UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                     ---------

                                     FORM 10-Q

(Mark One)

[X] 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

    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: 333-57212, 333-104539, 333-104546, 333-104547,
                            333-104548, 333-116137
                            ----------------------------------------------


                     ING USA Annuity and Life Insurance Company
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

Iowa                                                                  41-0991508
--------------------------------------------------------------------------------
(State or other jurisdiction of                (IRS employer identification no.)
 incorporation or organization)

1475 Dunwoody Drive, West Chester, Pennsylvania                       19380-1478
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip code)

Registrant's telephone number, including area code (610) 425-3400
                                                   --------------

-------------------------------------------------------------------------------
Former name, former address and formal fiscal year, if changed since last report

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for 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 [ X ] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common  stock,  as of the latest  practicable  date:  As of  November 12,  2004,
250,000  shares of Common Stock,  $10 Par Value,  are  authorized,  issued,  and
outstanding, all of which were directly owned by Lion Connecticut Holdings Inc.

NOTE:  WHEREAS ING USA ANNUITY AND LIFE  INSURANCE  COMPANY MEETS THE CONDITIONS
SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10Q, THIS FORM IS BEING
FILED WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION H(2).


                                       1

<PAGE>
                   ING USA Annuity and Life Insurance Company
         (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
                  Form 10-Q for period ended September 30, 2004


                                      INDEX

                                                                           Page
                                                                           ----
PART I.          FINANCIAL INFORMATION (Unaudited)

Item 1.          Financial Statements:
                 Condensed Statements of Income                              3
                 Condensed Balance Sheets                                    4
                 Condensed Statements of Changes in
                   Shareholder's Equity                                      6
                 Condensed Statements of Cash Flows                          7
                 Notes to Condensed Financial Statements                     8

Item 2.          Management's Narrative Analysis of the Results of
                   Operations and Financial Condition                       47

Item 4.          Controls and Procedures                                    60


PART II.         OTHER INFORMATION

Item 1.          Legal Proceedings                                          61

Item 6.          Exhibits                                                   61

Signatures                                                                  64




                                       2

<PAGE>

                   ING USA Annuity and Life Insurance Company
          (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)


PART I.  FINANCIAL INFORMATION (UNAUDITED)

Item 1.  Financial Statements


                         Condensed Statements of Income
                                   (Unaudited)
                                   (Millions)

<TABLE>
<S>                                                         <C>                                  <C>

                                                              Three months ended September 30,     Nine months ended September 30,
                                                                   2004              2003               2004              2003
                                                            -----------------  ----------------  -----------------  ----------------
Revenue:
    Premiums                                                 $          6.6     $       $ 6.5     $         19.0     $        21.3
    Fee income                                                        148.7             108.7              417.8             285.8
    Net investment income                                             266.0             272.2              829.9             838.2
    Net realized capital gains                                         13.7              15.8               32.7              10.8
    Other income                                                        0.8               3.1                2.3               7.2
                                                            -----------------  ----------------  -----------------  ----------------
Total revenue                                                         435.8             406.3            1,301.7           1,163.3
                                                            -----------------  ----------------  -----------------  ----------------
Benefits, losses and expenses:
    Benefits:
      Interest credited and other benefits to policyholders           276.4             272.4              852.6             809.9
    Underwriting, acquisition, and insurance expenses:
      General expenses                                                 56.8              49.1              166.7             155.2
      Commissions                                                     140.1              91.2              383.0             236.3
      Policy acquisition costs deferred                              (158.2)           (132.6)            (433.1)           (345.1)
    Amortization of deferred policy acquisition costs
      and value of business acquired                                   76.6              88.5              178.0             236.1
    Other:
      Expense and charges reimbursed under modified
        coinsurance agreements                                          0.8               0.3                1.5               0.5
      Interest expense                                                  3.0               4.8               10.3              12.3
                                                            -----------------  ----------------  -----------------  ----------------
Total benefits, losses and expenses                                   395.5             373.7            1,159.0           1,105.2
                                                            -----------------  ----------------  -----------------  ----------------
Income before income taxes and cumulative effect
    of change in accounting principle                                  40.3              32.6              142.7              58.1
Income tax expense                                                     37.2               3.8               70.4              10.7
                                                            -----------------  ----------------  -----------------  ----------------
Income before cumulative effect of change
    in accounting principle                                             3.1              28.8               72.3              47.4
Cumulative effect of change in accounting principle,
    net of tax                                                            -                 -               (2.3)                -
                                                            -----------------  ----------------  -----------------  ----------------
Net income                                                   $          3.1     $        28.8     $         70.0     $        47.4
                                                            =================  ================  =================  ================


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

</TABLE>


                                       3

<PAGE>

                   ING USA Annuity and Life Insurance Company
          (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

                            Condensed Balance Sheets
                                   (Unaudited)
                          (Millions, except share data)

<TABLE>
<S>                                                                                    <C>                <C>

                                                                                        September 30,       December 31,
                                                                                             2004               2003
                                                                                       -----------------  -----------------
Assets
Investments:
    Fixed maturities, available for sale, at fair value (amortized cost of
      $16,172.1 at 2004 and $15,025.0 at 2003)                                         $       16,628.5   $       15,538.7
    Equity securities available for sale, at fair value:
      Common stock (cost of $16.4 at 2004 and $13.5 at 2003)                                       16.9               13.7
      Preferred stock (cost of $6.4 at 2004 and $1.5 at 2003)                                       6.6                1.7
      Investment in mutual funds (cost of $1.6 at 2004 and $100.5 at 2003)                          1.7              104.8
    Mortgage loans on real estate                                                               3,706.2            3,388.7
    Real estate                                                                                     1.8                4.5
    Policy loans                                                                                  171.4              177.1
    Short-term investments                                                                         28.5                0.3
    Other investments                                                                             168.0               56.0
    Securities pledged (amortized cost of $1,427.1 at 2004 and $555.5 at 2003)                  1,454.3              559.1
                                                                                       -----------------  -----------------
Total investments                                                                              22,183.9           19,844.6
Cash and cash equivalents                                                                          42.5               65.1
Short-term investments under securities loan agreement                                            825.9               22.9
Accrued investment income                                                                         209.3              185.7
Reinsurance recoverable                                                                           990.0              651.9
Receivable for securities sold                                                                    172.5               11.7
Deferred policy acquisition costs                                                               1,534.4            1,826.7
Value of business acquired                                                                        105.3              111.5
Sales inducements to contractholders                                                              487.6                  -
Due from affiliates                                                                               199.5              117.7
Deferred income taxes                                                                                 -               28.6
Other assets                                                                                       30.5               20.1
Assets held in separate accounts                                                               21,708.7           18,220.1
                                                                                       -----------------  -----------------
Total assets                                                                           $       48,490.1   $       41,106.6
                                                                                       =================  =================

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

</TABLE>


                                       4

<PAGE>

                   ING USA Annuity and Life Insurance Company
          (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

                            Condensed Balance Sheets
                                   (Unaudited)
                          (Millions, except share data)

<TABLE>
<S>                                                                                    <C>                <C>

                                                                                        September 30,      December 31,
                                                                                             2004              2003
                                                                                       -----------------  ----------------
Liabilities and Shareholder's Equity
Policy liabilities and accruals:
    Future policy benefits and claims reserves                                         $       22,092.5   $      19,400.5
Notes to affiliates                                                                                35.0              35.0
Notes payable                                                                                      14.0                 -
Due to affiliates                                                                                  30.7              60.7
Payables for securities purchased                                                                 253.6                 -
Payables under securities loan agreement                                                          825.9              22.9
Borrowed money                                                                                    676.1             584.2
Current income taxes                                                                               16.0              19.4
Deferred income taxes                                                                              23.7                 -
Other liabilities                                                                                 263.9             226.6
Liabilities related to separate accounts                                                       21,708.7          18,220.1
                                                                                       -----------------  ----------------
Total liabilities                                                                              45,940.1          38,569.4
                                                                                       -----------------  ----------------
Shareholder's equity
    Common stock (250,000 shares authorized, issued and outstanding;
      $10.00 per share value)                                                                       2.5               2.5
    Additional paid-in capital                                                                  3,851.1           3,811.1
    Accumulated other comprehensive income                                                         92.8             190.0
    Retained deficit                                                                           (1,396.4)         (1,466.4)
                                                                                       -----------------  ----------------
Total shareholder's equity                                                                      2,550.0           2,537.2
                                                                                       -----------------  ----------------
Total liabilities and shareholder's equity                                             $       48,490.1   $      41,106.6
                                                                                       =================  ================

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


</TABLE>


                                       5

<PAGE>

                   ING USA Annuity and Life Insurance Company,
          (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

             Condensed Statements of Changes in Shareholder's Equity
                                   (Unaudited)
                                   (Millions)

<TABLE>
<S>                                                <C>            <C>             <C>              <C>             <C>

                                                                                   Accumulated
                                                                   Additional         Other                           Total
                                                      Common         Paid-In       Comprehensive     Retained      Shareholder's
                                                       Stock         Capital          Income          Deficit          Equity
                                                   -------------- --------------- ---------------- --------------  ---------------

Balance at December 31, 2002                        $        2.5   $     3,722.4   $        135.1   $   (1,511.3)   $     2,348.7
    Dividends paid                                             -                                -          (12.4)           (12.4)
    Contribution of capital                                    -            88.7                -              -             88.7
    Comprehensive income:
      Net income                                               -               -                -           47.4             47.4
      Other comprehensive income
        net of tax:
           Unrealized gain on securities
             ($164.0 pretax)                                   -               -            106.6              -            106.6
                                                                                                                   ---------------
    Comprehensive income                                       -               -                -              -            154.0
                                                   -------------- --------------- ---------------- --------------  ---------------
Balance at September 30, 2003                       $        2.5   $     3,811.1   $        241.7   $   (1,476.3)   $     2,579.0
                                                   ============== =============== ================ ==============  ===============

Balance at December 31, 2003                        $        2.5   $     3,811.1   $        190.0   $   (1,466.4)   $     2,537.2
    Contribution of capital                                    -            40.0                -              -             40.0
    Comprehensive loss:
      Net income                                               -               -                -           70.0             70.0
      Other comprehensive loss
        net of tax:
           Unrealized loss on securities
             (($149.5) pretax)                                 -               -            (97.2)             -            (97.2)
                                                                                                                   ---------------
    Comprehensive loss                                                                                                      (27.2)
                                                   -------------- --------------- ---------------- --------------  ---------------
Balance at September 30, 2004                       $        2.5   $     3,851.1   $       $ 92.8   $   (1,396.4)   $     2,550.0
                                                   ============== =============== ================ ==============  ===============


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

</TABLE>


                                       6

<PAGE>

                   ING USA Annuity and Life Insurance Company
          (A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

                       Condensed Statements of Cash Flows
                                   (Unaudited)
                                   (Millions)

<TABLE>
<S>                                                                                 <C>                <C>

                                                                                       Nine months ended September 30,
                                                                                          2004                 2003
                                                                                    ------------------   ------------------
Net cash provided by operating activities                                           $           989.1    $           560.1
Cash Flows from Investing Activities:
    Proceeds from the sale, maturity, or redemption of:
      Fixed maturities, available for sale                                                   15,034.9             15,961.6
      Equity securities, available for sale                                                     104.0                 12.0
      Mortgage loans on real estate originated                                                  303.7                402.2
      Short-term investments                                                                  2,798.1             10,171.8
    Acquisition of investments:
      Fixed maturities, available for sale                                                  (17,118.0)           (16,966.9)
      Equity securities                                                                          (8.1)               (16.2)
      Mortgage loans on real estate                                                            (625.2)              (789.7)
      Short-term investments                                                                 (2,826.3)           (10,318.8)
    Policy loans                                                                                  5.7                  2.2
    Proceeds from sale of real estate                                                             2.7                  1.4
    Purchase of real estate                                                                         -                 (2.7)
    Other investments                                                                          (107.2)               (59.3)
    Other                                                                                           -                 (0.4)
                                                                                    ------------------   ------------------
Net cash used in investing activities                                                        (2,435.7)            (1,602.8)
                                                                                    ------------------   ------------------
Cash Flows from Financing Activities:
    Deposits and interest credited for investment contracts                                   3,190.8              2,693.1
    Maturities and withdrawals from investment contracts                                     (1,597.6)            (1,257.0)
    Reinsurance recapture                                                                           -                134.5
    Transfers to separate accounts                                                             (315.1)              (883.1)
    Short-term loans                                                                            105.9                175.9
    Intercompany dividends                                                                          -                (12.4)
    Contribution of capital from Parent                                                          40.0                 88.7
                                                                                    ------------------   ------------------
Net cash provided by financing activities                                                     1,424.0                939.7
                                                                                    ------------------   ------------------
Net decrease in cash and cash equivalents                                                       (22.6)              (103.0)
Cash and cash equivalents, beginning of period                                                   65.1                199.1
                                                                                    ------------------   ------------------
Cash and cash equivalents, end of period                                            $            42.5    $            96.1
                                                                                    ==================   ==================
Supplemental cash flow information:
    Income taxes paid (received), net                                               $             8.0    $            (2.2)
                                                                                    ==================   ==================
    Interest paid                                                                   $            10.0    $             8.5
                                                                                    ==================   ==================


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

</TABLE>


                                       7

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

1.   Significant Accounting Policies

     Basis of Presentation

     ING USA Annuity and Life Insurance Company ("ING USA" or the "Company"),  a
     wholly-owned  subsidiary  of Lion  Connecticut  Holdings  Inc.  ("Lion"  or
     "Parent"),  is a stock life insurance  company  organized under the laws of
     the State of Iowa.  ING USA was originally  incorporated  under the laws of
     the State of  Minnesota  on January 2, 1973,  in the name of St.  Paul Life
     Insurance Company.  On December 21, 1993, the Company  redomesticated  from
     Minnesota to Delaware.

     On January 1, 2004,  the Company  redomesticated  from Delaware to Iowa. In
     addition, on January 1, 2004 (the "merger date"),  Equitable Life Insurance
     Company of Iowa ("Equitable  Life"), USG Annuity & Life Company ("USG") and
     United Life & Annuity Insurance  Company ("ULA") (the "Merger  Companies"),
     merged  with and into  Golden  American  Life  Insurance  Company  ("Golden
     American").  Immediately after the merger, Golden American changed its name
     to ING USA Annuity and Life Insurance  Company.  As of the merger date, the
     Merger  Companies  ceased to exist and were merged into ING USA.

     Lion is an indirect,  wholly-owned  subsidiary of ING Groep N.V. ("ING"), a
     global financial services holding company based in The Netherlands. ING USA
     is  authorized  to do business in the  District of Columbia  and all states
     except New York. ING USA is licensed as a life insurance  company under the
     laws of the  State of  Delaware  until  December  31,  2003 and Iowa  since
     January 1, 2004.

     Prior  to the  merger  date,  ING  USA  was a  wholly-owned  subsidiary  of
     Equitable Life from December 30, 2001 through December 31, 2003.  Formerly,
     from  October  24,  1997,  until  December  30,  2001,  Equitable  of  Iowa
     Companies,  Inc. ("EIC" or "Former Holding Company") directly owned 100% of
     Golden American's stock.

     Statement   of   Financial   Accounting   Standards   No.  141,   "Business
     Combinations" ("FAS 141"), excludes transfers of net assets or exchanges of
     shares  between  entities  under  common  control,  and notes that  certain
     provisions  under  Accounting  Principles  Board Opinion No. 16,  "Business
     Combinations"   ("APB  16"),   provide  a  source  of  guidance   for  such
     transactions.  In  accordance  with APB 16,  financial  information  of the
     combined  entity is presented as if the entities had been  combined for the
     full year,  and all  comparative  financial  statements  are  restated  and
     presented as if the  entities had  previously  been  combined,  in a manner
     similar to a pooling-of-interests.

     The unaudited condensed financial statements have been prepared in a manner
     similar to a pooling-of-interests, in accordance with the provisions of APB
     16 in order to present  the  condensed  financial  position  and results of
     operations of the Company and the Merger Companies,  as if the entities had
     previously  been  combined.  The  unaudited  condensed  balance  sheets and
     statements of income give effect to the consolidation  transaction as if it
     had occurred on December 31, 2003 and January 1, 2003, respectively.


                                       8

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     The condensed  financial  statements and notes as of September 30, 2004 and
     December 31, 2003 and for the three and nine-month  periods ended September
     30, 2004 and 2003  ("interim  periods"),  have been  prepared in accordance
     with U.S. generally accepted accounting  principles and are unaudited.  The
     condensed financial  statements reflect all normal adjustments  (consisting
     only of normal recurring accruals) which are, in the opinion of management,
     necessary for the fair presentation of the financial  position,  results of
     operations  and  cash  flows  for  the  interim  periods.  The  results  of
     operations  for the interim  periods may not be  considered  indicative  of
     results to be expected for the full year.

     Description of Business

     The Company  offers  various  insurance  products  including  deferred  and
     immediate annuities, variable annuities, interest sensitive and traditional
     life  insurance,  and health  insurance.  All health  insurance is ceded to
     other  insurers.  The  Company's  products are marketed by  broker/dealers,
     financial  institutions,  insurance agents,  and a career agency force. The
     Company's primary customers are consumers and corporations.

     Recently Adopted Accounting Standards

     Accounting   and   Reporting   by   Insurance   Enterprises   for   Certain
     Nontraditional Long-Duration Contracts and for Separate Accounts

     The Company  adopted  Statement of Position  ("SOP") 03-1,  "Accounting and
     Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration
     Contracts  and for  Separate  Accounts,"  on  January  1,  2004.  SOP  03-1
     establishes several new accounting and disclosure  requirements for certain
     nontraditional long-duration contracts and for separate accounts including,
     among other things,  a requirement  that assets and liabilities of separate
     account  arrangements that do not meet certain criteria be accounted for as
     general account assets and  liabilities,  and that the revenue and expenses
     related to such  arrangements  be  consolidated  within the respective line
     items in the Condensed Statements of Income. In addition,  the SOP requires
     additional  liabilities be  established  for certain  guaranteed  death and
     other benefits and for products with certain  patterns of cost of insurance
     charges,   and  that  sales  inducements  provided  to  contractholders  be
     recognized on the balance sheet separately from deferred  acquisition costs
     and  amortized as a component of benefits  expense  using  methodology  and
     assumptions  consistent with those used for amortization of deferred policy
     acquisition costs.

     The Company  evaluated all  requirements of SOP 03-1 and determined that it
     is affected by the SOP's requirements to establish  additional  liabilities
     for  certain  guaranteed  benefits  and  products  with  patterns  of  cost
     insurance  charges  resulting in losses in later policy  durations from the
     insurance   benefit  function  and  to  defer,   amortize,   and  recognize
     separately, sales inducements to contractholders.  Requirements for certain
     separate account arrangements that do not meet the established criteria for
     separate  asset and liability  recognition  are  applicable to the Company,
     however,  the Company's policies on separate account assets and liabilities
     have  historically  been,  and  continue  to be,  in  conformity  with  the


                                       9

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     requirements  newly  established.  Upon  adoption  of the SOP,  the Company
     recognized  a  cumulative  effect of a change in  accounting  principle  of
     $(3.6) million, before tax or $(2.3) million, net of $1.3 million of income
     taxes, as of January 1, 2004.

