** **

**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 September 30,  2004**                                                                                                                                                                                                                                                                                                                                           |
| ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                            |
| **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 asspecified 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 andformer fiscal year, if changed since last report

 

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

Yes ý      Noo

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theExchange Act).

Yes o      Noý

**APPLICABLEONLY TO CORPORATE ISSUERS:**

 

Indicate the number of shares outstanding of each of the issuer’sclasses of common stock, as of the latest practicable date: 25,500 shares ofCommon Stock as of November 12, 2004, all of which were directly owned by INGLife Insurance and Annuity Company.

 

NOTE:  WHEREAS ING INSURANCECOMPANY OF AMERICA MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONH(1)(a) AND (b) OF FORM 10Q, THIS FORM IS BEING FILED WITH THE REDUCEDDISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION H(2).

 

 

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**INGInsurance Company of America**

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

**Form10-Q for the period ended September 30, 2004**

 

**INDEX**

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

 

2

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**INGInsurance Company of America**

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

**Form 10-Q for the period ended September 30, 2004**

 

**PART I**.                            FINANCIALINFORMATION (UNAUDITED)

 

##### **Item 1**.                                   FinancialStatements

#####  

**Condensed Statements of Income**

(Unaudited)

(Millions)

 
| ** **                                                                        | ** ** | **Three months ended September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
|-----------------------------------------------------------------------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                        | ** ** | **2004**                                  | ** ** | **2003**                                 | ** ** | **2004** | ** ** | **2003** | ** ** |
| Revenue:                                                                          |       |                                      |       |                                     |       |   |   |   |   |
| Fee income                                                                        |       | $                                         | 2.2        |                                     | $          | 2.4 |   | $ | 7.0 |   | $ | 7.7 |   |
| Net  investment income                                                            |       | 2.3                                       |       | 2.0                                      |       | 7.2 |   | 7.1 |   |
| Net realized  capital gains                                                       |       | 0.9                                       |       | 0.4                                      |       | 1.1 |   | 1.4 |   |
| Total  revenues                                                                   |       | 5.4                                       |       | 4.8                                      |       | 15.3 |   | 16.2 |   |
| Benefits,  losses and expenses:                                                   |       |                                      |       |                                     |       |   |   |   |   |
| Benefits:                                                                         |       |                                      |       |                                     |       |   |   |   |   |
| Interest  credited and other benefits to policyholders                            |       | 0.9                                       |       | 1.9                                      |       | 3.9 |   | 5.7 |   |
| Underwriting,  acquisition, and insurance expenses:                               |       |                                      |       |                                     |       |   |   |   |   |
| General  expenses                                                                 |       | 0.4                                       |       | 0.6                                      |       | 1.1 |   | 1.5 |   |
| Commissions                                                                       |       | 0.5                                       |       | 0.4                                      |       | 1.4 |   | 1.3 |   |
| Policy  acquisition costs deferred                                                |       | (0.1                                      | )          | —                                   |       | (0.4 | ) | (0.3 | ) |
| Amortization  of deferred policy acquisition costs and value of business acquired |       | 1.4                                       |       | (1.1                                     | )          | 4.0 |   | 2.0 |   |
| Total  benefits, losses and expenses                                              |       | 3.1                                       |       | 1.8                                      |       | 10.0 |   | 10.2 |   |
| Income  before income taxes                                                       |       | 2.3                                       |       | 3.0                                      |       | 5.3 |   | 6.0 |   |
| Income tax  (benefit) expense                                                     |       | (0.1                                      | )          | 0.8                                      |       | 0.8 |   | 1.3 |   |
| Net income                                                                        |       | $                                         | 2.4        |                                     | $          | 2.2 |   | $ | 4.5 |   | $ | 4.7 |   |

 

*Theaccompanying notes are an integral part of these financial statements.*

 

3

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**INGInsurance Company of America**

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

 

**Condensed Balance Sheets**

(Unaudited)

(Millions, exceptshare data)

 
| ** **                                                                                                  | ** ** | **September 30,  2004** | ** ** | **December 31,  2003** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                  | ** ** | **(Unaudited)**              | ** ** | ** **                  | ** ** |
| **Assets**                                                                                                  |       |                         |       |                        |       |
| Investments:                                                                                                |       |                         |       |                        |       |
| Fixed  maturities, available for sale, at fair value (amortized cost of $193.6 at  2004 and $127.9 at 2003) |       | $                            | 198.2      |                        | $          | 133.1 |   |
| Securities  pledged (amortized cost of $0.7 at 2004)                                                        |       | 0.7                          |       | —                      |       |
| Total  investments                                                                                          |       | 198.9                        |       | 133.1                       |       |
| Cash and  cash equivalents                                                                                  |       | 5.9                          |       | 4.8                         |       |
| Short term  investments under securities loan agreement                                                     |       | 0.7                          |       | —                      |       |
| Accrued  investment income                                                                                  |       | 1.6                          |       | 1.3                         |       |
| Deferred  policy acquisition costs                                                                          |       | 1.0                          |       | 0.9                         |       |
| Value of  business acquired                                                                                 |       | 28.7                         |       | 31.6                        |       |
| Other assets                                                                                                |       | 2.8                          |       | 20.3                        |       |
| Assets held  in separate accounts                                                                           |       | 522.6                        |       | 660.7                       |       |
| Total assets                                                                                                |       | $                            | 762.2      |                        | $          | 852.7 |   |
|                                                                                                        |       |                         |       |                        |       |
| **Liabilities  and Shareholder’s Equity**                                                              |       |                         |       |                        |       |
| Policy  liabilities and accruals:                                                                           |       |                         |       |                        |       |
| Other  policyholder’s funds                                                                            |       | $                            | 128.7      |                        | $          | 86.6 |   |
| Due to  affiliates                                                                                          |       | 2.7                          |       | 0.6                         |       |
| Payables  under securities loan agreement                                                                   |       | 0.7                          |       | —                      |       |
| Current  income taxes                                                                                       |       | 2.1                          |       | 1.7                         |       |
| Deferred  income taxes                                                                                      |       | 8.0                          |       | 7.9                         |       |
| Other  liabilities                                                                                          |       | 2.2                          |       | 2.6                         |       |
| Liabilities  related to separate accounts                                                                   |       | 522.6                        |       | 660.7                       |       |
| Total  liabilities                                                                                          |       | 667.0                        |       | 760.1                       |       |
|                                                                                                        |       |                         |       |                        |       |
| Shareholder’s  equity:                                                                                 |       |                         |       |                        |       |
| Common stock  (35,000 shares authorized, 25,500 issued and outstanding; $100 per share par  value)          |       | 2.5                          |       | 2.5                         |       |
| Additional  paid-in capital                                                                                 |       | 181.2                        |       | 181.2                       |       |
| Accumulated  other comprehensive income                                                                     |       | 0.3                          |       | 2.2                         |       |
| Retained  deficit                                                                                           |       | (88.8                        | )          | (93.3                       | )          |
| Total  shareholder’s equity                                                                            |       | 95.2                         |       | 92.6                        |       |
| Total  liabilities and shareholder’s equity                                                            |       | $                            | 762.2      |                        | $          | 852.7 |   |

