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 MARCH 31, 1997

                                       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  1-10640

                            RELIASTAR FINANCIAL CORP.
                            -------------------------
             (Exact name of registrant as specified in its charter)

             DELAWARE                         41-1620373
             --------                         ----------
(State or other jurisdiction of            (I.R.S. Employer
incorporation or organization)             Identification No.)


            20 WASHINGTON AVENUE SOUTH, MINNEAPOLIS, MINNESOTA 55401
            --------------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (612) 372-5432
                                 --------------
              (Registrant's telephone number, including area code)


(Former  name,  former  address and former  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 [ ]

Number  of  shares  of  common  stock  outstanding  as of  April  30,  1997  was
40,155,320.



PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                            RELIASTAR FINANCIAL CORP.
                      Condensed Consolidated Balance Sheets
                                  (in millions)
                                   (unaudited)

                                                                                MARCH 31, 1997     DECEMBER 31, 1996
                                                                                --------------     -----------------
<S>                                                                               <C>                <C>         
ASSETS
Fixed Maturity Securities, Available-for-Sale                                     $    9,212.4       $    9,298.2
Equity Securities                                                                         25.1               36.9
Mortgage Loans on Real Estate                                                          1,859.1            1,855.4
Real Estate and Leases                                                                    76.9               77.5
Policy Loans                                                                             555.1              549.0
Other Invested Assets                                                                     68.3               59.9
Short-Term Investments                                                                   123.7              119.4
                                                                                  ------------       ------------
     Total Investments                                                                11,920.6           11,996.3
Cash                                                                                      19.9               32.4
Accounts and Notes Receivable                                                            194.2              171.0
Reinsurance Receivable                                                                   209.8              199.0
Deferred Policy Acquisition Costs                                                      1,064.7            1,006.0
Present Value of Future Profits                                                          234.3              220.2
Property and Equipment, Net                                                              119.7              121.3
Accrued Investment Income                                                                175.3              164.7
Other Assets                                                                             424.9              383.9
Participation Fund Account Assets                                                        315.9              316.2
Assets Held in Separate Accounts                                                       2,254.6            2,096.0
                                                                                  ------------       ------------
       TOTAL ASSETS                                                               $   16,933.9       $   16,707.0
                                                                                  ============       ============

LIABILITIES
Future Policy and Contract Benefits                                               $   11,400.5       $   11,332.2
Pending Policy Claims                                                                    292.7              287.6
Other Policyholder Funds                                                                 209.0              190.6
Notes and Mortgages Payable                                                              449.1              407.5
Income Taxes                                                                             115.0              133.8
Other Liabilities                                                                        397.3              410.0
Participation Fund Account Liabilities                                                   315.9              316.2
Liabilities Related to Separate Accounts                                               2,249.1            2,090.5
                                                                                  ------------       ------------
       TOTAL LIABILITIES                                                              15,428.6           15,168.4
                                                                                  ------------       ------------

Company-Obligated Mandatorily Redeemable Preferred
   Securities Issued by a Consolidated Subsidiary                                        121.0              120.9

SHAREHOLDERS' EQUITY
Common Stock (Shares Issued: 1997, 42.6; 1996, 42.4)                                     578.9              572.3
Note Receivable from ESOP                                                                (21.2)             (21.6)
Unamortized Restricted Stock Awards                                                       (1.7)              (1.8)
Net Unrealized Investment Gains                                                           60.1              140.8
Retained Earnings                                                                        834.5              794.2
Less Treasury Common Stock, at Cost (Shares Held: 1997 and 1996,
 2.4)                                                                                    (66.3)             (66.2)
                                                                                  ------------       ------------
       TOTAL SHAREHOLDERS' EQUITY                                                      1,384.3            1,417.7
                                                                                  ------------       ------------

       TOTAL LIABILITIES AND
       SHAREHOLDERS' EQUITY                                                       $   16,933.9       $   16,707.0
                                                                                  ============       ============

See accompanying notes to condensed consolidated financial statements.
</TABLE>



<TABLE>
<CAPTION>


                            RELIASTAR FINANCIAL CORP.
                   Condensed Consolidated Statements of Income
                      (in millions, except per share data)
                                   (unaudited)

                                                                                    THREE MONTHS ENDED MARCH 31
                                                                                    ---------------------------
                                                                                      1997               1996
                                                                                      ----               ----
<S>                                                                               <C>               <C>          
REVENUES
Premiums                                                                          $      204.7      $       205.0
Net Investment Income                                                                    234.7              232.3
Realized Investment Gains                                                                  2.2                6.2
Policy and Contract Charges                                                               64.9               59.8
Other Income                                                                              56.7               30.1
                                                                                  ------------      -------------
     Total                                                                               563.2              533.4
                                                                                  ------------      -------------

BENEFITS AND EXPENSES
Benefits to Policyholders                                                                317.5              323.8
Sales and Operating Expenses                                                             121.4              100.2
Amortization of Deferred Policy Acquisition Costs
    and Present Value of Future Profits                                                   28.4               24.5
Interest Expense                                                                           7.4                7.3
Dividends and Experience Refunds to Policyholders                                          7.1                3.3
                                                                                  ------------      -------------
     Total                                                                               481.8              459.1
                                                                                  ------------      -------------

Income Before Income Taxes and Dividends on Preferred
    Securities of Subsidiary                                                              81.4               74.3
Income Tax Expense                                                                        28.4               26.2
Dividends on Preferred Securities of Subsidiary, Net of Tax                                1.7                 .1
                                                                                  ------------      -------------

Net Income                                                                        $       51.3      $        48.0
                                                                                  ============      =============

NET INCOME PER COMMON SHARE
Primary                                                                           $       1.26      $        1.24
                                                                                  ============      =============

Fully Diluted                                                                     $       1.26      $        1.17
                                                                                  ============      =============

Net Income Available to Common Shareholders                                       $       51.3      $        45.9
                                                                                  ============      =============

Weighted Average Shares
  Common and Common Equivalent Shares (Primary)                                           40.7               36.9
  Common Shares Assuming Maximum Dilution (Fully Diluted)                                 40.7               39.5


See accompanying notes to condensed consolidated financial statements.

</TABLE>


<TABLE>
<CAPTION>


                            RELIASTAR FINANCIAL CORP.
            Condensed Consolidated Statements of Shareholders' Equity
                      (in millions, except per share data)
                                   (unaudited)
                                                                                    THREE MONTHS ENDED MARCH 31

                                                                                    ---------------------------
                                                                                      1997               1996
                                                                                      ----               ----
<S>                                                                             <C>                 <C>          
10% SENIOR CUMULATIVE PREFERRED STOCK
   Beginning and End of Period                                                    $          -      $        63.2
                                                                                  ------------      -------------

ESOP CONVERTIBLE PREFERRED STOCK
   Beginning of Year                                                                         -               28.9
   Redeemed                                                                                  -                (.1)
                                                                                  ------------      -------------
      End of Period                                                                          -               28.8
                                                                                  ------------      -------------

COMMON STOCK
   Beginning of Year                                                                     572.3              566.5
   Issued for Benefit Plans                                                                5.3                  -
   Other, Net                                                                              1.3                (.5)
                                                                                  ------------      -------------
      End of Period                                                                      578.9              566.0
                                                                                  ------------      -------------

NOTE RECEIVABLE FROM ESOP
   Beginning of Year                                                                     (21.6)             (23.4)
   Repayments, Accrued or Paid                                                              .4                 .4
                                                                                  ------------      -------------
      End of Period                                                                      (21.2)             (23.0)
                                                                                  ------------      -------------

UNAMORTIZED RESTRICTED STOCK AWARDS
   Beginning of Year                                                                      (1.8)              (3.0)
   Awards, Net                                                                             (.2)               (.2)
   Amortization of Restricted Stock Awards                                                  .3                 .3
                                                                                --------------      -------------
      End of Period                                                                       (1.7)              (2.9)
                                                                                --------------      -------------

NET UNREALIZED INVESTMENT GAINS
   Beginning of Year                                                                     140.8              246.8
   Change for the Period                                                                 (80.7)            (118.5)
                                                                                --------------      -------------
      End of Period                                                                       60.1              128.3
                                                                                --------------      -------------

RETAINED EARNINGS
   Beginning  of Year                                                                    794.2              647.2
   Net Income                                                                             51.3               48.0
   Dividends to Shareholders:
      10% Senior Cumulative Preferred Stock (1996, $2.50 Per Share)                          -               (1.6)
      ESOP Convertible Preferred Stock (1996, $.5475 Per Share)                              -                (.7)
      Common Stock (Per Share: 1997, $.28; 1996, $.25)                                   (11.2)              (9.1)
   Other, Net                                                                               .2                (.1)
                                                                                --------------      -------------
      End of Period                                                                      834.5              683.7
                                                                                --------------      -------------

TREASURY COMMON STOCK
   Beginning of Year                                                                     (66.2)            (106.1)
   Acquired                                                                               (1.7)              (1.8)
   Reissued                                                                                1.6                7.8
                                                                                --------------      -------------
      End of Period                                                                      (66.3)            (100.1)
                                                                                --------------      -------------

TOTAL SHAREHOLDERS' EQUITY                                                      $      1,384.3      $     1,344.0
                                                                                ==============      =============

See accompanying notes to condensed consolidated financial statements.

