Voya Insurance & Annuity POS AM Prospectus update (post-effective amendment)

As filed with the Securities and Exchange Commission on April 18, 2008
Registration File No. 333-133154

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

FORM S-1
POST-EFFECTIVE AMENDMENT NO. 2
TO

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

ING USA ANNUITY AND LIFE INSURANCE COMPANY

IOWA
(State or other jurisdiction of incorporation or organization)
6355
(Primary Standard Industrial Classification Code Number)
41-0991508
(I.R.S. Employer Identification No.)

ING
1475 Dunwoody Drive
West Chester, PA 19380-1478
(610) 425-3400
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

John S. (Scott) Kreighbaum, Esq.
ING
1475 Dunwoody Drive
West Chester, PA 19380-1478
(610) 425-3404

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Approximate date of commencement of proposed sale to the public:
As soon as practical after the effective date of the Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act of 1933 check the following box	[X]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the
Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering	[  ]
If this Form is post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering	[  ]
If this Form is post-effective amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering	[  ]

PART I

INFORMATION REQUIRED IN PROSPECTUS

<R>

ING USA Annuity and Life Insurance Company
ING USA Guaranteed Account
	April28, 2008

</R>

Introduction
The ING USA Guaranteed Account (the Guaranteed Account) is a fixed interest option available during the
accumulation phase under the Smart Design variable annuity contract issued by ING USA Annuity and Life
Insurance Company (the Company, we, us, our). Read this prospectus carefully before investing in the Guaranteed
Account and save it for future reference.

General Description
The Guaranteed Account offers investors an opportunity to earn specified guaranteed rates of interest for specified
periods of time, called guaranteed terms. We generally offer several guaranteed terms at any one time for those
considering investing in the Guaranteed Account. The number of guaranteed terms offered may vary by state, we
may not offer all guaranteed terms on all contracts, and the rates for a given guaranteed term may vary among
contracts. Each guaranteed term offers a guaranteed interest rate for investments that remain in the Guaranteed
Account for the duration of the specific guaranteed term. The guaranteed term establishes both the length of time
for which we agree to credit a guaranteed interest rate and how long your investment must remain in the Guaranteed
Account in order to receive the guaranteed interest rate.

We guarantee both principal and interest if, and only if, your investment remains invested for the full guaranteed
term. Charges related to the contract, such as a maintenance fee or early withdrawal charge, may still apply even if
you do not withdraw until the end of a guaranteed term.Investments taken out of the Guaranteed Account prior
to the end of a guaranteed term may be subject to a market value adjustment which may result in an
investment gain or loss. See “Market Value Adjustment (MVA).”

Premium Bonus Option.If the premium bonus option is available under your contract and you elect that option,
we will credit a premium bonus to your contract for each purchase payment you make during the first account year.
There is an additional charge for this option during the first seven account years. For amounts allocated to the
Guaranteed Account, the assessment of this charge will result in a reduction in the interest which would have been
credited to your account during the first seven account years if you had not elected the premium bonus option.
Therefore, the fees you will pay if you elect the premium bonus option will be greater than the fees you will pay if
you do not elect the premium bonus option. The premium bonus option may not be right for you if you expect to
make additional purchase payments after the first account year or if you anticipate that you will need to make
withdrawals during the first seven account years. In these circumstances the amount of the premium bonus option
charge may be more than the amount of the premium bonus we credit to your contract. See the “Premium Bonus
Option-Suitability” section of the contract prospectus. The premium bonus option may not be available in all states.

This prospectus will explain:

·  Guaranteed interest rates and guaranteed terms; 

·  Contributions to the Guaranteed Account; 

·  Types of investments available; 

·  How rates are offered; 

·  How there can be an investment risk and how we calculate gain or loss; 

·  Contract charges that can affect your account value in the Guaranteed Account; 

·  Taking investments out of the Guaranteed Account; and 

·  How to reinvest or withdraw at maturity. 

Additional Disclosure Information

SD Guaranteed Account

Neither the Securities and Exchange Commission nor any state securities commission has approved or
disapproved of these securities or passed on the accuracy or adequacy of this prospectus. Any representation to
the contrary is a criminal offense. We do not intend for this prospectus to be an offer to sell or a solicitation
of an offer to buy these securities in any state or jurisdiction that does not permit their sale. We have not
authorized anyone to provide you with information that is different than that contained in this prospectus.

Our Customer Service Center:
P.O. Box 9271
Des Moines, IA 50306-9271
1-800-366-0066

SD Guaranteed Account

TABLE OF CONTENTS
	Page
SUMMARY	1
DESCRIPTION OF THE GUARANTEED ACCOUNT	3
TRANSFERS	6
WITHDRAWALS	6
MARKET VALUE ADJUSTMENT (MVA)	7
CONTRACT CHARGES	9
OTHER TOPICS	9
APPENDIX I – Examples of Market Value Adjustment Calculations	I-1
APPENDIX II – Examples of Market Value Adjustment Yields	II-1

SD Guaranteed Account

SUMMARY

The Guaranteed Account is a fixed interest option that may be available during the accumulation phase of your
variable annuity contract. The following is a summary of certain facts about the Guaranteed Account.

In General.Amounts that you invest in the Guaranteed Account will earn a guaranteed interest rate if left in the
Guaranteed Account for a specified period of time (the guaranteed term). You must invest amounts in the
Guaranteed Account for the full guaranteed term in order to receive the quoted guaranteed interest rate. If you
withdraw or transfer those amounts before the end of the guaranteed term, we may apply a “market value
adjustment,” which may be positive or negative.

Deposit Periods.A deposit period is the time during which we offer a specific guaranteed interest rate if you
deposit dollars for a specific guaranteed term. For a particular guaranteed interest rate and guaranteed term to apply
to your account dollars, you must invest them during the deposit period in which that rate and term are offered.

Guaranteed Terms.A guaranteed term is the period of time account dollars must be left in the Guaranteed Account
in order to earn the guaranteed interest rate specified for that guaranteed term. We offer different guaranteed terms
at different times. We may also offer more than one guaranteed term of the same duration with different guaranteed
interest rates. Check with your sales representative or the Company to learn the details about the guaranteed term(s)
currently offered. We reserve the right to limit the number of guaranteed terms or the availability of certain
guaranteed terms. The number of guaranteed terms offered may vary by state, we may not offer all guaranteed
terms on all contracts, and the rates for a given guaranteed term may vary among contracts.

Guaranteed Interest Rates.We guarantee different interest rates, depending upon when account dollars are
invested in the Guaranteed Account. For guaranteed terms one year or longer, we may offer different rates for
specified time periods within a guaranteed term. The interest rate we guarantee is an annual effective yield; that
means that the rate reflects a full year’s interest. We credit interest at a rate that will provide the guaranteed annual
effective yield over one year. The guaranteed interest rate(s) is guaranteed for that deposit period and for the length
of the guaranteed term.

The guaranteed interest rates we offer will always meet or exceed the minimum interest rates agreed to in the
contract. Apart from meeting the contractual minimum interest rates, we cannot guarantee any aspect of future
offerings.

Fees and Other Deductions.We do not make deductions from amounts in the Guaranteed Account to cover
mortality and expense risks. We consider these risks when determining the credited rate. The following other types
of charges may be deducted from amounts held in, withdrawn or transferred from the Guaranteed Account:

·	Market Value Adjustment (MVA). An MVA may be applied to amounts transferred or withdrawn prior to
	the end of a guaranteed term, which reflects changes in interest rates since the deposit period. The MVA
	may be positive or negative and therefore may increase or decrease the amount withdrawn to satisfy a
	transfer or withdrawal request. See “Market Value Adjustment (MVA).”
·	Tax Penalties and/or Tax Withholding. Amounts withdrawn may be subject to withholding for federal
	income taxes, as well as a 10% penalty tax for amounts withdrawn prior to your having attained age 59½.
	See “Taxation”; see also the “Taxation” section of the contract prospectus.
·	Early Withdrawal Charge. An early withdrawal charge, which is a deferred sales charge, may apply to
	amounts withdrawn from the contract, in order to reimburse us for some of the sales and administrative
	expenses associated with the contract. See “Contract Charges”; see also the “Fees” section of the contract
	prospectus.
·	Maintenance Fee. A maintenance fee of up to $30 may be deducted, on an annual basis, pro rata from all
	funding options including the Guaranteed Account. See “Contract Charges”; see also the “Fees” section of

SD Guaranteed Account

1

	the contract prospectus.
·	Transfer Fees. During the accumulation phase, transfer fees of up to $10 per transfer may be deducted
	from amounts held in or transferred from the Guaranteed Account. See “Contract Charges”; see also the
	“Fees” section of the contract prospectus.
·	Premium Taxes. We may deduct premium taxes of up to 4% from amounts in the Guaranteed Account.
	See “Contract Charges”; see also the “Fees” section of the contract prospectus.
·	Premium Bonus Option Charge. If you elected the premium bonus option, a charge will be deducted from
	amounts allocated to the Guaranteed Account, resulting in a 0.50% reduction in the interest which would
	have been credited to your account during the first seven account years if you had not elected the premium
	bonus option. See “Contract Charges”; see also the “Fee Tables,” “Fees” and “Premium Bonus Option”
	sections of the contract prospectus.

Market Value Adjustment (MVA).If you withdraw or transfer your account value from the Guaranteed Account
before a guaranteed term is complete, an MVA may apply. The MVA reflects the change in the value of the
investment due to changes in interest rates since the date of deposit. The MVA may be positive or negative
depending upon interest rate activity at the time of withdrawal or transfer.

An MVA will not apply to:

·	Amounts transferred or withdrawn at the end of a guaranteed term;
·	Transactions made under the maturity value transfer provision;
·	Transfers due to participation in the dollar cost averaging program (see “Market Value Adjustment” for
	certain restrictions);
·	Amounts distributed under a systematic distribution option (see “Systematic Distribution Options” in the
	contract prospectus);
·	Withdrawals for minimum distributions required by the Internal Revenue Code of 1986, as amended (Tax
	Code), and for which the early withdrawal charge is waived; and
·	Withdrawals due to your exercise of the right to cancel your contract. See the “Right to Cancel” section of
	the contract prospectus.

MVAs applied to withdrawals or transfers from the Guaranteed Account will be calculated as an “aggregate MVA,”
which is the sum of all MVAs applicable due to the withdrawal (see sidebar on “Market Value Adjustment (MVA)”
section of this prospectus). The following withdrawals will be subject to an aggregate MVA only if it is positive:

·	Withdrawals due to the election of a lifetime income option; and
·	Unless otherwise noted, payment of a guaranteed death benefit (if paid within the first six months following
	death).

All other withdrawals will be subject to an aggregate MVA, regardless of whether it is positive or negative,
including:

·	Withdrawals due to the election of a nonlifetime income option;
·	Payment of a guaranteed death benefit due to the death of a spousal beneficiary or a joint contract holder
	who continued the account in his or her name after the death of the other joint contract holder;

SD Guaranteed Account

2

·	Payment of a guaranteed death benefit more than six months after the date of death; and
·	Full or partial withdrawals during the accumulation phase (an MVA may not apply in certain situations, see
	“Market Value Adjustment (MVA)”).

See “Description of the Guaranteed Account” and “Market Value Adjustment (MVA).”

Maturity of a Guaranteed Term.On or before the end of a guaranteed term, you may instruct us to:

·	Transfer the matured amount to one or more new guaranteed terms available under the current deposit
	period;
·	Transfer the matured amount to other available investment options; or
·	Withdraw the matured amount.

Amounts withdrawn may be subject to an early withdrawal charge, a maintenance fee, tax withholding and, if you
are under age 59½, tax penalties. Withdrawals may also result in the forfeiture of all or part of any premium bonus
credited to the Guaranteed Account (see “Premium Bonus Option” in the contract prospectus).

See “Contract Charges”; see also the “Fees” and “Taxation” sections of the contract prospectus.