 

*Theaccompanying notes are an integral part of these financial 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)

(Millions)

 
| ** **                                                                                                                  | ** ** | **Nine months ended September 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                                                                  | ** ** | **2004**                                 | ** ** | **2003** | ** ** |
| Shareholder’s  equity, beginning of period                                                                             |       | $                                        | 92.6       |   | $ | 85.9 |   |
| Comprehensive  income:                                                                                                      |       |                                     |       |   |   |
| Net income                                                                                                                  |       | 4.5                                      |       | 4.7 |   |
| Other comprehensive  (loss) income net of tax: Unrealized (loss) gain on securities ($(2.9) and  $0.3, pretax year to date) |       | (1.9                                     | )          | 0.2 |   |
| Total  comprehensive income                                                                                                 |       | 2.6                                      |       | 4.9 |   |
| Other                                                                                                                       |       | —                                   |       | (0.1 | ) |
| Shareholder’s  equity, end of period                                                                                   |       | $                                        | 95.2       |   | $ | 90.7 |   |

 

*Theaccompanying notes are an integral part of these financial statements.*

 

5

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**INGInsurance Company of America**

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

 

**Condensed Statements of Cash Flows**

(Unaudited)

(Millions)

 
| ** **                                                                             | ** ** | **Nine months ended September 30,** | ** ** |
|----------------------------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                             | ** ** | **2004**                                 | ** ** | **2003** | ** ** |
| Net cash  (used for) provided by operating activities                                  |       | $                                        | (4.7       | ) | $ | 2.5 |   |
| Cash flows provided  by (used for) investing activities                                |       |                                     |       |   |   |
| Proceeds  from the sale, maturity or repayment of fixed maturities, available for sale |       | 201.5                                    |       | 191.9 |   |
| Acquisition  of fixed maturities, available for sale                                   |       | (195.9                                   | )          | (200.5 | ) |
| Net cash  provided by (used for) investing activities                                  |       | 5.6                                      |       | (8.6 | ) |
| Cash flows  provided by (used for) financing activities                                |       |                                     |       |   |   |
| Deposits and  interest credited for investment contracts                               |       | 0.2                                      |       | 5.9 |   |
| Maturities  and withdrawals from investment contracts                                  |       | —                                   |       | (1.5 | ) |
| Other, net                                                                             |       | —                                   |       | (3.5 | ) |
| Net cash  provided by financing activities                                             |       | 0.2                                      |       | 0.9 |   |
| Net change  in cash and cash equivalents                                               |       | 1.1                                      |       | (5.2 | ) |
| Cash and  cash equivalents, beginning of period                                        |       | 4.8                                      |       | 5.2 |   |
| Cash and  cash equivalents, end of period                                              |       | $                                        | 5.9        |   | $ | — |   |

 

*Theaccompanying notes are an integral part of these financial statements.*

** **

6

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**ING Insurance Company of America**

**(A wholly-owned subsidiary of ING Life Insuranceand Annuity Company)**

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

 

**1.**                                      Basis ofPresentation

** **

ING Insurance Company of America (“IICA” or the “Company”), is aprovider of financial products and services in the United States. The Companyis a wholly-owned subsidiary of ING Life Insurance and Annuity Company (“ILIAC”).ILIAC is a wholly-owned subsidiary of Lion Connecticut Holdings Inc. (“LionConnecticut”). Lion Connecticut’s ultimate parent is ING Groep N.V. (“ING”), afinancial services company based in The Netherlands.

 

The condensed financial statements and notes as of September 30,2004 and December 31, 2003 and for the three and nine months ended September 30,2004 and 2003 (“interim periods”) have been prepared in accordance with U.S.generally accepted accounting principles and are unaudited. The condensedfinancial statements reflect all adjustments (consisting only of normalrecurring 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. These condensed financial statements and notes shouldbe read in conjunction with the financial statements and related notes aspresented in the Company’s 2003 Annual Report on Form 10-K. The results ofoperations for the interim periods may not be indicative of results to beexpected for the full year.

 

The Company has one operating segment, U.S.Financial Services (“USFS”), and all revenue reported by the Company comes fromexternal customers.

 

**2.**                                      Recently AdoptedAccounting Standards

** **

*Accountingand Reporting by Insurance Enterprises for Certain Nontraditional Long-DurationContracts and for Separate Accounts*

* *

The Company adopted Statement of Position (“SOP”) 03-1, “Accounting andReporting by Insurance Enterprises for Certain Nontraditional Long-DurationContracts and for Separate Accounts,” on January 1, 2004. SOP 03-1establishes several new accounting and disclosure requirements for certainnontraditional long-duration contracts and for separate accounts including,among other things, a requirement that assets and liabilities of separateaccount arrangements that do not meet certain criteria be accounted for asgeneral account assets and liabilities, and that revenues and expenses relatedto such arrangements be consolidated with the respective revenue and expenselines in the Condensed Statement of Operations. In addition, the SOP requiresadditional liabilities be established for certain guaranteed death and otherbenefits and for Universal Life products with certain patterns of cost ofinsurance charges, and that sales inducements provided to contractholders berecognized on the balance sheet separately from deferred acquisition costs andamortized as a component of benefits expense using methodology and assumptionsconsistent with those used for amortization of deferred policy acquisitioncosts.

 

7

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The Company evaluated all requirements of SOP03-1 and determined that it is affected by the SOP’s requirements to accountfor certain separate account arrangements as general account arrangements.Requirements to establish additional liabilities forminimum guarantee benefits are applicable tothe Company, however, the Company’s policies on policy liabilities havehistorically been, and continue to be, in conformity with the requirementsnewly established. Requirements for recognition of additional liabilities forUniversal Life products with certain patterns of cost of insurance charges arenot applicable to the Company.

