein, were primarily affected by decreasing assets under management(“AUM”), portfolio realignment, and interest credited and other benefits tocontractowners.

 

*Revenues*

* *
| ** **                  | ** ** | **Three Months Ended June 30,** | ** ** | **$ ****Increase** | ** ** | **%****Increase** | ** ** |
|-----------------------------|------------|--------------------------------------|------------|-------------------------|------------|-------------------|------------|
| ** **                  | ** ** | **2005**                             | ** ** | **2004**                | ** ** | **(Decrease)**    | ** ** | **(Decrease)** | ** ** |
| **Revenues:**               | ** ** | ** **                           | ** ** | ** **              | ** ** | ** **        | ** ** | ** ** | ** ** |
| Net investment income       |       | $                                    | 1.9        |                    | $          | 2.5               |       | $ | (0.6 | ) | -24.0 | % |
| Fee income                  |       | 2.3                                  |       | 2.1                     |       | 0.2               |       | 9.5 | % |
| Net realized capital losses |       | (0.7                                 | )          | (0.2                    | )          | (0.5              | )          | NM |   |
| **Total revenue**           |       | $                                    | 3.5        |                    | $          | 4.4               |       | $ | (0.9 | ) | -20.5 | % |

 
| ** **                          | ** ** | **Six Months Ended June 30,** | ** ** | **$ ****Increase** | ** ** | **%****Increase** | ** ** |
|-------------------------------------|------------|------------------------------------|------------|-------------------------|------------|-------------------|------------|
| ** **                          | ** ** | **2005**                           | ** ** | **2004**                | ** ** | **(Decrease)**    | ** ** | **(Decrease)** | ** ** |
| **Revenues:**                       | ** ** | ** **                         | ** ** | ** **              | ** ** | ** **        | ** ** | ** ** | ** ** |
| Net investment income               |       | $                                  | 4.1        |                    | $          | 4.9               |       | $ | (0.8 | ) | -16.3 | % |
| Fee income                          |       | 4.5                                |       | 4.2                     |       | 0.3               |       | 7.1 | % |
| Net realized capital (losses) gains |       | (0.7                               | )          | 0.2                     |       | (0.9              | )          | NM |   |
| **Total revenue**                   |       | $                                  | 7.9        |                    | $          | 9.3               |       | $ | (1.4 | ) | -15.1 | % |

 

NM - Not meaningful.

 

The decreasein *Total revenues* for the threeand six months ended June 30, 2005, was primarily due to changes in *Net investment income*, *Netrealized capital gains (losses)* and *Feeincome*.  The decrease in *Net investment income* for the three andsix months ended June 30, 2005 is primarily due to lower investment yieldsexperienced in 2005 and the decrease in average fixed maturities.  *Fee income*increased primarily due to higher management fee income associated with productcharges for transfers and surrenders for the three and six months ended June 30,2005.  During the three and six monthsended June 30, 2005, *Net realizedcapital gains (losses)*decreased as the Company sold several fixedmaturities in conjunction with its realignment of investments to more closelymatch its business needs.

 

12

----

 

*Benefitsand Expenses*

* *
| ** **                                              | ** ** | **Three Months Ended June 30,** | ** ** | **$ Increase** | ** ** | **%****Increase** | ** ** |
|---------------------------------------------------------|------------|--------------------------------------|------------|---------------------|------------|-------------------|------------|
| ** **                                              | ** ** | **2005**                             | ** ** | **2004**            | ** ** | **(Decrease)**    | ** ** | **(Decrease)** | ** ** |
| **Benefits and expenses:**                              |       |                                 |       |                |       |              |       |   |   |
| Interest credited and other benefits to  contractowners |       | $                                    | 1.1        |                | $          | 1.2               |       | $ | (0.1 | ) | -8.3 | % |
| Operating expenses                                      |       | 0.8                                  |       | 0.6                 |       | 0.2               |       | 33.3 | % |
| Amortization of value of business acquired              |       | 1.4                                  |       | 1.4                 |       | —            |       | 0.0 | % |
| **Total benefits and expenses**                         |       | $                                    | 3.3        |                | $          | 3.2               |       | $ | 0.1 |   | 3.1 | % |