</TABLE>


<TABLE>
<CAPTION>
                            RELIASTAR FINANCIAL CORP.
                 Condensed Consolidated Statements of Cash Flows
                                  (in millions)
                                   (unaudited)
                                                                                     THREE MONTHS ENDED MARCH 31
                                                                                     ---------------------------
                                                                                       1997                 1996
                                                                                       ----                 ----
<S>                                                                              <C>               <C>           
OPERATING ACTIVITIES
Net Income                                                                       $        51.3     $         48.0
Adjustments to Reconcile Net Income to Net Cash Provided by
  Operating Activities
     Interest Credited to Insurance Contracts                                            122.9              122.3
     Future Policy Benefits                                                              (58.5)             (72.1)
     Capitalization of Policy Acquisition Costs                                          (50.5)             (44.5)
     Amortization of Deferred Policy Acquisition Costs and Present
        Value of Future Profits                                                           28.4               24.5
     Deferred Income Taxes                                                                 3.9                2.9
     Net Change in Receivables and Payables                                                 .5                3.6
     Other Assets                                                                        (50.7)              17.0
     Realized Investment Gains, Net                                                       (2.2)              (6.2)
     Other                                                                                 1.6                  -
                                                                                 -------------     --------------
          Net Cash Provided by Operating Activities                                       46.7               95.5
                                                                                 -------------     --------------

INVESTING ACTIVITIES
Proceeds from Sales of Fixed Maturity Securities                                          83.8               20.1
Proceeds from Maturities or Repayment of Fixed Maturity Securities                       173.5              201.6
Cost of Fixed Maturity Securities Acquired                                              (353.1)            (348.0)
Sales of Equity Securities, Net                                                           13.6                  -
Proceeds of Mortgage Loans Sold, Matured or Repaid                                       124.5               66.7
Cost of Mortgage Loans Acquired                                                         (132.5)             (89.8)
Sales of Real Estate and Leases, Net                                                       2.7                 .2
Policy Loans Issued, Net                                                                  (6.1)              (8.8)
Sales (Purchases) of Other Invested Assets, Net                                           (3.1)               5.0
Purchases of Short-Term Investments, Net                                                  (4.3)             (85.5)
                                                                                 -------------     --------------
          Net Cash Used by Investing Activities                                         (101.0)            (238.5)
                                                                                 -------------     --------------

FINANCING ACTIVITIES
Deposits to Insurance Contracts                                                          311.2              281.4
Maturities and Withdrawals from Insurance Contracts                                     (304.5)            (277.1)
Net Proceeds from Issuance of Trust-Originated Preferred Securities                          -              120.8
Increase in Notes and Mortgages Payable                                                   41.7               17.1
Repayment of Notes and Mortgages Payable                                                   (.1)             (16.1)
Issuance of Common Stock Under Stock Option and Other Plans                                6.4                5.8
Dividends on 10% Senior Cumulative Preferred Stock                                           -               (1.6)
Dividends on Common Stock                                                                (11.2)              (9.1)
Acquisition of Treasury Common Stock                                                      (1.7)              (1.8)
                                                                                 -------------     --------------
          Net Cash Provided by Financing Activities                                       41.8              119.4
                                                                                 -------------     --------------
Decrease in Cash                                                                         (12.5)             (23.6)
Cash at Beginning of Period                                                               32.4               48.5
                                                                                 -------------     --------------
Cash at End of Period                                                            $        19.9     $         24.9
                                                                                 =============     ==============

See accompanying notes to condensed consolidated financial statements.
</TABLE>


                            RELIASTAR FINANCIAL CORP.
              Notes to Condensed Consolidated Financial Statements
                                   (unaudited)

NOTE 1. BASIS OF PRESENTATION

The condensed consolidated financial statements have been prepared in conformity
with generally accepted  accounting  principles and such principles were applied
on a basis  consistent  with that reflected in the 1996 Annual Report filed with
the Securities and Exchange Commission (SEC) except for the accounting change as
described in Note 2. The financial  information  included herein, other than the
condensed  consolidated balance sheet as of December 31, 1996, has been prepared
by management  without audit by independent  certified public  accountants.  The
condensed  consolidated  balance  sheet as of December 31, 1996 has been derived
from,  and  does  not  include  all the  disclosures  contained  in the  audited
consolidated financial statements for the year ended December 31, 1996.

The information  furnished includes all adjustments and accruals consisting only
of  normal,   recurring  accrual  adjustments  which  are,  in  the  opinion  of
management,  necessary for a fair  statement of results for the interim  period.
The results of operations for any interim period are not necessarily  indicative
of results  for the full year.  The  unaudited  interim  condensed  consolidated
financial statements should be read in conjunction with the financial statements
and notes thereto  contained in the Annual Report of ReliaStar  Financial  Corp.
(the Company or ReliaStar) for the year ended December 31, 1996.

NOTE 2. ACCOUNTING CHANGE

ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL  ASSETS AND  EXTINGUISHMENTS
OF LIABILITIES

Effective for  transactions  occurring on or after January 1, 1997,  the Company
adopted the provisions of Statement of Financial Accounting Standards (SFAS) No.
125   "Accounting   for  Transfers   and  Servicing  of  Financial   Assets  and
Extinguishments  of  Liabilities,"  which have not been deferred by SFAS No. 127
"Deferral of the  Effective  Date of Certain  Provisions  of FASB  Statement No.
125." SFAS No. 125 requires a company to recognize  the  financial and servicing
assets it  controls  and the  liabilities  it has  incurred  and to  derecognize
financial  assets  when  control has been  surrendered  in  accordance  with the
criteria  provided in SFAS No. 125. The adoption of this standard did not have a
significant effect on the financial results of the Company.

NOTE 3. IMPACT OF ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED IN THE FUTURE

EARNINGS PER SHARE

During February 1997, the Financial  Accounting  Standards Board issued SFAS No.
128 "Earnings Per Share." SFAS No. 128 replaces primary earnings per share (EPS)
with "Basic" EPS and replaces fully diluted EPS with "Diluted" EPS. SFAS No. 128
is effective for fourth quarter 1997  reporting  with  restatement of previously
reported EPS required. Early adoption of SFAS No. 128 is not permitted.  "Basic"
EPS is defined as net income  available  to common  shareholders  divided by the
weighted average number of common shares  outstanding for the period.  "Diluted"
EPS is computed in a manner  similar to the current fully  diluted  earnings per
share  calculation.  The  Company  does not expect  that  "Diluted"  EPS will be
materially different than fully diluted EPS as currently reported.

NOTE 4. ACQUISITION

On February 23, 1997, the Company  signed a definitive  agreement to acquire and
merge  Security-Connecticut  Corporation (SRC) into ReliaStar.  SRC is a holding
company  with two  primary  subsidiaries:  Security-Connecticut  Life  Insurance
Company of Avon,  Connecticut,  and Lincoln  Security Life Insurance  Company of
Brewster,  New York. As of December 31, 1996, SRC had assets of $2.3 billion and
total  shareholders'  equity of $355 million.  The transaction  will be effected
through a stock-for-stock  exchange. The exchange ratio will be determined based
upon the average  price of the  Company's  common  stock  during the  twenty-day
trading  period which is expected to conclude  five days prior to the closing of
the transaction  and is subject to adjustments  based upon changes in the market
value of the Company's  common stock.  The definitive  agreement also includes a
breakup  provision  that would  result in a payment  of $8 million to  ReliaStar
under certain circumstances if the transaction is not completed. The acquisition
will be accounted for as a purchase.

