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 June 30, 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 July 31, 1997 was 45,811,355.


<PAGE>



PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                                                      June 30, 1997         December 31, 1996
                                                                      -------------         -----------------
ASSETS
<S>                                                                    <C>                       <C>         
Fixed Maturity Securities, Available-for-Sale                          $    9,340.1              $    9,298.2
Equity Securities                                                              24.9                      36.9
Mortgage Loans on Real Estate                                               1,992.5                   1,855.4
Real Estate and Leases                                                         74.2                      77.5
Policy Loans                                                                  566.9                     549.0
Other Invested Assets                                                          75.2                      59.9
Short-Term Investments                                                        172.8                     119.4
                                                                       ------------              ------------
     Total Investments                                                     12,246.6                  11,996.3
Cash                                                                           27.9                      32.4
Accounts and Notes Receivable                                                 202.0                     171.0
Reinsurance Receivable                                                        224.7                     199.0
Deferred Policy Acquisition Costs                                           1,065.4                   1,006.0
Present Value of Future Profits                                               220.0                     220.2
Property and Equipment, Net                                                   112.8                     121.3
Accrued Investment Income                                                     164.5                     164.7
Other Assets                                                                  453.3                     383.9
Participation Fund Account Assets                                             316.5                     316.2
Assets Held in Separate Accounts                                            2,639.7                   2,096.0
                                                                       ------------              ------------
       TOTAL ASSETS                                                    $   17,673.4              $   16,707.0
                                                                       ============              ============

LIABILITIES
Future Policy and Contract Benefits                                    $   11,479.4              $   11,332.2
Pending Policy Claims                                                         287.7                     287.6
Other Policyholder Funds                                                      214.0                     190.6
Notes and Mortgages Payable                                                   460.0                     407.5
Income Taxes                                                                  136.4                     133.8
Other Liabilities                                                             402.8                     410.0
Participation Fund Account Liabilities                                        316.5                     316.2
Liabilities Related to Separate Accounts                                    2,634.2                   2,090.5
                                                                       ------------              ------------
       TOTAL LIABILITIES                                                   15,931.0                  15,168.4
                                                                       ------------              ------------

Company-Obligated Mandatorily Redeemable Preferred
   Securities Issued by Consolidated Subsidiaries                             241.7                     120.9

SHAREHOLDERS' EQUITY
Common Stock (Shares Issued: 1997, 42.7; 1996, 42.4)                             .4                        .4
Additional Paid-in Capital                                                    586.5                     571.9
Note Receivable from ESOP                                                     (21.0)                    (21.6)
Unamortized Restricted Stock Awards                                            (1.5)                     (1.8)
Net Unrealized Investment Gains                                               131.6                     140.8
Retained Earnings                                                             874.1                     794.2
Less Treasury Common Stock, at Cost (Shares Held: 1997 
 and 1996, 2.4)                                                               (69.4)                    (66.2)
                                                                       ------------              ------------
       TOTAL SHAREHOLDERS' EQUITY                                           1,500.7                   1,417.7
                                                                       ------------              ------------
       TOTAL LIABILITIES AND
       SHAREHOLDERS' EQUITY                                            $   17,673.4              $   16,707.0
                                                                       ============              ============

</TABLE>

See accompanying notes to condensed consolidated financial statements.


<PAGE>



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

<TABLE>
<CAPTION>
                                                                Three Months Ended June 30              Six Months Ended June 30
                                                                --------------------------              ------------------------
                                                                  1997               1996               1997                1996
                                                              -----------         -----------        -----------         -----------
REVENUES
<S>                                                           <C>                 <C>                <C>                 <C>        
Premiums                                                      $     215.1         $     208.6        $     419.8         $     413.6
Net Investment Income                                               240.0               237.2              474.7               469.5
Realized Investment Gains                                              .3                 2.5                2.5                 8.7
Policy and Contract Charges                                          64.7                60.8              129.6               120.6
Other Income                                                         60.7                37.6              117.4                67.7
                                                              -----------         -----------        -----------         -----------
     Total                                                          580.8               546.7            1,144.0             1,080.1
                                                              -----------         -----------        -----------         -----------

BENEFITS AND EXPENSES
Benefits to Policyholders                                           320.9               328.5              638.4               652.3
Sales and Operating Expenses                                        129.3               100.7              250.7               200.9
Amortization of Deferred Policy Acquisition Costs
    and Present Value of Future Profits                              31.6                29.7               60.0                54.2
Interest Expense                                                      7.6                 6.9               15.0                14.2
Dividends and Experience Refunds to Policyholders                     7.4                 4.8               14.5                 8.1
                                                              -----------         -----------        -----------         -----------
     Total                                                          496.8               470.6              978.6               929.7
                                                              -----------         -----------        -----------         -----------
Income Before Income Taxes and Net Dividends on
     Preferred Securities of Subsidiaries                            84.0                76.1              165.4               150.4
Income Tax Expense                                                   30.0                26.7               58.4                52.9
Dividends on Preferred Securities of Subsidiaries, Net of Tax         2.1                 1.6                3.8                 1.7
                                                              -----------         -----------        -----------         -----------