 
| ** **                                             | ** ** | **Six Months Ended June 30,** | ** ** | **$ Increase** | ** ** | **%****Increase** | ** ** |
|--------------------------------------------------------|------------|------------------------------------|------------|---------------------|------------|-------------------|------------|
| ** **                                             | ** ** | **2005**                           | ** ** | **2004**            | ** ** | **(Decrease)**    | ** ** | **(Decrease)** | ** ** |
| **Benefits and expenses:**                             |       |                               |       |                |       |              |       |   |   |
| Interest credited and other benefits to contractowners |       | $                                  | 3.2        |                | $          | 2.3               |       | $ | 0.9 |   | 39.1 | % |
| Operating expenses                                     |       | 1.6                                |       | 1.4                 |       | 0.2               |       | 14.3 | % |
| Amortization of value of business acquired             |       | 2.1                                |       | 2.6                 |       | (0.5              | )          | -19.2 | % |
| **Total benefits and expenses**                        |       | $                                  | 6.9        |                | $          | 6.3               |       | $ | 0.6 |   | 9.5 | % |

 

*Interest credited and other benefits to contractowners*forthe three months ended June 30, 2005 decreased due to the correspondingdecrease in AUM while the six months ended June 30, 2005 fluctuated due toa decrease in ceded benefit reserves.

 

*Operating expenses* for the three and six monthsended June 30, 2005, remained relatively constant between periods exceptfor a release in the Company’s guaranty fund accrued liability for 2004.

 

*Amortization of VOBA* decreased for the sixmonths ended June 30, 2005 mainly due to declining profits, resulting fromdecreases in net investment income and realized capital gains (losses).

 

13

----

 

*Net Income and Taxes*

 
| ** **                 | ** ** | **Three Months Ended June 30,** | ** ** | **$ Increase** | ** ** | **%****Increase** | ** ** |
|----------------------------|------------|--------------------------------------|------------|---------------------|------------|-------------------|------------|
| ** **                 | ** ** | **2005**                             | ** ** | **2004**            | ** ** | **(Decrease)**    | ** ** | **(Decrease)** | ** ** |
| **Net income and taxes:**  | ** ** | ** **                           | ** ** | ** **          | ** ** | ** **        | ** ** | ** ** | ** ** |
| Income before income taxes |       | $                                    | 0.2        |                | $          | 1.2               |       | $ | (1.0 | ) | -83.3 | % |
| Income tax expense         |       | —                               |       | 0.4                 |       | (0.4              | )          | -100.0 | % |
| **Net income**             |       | $                                    | 0.2        |                | $          | 0.8               |       | $ | (0.6 | ) | -75.0 | % |
|                       |       |                                 |       |                |       |              |       |   |   |
| Effective tax rate         |       | -18.6                                | %          | 28.1                | %          | NM                |       | NM |   |

 
| ** **                 | ** ** | **Six Months Ended June 30,** | ** ** | **$ Increase** | ** ** | **%****Increase** | ** ** |
|----------------------------|------------|------------------------------------|------------|---------------------|------------|-------------------|------------|
| ** **                 | ** ** | **2005**                           | ** ** | **2004**            | ** ** | **(Decrease)**    | ** ** | **(Decrease)** | ** ** |
| **Net income and taxes:**  | ** ** | ** **                         | ** ** | ** **          | ** ** | ** **        | ** ** | ** ** | ** ** |
| Income before income taxes |       | $                                  | 1.0        |                | $          | 3.0               |       | $ | (2.0 | ) | -66.7 | % |
| Income tax expense         |       | 0.2                                |       | 0.9                 |       | (0.7              | )          | -77.8 | % |
| **Net income**             |       | $                                  | 0.8        |                | $          | 2.1               |       | $ | (1.3 | ) | -61.9 | % |
|                       |       |                               |       |                |       |              |       |   |   |
| Effective tax rate         |       | 16.4                               | %          | 29.3                | %          | NM                |       | -44.0 | % |

 

NM - Not meaningful.

 

*Income tax expense*decreased for the three andsix months ended June 30, 2005, primarily due to the overall decline inbusiness operations.  The dividendsreceived deduction contributes to the decrease in the effective tax rate.

 

**Financial Condition**

 

# **Investments**

# ** **

*InvestmentStrategy*

* *

The Company’s investment strategy for its general account investmentsinvolves diversification by asset class, and seeks to add economicdiversification and to reduce the risks of credit, liquidity, and embeddedoptions within certain investment products, such as convexity risk oncollateralized mortgage obligations and call options.  The investment management function iscentralized under ING Investment Management LLC (“IIM”), an affiliate of theCompany, pursuant to an investment advisory agreement.  Separate portfolios are established for eachgeneral type of product within the Company.