 

The adoption of SOP 03-1 did not have asignificant effect on the Company’s results of operations, and had no impact onthe Company’s net income.

 

The implementation of SOP 03-1 raised questions regarding theinterpretation of the requirements of Financial Accounting Standard (“FAS”) No.97, concerning when it is appropriate to record an unearned revenue liabilityrelated to the insurance benefit function. To clarify its position, the Financial Accounting Standards Board (“FASB”)issued FASB Staff Position No. FAS 97-1 (“FSP FAS 97-1”), “Situations in WhichParagraphs 17(b) and 20 of FASB Statement No. 97, ‘Accounting and Reporting byInsurance Enterprises for Certain Long-Duration Contracts and for RealizedGains and Losses from the Sale of Investments,’ Permit or Require Accrual of anUnearned Revenue Liability,” effective for fiscal periods beginning subsequentto the date the guidance was issued, June 18, 2004.  The Company adopted FSP FAS 97-1 on July 1,2004 and has evaluated the impact of the guidance on whether the Company isrequired to establish an unearned revenue reserve on its existing and newbusiness.   The adoption of FSP FAS 97-1did not have an impact on the Company’s financial position, results ofoperations or cash flows.

 

*TheMeaning of Other Than Temporary Impairment and its Application to CertainInvestments*

* *

In March 2004, the Emerging Issues Task Force (“EITF”) reached aconsensus on EITF Issue No. 03-1 (“EITF 03-1”), “The Meaning of Other ThanTemporary Impairment and Its Application to Certain Investments,” requiringthat a three-step impairment model be applied to securities within itsscope.  The three-step model is to beapplied on a security-by-security basis as follows:

 

Step 1:  Determine whether an investmentis impaired.  An investment is impairedif the fair value of the investment is less than its cost basis.

Step 2:  Evaluate whether an impairmentis other than temporary.

Step 3:  If the impairment is other thantemporary, recognize an impairment loss equal to the difference between theinvestment’s cost and its fair value.

 

On September 30, 2004, the FASB issued FASB Staff Position No.EITF Issue 03-1-1 (“FSP EITF 03-1-1”), “Effective Date of Paragraphs 10-20 ofEITF Issue No. 03-1, ‘The

 

8

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Meaning of Other Than Temporary Impairment and Its Application toCertain Investments,’” which delayed EITF 03-1’s original effective date of July 1,2004 for the paragraphs of the guidance surrounding steps two and three of theimpairment model introduced.  The delayis in effect until a final consensus can be reached on such guidance.  Despite the delay of the implementation ofsteps two and three, other than temporary impairments are still to berecognized as required by existing guidance.

 

Earlier consensus reached by the EITF on this issue required thatcertain quantitative and qualitative disclosures be made for unrealized losseson debt and equity securities that have not been recognized as other thantemporary impairments.  These disclosureswere adopted by the Company, effective December 31, 2003, and included inthe Investments footnote of the Notes to Financial Statements included in theCompany’s December 31, 2003 Form 10-K. In addition to the disclosure requirements adopted by the Companyeffective December 31, 2003, the final consensus of EITF 03-1 reached in March 2004included additional disclosure requirements that are effective for annualfinancial statements for fiscal years ending after June 15, 2004.

 

**3.**                                      New AccountingPronouncements

** **

In September 2004, the AICPA issued Technical Practice Aid6300.05-6300.08 “Q&As Related to the Implementation of SOP 03-1, Accountingand Reporting by Insurance Enterprises for Certain Nontraditional Long-DurationContracts and for Separate Accounts” (the “TPA”).  The TPA provides additional guidanceregarding certain implicit assessments that may be used in testing of the base mortalityfunction on contracts, which is performed to determine whether additionalliabilities are required in conjunction with SOP 03-1.  In addition, the TPA provides additionalguidance surrounding the allowed level of aggregation of additional liabilitiesdetermined under the SOP.  The Company iscurrently evaluating the impact of the TPA and anticipates it will have noimpact on the Company’s financial position, results of operations or cashflows.

 

**4.**                                      Deferred PolicyAcquisition Costs and Value of Business Acquired

** **

Deferred Policy Acquisition Costs (“DAC”) isan asset, which represents certain costs ofacquiring certain insurance business, whichare deferred and amortized.  These costs,all of which vary with and are primarily related to the production of new andrenewal business, consist principally of commissions, certain underwriting andcontract issuance expenses, and certain agency expenses. Value of businessacquired (“VOBA”) is an asset, which represents the present value of estimatednet cash flows embedded in the Company’s contracts, which existed at the timethe Company was acquired by ING. DAC and VOBA are evaluated for recoverabilityat each balance sheet date and these assets would be reduced to the extent thatgross profits are inadequate to recover the asset.

 

9

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The amortization methodology varies byproduct type based upon two accounting standards: FAS No. 60, “Accounting andReporting by Insurance Enterprises” (“FAS No. 60”) and FAS No. 97, “Accountingand Reporting by Insurance Enterprises for Certain Long-DurationContracts and Realized Gains and Losses from the Sale of Investments” (“FAS No.97”).

 

Under FAS No. 60, acquisition costs for traditional life insuranceproducts, which primarily include whole life and term life insurance contracts,are amortized over the premium payment period in proportion to the premiumrevenue recognition.

 

Under FAS No. 97, acquisition costs for universal life andinvestment-type products, which include universal life policies and fixed andvariable deferred annuities, are amortized over the life of the blocks ofpolicies (usually 25 years) in relation to the emergence of estimated grossprofits from surrender charges, investment margins, mortality and expensemargins, asset-based fee income, and actual realized gains (losses) oninvestments.  Amortization is adjustedretrospectively when estimates of current or future gross profits to berealized from a group of products are revised.

 

VOBA activity for the nine month periods ended September 30, 2004and 2003 was as follows:

 
| **(Millions)**                         | ** ** | **2004** | ** ** | **2003** | ** ** |
|----------------------------------------|------------|----------|------------|----------|------------|
| Balance at December 31            |       | $        | 31.6       |     | $          | 34.2 |   |
| Interest  accrued at 5% - 7%           |       | 1.3      |       | 1.8      |       |
| Amortization                           |       | (4.9     | )          | (3.6     | )          |
| Adjustment  for unrealized gain (loss) |       | 0.7      |       | (0.3     | )          |
| Balance at September 30           |       | $        | 28.7       |     | $          | 32.1 |   |

 

**5.**                                      Separate Accounts

** **

Separate Account assets and liabilities generally represent fundsmaintained to meet specific investment objectives of contractholders who bearthe investment risk, subject, in limited cases, to minimum guaranteed rates.Investment income and investment gains and losses generally accrue directly tosuch contractholders.  The assets of eachaccount are legally segregated and are not subject to claims that arise out ofany other business of the Company.