DESCRIPTION OF THE GUARANTEED ACCOUNT

General
The Guaranteed Account offers guaranteed interest rates for specific guaranteed terms. For a particular guaranteed
interest rate and guaranteed term to apply to your account dollars, you must invest them during the deposit period in
which that rate and term are offered. For guaranteed terms of one year or longer, we may offer different interest
rates for specified time periods within a guaranteed term. We may also offer more than one guaranteed term of the
same duration with different guaranteed interest rates.

An MVA may be applied to any values withdrawn or transferred from a guaranteed term prior to the end of that
guaranteed term, except for amounts transferred under the maturity value transfer provision, amounts transferred
under the dollar cost averaging program, amounts withdrawn under a systematic distribution option, amounts
withdrawn for minimum distributions required by the Tax Code and withdrawals due to your exercise of the right to
cancel your contract.

MVAs applied to withdrawals or transfers from the Guaranteed Account will be calculated as an “aggregate MVA,”
which is the sum of all MVAs applicable due to the withdrawal (see sidebar in “Market Value Adjustment (MVA)”
section of this prospectus for an example of the calculation of the aggregate MVA). The following withdrawals will
be subject to an aggregate MVA only if it is positive:

·  Withdrawals due to the election of a lifetime income option; and 

·  Unless otherwise noted, payment of a guaranteed death benefit (if paid within the first six months following death).

All other withdrawals will be subject to an aggregate MVA, regardless of whether it is positive or negative,
including:

·  Withdrawals due to the election of a nonlifetime income option; 

·  Payment of a guaranteed death benefit due to the death of a spousal beneficiary or a joint contract holder 

SD Guaranteed Account

3

	who continued the account in his or her name after the death of the other joint contract holder;
·	Payment of a guaranteed death benefit more than six months after the date of death; and
·	Full or partial withdrawals during the accumulation phase (an MVA may not apply in certain situations, see
	“Market Value Adjustment (MVA)”).

We maintain a toll-free telephone number for those wishing to obtain information concerning available deposit
periods, guaranteed interest rates and guaranteed terms. The telephone number is 1-800-366-0066. At least 18
calendar days before a guaranteed term matures we will notify you of the upcoming deposit period dates and
information on the current guaranteed interest rates, guaranteed terms and projected matured guaranteed term
values.

Contributions to the Guaranteed Account
You may invest in the guaranteed terms available in the current deposit period by allocating new payments to the
Guaranteed Account or by transferring a sum from other funding options available under the contract or from other
guaranteed terms of the Guaranteed Account, subject to the transfer limitations described in the contract. We may
limit the number of guaranteed terms you may select. Currently, if the dollar cost averaging program is in effect in a
guaranteed term and you wish to add an additional deposit to be dollar cost averaged, all amounts to be dollar cost
averaged will be combined and the dollar cost averaging amount will be recalculated. This will affect the duration
of amounts in the guaranteed term.

Although there is currently no limit, we reserve the right to limit the total number of investment options you may
select at any one time during the life of the contract. For purposes of determining any limit, each guaranteed term
counts as one investment option. Although we may require a minimum payment(s) to a contract, we do not require
a minimum investment for a guaranteed term. Refer to the contract prospectus. There is a $500 minimum for
transfers from other funding options.

Investments may not be transferred from a guaranteed term during the deposit period in which the investment is
applied or during the first 90 days after the close of the deposit period. This restriction does not apply to amounts
transferred or withdrawn under the maturity value transfer provision, to amounts transferred under the dollar cost
averaging program or, in some situations, withdrawn because you discontinued the dollar cost averaging program, or
to amounts distributed under a systematic distribution option. See “Maturity Value Transfer Provision” and
“Transfers.”

Deposit Period
The deposit period is the period of time during which you may direct investments to a particular guaranteed term(s)
and receive a stipulated guaranteed interest rate(s). The deposit period for a guaranteed term ends upon the
commencement of that specific guaranteed term. Each deposit period may be a month, a calendar quarter or any

other period of time we specify.

Guaranteed Terms
A guaranteed term is the time we specify during which we credit the guaranteed interest rate. We offer guaranteed
terms at our discretion for various periods ranging up to and including ten years. We may limit the number of
guaranteed terms you may select and may require enrollment in the dollar cost averaging program.

Guaranteed Interest Rates
Guaranteed interest rates are the rates that we guarantee will be credited on amounts applied during a deposit period
for a specific guaranteed term. We may offer different guaranteed interest rates on guaranteed terms of the same
duration. Guaranteed interest rates are annual effective yields, reflecting a full year’s interest. We credit interest at
a rate that will provide the guaranteed annual effective yield over one year. Guaranteed interest rates are credited
according to the length of the guaranteed term as follows:

Guaranteed Terms of One Year or Less.The guaranteed interest rate is credited from the date of deposit to the
last day of the guaranteed term.

SD Guaranteed Account

4

Guaranteed Terms of Greater than One Year.Several different guaranteed interest rates may be applicable
during a guaranteed term of more than one year. The initial guaranteed interest rate is credited from the date of
deposit to the end of a specified period within the guaranteed term. We may credit several different guaranteed
interest rates for subsequent specific periods of time within the guaranteed term. For example, for a five-year
guaranteed term we may guarantee 7% for the first year, 6.75% for the next two years and 6.5% for the remaining
two years. We reserve the right, however, to apply one guaranteed interest rate for an entire guaranteed term.

We will not guarantee or credit a guaranteed interest rate below the minimum rate specified in the contract, nor will
we credit interest at a rate above the guaranteed interest rate we announce prior to the start of a deposit period.

Our guaranteed interest rates are influenced by, but are not determined by, interest rates available on fixed income
investments we may buy using deposits directed to the Guaranteed Account (see “Investments”). We consider other
factors when determining guaranteed interest rates including regulatory and tax requirements, sales commissions and
administrative expenses borne by the Company, general economic trends and competitive factors.We make the
final determination regarding guaranteed interest rates. We cannot predict the level of future guaranteed
interest rates.

Maturity of a Guaranteed Term.At least 18 calendar days prior to the maturity of a guaranteed term we will
notify you of the upcoming deposit period, the projected value of the amount maturing at the end of the guaranteed
term and the guaranteed interest rate(s) and guaranteed term(s) available for the current deposit period.

When a guaranteed term matures, the amounts in any maturing guaranteed term may be:

·  Transferred to a new guaranteed term(s), if available under the contract; 

·  Transferred to any of the allowable investment options available under the contract; or 

·  Withdrawn from the contract. 

We do not apply an MVA to amounts transferred or withdrawn from a guaranteed term on the date the guaranteed
term matures. Amounts withdrawn, however, may be subject to an early withdrawal charge, a maintenance fee,
taxation and, if the contract holder is under age 59½, tax penalties. Withdrawals may also result in the forfeiture of
all or part of any premium bonus credited to the Guaranteed Account (see “Premium Bonus Option” in the contract
prospectus).

If we have not received direction from you by the maturity date of a guaranteed term, we will automatically transfer
the matured term value to a new guaranteed term of similar length. If the same guaranteed term is no longer
available, the next shortest guaranteed term available in the current deposit period will be used. If no shorter
guaranteed term is available, the next longest guaranteed term will be used.

Under the Guaranteed Account, each guaranteed term is counted as one funding option. If a guaranteed term
matures, and is renewed for the same term, it will not count as an additional investment option for purposes of any
limitation on the number of investment options.

You will receive a confirmation statement, plus information on the new guaranteed rate(s) and guaranteed term.

Maturity Value Transfer Provision
If we automatically reinvest the proceeds from a matured guaranteed term, you may transfer or withdraw from the
Guaranteed Account the amount that was reinvested without an MVA.

An early withdrawal charge and maintenance fee may apply to withdrawals. If the full amount reinvested is
transferred or withdrawn, we will include interest credited to the date of the transfer or withdrawal. This provision
is only available until the last business day of the month following the maturity date of the prior guaranteed term.
This provision only applies to the first transfer or withdrawal request received from the contract holder with respect
to a particular matured guaranteed term value, regardless of the amount involved in the transaction.

SD Guaranteed Account

5

TRANSFERS

We allow you to transfer all or a portion of your account value to the Guaranteed Account or to other investment
options under the contract. We do not allow transfers from any guaranteed term to any other guaranteed term or
investment option during the deposit period for that guaranteed term or for 90 days following the close of that
deposit period. The 90-day wait does not apply to:

·	Amounts transferred on the maturity date or under the maturity value transfer provision;
·	Amounts transferred from the Guaranteed Account before the maturity date due to the election of an
	income phase payment option;
·	Amounts distributed under a systematic distribution option;
·	Amounts transferred from an available guaranteed term in connection with the dollar cost averaging
	program; and
·	Withdrawals due to your exercise of the right to cancel your contract. See the “Right to Cancel” section
	of the contract prospectus.

Transfers after the 90-day period are permitted from a guaranteed term(s) to another guaranteed term(s) available
during a deposit period or to other available investment options. We will apply an MVA to transfers made before
the end of a guaranteed term. Transfers within one calendar month of a term’s maturity date are not counted as one
of the 12 free transfers of accumulated values in the account.

When the contract holder requests the transfer of a specific dollar amount, we account for any applicable MVA in
determining the amount to be withdrawn from a guaranteed term(s) to fulfill the request. Therefore, the amount we
actually withdraw from the guaranteed term(s) may be more or less than the requested dollar amount (see “Appendix
I” for an example). For more information on transfers, see the contract prospectus.

WITHDRAWALS

The contract allows for full or partial withdrawals from the Guaranteed Account at any time during the accumulation
phase. To make a full or partial withdrawal, a request form (available from us) must be properly completed and
submitted to our Home Office (or other designated office as provided in the contract).

Partial withdrawals are made pro rata from each guaranteed term group. Within each guaranteed term group, we
will first withdraw funds from the oldest deposit period until depleted, then from the next oldest and so on.

We may apply an MVA to withdrawals made prior to the end of a guaranteed term, except for withdrawals made
under the maturity value transfer provision (see “Market Value Adjustment”). We may deduct an early withdrawal
charge and maintenance fee. The early withdrawal charge is a deferred sales charge which may be deducted upon
withdrawal to reimburse us for some of the sales and administrative expenses associated with the contract. A
maintenance fee, up to $30, may be deducted pro rata from each of the funding options, including the Guaranteed
Account. Refer to the contract prospectus for a description of these charges. When a request for a partial
withdrawal of a specific dollar amount is made, we will include the MVA in determining the amount to be
withdrawn from the guaranteed term(s) to fulfill the request. Therefore, the amount we actually take from the
guaranteed term(s) may be more or less than the dollar amount requested. See “Appendix I” for an example.

Deferral of Payments
Under certain emergency conditions, we may defer payment of a Guaranteed Account withdrawal for up to six
months. Refer to the contract prospectus for more details.

SD Guaranteed Account

6

Reinstatement Privilege
You may elect to reinstate all or a portion of a full withdrawal during the 30 days following such a withdrawal. We
must receive amounts for reinstatement within 60 days of the withdrawal.

We will apply reinstated amounts to the current deposit period(s). This means that the guaranteed annual interest
rate(s) and guaranteed terms available on the date of reinstatement will apply. Amounts will be reinstated to the
guaranteed terms in the same proportion as prior to the full withdrawal. We will not credit your account for market
value adjustments or any premium bonus forfeited that we deducted at the time of withdrawal or refund any taxes
that were withheld. Refer to the contract prospectus for further details.

MARKET VALUE ADJUSTMENT (MVA)

We apply an MVA to amounts transferred or withdrawn from the Guaranteed Account prior to the end of a
guaranteed term. To accommodate early withdrawals or transfers, we may need to liquidate certain assets or use
cash that could otherwise be invested at current interest rates. When we sell assets prematurely we could realize a
profit or loss depending upon market conditions.

The MVA reflects changes in interest rates since the deposit period. When interest rates increase after the deposit
period, the value of the investment decreases and the MVA amount will be negative. Conversely, when interest
rates decrease after the deposit period, the value of the investment increases and the MVA amount will be positive.
Therefore, the application of an MVA may increase or decrease the amount withdrawn from a guaranteed term to
satisfy a withdrawal or transfer request.

