**UNITEDSTATES**

**SECURITIES AND EXCHANGECOMMISSION**

**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: 333-86276,  333-86278, 333-104456**                                                                                                                                                                                                   |

 

# **ING Life Insurance and Annuity Company**

(Exact name of registrant asspecified in its charter)

 
| **Connecticut**                                                                   | ** ** | **71-0294708**                     |
|-----------------------------------------------------------------------------------|------------|------------------------------------|
| (State or  other jurisdiction of  incorporation or organization)                  |       | (IRS  employer identification no.) |
|                                                                              |       |                               |
| **151 Farmington Avenue, Hartford,  Connecticut**                                 | ** ** | **06156**                          |
| (Address of  principal executive offices)                                         |       | (Zip code)                         |
|                                                                              |       |                               |
| Registrant’s telephone number, including  area code **(860) 723-4646**       |
|                                                                              |       |                               |
|                                                                              |       |                               |
| Former name,  former address and former fiscal year, if changed since last report |

 

Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days.

Yes  ý     No o

 

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

Yes  o     No ý

 

**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: 55,000 shares ofCommon Stock as of November 12, 2004, all of which were directly owned by LionConnecticut Holdings Inc.

 

NOTE:  WHEREAS ING LIFE INSURANCEAND ANNUITY COMPANY 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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**ING Life Insurance and Annuity Company andSubsidiaries**

**(A wholly-owned subsidiary of LionConnecticut Holdings Inc.)**

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

 

**INDEX**

 
| **PART I.**  | **FINANCIAL INFORMATION (Unaudited)**                                                      |       |
|--------------|--------------------------------------------------------------------------------------------|------------|
|         |                                                                                       |       |
| Item 1.      | Financial Statements:                                                                      |       |
|         |                                                                                       |       |
|         | Condensed  Consolidated Statements of Income                                               |       |
|         | Condensed Consolidated Balance Sheets                                                      |       |
|         | Condensed Consolidated Statements of  Changes in Shareholder’s Equity                 |       |
|         | Condensed Consolidated Statements of Cash  Flows                                           |       |
|         | Notes to Condensed Consolidated 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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**ING Life Insurance and Annuity Company andSubsidiaries**

**(A wholly-owned subsidiary of LionConnecticut Holdings Inc.)**

 

**PART I.****                            FINANCIALINFORMATION (UNAUDITED)**

** **

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

** **

**Condensed Consolidated Statements of Income**

(Unaudited)

(Millions)

 
| ** **                                                                        | ** ** | **Three months ended September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
|-----------------------------------------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                        | ** ** | **2004**                             | ** ** | **2003**                            | ** ** | **2004** | ** ** | **2003** | ** ** |
| Revenue:                                                                          |       |                                 |       |                                |       |   |   |   |   |
| Premiums                                                                          |       | $                                    | 9.7        |                                | $          | 9.1 |   | $ | 31.6 |   | $ | 42.3 |   |
| Fee income                                                                        |       | 114.1                                |       | 105.4                               |       | 349.1 |   | 294.5 |   |
| Net investment income                                                             |       | 251.4                                |       | 237.1                               |       | 730.3 |   | 718.1 |   |
| Net realized capital gains (losses)                                               |       | 3.8                                  |       | (0.2                                | )          | 19.7 |   | 33.2 |   |
| Total revenue                                                                     |       | 379.0                                |       | 351.4                               |       | 1,130.7 |   | 1,088.1 |   |
| Benefits, losses and expenses:                                                    |       |                                 |       |                                |       |   |   |   |   |
| Benefits:                                                                         |       |                                 |       |                                |       |   |   |   |   |
| Interest credited and other benefits to  policyholders                            |       | 189.6                                |       | 193.6                               |       | 561.2 |   | 561.3 |   |
| Underwriting, acquisition, and insurance  expenses:                               |       |                                 |       |                                |       |   |   |   |   |
| General expenses                                                                  |       | 101.7                                |       | 100.9                               |       | 308.7 |   | 308.5 |   |
| Commissions                                                                       |       | 30.9                                 |       | 30.4                                |       | 94.1 |   | 88.7 |   |
| Policy acquisition costs deferred                                                 |       | (39.1                                | )          | (39.4                               | )          | (122.5 | ) | (119.0 | ) |
| Amortization of deferred policy acquisition  costs and value of business acquired |       | 34.6                                 |       | 40.4                                |       | 108.8 |   | 96.4 |   |
| Total benefits, losses and expenses                                               |       | 317.7                                |       | 325.9                               |       | 950.3 |   | 935.9 |   |
| Income before income taxes                                                        |       | 61.3                                 |       | 25.5                                |       | 180.4 |   | 152.2 |   |
| Income tax (benefit) expense                                                      |       | (14.3                                | )          | 0.6                                 |       | 23.1 |   | 41.1 |   |
| Net income                                                                        |       | $                                    | 75.6       |                                | $          | 24.9 |   | $ | 157.3 |   | $ | 111.1 |   |

 

*The accompanying notes are an integralpart of these financial statements.*

 

3

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**ING Life Insurance and Annuity Company andSubsidiaries**

**(A wholly-owned subsidiary of LionConnecticut Holdings Inc.)**

 

**Condensed Consolidated Balance Sheets**

(Millions, except sharedata)

 
| ** **                                                                                                       | ** ** | **September 30  2004** | ** ** | **December 31,  2003** | ** ** |
|------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                                                                       | ** ** | **(Unaudited)**        | ** ** | ** **             | ** ** |
| **Assets**                                                                                                       |       |                   |       |                   |       |
| Investments:                                                                                                     |       |                   |       |                   |       |
| Fixed maturities, available for sale, at  fair value (amortized cost of $15,886.4 at 2004 and $15,455.0 at 2003) |       | $                      | 16,412.2   |                   | $          | 16,049.7 |   |
| Equity securities, available for sale, at  fair value:                                                           |       |                   |       |                   |       |
| Nonredeemable preferred stock (cost of  $59.3 at 2004 and $34.1 at 2003)                                         |       | 59.7                   |       | 34.4                   |       |
| Investment in affiliated mutual funds (cost  of $89.7 at 2004 and $112.3 at 2003)                                |       | 99.5                   |       | 127.4                  |       |
| Common stock (cost of $0.1 at 2004 and  2003)                                                                    |       | 0.1                    |       | 0.1                    |       |
| Mortgage loans on real estate                                                                                    |       | 1,059.3                |       | 754.5                  |       |
| Policy loans                                                                                                     |       | 264.4                  |       | 270.3                  |       |
| Short-term investments                                                                                           |       | 268.1                  |       | 1.0                    |       |
| Other investments                                                                                                |       | 58.4                   |       | 52.6                   |       |
| Securities pledged (amortized cost of $1,735.8  at 2004 and $1,624.4 at 2003)                                    |       | 1,753.8                |       | 1,644.8                |       |
| Total investments                                                                                                |       | 19,975.5               |       | 18,934.8               |       |
|                                                                                                             |       |                   |       |                   |       |
| Cash and cash equivalents                                                                                        |       | 169.3                  |       | 57.8                   |       |
| Short-term investments under securities  loan agreement                                                          |       | 744.6                  |       | 123.9                  |       |
| Accrued investment income                                                                                        |       | 187.8                  |       | 169.6                  |       |
| Reinsurance recoverable                                                                                          |       | 3,009.8                |       | 2,953.2                |       |
| Receivables for securities sold                                                                                  |       | 144.8                  |       | —                 |       |
| Deferred policy acquisition costs                                                                                |       | 380.0                  |       | 307.9                  |       |
| Sales inducements to contractholders                                                                             |       | 19.0                   |       | —                 |       |
| Value of business acquired                                                                                       |       | 1,364.5                |       | 1,415.4                |       |
| Property, plant and equipment (net of  accumulated depreciation of $82.4 at 2004 and $79.8 at 2003)              |       | 27.4                   |       | 31.7                   |       |
| Due from affiliates                                                                                              |       | 9.9                    |       | 41.5                   |       |
| Other assets                                                                                                     |       | 3.8                    |       | 174.5                  |       |
| Assets held in separate accounts                                                                                 |       | 30,739.4               |       | 33,014.7               |       |
| Total assets                                                                                                     |       | $                      | 56,775.8   |                   | $          | 57,225.0 |   |