 

*PortfolioComposition*

* *

Fixed maturities, including securities pledged, of $153.8 and $185.2 atJune 30, 2005 and December 31, 2004, represent 100% of the investmentportfolio.

 

14

----

 

*Fixed Maturities*

* *

Fixed maturities available-for-saleas of June 30, 2005, were as follows:

 
| ** **                                                 | ** ** | ** **    | ** ** | **Gross**      | ** ** | **Gross**      | ** ** | ** ** | ** ** |
|------------------------------------------------------------|------------|---------------|------------|----------------|------------|----------------|------------|------------|------------|
| ** **                                                 | ** ** | **Amortized** | ** ** | **Unrealized** | ** ** | **Unrealized** | ** ** | **Fair**   | ** ** |
| ** **                                                 | ** ** | **Cost**      | ** ** | **Gains**      | ** ** | **Losses**     | ** ** | **Value**  | ** ** |
| Fixed maturities:                                          |       |          |       |           |       |           |       |       |       |
| U.S. government and government agencies and  authorities   |       | $             | 22.6       |           | $          | 0.2            |       | $          | —     |   | $ | 22.8 |   |
|                                                       |       |          |       |           |       |           |       |       |       |
| U.S. corporate securities:                                 |       |          |       |           |       |           |       |       |       |
| Public utilities                                           |       | 9.8           |       | 0.3            |       | 0.1            |       | 10.0       |       |
| Other corporate securities                                 |       | 58.7          |       | 1.4            |       | 0.4            |       | 59.7       |       |
| Total U.S. corporate securities                            |       | 68.5          |       | 1.7            |       | 0.5            |       | 69.7       |       |
|                                                       |       |          |       |           |       |           |       |       |       |
| Foreign securities                                         |       | 4.8           |       | 0.2            |       | —         |       | 5.0        |       |
| Residential mortgage-backed securities                     |       | 44.1          |       | 0.1            |       | 0.4            |       | 43.8       |       |
| Commercial mortgage-backed securities                      |       | 4.8           |       | 0.2            |       | —         |       | 5.0        |       |
| Other asset-backed securities                              |       | 7.5           |       | —         |       | —         |       | 7.5        |       |
|                                                       |       |          |       |           |       |           |       |       |       |
| Total fixed maturities including fixed maturities  pledged |       | 152.3         |       | 2.4            |       | 0.9            |       | 153.8      |       |
| Less: fixed maturities pledged                             |       | 3.7           |       | —         |       | —         |       | 3.7        |       |
|                                                       |       |          |       |           |       |           |       |       |       |
| Fixed maturities                                           |       | $             | 148.6      |           | $          | 2.4            |       | $          | 0.9        |   | 150.1 |   |
|                                                            |            |               |            |                |            |                |            |            |            |  |  |  |  |

 

15

----

 

Fixed maturities available-for-saleas of December 31, 2004, were as follows:

 
| ** **                                                  | ** ** | ** **    | ** ** | **Gross**      | ** ** | **Gross**      | ** ** | ** ** | ** ** |
|-------------------------------------------------------------|------------|---------------|------------|----------------|------------|----------------|------------|------------|------------|
| ** **                                                  | ** ** | **Amortized** | ** ** | **Unrealized** | ** ** | **Unrealized** | ** ** | **Fair**   | ** ** |
| ** **                                                  | ** ** | **Cost**      | ** ** | **Gains**      | ** ** | **Losses**     | ** ** | **Value**  | ** ** |
| Fixed maturities:                                           |       |          |       |           |       |           |       |       |       |
| U.S. government and government agencies and  authorities    |       | $             | 47.2       |           | $          | 0.2            |       | $          | 0.4        |   | $ | 47.0 |   |
|                                                        |       |          |       |           |       |           |       |       |       |
| U.S. corporate securities:                                  |       |          |       |           |       |           |       |       |       |
| Public utilities                                            |       | 9.8           |       | 0.3            |       | 0.1            |       | 10.0       |       |
| Other corporate securities                                  |       | 64.3          |       | 2.5            |       | 0.3            |       | 66.5       |       |
| Total U.S. corporate securities                             |       | 74.1          |       | 2.8            |       | 0.4            |       | 76.5       |       |
|                                                        |       |          |       |           |       |           |       |       |       |
| Foreign securities                                          |       | 6.6           |       | 0.5            |       | —         |       | 7.1        |       |
| Residential mortgage-backed securities                      |       | 30.6          |       | 0.1            |       | 0.3            |       | 30.4       |       |
| Commercial mortgage-backed securities                       |       | 9.2           |       | 0.5            |       | 0.1            |       | 9.6        |       |
| Other asset-backed securities                               |       | 14.2          |       | 0.4            |       | —         |       | 14.6       |       |
|                                                        |       |          |       |           |       |           |       |       |       |
| Total fixed maturities, including fixed maturities  pledged |       | 181.9         |       | 4.5            |       | 1.2            |       | 185.2      |       |
| Less: fixed maturities pledged                              |       | 20.4          |       | —         |       | 0.2            |       | 20.2       |       |
|                                                        |       |          |       |           |       |           |       |       |       |
| Fixed maturities                                            |       | $             | 161.5      |           | $          | 4.5            |       | $          | 1.0        |   | $ | 165.0 |   |