Based on the closing  price of $59.125 for  ReliaStar  common stock on March 31,
1997, SRC shareholders  would receive .7949 of a share of ReliaStar common stock
for each  share of SRC  common  stock.  Assuming  the  March 31  closing  price,
ReliaStar would issue approximately seven million additional shares of ReliaStar
common  stock,  and the  purchase  price would be  approximately  $417  million,
including transaction costs.  Completion of the merger is expected in the second
or third quarter of 1997, and is subject to normal closing conditions, including
approval by SRC shareholders and various regulatory approvals.

NOTE 5. SUBSEQUENT EVENT

On May 9, 1997, the Company filed a shelf  registration  with the Securities and
Exchange  Commission for the issuance of up to $400.0 million of debt securities
and other  securities.  This filing  replaced and  superseded the unused portion
($125.0 million) of the Company's December 18, 1995 shelf registration.


ITEM 2.

<TABLE>
<CAPTION>

                            RELIASTAR FINANCIAL CORP.

                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations

RESULTS OF OPERATIONS

Pretax  results of  operations  by  business  segment are  summarized  below (in
millions):

                                                                                  THREE MONTHS
                                                                                 ENDED MARCH 31
                                                                                 --------------
                                                                              1997             1996
                                                                              ----             ----
<S>                                                                             <C>               <C>
Pretax Operating Income (Loss) (1)
   Individual Insurance                                                       $53.4            $51.0
   Employee Benefits                                                           11.2              9.8
   Life and Health Reinsurance                                                 13.4             11.9
   Pension                                                                      2.9              4.1
   Corporate and Other                                                         (1.1)            (7.9)
                                                                           --------         --------
       Pretax Operating Income                                                 79.8             68.9
Pretax Net Realized Investment Gains                                            1.6              5.4
                                                                           --------         --------
   Pretax Income Before Dividends
     on Preferred Securities of Subsidiary                                     81.4             74.3
Income Tax Expense                                                             28.4             26.2
Dividends on Preferred Securities of Subsidiary, Net of Tax                     1.7               .1
                                                                           --------         --------
   Net Income                                                                 $51.3            $48.0
                                                                           ========         ========

</TABLE>

(1) Operating  income excludes  realized  investment  gains and losses and their
impact on the  amortization  of  deferred  policy  acquisition  costs  (DAC) and
present  value of future  profits  (PVFP).  Prior  period  information  has been
restated to reflect this definition of operating income.

The  discussion  of business  segment  results that follows  refers to the above
pretax segment  results and, in each  instance,  amounts are before income taxes
unless otherwise noted.

INDIVIDUAL INSURANCE

The  Individual  Insurance  segment of the Company is composed of the individual
insurance  division  of  ReliaStar  Life  Insurance  Company  (ReliaStar  Life),
Northern Life  Insurance  Company  (Northern),  ReliaStar  United  Services Life
Insurance   Company  (United  Services)  and  ReliaStar  Bankers  Security  Life
Insurance  Company  (Bankers   Security).   These   subsidiaries  are  sometimes
collectively referred to as the Insurers.

Pretax  operating  income  for the first  three  months of 1997  increased  $2.4
million,  or 5%, compared with the same period in 1996. The increase in earnings
is primarily due to a 7% growth in assets under management,  partially offset by
a decrease in interest spreads.  The average interest spread of 255 basis points
in the first quarter of 1997,  compares to 262 basis points in the first quarter
of 1996.  This  decrease in spreads  reflects a 9 basis point  reduction  in the
average  crediting rate and a 16 basis point decrease in the portfolio yield. It
should be noted that the interest  spread  calculation is an annualized  measure
and  can  be  overly  influenced  in  a  particular  quarter  by  the  level  of
prepayments,  recoveries on problem investments and other quarterly variances in
the level of net investment income. For most of the business, crediting rates on
in force  business are reset  annually at the beginning of the calendar year and
are  guaranteed  for one year.  Crediting  rates  offered on new business can be
changed at any time in response to competition and market  interest  rates,  and
are guaranteed on most new premiums received to the end of the calendar year.

EMPLOYEE BENEFITS

Pretax  operating  income  for the first  three  months of 1997  increased  $1.4
million,  or 14%,  compared  with the same period in 1996.  The increase for the
first  quarter was primarily  due to improved  mortality  experience as compared
with the same period in 1996.

LIFE AND HEALTH REINSURANCE

Pretax operating income of the Life and Health Reinsurance segment for the three
months ended March 31, 1997 increased  $1.5 million,  or 13%, when compared with
the same  period  in 1996.  Income  for the  segment  was  higher  than 1996 due
primarily to a 17% increase in net earned premiums,  increased investment income
and a slightly more favorable  overall loss ratio.  These favorable impacts were
partially  offset by higher  experience  rating  refunds  and  higher  sales and
operating  expenses.  Earnings in the  reinsurance  business can fluctuate based
upon a number of factors,  including pricing,  market capacity, the availability
and pricing of retrocessional  programs, loss experience and the risk profile of
the book of business.

PENSION

Pretax  operating income of the Pension segment for the three months ended March
31, 1997,  decreased $1.2 million, or 29%, when compared with the same period in
1996.  Pretax  operating  income from the small employer 401(k) line of business
increased $.7 million to $1.6 million for the three months ended March 31, 1997.
Income in this line of business  increased  primarily due to higher fee revenues
attributable to the growth in assets under  management.  Pretax operating income
in the participating  pension and GIC line of business decreased $1.9 million to
$1.3 million for the three  months ended March 31, 1997.  Income in this line of
business was lower primarily due to the decline in the Company's closed block of
pension contract liabilities.

CORPORATE AND OTHER

The pretax  operating  loss for  Corporate  and Other for the three months ended
March 31, 1997,  decreased  $6.8 million when  compared  with the same period in
1996. This favorable  variance was primarily due to increased  operating results
from the Company's mutual fund and mortgage banking operations as well as higher
recovery of corporate  costs from other business  segments.  In addition,  first
quarter  1997  includes   pretax  earnings  of  $.3  million  and  $.6  million,
respectively,  from Successful Money Management  Seminars,  Inc. acquired in the
third quarter of 1996, and PrimeVest  Financial  Services,  Inc. acquired in the
fourth quarter of 1996.

REALIZED INVESTMENT GAINS AND LOSSES

The sources of pretax  realized  investment  gains  (losses) were as follows (in
millions):
<TABLE>
<CAPTION>

                                                                                  THREE MONTHS
                                                                                 ENDED MARCH 31
                                                                                 --------------
                                                                              1997             1996
                                                                              ----             ----
<S>                                                                           <C>              <C>  
Net Gains (Losses) on Sales of Investments
    Fixed Maturity Securities                                                 $(2.6)           $ 3.8
    Equity Securities                                                           2.2                -
    Foreclosed Real Estate                                                       .2              (.1)
    Real Estate                                                                  .1               .7
    Other                                                                       5.4              4.1
Provision for Losses on Investments
   Fixed Maturity Securities                                                    (.7)               -
   Mortgage Loans                                                              (1.4)            (1.1)
   Foreclosed Real Estate                                                      (1.0)            (1.2)
                                                                           --------         --------
       Pretax Realized Investment Gains                                         2.2              6.2
DAC/PVFP Amortization (1)                                                       (.6)             (.8)
                                                                           --------         --------
       Pretax Net Realized Investment Gains                                    $1.6             $5.4
                                                                           ========         ========

(1) Due to realized investment gains and losses.

</TABLE>




Gross realized  investment gains and losses from the sale of  available-for-sale
fixed maturity securities were as follows (in millions):

                                                    THREE MONTHS
                                                   ENDED MARCH 31
                                                   --------------
                                                1997             1996
                                                ----             ----
Gross Realized Gains                          $    .6             $ 3.9

Gross Realized Losses                         $  (3.2)            $ (.1)


The Company establishes  allowances and writes down the value of specific assets
based  upon  its  continuing  review  of  individual  problem  investments.  The
Company's  recording  of  allowances  and  write-downs  based  upon a review  of
individual  problem assets results in fluctuations in the level of the provision
for losses on investments  reported in each period.  The provision for losses on
investments is affected to a significant  degree by general economic  conditions
and the status of the real estate market.  While the Company believes it has set
aside appropriate  reserves and allowances for problem  investments,  subsequent
economic  and market  conditions  may require the  establishment  of  additional
reserves.