     The   implementation   of  SOP  03-1   raised   questions   regarding   the
     interpretation of the requirements of Financial Accounting Standard ("FAS")
     No. 97,  concerning  when it is appropriate  to record an unearned  revenue
     liability  related  to the  insurance  benefit  function.  To  clarify  its
     position,  the Financial  Accounting  Standards  Board ("FASB") issued FASB
     Staff  Position  No.  FAS  97-1  ("FSP  FAS  97-1"),  "Situations  in Which
     Paragraphs 17(b) and 20 of FASB Statement No. 97, `Accounting and Reporting
     by  Insurance  Enterprises  for  Certain  Long-Duration  Contracts  and for
     Realized Gains and Losses from the Sale of Investments,'  Permit or Require
     Accrual of an Unearned  Revenue  Liability,"  effective for fiscal  periods
     beginning  subsequent  to the date the guidance was issued,  June 18, 2004.
     The  Company  adopted  FSP FAS 97-1 on July 1, 2004 and has  evaluated  the
     impact of the  guidance on whether the Company is required to  establish an
     unearned revenue reserve on its existing and new business.  The adoption of
     FSP FAS 97-1 did not have an impact on the  Company's  financial  position,
     results of operations or cash flows.

     The  Meaning of Other Than  Temporary  Impairment  and its  Application  to
     Certain Investments

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

     Step 1:  Determine  whether an  investment  is impaired.  An  investment is
              impaired  if the fair  value of the  investment  is less than its
              cost basis.
     Step 2: Evaluate whether an impairment is other than temporary.
     Step 3: If the  impairment  is  other  than  temporary,  recognize  an
             impairment loss equal to the difference  between the investment's
             cost and its fair value.

     On September 30, 2004,  the FASB issued FASB Staff  Position No. EITF Issue
     03-1-1 ("FSP EITF  03-1-1"),  "Effective  Date of Paragraphs  10-20 of EITF
     Issue No. 03-1,  `The Meaning of Other Than  Temporary  Impairment  and Its
     Application to Certain  Investments,'"  which delayed EITF 03-1's  original
     effective  date  of  July  1,  2004  for  the  paragraphs  of the  guidance
     surrounding  steps two and three of the impairment  model  introduced.  The
     delay is in effect until a final consensus can be reached on such guidance.
     Despite the delay of the  implementation of steps two and three, other than
     temporary  impairments  are still to be  recognized as required by existing
     guidance.


                                       10

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Earlier  consensus  reached by the EITF on this issue required that certain
     quantitative and qualitative  disclosures be made for unrealized  losses on
     debt and  equity  securities  that have not been  recognized  as other than
     temporary  impairments.  These  disclosures  were  adopted by the  Company,
     effective  December 31, 2003, and included in the  Investments  footnote of
     the Notes to  Condensed  Financial  Statements  included  in the  Company's
     December  31, 2003 Form 10-K.  In addition to the  disclosure  requirements
     adopted by the Company effective  December 31, 2003, the final consensus of
     EITF 03-1 reached in March 2004 included additional disclosure requirements
     that are effective for annual financial  statements for fiscal years ending
     after June 15, 2004.

     Accounting for Derivative Instruments and Hedging Activities

     In 2003,  the  Derivative  Implementation  Group  ("DIG")  responsible  for
     issuing guidance on behalf of the FASB for  implementation  of FAS No. 133,
     "Accounting  for  Derivative  Instruments  and Hedging  Activities"  issued
     Statement  Implementation  Issue No. B36, "Embedded  Derivatives:  Modified
     Coinsurance  Arrangements and Debt Instruments That Incorporate Credit Risk
     Exposures  That Are  Unrelated  or Only  Partially  Related  to the  Credit
     Worthiness of the Obligor under Those  Instruments" ("DIG B36"). Under this
     interpretation,  modified  coinsurance and coinsurance  with funds withheld
     reinsurance  agreements as well as other types of receivables  and payables
     where  interest is  determined  by  reference  to a pool of fixed  maturity
     assets or total  return debt index may be  determined  to contain  embedded
     derivatives that are required to be bifurcated. The Company adopted DIG B36
     on  October  1,  2003  and  has  modified  coinsurance  treaties  that  are
     applicable  to  the  guidance.  The  applicable  contracts,  however,  were
     determined  to  generate  embedded  derivatives  with a fair value of zero.
     Therefore,  the guidance,  while implemented,  did not impact the Company's
     financial position, results of operations, or cash flows.

     Variable Interest Entities

     In January 2003,  the Financial  Accounting  Standards  Board (FASB) issued
     FASB  Interpretation 46,  "Consolidation of Variable Interest Entities,  an
     Interpretation of ARB No. 51" (FIN 46). In December 2003, the FASB modified
     FIN  46  to  make  certain   technical   corrections  and  address  certain
     implementation  issues that had arisen. FIN 46 provides a new framework for
     identifying  variable  interest  entities  (VIEs)  and  determining  when a
     company should include the assets,  liabilities,  noncontrolling  interests
     and  results  of  activities  of  a  VIE  in  its  consolidated   financial
     statements.

     In  general,  a  VIE  is  a  corporation,  partnership,   limited-liability
     corporation, trust, or any other legal structure used to conduct activities
     or hold  assets  that  either (1) has an  insufficient  amount of equity to
     carry  out  its  principal   activities  without  additional   subordinated
     financial support, (2) has a group of equity owners that are unable to make
     significant  decisions about its  activities,  or (3) has a group of equity
     owners  that do not have the  obligation  to absorb  losses or the right to
     receive returns generated by its operations.


                                       11

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     FIN 46  requires a VIE to be  consolidated  if a party  with an  ownership,
     contractual  or other  financial  interest in the VIE (a variable  interest
     holder)  is  obligated  to absorb a  majority  of the risk of loss from the
     VIE's  activities,  is entitled to receive a majority of the VIE's residual
     returns (if no party  absorbs a majority of the VIE's  losses),  or both. A
     variable  interest holder that  consolidates  the VIE is called the primary
     beneficiary.  Upon consolidation,  the primary  beneficiary  generally must
     initially  record all of the VIE's assets,  liabilities and  noncontrolling
     interests at fair value and subsequently  account for the VIE as if it were
     consolidated  based  on  majority  voting  interest.  FIN 46 also  requires
     disclosures about VIEs that the variable interest holder is not required to
     consolidate but in which it has a significant variable interest.

     At September 30, 2004, the Company held the following investments that, for
     purposes of FIN 46, were evaluated and determined  that the  investments do
     not require consolidation in the Company's financial statements:

     <TABLE>
     <S>                                                 <C>                        <C>              <C>

     (Millions)
                        Asset Type                                Purpose            Book Value (1)    Market Value
     --------------------------------------------------- -------------------------- ---------------- ----------------
     Private Corporate Securities - synthetic leases;
       project financings; credit tenant leases             Investment Holdings        $    3,188.3     $    3,321.1
     Foreign Securities - US VIE subsidiaries of
       foreign companies                                    Investment Holdings               556.1            587.6
     Commercial Mortgage Obligations (CMO)                  Investment Holdings             3,051.7          3,101.4
     Collateralized Debt Obligations (CDO)               Investment Holdings and/or
                                                            Collateral Manager                 73.7             69.3
     Asset-Backed Securities (ABS)                          Investment Holdings               153.2            152.8
     Commercial Mortgage Backed Securities (CMBS)           Investment Holdings             1,027.3          1,066.0

     (1)  Represents  maximum  exposure to loss except for those  structures for
          which the Company also receives asset management fees.


     </TABLE>

     New Accounting Pronouncements

     In  September  2004,  the AICPA  issued  Technical  Practice  Aid 6300.05 -
     6300.08 "Q&As Related to the  Implementation  of SOP 03-1,  Accounting  and
     Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration
     Contracts  and  for  Separate  Accounts"  (the  "TPA").  The  TPA  provides
     additional guidance regarding certain implicit assessments that may be used
     in testing of the base mortality function on contracts,  which is performed
     to determine  whether  additional  liabilities  are required in conjunction
     with  SOP  03-1.  In  addition,   the  TPA  provides   additional  guidance
     surrounding  the allowed level of  aggregation  of  additional  liabilities
     determined under the SOP. The Company is currently evaluating the impact of
     the TPA on the  cumulative  effect  of a  change  in  accounting  principle
     recognized on January 1, 2004, and anticipates a potential  decrease in the
     net liability established as part of the accounting change. The TPA will be
     fully implemented  during the fourth quarter 2004 and will be reported as a
     cumulative effect of a change in accounting principle applied retroactively
     to January 1, 2004.


                                       12

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Use of Estimates

     The  preparation  of financial  statements  in conformity  with  accounting
     principles  generally  accepted  in the United  States of America  requires
     management  to make  estimates  and  assumptions  that  affect the  amounts
     reported in the financial statements and accompanying notes. Actual results
     could differ from reported results using those estimates.

     Cash and Cash Equivalents

     Cash and cash equivalents  include cash on hand,  money market  instruments
     and other debt issues with a maturity of 90 days or less when purchased.

     Investments

     All of the Company's  fixed  maturity and equity  securities  are currently
     designated  as   available-for-sale.   Available-for-sale   securities  are
     reported at fair value and unrealized  gains and losses on these securities
     are included directly in shareholder's equity, after adjustment for related
     charges in deferred policy  acquisition  costs, value of business acquired,
     and deferred income taxes.

     The Company analyzes the general account  investments to determine  whether
     there has been an other than  temporary  decline  in fair  value  below the
     amortized  cost  basis in  accordance  with FAS No.  115,  "Accounting  for
     Certain  Investments in Debt and Equity Securities."  Management  considers
     the length of the time and the  extent to which the  market  value has been
     less than cost;  the financial  condition  and  near-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 for a period of
     time  sufficient to allow for recovery in market  value.  If it is probable
     that all amounts due according to the contractual  terms of a debt security
     will not be collected,  an other than temporary impairment is considered to
     have occurred.

     In addition,  the Company  invests in structured  securities  that meet the
     criteria  of  Emerging   Issues  Task  Force   ("EITF")  Issue  No.  99-20,
     "Recognition  of Interest  Income and  Impairment on Purchased and Retained
     Beneficial Interests in Securitized Financial Assets." Under EITF Issue No.
     99-20, a determination  of the required  impairment is based on credit risk
     and the  possibility  of  significant  prepayment  risk that  restricts the
     Company's ability to recover the investment. An impairment is recognized if
     the fair value of the  security is less than  amortized  cost and there has
     been an adverse change in cash flow since the  remeasurement  date.  When a
     decline  in fair  value is  determined  to be  other  than  temporary,  the
     individual security is written down to fair value and the loss is accounted
     for as a realized loss.

     Realized capital gains and losses on all other  investments are included in
     the Condensed Statements of Income.  Unrealized capital gains and losses on
     all other investments are reflected in shareholder's equity, net of related
     income taxes.


                                       13

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Purchases and sales of fixed  maturities and equity  securities  (excluding
     private placements) are recorded on the trade date.  Purchases and sales of
     private placements and mortgage loans are recorded on the closing date.

     Fair values for fixed  maturities  are obtained  from  independent  pricing
     services or  broker/dealer  quotations.  Fair values for  privately  placed
     bonds are determined using a matrix-based  model.  The  matrix-based  model
     considers the level of risk-free interest rates, current corporate spreads,
     the  credit  quality of the  issuer  and cash flow  characteristics  of the
     security.  The fair values for equity securities are based on quoted market
     prices.  For equity  securities not actively traded,  estimated fair values
     are  based  upon  values  of issues of  comparable  yield  and  quality  or
     conversion value where applicable.

     The Company engages in securities  lending whereby certain  securities from
     its portfolio are loaned to other  institutions  for short periods of time.
     Initial  collateral,  primarily  cash, is required at a rate of 102% of the
     market value of the loaned domestic securities. The collateral is deposited
     by the  borrower  with a lending  agent and  retained  and  invested by the
     lending agent according to the Company's  guidelines to generate additional
     income.  The market value of the loaned  securities is monitored on a daily
     basis with additional  collateral  obtained or refunded as the market value
     of the loaned securities fluctuates.

     The Company engages in dollar  repurchase  agreements  ("dollar rolls") and
     repurchase agreements.  These transactions involve a sale of securities and
     an agreement to repurchase substantially the same securities as those sold.
     Company  policies  require a minimum of 95% of the fair value of securities
     pledged  under dollar rolls and  repurchase  agreement  transactions  to be
     maintained as  collateral.  Cash  collateral  received is invested in fixed
     maturities and the offsetting  collateral liability is included in borrowed
     money on the Condensed Balance Sheets.

     The Company enters into reverse repurchase  agreements.  These transactions
     involve a purchase of securities and an agreement to sell substantially the
     same securities as those  purchased.  Company policies require a minimum of
     102% of the fair  value of  securities  pledged  under  reverse  repurchase
     agreements to be pledged as collateral.

     The  investment  in mutual funds  represents  an investment in mutual funds
     managed by the Company, and is carried at fair value.

     Mortgage  loans  on  real  estate  are  reported  at  amortized  cost  less
     impairment  writedowns.  If the value of any mortgage loan is determined to
     be impaired  (i.e.,  when it is probable that the Company will be unable to
     collect all  amounts due  according  to the  contractual  terms of the loan
     agreement),  the  carrying  value of the  mortgage  loan is  reduced to the
     present  value of  expected  cash  flows from the loan,  discounted  at the
     loan's effective  interest rate, or to the loan's  observable market price,
     or the fair value of the underlying  collateral.  The carrying value of the
     impaired loans is reduced by establishing a permanent  writedown charged to
     realized loss.


                                       14

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Investments  in  real  estate  are  reported  at  historical   cost,   less
     accumulated  depreciation and impairment writedowns,  with the exception of
     land,  which  is not  depreciated.  If the  value  of any  real  estate  is
     determined to be impaired (i.e.,  when it is probable that the Company will
     be unable to recover the carrying  value of the real estate),  the carrying
     value of the real estate is reduced to the current fair value. The carrying
     value of the impaired  real estate is reduced by  establishing  a permanent
     writedown charged to realized loss.

     Policy loans are carried at unpaid  principal  balances,  net of impairment
     reserves.

     Short-term  investments,  consisting  primarily of money market instruments
     and other fixed maturity issues  purchased with an original  maturity of 91
     days to one year, are considered available for sale and are carried at fair
     value, which approximates amortized cost.

     The Company's use of  derivatives  is limited to hedging  purposes which do
     not  qualify  for hedge  accounting  treatment  under FAS 133.  The Company
     enters into interest rate and currency  contracts,  including swaps,  caps,
     floors,  options,  futures, and embedded derivatives,  to reduce and manage
     risks associated with changes in value, yield, price, cash flow or exchange
     rates of assets or liabilities held or intended to be held.  Changes in the
     fair  value of open  derivative  contracts  are  recorded  in net  realized
     capital gains and losses.  Derivatives are included in Other investments on
     the Condensed Balance Sheets.

     On  occasion,   the  Company  sells  call  options  written  on  underlying
     securities  that are carried at fair value.  Changes in fair value of these
     options are recorded in net realized capital gains or losses.

     Deferred Policy Acquisition Costs and Value of Business Acquired

     Deferred Policy  Acquisition  Costs ("DAC") is an asset,  which  represents
     certain costs of acquiring certain insurance  business,  which are deferred
     and  amortized.  These  costs,  all of which  vary  with and are  primarily
     related to the production of new and renewal business,  consist principally
     of commissions,  certain  underwriting and contract issuance expenses,  and
     certain agency expenses.  Value of Business  Acquired ("VOBA") is an asset,
     which  represents the present value of estimated net cash flows embedded in
     the Company's contracts, which existed at the time the Company was acquired
     by ING. DAC and VOBA are evaluated for recoverability at each balance sheet
     date and these assets would be reduced to the extent that gross profits are
     inadequate to recover the asset.

     The  amortization  methodology  varies  by  product  type  based  upon  two
     accounting  standards:  FAS No. 60,  "Accounting and Reporting by Insurance
     Enterprises"  ("FAS No. 60") and FAS No. 97,  "Accounting  and Reporting by
     Insurance  Enterprises  for Certain  Long-Duration  Contracts  and Realized
     Gains and Losses from the Sale of Investments" ("FAS No. 97").


                                       15

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

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

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

     DAC and VOBA are  written  off to the  extent  that it is  determined  that
     future  policy  premiums  and  investment  income or gross  profits are not
     adequate to cover related expenses.

     Activity for the periods ended  September 30, 2004 and 2003 within VOBA was
     as follows:

     (Millions)
     Balance at December 31, 2002                               $       134.5
     Adjustment for FAS No. 115                                          (0.2)
     Interest accrued at 5% - 7%                                          5.0
     Amortization                                                       (23.3)
                                                                --------------
     Balance at September 30, 2003                              $       116.0
                                                                ==============

     Balance at December 31, 2003                               $       111.5
     Adjustment for FAS No. 115                                          (5.8)
     Interest accrued at 4% - 6%                                          5.2
     Amortization                                                        (5.6)
                                                                --------------
     Balance at September 30, 2004                              $       105.3
                                                                ==============

     The  estimated  amount of VOBA to be amortized,  net of interest,  over the
     next five years is $2.7 million, $13.6 million, $13.4 million, $9.5 million
     and  $9.8  million  for  the  years  2004,   2005,  2006,  2007  and  2008,
     respectively.  Actual amortization  incurred during these years may vary as
     assumptions are modified to incorporate actual results.

     Separate Accounts

     Separate   Account  assets  and  liabilities   generally   represent  funds
     maintained to meet specific  investment  objectives of contractholders  who
     bear the investment  risk,  subject,  in limited cases,  to certain minimum
     guarantees.  Investment  income and investment  gains and losses  generally
     accrue  directly to such  contractholders.  The assets of each  account are
     legally  segregated  and are not  subject  to claims  that arise out of any
     other business of the Company.


                                       16

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

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

     Separate Account assets and liabilities are carried at fair value and shown
     as separate captions in the Condensed Balance Sheets. Deposits,  investment
     income and net  realized  and  unrealized  capital  gains and losses of the
     Separate Accounts are not reflected in the Condensed Financial  Statements.
     The Condensed  Statements of Cash Flows do not reflect investment  activity
     of the Separate Accounts.

     Assets and liabilities of separate  account  arrangements  that do not meet
     the criteria in SOP 03-1 for  presentation  in the separate  caption in the
     Condensed  Balance Sheets  (primarily  guaranteed  interest  options),  and
     revenue and expenses related to such arrangements,  are consolidated in the
     financial  statements with the general  account.  At September 30, 2004 and
     2003, unrealized gains of $107.5 million and $143.4 million,  respectively,
     after  taxes,  on  assets  supporting  a  guaranteed  interest  option  are
     reflected in shareholder's equity.