 

*The accompanying notes are anintegral part of these financial statements.*

 

4

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**ING Life Insurance and Annuity Company andSubsidiaries**

**(A wholly-owned subsidiary of LionConnecticut Holdings Inc.)**

 

**CondensedConsolidated Balance Sheets**

(Millions, except sharedata)

 
| ** **                                                                                                  | ** ** | **September 30,  2004** | ** ** | **December 31,  2003** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|------------------------|------------|
| ** **                                                                                                  | ** ** | **(Unaudited)**         | ** ** | ** **             | ** ** |
| **Liabilities and Shareholder’s Equity**                                                               |       |                    |       |                   |       |
| Policy liabilities and accruals:                                                                            |       |                    |       |                   |       |
| Future policy benefits and claims reserves                                                                  |       | $                       | 3,229.1    |                   | $          | 3,379.9 |   |
| Unpaid claims and claim expenses                                                                            |       | 30.6                    |       | 25.4                   |       |
| Other policyholders’ funds                                                                             |       | 17,647.6                |       | 15,871.3               |       |
| Total policy liabilities and accruals                                                                       |       | 20,907.3                |       | 19,276.6               |       |
| Due to affiliates                                                                                           |       | 42.1                    |       | 92.4                   |       |
| Payables under securities loan agreement                                                                    |       | 744.6                   |       | 123.9                  |       |
| Borrowed money                                                                                              |       | 1,029.1                 |       | 1,519.3                |       |
| Current income taxes                                                                                        |       | 39.8                    |       | 85.6                   |       |
| Deferred income taxes                                                                                       |       | 193.9                   |       | 184.7                  |       |
| Payables for securities purchased                                                                           |       | 133.5                   |       | 5.4                    |       |
| Other liabilities                                                                                           |       | 184.6                   |       | 276.5                  |       |
| Liabilities related to separate accounts                                                                    |       | 30,739.4                |       | 33,014.7               |       |
| Total liabilities                                                                                           |       | 54,014.3                |       | 54,579.1               |       |
| Shareholder’s equity                                                                                   |       |                    |       |                   |       |
| Common stock (100,000 shares authorized,  55,000 shares issued and outstanding, $50.00 per share par value) |       | 2.8                     |       | 2.8                    |       |
| Additional paid-in capital                                                                                  |       | 4,646.5                 |       | 4,646.5                |       |
| Accumulated other comprehensive income                                                                      |       | 67.2                    |       | 106.8                  |       |
| Retained deficit                                                                                            |       | (1,955.0                | )          | (2,110.2               | )          |
| Total shareholder’s equity                                                                             |       | 2,761.5                 |       | 2,645.9                |       |
| Total liabilities and shareholder’s equity                                                             |       | $                       | 56,775.8   |                   | $          | 57,225.0 |   |

 

*The accompanying notes are anintegral part of these financial statements.*

 

5

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**ING Life Insurance and Annuity Company andSubsidiaries**

**(A wholly-owned subsidiary of LionConnecticut Holdings Inc.)**

 

**Condensed Consolidated Statements of Changesin Shareholder’s Equity**

(Unaudited)

(Millions)

 
| ** **                                                                                                                    | ** ** | **Nine months ended September 30,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                                                                    | ** ** | **2004**                            | ** ** | **2003** | ** ** |
| Shareholder’s equity, beginning of period                                                                                |       | $                                   | 2,645.9    |   | $ | 2,262.8 |   |
| Comprehensive income:                                                                                                         |       |                                |       |   |   |
| Net income                                                                                                                    |       | 157.3                               |       | 111.1 |   |
| Other comprehensive (loss) income net of  tax: Unrealized (loss) gain on securities ($(60.9) and $16.8, pretax year to  date) |       | (39.6                               | )          | 10.9 |   |
| Other                                                                                                                         |       | (2.1                                | )          | — |   |
| Total comprehensive income                                                                                                    |       | 115.6                               |       | 122.0 |   |
| Capital contributions                                                                                                         |       | —                              |       | 200.0 |   |
| Shareholder’s equity, end of period                                                                                      |       | $                                   | 2,761.5    |   | $ | 2,584.8 |   |

 

*The accompanying notes are anintegral part of these financial statements.*

 

6

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**ING Life Insurance and Annuity Company andSubsidiaries**

**(A wholly-owned subsidiary of LionConnecticut Holdings Inc.)**

 

**Condensed Consolidated Statements of CashFlows**

(Unaudited)

(Millions)

 
| ** **                                               | ** ** | **Nine months ended September 30,** | ** ** |
|----------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                               | ** ** | **2004**                            | ** ** | **2003** | ** ** |
| Net cash provided by operating activities                |       | $                                   | 430.5      |   | $ | 1,363.2 |   |
| Cash flows from investing activities                     |       |                                |       |   |   |
| Proceeds from the sale, maturity or  repayment of:       |       |                                |       |   |   |
| Fixed maturities, available for sale                     |       | 21,641.5                            |       | 21,924.3 |   |
| Equity securities, available for sale                    |       | 43.1                                |       | 92.3 |   |
| Short-term and other investments                         |       | 418.4                               |       | 0.3 |   |
| Mortgages                                                |       | 12.4                                |       | 12.7 |   |
| Acquisition of investments:                              |       |                                |       |   |   |
| Fixed maturities, available for sale                     |       | (21,306.0                           | )          | (23,516.4 | ) |
| Equity securities, available for sale                    |       | (41.6                               | )          | (23.3 | ) |
| Short-term and other investments                         |       | (685.7                              | )          | — |   |
| Mortgages                                                |       | (317.2                              | )          | (191.6 | ) |
| Sale of property and equipment                           |       | 13.4                                |       | (2.8 | ) |
| Other, net                                               |       | (13.6                               | )          | 13.4 |   |
| Net cash provided by (used for) investing  activities    |       | (235.3                              | )          | (1,691.1 | ) |
| Cash flows from financing activities                     |       |                                |       |   |   |
| Deposits for investment contracts and  interest credited |       | 1,033.4                             |       | 444.2 |   |
| Maturities and withdrawals from investment  contracts    |       | (1,309.1                            | )          | (247.1 | ) |
| Capital contribution                                     |       | —                              |       | 200.0 |   |
| Transfers from (to) separate accounts                    |       | 192.0                               |       | (37.0 | ) |
| Net cash (used for) provided by financing  activities    |       | (83.7                               | )          | 360.1 |   |
| Net increase in cash and cash equivalents                |       | 111.5                               |       | 32.2 |   |
| Cash and cash equivalents, beginning of  period          |       | 57.8                                |       | 65.4 |   |
| Cash and cash equivalents, end of period                 |       | $                                   | 169.3      |   | $ | 97.6 |   |

 

*The accompanying notes are anintegral part of these financial statements.*

 

7

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**ING LifeInsurance and Annuity Company and Subsidiaries**

**(Awholly-owned subsidiary of Lion Connecticut Holdings Inc.)**

**Notes toCondensed Consolidated Financial Statements (Unaudited)**

 

**1.**                                      Basisof Presentation

** **

ING Life Insuranceand Annuity Company (“ILIAC”), and its wholly-owned subsidiaries (collectively,the “Company”) are providers of financial products and services in the UnitedStates. These condensed consolidated financial statements include ILIAC and itswholly-owned subsidiaries, ING Insurance Company of America (“IICA”), INGFinancial Advisers, LLC, and, through February 28, 2002, Aetna InvestmentAdviser Holding Company, Inc. (“IA Holdco”). ILIAC was a wholly-owned subsidiary of ING Retirement Holdings, Inc. (“HOLDCO”),which was a wholly-owned subsidiary of ING Retirement Services, Inc. (“IRSI”).IRSI was a wholly-owned subsidiary of Lion Connecticut Holdings Inc. (“Lion”),which in turn was ultimately owned by ING Groep N.V. (“ING”), a financialservices company based in The Netherlands. However, on March 30, 2003, a seriesof mergers occurred in the following order: IRSI merged into Lion, HOLDCOmerged into Lion and IA Holdco merged into Lion. As a result, ILIAC is now adirect wholly-owned subsidiary of Lion.