Net Income                                                    $      51.9         $      47.8        $     103.2         $      95.8
                                                              ===========         ===========        ===========         ===========

NET INCOME PER COMMON SHARE
Primary                                                       $      1.27         $      1.23        $      2.52         $      2.48
                                                              ===========         ===========        ===========         ===========
Fully Diluted                                                 $      1.27         $      1.17        $      2.52         $      2.34
                                                              ===========         ===========        ===========         ===========
Net Income Available to Common Shareholders                   $      51.9         $      45.7        $     103.2         $      91.6
                                                              ===========         ===========        ===========         ===========

Weighted Average Shares
  Common and Common Equivalent Shares (Primary)                      40.8                37.0               40.7                36.9
  Common Shares Assuming Maximum Dilution (Fully Diluted)            41.0                39.5               40.9                39.5

</TABLE>

See accompanying notes to condensed consolidated financial statements.


<PAGE>




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

<TABLE>
<CAPTION>
                                                                                     Six Months Ended June 30
                                                                                  -------------------------------
                                                                                      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 and End of Period                                                              .4                 .4
                                                                                  ------------      -------------
ADDITIONAL PAID-IN CAPITAL
   Beginning of Year                                                                     571.9              566.1
   Stock Issued for Benefit Plans                                                         11.0               (2.0)
   Tax Benefit on Stock Options Exercised                                                  3.8                1.4
   Other, Net                                                                              (.2)                 -
                                                                                  ------------      -------------
      End of Period                                                                      586.5              565.5
                                                                                  ------------      -------------
NOTE RECEIVABLE FROM ESOP
   Beginning of Year                                                                     (21.6)             (23.4)
   Repayments, Accrued or Paid                                                              .6                 .8
                                                                                  ------------      -------------
      End of Period                                                                      (21.0)             (22.6)
                                                                                  ------------      -------------
UNAMORTIZED RESTRICTED STOCK AWARDS
   Beginning of Year                                                                      (1.8)              (3.0)
   Awards, Net                                                                             (.2)               (.1)
   Amortization of Restricted Stock Awards                                                  .5                 .8
                                                                                  ------------      -------------
      End of Period                                                                       (1.5)              (2.3)
                                                                                  ------------      -------------
NET UNREALIZED INVESTMENT GAINS
   Beginning of Year                                                                     140.8              246.8
   Change for the Period                                                                  (9.2)            (170.9)
                                                                                  ------------      -------------
      End of Period                                                                      131.6               75.9
                                                                                  ------------      -------------
RETAINED EARNINGS
   Beginning  of Year                                                                    794.2              647.2
   Net Income                                                                            103.2               95.8
   Dividends to Shareholders:
      10% Senior Cumulative Preferred Stock (1996, $5.00 Per Share)                          -               (3.2)
      ESOP Convertible Preferred Stock (1996, $1.095 Per Share)                              -               (1.4)
      Common Stock (Per Share: 1997, $.59, 1996, $.53)                                   (23.7)             (19.4)
   Other, Net                                                                               .4                 .1
                                                                                  ------------      -------------
      End of Period                                                                      874.1              719.1
                                                                                  ------------      -------------
TREASURY COMMON STOCK
   Beginning of Year                                                                     (66.2)            (106.1)
   Acquired                                                                               (4.7)              (2.6)
   Reissued                                                                                1.5               11.3
                                                                                  ------------      -------------
      End of Period                                                                      (69.4)             (97.4)
                                                                                  ------------      -------------
TOTAL SHAREHOLDERS' EQUITY                                                        $    1,500.7      $     1,330.6
                                                                                  ============      =============

</TABLE>

See accompanying notes to condensed consolidated financial statements.


<PAGE>



                            RELIASTAR FINANCIAL CORP.
                 Condensed Consolidated Statements of Cash Flows
                                  (in millions)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                  Six Months Ended June 30
                                                                                  ------------------------
                                                                                   1997                 1996
                                                                             -------------        --------------
<S>                                                                          <C>                  <C>           
OPERATING ACTIVITIES
Net Income                                                                   $       103.2        $         95.8
Adjustments to Reconcile Net Income to Net Cash Provided by
  Operating Activities
     Interest Credited to Insurance Contracts                                        249.7                 245.1
     Future Policy Benefits                                                         (115.9)               (122.9)
     Capitalization of Policy Acquisition Costs                                     (100.4)                (92.1)
     Amortization of Deferred Policy Acquisition Costs and Present
        Value of Future Profits                                                       60.0                  54.2
     Deferred Income Taxes                                                             9.7                   5.6
     Net Change in Receivables and Payables                                          (37.2)                 10.0
     Other Assets                                                                    (69.2)                 (5.0)
     Realized Investment Gains, Net                                                   (2.5)                 (8.7)
     Other                                                                            10.2                   4.4
                                                                             -------------        --------------
          Net Cash Provided by Operating Activities                                  107.6                 186.4
                                                                             -------------        --------------