ACQUISITIONS

On February 23, 1997, the Company  signed a definitive  agreement to acquire and
merge  Security-Connecticut  Corporation (SRC) into ReliaStar.  SRC is a holding
company  with two  primary  subsidiaries:  Security-Connecticut  Life  Insurance
Company of Avon,  Connecticut,  and Lincoln  Security Life Insurance  Company of
Brewster,  New York. As of December 31, 1996, SRC had assets of $2.3 billion and
total  shareholders'  equity of $355 million.  The transaction  will be effected
through a stock-for-stock  exchange. The exchange ratio will be determined based
upon the average  price of the  Company's  common  stock  during the  twenty-day
trading  period which is expected to conclude  five days prior to the closing of
the transaction  and is subject to adjustments  based upon changes in the market
value of the Company's  common stock.  The definitive  agreement also includes a
breakup  provision  that would  result in a payment  of $8 million to  ReliaStar
under certain circumstances if the transaction is not completed. The acquisition
will be accounted for as a purchase.

Based on the closing  price of $59.125 for  ReliaStar  common stock on March 31,
1997, SRC shareholders  would receive .7949 of a share of ReliaStar common stock
for each  share of SRC  common  stock.  Assuming  the  March 31  closing  price,
ReliaStar would issue approximately seven million additional shares of ReliaStar
common  stock,  and the  purchase  price would be  approximately  $417  million,
including transaction costs.  Completion of the merger is expected in the second
or third quarter of 1997, and is subject to normal closing conditions, including
approval by SRC shareholders and various regulatory approvals.

On April 21, 1997, the Company signed a definitive agreement to acquire Citizens
Community Bancshares,  Co. (CCB). CCB is a bank holding company with one primary
subsidiary,  Citizens  Savings  Bank,  F.S.B.  of St.  Cloud,  Minnesota.  As of
December 31, 1996, CCB had total assets of  approximately  $40 million and total
shareholders'  equity of  approximately  $3  million.  The  transaction  will be
accounted for as a pooling-of-interests.  Completion of the merger is subject to
normal closing conditions, including various regulatory approvals.

FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES - RELIASTAR FINANCIAL CORP.

ReliaStar,  as parent,  is dependent upon  dividends,  interest and payments for
other charges  received from its  subsidiaries to pay dividends to shareholders,
service its debt and pay other obligations.  The payment of dividends,  interest
or  other  charges  by the  Insurers  is  subject  to  restrictions  imposed  by
applicable insurance laws and regulations.

The payment of future dividends by ReliaStar will be largely  dependent upon the
ability of ReliaStar Life to pay dividends to it. Under Minnesota  insurance law
regulating the payment of dividends by ReliaStar  Life, any such payment must be
in an amount deemed prudent by ReliaStar  Life's board of directors and,  unless
otherwise  approved by the Commissioner of the Minnesota  Department of Commerce
(the  Commissioner),  must be paid solely from the  adjusted  earned  surplus of
ReliaStar  Life.  Adjusted earned surplus means the earned surplus as determined
in accordance with statutory accounting practices (unassigned funds) less 25% of
the  amount of such  earned  surplus  which is  attributable  to net  unrealized
capital gains. Further, without approval of the Commissioner, ReliaStar Life may
not pay in any  calendar  year any  dividend  which,  when  combined  with other
dividends paid within the preceding 12 months, exceeds the greater of (i) 10% of
ReliaStar  Life's  statutory  surplus  at the  prior  year-end  or (ii)  100% of
ReliaStar  Life's  statutory net gain from  operations  (not including  realized
capital  gains) for the prior  calendar  year. For 1997, the amount of dividends
which can be paid by  ReliaStar  Life  without  Commissioner  approval is $144.0
million.

On May 9, 1997, the Company filed a shelf  registration  with the Securities and
Exchange  Commission for the issuance of up to $400.0 million of debt securities
and other  securities.  This filing  replaced and  superseded the unused portion
($125.0 million) of the Company's December 18, 1995, shelf registration  filing.
On March 29,  1996,  the Company sold $125.0  million of 8.20%  Trust-Originated
Preferred Securities (TOPrSsm) due March 15, 2016. The Company used the proceeds
from this offering to redeem,  at par, all of the outstanding  shares of its 10%
Senior  Cumulative  Preferred Stock on July 1, 1996,  repay short-term bank debt
and for general corporate purposes.

The Company has announced  its intent to repurchase up to $100.0  million of its
common stock under a common stock buyback program to be conducted in conjunction
with and contingent  upon the acquisition of SRC, such repurchase to be financed
with the  proceeds  of debt,  preferred  stock,  or  similar  public or  private
financing.

LIQUIDITY AND CAPITAL RESOURCES - INSURERS

Liquidity  for life  insurance  companies  is measured  by their  ability to pay
scheduled  contractual  benefits,  pay  operating  expenses and fund  investment
commitments.  Sources of liquidity include  scheduled and unscheduled  principal
and interest payments on investments, premium payments and deposits and the sale
of liquid investments. These sources of liquidity for the Insurers significantly
exceed scheduled uses.

Liquidity is also affected by  unscheduled  benefit  payments,  including  death
benefits,  benefits  under  insured  accident  and health  policies and contract
withdrawals and surrenders. The amount of withdrawals and surrenders is affected
by a variety of factors such as credited interest rates for competing  products,
general economic  conditions,  the Insurers' claims paying ratings and events in
the industry which affect policyholders' confidence.

The Insurers'  investment  portfolios  represent a significant  source of liquid
assets. As of March 31, 1997, the Insurers'  investment  portfolio included $6.6
billion (39% of total assets) of short-term  investments  and  investment  grade
marketable  bonds.  The March 31, 1997  investment  portfolio also included $2.2
billion of investment  grade  privately  placed bonds which,  while not publicly
traded, are a source of liquidity.

The policies and annuities  issued by the Individual  Insurance  segment contain
provisions which allow  contractholders to withdraw or surrender their contracts
under defined  circumstances.  These  policies and annuities  generally  contain
provisions   which  apply  penalties  or  otherwise   restrict  the  ability  of
contractholders  to make such  withdrawals or surrenders.  The Insurers  closely
monitor the surrender and policy loan activity of their  insurance  products and
manage the composition of their investment portfolios,  including liquidity,  in
light of such  activity.  While the Insurers have recently  experienced a modest
increase in withdrawal and surrender  activity  attributable to their individual
insurance  products,  the surrender activity is within a reasonable range of the
Company's  expectations  and is well below a level  which  would have a material
effect on liquidity.

Changes in interest  rates may affect the  incidence  of policy  surrenders  and
other   withdrawals.   In  addition  to  the  potential   impact  on  liquidity,
unanticipated withdrawals in a changed interest rate environment could adversely
affect  earnings if the Company  were  required to sell  investments  at reduced
values in order to meet  liquidity  demands.  The Company  manages the asset and
liability  portfolios  in order to  minimize  the  adverse  earnings  impact  of
changing  market  interest  rates.  The Company seeks assets which have duration
characteristics  similar to the liabilities which they support. The Company also
uses derivative instruments,  such as interest rate swaps and futures contracts,
to  adjust  the   duration   of  the  asset  and   liability   portfolios   (see
Investments-Derivative  Financial Instruments). The Company closely monitors its
derivative usage and has procedures in place to manage  counter-party  risks and
related exposures.

Statutory  surplus is computed  according  to rules  prescribed  by the National
Association  of Insurance  Commissioners  (NAIC),  as modified by each Insurer's
state of domicile.  Statutory  accounting  rules are  different  from  generally
accepted  accounting  principles  (GAAP)  and are  intended  to  reflect  a more
conservative  perspective by, for example,  requiring  immediate  recognition of
selling expenses.

The  Company's  long-term  growth  goals  contemplate  continued  growth  in its
insurance  businesses.  To achieve these growth goals, the Insurers will need to
increase their statutory  surplus.  Additional  statutory surplus may be secured
through  various  sources such as  internally  generated  statutory  earnings or
equity  infusions  by the Company  with funds  generated  through debt or equity
offerings.