 

On February 28,2002, ILIAC contributed 100% of the stock of IA Holdco and its subsidiaries toHOLDCO, (former ILIAC parent company), resulting in a distribution totaling$60.1 million. As a result of this transaction, the Investment ManagementServices segment is no longer reflected as an operating segment of the Company.

 

The condensedconsolidated financial statements and notes as of September 30, 2004 andDecember 31, 2003 and for the three and nine-months ended September 30, 2004and 2003 (“interim periods”) have been prepared in accordance with U.S.generally accepted accounting principles and are unaudited.  The condensed consolidated financialstatements reflect all adjustments (consisting only of normal recurring accruals),which are, in the opinion of management, necessary for the fair presentation ofthe consolidated financial position, results of operations and cash flows forthe interim periods.  These condensedconsolidated financial statements and notes should be read in conjunction withthe consolidated financial statements and related notes as presented in theCompany’s 2003 Annual Report on Form 10-K. The results of operations for the interim periods may not be consideredindicative of results to be expected for the full year.  Certain reclassifications have been made to2003 financial information to conform to the 2004 presentation.

 

The Companyconducts its business through one reporting segment, U.S. Financial Services (“USFS”),and revenue reported by the Company is predominantly derived from externalcustomers.

 

8

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**2.**                                      RecentlyAdopted Accounting Standards

** **

*Accounting and Reportingby Insurance Enterprises for Certain Nontraditional Long-Duration Contracts andfor Separate Accounts*

* *

The Companyadopted Statement of Position (“SOP”) 03-1, “Accounting and Reporting byInsurance Enterprises for Certain Nontraditional Long-Duration Contracts andfor 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 andexpense lines in the Condensed Consolidated Statement of Operations.  In addition, the SOP requires additional liabilitiesbe established for certain guaranteed death and other benefits and forUniversal Life products with certain patterns of cost of insurance charges, andthat sales inducements provided to contractholders be recognized on the balancesheet separately from deferred acquisition costs and amortized as a componentof benefits expense using methodology and assumptions consistent with thoseused for amortization of deferred policy acquisition costs.

 

The Companyevaluated all requirements of SOP 03-1 and determined that it is affected bythe SOP’s requirements to account for certain separate account arrangements asgeneral account arrangements and to defer, amortize, and recognize separately,sales inducements to contractholders. Requirements to establish additional liabilities for minimum guaranteebenefits are also applicable to the Company, however, the Company’s policies oncontract liabilities have historically been, and continue to be, in conformitywith the requirements newly established. Requirements for recognition of additional liabilities for products withcertain patterns of cost of insurance charges are not applicable to theCompany.

 

The adoption ofSOP 03-1 did not have a significant effect on the Company’s results ofoperations, and had no impact on the Company’s net income.

 

The implementationof SOP 03-1 raised questions regarding the interpretation of the requirementsof Financial Accounting Standard (“FAS”) No. 97, concerning when it isappropriate to record an unearned revenue liability related to the insurancebenefit function.  To clarify itsposition, the Financial Accounting Standards Board (“FASB”) issued FASB StaffPosition No. FAS 97-1 (“FSP FAS 97-1”), “Situations in Which Paragraphs 17(b)and 20 of FASB Statement No. 97, ‘Accounting and Reporting by InsuranceEnterprises for Certain Long-Duration Contracts and for Realized Gains andLosses from the Sale of Investments,’ Permit or Require Accrual of an Unearned RevenueLiability,” effective for fiscal periods beginning subsequent to the date theguidance was issued, June 18, 2004.  TheCompany adopted FSP FAS 97-1 on July 1, 2004 and has evaluated the impact ofthe guidance on whether the Company is required to establish an additional unearnedrevenue reserve on its existing and new

 

9

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business.  The adoption of FSP FAS 97-1 did not have animpact on the Company’s financial position, results of operations or cashflows.

 

*The Meaning of OtherThan Temporary Impairment and its Application to Certain Investments*

* *

In March 2004, theEmerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 03-1(“EITF 03-1”), “The Meaning of Other Than Temporary Impairment and ItsApplication to Certain Investments,” requiring that a three-step impairmentmodel be applied to securities within its scope.  The three-step model is to be applied on asecurity-by-security basis as follows:

 

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

Step 2:            Evaluate whether an impairment is otherthan temporary.

Step 3:            If the impairment is other than temporary,recognize an impairment loss equal to the difference between the investment’scost and its fair value.

 

On September 30,2004, the FASB issued FASB Staff Position No. EITF Issue 03-1-1 (“FSP EITF03-1-1”), “Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, ‘TheMeaning of Other Than Temporary Impairment and Its Application to CertainInvestments,’” 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 consensusreached by the EITF on this issue required that certain quantitative andqualitative disclosures be made for unrealized losses on debt and equitysecurities that have not been recognized as other than temporaryimpairments.  These disclosures wereadopted by the Company, effective December 31, 2003, and included in theInvestments footnote of the Notes to Consolidated Financial Statements includedin the Company’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 March2004 included additional disclosure requirements that are effective for annualfinancial statements for fiscal years ending after June 15, 2004.

 

**3.**                                      NewAccounting Pronouncements

** **

In September 2004,the AICPA issued Technical Practice Aid 6300.05 – 6300.08 “Q&As Related tothe Implementation of SOP 03-1, Accounting and Reporting by InsuranceEnterprises for Certain Nontraditional Long-Duration Contracts and for SeparateAccounts” (the “TPA”).  The TPA providesadditional guidance regarding certain implicit assessments that may be used intesting of the base mortality function on contracts, which is performed todetermine whether additional liabilities are required in conjunction with SOP03-1.  In addition, the TPA providesadditional guidance

 

10

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surrounding theallowed level of aggregation of additional liabilities determined under theSOP.  The Company is currently evaluatingthe impact of the TPA and anticipates it will have no impact on the Company’sfinancial position, results of operations or cash flows.

 

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

** **

Deferred PolicyAcquisition Costs (“DAC”) is an asset, which represents certain costs ofacquiring certain insurance business, which are deferred and amortized.  These costs, all of which vary with and areprimarily related to the production of new and renewal business, consistprincipally of commissions, certain underwriting and contract issuance expenses,and certain agency expenses.  Value ofbusiness acquired (“VOBA”) is an asset, which represents the present value ofestimated net cash flows embedded in the Company’s contracts, which existed atthe time the Company was acquired by ING. DAC and VOBA are evaluated for recoverability at each balance sheet dateand these assets would be reduced to the extent that gross profits areinadequate to recover the asset.

 

The amortizationmethodology varies by product type based upon two accounting standards: FAS No.60, “Accounting and Reporting by Insurance Enterprises” (“FAS No. 60”) and FASNo. 97, “Accounting and Reporting by Insurance Enterprises for CertainLong-Duration Contracts and Realized Gains and Losses from the Sale ofInvestments” (“FAS No. 97”).

 

Under FAS No. 60,acquisition costs for traditional life insurance products, which primarilyinclude whole life and term life insurance contracts, are amortized over thepremium payment period in proportion to the premium revenue recognition.

 

Under FAS No. 97,acquisition costs for universal life and investment-type products, whichinclude universal life policies and fixed and variable deferred annuities, areamortized over the life of the blocks of policies (usually 25 years) inrelation to the emergence of estimated gross profits from surrender charges,investment margins, mortality and expense margins, asset-based fee income, andactual realized gains (losses) on investments. Amortization is adjusted retrospectively when estimates of current or futuregross profits to be realized from a group of products are revised.

 

11

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

 
| **(Millions)**               | ** ** | **2004** | ** ** | **2003** | ** ** |
|------------------------------|------------|----------|------------|----------|------------|
| Balance at December 31       |       | $        | 1,415.4    |     | $          | 1,438.4 |   |
| Adjustment for FAS No. 115   |       | 5.3      |       | 2.8      |       |
| Additions                    |       | 37.4     |       | 42.7     |       |
| Interest accrued at 5% to 7% |       | 69.4     |       | 71.8     |       |
| Amortization                 |       | (163.0   | )          | (156.6   | )          |
| Balance at September 30      |       | $        | 1,364.5    |     | $          | 1,399.1 |   |

 

**5.**                                      Investments

** **

*Impairments*

* *

During the threemonths ended September 30, 2004, the Company determined that 26 fixedmaturities had other than temporary impairments.  As a result, for the three months endedSeptember 30, 2004, the Company recognized a pre-tax loss of $5.6 million toreduce the carrying value of the fixed maturities to their fair value at thetime of impairment.  During the threemonths ended September 30, 2003, the Company determined that 5 fixed maturitieshad other than temporary impairments. As a result, for the three months endedSeptember 30, 2003, the Company recognized a pre-tax loss of $8.5 million toreduce the carrying value of the fixed maturities to their fair value at thetime of impairment.