INVESTING ACTIVITIES
Proceeds from Sales of Fixed Maturity Securities                                     188.9                  51.8
Proceeds from Maturities or Repayment of Fixed Maturity Securities                   389.0                 481.2
Cost of Fixed Maturity Securities Acquired                                          (656.0)               (734.5)
Sales of Equity Securities, Net                                                       12.7                   2.0
Proceeds of Mortgage Loans Sold, Matured or Repaid                                   290.4                 226.4
Cost of Mortgage Loans Acquired                                                     (436.9)               (179.4)
Sales of Real Estate and Leases, Net                                                  10.3                   5.7
Policy Loans Issued, Net                                                             (17.9)                (19.8)
Sales (Purchases) of Other Invested Assets, Net                                      (10.1)                   .9
Purchases of Short-Term Investments, Net                                             (53.6)               (113.4)
                                                                             --------------       --------------
          Net Cash Used by Investing Activities                                     (283.2)               (279.1)
                                                                             -------------        --------------

FINANCING ACTIVITIES
Deposits to Insurance Contracts                                                      632.1                 575.1
Maturities and Withdrawals from Insurance Contracts                                 (618.3)               (571.5)
Net Proceeds from Issuance of Trust-Originated Preferred Securities                  120.8                 120.8
Increase in Notes and Mortgages Payable                                               68.0                  17.0
Repayment of Notes and Mortgages Payable                                             (15.4)                (43.4)
Issuance of Common Stock Under Stock Option and Other Plans                           12.3                   7.4
Dividends on 10% Senior Cumulative Preferred Stock                                       -                  (3.2)
Dividends on ESOP Convertible Preferred Stock                                            -                  (1.4)
Dividends on Common Stock                                                            (23.7)                (19.4)
Acquisition of Treasury Common Stock                                                  (4.7)                 (2.6)
                                                                             -------------        --------------
          Net Cash Provided by Financing Activities                                  171.1                  78.8
                                                                             -------------        --------------
Decrease in Cash                                                                      (4.5)                (13.9)
Cash at Beginning of Period                                                           32.4                  48.5
                                                                             -------------        --------------
Cash at End of Period                                                        $        27.9        $         34.6
                                                                             =============        ==============
</TABLE>


See accompanying notes to condensed consolidated financial statements.


<PAGE>



                            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 Annual Report of ReliaStar
Financial Corp. (the Company or ReliaStar) for the year ended December 31, 1996
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 Company's Annual Report.

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 July 1, 1997, the Company completed the acquisition of Security-Connecticut
Corporation (SRC). 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. The acquisition was
effected through a stock-for stock exchange whereby the Company issued .7367
shares of its common stock for each issued and outstanding share of SRC common
stock, or approximately 6.3 million additional ReliaStar shares. The transaction
will be accounted for as a purchase. Accordingly, the results of SRC will be
included in ReliaStar's results beginning July 1, 1997.

<PAGE>

Note 5. Company-Obligated Mandatorily Redeemable Preferred Securities Issued by
a Consolidated Subsidiary

On June 3, 1997, ReliaStar Financing II ( "Subsidiary Trust II"), a consolidated
wholly owned subsidiary of ReliaStar, completed the issuance of $125.0 million
of 8.10% Trust-Originated Preferred Securities (the "8.10% Preferred
Securities"). In connection with Subsidiary Trust II's issuance of the 8.10%
Preferred Securities and the related purchase by ReliaStar of all of Subsidiary
Trust II's common securities (the "Common Securities"), ReliaStar issued to
Subsidiary Trust II $128.9 million principal amount of its 8.10% Subordinated
Deferrable Interest Notes, due June 3, 2027 (the "8.10% Junior Subordinated Debt
Securities"). Under certain circumstances the stated maturity date may be
extended at any time by ReliaStar to any date not later than June 3, 2046. The
sole assets of Subsidiary Trust II are and will be the 8.10% Junior Subordinated
Debt Securities. The interest and other payment dates on the 8.10% Junior
Subordinated Debt Securities correspond to the distribution and other payment
dates on the 8.10% Preferred Securities and the Common Securities. Under certain
circumstances, the 8.10% Junior Subordinated Debt Securities may be distributed
to holders of 8.10% Preferred Securities and holders of the Common Securities in
liquidation of Subsidiary Trust II. The 8.10% Junior Subordinated Debt
Securities are redeemable at the option of ReliaStar on or after June 3, 2002,
at a redemption price of $25 per 8.10% Junior Subordinated Debt Security plus
accrued and unpaid interest. The 8.10% Preferred Securities and the Common
Securities will be redeemed on a pro rata basis to the same extent that the
8.10% Junior Subordinated Debt Securities are repaid, at $25 per 8.10% Preferred
Security and Common Security plus accumulated and unpaid distributions.
ReliaStar's obligations under the 8.10% Junior Subordinated Debt Securities and
related agreements, taken together, constitute a full and unconditional
guarantee by ReliaStar of payments due on the 8.10% Preferred Securities. On
June 3, 1997, 5,000,000 shares of 8.10% Preferred Securities were issued and all
remain outstanding.