The state of domicile of each of the Insurers imposes minimum risk-based capital
requirements  on insurance  enterprises  that were  developed  by the NAIC.  The
formulas  for  determining  the amount of  risk-based  capital  specify  various
weighting  factors that are applied to financial  balances or various  levels of
activity  based on the  perceived  degree  of  risk.  Regulatory  compliance  is
determined  by a ratio of a company's  regulatory  total  adjusted  capital,  as
defined,  to its  authorized  control  level  risk-based  capital,  as  defined.
Companies below specific trigger points or ratios are classified  within certain
levels,  each of which  requires  specified  corrective  action.  The risk-based
capital ratio of each of the Insurers  significantly exceeds the ratios at which
regulatory corrective action would be required.

CONSOLIDATED CASH FLOWS

The Company's cash balance at March 31, 1997 was $19.9 million. During the first
quarter of 1997,  net cash provided by operating and  financing  activities  was
$46.7 million and $41.8 million, respectively, which was offset by net cash used
by investing activities of $101.0 million.

The $46.7 million of net cash provided by operating activities was primarily the
result of positive  cash flow from premiums and  investment  income in excess of
cash outflows for insurance benefits and sales and operating expenses.  Net cash
provided by financing  activities  of $41.8  million was primarily the result of
proceeds from short-term borrowings and issuance of commercial paper.

INVESTMENTS

The current  investment  strategy  for the  Company is designed to maintain  the
overall  quality  of  the  portfolios,  to  maintain  an  appropriate  liquidity
position,  to assure appropriate  asset/liability  structures,  to achieve asset
type diversification and to avoid issuer concentration.

The  Company  intends  to direct  most of its new  investment  cash flow for the
remainder  of  1997  to the  acquisition  of  investment  grade  marketable  and
privately placed bonds.  The marketable  bonds category  includes both corporate
issues  and  structured  finance  securities  such  as  collateralized  mortgage
obligations (CMOs) and other mortgage-backed  securities.  The Company will make
new investments in commercial mortgages and below investment grade bonds subject
to overall limitations.

The assets held by each of the Insurers are legally  segregated and support only
their  respective  contractual  obligations.  The investment  portfolios of each
Insurer are structured to reflect the  characteristics  of the liabilities which
they support.  The Company  internally  allocates  assets within the Insurers to
facilitate  segment  asset/liability  matching.  These segment  allocations  are
solely  for  portfolio  management  purposes,  and  generally  all of the assets
allocated to a segment are available to satisfy the  respective  liabilities  of
all segments within each Insurer. Assets within these portfolios are selected to
provide compatible duration,  cash flow and return  characteristics.  All of the
investments in the Insurers' portfolios are subject to diversification,  quality
and reserving requirements of state laws regulating the Insurers.

The  following  table  provides  information  regarding the  composition  of the
Company's invested assets as of the indicated dates (in millions):

<TABLE>
<CAPTION>


                                                          MARCH 31, 1997           DECEMBER 31, 1996
                                                          --------------           -----------------
                                                       AMOUNT       PERCENT        AMOUNT      PERCENT
                                                       ------       -------        ------      -------
<S>                                                   <C>            <C>         <C>            <C>   
Investment Grade Bonds:
    Marketables                                      $  6,512.9       54.6%     $  6,604.9       55.0%
    Private Placements                                  2,157.5       18.1         2,156.2       18.0
                                                      ---------      -----       ---------      -----
        Subtotal                                        8,670.4       72.7         8,761.1       73.0

Below Investment Grade Bonds:
    Marketables                                           290.5        2.4           279.7        2.4
    Private Placements                                    246.9        2.1           255.4        2.1
                                                      ---------      -----       ---------      -----
           Subtotal                                       537.4        4.5           535.1        4.5

Equity Securities                                          25.1         .2            36.9         .3
Commercial Mortgages                                    1,358.7       11.4         1,359.6       11.3
Mortgages, Residential and Other                          500.4        4.2           495.8        4.1
Real Estate                                                76.9         .6            77.5         .7
Short-Term Investments                                    123.7        1.1           119.4        1.0
Other                                                     628.0        5.3           610.9        5.1
                                                      ---------      -----       ---------      -----
    Total Invested Assets                             $11,920.6      100.0%      $11,996.3      100.0%
                                                      =========      =====       =========      =====

</TABLE>

FIXED MATURITY SECURITIES

The  amounts  invested  in fixed  maturity  securities  as of March 31, 1997 and
December 31, 1996 were $9.2 billion and $9.3 billion,  respectively. The average
marketable and private  placement bond  investments in a single corporate issuer
(excluding  structured  finance  securities such as CMOs,  mortgage-backed  pass
throughs and asset-backed securities) as of March 31, 1997 were $9.5 million and
$7.9 million, respectively.

All of the Company's  marketable  and privately  placed bonds are required to be
evaluated  by the  Securities  Valuation  Office  (SVO)  of the  NAIC.  The  SVO
evaluates the  investments  of insurers for  regulatory  reporting  purposes and
assigns  securities to one of six investment  categories.  The NAIC's categories
closely follow the public rating agencies' definition for marketable bonds. NAIC
categories 1 and 2 include bonds considered  investment grade (BBB or higher) by
the public  rating  agencies.  Categories  3 through 6 are  referred to as below
investment grade (BB or lower).

As of March  31,  1997,  the  weighted  average  book  yields  of the  Company's
investment  grade portfolio and below  investment  grade portfolio were 7.8% and
8.8%,  respectively.   The  weighted  average  book  yield  is  not  necessarily
reflective  of the net  investment  income  ultimately  realized by the Company.
Investments  with  greater  credit  risk have a  greater  risk of  default  than
investment grade securities, and accordingly, some of the incremental book yield
of the below investment grade portfolio may not be realized.


The  following  tables  identify  the  amortized  cost and the fair value of the
Company's   fixed  maturity   securities   with  respect  to  each  NAIC  credit
classification as of the indicated dates (in millions):

<TABLE>
<CAPTION>

                                                      MARCH 31, 1997
---------------------------------------------------------------------------------------------------------
                                MARKETABLES                                PRIVATE PLACEMENTS
                -----------------------------------------------------------------------------------------
NAIC            AMORTIZED     GROSS UNREALIZED       FAIR      AMORTIZED     GROSS UNREALIZED       FAIR
RATING            COST        GAINS     (LOSSES)     VALUE       COST        GAINS    (LOSSES)      VALUE
------            ----        -----     --------     -----       ----        -----    --------      -----
<C>             <C>           <C>         <C>       <C>        <C>            <C>      <C>        <C>     
1               $4,669.6      $123.5      $(41.3)   $4,751.8   $  774.5       $18.0    $  (7.9)   $  784.6
2                1,736.0        44.5       (19.4)    1,761.1    1,363.7        24.2      (15.0)    1,372.9
3                  268.4         5.2        (3.4)      270.2      160.7         1.7       (2.9)      159.5
4                   18.3         0.4        (0.3)       18.4       55.0         1.3       (0.8)       55.5
5                    1.8         0.1           -         1.9       31.2         0.1       (1.9)       29.4
6                      -           -           -          -         2.5          -           -         2.5
Redeemable
  Preferred
  Stock              3.1           -           -         3.1        1.6          -        (0.1)        1.5
                --------    --------    --------    --------   --------    --------   --------    --------
    Total       $6,697.2      $173.7      $(64.4)   $6,806.5   $2,389.2       $45.3     $(28.6)   $2,405.9
                ========    ========    ========    ========   ========    ========   ========    ========

</TABLE>


<TABLE>
<CAPTION>

                                                     DECEMBER 31, 1996
---------------------------------------------------------------------------------------------------------
                                MARKETABLES                                PRIVATE PLACEMENTS
                -----------------------------------------------------------------------------------------
NAIC            AMORTIZED     GROSS UNREALIZED       FAIR      AMORTIZED     GROSS UNREALIZED       FAIR
RATING            COST        GAINS     (LOSSES)     VALUE       COST        GAINS    (LOSSES)      VALUE
------            ----        -----     --------     -----       ----        -----    --------      -----
<C>             <C>           <C>         <C>       <C>        <C>            <C>      <C>        <C>     
1               $4,738.4      $189.6      $(20.6)   $4,907.4   $  779.7       $29.4    $  (3.6)   $  805.5
2                1,633.7        70.2        (6.4)    1,697.5    1,311.3        43.0       (3.6)    1,350.7
3                  252.3         8.3        (1.6)      259.0      158.2         3.0       (1.4)      159.8
4                   18.9         0.3        (0.3)       18.9       58.7         1.5       (0.7)       59.5
5                    1.8         0.1        (0.1)        1.8       35.9         0.2       (2.5)       33.6
6                      -           -           -          -         2.5           -          -         2.5
Redeemable
  Preferred
  Stock              0.5           -           -         0.5        1.6           -       (0.1)        1.5
                --------    --------    --------    --------   --------    --------   --------    --------
    Total       $6,645.6      $268.5      $(29.0)   $6,885.1   $2,347.9       $77.1     $(11.9)   $2,413.1
                ========    ========    ========    ========   ========    ========   ========    ========

</TABLE>

The amortized  cost and fair value of fixed  maturity  securities by contractual
maturity  are shown  below.  Expected  maturities  will differ from  contractual
maturities  because  borrowers may have the right to call or prepay  obligations
with or without call or prepayment penalties (in millions).