 

Separate Account assets supporting variable options under universallife and annuity contracts are invested, as designated by the policyholder orparticipant (who bears the investment risk subject, in limited cases, tominimum guaranteed rates) under a contract in shares of mutual funds which aremanaged by the Company, or in other selected mutual funds not managed by theCompany.

 

10

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Separate Account assets and liabilities are carried at fair value andshown as separate captions in the Condensed Balance Sheets.  Deposits, investment income and net realizedand unrealized capital gains and losses of the Separate Accounts are notreflected in the Condensed Financial Statements (with the exception of realizedand unrealized capital gains and losses on the assets supporting the guaranteedinterest option).  The CondensedStatements of Cash Flows do not reflect investment activity of the SeparateAccounts.

 

Assets and liabilities of separate account arrangements that do notmeet the criteria in SOP 03-1 for separate presentation in the CondensedBalance Sheets (those arrangements supporting the guaranteed interest option),and revenues and expenses related to such arrangements, were reclassified tothe general account on January 1, 2004, in accordance with the SOPrequirements.

 

**6.**                                      AdditionalInsurance Benefits and Minimum Guarantees

** **

Under SOP 03-1, the Company calculates an additional liability (the “SOPreserve”) for certain guaranteed benefits in order to recognize the expectedvalue of death benefits in excess of the projected account balance over theaccumulation period based on total expected assessments.

 

The SOP reserve calculated is the minimum guaranteed death benefits (“MGDB”)reserve and is determined each period by estimating the expected value of deathbenefits in excess of the projected account balance and recognizing the excessratably over the accumulation period based on total expected assessments. TheCompany regularly evaluates estimates used to adjust the additional liabilitybalance, with a related charge or credit to benefit expense, if actual experience or other evidence suggeststhat earlier assumptions should be revised. The following assumptions andmethodology were used to determine the MGDB SOP reserve at September 30, 2004:

 
| **Area**                    | ** ** | **Assumptions/Basis  for Assumptions**                                                               |
|-----------------------------|------------|------------------------------------------------------------------------------------------------------|
| Data used                   |       | Based on 101 investment performance scenarios stratified based on  10,000 random generated scenarios |
| Mean investment performance |       | 8.5%                                                                                                 |
| Volatility                  |       | 18.0%                                                                                                |
| Mortality                   |       | 60.0% of the 90-95 ultimate mortality table                                                          |
| Lapse rates                 |       | Vary by contract type and duration; range between 1.0% and 40.0%                                     |
| Discount rates              |       | 6.5%, based on the portfolio earned rate of the general account                                      |

 

11

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As of September 30, 2004, the separate account liability subjectto SOP 03-1 for minimum guaranteed benefits and the additional liabilityrecognized related to minimum guarantees is $496.5 million and $0.2 million,respectively.  During the nine monthsended September 30, 2004, there were no incurred guaranteed benefits orpaid guaranteed benefits. The net amount at risk (net of reinsurance) and theweighted average attained age of contractholders is $7.5 million and 72,respectively, as of September 30, 2004.

 

The aggregate fair value of equity securities (including mutual funds)supporting separate accounts with additional insurance benefits and minimuminvestment return guarantees as of September 30, 2004 is $496.5 million.

 

**7.**                                      Income Taxes

** **

The Company’s effective tax rates for thethree months ended September 30, 2004 and 2003 were (4.3)% and 26.7%,respectively.  Effective tax rates forthe nine months ended September 30, 2004 and 2003 were 15.1% and 21.7%,respectively.  The decrease ineffective rates for both the three and nine months ended September 30,2004, is primarily due to the tax benefit associated with the settlement of the1998-2000 IRS audit. The benefit, which relates primarily to the separateaccount dividends received deduction, reduced the three month and nine month,year over year effective rates by 37.5% and 15.3%, respectively. Additionally,the prior year nine month results include an increase in tax due to anon-recurring prior year refinement of the deferred tax balance.

 

**8.**                                      Commitments andContingent Liabilities

** **

*Litigation*

 

The Company is a party to threatened or pending lawsuits/arbitrationsarising from the normal conduct of business. Due to the climate in insurance and business litigation, suits againstthe Company sometimes include claims for substantial compensatory,consequential or punitive damages and other types of relief. Moreover, certainclaims are asserted as class actions, purporting to represent a group ofsimilarly situated individuals.  While itis not possible to forecast the outcome of such lawsuits/arbitrations, in lightof existing insurance, reinsurance and established reserves, it is the opinionof management that the disposition of such lawsuits/arbitrations will not havea materially adverse effect on the Company’s operations or financial position.

 

 

 

12

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**9.**                                      Reclassificationand Changes to Prior Year Presentation

** **

Certain reclassifications have been made to prior year quarterlyfinancial information as stated in the Company’s 2003 Form 10-K to conform tothe current year classifications.

 

The changes were made to the 2003 classification of MGDB excess claims,which previously were included as a reduction to fee income. These changes hadno impact on net income or shareholder’s equity of the Company. The followingsummarizes the change in classification to each financial statement line item(in millions):

 
| **Three months ended March 31, 2003**             | ** ** | **Previously  Reported 2003** | ** ** | **Adjustment** | ** ** | **Restated  2003** | ** ** |
|--------------------------------------------------------|------------|-------------------------------|------------|----------------|------------|--------------------|------------|
|                                                   |       |                          |       |           |       |               |       |
| Fee income                                             |       | $                             | 1.9        |           | $          | 0.6                |       | $ | 2.5 |   |
| Total  revenue                                         |       | 4.7                           |       | 0.6            |       | 5.3                |       |
| Interest  credited and other benefits to policyholders |       | 1.8                           |       | 0.6            |       | 2.4                |       |
| Total  expense                                         |       | 4.5                           |       | 0.6            |       | 5.1                |       |
|                                                        |            |                               |            |                |            |                    |            |  |  |  |