     Policy Liabilities and Accruals

     Future  policy  benefits  include  reserves for universal  life,  immediate
     annuities  with life  contingent  payouts and  traditional  life  insurance
     contracts.  Reserves for  universal  life  products are equal to cumulative
     deposits  less  withdrawals  and charges plus  credited  interest  thereon.
     Reserves for  traditional  life insurance  contracts  represent the present
     value of future  benefits to be paid to or on behalf of  policyholders  and
     related expenses less the present value of future net premiums.

     Reserves for immediate  annuities with life contingent payout contracts are
     computed on the basis of assumed investment yield, mortality, and expenses,
     including a margin for adverse deviations.  Such assumptions generally vary
     by plan, year of issue and policy  duration.  Reserve interest rates ranged
     from 3.0% to 7.95% for all periods presented.  Investment yield is based on
     the Company's experience.

     Mortality and withdrawal  rate  assumptions  are based on relevant  Company
     experience and are periodically  reviewed  against both industry  standards
     and experience.

     Other  policyholders' fund include reserves for deferred annuity investment
     contracts and immediate annuity without life contingent  payouts.  Reserves
     on such  contracts  are  equal to  cumulative  deposits  less  charges  and
     withdrawals plus credited  interest thereon (rates range from 0.0% to 10.0%
     for all periods  presented)  net of adjustments  for investment  experience
     that the Company is entitled to reflect in future credited interest.


                                       17

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Sales Inducements

     Sales  inducements  represent  benefits  paid to  contractholders  that are
     incremental to the amounts the Company credits on similar contracts and are
     higher than the contract's  expected  ongoing  crediting  rates for periods
     after the  inducement.  As of January 1, 2004,  such  amounts are  reported
     separately on the balance sheet in accordance with SOP 03-1. Prior to 2004,
     sales  inducements  were  recorded as a component  of DAC on the  Condensed
     Balance Sheet.  Sales  inducements  are amortized as a component of benefit
     expense using  methodology and  assumptions  consistent with those used for
     amortization of DAC.

     Revenue Recognition

     For universal life and certain annuity contracts,  charges assessed against
     policyholders' funds for the cost of insurance,  surrender,  expenses,  and
     other  fees are  recorded  as  revenue  as  charges  are  assessed  against
     policyholders.  Other amounts received for these contracts are reflected as
     deposits  and are not  recorded as revenue.  Related  policy  benefits  are
     recorded  in relation to the  associated  premiums or gross  profit so that
     profits are  recognized  over the  expected  lives of the  contracts.  When
     annuity  payments with life  contingencies  begin under contracts that were
     initially investment  contracts,  the accumulated balance in the account is
     treated as a single premium for the purchase of an annuity and reflected as
     an offsetting  amount in both  premiums and current and future  benefits in
     the Condensed Statement of Income.

     Reinsurance

     The  Company  utilizes  indemnity  reinsurance  agreements  to  reduce  its
     exposure to large  losses in all aspects of its  insurance  business.  Such
     reinsurance  permits  recovery  of a  portion  of losses  from  reinsurers,
     although  it does not  discharge  the primary  liability  of the Company as
     direct insurer of the risks reinsured.  The Company evaluates the financial
     strength of potential  reinsurers  and  continually  monitors the financial
     condition of reinsurers. Only those reinsurance recoverable balances deemed
     probable of recovery  are  reflected as assets on the  Company's  Condensed
     Balance Sheets.

     Participating Insurance

     Participating  business  approximates  10% of the  Company's  ordinary life
     insurance in force and 27% of premium income. The amount of dividends to be
     paid is determined annually by the Board of Directors. Amounts allocable to
     participating  policyholders are based on published dividend projections or
     expected dividend scales. Dividends of $12.3 million and $12.8 million were
     incurred  during  the nine  months  ended  September  30,  2004  and  2003,
     respectively.


                                       18

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Income Taxes

     The  Company is taxed at regular  corporate  rates after  adjusting  income
     reported  for  financial  statement  purposes for certain  items.  Deferred
     income  tax  expenses/benefits  result  from  changes  during  the  year in
     cumulative  temporary  differences  between the tax basis and book basis of
     assets and liabilities.


2.   Investments

     Fixed maturities and equity  securities  available for sale as of September
     30, 2004 were as follows:

     <TABLE>
     <S>                                                 <C>              <C>              <C>             <C>

                                                                              Gross            Gross
                                                           Amortized       Unrealized       Unrealized          Fair
     (Millions)                                               Cost            Gains           Losses            Value
                                                         ---------------  --------------   --------------  ---------------
     Fixed maturities:
         U.S. government and government
           agencies and authorities                      $        172.4   $         1.5    $         0.3   $        173.6
         State, municipalities and political
           subdivisions                                            20.7               -              0.9             19.8

         U.S. corporate securities:
           Public utilities                                     1,794.6            78.2              8.6          1,864.2
           Other corporate securities                           7,309.4           298.4             27.9          7,579.9
                                                         ---------------  --------------   --------------  ---------------
         Total U.S. corporate securities                        9,104.0           376.6             36.5          9,444.1
                                                         ---------------  --------------   --------------  ---------------

         Foreign securities:
           Government                                             525.5            17.7              2.8            540.4
           Other                                                2,423.4            95.2             11.5          2,507.1
                                                         ---------------  --------------   --------------  ---------------
         Total foreign securities                               2,948.9           112.9             14.3          3,047.5
                                                         ---------------  --------------   --------------  ---------------

         Mortgage-backed securities                             3,451.3            61.0             19.2          3,493.1
         Other asset-backed securities                          1,901.9            19.3             16.5          1,904.7

         Total fixed maturities, including fixed
           maturities pledged to creditors                     17,599.2           571.3             87.7         18,082.8
         Less: fixed maturities pledged to creditors            1,427.1            31.1              3.9          1,454.3
                                                         ---------------  --------------   --------------  ---------------
     Fixed maturities                                          16,172.1           540.2             83.8         16,628.5

     Equity securities                                             24.4             0.9              0.1             25.2
                                                         ---------------  --------------   --------------  ---------------
     Total investments available for sale                $     16,196.5   $       541.1    $        83.9   $     16,653.7
                                                         ===============  ==============   ==============  ===============


     </TABLE>

                                       19

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Fixed  maturities and equity  securities  available for sale as of December
     31, 2003 were as follows:


     <TABLE>
     <S>                                                 <C>              <C>              <C>             <C>

                                                                              Gross            Gross
                                                           Amortized        Unrealized      Unrealized          Fair
     (Millions)                                               Cost            Gains           Losses            Value
                                                         ---------------  ---------------  --------------   --------------
     Fixed maturities:
         U.S. government and government
           agencies and authorities                      $        195.5   $          2.0   $         0.1    $       197.4
         State, municipalities and political
           subdivisions                                            31.7                -             2.5             29.2

         U.S. corporate securities:
           Public utilities                                     1,341.2             84.3             8.0          1,417.5
           Other corporate securities                           7,020.6            346.7            35.8          7,331.5
                                                         ---------------  ---------------  --------------   --------------
         Total U.S. corporate securities                        8,361.8            431.0            43.8          8,749.0
                                                         ---------------  ---------------  --------------   --------------

         Foreign securities:
           Government                                             487.1             21.7             3.9            504.9
           Other                                                1,984.4             96.0            24.1          2,056.3
                                                         ---------------  ---------------  --------------   --------------
         Total foreign securities                               2,471.5            117.7            28.0          2,561.2
                                                         ---------------  ---------------  --------------   --------------

         Mortgage-backed securities                             3,247.0             66.7            21.8          3,291.9
         Other asset-backed securities                          1,273.0             17.2            21.1          1,269.1

         Total fixed maturities, including fixed
           maturities pledged to creditors                     15,580.5            634.6           117.3         16,097.8
         Less: fixed maturities pledged to creditors              555.5              6.4             2.8            559.1
                                                         ---------------  ---------------  --------------   --------------
         Fixed maturities                                      15,025.0            628.2           114.5         15,538.7

     Equity securities                                            115.5              4.7               -            120.2
                                                         ---------------  ---------------  --------------   --------------
     Total investments available for sale                $     15,140.5   $        632.9   $       114.5    $    15,658.9
                                                         ===============  ===============  ==============   ==============


     </TABLE>

     At September 30, 2004 and December 31, 2003, net unrealized appreciation is
     $484.4 million and $522.0 million, respectively, on total fixed maturities,
     including fixed maturities pledged to creditors, and equity securities.


                                       20

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     The  aggregate  unrealized  losses and  related  fair values of total fixed
     maturities,  including fixed  maturities  pledged to creditors,  and equity
     securities with unrealized losses as of September 30, 2004, are shown below
     by duration:

                                                    Unrealized         Fair
                                                       Loss            Value
                                                   ------------    -------------
     (Millions)
     Duration category:
       Less than six months below cost             $    13.2       $   1,505.0
       More than six months and less than
         twelve months below cost                       35.0           2,481.6
       More than twelve months below cost               39.6             764.4
                                                   ------------    -------------
     Total                                         $    87.8       $   4,751.0
                                                   ============    =============

     Of the  unrealized  losses less than 6 months in duration of $13.2 million,
     there were $12.6 million in unrealized losses that are primarily related to
     interest rate movement,  or spread widening,  for other than credit-related
     reasons.  Business and operating  fundamentals  are performing as expected.
     The remaining  losses of $0.6 million as of September 30, 2004,  related to
     securities  under the  guidance  prescribed  by EITF 99-20.  This  category
     includes U.S. government-backed securities, principal protected securities,
     and  structured  securities,  which did not have an adverse  change in cash
     flows, for which the carrying amount was $259.2 million.

     Of the  unrealized  losses  more  than 6 months  and less than 12 months in
     duration of $35.0  million,  there were $30.1 million in unrealized  losses
     that are primarily  related to interest rate movement,  or spread widening,
     for other than credit-related reasons.  Business and operating fundamentals
     are performing as expected. The remaining unrealized losses of $4.9 million
     as of September 30, 2004, included the following significant items:

     |X|  $3.7 million of  unrealized  losses  related to  securities  under the
          guidance  prescribed  by  EITF  99-20.  This  category  includes  U.S.
          government-backed  securities,  principal  protected  securities,  and
          structured  securities,  which did not have an adverse  change in cash
          flows, for which the carrying amount was $243.1 million.

     |X|  $1.2 million of unrealized losses related to a foreign  security,  the
          issuer of which is in the Dominican  Republic,  for which the carrying
          amount was $22.7 million.

     Of the unrealized  losses more than 12 months in duration of $39.6 million,
     there were $33.7 million,  in unrealized  losses that are primarily related
     to interest rate movement, or spread widening for other than credit-related
     reasons.  Business and operating  fundamentals  are performing as expected.
     The  remaining  unrealized  losses of $5.9 million as of September 30, 2004
     included the following significant items:

     |X|  $3.4 million of  unrealized  losses  related to  securities  under the
          guidance  prescribed  by  EITF  99-20.  This  category  includes  U.S.
          government-backed  securities,  principal  protected  securities,  and
          structured  securities,  which did not have an adverse  change in cash
          flows, for which the carrying amount was $115.8 million.


                                       21

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     |X|  $1.1 million of unrealized  losses relating to the airlines  industry,
          for which the carrying  amount was $4.9  million.

     |X|  $1.4 million of unrealized losses related to a foreign  security,  the
          issuer of which is in the Dominican  Republic,  for which the carrying
          amount was $5.6 million.

     The amortized cost and fair value of total fixed maturities as of September
     30, 2004 are shown below by  contractual  maturity.  Actual  maturities may
     differ from contractual  maturities because securities may be restructured,
     called, or prepaid.

                                               Amortized             Fair
                                                  Cost               Value
                                           -----------------  -----------------
     (Millions)
     Due to mature:
       One year or less                     $         303.6    $         310.0
       After one year through five years            3,772.7            3,880.5
       After five years through ten years           3,954.5            4,146.5
       After ten years                              3,159.7            3,252.6
       Mortgage-backed securities                   4,506.8            4,588.5
       Other asset-backed securities                1,901.9            1,904.7
       Less: fixed maturities pledged
         to creditors                               1,427.1            1,454.3
                                           -----------------  -----------------
     Fixed maturities                       $      16,172.1    $      16,628.5
                                           =================  =================

     At September  30, 2004 and December 31, 2003,  fixed  maturities  with fair
     values of $13.4 million and $20.1 million, respectively, were on deposit as
     required by regulatory authorities.

     The Company did not have any  investments  in a single  issuer,  other than
     obligations of the U.S. government,  with a carrying value in excess of 10%
     of the Company's shareholder's equity at September 30, 2004.

     The  Company  enters  into  dollar  repurchase   agreement  and  repurchase
     agreement  transactions  to increase its return on investments  and improve
     liquidity.  At September 30, 2004 and December 31, 2003, the carrying value
     of  the  securities  pledged  in  dollar  rolls  and  repurchase  agreement
     transactions  was $663.0  million  and $536.8  million,  respectively.  The
     carrying  value of the  securities  pledged in dollar rolls and  repurchase
     agreement  transactions is included in pledged  securities on the Condensed
     Balance Sheets. The repurchase obligation totaled $691.2 million and $534.2
     million at September 30, 2004 and December 31, 2003, respectively.


                                       22

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     The primary risk associated with  short-term  collateralized  borrowings is
     that the  counterparty  will be  unable to  perform  under the terms of the
     contract.  The  Company's  exposure  is  limited  to the  excess of the net
     replacement  cost  of the  securities  over  the  value  of the  short-term
     investments,  an amount that was not  material at September  30, 2004.  The
     Company  believes  the  counterparties  to  the  dollar  roll  and  reverse
     repurchase agreements are financially responsible and that the counterparty
     risk is immaterial.

     During the three months ended  September 30, 2004,  the Company  determined
     that 47 fixed  maturities  had an other  than  temporary  impairment.  As a
     result,  for the  three  months  ended  September  30,  2004,  the  Company
     recognized a pre-tax  loss of $4.8 million to reduce the carrying  value of
     the fixed maturities to their fair value at the time of impairment.  During
     the three months ended  September 30, 2003, the Company  determined that 42
     fixed maturities had other than temporary impairments. As a result, for the
     three months ended  September  30, 2003,  the Company  recognized a pre-tax
     loss of $12.5 million to reduce the carrying value of the fixed  maturities
     to their fair value at the time of impairment.

     During the nine months ended  September  30, 2004,  the Company  determined
     that 86 fixed  maturities  had an other  than  temporary  impairment.  As a
     result,  for  the  nine  months  ended  September  30,  2004,  the  Company
     recognized a pre-tax loss of $17.9 million to reduce the carrying  value of
     the fixed maturities to their fair value at the time of impairment.  During
     the nine months ended  September 30, 2003, the Company  determined that 188
     fixed maturities had other than temporary impairments. As a result, for the
     nine months ended September 30, 2003, the Company recognized a pre-tax loss
     of $99.5  million to reduce the carrying  value of the fixed  maturities to
     their fair value at the time of impairment.

     The fair value of the remaining  impaired fixed maturities at September 30,
     2004 and 2003 is $173.4 million and $219.5 million, respectively.


3.   Financial Instruments

     Estimated Fair Value

     The following  disclosures are made in accordance with the  requirements of
     FAS No. 107,  "Disclosures about Fair Value of Financial  Instruments." FAS
     No. 107  requires  disclosure  of fair value  information  about  financial
     instruments,  whether or not recognized in the balance sheet,  for which it
     is practicable to estimate that value.  In cases where quoted market prices
     are not available,  fair values are based on estimates  using present value
     or other valuation techniques.

     Those  techniques  are  significantly  affected  by the  assumptions  used,
     including  the discount  rate and  estimates of future cash flows.  In that
     regard,  the derived  fair value  estimates,  in many  cases,  could not be
     realized in immediate  settlement of the  instrument.  FAS No. 107 excludes
     certain financial instruments and all nonfinancial instruments from its


                                       23

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     disclosure  requirements.  Accordingly,  the  aggregate  fair value amounts
     presented do not represent the underlying value of the Company.

     The following valuation methods and assumptions were used by the Company in
     estimating the fair value of the above financial instruments:

     Fixed  maturities  securities:  The fair  values  for the  actively  traded
     marketable  bonds are determined  based upon the quoted market prices.  The
     fair values for  marketable  bonds  without an active  market are  obtained
     through  several  commercial  pricing  services which provide the estimated
     fair values.  Fair values of privately  placed bonds are determined using a
     matrix-based  pricing  model.  The model  considers  the  current  level of
     risk-free interest rates,  current corporate spreads, the credit quality of
     the issuer and cash flow  characteristics of the security.  Also considered
     are factors such as the net worth of the borrower, the value of collateral,
     the capital  structure of the borrower,  the presence of guarantees and the
     Company's evaluation of the borrower's ability to compete in their relevant
     market. Using this data, the model generates estimated market values, which
     the Company considers reflective of the fair value of each privately placed
     bond.

     Equity  securities:  Fair values of these  securities are based upon quoted
     market value.

     Mortgage  loans on real estate:  The fair values for mortgage loans on real
     estate  are  estimated  using  discounted  cash  flow  analyses  and  rates
     currently  being offered in the  marketplace for similar loans to borrowers
     with  similar  credit  ratings.  Loans  with  similar  characteristics  are
     aggregated for purposes of the calculations.

     Real  estate:  The fair  values for real estate are  estimated  using three
     methods  of  review:  a  discounted  cash  flow  analyses  utilizing  rates
     currently being offered in the marketplace,  market value/sales comparisons
     of similar products in the subject  property market,  and cost to reproduce
     the asset.  These reviews are done  periodically;  however,  a major event,
     such as signing/loss of a tenant, physical change to the property, or local
     governmental  zoning or  regulation  changes,  will  trigger  an  immediate
     valuation review.

     Cash,  short-term  investments and policy loans:  The carrying  amounts for
     these assets approximate the assets' fair values.

     Assets held in separate  accounts:  Assets  held in separate  accounts  are
     reported  at the quoted  fair values of the  individual  securities  in the
     separate accounts.

     Notes  to  affiliates:  Estimated  fair  value  of the  Company's  notes to
     affiliates  are based upon  discounted  future  cash flows using a discount
     rate approximating the current market value.


                                       24

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Investment  contract  liabilities  (included in future policy  benefits and
     claims' reserves):

     With a fixed maturity: Fair value is estimated by discounting cash flows at
     interest rates currently being offered by, or available to, the Company for
     similar contracts.

     Without a fixed maturity:  Fair value is estimated as the amount payable to
     the policyholder upon demand. However, the Company has the right under such
     contracts to delay payment of withdrawals  which may  ultimately  result in
     paying an amount different than that determined to be payable on demand.

     Liabilities  related to separate accounts:  Liabilities related to separate
     accounts  are reported at full account  value in the  Company's  historical
     balance sheet.  Estimated fair values of separate  account  liabilities are
     equal to their carrying amount.