Note 6. Split of Common Stock

In August 1997, the Company's Board of Directors approved a 2-for-1 split of its
common stock. The split will be effected by a 100% dividend of the Company's
common stock on September 10, 1997 for each common share owned by shareholders
of record at the close of business August 19, 1997.

Note 7. Reclassification

Certain prior year balance sheet amounts have been reclassified to conform to
the current-year presentation due to an amendment to the certificate of
incorporation to change the Company's common stock from no par value to a par
value of $.01 per share. The reclassification had no effect on previously
reported total assets, liabilities or equity.


<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

                            RELIASTAR FINANCIAL CORP.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                                                    Three Months               Six Months
                                                                    Ended June 30             Ended June 30
                                                               ---------------------      -----------------
                                                                1997           1996          1997        1996
                                                                ----           ----          ----        ----
<S>                                                             <C>          <C>         <C>            <C>   
Pretax Operating Income (Loss) (1)
   Individual Insurance                                         $  53.9      $  48.4     $  107.3       $ 99.4
   Employee Benefits                                               13.6         12.2         24.8         22.0
   Life and Health Reinsurance                                     12.7         12.3         26.1         24.2
   Pension                                                          5.4          3.5          8.3          7.6
   Corporate and Other                                             (1.5)        (1.8)        (2.6)        (9.7)
                                                                -------      -------     --------       ------
     Pretax Operating Income                                       84.1         74.6        163.9        143.5
Pretax Net Realized Investment Gains (Losses)                       (.1)         1.5          1.5          6.9
                                                                -------      -------     --------       ------
   Pretax Income Before Dividends
     on Preferred Securities of Subsidiary                         84.0         76.1        165.4        150.4
Income Tax Expense                                                 30.0         26.7         58.4         52.9
Dividends on Preferred Securities of Subsidiary, Net of Tax         2.1          1.6          3.8          1.7
                                                                -------      -------     --------       ------
   Net Income                                                   $  51.9      $  47.8     $  103.2       $ 95.8
                                                                =======      =======     ========       ======

</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 second quarter of 1997 increased $5.5 million,
or 11%, compared with the same period in 1996. The increase in earnings is
primarily due to an 8% growth in assets under management, partially offset by a
decrease in interest spreads. The average interest spread of 245 basis points in
the second quarter of 1997, compares to 259 basis points in the second quarter
of 1996. This decrease in spreads reflects a 3 basis point reduction in the
average crediting rate and a 17 basis point decrease in the portfolio yield.
Year-to-date earnings increased 8% over the comparable period in 1996 also due
primarily to growth in assets under management, offset in part by a decline in
interest spreads. It should be noted that the interest spread calculation is an
annualized measure and can be overly influenced in a particular period by the
level of prepayments, recoveries on problem investments and other variances in
the level of net investment income. For most of the business included in the
Individual Insurance Segment, 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.

<PAGE>


Employee Benefits

Pretax operating income for the second quarter of 1997 increased $1.4 million,
or 11%, compared with the same period in 1996. The increase for the second
quarter was primarily due to improved mortality experience partially offset by
higher operating expenses, as compared with the same period in 1996. Pretax
operating income for the six months ended June 30, 1997 increased 13% as
compared to same period last year due primarily to improved mortality
experience.

Life and Health Reinsurance

Pretax operating income of the Life and Health Reinsurance segment for the
second quarter of 1997 increased $.4 million, or 3%, when compared with the same
period in 1996. Income for the segment was higher than 1996 due primarily to a
19% increase in net earned premiums, partially offset by higher experience
rating refunds and commission expenses. Pretax operating income for 1997
year-to-date increased 8% over the same period in 1996 primarily due to an 18%
growth in earned premiums, partially offset by higher experience rating refunds
and commission 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 included in this segment.

Pension

Pretax operating income of the Pension segment for the second quarter of 1997
increased $1.9 million, or 54%, when compared with the same period in 1996.
Pretax operating income from the small employer 401(k) line of business
increased $.9 million to $2.1 million for the second quarter of 1997. Income in
this line of business increased primarily due to higher separate account fees
reflecting the growth in assets under management. Pretax operating income from
the Company's closed block of pension contract liabilities increased $1.0
million to $3.3 million for the second quarter of 1997, primarily due to
favorable investment income and mortality experience compared with the same
period last year. Year-to-date pretax operating income for 1997 increased 9%
primarily due to increased assets under management in the 401(k) line of
business, partially offset by a decrease in earnings caused by the decline in
the closed block of pension contract liabilities.

Corporate and Other

The pretax operating loss for Corporate and Other for the second quarter of 1997
decreased $.3 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 partially offset by lower recovery
of corporate costs from other business segments. The year-to-date pretax
operating loss for 1997 declined 73% from the same period of 1996 primarily due
to the improved operating results of the Company's mutual fund and mortgage
banking operations and higher recovery of corporate costs from other business
units.