 
| **Six Months ended June 30, 2003**                | ** ** | **Previously  Reported 2003** | ** ** | **Adjustment** | ** ** | **Restated  2003** | ** ** |
|--------------------------------------------------------|------------|-------------------------------|------------|----------------|------------|--------------------|------------|
|                                                   |       |                          |       |           |       |               |       |
| Fee income                                             |       | $                             | 3.6        |           | $          | 1.7                |       | $ | 5.3 |   |
| Total  revenue                                         |       | 9.7                           |       | 1.7            |       | 11.4               |       |
| Interest  credited and other benefits to policyholders |       | 2.1                           |       | 1.7            |       | 3.8                |       |
| Total  expense                                         |       | 6.7                           |       | 1.7            |       | 8.4                |       |
|                                                        |            |                               |            |                |            |                    |            |  |  |  |

 
| **Nine Months ended September 30, 2003**          | ** ** | **Previously  Reported 2003** | ** ** | **Adjustment** | ** ** | **Restated  2003** | ** ** |
|--------------------------------------------------------|------------|-------------------------------|------------|----------------|------------|--------------------|------------|
|                                                   |       |                          |       |           |       |               |       |
| Fee income                                             |       | $                             | 5.0        |           | $          | 2.7                |       | $ | 7.7 |   |
| Total  revenue                                         |       | 13.5                          |       | 2.7            |       | 16.2               |       |
| Interest  credited and other benefits to policyholders |       | 3.0                           |       | 2.7            |       | 5.7                |       |
| Total  expense                                         |       | 7.5                           |       | 2.7            |       | 10.2               |       |
|                                                        |            |                               |            |                |            |                    |            |  |  |  |

 
| **Twelve Months ended December 31, 2003**         | ** ** | **Previously  Reported 2003** | ** ** | **Adjustment** | ** ** | **Restated  2003** | ** ** |
|--------------------------------------------------------|------------|-------------------------------|------------|----------------|------------|--------------------|------------|
|                                                   |       |                          |       |           |       |               |       |
| Fee income                                             |       | $                             | 6.7        |           | $          | 3.0                |       | $ | 9.7 |   |
| Total  revenue                                         |       | 15.6                          |       | 3.0            |       | 18.6               |       |
| Interest  credited and other benefits to policyholders |       | 0.3                           |       | 3.0            |       | 3.3                |       |
| Total  expense                                         |       | 7.3                           |       | 3.0            |       | 10.3               |       |
|                                                        |            |                               |            |                |            |                    |            |  |  |  |

 

13

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**Item 2****.****                                  ****Management’s NarrativeAnalysis of the Results of Operations and Financial Condition**

 

**Overview**

 

The following narrative analysis ofthe results of operations and financial condition presents a review of INGInsurance Company of America (“IICA”, or the “Company”) as of September 30,2004 and December 31, 2003 and for the three and nine month periods ended September 30,2004 and 2003. This review should be read in conjunction with the condensedfinancial statements and other data presented herein, as well as the “Management’sNarrative Analysis of the Results of Operations and Financial Condition” section containedin the Company’s 2003 Annual Report on Form 10-K.

 

**Nature of Business**

 

The Company principally offersannuity contracts to individuals on a qualified and nonqualified basis and toemployer sponsored retirement plans qualified under Internal Revenue CodeSections 401, 403, and 408.  The Company’sproducts are offered primarily to individuals and employer-sponsored groups inthe education market.  The Company’sproducts are generally sold through a managed network of broker/dealers anddedicated career agents.

 

**Recently AdoptedAccounting Standards**

 

*Accountingand Reporting by Insurance Enterprises for Certain Nontraditional Long-DurationContracts and for Separate Accounts*

* *

The Company adopted Statement ofPosition (“SOP”) 03-1, “Accounting and Reporting by Insurance Enterprises forCertain Nontraditional Long-Duration Contracts and for Separate Accounts,” on January 1,2004. SOP 03-1 establishes several new accounting and disclosure requirementsfor certain nontraditional long-duration contracts and for separate accountsincluding, among other things, a requirement that assets and liabilities ofseparate account arrangements that do not meet certain criteria be accountedfor as general account assets and liabilities, and that revenues and expensesrelated to such arrangements, be consolidated with the respective revenue and expenselines in the Condensed Statement of Operations. In addition, the SOP requiresadditional liabilities be established for certain guaranteed death and otherbenefits and for Universal Life products with certain patterns of cost ofinsurance charges, and that sales inducements provided to contractholders berecognized on the balance sheet separately from deferred acquisition costs andamortized as a component of benefits expense using methodology and assumptionsconsistent with those used for amortization of deferred policy acquisitioncosts.

 

The Company evaluated allrequirements of SOP 03-1 and determined that it is affected by the SOP’srequirements to account for certain separate account arrangements as generalaccount arrangements. Requirements to establish additional liabilities forminimum guarantee benefits are applicable to the Company, however,

 

14

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the Company’s policies on policyliabilities have historically been, and continue to be, in conformity with therequirements newly established. Requirements for recognition of additionalliabilities for Universal Life products with certain patterns of cost ofinsurance charges are not applicable to the Company.

 

The adoption of SOP 03-1 did not havea significant effect on the Company’s results of operations, and had no impacton the Company’s net income.

 

The implementation of SOP 03-1 raisedquestions regarding the interpretation of the requirements of FinancialAccounting Standard (“FAS”) No. 97, concerning when it is appropriate to recordan unearned revenue liability related to the insurance benefit function.  To clarify its position, the FinancialAccounting Standards Board (“FASB”) issued FASB Staff Position No. FAS 97-1 (“FSPFAS 97-1”), “Situations in Which Paragraphs 17(b) and 20 of FASB Statement No.97, ‘Accounting and Reporting by Insurance Enterprises for CertainLong-Duration Contracts and for Realized Gains and Losses from the Sale ofInvestments,’ Permit or Require Accrual of an Unearned Revenue Liability,”effective for fiscal periods beginning subsequent to the date the guidance wasissued, June 18, 2004.  The Companyadopted FSP FAS 97-1 on July 1, 2004 and has evaluated the impact of theguidance on whether the Company is required to establish an unearned revenue reserveon its existing and new business.  Theadoption of FSP FAS 97-1 did not have an impact on the Company’s financialposition, results of operations or cash flows.

 

*TheMeaning of Other Than Temporary Impairment and its Application to CertainInvestments*

* *

In March 2004, the Emerging Issues Task Force (“EITF”)reached a final consensus on EITF Issue No. 03-1 (“EITF-03-1”), “The Meaning ofOther Than Temporary Impairment and Its Application to Certain Investments,”requiring that a three-step impairment model be applied to securities withinits scope.  The three-step model is to beapplied on a security-by-security basis as follows:

 

Step 1:  Determine whether an investmentis impaired.  An investment is impairedif the fair value of the investment is less than its cost basis.