     The carrying  values and estimated  fair values of certain of the Company's
     financial  instruments  at September 30, 2004 and December 31, 2003 were as
     follows:

     <TABLE>
     <S>                                       <C>                              <C>

                                                              2004                            2003
                                               -------------------------------  ------------------------------
                                                  Carrying          Fair          Carrying          Fair
                                                   Value           Value            Value           Value
                                               --------------- ---------------  --------------  --------------
     (Millions)
     Assets:
      Fixed maturity, including securities
      pledged to creditors                     $     18,082.8  $     18,082.8   $    16,097.8   $    16,097.8
     Equity securities                                    25.2            25.2           120.2           120.2
     Mortgage loans on real estate                     3,706.2         3,853.9         3,388.7         3,581.4
     Real estate                                           1.8             2.0             4.5             4.8
     Policy loans                                        171.4           171.4           177.1           177.1
     Cash and short-term investments                     896.9           896.9            88.3            88.3
     Other investments                                   168.0           168.0            56.0            56.0
     Assets held in separate accounts                 21,708.7        21,708.7        18,220.1        18,220.1
    Liabilities:
     Notes to affiliates                                  35.0            49.7            35.0            57.3
     Investment contract liabilities:
      Deferred annuities                             17,333.5        16,210.9        16,072.4        15,069.0
      Supplementary contracts and
        immediate annuities                             865.9           865.9           840.1           840.1
      Liabilities related to separate accounts       21,708.7        21,708.7        18,220.1        18,220.1

    </TABLE>

     Fair  value  estimates  are made at a  specific  point  in  time,  based on
     available  market   information  and  judgments  about  various   financial
     instruments,  such as estimates of timing and amounts of future cash flows.
     Such  estimates  do not reflect any premium or discount  that could  result
     from  offering  for sale at one time the  Company's  entire  holdings  of a
     particular financial instrument, nor do they consider the tax impact of the
     realization of unrealized  gains or losses.  In many cases,  the fair value
     estimates cannot be substantiated by comparison to independent markets, nor
     can  the  disclosed  value  be  realized  in  immediate  settlement  of the
     instruments. In evaluating the Company's management of interest rate, price


                                       25

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     and liquidity risks,  the fair values of all assets and liabilities  should
     be taken into consideration, not only those presented above.

     Derivative Financial Instruments

     Interest Rate Caps

     Interest  rate  caps are  used to  manage  the  interest  rate  risk in the
     Company's bond portfolio.  Interest rate caps are purchased  contracts that
     provide  the  Company  with  an  annuity  in an  increasing  interest  rate
     environment.  The notional  amount of the Company's open interest rate caps
     as of September 30, 2004 was $736.2  million.  Carrying value and estimated
     fair value of the open interest rate caps was minimal. The notional amount,
     carrying  value and  estimated  fair value  (liabilities  are denoted  with
     parentheses)  of the  Company's  open interest rate caps as of December 31,
     2003  were   $1,036.2   million,   $20.0   thousand  and  $20.0   thousand,
     respectively.

     Interest Rate Swaps

     Interest  rate  swaps  are used to  manage  the  interest  rate risk in the
     Company's  bond  portfolio as well as the Company's  liabilities.  Interest
     rate swaps  represent  contracts that require the exchange of cash flows at
     regular  interim  periods,  typically  monthly or  quarterly.  The notional
     amount,  carrying  value and  estimated  fair value of the  Company's  open
     interest rate swaps as of September 30, 2004 were $2,263.1  million,  $26.9
     million and $26.9  million,  respectively.  The notional  amount,  carrying
     value and estimated fair value of the Company's open interest rate swaps as
     of December 31, 2003 were  $1,266.5  million,  $(91.2)  million and $(91.2)
     million, respectively.

     Futures

     Futures  contracts are used to hedge against a decrease in certain indexes.
     Such decrease  results in increased  reserve  liabilities,  and the futures
     offset this increased  expense.  The  underlying  reserve  liabilities  are
     carried  at market  value  with the  change in value  running  through  the
     statement  of  income,  which is offset by the daily cash  movement  of the
     futures.  The notional  amount,  carrying value and estimated fair value of
     the  Company's  open  interest  rate swaps as of September  30, 2004,  were
     $(1,165.2) million,  $(1.9) million and $(1.9) million,  respectively.  The
     notional  amount,  carrying value and estimated fair value of the Company's
     open interest rate swaps as of December 31, 2003, were $491.3 million, $0.8
     million and $0.8 million, respectively.

     Foreign Exchange Swaps

     Foreign  exchange  swaps  are used to  reduce  the risk of a change  in the
     value, yield or cash flow with respect to invested assets. Foreign exchange
     swaps  represent  contracts  that require the exchange of foreign  currency
     cash flows for US dollar cash flows at regular interim  periods,  typically
     quarterly  or  semi-annually.  The  notional  amount,  carrying  value  and


                                       26

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     estimated fair value of the Company's  open foreign  exchange rate swaps as
     of  September  30, 2004 were $146.7  million,  $(22.3)  million and $(22.3)
     million,  respectively.  The notional amount,  carrying value and estimated
     fair value of the Company's open foreign exchange rate swaps as of December
     31,  2003  were  $128.2  million,  $(19.4)  million  and  $(19.4)  million,
     respectively.

     Options

     S&P  Options are used to hedge  against an increase in the S&P Index.  Such
     increase results in increased reserve  liabilities,  and the options offset
     this  increased  expense.  The options are  accounted  for in a  consistent
     manner with the underlying reserve  liabilities,  both of which are carried
     at fair value with the change in value  running  through the  statement  of
     income. If the options mature in the money, the amount received is recorded
     in income to offset the increased expense for the reserve liabilities.  The
     notional  amount,  carrying value and estimated fair value of the Company's
     open  options  as of  September  30,  2004 were  $2,047.8  million,  $109.7
     million, and $109.7 million,  respectively.  The notional amount,  carrying
     value and estimated fair value of the Company's open options as of December
     31,  2003 were  $1,287.8  million,  $100.9  million,  and  $100.9  million,
     respectively.

     Embedded Derivatives

     The Company also had investments in certain fixed maturity  instruments and
     retail annuity products that contain embedded derivatives,  including those
     whose market value is at least partially determined by, among other things,
     levels of or changes in domestic  and/or foreign  interest rates (short- or
     long-term),  exchange  rates,  prepayment  rates,  equity markets or credit
     ratings/spreads.  The  estimated  fair  value of the  embedded  derivatives
     within securities as of September 30, 2004 and December 31, 2003 was $(2.6)
     thousand and $(1,055.9) thousand, respectively. The estimated fair value of
     the embedded derivatives within retail annuity products as of September 30,
     2004 and  December  31,  2003,  was  $384.8  million  and  $238.9  million,
     respectively.


                                       27

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

4.   Net Investment Income

     Sources of net investment income were as follows:

     <TABLE>
     <S>                                                      <C>                   <C>

                                                                 Three months          Three months
                                                                     ended                 ended
                                                                 September 30,         September 30,
     (Millions)                                                      2004                  2003
                                                              ------------------    -----------------
     Fixed maturities                                           $     249.8           $    239.3
     Equity securities                                                  0.1                  0.1
     Mortgage loans                                                    54.0                 50.9
     Policy loans                                                       1.2                  3.5
     Short-term investments and cash equivalents                        0.5                  0.7
     Other                                                            (21.4)                (5.3)
                                                              ------------------    -----------------
     Gross investment income                                          284.2                289.2
     Less: investment expenses                                        (18.2)               (17.0)
                                                              ------------------    -----------------
     Net investment income                                      $     266.0           $    272.2
                                                              ==================    =================


                                                                 Nine months          Nine months
                                                                    ended                ended
                                                                 September 30,        September 30,
     (Millions)                                                     2004                 2003
                                                              ------------------    -----------------
     Fixed maturities                                           $     722.5           $    724.2
     Equity securities                                                  0.2                  2.7
     Mortgage loans                                                   164.3                153.1
     Real estate                                                        0.2                  0.5
     Policy loans                                                       6.1                  7.3
     Short-term investments and cash equivalents                        1.1                  2.0
     Other                                                            (12.0)                (4.8)
                                                              ------------------    -----------------
     Gross investment income                                          882.4                885.0
     Less: investment expenses                                        (52.5)               (46.8)
                                                              ------------------    -----------------
     Net investment income                                      $     829.9           $    838.2
                                                              ==================    =================

     </TABLE>

5.   Dividend Restrictions and Shareholder's Equity

     The  Company's  ability  to pay  dividends  to its Parent is subject to the
     prior  approval  of  insurance   regulatory   authorities  for  payment  of
     dividends,  which  exceed an annual  limit.  The Company did not pay common
     stock  dividends  during the period  ended  September  30, 2004 or the year
     ended December 31, 2003.


                                       28

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     The Insurance Department of the State of Iowa (the "Department"), effective
     January 1, 2004,  recognizes  as net income and capital  and surplus  those
     amounts  determined  in  conformity  with  statutory  accounting  practices
     prescribed or permitted by the Department, which differ in certain respects
     from  accounting  principles  generally  accepted  in  the  United  States.
     Statutory  net income was $68.0  million and $24.1  million,  for the three
     months  ended  September  30, 2004 and 2003,  respectively.  Statutory  net
     income  (loss) was $55.4 million and $(36.3)  million,  for the nine months
     ended  September  30, 2004 and 2003,  respectively.  Statutory  capital and
     surplus was $1,224.8  million and $1,071.0 million as of September 30, 2004
     and 2003, respectively.

     As of  September  30,  2004,  the Company  does not  utilize any  statutory
     accounting  practices,   which  are  not  prescribed  by  state  regulatory
     authorities  that,  individually  or in the  aggregate,  materially  affect
     statutory capital and surplus.


6.   Capital Gains and Losses

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

                                              Nine months         Nine months
                                                 ended               ended
                                             September 30,       September 30,
     (Millions)                                  2004                2003
                                           -----------------   -----------------
     Fixed maturities                        $        30.7       $        98.3
     Equity securities                                 5.4                (1.0)
     Derivatives                                      (1.3)              (83.5)
     Real estate                                         -                (2.7)
     Other                                            (2.1)               (0.3)
                                           -----------------   -----------------
     Pretax realized capital gains                    32.7                10.8
                                           =================   =================
     After-tax realized capital gains        $        21.3       $         7.0
                                           =================   =================

     Proceeds from the sale of total fixed maturities and equity  securities and
     the related gross gains and losses were as follows:

                                              Nine months         Nine months
                                                 ended               ended
                                              September 30,      September 30,
     (Millions)                                  2004                2003
                                           ------------------  -----------------
     Proceeds on sales                       $     8,536.5       $    11,295.6
     Gross gains                                     115.9               257.0
     Gross losses                                     52.2                49.0


                                       29

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Changes in  shareholder's  equity related to changes in  accumulated  other
     comprehensive income were as follows:

     <TABLE>
     <S>                                                      <C>                   <C>

                                                                Nine months           Nine months
                                                                    ended                ended
                                                                September 30,         September 30,
     (Millions)                                                     2004                  2003
                                                              ------------------    -----------------
     Fixed maturities                                          $       (33.7)        $       35.5
     Equity securities                                                  (4.4)                 7.4
     DAC/VOBA                                                          (67.1)               101.1
     Derivatives                                                         4.6                  3.0
     Sales inducements                                                  (8.7)                   -
     Other                                                               0.1                 (0.1)
                                                              ------------------    -----------------
     Subtotal                                                         (109.2)               146.9
     Decrease (increase) in deferred
       income taxes                                                     12.0                (40.3)
                                                              ------------------    -----------------
     Net changes in accumulated other
       comprehensive income                                    $       (97.2)        $      106.6
                                                              ==================    =================

     </TABLE>

     Shareholder's equity included the following accumulated other comprehensive
     income:

     <TABLE>
     <S>                                                      <C>                   <C>

                                                                September 30,         September 30,
     (Millions)                                                      2004                  2003
                                                              ------------------    -----------------
     Net unrealized capital gains (losses):
     Fixed maturities                                          $       483.5         $       643.3
     Equity securities                                                    0.9                  4.0
     DAC/VOBA                                                          (277.7)              (260.8)
     Derivatives                                                         (9.4)               (24.7)
     Sales inducements                                                   (8.7)                   -
     Other                                                                0.1                  0.2
                                                              ------------------    -----------------
     Subtotal                                                           188.7                362.0
     Less: deferred income taxes                                         95.9                120.3
                                                              ------------------    -----------------
     Net accumulated other comprehensive income                $        92.8         $       241.7
                                                              ==================    =================

     </TABLE>

                                       30

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Changes in  accumulated  other  comprehensive  income related to changes in
     unrealized gains (losses) on securities, were as follows:

    <TABLE>
    <S>                                                       <C>                   <C>

                                                                        Nine months ended
                                                                          September 30,
     (Millions)                                                      2004                 2003
                                                              -----------------     -----------------
     Unrealized holding gains (losses) arising
       during the year (1)                                     $        (37.2)       $       197.9
     Less: reclassification adjustment for gains
       and other items included in net income (2)                        60.0                 91.3
                                                              -----------------     -----------------
     Net unrealized gains (losses) on securities               $        (97.2)       $       106.6
                                                              =================     =================
     </TABLE>

     (1)  Pretax  unrealized  holding gains  (losses)  arising during the period
          were  $(57.2)  million and $304.5  million  for the nine months  ended
          September 30, 2004 and 2003, respectively.

     (2)  Pretax reclassification adjustments for gains and other items included
          in net income  were $92.3  million  and  $140.5  million  for the nine
          months ended September 30, 2004 and 2003, respectively.


7.   Additional Insurance Benefits and Minimum Guarantees

     Under  SOP  03-1,  the  Company  calculates  additional  liabilities  ("SOP
     reserves") for certain guaranteed  benefits and for Universal Life products
     with  certain  patterns  of  cost of  insurance  charges.  The SOP  reserve
     recognized  for such  products is in addition to the  liability  previously
     held (the  Account  Value) and is to  recognize  the  portion  of  contract
     assessments  received  in early  years used to  compensate  the insurer for
     services provided in later years.

     ING USA  calculates a benefit  ratio for each block of business  subject to
     the SOP, and calculates an SOP reserve by accumulating amounts equal to the
     benefit ratio  multiplied by the  assessments  for each period,  reduced by
     excess death benefits during the period.  The SOP reserve is accumulated at
     interest using the  contract-credited  rate for the period.  The calculated
     reserve  includes a provision for universal life contracts with patterns of
     cost of insurance  charges that produce  expected  gains from the insurance
     benefit function followed by losses from that function in later years.


                                       31

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     The SOP  reserve for  annuities  with  minimum  guaranteed  death  benefits
     ("MGDB") is  determined  each period by  estimating  the expected  value of
     death benefits in excess of the projected  account  balance and recognizing
     the excess  ratably over the  accumulation  period based on total  expected
     assessments.  The Company regularly  evaluates estimates used to adjust the
     additional  liability  balance,  with a related charge or credit to benefit
     expense,  if actual  experience  or other  evidence  suggests  that earlier
     assumptions  should be revised.  The following  assumptions and methodology
     were used to determine the MGDB SOP reserve at September 30, 2004:

     Area                                 Assumptions/Basis for Assumptions
     ---------------------------          --------------------------------------
     Data used                            Based on 101 investment performance
                                          scenarios stratified based on 10,000
                                          random generated scenarios
     Mean investment performance          8.5%
     Volatility                           18.0%
     Mortality                            6.0%, 60.0%, 75.0%, 75.0% of the 90-95
                                          ultimate mortality table for standard,
                                          rachet, rolup and combination rollup
                                          and rachet, 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

     The SOP reserve for annuities with guaranteed minimum accumulation benefits
     ("GMAB") and guaranteed minimum withdrawal benefits ("GMWB") are considered
     to be derivatives under Financial  Accounting  Standards Board Statement of
     Financial   Accounting   Standards  No.  133,  "Accounting  for  Derivative
     Instruments  and  Hedging  Activities,"  and are  recognized  at fair value
     through earnings.

     The SOP reserve for the  guaranteed  minimum  income  benefits  ("GMIB") is
     determined each period by estimating the expected value of the annutization
     benefits  in  excess  of the  projected  account  balance  at the  date  of
     annuitization  and  recognizing  the excess  ratably over the  accumulation
     period based on total expected assessments. The Company regularly evaluates
     estimates used and adjusts the additional liability balance, with a related
     charge or credit to  benefit  expense,  if the actual  experience  or other
     evidence  suggests  that  earlier   assumptions  should  be  revised.   The
     assumptions used for calculating the additional GMIB liability at September
     30, 2004, are consistent with those used for the calculating the additional
     MGDB liability.  In addition, the calculation of the GMIB liability assumes
     dynamic surrenders and dynamic annuitization reflecting the extent to which
     the benefit, at the time of payment, has a positive value.


                                       32

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     The separate account liabilities subject to SOP 03-1 for minimum guaranteed
     benefits,  and the  additional  liabilities  recognized  related to minimum
     guarantees,  by type, as of September  30, 2004,  and the paid and incurred
     amounts  by type  for the  nine  months  ended  September  30,  2004 are as
     follows:

     <TABLE>
     <S>                                                    <C>             <C>                     <C>

                                                                Minimum           Guaranteed          Guaranteed
                                                              Guaranteed           Minimum              Minimum
                                                                 Death          Accumulation/           Income
                                                                Benefit       Withdrawal Benefit        Benefit
                                                                 (MGDB)           (GMAB/GMWB)            (GMIB)
                                                            --------------  ---------------------   --------------
     Separate account liability
       balance                                               $   21,708.7       $    1,544.6         $    7,371.0
                                                            ==============  =====================   ==============
     Additional liability balance:
     Balance at January 1, 2004                              $       56.5       $       14.5         $       13.6
     Incurred guaranteed benefits                                    39.8                5.5                 17.1
     Paid guaranteed benefits                                       (24.8)                 -                    -
                                                            --------------  ---------------------   --------------
     Balance at September 30, 2004                           $       71.5       $       20.0         $       30.7
                                                            ==============  =====================   ==============

     </TABLE>

     The net  amount  at risk  (net of  reinsurance)  and the  weighted  average
     attained age of contractholders by type of minimum guaranteed benefit,  are
     as follows as of September 30, 2004:

     <TABLE>
     <S>                                                    <C>             <C>                     <C>

                                                                Minimum           Guaranteed          Guaranteed
                                                              Guaranteed           Minimum              Minimum
                                                                 Death          Accumulation/           Income
                                                                Benefit       Withdrawal Benefit        Benefit
                                                                 (MGDB)           (GMAB/GMWB)            (GMIB)
                                                            --------------  ---------------------   --------------
     Net Amount at Risk (net of reinsurance)                 $    1,811.4     $        105.3         $      352.7
     Weighted Average Attained Age                                     64                 59                   59

     </TABLE>

     The aggregate  fair value of equity  securities  (including  mutual funds),
     supporting separate accounts with additional insurance benefits and minimum
     investment return guarantees as of September 30, 2004 is $21,708.7 million.