 

It is management’s objective that theportfolio of fixed maturities be of high quality and be well diversified bymarket sector.  The fixed maturities inthe Company’s portfolio are generally rated by external rating agencies and, ifnot externally rated, are rated by the Company on a basis believed to besimilar to that used by the rating agencies. The average quality rating of the Company’s fixed maturities portfoliowas AA at June 30, 2005 and December 31, 2004.  Ratings are calculated using a ratinghierarchy that considers S&P, Moody’s, and internal ratings.

 

Total fixed maturities by qualityrating category, including fixed maturities pledged to creditors, were asfollows at June 30, 2005 and December 31, 2004:

 
| ** **  | ** ** | **2005**  | ** ** | **2004**    | ** ** |
|-------------|------------|-----------|------------|-------------|------------|
| ** **  | ** ** | **Fair**  | ** ** | **%****of** | ** ** | **Fair** | ** ** | **%****of** | ** ** |
| ** **  | ** ** | **Value** | ** ** | **Total**   | ** ** | **Value** | ** ** | **Total** | ** ** |
| AAA         |       | $         | 80.6       |        | 52.4       | % | $ | 99.7 |   | 53.8 | % |
| AA          |       | 5.1       |       | 3.3         | %          | 5.9 |   | 3.2 | % |
| A           |       | 36.7      |       | 23.9        | %          | 46.2 |   | 24.9 | % |
| BBB         |       | 26.1      |       | 17.0        | %          | 29.0 |   | 15.7 | % |
| BB          |       | 4.8       |       | 3.1         | %          | 4.4 |   | 2.4 | % |
| B and below |       | 0.5       |       | 0.3         | %          | — |   | 0.0 | % |
| Total       |       | $         | 153.8      |        | 100.0      | % | $ | 185.2 |   | 100.0 | % |

 

16

----

 

96.6% and 97.6% of fixed maturitieswere invested in securities rated BBB and above (Investment Grade) atJune 30, 2005 and December 31, 2004, respectively.

 

Fixed maturities rated BB and below(Below Investment Grade) may have speculative characteristics, and changes ineconomic conditions or other circumstances are more likely to lead to aweakened capacity of the issuer to make principal and interest payments than isthe case with higher rated fixed maturities.

 

Total fixed maturities by marketsector, including fixed maturities pledged to creditors, were as follows, atJune 30, 2005 and December 31, 2004:

 
| ** **                             | ** ** | **2005**  | ** ** | **2004**    | ** ** |
|----------------------------------------|------------|-----------|------------|-------------|------------|
| ** **                             | ** ** | **Fair**  | ** ** | **%****of** | ** ** | **Fair** | ** ** | **%****of** | ** ** |
| ** **                             | ** ** | **Value** | ** ** | **Total**   | ** ** | **Value** | ** ** | **Total** | ** ** |
| U.S. corporate                         |       | $         | 69.7       |        | 45.3       | % | $ | 76.5 |   | 41.3 | % |
| Residential mortgage-backed            |       | 43.8      |       | 28.5        | %          | 30.4 |   | 16.4 | % |
| Foreign(1)                             |       | 5.0       |       | 3.3         | %          | 7.1 |   | 3.8 | % |
| Commercial/multifamily mortgage-backed |       | 5.0       |       | 3.3         | %          | 9.6 |   | 5.2 | % |
| Asset-backed                           |       | 7.5       |       | 4.9         | %          | 14.6 |   | 7.9 | % |
| U.S. treasuries/agencies               |       | 22.8      |       | 14.7        | %          | 47.0 |   | 25.4 | % |
| Total                                  |       | $         | 153.8      |        | 100.0      | % | $ | 185.2 |   | 100.0 | % |

 

(1) Primarily U.S. dollar denominated

 

The Company did not have anyinvestments in a single issuer, other than obligations of the U.S. government,with a carrying value in excess of 10% of the Company’s shareholder’s equity atJune 30, 2005.