An MVA will not apply to:

·	Amounts transferred or withdrawn at the end of a guaranteed term;
·	Transactions made under the maturity value transfer provision;
·	Transfers due to participation in the dollar cost averaging program*;
·	Amounts distributed under a systematic distribution option—see “Systematic Distribution Options” in the
	contract prospectus; or
·	Withdrawals for minimum distributions required by the Tax Code and for which the early withdrawal
	charge is waived.

*	If you discontinue the dollar cost averaging program and transfer the amounts in it, subject to the Company’s terms and
	conditions governing guaranteed terms, to another guaranteed term, an MVA will apply.

MVAs applied to withdrawals or transfers from the Guaranteed Account will be calculated as an “aggregate MVA,”
which is the sum of all MVAs applicable due to the withdrawal (see sidebar for an example of the calculation of the
aggregate MVA). The following withdrawals will be subject to an aggregate MVA only if it is positive:

·	Withdrawals due to the election of a lifetime income option; and
·	Unless otherwise noted, payment of a guaranteed death benefit (if paid within the first six months following
	death).

All other withdrawals will be subject to an aggregate MVA, regardless of whether it is positive or negative,
including:

·Withdrawals due to the election of a nonlifetime income option;

SD Guaranteed Account7

·	Payment of a guaranteed death benefit due to the death of a spousal beneficiary or a joint contract holder
	who continued the account in his or her name after the death of the other joint contract holder;
·	Payment of a guaranteed death benefit more than six months after the date of death; and
·	Full or partial withdrawals during the accumulation phase (an MVA may not apply in certain situations, as noted above).

Aggregate MVA—The total of all MVAs applied due to a transfer or withdrawal.

Calculation of the Aggregate MVA—In order to satisfy a transfer or withdrawal, amounts may be withdrawn from
more than one guaranteed term, with more than one guaranteed interest rate. In order to determine the MVA
applicable to such a transfer or withdrawal, the MVAs applicable toeach guaranteed termwill be added together, in
order to determine the “aggregate MVA.”

Example:
$1,000 withdrawal, two guaranteed terms,
MVA1 = $10, MVA2 = $–30
$10 + $–30 = $–20.
Aggregate MVA = $–20.

Example:
$1,000 withdrawal, two guaranteed terms,
MVA1 = $30, MVA2 = $–10
$30 + $–10 = $20.
Aggregate MVA = $20.

Calculation of the MVA
The amount of the MVA depends upon the relationship between:

·	The deposit period yield of U.S. Treasury Notes that will mature in the last quarter of the guaranteed term;
	and
·	The current yield of such U. S. Treasury Notes at the time of withdrawal.

If the current yield is less than the deposit period yield, the MVA will decrease the amount withdrawn from a
guaranteed term to satisfy a transfer or withdrawal request (the MVA will be positive). If the current yield is greater
than the deposit period yield, the MVA will increase the amount withdrawn from a guaranteed term (the MVA will
be negative or detrimental to the investor).

Deposit Period Yield
We determine the deposit period yield used in the MVA calculation by considering interest rates prevailing during
the deposit period of the guaranteed term from which the transfer or withdrawal will be made. First, we identify the
Treasury Notes that mature in the last three months of the guaranteed term. Then, we determine their yield-to-
maturity percentages for the last business day of each week in the deposit period. We then average the resulting
percentages to determine the deposit period yield.

Treasury Note information may be found each business day in publications such as the Wall Street Journal, which
publishes the yield-to-maturity percentages for all Treasury Notes as of the preceding business day.

Current Yield
We use the same Treasury Notes identified for the deposit period yield to determine the current yield—Treasury
Notes that mature in the last three months of the guaranteed term. However, we use the yield-to-maturity
percentages for the last business day of the week preceding the withdrawal and average those percentages to get the
current yield.

SD Guaranteed Account

8

MVA Formula
The mathematical formula used to determine the MVA is:

	X/365
{1+i }
1+j

whereiis the deposit period yield;jis the current yield; andxis the number of days remaining (computed from
Wednesday of the week of withdrawal) in the guaranteed term. (For examples of how we calculate MVA, refer to
Appendix I.)

We make an adjustment in the formula of the MVA to reflect the period of time remaining in the guaranteed term
from the Wednesday of the week of a withdrawal.

CONTRACT CHARGES

Certain charges may be deducted directly or indirectly from the funding options available under the contract,
including the Guaranteed Account. The contract may have a maintenance fee of up to $30 that we will deduct, on an
annual basis, pro rata from all funding options including the Guaranteed Account. We may also deduct a
maintenance fee upon full withdrawal of a contract.

The contract may have an early withdrawal charge that we will deduct, if applicable, upon a full or partial
withdrawal from the contract. If the withdrawal occurs prior to the maturity of a guaranteed term, both the early
withdrawal charge and an MVA may be assessed.

We do not make deductions from amounts in the Guaranteed Account to cover mortality and expense risks. Rather,
we consider these risks when determining the interest rate to be credited.

Also, if you elected the premium bonus option, a charge will be deducted from amounts allocated to the Guaranteed
Account, resulting in a 0.50% reduction in the interest which would have been credited to your account during the
first seven account years if you had not elected the premium bonus option. See the “Fee Tables,” “Fees” and
“Premium Bonus Option” sections of the contract prospectus.

We may deduct a charge for premium taxes of up to 4% from amounts in the Guaranteed Account.

During the accumulation phase, we reserve the right to charge transfer fees of up to $10 per transfer from amounts
held in or transferred from the Guaranteed Account.

Refer to the contract prospectus for details on contract deductions.

OTHER TOPICS

The Company
ING USA Annuity and Life Insurance Company, (“ING USA”) is an Iowa stock life insurance company, which was
originally incorporated in Minnesota on January 2, 1973. ING USA is a wholly owned subsidiary of Lion
Connecticut Holdings Inc. (“Lion Connecticut”), which in turn is a wholly owned subsidiary of ING Groep N.V.
(“ING”), a global financial services holding company based in The Netherlands. ING USA is authorized to sell
insurance and annuities in all states, except New York, and the District of Columbia. Lion Connecticut is the
holding company for Directed Services LLC, distributor of the Contracts, and other interests. Although we are a
subsidiary of ING, ING is not responsible for the obligations under the Contract. The obligations under the Contract
are solely the responsibility of ING USA Annuity and Life Insurance Company.

SD Guaranteed Account

9

Our principal office is located at 1475 Dunwoody Drive, West Chester, Pennsylvania 19380

Regulatory Matters
As with many financial services companies, the Company and its affiliates have received informal and formal
requests for information from various state and federal governmental agencies and self-regulatory organizations in
connection with inquiries and investigations of the products and practices of the financial services industry. In each
case, the Company and its affiliates have been and are providing full cooperation.

Insuranceand Retirement Plan Productsand Other Regulatory Matters.
Federal and state regulators and self-regulatory agencies areconducting broad inquiries and
investigations involving the insurance and retirement industries. These initiatives currently focus on, among other
things, compensation, revenue sharing, and other sales incentives; potential conflicts of interest; potential anti-
competitive activity; reinsurance;sales andmarketing practices (including sales to seniors); specific product types
(including group annuities and indexed annuities); and disclosure. It is likely that the scope of these industry
investigations will further broaden before they conclude. The Company and certain of its U.S. affiliates have
received formal and informal requests in connection with such investigations, and are cooperating fully with each
request for information. Some of these matters could result in regulatory action involving the Company. These
initiatives also may result in new legislation and regulation that could significantly affect the financial services
industry, including businesses in which the Company is engaged. In light of these and other developments, U.S.
affiliates of ING, including the Company, periodically review whether modifications to their business practices are
appropriate.

Investment Product Regulatory Issues.Since 2002, there has been increased governmental and regulatory
activity relating to mutual funds and variable insurance products. This activity has primarily focused on
inappropriate trading of fund shares; directed brokerage; compensation; sales practices, suitability, and supervision;
arrangements with service providers; pricing; compliance and controls; adequacy of disclosure; and document
retention.

In addition to responding to governmental and regulatory requests on fund trading issues, ING management, on its
own initiative, conducted, through special counsel and a national accounting firm, an extensive internal review of
mutual fund trading in ING insurance, retirement, and mutual fund products. The goal of this review was to identify
any instances of inappropriate trading in those products by third parties or by ING investment professionals and
other ING personnel.

The internal review identified several isolated arrangements allowing third parties to engage in frequent trading of
mutual funds within the variable insurance and mutual fund products ofcertain affiliates of the Company, and
identified other circumstances where frequent trading occurred despite measures taken by ING intended to combat
market timing. Each of the arrangements has been terminated and disclosed to regulators, to the independent trustees
of ING Funds (U.S.) and in Company reports previously filed with the SEC pursuant to the Securities Exchange Act
of 1934, as amended.

Action may be taken by regulators with respect tocertainINGaffiliates before investigations
relating to fund trading are completed. The potential outcome of such action is difficult to predict but could subject
certain affiliates to adverse consequences, including, but not limited to, settlement payments,
penalties, and other financial liability. It is not currently anticipated, however, that the actual outcome of any such
action will have a material adverse effect on ING or ING’s U.S.-based operations, including the Company.

ING has agreed to indemnify and hold harmless the ING Funds from all damages resulting from wrongful conduct
by ING or its employees or from ING’s internal investigation, any investigations conducted by any governmental or
self-regulatory agencies, litigation or other formal proceedings, including any proceedings by the SEC.
Management reported to the ING Funds Board that ING management believes that the total amount of any
indemnification obligations will not be material to ING or ING’s U.S.-based operations, including the Company.

Income Phase
The Guaranteed Account may not be used as a funding option during the income phase. Amounts invested in

SD Guaranteed Account

10

guaranteed terms must be transferred to one or more of the options available to fund income payments before
income payments can begin.

An aggregate MVA, as previously described, may be applied to amounts transferred to fund income payments
before the end of a guaranteed term. Amounts used to fund lifetime income payments will receive either a positive
aggregate MVA or none at all; however, amounts transferred to fund a nonlifetime income payment option may
receive either a positive or negative aggregate MVA. Refer to the contract prospectus for a discussion of the income
phase.

Investments
Amounts applied to the Guaranteed Account will be allocated to a nonunitized separate account established under
Iowa law. A nonunitized separate account is a separate account in which the contract holder does not participate in
the performance of the assets through unit values or any other interest. Contract holders allocating funds to the
nonunitized separate account do not receive a unit value of ownership of assets accounted for in this separate
account. The risk of investment gain or loss is borne entirely by the Company. All Company obligations due to
allocations to the nonunitized separate account are contractual guarantees of the Company and are accounted for in
the separate account. All of the general assets of the Company are available to meet our contractual guarantees.
Income, gains and losses of the separate account are credited to or charged against the separate account without
regard to other income, gains or losses of the Company.

Types of Investments.We intend to invest primarily in investment-grade fixed income securities including:

·	Securities issued by the United States Government;
·	Issues of United States Government agencies or instrumentalities (these issues may or may not be
	guaranteed by the United States Government);
·	Debt securities which have an investment grade, at the time of purchase, within the four highest grades
	assigned by Moody’s Investors Services, Inc. (Aaa, Aa, A or Baa), Standard & Poor’s Corporation (AAA,
	AA, A or BBB) or any other nationally-recognized rating service;
·	Other debt instruments, including those issued or guaranteed by banks or bank holding companies, and of
	corporations, which although not rated by Moody’s, Standard & Poor’s or other nationally-recognized
	rating services, are deemed by the Company’s management to have an investment quality comparable to
	securities which may be purchased as stated above; and
·	Commercial paper, cash or cash equivalents and other short-term investments having a maturity of less than
	one year, which are considered by the Company’s management to have investment quality comparable to
	securities, which may be purchased as stated above.