 

During the ninemonths ended September 30, 2004, the Company determined that 50 fixedmaturities had other than temporary impairments.  As a result, for the nine months endedSeptember 30, 2004, the Company recognized a pre-tax loss of $11.4 million toreduce the carrying value of the fixed maturities to their fair value at thetime of impairment.  During the ninemonths ended September 30, 2003, the Company determined that 80 fixedmaturities had other than temporary impairments.  As a result, for the nine months endedSeptember 30, 2003, the Company recognized a pre-tax loss of $74.7 million toreduce the carrying value of the fixed maturities to their fair value at thetime of impairment.

 

The fair value ofthe remaining impaired fixed maturities at September 30, 2004 and 2003 is $145.1million and $156.8 million, respectively.

 

12

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**6.**                                      SeparateAccounts

** **

Separate Accountassets and liabilities generally represent funds maintained to meet specificinvestment objectives of contractholders who bear the investment risk, subject,in limited cases, to minimum guaranteed rates. Investment income and investment gains and losses generally accruedirectly to such contractholders.  Theassets of each account are legally segregated and are not subject to claimsthat arise out of any other business of the Company.

 

Separate Accountassets supporting variable options under universal life and annuity contractsare invested, as designated by the policyholder or participant (who bears theinvestment risk subject, in limited cases, to minimum guaranteed rates) under acontract in shares of mutual funds which are managed by the Company, or inother selected mutual funds not managed by the Company.

 

Separate Accountassets and liabilities are carried at fair value and shown as separate captionsin the Condensed Consolidated Balance Sheets. Deposits, investment income and net realized and unrealized capitalgains and losses of the Separate Accounts are not reflected in the CondensedConsolidated Financial Statements (with the exception of realized andunrealized capital gains and losses on the assets supporting the guaranteedinterest option).  The CondensedConsolidated Statements of Cash Flows do not reflect investment activity of theSeparate Accounts.

 

Assets andliabilities of separate account arrangements that do not meet the criteria inSOP 03-1 for separate presentation in the Condensed Consolidated Balance Sheets(those arrangements supporting the guaranteed interest option), and revenuesand expenses related to such arrangements, were reclassified to the generalaccount on January 1, 2004, in accordance with the SOP requirements.

 

**7.**                                      AdditionalInsurance Benefits and Minimum Guarantees

** **

Under SOP 03-1,the Company calculates an additional liability (the “SOP reserve”) for certainguaranteed benefits in order to recognize the expected value of death benefitsin excess of the projected account balance over the accumulation period basedon total expected assessments.

 

13

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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.  The Company regularly evaluates estimatesused to adjust the additional liability balance, with a related charge orcredit to benefit expense, if actual experience or other evidence suggests thatearlier assumptions should be revised. The following assumptions and methodology were used to determine theMGDB 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%,  60.0%, 75.0% of the 90-95 ultimate mortality table for standard, rachet, and  rollup, respectively |
| 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                                           |

 

As of September30, 2004, the separate account liability subject to SOP 03-1 for minimumguaranteed benefits and the additional liability recognized related to minimumguarantees is $4,361.5 million and $0.9 million, respectively.  During the nine months ended September 30,2004, incurred guaranteed benefits and paid guaranteed benefits were $0.3million and $0.1 million, respectively. The net amount at risk (net of reinsurance) and the weighted averageattained age of contractholders is $44.5 million and 67, respectively, as ofSeptember 30, 2004.

 

The aggregate fairvalue of equity securities (including mutual funds), by major investment assetcategory, supporting separate accounts with additional insurance benefits andminimum investment return guarantees as of September 30, 2004 is $4,361.5million.

 

**8.**                                      SalesInducements

** **

Sales inducementsrepresent benefits paid to contractholders that are incremental to the amountsthe Company credits on similar contracts and are higher than the contract’sexpected ongoing crediting rates for periods after the inducement.  As of January 1, 2004, such amounts arereported separately on the balance sheet in accordance with SOP 03-1.  Prior to 2004, sales inducements wererecorded as a component of other assets on the Condensed Consolidated BalanceSheets.  Sales inducements are amortizedas a component of benefit expense using methodology and assumptions consistentwith those used for amortization of DAC. During the three months endedSeptember 30, 2004, the Company capitalized $0.8 million and amortized $1.8million of sales inducements, respectively. During the nine months ended September 30, 2004, the Company capitalized$2.1 million and amortized $5.1 million of sales inducements, respectively.

 

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The unamortized balance of capitalized sales inducements as ofSeptember 30, 2004 is $19.0 million.

 

**9.**                                      BenefitPlans

** **

*Non-QualifiedRetirement Plans*

 

As of December 31,2001, the Company, in conjunction with ING, offers certain eligible employees(excluding, among others, Career Agents) the Supplemental ING Retirement Planfor Aetna Financial Services and Aetna International Employees (“SERP”).  Effective January 1, 2002, the Company, inconjunction with ING, offers certain employees (other than Career Agents)supplemental retirement benefits under the ING Americas Supplemental ExecutiveRetirement Plan (the “Americas Supplemental Plan”).  The Company, in conjunction with ING,sponsors the Pension Plan for Certain Producers of ING Life Insurance andAnnuity Company (formerly the Pension Plan for Certain Producers of Aetna LifeInsurance and Annuity Company) (the “Agents Non-Qualified Plan”), anon-qualified defined benefit pension plan. The Company also sponsors the Producers’ Incentive Savings Plan (“PIP”),which is a non-qualified deferred compensation plan for eligible Career Agentsand certain other individuals who meet the eligibility criteria specified inthe PIP.  The Company also sponsors theProducers’ Deferred Compensation Plan (“DCP”), which is a non-qualifieddeferred compensation plan for eligible Career Agents and certain otherindividuals who meet the eligibility criteria specified in the DCP.  Benefit accruals under the SERPs ceasedeffective as of December 31, 2001.

 

Net periodic benefit costs for theSERP and the Agents Non-Qualified Plan for the periods ended September 30, 2004and 2003 were as follows:

 
| ** **                                                 | ** ** | **Three months ended September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
|------------------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| **(Millions)**                                             | ** ** | **2004**                             | ** ** | **2003**                            | ** ** | **2004** | ** ** | **2003** | ** ** |
| Interest cost                                              |       | $                                    | 1.4        |                                | $          | 1.7 |   | $ | 4.4 |   | $ | 5.2 |   |
| Net actuarial loss recognized in the year                  |       | 0.1                                  |       | 0.2                                 |       | 0.1 |   | 0.6 |   |
| Unrecognized past service cost recognized  during the year |       | 0.1                                  |       | 0.1                                 |       | 0.2 |   | 0.2 |   |
| Net periodic benefit cost                                  |       | $                                    | 1.6        |                                | $          | 2.0 |   | $ | 4.7 |   | $ | 6.0 |   |

 

Contributions for the SERP and Agents’Non-Qualified Plan are expected to be $9.7 million during 2004.

 

15

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*Post-RetirementBenefits*

* *

In addition toproviding pension benefits, the Company, in conjunction with ING, providescertain health care and life insurance benefits for retired employees andcertain agents, including certain Career Agents.  Generally, retired employees and eligibleCareer Agents pay a portion of the cost of these post-retirement benefits,usually based on their years of service with the Company.  The amount a retiree or eligible Career Agentpays for such coverage is subject to change in the future.