<PAGE>


REALIZED INVESTMENT GAINS AND LOSSES

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

<TABLE>
<CAPTION>
                                                                    Three Months               Six Months
                                                                    Ended June 30             Ended June 30
                                                                    -------------             -------------
                                                                 1997          1996         1997          1996
                                                                 ----          ----         ----          ----
<S>                                                            <C>           <C>          <C>            <C>   
Net Gains (Losses) on Sales of Investments
    Fixed Maturity Securities
      Gross Gains                                              $  2.0        $   2.2      $   2.6        $  6.1
      Gross Losses                                               (1.0)             -         (4.2)          (.1)
    Equity Securities                                              .2             .1          2.4            .1
    Mortgage Loans                                                 .1              -           .1             -
    Foreclosed Real Estate                                        (.1)            .4           .1            .3
    Real Estate                                                     -              -           .1            .7
    Other                                                          .2            1.6          5.6           5.7
Provision for Losses on Investments
    Fixed Maturity Securities                                    (1.0)          (1.1)        (1.7)         (1.1)
    Mortgage Loans                                                  -            (.1)        (1.4)         (1.2)
    Foreclosed Real Estate                                        (.1)           (.2)        (1.1)         (1.4)
    Real Estate                                                     -            (.4)           -           (.4)
                                                               ------        -------      -------        ------
       Pretax Realized Investment Gains                            .3            2.5          2.5           8.7
DAC/PVFP Amortization (1)                                         (.4)          (1.0)        (1.0)         (1.8)
                                                               ------        --------     -------        ------
       Pretax Net Realized Investment Gains                    $  (.1)       $   1.5      $   1.5        $  6.9
                                                               ======        =======      =======        ======
</TABLE>

(1)    Due to realized investment gains and losses.

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.

ACQUISITION

On July 1, 1997, the Company completed the acquisition of Security-Connecticut
Corporation (SRC). (see Known Trends and Uncertainties Which May Affect Future
Reported Results.)

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 the Company. 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 

<PAGE>

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. On June
3, 1997, the Company completed the issuance of $125.0 million of 8.10%
Trust-Originated Preferred Securities. On June 3, 1997, 5,000,000 shares of the
8.10% Preferred Securities were issued and all remain outstanding.

The Company has announced its intent to repurchase up to $125.0 million of its
common stock under a common stock buyback program to be conducted in conjunction
with the acquisition of SRC, such repurchase to be financed with the proceeds of
the 8.10% Preferred Securities issued on June 3, 1997. The Company's repurchase
of shares began July 2, 1997 and through July 31, 1997, the Company had
repurchased 818,600 shares.

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 June 30, 1997, the Insurers' investment portfolio included $6.7
billion (38% of total assets) of short-term investments and investment grade
marketable bonds. The June 30, 1997 investment portfolio also included $2.2
billion of investment grade privately placed bonds which, while not publicly
traded, are an additional 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 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, 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 
<PAGE>


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 June 30, 1997 was $27.9 million. During the second
quarter of 1997, net cash provided by operating and financing activities was
$107.6 million and $171.1 million, respectively, which was offset by net cash
used by investing activities of $283.2 million.

The $107.6 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 $171.1 million was primarily the result
of the issuance of the 8.10% Preferred Securities, 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>
                                                           June 30, 1997           December 31, 1996
                                                           -------------           -----------------
                                                       Amount       Percent        Amount      Percent
                                                       ------       -------        ------      -------
<S>                                                  <C>              <C>       <C>              <C>  
Investment Grade Bonds:
    Marketables                                      $  6,535.5       53.4%     $  6,604.9       55.0%
    Private Placements                                  2,211.2       18.1         2,156.2       18.0
                                                    -----------     ------     -----------       ----
        Subtotal                                        8,746.7       71.5         8,761.1       73.0

<PAGE>


Below Investment Grade Bonds:
    Marketables                                           289.5        2.4           279.7        2.4
    Private Placements                                    299.0        2.4           255.4        2.1
                                                   ------------    -------    ------------      -----
           Subtotal                                       588.5        4.8           535.1        4.5

Equity Securities                                          24.9         .2            36.9         .3
Commercial Mortgages                                    1,382.6       11.3         1,359.6       11.3
Mortgages, Residential and Other                          609.9        5.0           495.8        4.1
Real Estate                                                74.2         .6            77.5         .7
Short-Term Investments                                    172.8        1.4           119.4        1.0
Other                                                     647.0        5.2           610.9        5.1
                                                   ------------    -------    ------------    -------
    Total Invested Assets                             $12,246.6      100.0%      $11,996.3      100.0%
                                                      =========      =====       =========      =====
</TABLE>