We may invest in futures and options. We purchase financial futures, related options and options on securities
solely for non-speculative hedging purposes. Should securities prices be expected to decline, we may sell a futures
contract or purchase a put option on futures or securities to protect the value of securities held in or to be sold for the
nonunitized separate account. Similarly, if securities prices are expected to rise, we may purchase a futures contract
or a call option against anticipated positive cash flow or may purchase options on securities.

We are not obligated to invest the assets attributable to the contract according to any particular strategy,
except as required by Iowa and other state insurance laws. The guaranteed interest rates established by the
Company are not determined by the performance of the nonunitized separate account.

Taxation
You should seek advice from your tax adviser as to the application of federal (and where applicable, state and local)
tax laws to amounts paid to or distributed under the contract. Refer to the contract prospectus for a discussion of tax
considerations.

Taxation of the Company.We are taxed as a life insurance company under the Tax Code. We own all assets

SD Guaranteed Account

11

supporting the contract obligations. Any income earned on such assets is considered income to the Company. We
do not intend to make any provision or impose a charge under the contracts with respect to any tax liability of the
Company other than state premium taxes.

Taxation of Payments and Distributions.For information concerning the tax treatment of payments to and
distributions from the contract, please refer to the contract prospectus.

Experts
The financial statements of the Company appearing in the Company’s Annual Report (Form 10-K) for the year
ended December 31, 2007 (including schedules appearing therein), have been audited by Ernst & Young LLP,
independent registered public accounting firm, as set forth in their reports thereon included therein, and are included
and incorporated herein by reference. Such financial statements are included and incorporated herein by reference
in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

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

Directed Services LLC, the principal underwriter and distributor of the contract, is a party to threatened or pending
lawsuits/arbitration that generally arise from the normal conduct of business. Some of these suits may seek class
action status and sometimes include claims for substantial compensatory, consequential or punitive damages and
other types of relief. Directed Services LLC is not involved in any legal proceeding which, in the opinion of
management, is likely to have a material adverse effect on its ability to distribute the contract.

Further Information
This prospectus does not contain all of the information contained in the registration statement of which this
prospectus is a part. Portions of the registration statement have been omitted from this prospectus as allowed by the
Securities and Exchange Commission (SEC). You may obtain the omitted information from the offices of the SEC,
as described below. We are required by the Securities Exchange Act of 1934 to file periodic reports and other
information with the SEC. You may inspect or copy information concerning the Company at the Public Reference
Room of the SEC at:

Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, DC 20549

You may also obtain copies of these materials at prescribed rates from the Public Reference Room of the above
office. You may obtain information on the operation of the Public Reference Room by calling the SEC at either
1-800-SEC-0330 or 1-202-942-8090. You may also find more information about the Company atwww.ing.com.

A copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 accompanies this
prospectus. We refer to Form 10-K for a description of the Company and its business, including financial
statements. We intend to send contract holders annual account statements and other such legally required reports.
We do not anticipate such reports will include periodic financial statements or information concerning the Company.

You can find this prospectus and other information the Company files electronically with the SEC on the SEC’s web
site athttp://www.sec.gov.

Incorporation of Certain Documents by Reference
We have incorporated by reference the Company’s latest Annual Report on Form 10-K, as filed with the SEC and in
accordance with the Securities and Exchange Act of 1934. The Annual Report must accompany this prospectus.

SD Guaranteed Account

12

Form 10-K contains additional information about the Company including certified financial statements for the latest
fiscal year. We were not required to file any other reports pursuant to Section 13(a) or 15(d) of the Securities and
Exchange Act since the end of the fiscal year covered by that Form 10-K. The registration statement for this
prospectus incorporates some documents by reference. We will provide a free copy of any such documents upon the
written or oral request of anyone who has received this prospectus. We will not include exhibits to those documents
unless they are specifically incorporated by reference into the document. Direct requests to:

ING USA Annuity and Life Insurance Company
Attn: Customer Service Department
P.O. Box 9271
Des Moines, Iowa 50306-9271
1-800-366-0066

Inquiries
You may contact us directly by writing or calling us at the address or phone number shown above.

SD Guaranteed Account

13

APPENDIX I

Examples of Market Value Adjustment Calculations

The following are examples of market value adjustment (MVA) calculations using several hypothetical deposit
period yields and current yields. These examples do not include the effect of any early withdrawal charge or other
fees or deductions that may be assessed under the contract upon withdrawal.

EXAMPLE I

Assumptions:

i, the deposit period yield, is 4%

j, the current yield, is 6%

x, the number of days remaining (computed from
Wednesday of the week of withdrawal) in the guaranteed
term, is 927.

	x
	{(1+i) }365
MVA =	(1+j)
	927
	{(1.04) }365
=	(1.06)
	= .9528

In this example, the deposit period yield of 4% is less than
the current yield of 6%; therefore, the MVA is less than
one. The amount withdrawn from the guaranteed term is
multiplied by this MVA.

If a withdrawal or transfer of a specific dollar amount is
requested, the amount withdrawn from a guaranteed term
will be increased to compensate for the negative MVA
amount. For example, a withdrawal request to receive a
check for $2,000 would result in a $2,099.08 withdrawal
from the guaranteed term.

Assumptions:

i, the deposit period yield, is 5%

j, the current yield, is 6%

x, the number of days remaining (computed from
Wednesday of the week of withdrawal) in the guaranteed
term, is 927.

	x
	{(1+i) }365
MVA =	(1+j)
	927
	{(1.05) }365
=	(1.06)
	= .9762

In this example, the deposit period yield of 5% is less than
the current yield of 6%; therefore, the MVA is less than
one. The amount withdrawn from the guaranteed term is
multiplied by this MVA.

If a withdrawal or transfer of a specific dollar amount is
requested, the amount withdrawn from a guaranteed term
will be increased to compensate for the negative MVA
amount. For example, a withdrawal request to receive a
check for $2,000 would result in a $2,048.76 withdrawal
from the guaranteed term.

SD Guaranteed Account

I-1

EXAMPLE II
Assumptions:

i, the deposit period yield, is 6%

j, the current yield, is 4%

x, the number of days remaining (computed from
Wednesday of the week of withdrawal) in the guaranteed
term, is 927.

	x
	{(1+i)}365
MVA =	(1+j)
	927
	{(1.06)}365
=	(1.04)
	=1.0496

In this example, the deposit period yield of 6% is greater
than the current yield of 4%; therefore, the MVA is greater
than one. The amount withdrawn from the guaranteed term
is multiplied by this MVA.

If a withdrawal or transfer of a specific dollar amount is
requested, the amount withdrawn from a guaranteed term
will be decreased to compensate for the positive MVA
amount. For example, a withdrawal request to receive a
check for $2,000 would result in a $1,905.49 withdrawal
from the guaranteed term.

Assumptions:

i, the deposit period yield, is 5%

j, the current yield, is 4%

x, the number of days remaining (computed from Wednesday
of the week of withdrawal) in the guaranteed term, is 927.

	x
	{(1+i)}365
MVA =	(1+j)
	927
	{(1.05)}365
=	(1.04)
	=1.0246

In this example, the deposit period yield of 5% is greater than
the current yield of 4%; therefore, the MVA is greater than
one. The amount withdrawn from the guaranteed term is
multiplied by this MVA.

If a withdrawal or transfer of a specific dollar amount is
requested, the amount withdrawn from a guaranteed term
will be decreased to compensate for the positive MVA
amount. For example, a withdrawal request to receive a
check for $2,000 would result in a $1,951.98 withdrawal
from the guaranteed term.

SD Guaranteed Account

I-2

APPENDIX II

Examples of Market Value Adjustment Yields

The following hypothetical examples show the MVA based upon a given current yield at various times remaining in
the guaranteed term. Table A illustrates the application of the MVA based upon a deposit period yield of 6%; Table
B illustrates the application of the MVA based upon a deposit period yield of 5%. The MVA will have either a
positive or negative influence on the amount withdrawn from or remaining in a guaranteed term. Also, the amount
of the MVA generally decreases as the end of the guaranteed term approaches.

TABLE A: Deposit Period Yield of 6%
	Change in
Current	Deposit			Time Remaining to
Yield	Period Yield			Maturity of Guaranteed Term
		8 Years	6 Years	4 Years	2 Years	1 Year	3 Months
9%	3%	-20.0%	-15.4%	-10.6%	-5.4%	-2.8%	-0.7%
8%	2%	-13.9%	-10.6%	-7.2%	-3.7%	-1.9%	-0.5%
7%	1%	-7.2%	-5.5%	-3.7%	-1.9%	-0.9%	-0.2%
6%	0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
4%	-2%	16.5%	12.1%	7.9%	3.9%	1.9%	0.5%
3%	-3%	25.8%	18.8%	12.2%	5.9%	2.9%	0.7%
2%	-4%	36.0%	26.0%	16.6%	8.0%	3.9%	1.0%
1%	-5%	47.2%	33.6%	21.3%	10.1%	5.0%	1.2%
TABLE B: Deposit Period Yield of 5%
	Change in
Current	Deposit			Time Remaining to
Yield	Period Yield			Maturity of Guaranteed Term
		8 Years	6 Years	4 Years	2 Years	1 Year	3 Months
9%	3%	-25.9%	-20.1%	-13.9%	-7.2%	-3.7%	-0.9%
8%	2%	-20.2%	-15.6%	-10.7%	-5.5%	-2.8%	-0.7%
7%	1%	-14.0%	-10.7%	-7.3%	-3.7%	-1.9%	-0.5%
6%	0%	-7.3%	-5.5%	-3.7%	-1.9%	-0.9%	-0.2%
4%	-2%	8.0%	5.9%	3.9%	1.9%	1.0%	0.2%
3%	-3%	16.6%	12.2%	8.0%	3.9%	1.9%	0.5%
2%	-4%	26.1%	19.0%	12.3%	6.0%	2.9%	0.7%
1%	-5%	36.4%	26.2%	16.8%	8.1%	4.0%	1.0%

SD Guaranteed Account

II-1

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedDecember 31, 2007

Commission File Number:333-133154, 333-133076, 333-133156, 333-133153, 333-133155, 333-133152

ING USA ANNUITY AND LIFE INSURANCE COMPANY

(Exact name of registrant as specified in its charter)

Iowa	41-0991508
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
1475 Dunwoody Drive	19380-1478
West Chester, Pennsylvania	(Zip Code)
(Address of principal executive offices)

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

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

Securities registered pursuant to Section 12(b) of the Act:
Title: 4.50% Secured Medium Term Notes due 2010 of ING USA Global Funding Trust I
Name of exchange on which registered: New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes	x	No	£
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes	£No		x

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.

Yesx

No£

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-K or any
amendment to this Form 10-K. YesxNo£

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	£Accelerated filer	£Non-accelerated filerx			Smaller reporting company	£
		(Do not check if a smaller
		reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).			Yes	£No	x
State the aggregate market value of the voting and non-voting common equity held by non-affiliates: N/A

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 250,000 shares of Common Stock, $10 par
value, as of March 25, 2008, are authorized, issued, and outstanding, all of which were directly owned by Lion Connecticut Holdings Inc.

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

1

	ING USA Annuity and Life Insurance Company
	(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
	Annual Report on Form 10-K
	For the Year Ended December 31, 2007
TABLE OF CONTENTS
		PAGE
PART I
Item 1.	Business**	3
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	23
Item 2.	Properties**	23
Item 3.	Legal Proceedings	24
Item 4.	Submission of Matters to a Vote of Security Holders*	24
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters	25
	and Issuer Purchases of Equity Securities
Item 6.	Selected Financial Data***	26
Item 7.	Management’s Narrative Analysis of the Results of Operations and	27
	Financial Condition**
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	67
Item 8.	Financial Statements and Supplementary Data	72
Item 9.	Changes in and Disagreements With Accountants on Accounting and
	Financial Disclosure	131
Item 9A.	Controls and Procedures	131
Item 9B.	Other Information	132
PART III
Item 10.	Directors, Executive Officers, and Corporate Governance*	133
Item 11.	Executive Compensation*	133
Item 12.	Security Ownership of Certain Beneficial Owners and Management
	and Related Stockholder Matters*	133
Item 13.	Certain Relationships, Related Transactions, and Director Independence*	133
Item 14.	Principal Accounting Fees and Services	134
PART IV
Item 15.	Exhibits, Financial Statement Schedules	136
	Index to Financial Statement Schedules	137
	Signatures	141
	Exhibits Index	142

*	Item omitted pursuant to General Instruction I(2) of Form 10-K, except as to Part III, Item 10 with respect to compliance with Sections 406 and 407 of the Sarbanes-Oxley Act of 2002.
**	Item prepared in accordance with General Instruction I(2) of Form 10-K.
***	Although item may be omitted pursuant to General Instruction I(2) of Form 10-K, the Company has provided certain disclosure under this item.