 

Net periodicbenefit costs for retired employees’ and retired agents’ post-retirement healthcare benefits for the periods ended September 30, 2004 and 2003 were asfollows:

 
| ** **                                                 | ** ** | **Three months ended September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
|------------------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| **(Millions)**                                             | ** ** | **2004**                             | ** ** | **2003**                            | ** ** | **2004** | ** ** | **2003** | ** ** |
| Service cost                                               |       | $                                    | 0.3        |                                | $          | 0.2 |   | $ | 0.9 |   | $ | 0.6 |   |
| Interest cost                                              |       | 0.4                                  |       | 0.5                                 |       | 1.3 |   | 1.3 |   |
| Net actuarial loss recognized in the year                  |       | 0.2                                  |       | 0.1                                 |       | 0.5 |   | 0.3 |   |
| Unrecognized past service cost recognized  during the year |       | (0.5                                 | )          | (0.1                                | )          | (0.7 | ) | (0.3 | ) |
| Net periodic benefit cost                                  |       | $                                    | 0.4        |                                | $          | 0.7 |   | $ | 2.0 |   | $ | 1.9 |   |

 

Contributions for retired employees’and retired agents’ post-retirement health care benefits are expected to be$1.3 million during 2004.

 

*Changes inAssumptions*

* *

Changes in the weighted-averageassumptions used in the measurement of the benefit obligation for theRetirement Plan were as follows:

 
| ** **                           | ** ** | **2004** | ** ** | **2003** | ** ** |
|--------------------------------------|------------|----------|------------|----------|------------|
| Discount rate at beginning of period |       | 6.25     | %          | 6.75     | %          |

 

*Changeto Post Retirement Health and Welfare Plan*

 

On August 1, 2004,the Post Retirement Health and Welfare Plan (the “Plan”) was amended to changethe age and service required to qualify for benefits.  The Plan now requires five years ofcontinuous service beginning on or after age 50.  Whereas previously service cost wasattributed throughout the employee’s career with the Company, it will now beattributed beginning at age 50.  Thechange is accounted for as a negative plan amendment and curtailment.  A remeasurement was performed as of August 1,2004, using best estimate assumptions as of that date.  The impact of the amendment and subsequentremeasurement was as follows:

 
| Accumulated post retirement benefit  obligation |   | $      | 7.2    |   |
|-------------------------------------------------|--------|--------|--------|--------|
| Unrecognized (gains)/losses                     |   | (0.4   | )      |
| Unrecognized past service cost                  |   | (6.9   | )      |
| Net (liability) or asset                        |   | $      | (0.1   | )      |
|                                            |   |   |   |
| Net periodic cost for the quarter               |   | $      | (0.3   | )      |
| Net periodic cost year to date                  |   | $      | (0.3   | )      |

 

*Effectof Recently Enacted Legislation*

* *

On December 8,2003, President Bush signed into law the Medicare Prescription Drug Improvementand Modernization Act of 2003 (the “Act”). The Act expands Medicare, primarily by including a prescription drugbenefit starting in 2006.  Employerscurrently sponsoring such prescription drug programs will have a range ofoptions to potentially reduce program costs. In May 2004, the FASB issued Staff Position No. FAS 106-2, “Accounting and Disclosure Requirements Related to theMedicare Prescription Drug, Improvement and Modernization Act of 2003*”* (FSP FAS 106-2), which superceded FSP FAS 106-1 and providesguidance on how companies should account for the impact of the Act onpostretirement health care plans.  Toencourage employers to maintain postretirement drug benefits, beginning in2006, the

 

16

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federal governmentwill provide non-taxable subsidy payments to employers who sponsor retiree drugbenefits that are “actuarially equivalent” to the Medicare Part Dbenefits.  The Company has determinedthat its postretirement medical plan’s prescription drug benefits are likely toqualify as actuarially equivalent to Part D benefits. The resulting subsidy,when received by the Company, will be passed through to the retirees in theform of lower contributions on the part of plan participants.  The Company is currently in the process ofamending the Plan to reflect the reduction of participant contributions, andtherefore, the subsidy is not expected to have a significant impact on theCompany’s financial position or results of operations.

 

**10.**                               IncomeTaxes

** **

The Company’seffective tax rates for the three months ended September 30, 2004 and 2003 were(23.3)% and 2.4%, respectively. Effective tax rates for the nine months ended September 30, 2004 and2003 were 12.8% and 27.0%, respectively. The decrease in effective rates for both the three and nine months endedSeptember 30, 2004, is primarily due to the tax benefit associated with thesettlement of the 1998-2000 IRS audit. The benefit, which relates primarily to the separate account dividendsreceived deduction, reduced the three-month and nine month year over yeareffective rates by 53.8% and 18.3%, respectively.

 

17

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**11.**                               Commitmentsand Contingent Liabilities

** **

*Commitments*

* *

Through the normalcourse of investment operations, the Company commits to either purchase or sellsecurities, commercial mortgage loans or money market instruments at aspecified future date and at a specified price or yield.  The inability of counterparties to honorthese commitments may result in either higher or lower replacement cost.  Also, there is likely to be a change in thevalue of the securities underlying the commitments. At September 30, 2004 andDecember 31, 2003, the Company had off-balance sheet commitments to purchaseinvestments equal to the fair value of $225.9 million and $154.3 million,respectively.

 

*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, suits against the Company sometimesinclude claims for substantial compensatory, consequential or punitive damagesand other types of relief.  Moreover,certain claims are asserted as class actions, purporting to represent a groupof similarly situated individuals.  Whileit is not possible to forecast the outcome of such lawsuits/arbitrations, inlight of existing insurance, reinsurance and established reserves, it is theopinion of management that the disposition of such lawsuits/arbitrations willnot have a materially adverse effect on the Company’s operations or financialposition.

 

 

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**Item 2.**                                Management’sNarrative Analysis of the Results of Operations and Financial Condition

 

#### **Overview**

 

The following narrative analysis of the results ofoperations and financial condition presents a review of ING Life Insurance andAnnuity Company and its wholly-owned subsidiaries (“ILIAC”, or the “Company”)as of September 30, 2004 and December 31, 2003 and for the three andnine-month periods ended September 30, 2004 and September 30, 2003.  This review should be read in conjunctionwith the condensed consolidated financial statements and other data presentedherein, as well as the “Management’s Narrative Analysis of the Results ofOperations and Financial Condition” section contained in the Company’s 2003Annual Report on Form 10-K.

 

#### **Nature of Business**

#### ** **

The Company offers qualified and nonqualified annuity contracts thatinclude a variety of funding and payout options for individuals and employersponsored retirement plans qualified under Internal Revenue Code Sections 401,403 and 457, as well as nonqualified deferred compensation plans.  Annuity contracts may be deferred orimmediate (payout annuities).  Theseproducts also include programs offered to qualified plans and nonqualifieddeferred compensation plans that package administrative and record-keepingservices along with a variety of investment options, including affiliated andnonaffiliated mutual funds and variable and fixed investment options.  In addition, the Company also offers wrapperagreements entered into with retirement plans which contain certain benefitresponsive guarantees (i.e. liquidity guarantees of principal and previouslyaccrued interest for benefits paid under the terms of the plan) with respect toportfolios of plan-owned assets not invested with the Company.  The Company also offers investment advisoryservices and pension plan administrative services.

 

**Recently Adopted Accounting 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 and Reporting by Insurance Enterprises for CertainNontraditional Long-Duration Contracts and for Separate Accounts,” on January1, 2004.  SOP 03-1 establishes severalnew accounting and disclosure requirements for certain nontraditionallong-duration contracts and for separate accounts including, among otherthings, a requirement that assets and liabilities of separate accountarrangements that do not meet certain criteria be accounted for as generalaccount assets and liabilities, and that revenues and expenses related to sucharrangements be consolidated with the respective revenue and expense lines inthe Condensed Consolidated Statement of Operations.  In addition, the SOP requires additionalliabilities be established for certain guaranteed death and other benefits andfor Universal Life products with certain patterns of cost of insurance charges,and that sales inducements provided to contractholders be recognized on thebalance sheet separately from deferred acquisition costs and amortized as acomponent of benefits expense using

 

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methodology and assumptions consistent with those usedfor amortization of deferred policy acquisition costs.

 

The Company evaluated all requirements of SOP 03-1 anddetermined that it is affected by the SOP’s requirements to account for certainseparate account arrangements as general account arrangements, and to recognizesales inducements to contractholders. Requirements to establish additional liabilities for minimum guarantee benefitsare applicable to the Company, however, the Company’s policies on policyliabilities have historically been, and continue to be, in conformity with therequirements newly established. Requirements for recognition of additional liabilities for products withcertain patterns of cost of insurance charges are not applicable to theCompany.