Step 2:  Evaluate whether an impairmentis other than temporary.

Step 3:  If the impairment is other thantemporary, recognize an impairment loss equal to the difference between theinvestment’s cost and its fair value.

 

On September 30, 2004, the FASBissued FASB Staff Position No. EITF Issue 03-1-1 (“FSP EITF 03-1-1”), “EffectiveDate of Paragraphs 10-20 of EITF Issue No. 03-1, ‘The Meaning of Other ThanTemporary Impairment and Its Application to Certain Investments,’” whichdelayed EITF 03-1’s original effective date of July 1, 2004 for theparagraphs of the guidance surrounding steps two and three of the impairmentmodel introduced.  The delay is in effectuntil a final consensus can be reached on such guidance.  Despite the delay of the implementation ofsteps two and three, other than temporary impairments are still to berecognized as required by existing guidance.

 

15

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Earlier consensus reached by the EITF on this issuerequired that certain quantitative and qualitative disclosures be made forunrealized losses on debt and equity securities that have not been recognizedas other than temporary impairments. These disclosures were adopted by the Company, effective December 31,2003, and included in the Investments footnote of the Notes to FinancialStatements included in the Company’s December 31, 2003 Form 10-K.  In addition to the disclosure requirementsadopted by the Company effective December 31, 2003, the final consensus ofEITF 03-1 reached in March 2004 included additional disclosurerequirements that are effective for annual financial statements for fiscalyears ending after June 15, 2004.

 

**New Accounting Pronouncements**

 

In September 2004, the AICPA issuedTechnical Practice Aid 6300.05 – 6300.08 “Q&As Related to theImplementation of SOP 03-1, Accounting and Reporting by Insurance Enterprisesfor Certain Nontraditional Long-Duration Contracts and for Separate Accounts”(the “TPA”).  The TPA provides additionalguidance regarding certain implicit assessments that may be used in testing ofthe base mortality function on contracts, which is performed to determinewhether additional liabilities are required in conjunction with SOP 03-1.  In addition, the TPA provides additionalguidance surrounding the allowed level of aggregation of additional liabilitiesdetermined under the SOP.  The Company iscurrently evaluating the impact of the TPA and anticipates it will have noimpact on the Company’s financial position, results of operations or cashflows.

 

**Critical AccountingPolicies**

 

*General*

 

The preparation of financialstatements in conformity with U.S. generally accepted accounting principlesrequires the use of estimates and assumptions in certain circumstances thataffect amounts reported in the accompanying condensed financial statements andrelated footnotes. These estimates and assumptions are evaluated on an on-goingbasis based on historical developments, market conditions, industry trends andother information that is reasonable under the circumstances. There can be noassurance that actual results will conform to estimates and assumptions, andthat reported results of operations will not be materially adversely affectedby the need to make future accounting adjustments to reflect changes in theseestimates and assumptions from time to time.

 

The Company has identified thefollowing estimates as critical in that they involve a higher degree ofjudgment and are subject to a significant degree of variability. In developingthese estimates management makes subjective and complex judgments that areinherently uncertain and subject to material change as facts and circumstancesdevelop. Although variability is inherent in these estimates, managementbelieves the amounts provided are appropriate based upon the facts availableupon compilation of the condensed financial statements.

 

16

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*InvestmentImpairment Testing*

 

The Company reviews the generalaccount investments for impairments by considering the length of the time andthe 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 fair value. Based on the facts and circumstances of each case,management uses judgment in deciding whether any calculated impairments aretemporary or other than temporary. For those impairments judged to be otherthan temporary, the Company reduces the carrying value of those investments tothe current fair value and records impairment losses for the difference.

 

*Amortization ofDeferred Acquisition Costs and Value of Business Acquired*

 

Deferred policy acquisition costs (“DAC”)and value of business acquired (“VOBA”) are amortized with interest over thelife of the contracts (usually 25 years) in relation to the present value ofestimated gross profits from projected interest margins, asset-based fees,policy administration and surrender charges less policy maintenance fees.

 

Changes in assumptions can have asignificant impact on the calculation of DAC/VOBA and its related amortizationpatterns. Due to the relative size of the DAC/VOBA balance and the sensitivityof the calculation to minor changes in the underlying assumptions and therelated volatility that could result in the reported DAC/VOBA balance, theCompany performs a quarterly analysis of DAC/VOBA. At each balance sheet date,actual historical gross profits are reflected and expected future gross profitsand related assumptions are evaluated for continued reasonableness.

 

Any adjustment in estimated profitrequires that the amortization rate be revised retroactively to the date ofpolicy or contract issuance (“unlocking”), which could be significant. Thecumulative difference related to prior periods is recognized as a component ofthe current period’s amortization, along with amortization associated with theactual gross profits of the period. In general, increases in estimated returnsresult in increased expected future profitability and may lower the rate ofamortization, while increases in lapse/surrender and mortality assumptions ordecreases in returns reduce the expected future profitability of the underlyingbusiness and may increase the rate of amortization.

 

One of the most significantassumptions involved in the estimation of future gross profits for variableuniversal life and deferred annuity products is the assumed return associatedwith future separate account performance. To reflect the near-term andlong-term volatility in the equity markets this assumption involves acombination of near-term expectations and a long-term assumption about marketperformance. The overall return generated by the separate account is dependenton several factors, including the relative mix of the underlying sub-accountsamong bond funds and equity funds as well as equity sector weightings.

 

17

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**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 and 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. Withoutlimiting the foregoing, forward-looking statements include statements whichrepresent 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 and contingencies,many of which are beyond the Company’s control and many of which are subject tochange.  These uncertainties andcontingencies could cause actual results to differ materially from thoseexpressed in any forward-looking statements made by, or on behalf of, theCompany.

 

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 (foradditional information, see the Legislative Initiatives section below).  Some may relate to the insurance industrygenerally, such as pricing competition, regulatory developments and industryconsolidation. Others may relate to the Company specifically, such as credit,volatility and other risks associated with the Company’s investmentportfolio.  Investors are also directedto consider other risks and uncertainties discussed in documents filed by theCompany with the SEC.  The Companydisclaims any obligation to update forward-looking information.

 

**Results ofOperations**

 

Fee income for the three and ninemonth periods ended September 30, 2004 decreased by $0.2 million and $0.7million, respectively, compared to the same periods in 2003.  The decrease in fee income for the respectivetime periods is primarily the result of lower variable assets under management.