FIXED MATURITY SECURITIES

The amounts invested in fixed maturity securities as of June 30, 1997 and
December 31, 1996 were $9.3 billion. 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 June 30, 1997 were $9.3 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 June 30, 1997, the weighted average book yields of the Company's
investment grade portfolio and below investment grade portfolio were 7.8% and
8.9%, 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>
                                                       June 30, 1997
                ------------------------------------------------------------------------------------------
                                Marketables                                Private Placements
                ------------------------------------------       -----------------------------------------
NAIC            Amortized     Gross Unrealized       Fair      Amortized     Gross Unrealized       Fair
                              ----------------                               ----------------
Rating            Cost        Gains     (Losses)     Value       Cost        Gains    (Losses)      Value
------            ----        -----     --------     -----       ----        -----    --------      -----
<S>             <C>           <C>         <C>       <C>        <C>            <C>      <C>        <C>     
1               $4,526.3      $170.5      $(18.1)   $4,678.7   $  778.4       $24.8    $  (4.4)   $  798.8
2                1,797.8        66.0        (7.0)    1,856.8    1,382.6        36.1       (6.3)    1,412.4
3                  263.1         8.5         (.6)      271.0      186.2         2.8       (1.7)      187.3
4                   16.5          .5         (.4)       16.6       64.6         1.7        (.3)       66.0
5                    1.9           -           -         1.9       46.1          .1       (2.0)       44.2
6                      -           -           -          -         1.5          -           -         1.5
Redeemable
  Preferred
  Stock              3.1          .4           -         3.5        1.6          -         (.2)        1.4
                --------      ------      ------    --------   --------       -----     ------    --------
    Total       $6,608.7      $245.9      $(26.1)   $6,828.5   $2,461.0       $65.5     $(14.9)   $2,511.6
                ========      ======      =======   ========   ========       =====     =======   ========


                                                     December 31, 1996     
                 -----------------------------------------------------------------------------------------
                                Marketables                                Private Placements
                -----------------------------------------      -----------------------------------------
NAIC            Amortized     Gross Unrealized       Fair      Amortized     Gross Unrealized       Fair
                              ----------------                               ----------------

<PAGE>

Rating            Cost        Gains     (Losses)     Value       Cost        Gains    (Losses)      Value
------            ----        -----     --------     -----       ----        -----    --------      -----


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>
                                                        June 30, 1997                  December 31, 1996
                                                    ---------------------            -------------------
                                                      Amortized    Fair               Amortized    Fair
                                                        Cost       Value                Cost       Value
                                                        ----       -----                ----       -----
<S>                                                  <C>        <C>                   <C>        <C>      
Due in One Year or Less                              $   204.6  $   207.1             $   155.8  $   157.4
Due After One Year Through Five Years                  3,215.0    3,298.3               2,967.6    3,057.0
Due After Five Years Through Ten Years                 2,566.7    2,652.3               2,622.4    2,723.6
Due After Ten Years                                      983.8    1,024.8               1,055.3    1,108.7
Mortgage-Backed/Structured Finance
  Securities                                           2,099.6    2,157.6               2,192.4    2,251.5
                                                     ---------  ---------             ---------  ---------
     Total                                            $9,069.7   $9,340.1              $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
                                                     -----------                  ------------------
                                              June 30,      December 31,       June 30,       December 31,
                                                1997            1996             1997             1996
                                                ----            ----             ----             ----

<S>                                              <C>             <C>              <C>              <C> 
Basic Materials                                  7.0%            6.7%             9.5%             9.5%
Consumer Non-Cyclical                            5.9             6.0             17.8             18.4
Consumer Products/Services                       7.9             7.3             18.4             18.4
Energy                                           6.1             6.2              5.8              6.9
Financial Services                              19.8            19.3             19.4             18.6
Government                                       3.3             3.5               .7               .8
Industrial                                       3.5             3.6              9.8             10.3

<PAGE>


Mortgage-Backed/Structured
   Finance Securities                           31.5            32.2              3.2              1.2
Real Estate                                       .4              .3              1.7              1.3
Retailing                                        2.2             2.3              5.7              5.9
Technology                                       2.3             2.5              3.0              3.2
Utilities                                       10.1            10.1              5.0              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 June 30, 1997. The
largest investment in below investment grade bonds of any one industry grouping
was approximately 1.8% of invested assets at June 30, 1997. The portfolio of
below investment grade bonds are regularly analyzed and managed in an effort to
avoid concentration risks.