2

PART I

Item 1. Business
(Dollar amounts in millions, unless otherwise stated)

Organization of Business

ING USA Annuity and Life Insurance Company (“ING USA” or the “Company,” as
appropriate) is a stock life insurance company domiciled in the State of Iowa and
provides financial products and services in the United States. ING USA is authorized
to conduct its insurance business in all states, except New York, and in the District of
Columbia.

ING USA is a direct, wholly-owned subsidiary of Lion Connecticut Holdings Inc.
(“Lion” or “Parent”), which is an indirect, wholly-owned subsidiary of ING Groep
N.V. (“ING”). ING is a global financial services holding company based in The
Netherlands, with American Depository Shares listed on the New York Stock
Exchange under the symbol “ING”.

Description of Business

ING’s U.S.-based operations offer a broad range of life insurance, annuity, mutual
fund, employee benefit, defined contribution, guaranteed investment, and funding
agreement contracts. For the year ended December 31, 2007, ING’s U.S.-based
operations were ranked eighth in sales of variable annuities according to data
published by Morningstar, Inc. and twelfth in sales of fixed annuities, excluding
structured settlements, according to data published by LIMRA International Inc.
(“LIMRA”). The Company serves as one of the primary vehicles through which
ING’s U.S.-based operations write variable and fixed annuity business. According to
LIMRA’s fourth quarter 2007 sales report on Stable Value and Funding Agreement
products, ING’s U.S.-based operations were ranked second in market share for
funding agreement contracts, and seventh for traditional general account guaranteed
investment contracts, in terms of total assets.

The Company offers various insurance products, including immediate and deferred

variable and fixed annuities.

The Company’s annuity products are distributed by

national wirehouses, regional securities firms, independent broker-dealers, banks, life
insurance companies with captive agency sales forces, independent insurance agents,
independent marketing organizations, and affiliated broker-dealers. The Company’s
primary annuity customers are individual consumers.

The Company also offers guaranteed investment contracts and funding agreements
(collectively referred to as “GICs”), sold primarily to institutional investors and
corporate benefit plans. These products are marketed by home office personnel or
through specialty insurance brokers.

3

See “Reserves” for a discussion of the Company’s reserves by product type.

The Company has one operating segment, which offers the products described below.

Products and Services

Products offered by the Company include immediate and deferred variable and fixed
annuities, designed to address customer needs for tax-advantaged savings, retirement
needs, and wealth-protection concerns, and GICs.

Variable Annuities: The variable annuities offered by the Company are savings
vehicles in which contractowner deposits are recorded and primarily maintained in
separate accounts established by the Company and registered with the Securities and
Exchange Commission (“SEC”) as a unit investment trust. Unlike fixed annuities,
variable annuity contractowners bear the risk of investment gains and losses
associated with the selected investment allocation. The Company, however, offers
certain guaranteed death and living benefits (described below) under which it bears
specific risks associated with these products.

Separate account assets and liabilities generally represent funds maintained to meet
specific investment objectives of contractowners. In general, investment income and
investment gains and losses accrue directly to the separate accounts. The assets of
each account are legally segregated and are not subject to claims that arise out of any
other business of the Company.

Separate account assets supporting variable options under variable annuity contracts
are invested, as designated by the contractowner or participant under a contract, in
shares of mutual funds managed by affiliates of the Company or in other selected
mutual funds not managed by affiliates of the Company. Variable annuity deposits
are allocated to various subaccounts established within the separate account. Each
subaccount represents a different investment option into which the contractowner
may allocate deposits. The account value of a variable annuity contract is equal to the
aggregate value of the subaccounts selected by the contractowner, including the value
allocated to any fixed account, less fees and expenses. The Company offers
investment options for its variable annuities covering a wide range of investment
styles, including large, mid, and small cap equity funds, as well as fixed income
alternatives. Many of the variable annuity contracts issued by the Company are
combination contracts, offering both variable and fixed options under which some or
all of the deposits may be allocated by the contractowner to a fixed account.

The Company’s major source of income from variable annuities is the base contract
mortality, expense, and guaranteed death and living benefit rider fees charged to the
contractowner, less the costs of administering the product and providing for the
guaranteed death and living benefits.

4

The Company’s variable annuities offer one or more of the following guaranteed
death and living benefits:

Guaranteed Minimum Death Benefits(“GMDBs”):

§	Standard - Guarantees that, upon death, the death benefit will be no less than the premiums paid by the contractowner, adjusted for any contract withdrawals.
§	Ratchet - Guarantees that, upon death, the death benefit will be no less than the greater of (1) Standard or (2) the maximum contract anniversary (or quarterly) value of the variable annuity, adjusted for contract withdrawals.
§	Rollup (7.0% or 5.5% Solution) - Guarantees that, upon death, the death benefit will be no less than the aggregate premiums paid by the contractowner accruing interest at 7.0% or 5.5% per annum, adjusted for contract withdrawals, which may be subject to a maximum cap on the rolled up amount. (The Company has discontinued this option for new sales.)
§	Combo (Max 7) - Guarantees that, upon death, the death benefit will be no less than the greater of (1) Ratchet or (2) Rollup.

For contracts issued prior to January 1, 2000, most contracts with enhanced death
benefit guarantees were reinsured to third party reinsurers to mitigate the risk
produced by such guaranteed death benefits. For contracts issued after December 31,
1999, the Company instituted an equity hedging program in lieu of reinsurance. The
equity hedging program is based on the Company entering into derivative positions to
offset exposures to guaranteed minimum death benefits due to adverse changes in the
equity markets.

At December 31, 2007 and 2006, the guaranteed value of these death benefits in
excess of account values was estimated to be $2.7 billion and $2.2 billion,
respectively, before reinsurance. The increase was primarily driven by the decrease
in account values due to unfavorable equity market performance in the second half of
2007.

At December 31, 2007, the guaranteed value of minimum guaranteed death benefits
in excess of account values, net of reinsurance, was estimated to be $1.8 billion, of
which $537.6 was projected to be covered by the Company’s equity hedging
program. At December 31, 2006, the guaranteed value of minimum guaranteed death
benefits in excess of account values, net of reinsurance, was estimated to be $1.3
billion, of which $381.7 was projected to be covered by the Company’s equity
hedging program. As of December 31, 2007 and 2006, the Company recorded a
liability of $209.4 and $139.7, respectively, net of reinsurance, representing the
estimated net present value of the Company’s future obligation for guaranteed
minimum death benefits in excess of account values. The liability increased mainly
due to the accumulation of fees used to fund the reserve during 2007 and higher
future project benefits in excess of account values.

5

Guaranteed Living Benefits:

§	Guaranteed Minimum Income Benefit (“GMIB”) - Guarantees a minimum income payout, exercisable each contract anniversary on or after a specified date, in most cases the 10th rider anniversary.
§	Guaranteed Minimum Withdrawal Benefit (“GMWB”) - Guarantees annual withdrawals for life of a percentage of premiums received during the growth phase (before taking withdrawals and after age 60). The percentage may vary by age at first withdrawal, depending on the base annuity contract. For certain versions, before withdrawals begin there are annual step-up (for 10 years) and quarterly ratchet features that may increase the amount used to calculate the annual withdrawal amount. Other versions have a quarterly ratchet feature only.
	A joint life-time withdrawal benefit option is available to include coverage for spouses. Most versions of the withdrawal benefit have reset and/or step up features that may increase the guaranteed withdrawal amount in certain conditions. Earlier versions of the withdrawal benefit guarantee that annual withdrawals of up to 7.0 % of eligible premiums may be made until eligible premiums previously paid by the contractowner are returned, regardless of account value performance. Asset allocation requirements apply at all times where withdrawals are guaranteed for life.
§	Guaranteed Minimum Accumulation Benefit (“GMAB”) - Guarantees that the account value will be at least 100% of the eligible premiums paid by the contractowner after 10 years, net of any contract withdrawals (GMAB 10). In the past, the Company offered an alternative design that guaranteed the account value to be at least 200% of the eligible premiums paid by contractowners after 20 years (GMAB 20).

All living benefits are covered by the Company’s equity hedging program.

At December 31, 2007 and 2006, the guaranteed value of these living benefits in
excess of account values was $506.5 and $227.4, respectively. The increase was
primarily driven by the decrease in account values due to unfavorable equity market
performance in the second half of 2007. As of December 31, 2007 and 2006, the
Company recorded a liability of $149.3 and $76.1, respectively, representing the
estimated net present value of its future obligation for living benefits in excess of
account values. The liability increased mainly due to accumulation of fees used to
fund the reserve and higher future projected benefits in excess of account values
during 2007.

Equity Hedging Program: In order to hedge equity risk associated with GMDBs and
guaranteed living benefits, the Company enters into futures positions on various
public market equity indices chosen to closely replicate contractowner variable fund
returns. The Company uses market consistent valuation techniques to establish its
derivative positions and to rebalance the derivative positions in response to market
fluctuations. One aspect of the hedging program is designed to offset changes related
to equity experience in the liability and to pay excess claims not covered by the
contractowner account value. The Company also administers a hedging program that
mitigates both equity risk and equity volatility risk associated with its Principal Guard
GMWB product issued in 2005 and beyond. This hedge strategy primarily involves
entering into put options.

6

Other risks posed by market conditions, such as interest rate risk and the majority of
the Company’s equity volatility risk, and risks posed by contractowner experience,
such as surrender and mortality experience deviations, are not explicitly mitigated by
this program. In addition, certain funds, where there is no replicating market index
and where hedging is not appropriate, are excluded from the program.

For those risks addressed by the equity hedging program, the Company is exposed to
the risk that the market indices will not adequately replicate actual contractowner
variable fund growth. Any differences between actual results and the market indices
result in income volatility.

Fixed Annuities: The fixed annuities offered by the Company are general account
products and include single premium immediate, multi-year guaranteed, annual reset,
and fixed indexed (“FIA”) annuities. Under fixed annuity contracts, the principal
amount is guaranteed, and, for a specified time period, the Company credits interest
to the contractowner accounts at a fixed interest rate, or, for an FIA, the greater of a
fixed interest rate or a return based upon performance of the Standard & Poor’s
(“S&P”) 500 index and participation rates set by the Company. For accounting
purposes, the equity return component of an FIA is considered an embedded
derivative. See further discussion under “Reserves” below. The Company bears the
investment risk on fixed annuities, because, while the Company credits contractowner
accounts with a stated interest rate, the Company cannot be certain the investment
income earned on the general account assets will exceed that rate.

S&P 500 call options are purchased and written to hedge equity risk associated with
FIA contracts. During the fourth quarter of 2007, the Company began using futures
contracts to hedge certain FIA contracts. The FIA hedging program is limited to
currently accruing liabilities resulting from participation rates that have already been
set, and measured using capital market valuation techniques. Future equity returns,
which may be reflected in FIA credited rates beyond the current policy term, are not
hedged.

The Company’s major source of income from fixed annuities is the spread between
the investment income earned on the underlying general account assets and the
interest rate credited to contractowner accounts.