 

Net investment income increased by$0.3 million and $0.1 million for the three and nine month periods ended September 30,2004, respectively, compared to the same periods in 2003. The increase for eachrespective time period is primarily the result of an increase in average assetsunder management with fixed options.

 

Net realized capital gains increasedby $0.5 million for the three months ended September 30, 2004 compared tothe three months ended September 30, 2003, primarily due to a decreasinginterest rate environment experienced during the three months ended September 30,2004, versus an increasing interest rate environment

 

18

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experienced during the same period in2003.  Net realized capital gainsdecreased $0.3 million for the nine months ended September 30, 2004compared to the nine months ended September 30, 2003, primarily due to anincrease in the year-to-date average interest rate.  The fluctuations in net realized gainsreflect the impact of the interest rate environment on the overall sale offixed maturities during the respective time periods.

 

Interest credited and other benefitsto contractholders for the three and nine months ended September 30, 2004decreased $1.0 million and $1.8 million, respectively, compared to the sameperiods in 2003, primarily due to a decrease in credited interest rates tocontractholders, partially offset by an increase in average assets undermanagement with fixed options.

 

Underwriting, acquisition, andinsurance expenses for the three and nine month periods ended September 30,2004 decreased by $0.2 million and $0.4 million, respectively, compared to thesame periods in 2003, primarily due to the blocks of business no longer beingsold by the Company.

 

Amortization of DAC and VOBA for thethree and nine months ended September 30, 2004, increased by $2.5 millionand $2.0 million, respectively, compared to the same periods in 2003.  Amortization of long-duration products isrecorded in proportion to actual and estimated future gross profits. Estimatedgross profits are computed based on underlying assumptions related to theunderlying contracts, including but not limited to interest margins, mortality,lapse, premium persistency, expenses, and asset growth. The increase in theamortization of deferred policy acquisition costs and value of insuranceacquired reflects the impact of these variables on the overall book of business.

 

Net income increased by $0.2 millionfor the three months ended September 30, 2004 compared to the same periodin 2003. The increase in earnings is primarily the result of increases in netinvestment income and net realized capital gains in addition to a decrease inincome taxes, partially offset by a decrease in fee income and a slightincrease in the net of all benefits and expenses.  Net income decreased by $0.2 million for thenine months ended September 30, 2004 compared to the same period in 2003.  The decline in earnings is primarily theresult of lower fee income and net realized capital gains, partially offset bya minor increase in net investment income, a slight decrease in the net of allbenefits and expenses, and a decrease in income taxes.

 

19

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The Company’s annuity deposits andassets under management are as follows:

 
| ** **                    | ** ** | **Three months ended  September 30,** | ** ** | **Nine months ended  September 30,** | ** ** |
|-------------------------------|------------|--------------------------------------------|------------|-------------------------------------------|------------|
| **(Millions) (Unaudited)**    | ** ** | **2004**                                   | ** ** | **2003**                                  | ** ** | **2004** | ** ** | **2003** | ** ** |
| Deposits                      |       |                                       |       |                                      |       |   |   |   |   |
| Annuities -  fixed options    |       | $                                          | 0.4        |                                      | $          | 1.0 |   | $ | 1.8 |   | $ | 3.7 |   |
| Annuities -  variable options |       | 4.0                                        |       | 4.2                                       |       | 13.5 |   | 13.3 |   |
| Total -  deposits             |       | $                                          | 4.4        |                                      | $          | 5.2 |   | $ | 15.3 |   | $ | 17.0 |   |
|                               |            |                                            |            |                                           |            |  |  |  |  |  |  |  |  |  |

 
| ** **                             | ** ** | **As of September 30,** | ** ** |
|----------------------------------------|------------|------------------------------|------------|
| ** **                             | ** ** | **2004**                     | ** ** | **2003** | ** ** |
| Assets under  management               |       |                         |       |   |   |
| Annuities -  fixed options(1)          |       | $                            | 122.9      |   | $ | 144.0 |   |
| Annuities -  variable options (2) |       | 522.5                        |       | 547.6 |   |
| Total -  assets under management       |       | $                            | 645.4      |   | $ | 691.6 |   |

 

----

(1) Excludes net unrealized capital gains of$4.4 million and $7.0 million at September 30, 2004 and 2003,respectively.

(2) Includes$386.3 million and $409.0 million at September 30, 2004 and 2003,respectively, of assets invested through the Company’s products in unaffiliatedmutual funds.

 

**Financial Condition**

 

**Investments**

 

*Fixed Maturities*

 

At September 30, 2004 and December 31,2003, the Company’s carrying value of available for sale fixed maturitiesincluding securities pledged (hereinafter referred to as “total fixedmaturities”) represented 100.0% of the total general account for 2004 and 2003.For the same periods, $77.8 million, or 39.1% of total fixed maturities, and$92.3 million, or 69.3% of total fixed maturities, respectively, supportedexperience-rated products. Total fixed maturities reflected net unrealizedcapital gains of $4.4 million and $5.2 million at September 30, 2004 and December 31,2003, respectively.

 

It is management’s objective that theportfolio of fixed maturities be of high quality and be well diversified bymarket sector. The fixed maturities in the Company’s portfolio are generallyrated by external rating agencies and, if not externally rated, are rated bythe Company on a basis believed to be similar to that used by the ratingagencies. The average quality rating of the Company’s fixed maturitiesportfolio was AA at September 30, 2004 and December 31, 2003.

 

Fixedmaturities rated BBB and below may have speculative characteristics and changesin economic 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.

 

20

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The percentage of total fixedmaturities by quality rating category is as follows:

 
| ** **  | ** ** | **September 30,  2004** | ** ** | **December 31,  2003** | ** ** |
|-------------|------------|------------------------------|------------|-----------------------------|------------|
| AAA         |       | 54.6                         | %          | 47.7                        | %          |
| AA          |       | 3.0                          |       | 1.2                         |       |
| A           |       | 25.9                         |       | 27.7                        |       |
| BBB         |       | 14.4                         |       | 22.6                        |       |
| BB          |       | 2.1                          |       | 0.1                         |       |
| B and below |       | —                       |       | 0.7                         |       |
| Total       |       | 100.0                        | %          | 100.0                       | %          |

 

The percentage of total fixedmaturities by market sector is as follows:

 
| ** **                              | ** ** | **September 30,  2004** | ** ** | **December 31,  2003** | ** ** |
|-----------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| U.S.  Corporate                         |       | 40.2                         | %          | 56.9                        | %          |
| Residential  Mortgaged-Backed           |       | 15.9                         |       | 19.7                        |       |
| U.S.  Treasuries/Agencies               |       | 26.3                         |       | 6.0                         |       |
| Foreign (1)                             |       | 4.6                          |       | 7.2                         |       |
| Asset-Backed                            |       | 7.4                          |       | 6.2                         |       |
| Commercial/Multifamily  Mortgage-Backed |       | 5.6                          |       | 4.0                         |       |
| Total                                   |       | $                            | 100.0      | %                           | $          | 100.0 | % |
|                                         |            |                              |            |                             |            |  |  |

 

----

(1) Primarily U.S. dollar denominated.