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>
                                                                             June 30, 1997
                                                                             -------------
                                                                   Amortized
                                                                     Cost               Fair Value
                                                                  --------               --------
<S>                                                               <C>                    <C>     
Adjustable Rate Pass Through MBS Securities:
Below 6%                                                         $    10.0              $    10.0
6% - 7%                                                              129.1                  130.3
7% - 8%                                                              306.8                  308.2
Above 8%                                                              32.2                   32.5

Fixed Rate Pass Through MBS Securities:
Below 9%                                                               5.9                    6.3
Above 9%                                                               8.1                    8.6

Planned Amortization Class MBS Securities:
Below 7%                                                             288.2                  297.7
7% - 8%                                                              337.7                  352.7
8% - 9%                                                              106.5                  111.6
Above 9%                                                              11.9                   12.3

Other MBS Securities:
Below 7%                                                             198.6                  205.6
7% - 8%                                                               91.6                   98.1
8% - 9%                                                               19.1                   20.4
Above 9%                                                              11.4                   12.0
                                                                  --------               --------
     Total MBS Securities                                         $1,557.1               $1,606.3
                                                                  ========               ========

</TABLE>

<PAGE>

The Company invests in asset-backed securities in addition to the MBS securities
described above. As of June 30, 1997, the Insurers held asset-backed securities
with an amortized cost of $542.5 million and a fair value of $551.3 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 June
30, 1997 being approximately $2.3 million.

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

                                              June 30,        December 31,
                                                1997              1996
                                                ----              ----
Property Type
-------------
Office                                          22.1%             24.6%
Industrial                                      22.2              23.5
Special Purpose                                 17.5              17.3
Retail                                          17.4              16.1
Apartment                                       19.5              15.7
Hotel/Motel                                      1.3               2.8
                                               -----             -----
     Total                                     100.0%            100.0%
                                               =====             =====

                                              June 30,        December 31,
                                                1997              1996
                                                ----              ----
Geographic Region
-----------------
Midwest                                         30.6%             31.6%
Pacific                                         28.4              30.1
Southeast                                       19.7              18.2
Northeast                                        8.6               8.7
Mountain                                         6.8               6.5
Southwest                                        5.9               4.9
                                               -----             -----
     Total                                     100.0%            100.0%
                                               =====             =====

The weighted average yield of the commercial mortgage loan portfolio as of June
30, 1997 was 8.6%. The weighted average maturity of these loans was 6.9 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 June 30, 1997 and December 31,
1996, the Insurers held $608.4 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):

                                                  June 30,        December 31,
                                                    1997              1996
                                                    ----              ----
Unrealized Investment Gains                        $276.2            $310.5
DAC/PVFP Adjustment                                 (73.8)            (93.8)
Deferred Income Taxes                               (70.8)            (75.9)
                                                   ------            ------
     Net Unrealized Investment Gains               $131.6            $140.8
                                                   ======            ======

<PAGE>

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 attempts to structure investment asset portfolios with
compatible characteristics. Investment assets are selected in an effort to
provide yield, cash flow and interest rate sensitivities appropriate to support
the insurance products.

The Company uses interest rate swaps 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. 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):

                                                  June 30, 1997
                                    ----------------------------------------
                                      Asset         Portfolio        Target
                                    Duration        Duration        Duration
                                    --------        --------        --------
Individual Insurance                   3.85           4.04        3.5 - 5.0
Employee Benefits                      3.39           3.73        3.5 - 8.0
Life and Health Reinsurance            4.15           4.25        3.5 - 8.0
Pension                                2.22           2.99        2.5 - 3.5

At June 30, 1997, the Company had 71 interest rate swap contracts in effect with
a notional amount of $1.16 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 six months ended June 30, 1997, seven new interest rate swap
contracts were entered into with a notional amount of $140.0 million and five
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 six months of 1997. The Company had no deferred gains or losses
at June 30, 1997 related to interest rate swap contracts terminated early. The
estimated fair value of the interest rate swap contracts in effect at June 30,
1997 was an unrealized gain of $3.8 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 June 30, 1997 (dollars in millions).

<PAGE>

                                                     Notional   Range of Fixed
                                                      Amount    Rates Received
                                                      ------    --------------
Maturing in One Year or Less                           $305.0     7.0 - 8.7%
Maturing After One Year Through Three Years             200.0     5.2 - 6.9%
Maturing After Three Years Through Five Years           482.5     5.3 - 8.2%
Maturing After Five Years Through Seven Years           175.0     6.3 - 7.0%
                                                     --------
     Total Notional Amount                           $1,162.5
                                                     ========

The Company 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 June 30, 1997, the Company held $1.41 billion of adjustable
rate invested assets, short-term investments and cash. 

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, is shown below (in millions):

                                                    June 30,        December 31,
                                                      1997              1996
                                                     ------           ------
Fixed Maturity Securities(1)                          $16.4            $15.5
Commercial Mortgage Loans                              16.3             22.4
Residential and Other Mortgage Loans                    4.4              4.2
Investment Real Estate(2)                               8.8             12.3
Foreclosed Real Estate                                 40.1             37.4
                                                     ------           ------
    Total                                             $86.0            $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):

                                                 June 30,        December 31,
                                                   1997              1996
                                                   ----              ----
Fixed Maturity Securities                           $9.6             $8.3
Commercial Mortgage Loans                           10.8             10.5
Residential and Other Mortgage Loans                  .7               .7
Foreclosed Real Estate                              25.1             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 


<PAGE>

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 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: 

                              June 30,        December 31,
Property Type                   1997             1996
-------------                   ----             ----
Office                          69.5%            67.9%
Retail                          15.1             15.4
Industrial                      11.9             13.2
Hotel/Motel                      3.5              3.5
                             -------          -------
     Total                     100.0%           100.0%
                               =====            =====

                              June 30,       December 31,
Geographic Region               1997             1996
-----------------               ----             ----
Midwest                         54.3%            51.5%
Southeast                       20.1             21.0
Pacific                         15.8             17.2
Southwest                        5.9              6.3
Northeast                        2.7              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 $28.2 million and $21.7 million, respectively, at June 30, 1997.