Guaranteed Investments Contracts and Funding Agreements: The Company is also a
provider of GICs issued to the stable value market and other institutional customers.
The Company may issue GICs to one or more special purpose vehicles, including the
ING USA Global Funding Trusts, which concurrently sell notes to institutional or retail
investors in order to fund the purchase of GICs. The Company profits from the sale of
GICs by earning income in excess of the amount credited to the customer accounts, less
the cost of administering the product. The Company bears the investment risk because,
while the Company credits customer accounts with an interest rate based on a
predetermined index, plus a spread or a fixed rate, the Company cannot be certain the
investment income earned on the general account investments, less expenses will
exceed that rate.

7

Other Insurance Products: Historically, the Company provided interest-sensitive,
traditional life insurance, and health insurance products. All health insurance has been
ceded to other insurers and new policies are no longer written. The Company ceased
the issuance of life insurance policies in 2001, and all life insurance business is
currently in run-off. A certain portion of the assets held in the general account are
dedicated to funding this block of business.

Strategy, Method of Distribution, and Principal Markets

The Company believes longer life expectancies, an aging population, and growing
concern over the stability and availability of the Social Security system have made
retirement planning a priority for many Americans. The target market for the
Company’s annuity products is primarily individuals, while the target market for GICs
is primarily institutional investors and corporate benefit plans.

The principal distribution channels of the Company’s variable and fixed annuities
include national wirehouses, regional securities firms, independent broker-dealers,
banks, life insurance companies with captive agency sales forces, independent
insurance agents, independent marketing organizations, and affiliated broker-dealers.
GICs are distributed primarily through direct sales by home office personnel or through
specialty insurance brokers.

The Company markets its variable annuities primarily on the underlying guarantee
features, positioning the product line as a risk management tool for clients and advisors.
Indexed annuities are marketed primarily based on underlying guarantee features
coupled with consumer-friendly product designs offering the potential for equity
market upside. The Company also offers fixed annuities offering a guaranteed interest
rate or annuity payment suitable for clients seeking a stable return.

The Company also utilizes sales inducements as part of its distribution strategy for
annuities. Sales inducements represent benefits paid to contractowners for a specified
period, which are incremental to the amounts the Company credits on similar contracts
and are higher than the contract’s expected ongoing crediting rates for periods after the
inducement.

The Company is not dependent upon any single customer, and no single customer
accounted for 10.0% or more of the Company’s revenue in 2007. The only
distributor that produced 5.0% or more of 2007 annuity sales was the ING Advisors
Network (a group of broker-dealers affiliated with the Company), which produced
approximately 14.2% of annuity sales.

8

Assets Under Management

A substantial portion of the Company’s fees, or other charges and margins, are based
on general and separate account assets under management (“AUM”). General
account AUM represents assets in which the Company bears the investment risk,
while separate account AUM represents assets in which the contractowners bear the
investment risk. AUM is principally affected by net deposits (i.e., annuity premiums
and GIC deposits, less surrenders), investment performance (i.e., interest credited to
contractowner accounts for fixed options or market performance for variable options),
and contractowner retention. The general and separate account AUM was as follows
at December 31, 2007 and 2006.

	December 31,
	2007		2006
Variable annuities	$ 45,525.9	$ 38,801.6
Fixed annuities	17,167.4		17,084.1
GICs	6,976.1		2,353.9
Other insurance products	1,300.9		1,316.0
Total	$ 70,970.3	$ 59,555.6
Competition

The competitive annuity market remains intense and is dominated by a number of
large, highly-rated insurance companies. Increasing competition within the retirement
savings business from traditional insurance carriers, as well as banks and mutual fund
companies, offers consumers many choices. The Company’s annuity products compete
in the annuity market principally on the basis of investment performance, product
design, brand recognition, financial strength ratings, distribution capabilities, levels of
charges and credited rates, reputation, and customer service.

The Company competes in the GIC market primarily on the basis of its capital markets,
product structuring, and risk management expertise, as well as its brand recognition and
financial strength ratings. Other competitors in this market include other life insurance
companies, as well as banks and other financial institutions.

Reserves

The Company establishes and carries actuarially-determined reserves that are
calculated to meet its future obligations. Generally, reserves are calculated using
mortality and withdrawal rate assumptions based on relevant Company experience
and are periodically reviewed against both industry standards and experience.
Changes in, or deviations from, the assumptions used can significantly affect the
Company’s reserve levels and related future operations.

Future policy benefits and claims reserves include reserves for deferred annuities and
immediate annuities with and without life contingent payouts, universal and
traditional life insurance contracts, and GICs.

9

Reserves for deferred annuity investment contracts and immediate annuities without
life contingent payouts are equal to cumulative deposits, less charges and
withdrawals, plus credited interest thereon. Deferred annuity crediting rates and
reserve interest rates varied by product up to 10.0% for 2007, 7.8% for 2006, and
8.0% for 2005.

Reserves for individual immediate annuities with life contingent payout benefits are
computed on the basis of assumed interest discount rate, mortality, and expenses,
including a margin for adverse deviations. Such assumptions generally vary by

annuity plan type, year of issue, and policy duration.

For 2007, 2006, and 2005,

immediate annuity reserve interest discount rates varied up to 8.0% .

Reserves for FIAs are computed in accordance with the Financial Accounting
Standards Board Statement of Financial Accounting Standards (“FAS”) No. 97,
“Accounting and Reporting by Insurance Enterprises for Certain Long-Duration
Contracts and for Realized Gains and Losses from the Sale of Investments” (“FAS
No. 97”) and FAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities” (“FAS No. 133”). Accordingly, the aggregate initial liability is equal to
the deposit received, plus a bonus, if applicable, and is split into a host component
and an embedded derivative component. Thereafter, the host liability accumulates at a
set interest rate, and the embedded derivative liability is recognized at fair value, with
the change in fair value recorded in the Statements of Operations.

Reserves for universal life products are equal to cumulative deposits, less withdrawals
and charges, plus credited interest thereon. Reserves for traditional life insurance
contracts represent the present value of future benefits to be paid to or on behalf of
contractowners and related expenses, less the present value of future net premiums.

Under Statement of Position (“SOP”) 03-1, “Accounting and Reporting by Insurance
Enterprises for Certain Nontraditional Long-Duration Contracts for Separate
Accounts” (“SOP 03-1”), the Company calculates additional liabilities (“SOP 03-1
reserves”) for certain guaranteed benefits and for universal life products with certain
patterns of cost of insurance charges and certain other fees. The SOP 03-1 reserve for
such products recognizes the portion of contract assessments received in early years
used to compensate the insurer for services provided in later years.

The Company calculates a benefit ratio for each block of business subject to SOP 03-
1, and calculates an SOP 03-1 reserve by accumulating amounts equal to the benefit
ratio multiplied by the assessments for each period, reduced by excess death benefits
during the period. The SOP 03-1 reserve is accumulated at interest rates using the
contract-credited rate for the period. The calculated reserve includes a provision for
universal life contracts with patterns of cost of insurance charges that produce
expected gains from the insurance benefit function followed by losses from that
function in later years.

GMABs and GMWBs without life contingent payouts are considered to be
derivatives under FAS No. 133. The additional reserves for these guarantees are
recognized at fair value through the Statements of Operations.

10

Reserves for GICs are calculated using the amount deposited with the Company, less
withdrawals, plus interest accrued to the ending valuation date. Interest on these
contracts is accrued by a predetermined index, plus a spread or a fixed rate,
established at the issue date of the contract.

As of December 31, 2007 and 2006, the Company’s life and annuity insurance
reserves (general and separate account) and deposit-type funds were comprised of
each type of the following products:

	2007		2006
	Reserves	% of Total	Reserves	% of Total
Variable annuity	$ 49,789.0	65.6%	$ 43,353.9	67.1%
Fixed annuity	15,385.6	20.2%	15,287.5	23.7%
GICs	9,415.1	12.4%	4,603.8	7.1%
Other insurance products	1,349.7	1.8%	1,379.5	2.1%
Total	$ 75,939.4	100.0%	$ 64,624.7	100.0%
Reinsurance Arrangements

The Company utilizes indemnity reinsurance agreements to reduce its exposure to
large losses from its annuity and life insurance businesses. Reinsurance permits
recovery of a portion of losses from reinsurers, although it does not discharge the
Company’s primary liability as the direct insurer of the risks. Reinsurance treaties are
structured as yearly renewable term, coinsurance, or modified coinsurance. All
treaties for variable annuity and life products are closed for new business, including
variable annuity guarantees, and the life business in force under those treaties is in
run-off. Thus, the Company is currently not selecting new reinsurers. If in a position
to select a reinsurer, the Company would primarily base its selection on the financial
strength of the reinsurer.

The Company currently has a significant concentration of ceded reinsurance with its
affiliate, Security Life of Denver Insurance Company (“Security Life”). At
December 31, 2007, the Company has reinsurance primarily related to GICs, fixed
annuities, and universal life policies with Security Life. See “Liquidity and Capital
Resources - Facultative Reinsurance Agreement” in Management’s Narrative
Analysis of the Results of Operations and Financial Condition for further discussion
of the Company’s reinsurance of GICs to Security Life.

One of the main risks reinsured by the Company is the GMDBs on its variable
annuity policies issued prior to January 1, 2000. For contracts issued after
December 31, 1999, the Company hedges its exposure due to these products. Other
reinsurance contracts coinsure life, accident and health, and annuity businesses. The
Company continually monitors and evaluates the financial strength and credit ratings
of its reinsurers. Only those reinsurance recoverable balances deemed probable of
recovery are reflected as assets on the Company’s Balance Sheets.

11

Investment Overview and Strategy

The Company’s investment strategy focuses on diversification by asset class. The
Company seeks to achieve economic diversification, while reducing overall credit
risk and liquidity risks. In addition, the Company seeks to mitigate the impact of cash
flow variability from embedded options within certain investment products, such as
prepayment options and interest rate options embedded in collateralized mortgage
obligations and call options embedded in corporate bonds. The investment
management function is centralized under ING Investment Management LLC, an
affiliate of the Company, pursuant to an investment advisory agreement. Separate
portfolios are established for groups of products with similar liability characteristics
within the Company.

The Company’s general account invests primarily in fixed maturity investments,
including publicly issued bonds (including government bonds), privately placed notes
and bonds, mortgage-backed securities, and asset-backed securities. The primary
investment strategy is to optimize the risk-adjusted return through superior asset
selection predicated on a developed relative value approach, credit research and
monitoring, superior management of interest rate risk, and active exploration into new
investment product opportunities. Investments are purchased when market returns,
adjusted for risk and expenses, are sufficient to profitably support growth of the
liability block of business. In addition, assets and liabilities are analyzed and reported
for internal management purposes on an option-adjusted basis. The level of required
capital of given transactions is a primary factor in determining relative value among
different investment and liability alternatives, within the scope of each product type’s
objective. An active review of existing holdings identifies specific assets that could
be effectively traded in order to enhance the risk-adjusted returns of the portfolio,
while minimizing adverse tax and accounting impacts. The Company strives to
maintain a portfolio weighted average asset quality rating of A, based on S&P ratings
classifications. The weighted average excludes mortgage loans, but includes
mortgage-backed securities, which are reported with bonds.

The Company uses derivatives for hedging purposes to reduce the Company’s
exposure to cash flow variability of assets and liabilities, interest rate risk, credit risk,
and market risk. In addition, the Company uses credit default swaps to reduce the
credit loss exposure with respect to certain assets that the Company owns, or to
assume credit exposure on certain assets that the Company does not own. These
credit default swaps are similar in credit risk to bonds of the named issuer, and allow
the Company to gain access to a broader, more diversified pool of credit risks. See
“Liquidity and Capital Resources - Derivatives” in Management’s Narrative Analysis
of the Results of Operations and Financial Condition for further discussion of the
Company’s use of derivatives.