8.   Sales Inducements

     Sales  inducements  represent  benefits  paid to  contractholders  that are
     incremental to the amounts the Company credits on similar contracts and are
     higher than the contract's  expected  ongoing  crediting  rates for periods
     after the inducement.  Such amounts are reported  separately on the balance
     sheet as of January 1, 2004.  Prior to 2004, these amounts were included in
     DAC.  Sales  inducements  are  amortized as a component of benefit  expense
     using   methodology  and   assumptions   consistent  with  those  used  for
     amortization  of DAC. During the three months ended September 30, 2004, the


                                       33

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Company   capitalized  and  amortized  $24.4  million  and  $24.5  million,
     respectively, of sales inducements.  During the nine months ended September
     30, 2004,  the Company  capitalized  and amortized  $75.2 million and $64.7
     million,  respectively,  of sales inducements.  The unamortized  balance of
     capitalized  sales  inducements,  net of  unrealized  gains and losses,  is
     $487.6 million as of September 30, 2004.


9.   Income Taxes

     Effective  January 1, 2004, the Company files a stand-alone  federal income
     tax  return.  Prior  to that  date,  the  Company  and  each of the  Merger
     Companies,  filed federal income tax returns with their  respective  filing
     groups.

     At September 30, 2004,  the Company has  operating  loss  carryforwards  of
     approximately $483.3 million net of a $42.9 million valuation allowance for
     federal  income tax purposes,  which are available to offset future taxable
     income. If not used, these carryforwards will expire between 2015 and 2019.

     At  September  30,  2004,  the Company has capital  loss  carryforwards  of
     approximately  $4.1  million for  federal  income tax  purposes,  which are
     available to offset future capital gains. If not used, these  carryforwards
     will expire in 2009.

     Income tax expense  (benefit) from  continuing  operations  included in the
     condensed financial statements are as follows:

     <TABLE>
     <S>                                                                        <C>                 <C>

                                                                                  Three months        Three months
                                                                                      ended              ended
                                                                                  September 30,      September 30,
     (Millions)                                                                       2004                2003
                                                                                ------------------  -----------------
     Current tax (benefit):
       Federal                                                                    $         4.7       $       43.6
                                                                                ------------------  -----------------
         Total current tax (benefit)                                                        4.7               43.6
                                                                                ------------------  -----------------
     Deferred tax (benefit):
       Operations and capital loss carryforwards                                           19.5                  -
       Other federal deferred tax                                                          13.0              (39.8)
                                                                                ------------------  -----------------
         Total deferred tax (benefit)                                                      32.5              (39.8)
                                                                                ------------------  -----------------
     Total income tax expense (benefit)                                           $        37.2       $        3.8
                                                                                ==================  =================


                                                                                  Nine months         Nine months
                                                                                     ended                ended
                                                                                  September 30,       September 30,
     (Millions)                                                                       2004                 2003
                                                                                ------------------  -----------------
     Current tax (benefit):
       Federal                                                                    $         4.7       $       (0.9)
                                                                                ------------------  -----------------
         Total current tax (benefit)                                                        4.7               (0.9)
                                                                                ------------------  -----------------
     Deferred tax:
       Operations and capital loss carryforwards                                          (17.1)                 -
       Other federal deferred tax                                                          82.8               11.6
                                                                                ------------------  -----------------
         Total deferred tax                                                                65.7               11.6
                                                                                ------------------  -----------------
     Total income tax expense                                                     $        70.4       $       10.7
                                                                                ==================  =================

     </TABLE>

                                       34

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Income  taxes were  different  from the amount  computed  by  applying  the
     federal income tax rate to income from continuing  operations before income
     taxes for the following reasons:

     <TABLE>
     <S>                                                                        <C>                   <C>

                                                                                  Three months        Three months
                                                                                      ended               ended
                                                                                  September 30,       September 30,
     (Millions)                                                                       2004                2003
                                                                                -----------------   -----------------
     Income before income taxes                                                   $        40.3       $       32.6
     Tax rate                                                                                35%                35%
                                                                                -----------------   -----------------
     Income tax at federal statutory rate                                                  14.1               11.4
     Tax effect of:
       Meals and entertainment                                                              0.2                0.2
       Dividend received deduction                                                          4.9               (7.8)
       Valuation allowance for losses                                                      15.0                  -
       Other                                                                                3.0                  -
                                                                                -----------------   -----------------
     Income taxes                                                                 $        37.2       $        3.8
                                                                                =================   =================


                                                                                  Nine months          Nine months
                                                                                      ended               ended
                                                                                  September 30,       September 30,
     (Millions)                                                                       2004                2003
                                                                                -----------------   -----------------
     Income before income taxes                                                   $       142.7       $       58.1
     Tax rate                                                                                35%                35%
                                                                                -----------------   -----------------
     Income tax at federal statutory rate                                                  50.0               20.3
     Tax effect of:
       Meals and entertainment                                                              0.4                0.4
       Dividend received deduction                                                          2.0              (10.0)
       Valuation allowance for losses                                                      15.0                  -
       Other                                                                                3.0                  -
                                                                                -----------------   -----------------
     Income taxes                                                                 $        70.4       $       10.7
                                                                                =================   =================

     </TABLE>

     A valuation  allowance has been provided for operating  loss  carryforwards
     not  expected to be utilized  in the future as a result of  publication  of
     clarifying tax guidance.


                                       35

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     The tax effects of  temporary  differences  that give rise to deferred  tax
     assets and deferred tax  liabilities at September 30, 2004 and December 31,
     2003 are presented below:

     <TABLE>
     <S>                                                       <C>                 <C>

     (Millions)                                                       2004                2003
                                                               -----------------   -----------------
     Deferred tax assets:
       Operations and capital loss carryforwards                 $      185.6        $      168.5
       Future policy benefits                                           303.7               470.7
       Goodwill                                                           9.6                 9.8
       Investments                                                       14.2                20.5
       Employee compensation and benefits                                20.5                16.8
       Other                                                             31.0                33.4
                                                               -----------------   -----------------
           Total gross assets                                           564.6               719.7
           Less valuation allowance                                      15.0                   -
                                                               -----------------   -----------------
           Assets net of valuation allowance                            549.9               719.7
                                                               -----------------   -----------------

     Deferred tax liabilities:
       Unrealized gains on investments                                 (111.4)             (123.4)
       Deferred policy acquisition cost                                (430.2)             (529.1)
       Value of purchased insurance in force                            (30.7)              (38.3)
       Other                                                             (1.0)               (0.3)
                                                               -----------------   -----------------
           Total gross liabilities                                     (573.3)             (691.1)
                                                               -----------------   -----------------
Net deferred income tax asset (liability)                        $      (23.7)       $       28.6
                                                               =================   =================

     </TABLE>

     The Internal Revenue Service has commenced  examinations for the years 2000
     and 2001. Management does not believe adverse consequences will result from
     those examinations.


10.  Benefit Plans

     Defined Benefit Plan

     ING North America Insurance  Corporation ("ING North America") sponsors the
     ING  Americas  Retirement  Plan (the  "Retirement  Plan"),  effective as of
     December 31, 2001. Substantially all employees of ING North America and its
     subsidiaries and affiliates  (excluding  certain employees) are eligible to
     participate, including the Company's employees other than Company agents.

     The Retirement Plan is a  tax-qualified  defined benefit plan, the benefits
     of which are  guaranteed  (within  certain  specified  legal limits) by the
     Pension Benefit Guaranty Corporation  ("PBGC"). As of January 1, 2002, each
     participant in the Retirement Plan (except for certain specified employees)
     earns a benefit under a final average compensation  formula.  Subsequent to
     December 31, 2001, ING North America is responsible for all Retirement Plan
     liabilities.  The  costs  allocated  to  the  Company  for  its  employees'
     participation in the Retirement Plan were $3.0 million and $2.2 million for
     the three-month periods ended September 30, 2004 and 2003, respectively and


                                       36

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     $8.5 million and $6.5 million for the  nine-month  periods ended  September
     30, 2004 and 2003, respectively.

     Non-Qualified Retirement Plans

     Through  December 31, 2001, the Company,  in conjunction  with ING, offered
     certain eligible employees a Supplemental  Executive Retirement Plan and an
     Excess  Plan  (collectively,  the  "SERPs").  The SERPs  are  non-qualified
     defined  benefit  pension plans,  which means all benefits are payable from
     the general assets of the Company.  SERP benefits are not guaranteed by the
     PBGC. Benefit accruals under the SERPs ceased, effective as of December 31,
     2001.  Benefits  under  the  SERPs  are  determined  based  on an  eligible
     employees years of service and such employee's average annual  compensation
     for the highest five years during the last ten years of employment. Pre-tax
     charges of operations of the Company for the SERPs were $97.6  thousand and
     $47.4  thousand for the  three-month  periods ended  September 30, 2004 and
     2003,  respectively  and $0.3 million and $0.1  million for the  nine-month
     periods ended September 30, 2004 and 2003, respectively.

     The  following  tables  summarize  the benefit  obligations  and the funded
     status for the SERP and the Excess  Plan for the year  ended  December  31,
     2003:


     (Millions)
     Change in Benefit Obligation:
       Defined Benefit Obligation, January 1                     $       8.8
       Interest cost                                                     0.6
       Benefits paid                                                    (0.4)
       Actuarial (gain) loss on obligation                               2.0
                                                                 ---------------
       Defined Benefit Obligation, December 31                   $      11.0
                                                                 ===============

     Funded status:
       Funded status at December 31                              $     (11.0)
       Unrecognized past service cost                                   (0.1)
       Unrecognized net loss                                            (1.8)
                                                                 ---------------
     Net amount recognized                                       $     (12.9)
                                                                 ===============

     At December 31, 2003, the accumulated benefit obligation was $9.3 million.

     The  weighted-average  assumptions  used in the  measurement of the benefit
     obligation for the SERPs were as follows:

                                                   2004              2003
                                              --------------    ---------------
     Discount rate at beginning of period          6.25%             6.75%
     Rate of compensation increase                 3.75              3.75


                                       37

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Net periodic  benefit  costs for the periods  ended  September 30, 2004 and
     2003 were as follows:

     <TABLE>
     <S>                                                     <C>                   <C>

                                                               Three months          Three months
                                                                   ended                 ended
                                                               September 30,         September 30,
                                                                    2004                  2003
                                                             -------------------   ------------------
     (Millions)
     Interest cost                                             $         0.2         $        0.1
     Unrecognized past service cost recognized in period                (0.1)                (0.1)
                                                             -------------------   ------------------
     Net periodic benefit cost                                 $         0.1         $          -
                                                             ===================   ==================


                                                                Nine months           Nine months
                                                                   ended                 ended
                                                               September 30,         September 30,
                                                                    2004                  2003
                                                             -------------------   ------------------
     (Millions)
     Interest cost                                             $         0.5         $        0.4
     Unrecognized past service cost recognized in period                (0.2)                (0.3)
                                                             -------------------   ------------------
     Net periodic benefit cost                                 $         0.3         $        0.1
                                                             ===================   ==================

     </TABLE>

     Contributions for the SERPs are expected to be $0.4 million during 2004.

     Defined Contribution Plans

     ING North  America  sponsors  the ING Savings  Plan and ESOP (the  "Savings
     Plan").   Substantially   all  employees  of  ING  North  America  and  its
     subsidiaries and affiliates  (excluding,  among others,  Career Agents) are
     eligible to  participate,  including  the  Company's  employees  other than
     Company  agents.  The Savings Plan is a  tax-qualified  profit  sharing and
     stock bonus plan,  which includes an employee stock ownership plan ("ESOP")
     component.  Savings  Plan  benefits  are not  guaranteed  by the PBGC.  The
     Savings Plan allows eligible  participants to defer into the Savings Plan a
     specified percentage of eligible compensation on a pre-tax basis. ING North
     America  matches  such  pre-tax  contributions,  up to a  maximum  of 6% of
     eligible  compensation.  All matching contributions are subject to a 4-year
     graded  vesting  schedule  (although  certain  specified  participants  are
     subject to a 5-year graded vesting schedule). All contributions made to the
     Savings  Plan are  subject to certain  limits  imposed by  applicable  law.
     Pre-tax charges to operations of the Company for the Savings Plan were $0.9
     million and $0.7 million for the  three-month  periods ended  September 30,
     2004 and 2003,  respectively  and $2.8  million  and $2.2  million  for the
     nine-month periods ended September 30, 2004 and 2003, respectively.


                                       38

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Post-Retirement Benefits

     In addition to providing pension benefits, the Company, in conjunction with
     ING,  provides certain health care and life insurance  benefits for retired
     employees and certain  agents.  Generally,  retired  employees and eligible
     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 agent pays for such coverage is subject to change in the future.

     The  following  tables  summarize  the benefit  obligations  and the funded
     status for retired  employees' and retired agents'  post-retirement  health
     care benefits for the year ended December 31, 2003:

     (Millions)
     Change in Benefit Obligation:
       Defined Benefit Obligation, January 1                     $        8.8
       Service cost                                                       0.5
       Interest cost                                                      0.6
       Benefits paid                                                     (0.6)
       Actuarial loss on obligation                                       0.7)
                                                                 ---------------
     Defined Benefit Obligation, December 31                              8.6

     Funded status:
      Funded status at December 31                                       (8.6)
      Unrecognized losses                                                (0.6)
      Unrecognized past service cost                                      0.4
                                                                 ---------------
     Net amount recognized                                       $       (8.8)
                                                                 ===============

     The medical health care trend rate was 10% for 2004,  gradually  decreasing
     to 5.0% by 2009.  Increasing the health care trend by 1% would increase the
     benefit obligation by $0.5 million as of December 31, 2003.  Decreasing the
     health care trend rate by 1% would decrease the benefit  obligation by $0.5
     million as of December 31, 2003.

     Net periodic  benefit  costs for the periods  ended  September 30, 2004 and
     2003 were as follows:

     <TABLE>
     <S>                                                     <C>                   <C>

                                                                 Three months         Three months
                                                                     ended                ended
                                                                 September 30,        September 30,
                                                                     2004                 2003
                                                             -------------------   -------------------
     (Millions)
     Service cost                                              $          0.2        $          0.1
     Interest cost                                                        0.1                   0.1
     Amortization of prior service costs                                 (0.1)                    -
     Curtailment gain or loss                                             0.3                     -
                                                             -------------------   -------------------
     Net periodic benefit cost                                 $          0.5        $          0.2
                                                             ===================   ===================

     </TABLE>


                                       39

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     <TABLE>
     <S>                                                     <C>                   <C>

                                                                 Nine months         Nine months
                                                                     ended                ended
                                                                 September 30,        September 30,
                                                                     2004                 2003
                                                             -------------------   -------------------
     (Millions)
     Service cost                                              $          0.5        $          0.4
     Interest cost                                                        0.4                   0.4
     Amortization of prior service costs                                 (0.1)                    -
     Curtailment gain or loss                                             0.3                     -
                                                             -------------------   -------------------
     Net periodic benefit cost                                 $          1.1        $          0.8
                                                             ===================   ===================

     </TABLE>

     Contributions  for retired  employees' and retired agents'  post-retirement
     health care benefits are expected to be $0.5 million during 2004.

     Substantive Change to Post Retirement Health and Welfare Plan

     On August 1, 2004, the Post Retirement Health and Welfare Plan (the "Plan")
     was amended to change the age and service required to qualify for benefits.
     The Plan now  requires  five years of  continuous  service  beginning on or
     after age 50. Whereas previously service cost was attributed throughout the
     employee's career with the Company, it will now be attributed  beginning at
     age 50.  The  change 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
     subsequent remeasurement was as follows:

     Accumulated post retirement benefit obligation                $       1.6
     Unrecognized loss (gain)                                              0.6
     Unrecognized past service cost                                       (2.6)
                                                                  --------------
        Net (liability) asset                                      $      (0.4)
                                                                  ==============

     Net periodic cost for the quarter                             $      (0.2)
     Net periodic cost year to date                                $      (0.2)


     Effect of Recently Enacted Legislation

     On  December  8,  2003,   President  Bush  signed  into  law  the  Medicare
     Prescription  Drug Improvement and  Modernization  Act of 2003 (the "Act").
     The Act  expands  Medicare,  primarily  by  including a  prescription  drug
     benefit starting in 2006.  Employers currently sponsoring such prescription
     drug programs will have a range of options to  potentially  reduce  program
     costs.  In May 2004, the FASB issued Staff Position No. 106-2,  "Accounting
     and  Disclosure  Requirements  Related to the Medicare  Prescription  Drug,
     Improvement  and  Modernization  Act  of  2003"  (FSP  FAS  106-2),   which
     superceded  FSP FAS 106-1 and  provides  guidance on how  companies  should
     account for the impact of the Act on  postretirement  health care plans. To
     encourage employers to maintain postretirement drug benefits,  beginning in
     2006, the


                                       40

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     federal government will provide  non-taxable  subsidy payments to employers
     who sponsor retiree drug benefits that are "actuarially  equivalent" to the
     Medicare   Part  D  benefits.   The  Company   has   determined   that  its
     postretirement  medical  plan's  prescription  drug  benefits are likely to
     qualify  as  actuarially  equivalent  to  Part D  benefits.  The  resulting
     subsidy,  when  received  by the  Company,  will be passed  through  to the
     retirees  in  the  form  of  lower   contributions  on  the  part  of  plan
     participants.  The Company is currently in the process of amending the Plan
     to reflect the reduction of participant  contributions,  and therefore, the
     subsidy  is not  expected  to have a  significant  impact on the  Company's
     financial position or results of operations.


11.  Related Party Transactions

     Operating Agreements

     The Company has certain agreements whereby it generates revenues and incurs
     expenses with affiliated entities. The agreements are as follows:

     |X|  Underwriting and distribution  agreement with Directed Services,  Inc.
          ("DSI"),  for the variable  insurance  products issued by the Company.
          DSI is  authorized to enter into  agreements  with  broker/dealers  to
          distribute the Company's variable products and appoint representatives
          of the  broker/dealers as agents. For the three months ended September
          30, 2004 and 2003, commission expenses were incurred in the amounts of
          $137.2  million and $89.8 million,  respectively.  For the nine months
          ended September 30, 2004 and 2003,  commission  expenses were incurred
          in the amounts of $374.4 million and $250.1 million, respectively.

     |X|  Asset management agreement with ING Investment Management LLC ("IIM"),
          in which IIM provides asset  management and accounting  services.  The
          Company records a fee, which is paid quarterly,  based on the value of
          the assets under management.  For the three months ended September 30,
          2004 and 2003,  expenses were incurred in the amounts of $18.1 million
          and $16.6 million,  respectively.  For the nine months ended September
          30,  2004 and 2003,  expenses  were  incurred  in the amounts of $51.5
          million and $45.7 million, respectively.

     |X|  Expense   sharing   agreements   with  ING  AIH  for   administrative,
          management, financial, and information technology services, which were
          approved in 2001.  For the three months ended  September  30, 2004 and
          2003,  ING USA incurred  expenses of $15.3 million and $14.4  million,
          respectively.  For the nine months ended  September 30, 2004 and 2003,
          ING  USA  incurred  expenses  of  $45.8  million  and  $46.8  million,
          respectively.

     |X|  Services  agreement  with ING  Financial  Advisors,  LLC ("ING FA") to
          provide certain  administrative,  management,  professional  advisory,
          consulting  and other  services  to the Company for the benefit of its
          customers.  Charges  for  these  services  are  to  be  determined  in
          accordance  with fair and  reasonable  standards  with  neither  party
          realizing a profit nor  incurring  a loss as a result of the  services
          provided to the Company.  The Company will reimburse ING FA for direct
          and indirect costs incurred on behalf of the Company.