 

## *UnrealizedLosses*

##  

Unrealized losses related to fixed maturities are analyzed in detail inthe following tables.

 

Unrealized losses in fixed maturities, including securities pledged tocreditors, for Investment Grade (“IG”) and Below Investment Grade (“BIG”)securities by duration were as follows at December June 30, 2005 andDecember 31, 2004:

 
| ** **                                                             | ** ** | **2005**   | ** ** | **2004**        | ** ** |
|------------------------------------------------------------------------|------------|------------|------------|-----------------|------------|
| ** **                                                             | ** ** | ** ** | ** ** | **%****of  IG** | ** ** | ** ** | ** ** | **%****of  IG** | ** ** | ** ** | ** ** | **%****of  IG** | ** ** | ** ** | ** ** | **%****of  IG** | ** ** |
| ** **                                                             | ** ** | **IG**     | ** ** | **and BIG**     | ** ** | **BIG** | ** ** | **and BIG** | ** ** | **IG** | ** ** | **and BIG** | ** ** | **BIG** | ** ** | **and BIG** | ** ** |
| Less than six months below amortized cost                              |       | $          | 0.1        |            | 11.1       | % | $ | — |   | 0.0 | % | $ | 0.5 |   | 41.7 | % | $ | — |   | 0.0 | % |
| More than six months and less than twelve  months below amortized cost |       | 0.2        |       | 22.2            | %          | — |   | 0.0 | % | 0.3 |   | 25.0 | % | — |   | 0.0 | % |
| More than twelve months below amortized  cost                          |       | 0.6        |       | 66.7            | %          | — |   | 0.0 | % | 0.4 |   | 33.3 | % | — |   | 0.0 | % |
| Total unrealized loss                                                  |       | $          | 0.9        |            | 100.0      | % | $ | — |   | 0.0 | % | $ | 1.2 |   | 100.0 | % | $ | — |   | 0.0 | % |
|                                                                        |            |            |            |                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

17

----

 

Unrealizedlosses at June 30, 2005, were primarily related to interest rate movementor spread widening for other than credit-related reasons and to asset-backedsecurities. Asset-backed securities include U.S. government backed securities,principal protected securities, and structured securities, which did not havean adverse change in cash flows. The following table summarizes the unrealizedlosses by duration and reason, along with the carrying amount of securities inunrealized loss positions at June 30, 2005:

 
| ** **                       | ** ** | ** **     | ** ** | **More than**     | ** ** | ** **        | ** ** |
|----------------------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|
| ** **                       | ** ** | ** **     | ** ** | **Six Months**    | ** ** | ** **        | ** ** |
| ** **                       | ** ** | **Less than**  | ** ** | **and less than** | ** ** | **More than**     | ** ** |
| ** **                       | ** ** | **Six Months** | ** ** | **Twelve Months** | ** ** | **Twelve Months** | ** ** |
| Interest rate or spread widening |       | $              | 0.1        |              | $          | 0.1               |       | $ | 0.3 |   |
| Asset-backed securities          |       | —         |       | 0.1               |       | 0.3               |       |
| Total unrealized loss            |       | $              | 0.1        |              | $          | 0.2               |       | $ | 0.6 |   |
| Carrying amount                  |       | $              | 25.6       |              | $          | 17.0              |       | $ | 32.9 |   |

 