12

Ratings

On August 23, 2005, S&P reaffirmed its AA (Very Strong) counterparty credit and
financial strength rating of ING’s primary U.S. insurance operating companies (“ING
U.S.”), including the Company. S&P also, on that date, affirmed the stable outlook
on the core insurance operating companies. On February 9, 2005, S&P assigned its
A-1+ short-term counterparty credit rating to the Company. S&P noted that the
ratings are based on the Company’s status as a core member of ING U.S. There has
been no change in S&P’s rating of ING U.S., including the Company, since that date.

On July 25, 2007, Moody’s Investor’s Service, Inc. (“Moody’s”) affirmed the
financial strength rating of ING U.S., including the Company, of Aa3 (Excellent)
with a stable outlook. The rating is based on the strong implicit support and financial
strength of the parent company, ING.

On, May 11, 2007, A.M. Best Company, Inc. (“A.M. Best”) reaffirmed the financial
strength rating of A+ (Superior) of ING U.S., including the Company, with a stable
outlook. A.M. Best also affirmed and assigned issuer credit ratings of aa- to the same
entities. Concurrently, A.M. Best affirmed the debt ratings of aa- on the two funding
agreement backed securities programs sponsored by ING USA and the notes issued
thereunder.

Regulation

The Company’s operations are subject to comprehensive regulation throughout the
United States. The laws of the various jurisdictions establish supervisory agencies,
including the state insurance departments, with broad authority to grant licenses to
transact business and regulate many aspects of the products and services offered by
the Company, as well as solvency and reserve adequacy. Many agencies also
regulate the investment activities of insurance companies on the basis of quality,
diversification, and other quantitative criteria. The Company’s operations and
accounts are subject to examination at regular intervals by certain of these regulators.

ING USA is subject to the insurance laws of the state in which it is organized and of
the other jurisdictions in which it transacts business. The primary regulator of the
Company’s insurance operations is the Division of Insurance for the State of Iowa.
Among other matters, these agencies may regulate trade practices, agent licensing,
policy forms, underwriting and claims practices, minimum interest rate to be credited
to fixed annuity contractowner accounts, and the maximum interest rates that can be
charged on policy loans.

The SEC, the Financial Industry Regulatory Authority (“FINRA”), the self-regulatory
organization which succeeded to the regulatory functions of the National Association
of Securities Dealers and the New York Stock Exchange, and, to a lesser extent, the
states, regulate sales and investment management activities and operations of the
Company. Generally, the Company’s variable annuity products and certain of its
fixed annuities are registered as securities with the SEC. Regulations of the SEC,
Department of Labor, and Internal Revenue Service also impact certain of the
Company’s annuity, life insurance, and other investment products. These products

13

may involve separate accounts and mutual funds registered under the Investment
Company Act of 1940.

Insurance Holding Company Laws

A number of states regulate affiliated groups that include insurers such as the
Company under holding company statutes. These laws, among other things, place
certain restrictions on investments in, or transactions with, affiliates and may require
pre-approval of the payment of certain dividends by the Company to its parent.

Insurance Company Guaranty Fund Assessments

Insurance companies are assessed the costs of funding the insolvencies of other
insurance companies by the various state guaranty associations, generally based on
the amount of premiums companies collect in that state.

The Company accrues the cost of future guaranty fund assessments based on
estimates of insurance company insolvencies provided by the National Organization
of Life and Health Insurance Guaranty Associations and the amount of premiums
written in each state. The Company has estimated this liability to be $11.6 and $12.7
as of December 31, 2007 and 2006, respectively. The Company has also recorded an
asset of $4.6 and $5.3 as of December 31, 2007 and 2006, respectively, for future
credits to premium taxes for assessments already paid.

For information regarding certain other potential regulatory changes relating to the
Company’s businesses, see Item 1A. Risk Factors.

Employees and Other Shared Services

The Company had 1,318 employees as of December 31, 2007, primarily focused on
managing new business processing, product distribution, marketing, customer service,
and product management for the Company and certain of its affiliates, as well as
providing product development, actuarial, and finance services to the Company and
certain of its affiliates. The Company also utilizes services provided by ING North
America Insurance Corporation and other affiliates. These services include
underwriting, risk management, human resources, investment management,
information technology, legal and compliance services, as well as other new business
processing, product distribution, marketing, customer service, product management,
actuarial, and finance related services. The affiliated companies are reimbursed for
the Company’s use of various services and facilities under a variety of intercompany
agreements.

14

Item 1A. Risk Factors

In addition to the normal risks of business, the Company is subject to significant risks
and uncertainties, including those which are described below.

Equity market volatility could negatively impact profitability and financial
condition

The decline of the United States and international equity markets over an extended
period of time may reduce the profitability and negatively affect the financial
condition of the Company due to the following:

§	Sales of new contracts and profitability of in force variable annuity products that provide returns based on equities or equity indices may decrease, which results in a decrease in fees and profits earned on the accounts. The amount of fees the Company earns on variable annuity products is based on such account values.
§	The Company’s exposure under certain guarantees related to the equity markets may increase due to equity markets decline. As a result, the Company may need to increase reserves through a charge to earnings while at the same time receiving lower fees from such products.
§	The Company tries to minimize its exposure to guaranteed benefits by using reinsurance and other risk management strategies, including a hedging program.
	For guaranteed minimum death benefits, the Company uses a combination of reinsurance and a hedging program to mitigate the risk; for guaranteed living benefits (GMIBs, GMWBs, GMABs) the Company uses a hedging program. If the Company is not successful in minimizing these risks, the Company’s future profitability may be negatively impacted. The factors that could cause the Company to be unsuccessful in minimizing these risks would include, though not be limited to, the risk that reinsurers or derivative counterparties would be unable or unwilling to meet their contractual obligations; the risk that our other risk management strategies would not be effective; and the risk that unfavorable market changes would produce losses beyond what is covered by our risk management strategies.
§	If the Company’s expectations of future performance and profits decrease, it may be required to accelerate the amortization of deferred policy acquisition costs, decreasing profits.

Changes in interest rates could have a negative impact on profitability and
financial condition

Changes in interest rates may be caused by either changes in the underlying risk free
rates or changes in the credit spreads required for various levels of risk within the
market. Changes in interest rates may negatively affect the Company’s attempts to
maintain profitable margins between the amounts earned on its general account
investments and the amounts paid under its annuity and insurance contracts.

15

As interest rates rise, fixed annuity contract surrenders and withdrawals may increase
as contractowners seek higher returns. To raise the cash necessary to fund such
surrenders and withdrawals, the Company may need to sell assets at capital losses.
An increase in contract surrenders and withdrawals may also require the Company to
accelerate amortization of deferred policy acquisition costs relating to such contracts,
further reducing profits. In addition, rising interest rates increase unrealized losses
for fixed maturities and certain derivatives where the Company assumes credit
exposure. Significant or sustained increases in interest rates may result in increased
other-than-temporary impairments.

As interest rates decline, borrowers may prepay or redeem mortgages and bonds with
embedded call options that are owned as investments by the Company. This may
force the Company to reinvest the proceeds at lower interest rates. In addition, many
of the Company’s annuity products contain minimum interest rate guarantees that
limit the Company’s ability to lower interest rates credited to contractowners in
response to lower investment returns. A decrease in the difference between earned
investment income and the interest credited to contractowners further reduces profits.
This decrease in profits may also require the Company to accelerate amortization of
deferred policy acquisition costs.

The Company’s investment portfolio is subject to risks that may reduce the
value of invested assets and adversely affect sales, profitability, and investment
returns credited to contractowners

The Company’s investment portfolio is subject to several risks, including the
following:

§	An increase in defaults or delinquency in investment portfolios, including derivative contracts;
§	Greater difficulty selling privately placed and certain asset-backed fixed maturity securities and commercial mortgage loans at attractive prices and in a timely manner, as all are less liquid than publicly traded fixed maturity securities;
§	Borrower prepayment or redemption, prior to maturity, of mortgages that back mortgage-backed securities and bonds with embedded call options could force the Company to reinvest proceeds at lower interest rates;
§	An increase in environmental liability exposure from the Company’s commercial mortgage loan portfolio; and
§	Losses in the commercial mortgage loan portfolio as a result of economic downturns or natural disasters.
	Changes in underwriting and actual experience could materially affect profitability

The Company prices its products based on long-term assumptions regarding
investment returns, mortality, morbidity, persistency, and operating costs.
Management establishes target returns for each product based upon these factors and
the average amount of regulatory and rating agency capital that the Company must
hold to support in-force contracts. The Company monitors and manages pricing and
sales mix to achieve target returns. Profitability from a new business emerges over a

16

period of years, depending on the nature and life of the product, and is subject to
variability, either positive or negative, as actual results may differ from pricing
assumptions.

The Company’s profitability depends on the following:

§	Adequacy of investment margins;
§	Management of market and credit risks associated with investments;
§	Ability to maintain premiums and contract charges at a level adequate to cover mortality and morbidity benefits and contract administration expenses;
§	Adequacy of contract charges on variable contracts to cover the cost of product features;
§	Persistency of policies to ensure recovery of acquisition expenses; and
§	Management of operating costs and expenses within anticipated pricing allowances.
	Changes in reserve estimates may reduce profitability

The Company establishes reserves based upon estimates of how much the Company
will pay for future benefits and claims. The Company calculates reserves based on
many assumptions and estimates including future investment yields, mortality,
morbidity, policy terminations, and expenses. The assumptions and estimates used in
connection with the reserve estimation process are inherently uncertain. The
Company periodically reviews the adequacy of reserves. The Company cannot,
however, determine with precision the amounts that the Company will pay for, or the
timing of payment of, actual benefits and claims or whether the assets supporting the
policy liabilities will grow to the level assumed prior to payment of benefits or
claims. If actual experience differs significantly from assumptions or estimates,
reserves may not be adequate. As a result, the Company would incur a charge to
earnings in the quarter in which the reserves are increased.

A downgrade in the Company’s ratings may negatively affect profitability and
financial condition

Ratings are an important factor in establishing the competitive position of insurance
companies. A downgrade, or the potential for a downgrade, of any of the Company’s
ratings may lead to lower margins and fee income as follows:

§	Increase in contract surrenders and withdrawals;
§	Termination of relationships with broker-dealers, banks, agents, wholesalers, and other distributors of products and services; and
§	Reduction of new annuity contract and guaranteed investment contract and funding agreement sales.

The Company cannot predict what actions rating organizations may take, or what
actions it may be required to take in response to the actions of rating organizations,
which could adversely affect the Company. Rating organizations assign ratings based
upon several factors, including the following:

17

§	Statutory capital;
§	Risk of investment portfolio;
§	Economic trends affecting the financial services industry;
§	Changes in models and formulas used by rating organizations to assess the financial strength of a rated company;
§	Enterprise risk management; and
§	Other circumstances outside the rated company’s control.
	The continued availability of capital may affect the ability to grow

The Company has, from time to time, required capital to increase its reserves
associated with growth from product sales. Although the Company believes it has
sufficient capital to fund its immediate growth and capital needs, the amount of
capital required and available can vary due to a variety of circumstances that may not
be predictable, foreseeable, or within its control. A lack of sufficient capital could
hinder the Company’s ability to grow.

The Company’s results of operations and financial condition may be adversely
affected by general economic and business conditions or adverse capital market
conditions that are less favorable than anticipated

Factors such as consumer spending, business investment, government spending, the
volatility and strength of capital markets and inflation affect the business and
economic environment and, ultimately, the amount and profitability of the
Company’s business. For example, in an economic downturn characterized by high
unemployment, lower family income, lower corporate earnings, lower business
investment and lower consumer spending, the demand for financial and insurance
products could be adversely affected. Additionally, slow growth and recessionary
periods are often associated with declining asset prices, lower interest rates, credit
rating agency downgrades and increasing default losses.

Adverse capital market conditions, such as that recently experienced with the
decrease in the value and liquidity of asset-backed securities supported by subprime
mortgages, as well as other investments, could also impact the cost of and ability of
the Company to issue debt, including commercial paper borrowings. While the
Company has various sources of liquidity available, adverse market conditions could
impact the cost and availability of these borrowing sources. This capital market
environment has reduced the liquidity of institutional investors, which has limited
their ability to purchase guaranteed investment contracts and funding agreements
(collectively, “GICs”). These market conditions may constrain the Company’s ability
to issue GICs in the near term.