                                       41

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Reinsurance Agreements

     ING USA entered into a reinsurance  agreement  with Security Life of Denver
     International,  Ltd.  ("SLDI"),  an affiliate,  covering  variable  annuity
     minimum guaranteed death benefits and minimum guaranteed living benefits of
     variable annuities issued after January 1, 2000. In March 2003, the Company
     amended its  reinsurance  agreement with SLDI.  Under this  amendment,  the
     Company  terminated  the  reinsurance  agreement  for all  inforce  and new
     business  and  recaptured  all  inforce   business   reinsured   under  the
     reinsurance  agreement  between the Company and SLDI retroactive to January
     1, 2003 and the Company  reduced  its  reinsurance  recoverable  related to
     these  liabilities by $150.1 million.  On March 28, 2003, SLDI  transferred
     assets to the Company in the amount of $185.6  million.  The  difference in
     amounts  transferred on March 28, 2003 and the reduction of the reinsurance
     recoverables as of January 1, 2003, reflects  adjustments on the investment
     of the  reinsurance  recoverable  as of January 1, 2003.  It also  reflects
     adjustments  on the  investment  income on the  assets and letter of credit
     costs between January 1, 2003 and the date of the asset  transfer.  It also
     encompasses  the net effect of a  recapture  fee paid in the amount of $5.0
     million  offset  by  the  receipt  of  a  $24.1  million   negative  ceding
     commission,  the net  impact of which was  deferred  in policy  acquisition
     costs and is being amortized over the period of estimated future profits.

     Reciprocal Loan Agreement

     On  January  1,  2004,  the  Company  entered  into a new  reciprocal  loan
     agreement  with ING  American  Insurance  Holdings,  Inc.  ("ING  AIH"),  a
     Delaware  corporation and affiliate,  to facilitate the handling of unusual
     and/or unanticipated short-term cash requirements.  In accordance with this
     agreement,  the maximum outstanding amount to be borrowed or lent shall not
     exceed 3% of ING USA's total admitted assets. This agreement supercedes the
     previous  reciprocal  loan agreement with ING AIH, by which the Company and
     ING AIH could borrow up to $499 million from one another.

     Under the previous and current reciprocal loan agreements,  interest on any
     ING USA  borrowings  was charged at the rate of ING AIH's cost of funds for
     the  interest  period plus 0.15%.  Interest on any ING AIH  borrowings  was
     charged at a rate based on the prevailing  interest rate of U.S. commercial
     paper available for purchase with a similar duration. Under this agreement,
     ING USA  incurred  minimal  interest  expense  for the three  months  ended
     September  30,  2004 and 2003.  Interest  expense of $0.1  million and $0.2
     million was incurred for the nine months ended September 30, 2004 and 2003,
     respectively.  ING USA earned interest of $0.5 million and $0.3 million for
     the three months ended September 30, 2004 and 2003, respectively,  and $1.6
     million and $0.8 million for the nine months ended  September  30, 2004 and
     2003,  respectively.  At September 30, 2004 and December 31, 2003,  ING USA
     had $199.0  million and $120.4 million  receivable  from ING AIH under this
     agreement included in due from affiliates.


                                       42

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Notes to Affiliates

     The Company's  promissory note in the amount of $50 million payable to Lion
     Connecticut  Holdings Inc. was repaid on May 17, 2004.  The note was issued
     on April 15, 1997.  Interest was charged at an annual rate of 8.75% and the
     face amount was due on demand. The Company incurred no interest expense for
     the three  months ended  September  30, 2004 and $1.1 million for the three
     months ended  September 30, 2003.  For the nine months ended  September 30,
     2004 and 2003, the Company  incurred  interest  expense of $1.7 million and
     $3.3 million, respectively.

     ING USA issued a 30-year  surplus note for $35 million with its  affiliate,
     Security  Life of Denver  Insurance  Company,  which matures on December 7,
     2029. Interest is charged at an annual rate of 7.98%.  Payment of the notes
     and  related   accrued   interest  is   subordinate   to  payments  due  to
     policyholders and claimant and beneficiary claims, as well as debts owed to
     all other classes of debtors,  other than surplus note holders, of ING USA.
     Any  payment  of  principal  and/or  interest  made is subject to the prior
     approval  of the Iowa  Insurance  Commissioner.  Interest  expense was $0.7
     million and $2.1  million for both the three  months and nine months  ended
     September 30, 2004 and 2003, respectively.

     Tax Sharing Agreements

     The Company has entered into a state tax sharing agreement with ING AIH and
     each of the specific  subsidiaries  that are parties to the agreement.  The
     state tax agreement  applies to situations in which ING AIH and all or some
     of the  subsidiaries  join in the  filing  of a state or  local  franchise,
     income  tax or other tax  return on a  consolidated,  combined  or  unitary
     basis.

     Capital Transactions

     During the nine months ended  September 30, 2004, ING USA received  capital
     contributions  of $40 million.  During the nine months ended  September 30,
     2003, ING USA received capital contributions of $88.7 million.


12.  Financing Agreements

     The Company  maintains a  revolving  loan  agreement  with  SunTrust  Bank,
     Atlanta (the "Bank").  Under this  agreement,  which is due on demand,  the
     Company  can  borrow  up to $125  million  from the Bank.  Interest  on any
     borrowing  accrues at an annual  rate equal to a rate quoted by the Bank to
     the Company for the borrowing.  Under the agreement,  the Company  incurred
     minimal  interest expense for the three and nine months ended September 30,
     2004 and 2003. At September 30, 2004, the Company had a $14 million balance
     payable to the Bank.  At December  31,  2003,  the Company did not have any
     balances payable to the Bank.


                                       43

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     The Company  also  maintains a revolving  loan  agreement  with Bank of New
     York, New York ("BONY"). Under this agreement, the Company can borrow up to
     $100 million from BONY. Interest on any of the Company borrowing accrues at
     an  annual  rate  equal to a rate  quoted  by BONY to the  Company  for the
     borrowing.  Under this agreement,  the Company incurred no interest expense
     for the three and nine months ended  September 30, 2004.  Minimal  interest
     expense was  incurred  for the three and nine months  ended  September  30,
     2003. At September 30, 2004 and December 31, 2003, the Company did not have
     any balances payable to BONY.


13.  Reinsurance

     At  September  30,  2004,  ING  USA  had   reinsurance   treaties  with  18
     unaffiliated  reinsurers and 2 affiliated reinsurers covering a significant
     portion of the mortality  risks and  guaranteed  death and living  benefits
     under its  variable  contracts.  ING USA  remains  liable to the extent its
     reinsurers do not meet their obligations under the reinsurance agreements.

     Reinsurance ceded in force for life mortality risks were $788.4 million and
     $1,209.4 million at September 30, 2004 and December 31, 2003, respectively.
     At September 30, 2004 and December 31, 2003, net receivables were comprised
     of the following:

     <TABLE>
     <S>                                                      <C>                  <C>

                                                                     2004                2003
                                                              ------------------   -----------------
     Claims recoverable from reinsurers                         $        14.0        $       17.1
     Payable for reinsurance premiums                                    (2.9)               (6.6)
     Reserve credits                                                     18.5                21.1
     Reinsured amounts due to an unaffiliated reinsurer                  (1.9)               (3.1)
     Reinsurance ceded                                                  958.8               619.4
     Other                                                                3.5                 4.0
                                                              ------------------   -----------------
     Total                                                      $       990.0        $      651.9
                                                              ==================   =================

     </TABLE>

     Included in the accompanying  condensed financial statements are net policy
     benefits  recoveries of $11.9 million and $9.3 million for the three months
     ended September 30, 2004 and 2003, respectively and $33.3 million and $31.7
     million  for  the  nine  months   ended   September   30,  2004  and  2003,
     respectively.


                                       44

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Interest  credited  and  other  benefits  to  policyholders   includes  the
     following premiums ceded and reinsurance recoveries:

     <TABLE>
     <S>                                                    <C>                 <C>

                                                              Three months          Three months
                                                                  ended                ended
                                                              September 30,        September 30,
                                                                  2004                  2003
                                                            -----------------   ----------------
     Premiums ceded under reinsurance                         $        2.1        $       3.9
     Reinsurance recoveries                                            2.3                0.4


                                                              Three months          Three months
                                                                  ended                ended
                                                              September 30,        September 30,
                                                                  2004                  2003
                                                            -----------------   ----------------
     Premiums ceded under reinsurance                         $        9.1        $      11.7
     Reinsurance recoveries                                            0.1                0.3

     </TABLE>

     ING  USA  participates  in  a  modified   coinsurance   agreement  with  an
     unaffiliated reinsurer. The accompanying condensed financial statements are
     presented net of the effects of the treaty which  decreased  income by $0.1
     million and $0.7 million for the three months ended  September 30, 2004 and
     2003,  respectively  and $1.1  million and $1.6 million for the nine months
     ended September 30, 2004 and 2003, respectively.


14.  Commitments and Contingent Liabilities

     Leases

     The Company leases its home office space and certain other  equipment under
     operating leases that expire through 2017.

     For both the three months ended  September 30, 2004 and 2003,  rent expense
     for leases was $1.9 million.  For the nine months ended  September 30, 2004
     and 2003,  rent  expense  for leases  was $5.7  million  and $5.5  million,
     respectively.  The future net minimum payments under  noncancelable  leases
     for the years ended December 31, 2004 through 2008 are estimated to be $7.6
     million,  $7.8  million,  $7.8  million,  $7.7  million  and $7.5  million,
     respectively, and $46.9 million, thereafter. The Company pays substantially
     all expenses  associated with its leased and subleased  office  properties.
     Expenses not paid  directly by the Company are paid for by an affiliate and
     allocated back to the Company.


                                       45

<PAGE>

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Condensed Financial Statements (Unaudited)
--------------------------------------------------------------------------------

     Commitments

     Through the normal course of investment operations,  the Company commits to
     either  purchase or sell  securities,  commercial  mortgage  loans or money
     market  instruments at a specified  future date and at a specified price or
     yield.  The  inability of  counterparties  to honor these  commitments  may
     result in either higher or lower replacement cost. Also, there is likely to
     be a change in the value of the securities  underlying the commitments.  At
     September 30, 2004 and December 31, 2003, the Company had off-balance sheet
     commitments  to  purchase  investments  equal to their fair value of $264.9
     million and $154.0 million, respectively.

     Litigation

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


                                       46

<PAGE>

Item 2.   Management's  Narrative  Analysis  of the  Results  of  Operations
          and Financial Condition

          Overview

          ING  USA  Annuity  and  Life  Insurance  Company  ("ING  USA"  or  the
          "Company"),  a wholly-owned  subsidiary of Lion  Connecticut  Holdings
          Inc. ("Lion" or "Parent"), is a stock life insurance company organized
          under  the  laws  of  the  State  of  Iowa.  ING  USA  was  originally
          incorporated  under the laws of the State of  Minnesota  on January 2,
          1973, in the name of St. Paul Life Insurance Company.  On December 21,
          1993, the Company redomesticated from Minnesota to Delaware.

          The  following  narrative  analysis of the results of  operations  and
          financial  condition  presents a review of the Company as of September
          30,  2004 and  December  31,  2003 and for the  three  and  nine-month
          periods ended  September 30, 2004 and 2003. This review should be read
          in conjunction with the condensed financial  statements and other data
          presented herein.

          Basis of Presentation

          On January 1, 2004, the Company  redomesticated from Delaware to Iowa.
          In addition,  on January 1, 2004 (the "merger  date"),  Equitable Life
          Insurance  Company  of Iowa  ("Equitable  Life"),  USG  Annuity & Life
          Company  ("USG") and United Life & Annuity  Insurance  Company ("ULA")
          (the "Merger  Companies"),  merged with and into Golden  American Life
          Insurance Company ("Golden  American").  Immediately after the merger,
          Golden American changed its name to ING USA Annuity and Life Insurance
          Company.  As of the merger date, the Merger  Companies ceased to exist
          and  were  merged  into  ING USA.  Lion is an  indirect,  wholly-owned
          subsidiary  of ING Groep N.V.  ("ING"),  a global  financial  services
          holding company based in The Netherlands.  ING USA is authorized to do
          business in the District of Columbia  and all states  except New York.
          ING USA is licensed as a life insurance  company under the laws of the
          State of Delaware  until  December 31, 2003 and Iowa since  January 1,
          2004.

          Prior to the merger date,  ING USA was a  wholly-owned  subsidiary  of
          Equitable  Life from  December  30, 2001  through  December  31, 2003.
          Formerly, from October 24, 1997, until December 30, 2001, Equitable of
          Iowa  Companies,  Inc. ("EIC" or "Former  Holding  Company")  directly
          owned 100% of Golden American's stock.

          Statement  of  Financial   Accounting  Standards  No.  141,  "Business
          Combinations"  ("FAS  141"),  excludes  transfers  of  net  assets  or
          exchanges of shares between  entities under common control,  and notes
          that certain provisions under Accounting  Principles Board Opinion No.
          16, "Business  Combinations"  ("APB 16"), provide a source of guidance
          for  such   transactions.   In  accordance  with  APB  16,   financial
          information of the combined entity is presented as if the entities had
          been  combined  for  the  full  year,  and all  comparative  financial
          statements   are  restated  and  presented  as  if  the  entities  had
          previously    been    combined,    in   a   manner    similar   to   a
          pooling-of-interests.


                                       47

<PAGE>

          The unaudited condensed  financial  statements have been prepared in a
          manner  similar  to a  pooling-of-interests,  in  accordance  with the
          provisions  of APB 16 in  order to  present  the  condensed  financial
          position  and  results of  operations  of the  Company  and the Merger
          Companies,  as if the  entities  had  previously  been  combined.  The
          unaudited  condensed  balance  sheets and  statements  of income  give
          effect  to the  consolidation  transaction  as if it had  occurred  on
          December 31, 2003 and January 1, 2003, respectively.

          Results of Operations

          Premiums for the three months ended  September 30, 2004 are comparable
          to that for the same period in 2003.  Premiums  decreased $2.3 million
          for the nine months  ended  September  30,  2004  compared to the same
          period in 2003.  This  decrease  in  premium  is related to the closed
          block of participating life business.

          Fee income and other  income  increased  by $37.7  million  and $127.1
          million  for the three  and nine  months  ended  September  30,  2004,
          respectively,  compared to the same  periods in 2003.  The increase is
          primarily  due to an  increase in the average  variable  assets  under
          management  by the Company.  The increase in average  variable  assets
          under management  reflects  continued business growth in the Company's
          variable  annuity  product  lines.  The rise in sales of products with
          higher charges for living benefits during 2004 also contributed to the
          increase.

          Net  investment  income for the three and nine months ended  September
          30, 2004  decreased  by $6.2 million and $8.3  million,  respectively,
          compared to the same period in 2003.  This decrease in net  investment
          income is primarily attributed to an increase in derivative expense.

          Net realized  capital  gains for the three months ended  September 30,
          2004  decreased by $2.1  million  compared to the same period in 2003.
          The decrease is primarily due to the interest rate environment. Rising
          interest  rates during third quarter 2004 resulted in lower net gains.
          Net realized  capital  gains for the nine months ended  September  30,
          2004  increased by $21.9 million  compared to the same period in 2003.
          The  increase  is  primarily  due to the  increase in the value of the
          derivatives portfolio as interest rates have risen.

          Interest  credited  and other  benefits to the  policyholders  for the
          three and nine  months  ended  September  30, 2004  increased  by $4.0
          million and $42.7 million, respectively,  compared to the same periods
          in 2003.  The increase is primarily  due to the  inclusion of deferred
          sales  inducement  amortization  as a component of benefit  expense in
          2004, as required  with the adoption of SOP 03-1.  In addition,  lower
          separate account benefit  guarantees were recognized  during the three
          months  ended  September  30,  2004 as a result of  improved  separate
          account market performance.

          General  expenses  increased by $7.7 million and $11.5 million for the
          three and nine months ended September 30, 2004, respectively, compared


                                       48

<PAGE>

          to that for the same periods in 2003. The increase in general expenses
          is  largely  due to growth of the  business  and higher  assets  under
          management.

          Commissions  increased  $48.9 million and $146.7 million for the three
          and nine months ended  September 30, 2004,  respectively,  compared to
          the same periods in 2003. This increase is primarily due to additional
          commissions  on  higher  new  sales  of  variable  and  fixed  annuity
          products.  Also  contributing  to the nine months ended increase was a
          $24.1 million ceded commission adjustment in the first quarter of 2003
          related to the recapture of an affiliate reinsurance agreement.

          Policy  acquisition costs deferred for the three and nine months ended
          September  30, 2004  increased  by $25.6  million  and $88.0  million,
          respectively,  compared to the same periods in 2003. This increase was
          primarily  due to the  deferral of increased  commissions  and selling
          expense on higher annuity product sales.

          Amortization  of  deferred  policy  acquisition  costs  and  value  of
          business  acquired  decreased  $11.9 million and $58.1 million for the
          three and nine months ended September 30, 2004, respectively, compared
          to the same periods in 2003. Amortization of long-duration products is
          reflected in proportion to actual and estimated  future gross profits.
          Estimated  future  gross  profits  are  computed  based on  underlying
          assumptions  related to the  underlying  contracts,  including but not
          limited to interest margins,  surrenders,  withdrawals,  expenses, and
          asset  growth.  The decrease in the  amortization  of deferred  policy
          acquisition costs and value of insurance  acquired reflects the impact
          of these variables on the overall book of business.

          Expense and charges  reimbursed under modified  coinsurance  ("MODCO")
          agreements  for the three and nine months  ended  September  30, 2004,
          increased by $0.5 million and $1.0 million, respectively,  compared to
          the same periods in 2003.  This balance  represents the net cash flows
          from the Paine Webber MODCO  agreements.  As this MODCO agreement does
          not cover new  business,  the  run-off of the  reserve  credit and the
          product charge reimbursement to Paine Webber exceed the commission and
          expense allowances that accrue to the Company.

          Interest  expense for the three and nine months  ended  September  30,
          2004 is comparable to that for the same periods in 2003.