 

The Company analyzes the generalaccount investments to determine whether there has been an other than temporarydecline in fair value below the amortized cost basis in accordance with FAS No.115, “Accounting for Certain Investments in Debt and Equity Securities”.Management considers the length of the time and the extent to which the fairvalue has been less than amortized cost; the financial condition and near-termprospects of the issuer; future economic conditions and market forecasts; andthe Company’s intent and ability to retain the investment in the issuer for aperiod of time sufficient to allow for recovery in fair value. If it isprobable that all amounts due according to the contractual terms of a fixedmaturity investment will not be collected, an other than temporary impairmentis considered to have occurred.

 

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.

 

**Liquidity andCapital Resources**

 

Liquidity is the ability of theCompany to generate sufficient cash flows to meet the cash requirements ofoperating, investing, and financing activities. The Company’s principal sourcesof liquidity are product charges, investment income and maturing investments.Primary uses of these funds are payments of commissions and operating expenses,interest credits, investment purchases, as well as withdrawals and surrenders.

 

21

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Management believes that its sourcesof liquidity are adequate to meet the Company’s short-term cash obligations.The Company has entered into agreements with ILIAC under which ILIAC has agreedto cause the Company to have sufficient capital to meet certain capital andsurplus levels.

 

The National Association of InsuranceCommissioners’ (“NAIC”) risk-based capital requirements require insurancecompanies to calculate and report information under a risk-based capitalformula. These requirements are intended to allow insurance regulators tomonitor the capitalization of insurance companies based upon the type andmixture of risks inherent in a Company’s operations. The formula includescomponents for asset risk, liability risk, interest rate exposure, and otherfactors. The Company has complied with the NAIC’s risk-based capital reportingrequirements.

 

Amounts reported indicate that theCompany has total adjusted capital above all required capital levels.

 

**Legislative Initiatives**

 

The Jobsand Growth Tax Relief Reconciliation Act of 2003, which was enacted in secondquarter 2003, may impact the Company. The Act’s provisions, which reduce thetax rates on long-term capital gains and corporate dividends, impact therelative competitiveness of the Company’s products, especially variableannuities.

 

Otherlegislative proposals under consideration include repealing the estate tax,changing the taxation of products and changing life insurance company taxation.Some of these proposals, if enacted, could have a material effect on lifeinsurance, annuity and other retirement savings product sales.  The impact on the Company’s products cannotbe predicted.

 

 

22

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#### **Item4**.                                   Controls andProcedures

#### ** **

a)              The Companycarried out an evaluation, under the supervision and with the participation ofits management, including its Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of the Company’s disclosure controls andprocedures (as defined in Rule 13a-15(e) and 15d-15(e) of the SecuritiesExchange Act of 1934) as of the end of the period covered by this report.  Based on that evaluation, the Chief ExecutiveOfficer and the Chief Financial Officer have concluded that the Company’scurrent disclosure controls and procedures are effective in ensuring thatmaterial information relating to the Company required to be disclosed in theCompany’s periodic SEC filings is made known to them in a timely manner.

 

b)             There hasnot been any change in the internal controls over financial reporting of theCompany that occurred during the period covered by this report that hasmaterially affected or is reasonably likely to materially affect these internalcontrols.

 

23

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**PART II****.****                       ****OTHER INFORMATION**

 

#### **Item 1**.                                   LegalProceedings

#### ** **

The Company is a party to threatened or pendinglawsuits arising from the normal conduct of business.  Due to the climate in insurance and businesslitigation, suits against the Company sometimes include claims for substantialcompensatory, consequential or punitive damages and other types of relief.  Moreover, certain claims are asserted asclass actions, purporting to represent a group of similarly situated individuals.  While it is not possible to forecast theoutcome of such lawsuits, in light of existing insurance, reinsurance andestablished reserves, it is the opinion of management that the disposition ofsuch lawsuits will not have a materially adverse effect on the Company’soperations or financial position.

 

As with many financial services companies, the Companyand its affiliates have received informal and formal requests for informationfrom various governmental and self-regulatory agencies in connection withinvestigations of the products and business practices of the financial servicesindustry. In each case, full cooperation has been and is being provided.Reference is made to “Other Regulatory Matters” in Note 10 to the Notes toFinancial Statements in Part II, Item 8 of the Company’s Form 10-K AnnualReport, filed on March 29, 2004 (SEC File No. 033-81010); the Company’sForm 8-K/A Current Report filed on September 8, 2004 (SEC File No.033-81010); and the Company’s Form 8-K Current Report filed on October 29,2004 (SEC File No. 033-81010).

 

#### **Item 6**.                                   Exhibits

 
| 3.         | (i)        | Articles of Incorporation, as restated January 1, 2002, incorporated  by reference to the Registrant’s Form 10-K, as filed with the SEC on March  28, 2002 (File No. 33-81010). |
|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                 |
|       | (ii)       | By-Laws, as amended and restated January 1, 2002, incorporated by  reference to the Registrant’s 

Form 10-K, as filed with the SEC on March 28, 2002 (File No.  33-81010).     |
|       |       |                                                                                                                                                                                 |
| 4.         |       | 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.         |
|       |       |                                                                                                                                                                                 |
|       |       | 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 therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|              | ING INSURANCE COMPANY OF AMERICA |   |
|-------------------|----------------------------------|--------|
|              | (Registrant)                     |   |
|              |                             |
|              |                             |
| November 12, 2004 |                             | By     | /s/ David A. Wheat |   |
| (Date)            |                             |   |   | David A. Wheat |   |
|              |                             |   |   | Director, Senior Vice  President, and  Chief Financial Officer |   |
|                   |                                  |        |  |  |  |  |

 

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