KNOWN TRENDS AND UNCERTAINTIES WHICH MAY AFFECT FUTURE REPORTED RESULTS

ACQUISITION

On July 1, 1997, the Company completed the acquisition on Security-Connecticut
Corporation (SRC). 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. The acquisition was
effected through a stock-for stock exchange whereby the Company issued .7367
shares of its common stock for each issued and outstanding share of SRC common
stock, or approximately 6.3 million additional ReliaStar shares. The 

<PAGE>

transaction will be accounted for as a purchase with a purchase price of
approximately $433 million. Accordingly, the results of SRC will be included in
ReliaStar's results beginning July 1, 1997. The proforma effects, assuming the
transaction was completed on March 31, 1997, were an increase in assets from
$16.9 billion to approximately $19.3 billion and an increase in shareholder's
equity from $1.4 billion to approximately $1.8 billion.

The future financial performance of the Company will be affected by the
acquisition of SRC. The Company expects to realize reductions in SRC expenses
due to the elimination of certain duplicative facilities, equipment and other
personnel and functions. If these expected savings are not realized, the
earnings of the combined company would be less than currently expected. The
Company also believes that the combined company will realize marketing and
distribution synergies through the joint distribution of insurance products. The
market for insurance products is, however, very competitive, and there can be no
assurance that the expected synergies will be realized.

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.

YEAR 2000 SYSTEMS MODIFICATIONS

<PAGE>

The Company's business units utilize data processing systems in the production
of new business and to service business after it is sold. Many of the Company's
data processing systems require modifications to enable them to process dates
including the year 2000 and beyond. The Company has a thorough and complete plan
to address the year 2000 issue and that work is progressing on schedule.

During the years 1997-1999 the Company expects to redirect certain internal and
external data processing resources to efforts which will enable these data
processing systems to process dates including the year 2000 and beyond. The net
effect of the redirection of these resources is not expected to have a material
effect on the Company's consolidated financial statements during the 1997-1999
period.


<PAGE>




PART II. OTHER INFORMATION

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)      The Registrant's annual meeting was held on May 8, 1997.

(b)      The following matters were submitted to a vote of security holders:

         Proposal 1 - Election of Directors
         To elect the following nominees to terms expiring in 2000:

         Nominees                     Votes For          Votes Withheld

         David C. Cox                 34,749,832           245,184
         Luella Gross Goldberg        34,745,853           249,163
         Randy C. James               34,732,377           262,639
         David A. Koch                34,754,357           240,659
         James J. Renier              34,731,980           263,036

         Carolyn H. Baldwin, John H. Flittie, William A. Hodder, James J. Howard
         III, Richard L. Knowlton, Richard M. Kovacevich, Glen D. Nelson, M.D.
         and John G. Turner continued to serve as directors following the
         meeting.

         Proposal 2 - Proposal to Approve the ReliaStar 1993 Stock Incentive
         Plan As Amended:

                           Votes for:                  29,262,963
                           Votes against:               5,322,441
                           Votes to abstain:              408,927
                           Broker non-votes:                  685

         Proposal 3 - Proposal to Amend the Certificate of Incorporation to
         change the Corporation's Capital Stock From No Par Value to $.01 Par
         Value Per Share.

                           Votes for:                33,815,459
                           Votes against:               860,772
                           Votes to abstain:            318,100
                           Broker non-votes:                685

         Proposal 4 - Proposal to Ratify the Appointment of Independent Public
         Accountants:

                           Votes for:                34,713,164
                           Votes against:                94,466
                           Votes to abstain:            187,386
                           Broker non-votes:                  -



<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

         (10)(a)  ReliaStar 1993 Stock Incentive Plan, as amended.

         (11)     Statement re Computation of Per Share Earnings

         (27)     Financial Data Schedule

(b)      Reports on Form 8-K:

         Form 8-K dated June 3, 1997, with respect to the offering of $125.0
         million of 8.10% Trust-Originated Preferred Securities by ReliaStar
         Financing II.


<PAGE>


                                   SIGNATURES

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

                            Dated August 12, 1997

                            RELIASTAR FINANCIAL CORP.

                            /s/ Wayne R. Huneke
                            by Wayne R. Huneke
                            Senior Vice President, Chief Financial
                            Officer and Treasurer


<PAGE>



                            ReliaStar Financial Corp.
                                  Exhibit Index

Description

(10)(a)           Reliastar 1993 Stock Incentive Plan, as amended

(11)              Statement re Computation of Per Share Earnings

(27)              Financial Data Schedule