          The  cumulative  effect of the change in accounting  principle for the
          nine months ended September 30, 2004, was a loss of $2.3 million,  net
          of  tax,  due to  the  implementation  of  SOP  03-1.  The  change  in
          accounting principle was recorded during the first quarter of 2004.

          Net income,  excluding  income tax  expense  and change in  accounting
          principle,  increased  by $7.7  million  for the  three  months  ended
          September  30, 2004  compared to the three months ended  September 30,
          2003. The increase in net income is primarily related to increased fee
          income and decreased amortization of deferred policy acquisition costs
          and value of new business  acquired,  partially offset by the increase


                                       49

<PAGE>

          in  commission  expense and policy  acquisition  costs  deferred.  Net
          income,   excluding  income  tax  expense  and  change  in  accounting
          principle,  increased  by  $84.6  million  for the nine  months  ended
          September 30, 2004, as compared to the nine months ended September 30,
          2003.  The  increase  in net  earnings  is  primarily  the  result  of
          increased fee income and  decreased  amortization  of deferred  policy
          acquisition costs and value of new business acquired, partially offset
          by higher interest  credited and other guarantee  benefits  related to
          expenses,  increased  commission expense, and policy acquisition costs
          deferred.

          Financial Condition

          Investments

          Fixed Maturities

          Total fixed  maturities  reflected  net  unrealized  capital  gains of
          $483.6  million and $517.3  million at September 30, 2004 and December
          31, 2003, respectively.

          It is management's objective that the portfolio of fixed maturities be
          of high quality and be well  diversified by market  sector.  The fixed
          maturities in the Company's  portfolio are generally rated by external
          rating agencies and, if not externally rated, are rated by the Company
          on a basis believed to be similar to that used by the rating agencies.
          The average quality rating of the Company's fixed maturities portfolio
          was A+ at September 30, 2004 and December 31, 2003.

          Fixed   maturities   rated  BB  and   below   may   have   speculative
          characteristics,   and  changes  in  economic   conditions   or  other
          circumstances  are more  likely to lead to a weakened  capacity of the
          issuer to make  principal and interest  payments than is the case with
          higher rated fixed maturities.

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

                                               September 30,      December 31,
                                                   2004               2003
                                             ----------------   ----------------
          AAA                                      34.7 %             35.3 %
          AA                                        4.9                4.7
          A                                        21.1               21.3
          BBB                                      35.0               33.4
          BB                                        3.6                4.0
          B and below                               0.7                1.3
                                             ----------------   ----------------
          Total                                   100.0 %            100.0 %
                                             ================   ================


                                       50
<PAGE>

          The  percentage  of total  fixed  maturities  by  market  sector is as
          follows:

                                               September 30,      December 31,
                                                   2004               2003
                                             ----------------   ----------------
          U.S. Corporate                           46.3 %                48.9 %
          Residential Mortgaged-backed             19.3                  20.8
          Commercial/Multifamily
            Mortgage-backed                         6.0                   5.0
          Foreign (1)                              16.9                  15.9
          U.S. Treasuries/Agencies                  1.0                   1.3
          Asset-backed                             10.5                   8.1
                                             ----------------   ----------------
          Total                                   100.0 %               100.0 %
                                             ================   ================

          (1) Primarily U.S. dollar denominated

          The Company  analyzes  the general  account  investments  to determine
          whether there has been an other than  temporary  decline in fair value
          below  the  amortized  cost  basis in  accordance  with  FAS No.  115,
          "Accounting  for Certain  Investments in Debt and Equity  Securities."
          Management  considers  the  length of the time and the extent to which
          the market value has been less than cost; the financial  condition and
          near 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 for a period of time  sufficient to allow for
          recovery  in market  value.  If it is  probable  that all  amounts due
          according  to the  contractual  terms of a debt  security  will not be
          collected,  an other than  temporary  impairment is considered to have
          occurred.

          In addition,  the Company  invests in structured  securities that meet
          the criteria of Emerging  Issues Task Force  ("EITF") Issue No. 99-20,
          "Recognition  of  Interest  Income and  Impairment  on  Purchased  and
          Retained Beneficial Interests in Securitized  Financial Assets." Under
          EITF Issue No. 99-20, a  determination  of the required  impairment is
          based on credit risk and the  possibility  of  significant  prepayment
          risk that restricts the Company's  ability to recover the  investment.
          An  impairment is recognized if the fair value of the security is less
          than book  value and  there  has been an  adverse  change in cash flow
          since the last remeasurement date.

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

          Liquidity and Capital Resources

          Liquidity  is the ability of the Company to generate  sufficient  cash
          flows to meet the  cash  requirements  of  operating,  investing,  and
          financing activities. The Company's principal sources of liquidity are
          annuity  premiums and product  charges,  investment  income,  maturing
          investments,  proceeds from debt issuance,  and capital contributions.
          Primary uses of these funds are payments of commissions  and operating
          expenses,   interest  and  premium  credits,   investment   purchases,
          repayment of debt, as well as withdrawals and surrenders.

                                       51

<PAGE>



          The Company's  liquidity  position is managed by maintaining  adequate
          levels  of  liquid  assets,  such  as cash  or  cash  equivalents  and
          short-term  investments.   Additional  sources  of  liquidity  include
          borrowing facilities to meet short-term cash requirements. The Company
          maintains a $499  million  revolving  note  facility  with ING America
          Insurance  Holdings,  Inc.  ("ING  AIH"),  a  perpetual  $100  million
          revolving  note  facility  with  Bank of New York  and a $125  million
          revolving  note  facility with SunTrust Bank which expires on July 30,
          2005. Management believes that these sources of liquidity 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 and report  information under a risk-based  capital formula.
          These  requirements  are  intended to allow  insurance  regulators  to
          monitor the capitalization of insurance  companies based upon the type
          and mixture of risks inherent in a Company's  operations.  The formula
          includes  components  for asset risk,  liability  risk,  interest rate
          exposure,  and other factors. The Company has complied with the NAIC's
          risk-based capital reporting  requirements.  Amounts reported indicate
          that the Company has total adjusted capital above all required capital
          levels.

          During the nine months  ended  September  30,  2004,  ING USA received
          capital  contributions  of $40  million.  During the nine months ended
          September 30, 2003, ING USA received  capital  contributions  of $88.7
          million.

          Recently Adopted Accounting Standards

          Accounting  and  Reporting  by  Insurance   Enterprises   for  Certain
          Nontraditional Long-Duration Contracts and for Separate Accounts

          The Company adopted  Statement of Position  ("SOP") 03-1,  "Accounting
          and  Reporting by  Insurance  Enterprises  for Certain  Nontraditional
          Long-Duration  Contracts  and for  Separate  Accounts,"  on January 1,
          2004.  SOP 03-1  establishes  several new  accounting  and  disclosure
          requirements for certain  nontraditional  long-duration  contracts and
          for separate  accounts  including,  among other things,  a requirement
          that assets and liabilities of separate account  arrangements  that do
          not meet certain  criteria be accounted for as general  account assets
          and  liabilities,  and that the revenue and  expenses  related to such
          arrangements  be  consolidated  with the respective  line items in the
          Condensed  Statements  of  Income.  In  addition,   the  SOP  requires
          additional  liabilities be established  for certain  guaranteed  death
          benefits and for products  with certain  patterns of cost of insurance
          charges,  and that sales inducements  provided to  contractholders  be
          recognized on the balance sheet  separately from deferred  acquisition
          costs  and  amortized  as  a  component  of  benefits   expense  using
          methodology   and   assumptions   consistent   with   those  used  for
          amortization of deferred policy acquisition costs.


                                       52

<PAGE>

          The Company evaluated all requirements of SOP 03-1 and determined that
          it is  affected  by the SOP's  requirements  to  establish  additional
          liabilities for certain guaranteed benefits and products with patterns
          of  cost  insurance  charges  resulting  in  losses  in  later  policy
          durations from the insurance benefit function and to defer,  amortize,
          and  recognize  separately,   sales  inducements  to  contractholders.
          Requirements  for certain separate  account  arrangements  that do not
          meet  the  established  criteria  for  separate  asset  and  liability
          recognition  are  applicable  to the Company,  however,  the Company's
          policies on separate account assets and liabilities have  historically
          been, and continue to be, in conformity  with the  requirements  newly
          established.  Upon  adoption  of the SOP,  the  Company  recognized  a
          cumulative  effect  of a change  in  accounting  principle  of  $(3.6)
          million,  before tax or $(2.3) million,  net of $1.3 million of income
          taxes as of January 1, 2004.

          The  implementation  of  SOP  03-1  raised  questions   regarding  the
          interpretation  of the requirements of Financial  Accounting  Standard
          ("FAS")  No.  97,  concerning  when it is  appropriate  to  record  an
          unearned revenue  liability related to the insurance benefit function.
          To clarify its position,  the  Financial  Accounting  Standards  Board
          ("FASB")  issued  FASB Staff  Position  No. FAS 97-1 ("FSP FAS 97-1"),
          "Situations in Which Paragraphs 17(b) and 20 of FASB Statement No. 97,
          `Accounting  and  Reporting  by  Insurance   Enterprises  for  Certain
          Long-Duration  Contracts  and for  Realized  Gains and Losses from the
          Sale of Investments,' Permit or Require Accrual of an Unearned Revenue
          Liability,"  effective for fiscal periods beginning  subsequent to the
          date the guidance was issued,  June 18, 2004. The Company  adopted FSP
          FAS 97-1 on July 1, 2004 and has  evaluated the impact of the guidance
          on whether the Company is required to  establish  an unearned  revenue
          reserve on its existing and new business. The adoption of FSP FAS 97-1
          did not have an impact on the Company's financial position, results of
          operations or cash flows.

          The Meaning of Other Than Temporary  Impairment and its Application to
          Certain Investments

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

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

          Step 2: Evaluate  whether an impairment is other than temporary.

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


                                       53

<PAGE>

          On September  30, 2004,  the FASB issued FASB Staff  Position No. EITF
          Issue 03-1-1 ("FSP EITF 03-1-1"),  "Effective Date of Paragraphs 10-20
          of  EITF  Issue  No.  03-1,  `The  Meaning  of  Other  Than  Temporary
          Impairment and Its Application to Certain Investments,'" which delayed
          EITF 03-1's original effective date of July 1, 2004 for the paragraphs
          of the  guidance  surrounding  steps two and  three of the  impairment
          model  introduced.  The delay is in effect until a final consensus can
          be reached on such guidance.  Despite the delay of the  implementation
          of steps two and three, other than temporary  impairments are still to
          be recognized as required by existing guidance.

          Earlier  consensus  reached  by the EITF on this issue  required  that
          certain   quantitative   and  qualitative   disclosures  be  made  for
          unrealized  losses on debt and  equity  securities  that have not been
          recognized as other than temporary impairments. These disclosures were
          adopted by the Company,  effective  December 31, 2003, and included in
          the  Investments   footnote  of  the  Notes  to  Condensed   Financial
          Statements  included in the Company's  December 31, 2003 Form 10-K. In
          addition  to  the  disclosure  requirements  adopted  by  the  Company
          effective  December 31, 2003, the final consensus of EITF 03-1 reached
          in March 2004 included  additional  disclosure  requirements  that are
          effective  for annual  financial  statements  for fiscal  years ending
          after June 15, 2004.

          Accounting for Derivative Instruments and Hedging Activities

          In 2003, the Derivative  Implementation  Group ("DIG") responsible for
          issuing guidance on behalf of the FASB for  implementation  of FAS No.
          133,  "Accounting for Derivative  Instruments and Hedging  Activities"
          issued Statement  Implementation Issue No. B36, "Embedded Derivatives:
          Modified   Coinsurance   Arrangements   and  Debt   Instruments   That
          Incorporate Credit Risk Exposures That Are Unrelated or Only Partially
          Related  to  the  Credit   Worthiness   of  the  Obligor  under  Those
          Instruments"   ("DIG  B36").  Under  this   interpretation,   modified
          coinsurance and coinsurance with funds withheld reinsurance agreements
          as well as other types of  receivables  and payables where interest is
          determined  by reference to a pool of fixed  maturity  assets or total
          return debt index may be  determined to contain  embedded  derivatives
          that are  required to be  bifurcated.  The Company  adopted DIG B36 on
          October  1,  2003  and has  modified  coinsurance  treaties  that  are
          applicable to the guidance.  The applicable  contracts,  however, were
          determined to generate embedded derivatives with a fair value of zero.
          Therefore,  the  guidance,  while  implemented,  did  not  impact  the
          Company's financial position, results of operations, or cash flows.

          Off-Balance Sheet Arrangements

          In January  2003,  the  Financial  Accounting  Standards  Board (FASB)
          issued FASB  Interpretation  46,  "Consolidation  of Variable Interest
          Entities,  an Interpretation of ARB No.51" (FIN 46). In December 2003,
          the FASB  modified FIN 46 to make certain  technical  corrections  and
          address certain implementation issues that had arisen. FIN 46 provides
          a new framework for identifying  variable interest entities (VIEs) and
          determining  when a company  should  include the assets,  liabilities,


                                       54

<PAGE>

          noncontrolling  interests  and results of  activities  of a VIE in its
          consolidated financial statements.

          In general,  a VIE is a  corporation,  partnership,  limited-liability
          corporation,  trust,  or any other  legal  structure  used to  conduct
          activities or hold assets that either (1) has an  insufficient  amount
          of equity to carry out its  principal  activities  without  additional
          subordinated  financial support, (2) has a group of equity owners that
          are unable to make significant decisions about its activities,  or (3)
          has a group of equity owners that do not have the obligation to absorb
          losses or the right to receive returns generated by its operations.

          FIN 46 requires a VIE to be consolidated if a party with an ownership,
          contractual  or  other  financial  interest  in the  VIE  (a  variable
          interest holder) is obligated to absorb a majority of the risk of loss
          from the VIE's  activities,  is  entitled to receive a majority of the
          VIE's  residual  returns (if no party  absorbs a majority of the VIE's
          losses), or both. A variable interest holder that consolidates the VIE
          is called the primary  beneficiary.  Upon  consolidation,  the primary
          beneficiary  generally must initially  record all of the VIE's assets,
          liabilities   and   noncontrolling   interests   at  fair   value  and
          subsequently  account for the VIE as if it were consolidated  based on
          majority voting interest.  FIN 46 also requires disclosures about VIEs
          that the variable  interest  holder is not required to consolidate but
          in which it has a significant variable interest.

          At September  30, 2004,  the Company  held the  following  investments
          that, for purposes of FIN 46, were  evaluated and determined  that the
          investments do not require  consolidation  in the Company's  financial
          statements:

          <TABLE>
          <S>                                                   <C>                          <C>               <C>

          (Millions)
                        Asset Type                                       Purpose             Book Value (1)      Market Value
          ---------------------------------                     --------------------------   ---------------   ---------------

          Private Corporate Securities - synthetic leases;
            project financings; credit tenant leases               Investment Holdings         $    3,188.3      $    3,321.1
          Foreign Securities - US VIE subsidiaries of
            foreign companies                                      Investment Holdings                556.1             587.6
          Commercial Mortgage Obligations (CMO)                    Investment Holdings              3,051.7           3,101.4
          Collateralized Debt Obligations (CDO)                Investment Holdings and/or
                                                                    Collateral Manager                 73.7              69.3
          Asset-Backed Securities (ABS)                            Investment Holdings                153.2             152.8
          Commercial Mortgage Backed Securities (CMBS)             Investment Holdings              1,027.3           1,066.0


          (1)  Represents  maximum  exposure to loss except for those structures
               for which the Company also receives asset management fees.

          </TABLE>

          New Accounting Pronouncements

          In September  2004,  the AICPA issued  Technical  Practice Aid ("TPA")
          6300.05 - 6300.08  "Q&As  Related to the  Implementation  of SOP 03-1,
          Accounting  and  Reporting  by  Insurance   Enterprises   for  Certain
          Nontraditional Long-Duration Contracts and for Separate Accounts" (the
          "TPA").  The  TPA  provides   additional  guidance  regarding  certain
          implicit assessments that may be used in testing of the base mortality
          function  on  contracts,  which  is  performed  to  determine  whether
          additional  liabilities are required in conjunction  with SOP 03-1. In


                                       55

<PAGE>

          addition, the TPA provides additional guidance surrounding the allowed
          level of aggregation of additional  liabilities  determined  under the
          SOP. The Company is currently  evaluating the impact of the TPA on the
          cumulative  effect of a change in accounting  principle  recognized on
          January  1,  2004 and  anticipates  a  potential  decrease  in the net
          liability  established as part of the accounting  change. The TPA will
          be  fully  implemented  during  the  fourth  quarter  2004 and will be
          reported as a cumulative  effect of a change in  accounting  principle
          applied retroactively to January 1, 2004.

          Critical Accounting Policies

          General

          The  preparation  of  financial  statements  in  conformity  with U.S.
          generally accepted accounting principles requires the use of estimates
          and assumptions in certain  circumstances that affect amounts reported
          in  the  accompanying   condensed  financial  statements  and  related
          footnotes.  These  estimates  and  assumptions  are  evaluated  on  an
          on-going basis based on historical  developments,  market  conditions,
          industry  trends and other  information  that is reasonable  under the
          circumstances.  There can be no  assurance  that actual  results  will
          conform to estimates and  assumptions,  and that  reported  results of
          operations will not be affected in a materially  adverse manner by the
          need to make future accounting adjustments to reflect changes in these
          estimates and assumptions from time to time.

          The Company has identified the following estimates as critical in that
          they  involve  a  higher  degree  of  judgment  and are  subject  to a
          significant  degree of  variability:  investment  impairment  testing,
          amortization  of  deferred  acquisition  costs and  value of  business
          acquired  and  goodwill   impairment   testing.  In  developing  these
          estimates,  management makes subjective and complex judgments that are
          inherently  uncertain  and  subject to  material  changes as facts and
          circumstances  develop.  Although  variability  is  inherent  in these
          estimates,  management  believes the amounts  provided are appropriate
          based  upon the facts  available  upon  compilation  of the  condensed
          financial statements.

          Investment Impairment Testing

          The Company reviews the general account investments for impairments by
          analyzing  the amount and length of time  amortized  cost has exceeded
          fair value, and by making certain estimates and assumptions  regarding
          the issuing companies' business prospects,  future economic conditions
          and market  forecasts.  Based on the facts and  circumstances  of each
          case,  management  uses  judgment in deciding  whether any  calculated
          impairments  are  temporary  or  other  than   temporary.   For  those
          impairments judged to be other than temporary, the Company reduces the
          carrying  value of those  investments  to the  current  fair value and
          records impairment losses for the difference.


                                       56
<PAGE>

          Amortization  of  Deferred  Acquisition  Costs and  Value of  Business
          Acquired

          Deferred  policy  acquisition  costs  ("DAC")  and  value of  business
          acquired  ("VOBA") are  amortized  with  interest over the life of the
          contracts  (usually  25 years) in  relation  to the  present  value of
          estimated gross profits from projected interest and mortality margins,
          asset-based  fees,  policy  administration  and surrender charges less
          policy maintenance fees and non-capitalized commissions.