 

The adoption of SOP 03-1 did not have a significanteffect on the Company’s results of operations, and had no impact on the Company’snet income.

 

The implementation of SOP 03-1 raised questionsregarding the interpretation of the requirements of Financial AccountingStandard (“FAS”) No. 97, concerning when it is appropriate to record anunearned 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 consensus on EITF Issue No. 03-1 (“EITF 03-1”), “The Meaning of OtherThan 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 investment isimpaired.  An investment is impaired ifthe fair value of the investment is less than its cost basis.

Step 2:            Evaluate whether an impairment is otherthan temporary.

Step 3:            If the impairment is other than temporary,recognize an impairment loss equal to the difference between the investment’scost and its fair value.

 

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On September 30, 2004, the FASB issued FASB StaffPosition No. EITF Issue 03-1-1 (“FSP EITF 03-1-1”), “Effective Date ofParagraphs 10-20 of EITF Issue No. 03-1, ‘The Meaning of Other Than TemporaryImpairment and Its Application to Certain Investments,’” which delayed EITF03-1’s original effective date of July 1, 2004 for the paragraphs of theguidance surrounding steps two and three of the impairment modelintroduced.  The delay is in effect untila 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 issuerequired that certain quantitative and qualitative disclosures be made forunrealized losses on debt and equity securities that have not been recognized asother than temporary impairments.  Thesedisclosures were adopted by the Company, effective December 31, 2003, andincluded in the Investments footnote of the Notes to Consolidated 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 of EITF03-1 reached in March 2004 included additional disclosure requirements that areeffective for annual financial statements for fiscal years ending after June15, 2004.

 

**New Accounting Pronouncements**

** **

In September 2004, the AICPA issued Technical PracticeAid 6300.05 – 6300.08 “Q&As Related to the Implementation of SOP 03-1,Accounting and Reporting by Insurance Enterprises for Certain NontraditionalLong-Duration Contracts and for Separate Accounts” (the “TPA”).  The TPA provides additional guidanceregarding certain implicit assessments that may be used in testing of the basemortality function on contracts, which is performed to determine whetheradditional 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 Accounting Policies**

** **

*General*

* *

**Thepreparation of financial statements in conformity with U.S. generally acceptedaccounting principles requires the use of estimates and assumptions in certaincircumstances.  These estimates andassumptions are evaluated on an on-going basis based on historicaldevelopments, market conditions, industry trends and other information that isreasonable under the circumstances. There can be no assurance that actual results will conform to estimatesand assumptions, and that reported results of operations will not be affectedin a materially adverse manner by the need to make future accountingadjustments to reflect changes in these estimates and assumptions from time totime.**

 

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The Company has identified the following estimates as critical in thatthey involve a higher degree of judgment and are subject to a significantdegree 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 isinherent in these estimates, management believes the amounts provided areappropriate based upon the facts available upon compilation of the condensedconsolidated financial statements.

 

*Investment Impairment Testing*

* *

The Company reviews the general account investmentsfor impairments by considering the length of time and the extent to which thefair value has been less than amortized cost; the financial condition andnear-term prospects of the issuer; future economic conditions and market forecasts;and the Company’s intent and ability to retain the investment in the issuer fora period of time sufficient to allow for recovery in fair value.  Based on the facts and circumstances of eachcase, management uses judgment in deciding whether any calculated impairmentsare temporary or other than temporary. For those impairments judged to be other than temporary, the Companyreduces the carrying value of those investments to the current fair value andrecords impairment losses for the difference.

 

*Amortization of Deferred Acquisition Costsand Value of Business Acquired*

* *

Deferred policy acquisition costs (“DAC”) and value of businessacquired (“VOBA”) are amortized with interest over the life of the contracts(usually 25 years) in relation to the present value of estimated gross profitsfrom projected interest margins, asset-based fees, policy administration andsurrender charges less policy maintenance fees.

 

Changes in assumptions can have a significant impact on the calculationof DAC/VOBA and its related amortization patterns.  Due to the relative size of the DAC/VOBAbalance and the sensitivity of the calculation to minor changes in theunderlying assumptions and the related volatility that could result in thereported DAC/VOBA balance, the Company performs a quarterly analysis ofDAC/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 profit requires that the amortization ratebe revised retroactively to the date of policy 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.  Ingeneral, increases in estimated returns result in increased expected futureprofitability and may lower the rate of amortization, while increases inlapse/surrender and mortality assumptions or decreases in returns reduce theexpected future profitability of the underlying business and may increase therate of amortization.

 

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One of the most significant assumptions involved in the estimation offuture gross profits for variable universal life and deferred annuity productsis the assumed return associated with future separate account performance.  To reflect the near-term and long-termvolatility in the equity markets this assumption involves a combination ofnear-term expectations and a long-term assumption about marketperformance.  The overall returngenerated by the separate account is dependent on several factors, includingthe relative mix of the underlying sub-accounts among bond funds and equityfunds as well as equity sector weightings.

 

*SalesInducements*

* *

Sales inducements represent benefits paid to contractholders that areincremental to the amounts the Company credits on similar contracts and arehigher than the contract’s expected ongoing crediting rates for periods afterthe inducement.  Such amounts arereported separately on the balance sheet and are amortized as a component ofbenefit expense using methodology and assumptions consistent with those usedfor amortization of DAC.

 

#### **Forward-Looking Information/Risk Factors**

#### ** **

In connection with the “safe harbor” provisions of the PrivateSecurities Litigation Reform Act of 1995, the Company cautions readersregarding certain forward-looking statements contained in this report and inany other statements made by, or on behalf of, the Company, whether or not infuture filings with the Securities and Exchange Commission (“SEC”).  Forward-looking statements are statements notbased on historical information and which relate to future operations,strategies, financial results, or other developments. Statements using verbssuch as “expect,” “anticipate,” “believe” or words of similar import generallyinvolve forward-looking statements. Without limiting the foregoing, forward-looking statements includestatements which represent the Company’s beliefs concerning future levels ofsales and redemptions of the Company’s products, investment spreads and yields,or the earnings and profitability of the Company’s activities.

 

Forward-looking statements are necessarily based on estimates andassumptions that are inherently subject to significant business, economic andcompetitive uncertainties and contingencies, many of which are beyond theCompany’s control and many of which are subject to change.  These uncertainties and contingencies couldcause actual results to differ materially from those expressed in anyforward-looking statements made by, or on behalf of, the Company.

 

**Whether ornot actual results differ materially from forward-looking statements may dependon numerous foreseeable and unforeseeable developments. Some may be national inscope, such as general economic conditions, changes in tax law and changes ininterest rates (for additional information, see the Legislative Initiativessection below).  Some may relate to theinsurance industry generally, such as pricing competition, regulatorydevelopments and industry consolidation. Others may relate to the Companyspecifically, such as credit, volatility and other risks associated with theCompany’s investment portfolio. Investors are also directed to consider other risks and uncertaintiesdiscussed in documents filed by the Company with the SEC. The Company disclaimsany obligation to update forward-looking information.**

 

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**Results of Operations**

** **

Premiums for the three months ended September 30, 2004remained stable compared to the same period in 2003.  Premiums decreased by $10.7 million for thenine months ended September 30, 2004 compared to the same period in 2003,primarily due to lower annuitizations and lower internal single premiumimmediate annuity sales.

 

Fee income for the three and nine month periods endedSeptember 30, 2004 increased by $8.7 million and $54.6 million, respectively,compared to the same periods in 2003, primarily due to higher average variableassets under management during the respective periods.

 

Net investment income increased by $14.3 million and $12.2million 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 due to an increase in average assets undermanagement with fixed options.

 

Net realized capital gains increased by $4.0 million for thethree months ended September 30, 2004 compared to the three months endedSeptember 30, 2003, primarily due to a decreasing interest rate environmentexperienced during the three months ended September 30, 2004, versus anincreasing interest rate environment experienced during the same period in2003.  Net realized capital gainsdecreased $13.5 million for the nine months ended September 30, 2004 comparedto the nine months ended September 30, 2003, primarily due to an increase inthe year-to-date average interest rate. The fluctuations in net realized gains reflect the impact of theinterest rate environment on the overall sale of fixed maturities during therespective time periods.