<TABLE>
<CAPTION>

                                                       MARCH 31, 1997                  DECEMBER 31, 1996
                                                       --------------                  -----------------
                                                      AMORTIZED    FAIR               AMORTIZED    FAIR
                                                        COST       VALUE                COST       VALUE
                                                        ----       -----                ----       -----
<S>                                                  <C>        <C>                   <C>        <C>      
Due in One Year or Less                              $   223.6  $   226.3             $   155.8  $   157.4
Due After One Year Through Five Years                  3,085.7    3,124.6               2,967.6    3,057.0
Due After Five Years Through Ten Years                 2,625.7    2,662.3               2,622.4    2,723.6
Due After Ten Years                                    1,000.5    1,021.4               1,055.3    1,108.7
Mortgage-Backed/Structured Finance
  Securities                                           2,150.9    2,177.8               2,192.4    2,251.5
                                                      --------  ---------              --------   --------
     Total                                            $9,086.4   $9,212.4              $8,993.5   $9,298.2
                                                      ========   ========              ========   ========

</TABLE>

The fair values for the marketable bonds are based upon the quoted market prices
for bonds  actively  traded.  The fair values for  marketable  bonds  without an
active market,  are obtained through several  commercial  pricing services which
provide the estimated fair values. Fair market values for privately placed bonds
which are not  considered  problems  are  determined  utilizing  a  commercially
available  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.  Utilizing  these data,  the model
generates estimated market values which the Company considers  reflective of the
fair value of each privately placed bond. Fair values for privately placed bonds
which are considered  problems are determined  through  consideration of factors
such as the net  worth  of  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 its  relevant  market (see
Problem Investments).

Fair values of fixed  income  securities  fluctuate  due to a number of factors,
including  the market level of interest  rates,  fluctuations  in the  corporate
spreads over the  risk-free  rate and changes in the credit  quality of specific
investments.

The Company's  marketable and private placement bond portfolios were diversified
by industry  (based upon amortized  cost) as of the indicated dates as set forth
in the following table:

<TABLE>
<CAPTION>

                                                     MARKETABLES                  PRIVATE PLACEMENTS
                                                     -----------                  ------------------
                                              MARCH 31,     DECEMBER 31,       MARCH 31,      DECEMBER 31,
                                                1997            1996             1997             1996
                                                ----            ----             ----             ----
<S>                                              <C>             <C>              <C>              <C> 
Basic Materials                                  7.1%            6.7%             9.4%             9.5%
Consumer Non-Cyclical                            6.0             6.0             18.1             18.4
Consumer Products/Services                       7.3             7.3             18.6             18.4
Energy                                           6.2             6.2              6.3              6.9
Financial Services                              19.6            19.3             18.3             18.6
Government                                       3.3             3.5              0.8               .8
Industrial                                       3.5             3.6             10.4             10.3
Mortgage-Backed/Structured
   Finance Securities                           31.9            32.2              2.2              1.2
Real Estate                                      0.3              .3              1.8              1.3
Retailing                                        2.3             2.3              5.6              5.9
Technology                                       2.3             2.5              3.1              3.2
Utilities                                       10.2            10.1              5.4              5.5
                                               -----           -----            -----            -----
    Total                                      100.0%          100.0%           100.0%           100.0%
                                               =====           =====            =====            =====

</TABLE>

BELOW INVESTMENT GRADE INVESTMENTS

Issuers of below investment grade debt frequently have relatively high levels of
indebtedness  and are more  sensitive to adverse  economic  conditions,  such as
recession or increasing  interest  rates,  than are issuers of investment  grade
securities.

The largest  investment in below  investment grade bonds of any one borrower was
approximately  two-tenths  of one percent of invested  assets at March 31, 1997.
The largest  investment  in below  investment  grade  bonds of any one  industry
grouping  was  approximately   1.7%  of  invested  assets  at  March  31,  1997.
Concentrations  of the portfolio in below  investment  grade bonds are regularly
analyzed and adjusted as appropriate.

MORTGAGE-BACKED SECURITIES

The Company's  investment  policy  permits the  acquisition  of  mortgage-backed
securities and collateralized mortgage obligations  (collectively referred to as
MBS  securities)  provided  that  the  Company's  aggregate  investment  in  MBS
securities  shall not exceed 50% of its  statutory  assets and the Company shall
not acquire any interests in residual,  interest only, principal only or inverse
floater tranches of MBS securities.  The Company's  investment strategy has been
to invest  primarily in actively  traded MBS securities  which are structured to
reduce  prepayment  risk as compared  to direct  investments  in the  underlying
mortgage collateral.  The amortized cost and estimated fair value of investments
in MBS securities  categorized  by interest  rates on the underlying  collateral
were comprised of the following (in millions):

<TABLE>
<CAPTION>

                                                                            MARCH 31, 1997
                                                                            --------------
                                                                   AMORTIZED
                                                                     COST                FAIR VALUE
                                                                     ----                ----------
<S>                                                               <C>                    <C>     
Adjustable Rate Pass Through MBS Securities:
Below 6%                                                         $     1.5              $     1.5
6% - 7%                                                              139.8                  141.0
7% - 8%                                                              339.1                  339.5
Above 8%                                                              35.1                   35.4

Fixed Rate Pass Through MBS Securities:
Below 9%                                                              10.2                   10.7
Above 9%                                                               8.5                    9.1

Planned Amortization Class MBS Securities:
Below 7%                                                             298.9                  301.8
7% - 8%                                                              341.1                  350.0
8% - 9%                                                              111.2                  114.9
Above 9%                                                              14.8                   15.2

Other MBS Securities:
Below 7%                                                             199.3                  200.2
7% - 8%                                                               91.8                   96.1
8% - 9%                                                               19.5                   20.7
Above 9%                                                              12.2                   12.7
                                                                  --------               --------
     Total MBS Securities                                         $1,623.0               $1,648.8
                                                                  ========               ========

</TABLE>

The Company invests in asset-backed securities in addition to the MBS securities
described above. As of March 31, 1997, the Insurers held asset-backed securities
with an amortized cost of $527.9 million and a fair value of $529.0 million.

MORTGAGE LOANS

The Company's  commercial mortgage loans generally range in size from $1 million
to $10 million, with the average commercial mortgage loan investment as of March
31, 1997 being approximately $2.2 million.

The  commercial  mortgage loan  portfolio  diversification  by property type and
geographic region of the country was as follows:


                                              MARCH 31,       DECEMBER 31,
                                                1997              1996
                                                ----              ----
PROPERTY TYPE
Office                                           22.9%             24.6%
Industrial                                       23.3              23.5
Special Purpose                                  17.8              17.3
Retail                                           16.7              16.1
Apartment                                        17.9              15.7
Hotel/Motel                                       1.4               2.8
                                                -----             -----
     Total                                      100.0%            100.0%
                                                =====             =====

                                              MARCH 31,       DECEMBER 31,
                                                1997              1996
                                                ----              ----
GEOGRAPHIC REGION
Midwest                                          30.3%             31.6%
Pacific                                          28.8              30.1
Southeast                                        19.3              18.2
Northeast                                         8.9               8.7
Mountain                                          6.6               6.5
Southwest                                         6.1               4.9
                                                -----             -----
     Total                                      100.0%            100.0%
                                                =====             =====


The weighted average yield of the commercial mortgage loan portfolio as of March
31, 1997 was 8.7%. The weighted average maturity of these loans was 6.7 years.

The Company invests in individual and pools of individual  residential  mortgage
loans in addition to the  structured  finance  securities  backed by residential
mortgages (see Fixed Maturity Securities). As of March 31, 1997 and December 31,
1996,   the  Insurers  held  $498.5  and  $493.9   million,   respectively,   of
non-securitized residential mortgage loans.