          Changes  in  assumptions   can  have  a  significant   impact  on  the
          calculation of DAC/VOBA and its related amortization  patterns. Due to
          the  relative  size of  DAC/VOBA  balance and the  sensitivity  of the
          calculation  to minor changes in the  underlying  assumptions  and the
          related volatility that could result in the reported DAC/VOBA balance,
          the Company performs a quarterly  analysis of DAC/VOBA for the annuity
          business (annually for the life business).

          At each  balance  sheet  date,  actual  historical  gross  profits are
          reflected and expected  future gross  profits and related  assumptions
          are  evaluated  for  continued   reasonableness.   Any  adjustment  in
          estimated  profit  requires  that  the  amortization  rate be  revised
          retroactively   to  the   date  of   policy   or   contract   issuance
          ("unlocking"),  which could be significant.  The cumulative difference
          related  to prior  periods is  recognized  as a  component  of current
          period's  amortization,  along with  amortization  associated with the
          actual gross profits of the period. In general, increases in estimated
          returns  result in increased  expected  future  profitability  and may
          lower the rate of amortization, while increases in lapse/surrender and
          mortality  assumptions  or  decreases  in returns  reduce the expected
          future  profitability of the underlying  business and may increase the
          rate of amortization.

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

          Sales Inducements

          Sales inducements  represent benefits paid to contractholders that are
          incremental  to the amounts the Company  credits on similar  contracts
          and are higher than the contract's  expected  ongoing  crediting rates
          for periods after the inducement. Such amounts are reported separately
          on the  balance  sheet and are  amortized  as a  component  of benefit
          expense using  methodology and assumptions  consistent with those used
          for amortization of DAC.


                                       57

<PAGE>



          Contractual Obligations

          As  of  September  30,  2004,  the  Company  had  certain  contractual
          obligations  due over a period of time as  summarized in the following
          table:

          <TABLE>
          <S>                               <C>           <C>           <C>             <C>           <C>

                                                            Payments due by Period (in millions)
                                            ----------------------------------------------------------------------
                                                           Less than                                    More than
          Contractual Obligations              Total         1 Year        1-3 Years      3-5 Years      5 Years
          ---------------------------       ------------  ------------  --------------  ------------  ------------
          Long-Term Debt                      $ 105.4       $   2.8        $  5.6         $   5.6       $  91.4
          Operating Lease Obligations            85.3           7.6          15.6            15.2          46.9
          Purchase Obligations                  264.9         264.9             -               -             -
                                            ------------  ------------  --------------  ------------  ------------
          Total                               $ 455.6       $ 275.3        $ 21.2         $  20.8       $ 138.3
                                            ============  ============  ==============  ============  ============

         </TABLE>

          The  Company's  long-term  debt  consists  of a  surplus  note and the
          related  interest  payable,  with  Security  Life of Denver  Insurance
          Company. As of September 30, 2004, the outstanding principal, interest
          rate,  and maturity  date of the surplus note are $35 million,  7.98%,
          and December 7, 2029, respectively.

          Operating lease obligations relate to the rental of office space under
          various non-cancelable  operating lease agreements that expire through
          May 2010.

          Purchase   obligations   consist  primarily  of  commitments  to  fund
          additional limited  partnerships and joint ventures and commitments to
          enter into mortgage  loan and private  placement  arrangements  during
          2004.

          Legislative Initiatives

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

          On October 22, 2004,  the President  signed the American Jobs Creation
          Act of 2004. The act allows tax-free distributions to be made from the
          Policyholders'  Surplus Account in 2005 and 2006. Under prior law, the
          Company  was  allowed  to defer from  taxation a portion of  statutory
          income  under   certain   circumstances.   The  deferred   income  was
          accumulated in the Policyholders'  Surplus Account and is taxable only
          under conditions that management considers to be remote. Therefore, no
          federal income taxes have been provided on the accumulated  balance of
          $14.4 million as of September 30, 2004.  Based on currently  available
          information, the Company anticipates that the new law will permanently
          eliminate  any  potential  tax on the  accumulated  balance  of  $14.4
          million.

          Other legislative  proposals under consideration include repealing the
          estate  tax,  changing  the  taxation of products  and  changing  life
          insurance company taxation. Some of these proposals, if enacted, could
          have a material effect on life insurance, annuity and other retirement
          savings product sales. The impact on the Company's  products cannot be
          predicted.


                                       58

<PAGE>

          Forward-Looking Information/Risk Factors

          In  connection  with  the  "safe  harbor"  provisions  of the  Private
          Securities Litigation Reform Act of 1995, the Company cautions readers
          regarding certain forward-looking  statements contained in this report
          and in any other  statements  made by, or on behalf of,  the  Company,
          whether  or  not in  future  filings  with  the  SEC.  Forward-looking
          statements  are  statements  not based on historical  information  and
          which relate to future operations,  strategies,  financial results, or
          other   developments.   Statements   using  verbs  such  as  "expect,"
          "anticipate,"  "believe" or words of similar import generally  involve
          forward-looking   statements.    Without   limiting   the   foregoing,
          forward-looking  statements  include  statements  which  represent the
          Company's beliefs concerning future levels of sales 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  and
          assumptions  that are  inherently  subject  to  significant  business,
          economic and  competitive  uncertainties  and  contingencies,  many of
          which are beyond the  Company's  control and many of which are subject
          to change.  These  uncertainties and contingencies  could cause actual
          results   to  differ   materially   from   those   expressed   in  any
          forward-looking  statements  made by, or on behalf  of,  the  Company.
          Whether or not actual results differ  materially from  forward-looking
          statements  may  depend  on  numerous  foreseeable  and  unforeseeable
          developments.  Some may be national in scope, such as general economic
          conditions, changes in tax law and changes in interest rates. Some may
          be  related  to the  insurance  industry  generally,  such as  pricing
          competition,   regulatory  developments  and  industry  consolidation.
          Others  may  relate  to the  Company  specifically,  such  as  credit,
          volatility and other risks  associated  with the Company's  investment
          portfolio.  Investors  are also  directed to consider  other risks and
          uncertainties  discussed  in  documents  filed by the Company with the
          SEC. The Company  disclaims any  obligation to update  forward-looking
          information.


                                       59

<PAGE>



          Item 4. Controls and Procedures

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

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


                                       60


<PAGE>

     PART II.  OTHER INFORMATION

     Item 1.   Legal Proceedings

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

               As with many financial  services  companies,  the Company and its
               affiliates  have  received   informal  and  formal  requests  for
               information  from  various   governmental   and   self-regulatory
               agencies in connection  with  investigations  of the products and
               business practices of the financial  services  industry.  In each
               case, full cooperation has been and is being provided.  Reference
               is made to "Other Regulatory  Matters" in Note 12 to the Notes to
               Consolidated  Financial  Statements  in  Part  II,  Item 8 of the
               Company's Form 10-K Annual  Report,  filed on March 29, 2004 (SEC
               File No.  033-87270);  the Company's  Form 8-K/A  Current  Report
               filed on  September  8, 2004 (SEC  File No.  033-87270);  and the
               Company's  Form 8-K Current Report filed on October 29, 2004 (SEC
               File No. 033-87270).


     Item 6.   Exhibits

               3.(i)Restated   Articles  of  Incorporation   Providing  for  the
                    Redomestication  of Golden  American Life Insurance  Company
                    dated  July  2 &  3,  2003,  incorporated  by  reference  to
                    Company's  10-K,  as filed  with the SEC on March  29,  2004
                    (File No. 033-87270).

                    Amendment  to Articles of  Incorporation  Providing  for the
                    Name Change of Golden American Life Insurance  Company dated
                    November  20,  2003,   incorporated   by  reference  to  the
                    Company's  10-K,  as filed  with the SEC on March  29,  2004
                    (File No. 033-87270).

                    Amendment  to Articles of  Incorporation  Providing  for the
                    Change in  Purpose  and Powers of ING USA  Annuity  and Life
                    Insurance  Company dated March 3 & 4, 2004,  incorporated by
                    reference to the  Company's  10-Q,  as filed with the SEC on
                    May17, 2004 (File No.033-87270).

               (ii) Amended  and  Restated  By-Laws of ING USA  Annuity and Life
                    Insurance Company,  adopted by the Board of Directors of the
                    Company on June 25, 2003,  as amended  November 11, 2003 and
                    February  25,  2004,   incorporated   by  reference  to  the
                    Company's  Form 10-Q,  as filed with the SEC on May 17, 2004
                    (File No. 033-87270).


                                       61

<PAGE>

               4.   Instruments   Defining  the  Rights  of  Security   Holders,
                    Including Indentures (Annuity Contracts).

                    Single  Premium   Deferred   Modified   Guaranteed   Annuity
                    Contract,   Single  Premium  Deferred  modified   Guaranteed
                    Annuity  Master   Contract,   and  Single  Premium  Deferred
                    Modified   Guaranteed  Annuity  Certificate  -  Incorporated
                    herein by  reference  to  Pre-Effective  Amendment  No. 1 to
                    Registration   Statement  on  Form  S-1  for  American  Life
                    Insurance  Company as filed with the SEC on February 8, 2002
                    (File No. 333-67660).

                    Single Premium Deferred Modified Guaranteed Annuity Contract
                    -   Incorporated   herein  by   reference   to  the  initial
                    Registration  Statement on Form S-1 for Golden American Life
                    Insurance  Company,  as filed with the SEC on June 30,  2000
                    (File No. 333-40596).

                    Single Premium Deferred Modified  Guaranteed  Annuity Master
                    Contract and Single  Premium  Deferred  Modified  guaranteed
                    Annuity   Certificate   -   Incorporated   by  reference  to
                    Post-Effective  Amendment No. 1 to Registration Statement on
                    Form S-1 for Golden  American  Life  Insurance  Company,  as
                    filed  with  the  SEC  on  September   13,  2000  (File  No.
                    333-40596).

                    Interest in Fixed Account I under Variable Annuity Contracts
                    -  Incorporated  herein  by  reference  to:   Post-Effective
                    Amendment No. 12 to  Registration  Statement on Form N-4 for
                    Golden American Life Insurance  Company  Separate Account B,
                    as filed with the  Securities  and  Exchange  Commission  on
                    April 23, 1999 (File Nos. 333-59261, 811-5626); Incorporated
                    by  reference   to   Post-Effective   Amendment   No.  3  to
                    Registration  Statement on Form N-4 for Golden American life
                    Insurance  Company,  as filed with the SEC on April 23, 1999
                    (File  Nos.  333-28769,   811-5626);   and  Incorporated  by
                    reference to  Pre-Effective  Amendment No. 1 to Registration
                    statement  on Form N-4 for Golden  American  Life  Insurance
                    Company  Separate  Account  B, as filed with the SEC on June
                    24, 2000 (File Nos. 333-33914, 811-5626).

                    Interests  in  Fixed  Account  II  under  Variable   Annuity
                    Contracts   -   Incorporated    herein   by   reference   to
                    Post-Effective  Amendment No. 7 to Registration Statement on
                    Form N-4 for  Separate  Account  B of Golden  American  Life
                    Insurance  Company  as filed with the SEC on October 2, 2000
                    (File  No.  333-28679,  811-5626),  Incorporated  herein  by
                    reference to Post-Effective  Amendment No. 2 to Registration
                    Statement  on Form  N-4 for  Separate  Account  B of  Golden
                    American  Life  Insurance  Company  as filed with the SEC on
                    October 2, 2000 (File No. 333-30180, 811-5626), Incorporated
                    herein by reference  to  Post-Effective  Amendment  No. 5 to
                    Registration Statement on Form N-4 for Separate Account B of
                    Golden American Life Insurance Company as filed with the SEC


                                       62

<PAGE>

                    on  April  23,   1999   (File  No.   333-28755,   811-5626),
                    Incorporated herein by reference to Post-Effective Amendment
                    No. 1 to  Registration  Statement  on Form N-4 for  Separate
                    Account B of Golden American Life Insurance Company as filed
                    with  the  SEC  on  April  23,  1999  (File  No.  333-66757,
                    811-5626), Incorporated herein by reference to Pre-Effective
                    Amendment  No. 1 to  Registration  Statement on Form N-4 for
                    Separate Account B of Golden American Life Insurance Company
                    as  filed  with  the  SEC on  October  26,  2001  (File  No.
                    333-63692,  811-5626),  Incorporated  herein by reference to
                    Pre-Effective  Amendment No. 1 to Registration  Statement on
                    Form N-4 for  Separate  Account  B of Golden  American  Life
                    Insurance Company as filed with the SEC on December 11, 2001
                    (File No.333-70600, 811-5626), and Incorporated by reference
                    to Post-Effective  Amendment No. 1 to Registration Statement
                    on Form  N-4 for  Golden  American  Life  Insurance  Company
                    Separate  Account B, as filed with the SEC on April 16, 2003
                    (File No. 333-90516, 811-5626).

                    Interest in the Guaranteed  Account under  Variable  Annuity
                    Contracts   -   Incorporated    herein   by   reference   to
                    Pre-Effective  Amendment No. 1 to Registration  Statement on
                    Form S-2 for Golden  American  Life  Insurance  Company,  as
                    filed with the SEC on June 29, 2001 (File No. 333-57212).

                    Single Premium Deferred Equity Indexed  Modified  Guaranteed
                    Annuity   Contract,   Single   Premium   Deferred   Modified
                    Guaranteed  Annuity Group Master  Contract,  Single  Premium
                    Deferred   Equity  Indexed   Modified   Guaranteed   Annuity
                    Certificate   -   Incorporated   herein  by   reference   to
                    Pre-Effective  Amendment No. 1 to Registration  Statement on
                    Form S-2 for ING USA Annuity and Life Insurance Company,  as
                    filed with the SEC on August 13, 2004 (File No. 333-116137).

                    31.1 Certificate  of David A. Wheat  pursuant to Section 302
                         of the Sarbanes-Oxley Act of 2002.

                    31.2 Certificate of Jacques de Vaucleroy 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 Jacques de Vaucleroy pursuant to Section
                         906 of the Sarbanes-Oxley Act of 2002.


                                       63


<PAGE>

                                   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 the
     undersigned thereunto duly authorized.


                             ING USA ANNUITY AND LIFE INSURANCE COMPANY
                                             (Registrant)


                             By:   /s/ David A. Wheat
     November 12, 2004             -----------------------------------------
     -----------------                 David A. Wheat
          (Date)                       Director, Senior Vice President and
                                         Chief Financial Officer

                                       (Duly Authorized Officer and Principal
                                          Financial Officer)


                                       64

<PAGE>

                                                                    Exhibit 31.1


                                  CERTIFICATION

     I, David A. Wheat, certify that:

     1.   I have reviewed this quarterly  report on Form 10-Q of ING USA Annuity
          and Life Insurance Company;

     2.   Based on my  knowledge,  this  report  does  not  contain  any  untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this report,  fairly  present in all material
          respects the financial condition, results of operations and cash flows
          of the  registrant  as of,  and for,  the  periods  presented  in this
          report;

     4.   The registrant's  other certifying  officers and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined  in  Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  for the
          registrant and have:

          a)   designed such disclosure controls and procedures,  or caused such
               disclosure  controls  and  procedures  to be  designed  under our
               supervision,  to ensure that material information relating to the
               registrant,  including  its  consolidated  subsidiaries,  is made
               known to us by others within those entities,  particularly during
               the period in which this report is being prepared;

          b)   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls  and   procedures  and  presented  in  this  report  our
               conclusions  about the  effectiveness of the disclosure  controls
               and  procedures,  as of the  end of the  period  covered  by this
               report based on such evaluation; and

          c)   disclosed in this report any change in the registrant's  internal
               control  over  financial   reporting  that  occurred  during  the
               registrant's most recent fiscal quarter (the registrant's  fourth
               fiscal  quarter  in  the  case  of an  annual  report)  that  has
               materially  affected,  or  is  reasonably  likely  to  materially
               affect,   the   registrant's   internal  control  over  financial
               reporting; and

     5.   The  registrant's  other  certifying  officer(s) and I have disclosed,
          based on our most recent evaluation of internal control over financial
          reporting, to the registrant's auditors and the audit committee of the
          registrant's  board of directors (or persons performing the equivalent
          functions):

          a)   all  significant  deficiencies  and  material  weaknesses  in the
               design or operation of internal control over financial  reporting
               which are reasonably  likely to adversely affect the registrant's
               ability  to  record,  process,  summarize  and  report  financial
               information; and

          b)   any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal control over financial reporting.


   Date:    November 12, 2004
            -----------------

   By       /s/ David A. Wheat
            -------------------------------------------
                David A. Wheat
                Director, Senior Vice President and
                  Chief Financial Officer
                (Duly Authorized Officer and Principal Financial Officer)


<PAGE>

                                                                    Exhibit 31.2


                                  CERTIFICATION

     I, Jacques de Vaucleroy, certify that:

     1.   I have reviewed this quarterly  report on Form 10-Q of ING USA Annuity
          and Life Insurance Company;

     2.   Based on my  knowledge,  this  report  does  not  contain  any  untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this report,  fairly  present in all material
          respects the financial condition, results of operations and cash flows
          of the  registrant  as of,  and for,  the  periods  presented  in this
          report;

     4.   The registrant's  other certifying  officers and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined  in  Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  for the
          registrant and have:

          a)   designed such disclosure controls and procedures,  or caused such
               disclosure  controls  and  procedures  to be  designed  under our
               supervision,  to ensure that material information relating to the
               registrant,  including  its  consolidated  subsidiaries,  is made
               known to us by others within those entities,  particularly during
               the period in which this report is being prepared;

          b)   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls  and   procedures  and  presented  in  this  report  our
               conclusions  about the  effectiveness of the disclosure  controls
               and  procedures,  as of the  end of the  period  covered  by this
               report based on such evaluation; and

          c)   disclosed in this report any change in the registrant's  internal
               control  over  financial   reporting  that  occurred  during  the
               registrant's most recent fiscal quarter (the registrant's  fourth
               fiscal  quarter  in  the  case  of an  annual  report)  that  has
               materially  affected,  or  is  reasonably  likely  to  materially
               affect,   the   registrant's   internal  control  over  financial
               reporting; and

     5.   The  registrant's  other  certifying  officer(s) and I have disclosed,
          based on our most recent evaluation of internal control over financial
          reporting, to the registrant's auditors and the audit committee of the
          registrant's  board of directors (or persons performing the equivalent
          functions):

          a)   all  significant  deficiencies  and  material  weaknesses  in the
               design or operation of internal control over financial  reporting
               which are reasonably  likely to adversely affect the registrant's
               ability  to  record,  process,  summarize  and  report  financial
               information; and

          b)   any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal control over financial reporting.


   Date   November 12, 2004
          -----------------


   By     /s/ Jacques de Vaucleroy
          -----------------------------------------
              Jacques de Vaucleroy
              Director and President
              (Duly Authorized Officer and Principal Executive Officer)


<PAGE>