 

Interest credited and other benefits to contractholders forthe three and nine months ended September 30, 2004 remained stable compared tothe same periods in 2003.

 

Underwriting, acquisition, and insurance expenses for thethree and nine month periods ended September 30, 2004 remained stable comparedto the same periods in 2003.

 

Amortization of DAC and VOBA decreased by $5.8 million, andincreased by $12.4 million, for the three and nine months ended September 30,2004, 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 ofbusiness.

 

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Net income increased by $50.7 million for the three monthsended September 30, 2004 compared to the same period in 2003. The increase inearnings is primarily the result of increases in fee income and net investmentincome, and a significant income tax benefit recognized in the third quarter of2004.  Partially offsetting the increasein earnings is a decrease in net realized capital gains and a slight increasein underwriting, acquisition, and insurance expenses, including DAC and VOBAamortization.  Net income for the ninemonths ended September 30, 2004 increased by $46.2 million compared to the sameperiod in 2003.  The increase in earningsis primarily the result of increases in fee income and net investment income,and a significant decrease in income taxes, partially offset by decreases inpremiums and net realized capital gains, and a slight increase in underwriting,acquisition, and insurance expenses, including DAC and VOBA amortization.

 

The Company’s annuity deposits and assets under management are asfollows:

 
| ** **                 | ** ** | **Three months ended  September 30,** | ** ** | **Nine months ended  September 30,** | ** ** |
|----------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| **(Millions) (Unaudited)** | ** ** | **2004**                              | ** ** | **2003**                             | ** ** | **2004** | ** ** | **2003** | ** ** |
| Deposits:                  |       |                                  |       |                                 |       |   |   |   |   |
| Annuities-fixed options    |       | $                                     | 380.2      |                                 | $          | 453.7 |   | $ | 1,222.4 |   | $ | 1,292.4 |   |
| Annuities-variable options |       | 1,025.2                               |       | 966.8                                |       | 3,361.9 |   | 2,926.6 |   |
| Total deposits             |       | $                                     | 1,405.4    |                                 | $          | 1,420.5 |   | $ | 4,584.3 |   | $ | 4,219.0 |   |

 
| ** **                                        | ** ** | **As of September 30,** | ** ** |
|---------------------------------------------------|------------|-------------------------|------------|
| ** **                                        | ** ** | **2004**                | ** ** | **2003** | ** ** |
| Assets under management:                          |       |                    |       |   |   |
| Annuities-fixed options (1)                  |       | $                       | 16,736.0   |   | $ | 15,863.9 |   |
| Annuities-variable options (2)                    |       | 29,485.9                |       | 25,999.4 |   |
| Subtotal-annuities                                |       | 46,221.9                |       | 41,863.3 |   |
| Plan sponsored and other                          |       | 5,465.4                 |       | 6,887.7 |   |
| Total-assets under management                     |       | 51,687.3                |       | 48,751.0 |   |
| Assets under administration (3)              |       | 23,294.6                |       | 19,837.5 |   |
| Total assets under management and  administration |       | $                       | 74,981.9   |   | $ | 68,588.5 |   |

 

----

(1)     Excludes netunrealized capital gains of $525.8 million and $735.9 million at September 30,2004 and 2003, respectively.

(2)     Includes $14,446.2 million at September 30, 2004and $11,191.3 million at September 30, 2003 related to deposits into theCompany’s products and invested in unaffiliated mutual funds.

(3)     Represents assets for which the Company providesadministrative services only.

 

25

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**Financial Condition**

** **

**Investments**

** **

*Fixed Maturities*

* *

At September 30, 2004 and December 31, 2003, the Company’s carryingvalue of available for sale fixed maturities including securities pledged(hereinafter referred to as “total fixed maturities”) represented 90.9% and93.5%, respectively, of the total general account invested assets.  For the same periods, $14,445.5 million, or79.5% of total fixed maturities, and $13,744.9 million, or 77.7% of total fixedmaturities, respectively, supported experience-rated products. Total fixedmaturities reflected net unrealized capital gains of $525.8 million and $615.1million at September 30, 2004 and December 31, 2003, respectively.

 

It is management’s objective that the portfolio of fixed maturities beof high quality and be well diversified by market sector.  The fixed maturities in the Company’sportfolio are generally rated by external rating agencies and, if notexternally rated, are rated by the Company on a basis believed to be similar tothat used by the rating agencies.  Theaverage quality rating of the Company’s fixed maturities portfolio was AA- atSeptember 30, 2004 and December 31, 2003.

 

Fixed maturities rated BBB and below may have speculativecharacteristics and changes in economic conditions or other circumstances aremore likely to lead to a weakened capacity of the issuer to make principal andinterest payments than is the case with higher rated fixed maturities.

 

The percentage of total fixed maturities by quality rating category isas follows:

 
| ** **  | ** ** | **September 30,  2004** | ** ** | **December 31,  2003** | ** ** |
|-------------|------------|-------------------------|------------|------------------------|------------|
| AAA         |       | 48.6                    | %          | 51.1                   | %          |
| AA          |       | 4.7                     |       | 4.3                    |       |
| A           |       | 19.9                    |       | 19.1                   |       |
| BBB         |       | 22.5                    |       | 21.3                   |       |
| BB          |       | 3.6                     |       | 3.2                    |       |
| B and below |       | 0.7                     |       | 1.0                    |       |
| Total       |       | 100.0                   | %          | 100.0                  | %          |

 

26

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The percentage of total fixed maturities by market sector is asfollows:

 
| ** **                             | ** ** | **September 30,  2004** | ** ** | **December 31,  2003** | ** ** |
|----------------------------------------|------------|-------------------------|------------|------------------------|------------|
| U.S. Corporate                         |       | 39.6                    | %          | 38.9                   | %          |
| Residential Mortgaged-backed           |       | 29.0                    |       | 33.7                   |       |
| Foreign (1)                       |       | 13.2                    |       | 11.6                   |       |
| Commercial/Multifamily Mortgage-backed |       | 8.5                     |       | 7.8                    |       |
| Asset-backed                           |       | 7.4                     |       | 6.0                    |       |
| U.S. Treasuries/Agencies               |       | 2.3                     |       | 2.0                    |       |
| Total                                  |       | 100.0                   | %          | 100.0                  | %          |

 

----

(1)     Primarily U.S. dollar denominated

 

The Company analyzes the general account investmentsto determine whether there has been an other than temporary decline in fairvalue below the amortized cost basis in accordance with FAS No. 115, “Accountingfor Certain Investments in Debt and Equity Securities.”  Management considers the length of 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.  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.

 

In addition, the Company invests in structuredsecurities that meet the criteria of Emerging Issues Task Force (“EITF”) IssueNo. 99-20 “Recognition of Interest Income and Impairment on Purchased andRetained Beneficial Interests in Securitized Financial Assets.”  Under EITF Issue No. 99-20, a 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.

 

When a decline in fair value is determined to be otherthan temporary, the individual security is written down to fair value and theloss is accounted for as a realized loss.

 

**Liquidity and CapitalResources**

** **

Liquidity is the ability of the Company to generatesufficient cash flows to meet the cash requirements of operating, investing,and financing activities. The Company’s principal sources of liquidity aredeposits on contracts, product charges, investment income, maturinginvestments, and capital contributions. Primary uses of liquidity are paymentsof commissions and operating expenses, interest and premium credits, investmentpurchases, as well as withdrawals and surrenders.

 

The Company’s liquidity position is managed bymaintaining adequate levels of liquid assets, such as cash or cash equivalentsand short-term investments. Additional sources of liquidity include a borrowingfacility to meet short-term cash requirements. The Company maintains areciprocal loan agreement with ING America Insurance

 

27

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Holdings, Inc. (“ING AIH”), a Delaware corporation andaffiliate.  Under this agreement, whichbecame effective in June 2001 and expires in April 2011, the Company and INGAIH can borrow up to 3.0% of the Company’s statutory admitted assets as of thepreceding December 31 from one another. Management believes that its sources ofliquidity are adequate to meet the Company’s short-term cash obligations.