Unrealized losses in fixed maturities, including securities pledged tocreditors, by market sector and duration were as follows at June 30, 2005:

 
| ** **                                                            | ** ** | ** **    | ** ** | ** **      | ** ** | **Commercial/**  | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------------|------------|---------------|------------|-----------------|------------|------------------|------------|-----------------|------------|------------|------------|------------|------------|
| ** **                                                            | ** ** | ** **    | ** ** | **Residential** | ** ** | **Multi-family** | ** ** | **U.S.**        | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                            | ** ** | **U.S.**      | ** ** | **Mortgage-**   | ** ** | **Mortgage-**    | ** ** | **Treasuries/** | ** ** | **Asset-** | ** ** | ** ** | ** ** |
| ** **                                                            | ** ** | **Corporate** | ** ** | **Backed**      | ** ** | **Backed**       | ** ** | **Agencies**    | ** ** | **Backed** | ** ** | **Total**  | ** ** |
| Less than six months below amortized cost                             |       | $             | 0.1        |            | $          | —           |       | $               | —     |       | $          | —     |       | $ | — |   | $ | 0.1 |   |
| More than six month and less than twelve  months below amortized cost |       | 0.1           |       | 0.1             |       | —           |       | —          |       | —     |       | 0.2        |       |
| More than twelve months below amortized  cost                         |       | 0.3           |       | 0.3             |       | —           |       | —          |       | —     |       | 0.6        |       |
| Total unrealized loss                                                 |       | $             | 0.5        |            | $          | 0.4              |       | $               | —     |       | $          | —     |       | $ | — |   | $ | 0.9 |   |

 

*Other-Than-TemporaryImpairments*

* *

The Company analyzes the generalaccount investments to determine whether there has been an other-than-temporarydecline in fair value below the amortized cost basis.  Management considers the length of the timeand the extent to which the fair value has been less than amortized cost; thefinancial condition and near-term prospects of the issuer; future economicconditions and market forecasts; and the Company’s intent and ability to retainthe investment in the issuer for a period of time sufficient to allow forrecovery in market value.  If it isprobable that all amounts due according to the contractual terms of aninvestment will not be collected, an other-than-temporary impairment isconsidered to have occurred.

 

In addition, the Company invests in otherasset-backed securities.  Determinationof the required impairment is based on credit risk and the possibility ofsignificant prepayment risk that restricts the Company’s ability to recover theinvestment.  An impairment is recognizedif the fair value of the security is less than book value and there has been anadverse change in cash flow since the last remeasurement date.

 

18

----

 

When a decline in fair value isdetermined to be other-than-temporary, the individual security is written downto fair value and the loss accounted for as a realized loss.

 

The Company had noother-than-temporary impairments for the three or six month periods endedJune 30, 2005 and 2004.

 

*Net RealizedCapital Gains and Losses*

 

Net realized capital gains (losses)are comprised of the difference between the carrying value of investments andproceeds from sale, maturity, and redemption, as well as losses incurred due tothe impairment of investments.  Netrealized capital gains (losses) on investments were as follows:

 
| ** **                            | ** ** | **Three Months Ended June 30,** | ** ** |
|---------------------------------------|------------|---------------------------------|------------|
| ** **                            | ** ** | **2005**                        | ** ** | **2004** | ** ** |
| Fixed maturities                      |       | $                               | (0.7       | ) | $ | (0.2 | ) |
| Pretax net  realized capital losses   |       | $                               | (0.7       | ) | $ | (0.2 | ) |
| After-tax net realized capital losses |       | $                               | (0.4       | ) | $ | (0.1 | ) |

 
| ** **                                     | ** ** | **Six Months Ended June 30,** | ** ** |
|------------------------------------------------|------------|-------------------------------|------------|
| ** **                                     | ** ** | **2005**                      | ** ** | **2004** | ** ** |
| Fixed maturities                               |       | $                             | (0.7       | ) | $ | 0.2 |   |
| Pretax net  realized capital (losses) gains    |       | $                             | (0.7       | )  | $ | 0.2 |   |
| After-tax net realized capital (losses)  gains |       | $                             | (0.4       | ) | $ | 0.1 |   |

 

Net realized capital gains (losses)allocated to experience-rated contracts of $(1.4) and $(0.1) for the threemonths and $(1.4) and $(0.4) for the six months ended June 30, 2005 and2004, respectively, were deducted from net realized capital gains, and anoffsetting amount was reflected in future policy benefits and claim reserves onthe Condensed Balance Sheets.  Netunamortized realized gains allocated to experience-rated contractowners were$2.5 and $1.4 at June 30, 2005 and December 31, 2004, respectively.

 

**Liquidity andCapital Resources**

 

Liquidity is the ability of theCompany to generate sufficient cash flows to meet the cash requirements ofoperating, investing, and financing activities.