UNREALIZED INVESTMENT GAINS AND LOSSES

All  of  the   Company's   debt  and  equity   securities   are   classified  as
available-for-sale  and  carried  at fair  value on the  Condensed  Consolidated
Balance Sheets with unrealized  investment gains and losses excluded from income
and reported as a separate component of shareholders' equity.

The components of net  unrealized  investment  gains  reported in  shareholders'
equity are shown below (in millions):

                                              MARCH 31,       DECEMBER 31,
                                                1997              1996
                                                ----              ----
Unrealized Investment Gains                    $131.4            $310.5
DAC/PVFP Adjustment                             (38.9)            (93.8)
Deferred Income Taxes                           (32.4)            (75.9)
                                              -------            ------
     Net Unrealized Investment Gains          $  60.1            $140.8
                                              =======            ======

Changes in net unrealized investment gains or losses are primarily the result of
fluctuations  in market  interest  rates which  impact the market value of fixed
interest  rate  securities.  The change in market value of the  Company's  fixed
maturity  securities is not expected to have a significant  effect on results of
operations  or  liquidity  because:  1) the Company  has the present  intent and
practice to hold most of its  available-for-sale  fixed  maturity  securities to
maturity and 2) the Company's asset/liability management activity is designed to
monitor and adjust for the effects of changes in market interest rates.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company has an established program prescribing the use of derivatives in its
asset/liability  management  activity.  The  investment  policy  of  each of the
Insurers  expressly  precludes  the  use of  such  instruments  for  speculative
purposes.  The policy  details  permissible  uses and  instruments  and contains
accounting  and management  controls  designed to assure  compliance  with these
policies. The Company is not a party to leveraged derivatives.

The  insurance  liabilities  of the Company are  sensitive  to changes in market
interest  rates.  The Company has  established  procedures for evaluating  these
liabilities  and  structures   investment   asset   portfolios  with  compatible
characteristics.  Investment  assets are selected which provide yield, cash flow
and interest rate sensitivities appropriate to support the insurance products.

The Company uses  interest  rate swaps and interest rate futures as part of this
asset/liability  management  program.  The  Company has  acquired a  significant
amount  of  certain  shorter  duration  investments,  such as  floating  rate or
adjustable rate  investments.  Acquisition of these assets shortens the duration
of an asset  portfolio.  The  Company  uses  interest  rate  swaps to extend the
duration of these  portfolios as an  alternative to purchasing  longer  duration
investments.

The Company  uses  duration  analysis to estimate the amount of  sensitivity  to
market interest rate changes.  Duration of a bond or portfolio can be thought of
as the life in years of a notional  zero-coupon  bond  whose  fair  value  would
change by the same amount in response  to any change in market  interest  rates.
The portfolio duration includes the duration impact added by interest rate swaps
and interest rate futures  contracts.  Target  durations  are  determined by the
Company based upon the subjective  evaluation of a number of  characteristics of
the liabilities,  including such factors as the ability of the Company to modify
interest  crediting  rates,  the  presence and  magnitude of surrender  charges,
historical and projected  lapse  experience,  the level of market interest rates
and competition.

The following table sets forth the asset duration, portfolio duration and target
duration for the investment portfolio of each business segment (in years):

<TABLE>
<CAPTION>

                                                                 MARCH 31, 1997
                                               ----------------------------------------------
                                                 ASSET             PORTFOLIO          TARGET
                                               DURATION            DURATION          DURATION
                                               --------            --------          --------
<S>                                               <C>               <C>           <C>   <C>
Individual Insurance                              3.9               4.1           3.5 - 5.0
Employee Benefits                                 3.4               3.7           3.5 - 8.0
Life and Health Reinsurance                       4.0               4.1           3.5 - 8.0
Pension                                           2.3               3.0           2.5 - 3.5

</TABLE>

At March 31,  1997,  the Company had 65 interest  rate swap  contracts in effect
with a notional  amount of $1.03 billion.  At December 31, 1996, the Company had
69  interest  rate swap  contracts  in effect  with a  notional  amount of $1.11
billion.  During the first quarter of 1997,  one new interest rate swap contract
was entered  into with a notional  amount of $10.0  million and 5 interest  rate
swap contracts  matured with a notional  amount of $87.0 million.  There were no
terminations  of interest rate swap contracts prior to maturity during the first
quarter of 1997.  The Company had no deferred  gains or losses at March 31, 1997
related to interest rate swap  contracts  terminated  early.  The estimated fair
value of the  interest  rate swap  contracts  in effect at March 31, 1997 was an
unrealized loss of $3.5 million.

All of the  interest  rate swap  contracts  are standard  contracts  whereby the
Company pays a floating rate of interest (generally based upon the LIBOR rate as
determined  from time to time) and receives a fixed rate  (generally a specified
contract rate). The following table details the characteristics of the Company's
interest rate swap contracts at March 31, 1997 (dollars in millions).

<TABLE>
<CAPTION>

                                                                 NOTIONAL             RANGE OF FIXED
                                                                  AMOUNT              RATES RECEIVED
                                                                  ------              --------------
<S>                                                                <C>                     <C>   <C> 
Maturing in One Year or Less                                       $105.0                  7.0 - 8.7%
Maturing After One Year Through Three Years                         373.0                  5.2 - 8.7%
Maturing After Three Years Through Five Years                       474.5                  5.3 - 8.2%
Maturing After Five Years Through Seven Years                        80.0                  6.3 - 7.0%
                                                                 --------
     Total Notional Amount                                       $1,032.5
                                                                 ========

</TABLE>

The Company closely monitors the effect of the swap position on reported income.
The Company's  investment  portfolio  includes a substantial  amount of floating
rate  investments.  Changes  in market  interest  rates  have an  opposite  (and
approximately offsetting) effect on the reported income from the swap portfolio.
Accordingly,  the reported  investment  income (or losses)  attributable  to the
Company's swap position will be approximately  offset by the changed  investment
income of the Company's  floating or adjustable  rate  investments in a changing
rate environment. At March 31, 1997 the Company held $1.26 billion of adjustable
rate invested assets, short-term investments and cash.

The Company also enters into futures contracts,  which are contracts for delayed
delivery of securities or money market instruments in which the seller agrees to
make delivery at a specified future date of a U.S.  Treasury Bond at a specified
price or yield. These contracts are entered into to manage interest rate risk of
the Company's GIC  operations.  The contracts  that the Company has entered into
are exchange  traded and marked to market  daily.  The  contract  value of these
futures contracts at March 31, 1997 was $74.1 million.

PROBLEM INVESTMENTS

The Company  classifies  invested assets of the Insurers as problem  investments
where:  (i) an asset  is  delinquent  in a  required  payment  of  principal  or
interest;  (ii) an asset is the subject of a foreclosure  action or the borrower
is in bankruptcy;  (iii) a loan has been  restructured;  or (iv) a loan has been
foreclosed  and the  collateral  is owned  (Problem  Investments).  The  Company
reports a mortgage  loan as delinquent  when a required  payment of principal or
interest  is 60 days  past  due.  Fixed  maturity  securities  are  reported  as
delinquent  following  the  contractual  grace  period  allowed for any required
payment of  principal  or interest.  The Company  generally  considers a loan as
restructured  when one or more of the following terms is changed for the benefit
of the  borrower:  (i) interest  rate for a specified  period of time or for the
life of the loan; (ii) maturity date;  (iii) the principal face amount or timing
of principal  repayments  on a contingent or absolute  basis;  or (iv) amount or
timing of payment of accrued interest.

The  amortized  cost of  Problem  Investments,  net of  related  write-offs  and
allowances and non-recourse debt, was as follows (in millions):


                                               MARCH 31,       DECEMBER 31,
                                                 1997              1996
                                                 ----              ----
Fixed Maturity Securities(1)                    $16.2             $15.5
Commercial Mortgage Loans                        23.4              22.4
Residential and Other Mortgage Loans              7.2               4.2
Investment Real Estate(2)                        12.0              12.3
Foreclosed Real Estate                           37.0              37.4
                                                -----             -----
    Total                                       $95.8             $91.8
                                                =====             =====
 
(1) All problem fixed maturity securities were private placements.
(2) The amounts shown represent real estate acquired as an investment  which the
Company has determined to be Problem Investments.