 

The National Association of Insurance Commissioners’ (“NAIC”)risk-based capital requirements require insurance companies to calculate andreport information under a risk-based capital formula. These requirements areintended to allow insurance regulators to monitor the capitalization ofinsurance companies based upon the type and mixture of risks inherent in aCompany’s operations. The formula includes components for asset risk, liabilityrisk, interest rate exposure, and other factors. The Company has complied withthe NAIC’s risk-based capital reporting requirements. Amounts reported indicatethat the Company has total adjusted capital above all required capital levels.

 

**Legislative Initiatives**

 

The Jobs and Growth Tax Relief Reconciliation Act of2003, which was enacted in second quarter 2003, may impact the Company. TheAct’s provisions, which reduce the tax rates on long-term capital gains andcorporate dividends, impact the relative competitiveness of the Company’sproducts, especially variable annuities.

 

On October 22, 2004 the President signed the AmericanJobs Creation Act of 2004.  The actallows tax-free distributions to be made from the Policyholders’ SurplusAccount in 2005 and 2006.  Under priorlaw, the Company was allowed to defer from taxation a portion of statutoryincome under certain circumstances.  Thedeferred income was accumulated in the Policyholders’ Surplus Account and istaxable only under conditions that management considers to be remote.  Therefore, no federal income taxes have beenprovided on the accumulated balance of $17.2 million as of September 30,2004.  Based on currently availableinformation, the Company anticipates that the new law will permanently eliminateany potential tax on the accumulated balance of $17.2 million.

 

Other legislative proposals under considerationinclude repealing the estate tax, changing the taxation of products andchanging life insurance company taxation. Some of these proposals, if enacted,could have a material effect on life insurance, annuity and other retirementsavings product sales.  The impact on theCompany’s products cannot be predicted.

 

28

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#### **Item 4.**                                 Controls and Procedures

#### ** **

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.

 

29

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**PART II. OTHER INFORMATION**

** **

#### **Item 1.**                                 Legal Proceedings

#### ** **

The Company is a partyto threatened or pending lawsuits/arbitrations arising from the normal conductof business.  Due to the climate ininsurance and business litigation, suits against the Company sometimes includeclaims for substantial compensatory, consequential or punitive damages andother 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.

 

Aswith many financial services companies, the Company and its affiliates havereceived informal and formal requests for information from various governmentaland self-regulatory agencies in connection with investigations of the productsand business practices of the financial services industry. In each case, fullcooperation has been and is being provided. Reference is made to “OtherRegulatory Matters” in Note 12 to the Notes to Consolidated FinancialStatements in Part II, Item 8 of the Company’s Form 10-K Annual Report, filedon March 29, 2004 (SEC File No. 033-23376); the Company’s Form 8-K/A CurrentReport filed on September 8, 2004 (SEC File No. 033-23376); and the Company’sForm 8-K/A Current Report filed on November 12, 2004 (SEC File No. 033-23376).

 

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

 
| 3.     |   | (i)    |   | Certificate of  Incorporation as amended and restated January 1, 2002. Incorporated by  reference to the ILIAC on Form 10-K, as filed with the SEC on March 28, 2002  (File No. 33-23376). |
|--------|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                                                       |
| 3.     |   | (ii)   |   | By-Laws, as restated  January 1, 2002. Incorporated by reference to the ILIAC on Form 10-K, as  filed on March 28, 2002 (File No. 33-23376).                                               |
|   |   |   |   |                                                                                                                                                                                       |
| 4.     |   |   |   | Instruments Defining the  Rights of Security Holders, Including Indentures (Annuity Contracts).                                                                                            |
|   |   |   |   |                                                                                                                                                                                       |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 14 to Registration Statement on Form N-4  (File No. 33-75964), as filed on July 29, 1997.                                       |
|   |   |   |   |                                                                                                                                                                                       |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File  No. 33-75980), as filed on February 12, 1997.                                    |
|   |   |   |   |                                                                                                                                                                                       |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 12 to Registration Statement on Form N-4  (File No. 33-75964), as filed on February 11, 1997.                                   |
|   |   |   |   |                                                                                                                                                                                       |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 5 to Registration Statement on Form N-4 (File  No. 33-75986), as filed on April 12, 1996.                                       |
|   |   |   |   |                                                                                                                                                                                       |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 12 to Registration Statement on Form N-4  (File No. 333-01107), as filed on February 4, 1999.                                   |
|   |   |   |   |                                                                                                                                                                                       |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 4 to Registration Statement on Form N-4 (File  No. 33-75988), as filed on April 15, 1996.                                       |
|   |   |   |   |                                                                                                                                                                                       |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File  No. 33-81216), as filed on April 17, 1996.                                       |
|   |   |   |   |                                                                                                                                                                                       |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File  No. 33-91846), as filed on April 15, 1996.                                       |
|   |   |   |   |                                                                                                                                                                                       |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File  No. 33-91846), as filed on August 6, 1996.                                       |
|   |   |   |   |                                                                                                                                                                                       |
|   |   |   |   | Incorporated by reference  to Registration Statement on Form N-4 (File No. 333-01107), as filed on February  21, 1996.                                                                     |
|   |   |   |   |                                                                                                                                                                                       |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 12 to Registration Statement on Form N-4  (File No. 33-75982), as filed on February 20, 1997.                                   |
|   |   |   |   |                                                                                                                                                                                       |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 7 to Registration Statement on Form N-4 (File  No. 33-75992), as filed on February 13, 1997.                                    |
|   |   |   |   |                                                                                                                                                                                       |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File  No. 33-75974), as filed on February 28, 1997.                                    |

 

30

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|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File  No. 33-75962), as filed on April 17, 1996.      |
|--------|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 14 to Registration Statement on Form N-4  (File No. 33-75962), as filed on April 17, 1998.     |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File  No. 33-75982), as filed on April 22, 1996.      |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 8 to Registration Statement on Form N-4 (File  No. 33-75980), as filed on August 19, 1997.     |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Registration Statement on Form N-4 (File No. 333-56297), as filed on June  8, 1998.                                         |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File  No. 33-79122), as filed on August 16, 1995.     |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 32 to Registration Statement on Form N-4  (File No. 33-34370), as filed on December 16, 1997.  |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 30 to Registration Statement on Form N-4  (File No. 33-34370), as filed on September 29, 1997. |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 26 to Registration Statement on Form N-4  (File No. 33-34370), as filed on February 21, 1997.  |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 35 to Registration Statement on Form N-4  (File No. 33-34370), as filed on April 17, 1998.     |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File  No. 33-87932), as filed on September 19, 1995.  |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 8 to Registration Statement on Form N-4 (File  No. 33-79122), as filed on April 17, 1998.      |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 7 to Registration Statement on Form N-4 (File  No. 33-79122), as filed on April 22, 1997.      |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 21 to Registration Statement on Form N-4  (File No. 33-75996), as filed on February 16, 2000.  |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 13 to Registration Statement on Form N-4  (File No. 333-01107), as filed on April 7, 1999.     |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 37 to Registration Statement on Form N-4  (File No. 33-34370), as filed on April 9, 1999.      |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File  No. 333-87305), as filed on December 13, 1999.  |

 

31

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|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 18 to Registration Statement on Form N-4  (File No. 33-56297), as filed on August 30, 2000.    |
|--------|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 17 to Registration Statement on Form N-4  (File No. 33-75996), as filed on April 7, 1999.      |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 19 to Registration Statement on From N-4  (File No. 333-01107), as filed on February 16, 2000. |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to the Registration Statement on Form S-2 (File No. 33- 64331), as filed on  November 16, 1995.                                |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Pre-Effective Amendment No. 2 to the Registration Statement on Form S-2  (File No. 33-64331), as filed on January 17,1996.  |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 30 to Registration Statement on Form N-4  (File No. 33-75988), as filed on December 30, 2003   |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 18 to Registration Statement on Form N-4  (File No. 33-75980), as filed on April 16, 2003.     |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Post-Effective Amendment No. 24 to Registration Statement on Form N-4  (File No. 33-81216), as filed on April 11, 2003.     |
|   |   |   |   |                                                                                                                                                      |
|   |   |   |   | Incorporated by reference  to Registration Statement on Form N-4 (File No. 333-109860), as filed on  October 21, 2003.                                    |
|   |   |   |   |                                                                                                                                                      |
| 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.                                                                 |

 

32

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**SIGNATURES**

** **

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

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

 

33

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