 

*Source and Uses ofLiquidity*

* *

The Company’s principal sources ofliquidity are product charges, investment income, proceeds from the maturingand sale of investments, and capital contributions. Primary uses of these fundsare payments of commissions and operating expenses, interest and premiumcredits, investment purchases, and contract maturities, withdrawals, andsurrenders.

 

The Company’s liquidity position ismanaged by maintaining adequate levels of liquid assets, such as cash or cashequivalents and short-term investments. Asset/liability management is integrated into many aspects of theCompany’s operations, including investment decisions, product development, anddetermination

 

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of crediting rates. As part of therisk management process, different economic scenarios are modeled, includingcash flow testing required for insurance regulatory purposes, to determine thatexisting assets are adequate to meet projected liabilitycash flows.  Key variables in the modeling process includeinterest rates, anticipated contractowner behavior, and variable separateaccount performance.  Contractowners bearthe investment risk related to variable insurance products, subject, in limitedcases, to certain minimum guaranteed rates.

 

The fixed account liabilities aresupported by a general account portfolio composed of fixed rate investmentswith matching duration characteristics that can generate predictable, steadyrates of return. The portfolio management strategy for the fixed accountconsiders the assets available-for-sale. This strategy enables the Company torespond to changes in market interest rates, prepayment risk, relative valuesof asset sectors and individual securities and loans, credit quality outlook,and other relevant factors. The objective of portfolio management is tomaximize returns, taking into account interest rate and credit risk, as well asother risks.  The Company’sasset/liability management discipline includes strategies to minimize exposureto loss as interest rates and economic and market conditions change.

 

The Company has entered intoagreements with ING Life Insurance and Annuity Company (“ILIAC”), under which ILIAC hasagreed to cause the Company to have sufficient capital to meet certain capitaland surplus levels.

 

Additional sources of liquidityinclude borrowing facilities to meet short-term cash requirements that arise inthe ordinary course of business.  TheCompany maintains a reciprocal loan agreement with ING America InsuranceHoldings, Inc. (“ING AIH”), an affiliate, whereby either party can borrow fromthe other up to 0.5% of the Company’s statutory admitted assets as of the priorDecember 31.  The Company had nooutstanding balances under the reciprocal loan agreement with ING AIH atJune 30, 2005 and had a $6.3 receivable at December 31, 2004.  The Company also maintains a $30.0uncommitted, perpetual revolving note facility with Bank of New York and a$30.0 uncommitted revolving note facility with SunTrust Bank, Atlanta.  The Company had no outstanding debt under therevolving note facility with SunTrust Bank for the periods ended June 30,2005 and December 31, 2004.  Managementbelieves that these sources of liquidity are adequate to meet the Company’sshort-term cash obligations.

 

*CapitalContributions and Dividends*

* *

The Company did not pay dividends toits parent or receive capital contributions from its parent during the three orsix month periods ended June 30, 2005 and 2004.

 

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**Legislative Initiatives**

 

Legislative proposals which have beenor are being considered by Congress include repealing the estate tax, reducingthe taxation on annuity benefits, changing the tax treatment of non-insurancefinancial products relative to insurance products, and changing life insurancecompany taxation.  Some of theseproposals, if enacted, could have a material effect on life insurance, annuityand other retirement savings product sales. The President has also established an advisory panel to study reform ofthe Internal Revenue Code.  The panel isscheduled to report its findings and make recommendations to the Secretary ofTreasury by the end of September 2005. The recommendations of this panel, if enacted by Congress, could affectthe tax treatment of insurance companies and products.  Legislation to restructure the SocialSecurity System and expand private pension plan incentives also may beconsidered.  Prospects for enactment andthe ultimate effect of these proposals are uncertain.

 

**Item4.**           Controlsand Procedures

** **

a)              The Company carried out an evaluation, under thesupervision and with the participation of its management, including its ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of the designand operation of the Company’s disclosure controls and procedures (as definedin Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as ofthe end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the ChiefFinancial Officer have concluded that the Company’s current disclosure controlsand procedures are effective in ensuring that material information relating tothe Company required to be disclosed in the Company’s periodic SEC filings ismade known to them in a timely manner.

 

b)             There has not been any change in the internal controlsover financial reporting of the Company that occurred during the period coveredby this report that has materially affected or is reasonably likely to materiallyaffect these internal controls.