The  amortized  cost of Problem  Investments  in the  preceding  table  reflects
reductions for write-offs  and allowances  taken by the Company.  The cumulative
amounts of such  write-offs  and  allowances on problem  invested  assets of the
Insurers  on the  Condensed  Consolidated  Balance  Sheets  were as follows  (in
millions):

                                               MARCH 31,       DECEMBER 31,
                                                 1997              1996
                                                 ----              ----
Fixed Maturity Securities                        $8.7              $8.3
Commercial Mortgage Loans                        11.7              10.5
Residential and Other Mortgage Loans              0.7                .7
Investment Real Estate                            2.1                 -
Foreclosed Real Estate                           26.1              24.7

The Company  establishes  the  carrying  value of all Problem  Investments.  For
problem  marketable  securities,  the fair value is the quoted market value. For
problem private placement debt securities,  the fair value is determined through
consideration  of 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 the
relevant market.

For problem and potential problem  securities,  the Company determines whether a
decline in fair value below the amortized cost is other than  temporary.  If the
decline in fair value is  determined  to be other than  temporary,  the  Company
writes  down the cost basis to fair value and the  amount of the  write-down  is
recorded  as a realized  loss.  Subsequent  changes in the fair value of problem
available-for-sale securities which are determined to be temporary are reflected
directly in equity as unrealized investment gains or losses.

Fair value for  problem  real estate and problem  mortgage  loans is  determined
taking into consideration one or more of the following factors, depending on the
circumstances for each property,  including:  (i) property valuation  techniques
utilizing  discounted cash flows at the time of stabilization  including capital
expenditures and stabilization costs; (ii) sales of comparable properties; (iii)
geographic  location of the property  and related  market  conditions;  and (iv)
disposition  costs.  In many  instances,  there is not an active market for such
properties.  Therefore,  the fair value determined by the Company may be greater
than the price which may be realized  if the  Company  were forced to  liquidate
such properties on an immediate sale basis. If fair value of a problem  mortgage
loan or real estate  investment  is less than the  carrying  value,  the Company
records a write-off or an increase in the allowance for  uncollectible  amounts.
Foreclosed  properties are actively  managed by the Company in order to maximize
net  realizable  value.  The  Company  has the intent and  ability to hold these
assets until appropriate sales opportunities arise.

The following tables set forth the distribution of problem  commercial  mortgage
loans by property type and geographic region:


                                               MARCH 31,       DECEMBER 31,
PROPERTY TYPE                                    1997              1996
-------------                                    ----              ----
Office                                           71.5%             67.9%
Retail                                           14.2              15.4
Industrial                                       11.1              13.2
Hotel/Motel                                       3.2               3.5
                                                -----             -----
     Total                                      100.0%            100.0%
                                                =====             =====


                                               MARCH 31,       DECEMBER 31,
GEOGRAPHIC REGION                                1997              1996
-----------------                                ----              ----
Midwest                                          52.9%             51.5%
Southeast                                        20.4              21.0
Pacific                                          17.0              17.2
Southwest                                         6.0               6.3
Northeast                                         2.5               2.7
Mountain                                          1.2               1.3
                                                -----            ------
     Total                                      100.0%            100.0%
                                                =====             =====

The Company also monitors its  portfolios in an attempt to identify  loans which
are not currently classified as Problem  Investments,  but where the Company has
knowledge  which causes it to have serious doubts as to the ability of borrowers
to comply with the present loan repayment terms.  These loans (Potential Problem
Investments)  are subject to increased  scrutiny and review by the Company.  The
amounts of private  placements and mortgage loan Potential  Problem  Investments
were $14.8 million and $20.8 million, respectively, at March 31, 1997.

KNOWN TRENDS AND UNCERTAINTIES WHICH MAY AFFECT FUTURE REPORTED RESULTS

ACQUISITION

On February 23, 1997, the Company  signed a definitive  agreement to acquire and
merge  Security-Connecticut  Corporation (SRC) into ReliaStar.  SRC is a holding
company  with two  primary  subsidiaries:  Security-Connecticut  Life  Insurance
Company of Avon,  Connecticut,  and Lincoln  Security Life Insurance  Company of
Brewster,  New York. As of December 31, 1996, SRC had assets of $2.3 billion and
total  shareholders'  equity of $355 million.  The transaction  will be effected
through a stock-for-stock  exchange. The exchange ratio will be determined based
upon the average  price of the  Company's  common  stock  during the  twenty-day
trading  period which is expected to conclude  five days prior to the closing of
the transaction  and is subject to adjustments  based upon changes in the market
value of the Company's  common stock.  The definitive  agreement also includes a
breakup  provision  that would  result in a payment  of $8 million to  ReliaStar
under certain circumstances if the transaction is not completed. The acquisition
will be accounted for as a purchase.

Based on the closing  price of $59.125 for  ReliaStar  common stock on March 31,
1997, SRC shareholders  would receive .7949 of a share of ReliaStar common stock
for each  share of SRC  common  stock.  Assuming  the  March 31  closing  price,
ReliaStar would issue approximately seven million additional shares of ReliaStar
common  stock,  and the  purchase  price would be  approximately  $417  million,
including transaction costs.  Completion of the merger is expected in the second
or third quarter of 1997, and is subject to normal closing conditions, including
approval by SRC shareholders and various regulatory approvals.

HEALTH CARE MARKETPLACE ENVIRONMENT

The market place for the provision of health care employee  benefits is changing
in response to legislative and regulatory  initiatives and a market trend toward
capitated and managed care plans.  The Company has  determined  that it will not
seek  to  directly  provide  capitated  plans,  but  rather  will  market  plans
maintained  by third  party  managed  care  organizations  through  a series  of
strategic  alliances in selected markets.  The Company intends to jointly market
its group life  coverage  with its  strategic  partners  in these  markets.  The
Company expects that its book of insured health and health related business will
decline over the next several years and the Company does not expect  significant
new sales of insured  health and health  related  products.  The Company  cannot
predict the impact that these market  developments  will have on future reported
earnings.  The earnings of the health  insurance and managed care  businesses of
the Company represented  approximately 8% of the Company's after tax earnings in
1996.

GUARANTY ASSOCIATION ASSESSMENTS
The Insurers are subject to state guaranty association assessments in all states
in which they are admitted.  Generally these  associations  guarantee  specified
amounts  (commonly  $100,000 of surrender  values or $300,000 of other benefits)
payable to residents of the state under  policies of insolvent  insurers.  State
laws vary widely on coverage  (and  inclusion in the  assessment  base) of GICs.
Most  state laws  permit  assessments  or some  portion  thereof to be  credited
against  future  premium  taxes.  However,  several  states do not permit such a
credit. While the Company believes that it has accrued appropriate amounts based
upon currently available information, the Company could be subject to additional
future assessments in amounts which may be material.

LITIGATION
The  Company is a defendant  in a number of  lawsuits  arising out of the normal
course of the  business  of the  Insurers.  While the  nature  and amount of the
Company's outstanding  litigation has been fairly constant over the past several
years,  some life insurers have recently been subjected to significant  punitive
damages awards in certain  jurisdictions.  While the Company is not aware of any
actions or allegations which should reasonably give rise to any punitive damages
liability, it is possible that the Company could be subjected to such a claim in
an amount which could be material.

FINANCIAL SERVICES DEREGULATION
The United  States  Congress is currently  considering  a number of  legislative
proposals  intended to reduce or eliminate  restrictions on  affiliations  among
financial services  organizations.  Proposals are extant which would allow banks
to own or affiliate with insurers and securities firms. An increased presence of
banks in the life insurance and annuity  businesses may increase  competition in
these markets.  Because the Company currently  provides  insurance  products for
sale by banks,  the adoption of these  proposals could have a positive impact on
the Company's sales through this venue. The Company cannot predict the impact of
these proposals on the earnings of the Company.


PART II-OTHER INFORMATION

                            RELIASTAR FINANCIAL CORP.



Item 6. Exhibits and Reports on Form 8-K:

     (a)  Exhibits:

          (11) Statement re Computation of Per Share Earnings

          (27) Financial Data Schedule

     (b)  Reports on Form 8-K:

               A separate Form 8-K dated February 23, 1997 was filed in relation
               to the Company entering into an agreement and plan of merger with
               Security-Connecticut Corporation.



                                   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.





                               Dated May 14, 1997
                                     ------------

                               RELIASTAR FINANCIAL CORP.


                               /S/ WAYNE R. HUNEKE
                               -------------------
                               by Wayne R. Huneke
                               Senior Vice President, Chief Financial
                               Officer and Treasurer