 

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# **PART II.  OTHER INFORMATION**

# ** **

# **Item1.**           LegalProceedings

# ** **

The Company is a party to threatenedor pending lawsuits/arbitrations arising from the normal conduct of business.  Due to the climate in insurance and businesslitigation/arbitrations, suits against the Company sometimes include claims forsubstantial compensatory, consequential or punitive damages and other types ofrelief.  Moreover, certain claims areasserted as class actions, purporting to represent a group of similarlysituated individuals.  While it is notpossible to forecast the outcome of such lawsuits/arbitrations, in light ofexisting insurance, reinsurance and established reserves, it is the opinion ofmanagement that the disposition of such lawsuits/arbitrations will not have amaterially adverse effect on the Company’s operations or financial position.

 

As with many financial servicescompanies, the Company and its affiliates have received informal and formalrequests for information from various state and federal governmental agenciesand self-regulatory organizations in connection with inquiries andinvestigations of the products and practices of the financial servicesindustry.  In each case, the Company andits affiliates have been and are providing full cooperation.  This discussion should be read in conjunctionwith the “Other Regulatory Matters” section of “Management’s Narrative Analysisof the Results of Operations and Financial Condition” included in the Company’s2004 Form 10-K Annual Report.

 

# **Item 6.**           Exhibits

# ** **

| 3.(i)  |   | Articles of Incorporation, as amended and restated effective April 1, 2005.                                                                                                                |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                            |
| (ii)   |   | By-Laws, as amended and restated effective January 1, 2005, incorporated by reference to the Registrant’s Form 10-Q, as filed with the SEC on May 13, 2005 (File No. 033-81010). |
|   |   |                                                                                                                                                                                            |
| 4.(a)  |   | Instruments Defining the Rights of Security Holders, Including Indentures (Annuity Contracts)                                                                                                   |
|   |   |                                                                                                                                                                                            |
|   |   | Incorporated herein by reference to Registration Statement on Form N-4, File No. 33-80750, as amended and filed with the SEC on April 23, 1997.                                            |
|   |   |                                                                                                                                                                                            |
|   |   | Incorporated herein by reference to Registration Statement on Form N-4, File No. 33-59749, as filed with the SEC on June 1, 1995.                                                          |
|   |   |                                                                                                                                                                                            |
|   |   | Incorporated herein by reference to Post-Effective Amendment No. 4 to Registration Statement on Form N-4, File No. 33-59749, as filed with the SEC on April 16, 1997.                           |
|   |   |                                                                                                                                                                                            |
|   |   | Incorporated herein by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4, File No. 33-59749, as filed with the SEC on November 26, 1997.              |

 

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|   |   | Incorporated herein by reference to Post-Effective Amendment No. 8 to Registration Statement on Form N-4, File No. 33-59749, as filed with the SEC on April 17, 1998.           |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                 |
|   |   | Incorporated herein by reference to Registration Statement on Form S-2, File No. 33-63657, as filed with the SEC on October 25, 1995.                                           |
|   |   |                                                                                                                                                                                 |
|   |   | Incorporated herein by reference to Pre-Effective Amendment No. 3 to the Registration Statement on Form S-2, File No. 33-63657, as filed with the SEC on January 17, 1996. |
|   |   |                                                                                                                                                                                 |
|   |   | Incorporated herein by reference to Post-Effective Amendment No. 3 to Registration Statement on Form S-2, File No. 33-63657, as filed with the SEC on November 24, 1997.        |
|   |   |                                                                                                                                                                                 |
| 31.1   |   | Certificate of David A. Wheat pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                             |
|   |   |                                                                                                                                                                                 |
| 31.2   |   | Certificate of Brian D. Comer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                             |
|   |   |                                                                                                                                                                                 |
| 32.1   |   | Certificate of David A. Wheat pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                             |
|   |   |                                                                                                                                                                                 |
| 32.2   |   | Certificate of Brian D. Comer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                             |

 

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**SIGNATURES**

 

Pursuant to the requirements ofSection 13 or 15(d) of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 
|            |   | ING INSURANCE COMPANY OF AMERICA                           |               |
|-----------------|--------|------------------------------------------------------------|--------------------|
|            |   | (Registrant)                                               |               |
|            |   |                                                       |
| August 11, 2005 |   | By                                                         | /s/ David A. Wheat |   |
| (Date)          |   |                                                       | David A. Wheat     |
|            |   | Director, Executive  Vice President and                    |
|            |   | Chief Financial Officer                                    |
|            |   | (Duly Authorized  Officer and Principal Financial Officer) |
|                 |        |                                                            |                    |  |  |

 

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