A loss of key product distribution relationships could materially affect sales

The Company distributes certain products under agreements with other members of
the financial services industry that are not affiliated with the Company. Termination
of one or more of these agreements due to, for example, a change in control of one of
the distributors, could reduce sales.

18

Competition could negatively affect the ability to maintain or increase
profitability

The insurance industry is intensely competitive. The Company competes based on
factors including the following:

§	Name recognition and reputation;
§	Service;
§	Investment performance;
§	Product features;
§	Price;
§	Perceived financial strength; and
§	Claims paying and credit ratings.

The Company’s competitors include insurers, broker-dealers, financial advisors, asset
managers, and other financial institutions, which may, for example, have greater
market share, offer a broader range of products, or have higher claims-paying or
credit ratings than the Company.

In recent years, there has been substantial consolidation among companies in the
financial services industry resulting in increased competition from large, well-
capitalized financial services firms.Many of these firms also have been able to
increase their distribution systems through mergers or contractual arrangements.
Furthermore, larger competitors may lower operating costs and have an ability to
absorb greater risk, while maintaining financial strength ratings, allowing them to
price products more competitively.While the Company cannot predict the future
level of consolidation, the Company expects consolidation to continue and perhaps
accelerate in the future, increasing competitive pressure.

Changes in federal income tax law or interpretations of existing tax law could
affect profitability and financial condition by making some products less
attractive to contractowners and increasing tax costs of contractowners or the
Company

Annuity products that the Company sells currently benefit from one or more forms of
tax favored status under current federal tax law. The Economic Growth and Tax
Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation
Act of 2003 contain provisions that will, over time, significantly lower individual tax
rates. This decrease will reduce the benefits of deferral on the build-up of value of
annuities.Many of these provisions expire in 2008 and 2010.The Bush
Administration, however, has proposed that many of the rate reductions and tax-
favored savings initiatives be made permanent.Although the Company cannot
predict the overall effect on product sales, some of these tax law changes could hinder
sales and result in the increased surrender of annuity contracts.

19

Additionally, the Company is subject to federal corporation income tax, and benefits
from certain federal tax provisions, including but not limited to, dividends received
deductions, various tax credits, and insurance reserve deductions. There is risk that
changes to federal tax law or in Internal Revenue Service (“IRS”) interpretation of
existing tax law may be enacted or adopted, and could result in materially higher
corporate taxes than would be incurred under existing tax law or interpretation and
adversely impact profitability.

Litigation may adversely affect profitability and financial condition

The Company is, and may be in the future, subject to legal actions in the ordinary
course of insurance, investment management, and other business operations. These
legal actions may include proceedings relating to aspects of businesses and operations
that are specific to the Company, and proceedings that are typical of the businesses in
which the Company operates. Some of these proceedings may be brought on behalf
of a class. Plaintiffs may seek large or indeterminate amounts of damage, including
compensatory, liquidated, treble, and/or punitive damages. Given the large or
indeterminate amounts sometimes sought, and the inherent unpredictability of
litigation, it is possible that an adverse outcome could, from time to time, have an
adverse effect on the Company’s reputation, results of operations, or cash flows, in
particular quarterly or annual periods.

Changes in regulation in the United States and recent regulatory investigations
may reduce profitability

The Company’s insurance and securities business is subject to comprehensive state
and federal regulation and supervision throughout the United States. The primary
purpose of state regulation is to protect contractowners, and not necessarily to protect
creditors and investors. State insurance and securities regulators, state attorneys
general, the National Association of Insurance Commissioners, the SEC, the FINRA,
the Department of Labor and the IRS continually reexamine existing laws and
regulations and may impose changes in the future. Changes in legislation and
administrative policies, or new interpretations of existing laws, in areas such as
employee benefit plan regulation, financial services regulation, and federal taxation,
could lessen the competitive advantages of certain of the Company’s products, result
in the surrender of existing contracts and policies, increase costs, reduce new product
sales, or result in higher taxes affecting the Company, thus reducing the Company’s
profitability.

Since 2002, the insurance industry has become the focus of increased regulatory
scrutiny as various state and federal governmental agencies and self-regulatory
organizations conduct inquiries and investigations into the products and practices of
the financial services industries. These initiatives currently focus on areas such as:

§	Inappropriate trading of fund shares;
§	Revenue sharing and directed brokerage;
§	Sales and marketing practices (including sales to seniors);
§	Suitability;
§	Arrangements with service providers;
§	Pricing;

20

§	Product cost and fees;
§	Compensation and sales incentives;
§	Potential conflicts of interest;
§	Potential anti-competitive activity;
§	Reinsurance;
§	Specific product types, including group annuities and indexed annuities; and
§	Adequacy of disclosure.

It is likely that the scope of these industry investigations will become broader before
they conclude.

In some cases, this regulatory scrutiny has led to new proposed legislation and
regulation that could significantly affect the financial services industry, including
businesses in which the Company is engaged, or has resulted in regulatory penalties,
and litigation. At this time, the Company does not believe that any of this regulatory
scrutiny will have a material adverse affect on it. The Company cannot, however,
guarantee that new laws, regulations, and other regulatory action aimed at the
business practices under scrutiny would not adversely affect its business. The
adoption of new laws and regulations, enforcement actions, or litigation, whether or
not involving the Company, could influence the manner in which the Company
distributes its products, result in negative coverage of the industry by the media,
cause significant harm to the Company’s reputation, and adversely impact
profitability.

The Company’s products are subject to extensive regulation and failure to meet
any of the complex product requirements may reduce profitability

The Company’s insurance and annuity products are subject to a complex and
extensive array of state and federal tax, securities and insurance laws, and regulations,
which are administered and enforced by a number of different governmental and self-
regulatory authorities, including state insurance regulators, state securities
administrators, the SEC, the FINRA, and the IRS.

For example, U.S. federal income tax law imposes requirements relating to insurance
and annuity product design, administration, and investments that are conditions for
beneficial tax treatment of such products under the Internal Revenue Code. Failure to
administer certain contract features (for example, contractual annuity start dates in
nonqualified annuities) could affect such beneficial tax treatment. Additionally, state
and federal securities and insurance laws impose requirements relating to insurance
and annuity product design, offering and distribution, and administration. Failure to
meet any of these complex tax, securities, or insurance requirements could subject the
Company to administrative penalties imposed by a particular governmental or self-
regulatory authority, unanticipated costs associated with remedying such failure or
other claims, harm to the Company's reputation, interruption of the Company's
operations, or adversely impact profitability.

21

A failure of the Company’s operating systems or a compromise of security with
respect to operating systems or portable electronic devices could adversely
affect the Company’s results of operations and financial condition

The Company is highly dependent on automated systems to record and process
Company and contractowner transactions. The Company may experience a failure of
its operating systems or a compromise of security due to technical system flaws,
clerical or record-keeping errors, or tampering or manipulation of those systems by
employees or unauthorized third parties. Information security risks also exist with
respect to the use of portable electronic devices, such as laptops, which are

particularly vulnerable to loss and theft.

The Company may also be subject to

disruptions of its operating systems arising from events that are wholly or partially
beyond its control (for example, natural disasters, acts of terrorism, epidemics,
computer viruses, and electrical/telecommunications outages). All of these risks are
also applicable where the Company relies on outside vendors to provide services to it
and its contractowners. Operating system failures or disruptions or the compromise
of security with respect to operating systems or portable electronic devices could
subject the Company to regulatory sanctions, or other claims, harm the Company’s
reputation, interrupt the Company’s operations, and adversely affect the Company’s
business, results of operations, or financial condition.

Reinsurance subjects the Company to the credit risk of reinsurers and may not
be adequate to protect against losses arising from ceded reinsurance

The collectibility of reinsurance recoverables is subject to uncertainty arising from a
number of factors, including whether the insured losses meet the qualifying
conditions of the reinsurance contract and whether reinsurers, or their affiliates, have
the financial capacity and willingness to make payments under the terms of the
reinsurance treaty or contract. The Company’s inability to collect a material recovery
from a reinsurer could have a material adverse effect on profitability and financial
condition.

The occurrence of natural or man-made disasters may adversely affect the
Company’s results of operations and financial condition

The Company is exposed to various risks arising from natural disasters, including
hurricanes, floods, earthquakes, tornadoes, and pandemic disease, caused by a virus
such as H5N1 (the “Avian flu” virus), as well as man-made disasters, including acts
of terrorism and military actions, which may adversely affect assets under
management, results of operations and financial condition, as follows:

§	Losses in the Company’s investment portfolio due to significant volatility in global financial markets or the failure of counterparties to perform.
§	Changes in the rate of mortality lapses and surrenders of existing policies/contracts, as well as sales of new policies/contracts.
§	Reduced collectibility of reinsurance.
§	Disruption of the Company’s normal business operations due to catastrophic property damage, loss of life, or disruption of public and private infrastructure, including communications and financial services.

22

While the Company has a business continuation and crisis management plan, there
can be no assurance that the Company’s plan and insurance coverages would be
effective in mitigating any negative effects on operations or profitability in the event
of a disaster.

The occurrence of unidentified or unanticipated risks could negatively affect the
Company’s business or result in losses

The Company has developed risk management policies and procedures and expects to
continue to do so in the future. Nonetheless, the Company's policies and procedures
to identify, monitor, and manage risks may not be fully effective. Many of the
Company's methods of managing risk and exposures are based upon observed
historical market behavior or statistics based on historical models. As a result, these
methods may not predict future exposures, which could be significantly greater than

historical measures indicate.

Other risk management methods depend on the

evaluation of information regarding markets, clients, catastrophe occurrence, or other
matters, that is publicly available or otherwise accessible to the Company. This
information may not always be accurate, complete, up-to-date, or properly evaluated.
Management of operational, legal, and regulatory risks requires, among other things,
policies and procedures to record and verify large numbers of transactions and events.
These policies and procedures may not be fully effective.

Item 1B. Unresolved Staff Comments

None.

Item 2.

Properties

The Company’s principal office is located at 1475 Dunwoody Drive, West Chester,
Pennsylvania, 19380-1478. The Company’s annuity operations and customer service
center are located at 909 Locust Street, Des Moines, Iowa 50309, and the guaranteed
investment contract business activities are located at 1290 Broadway, Denver,
Colorado 80203-2122. All Company office space is leased or subleased by the
Company or its other affiliates. The Company pays substantially all expenses
associated with its leased and subleased office properties. Affiliates within ING’s
U.S. operations provide the Company with various management, finance, investment
management, and other administrative services, from facilities located at 5780 Powers
Ferry Road, N.W., Atlanta, Georgia 30327-4390, and One Orange Way, Windsor,
Connecticut 06095-4774. The affiliated companies are reimbursed for the
Company’s use of these services and facilities under a variety of intercompany
agreements.

23

Item 3.

Legal Proceedings

The Company is involved in threatened or pending lawsuits/arbitrations arising from
the normal conduct of business. Due to the climate in insurance and business
litigation/arbitrations, suits against the Company sometimes include claims for
substantial compensatory, consequential, or punitive damages, and other types of
relief. Moreover, certain claims are asserted as class actions, purporting to represent

a group of similarly situated individuals.

While it is not possible to forecast the

outcome of such lawsuits/arbitrations, in light of existing insurance, reinsurance, and
established reserves, it is the opinion of management that the disposition of such
lawsuits/arbitrations will not have a materially adverse effect on the Company’s
operations or financial position.

Item 4. Submission of Matters to a Vote of Security Holders

Omitted pursuant to General Instruction I(2)(c) of Form 10-K.

24

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and
	Issuer Purchases of Equity Securities
	(Dollar amounts in millions, unless otherwise stated)

There is no public trading market for the common stock of ING USA Annuity and
Life Insurance Company (“ING USA” or the “Company”, as appropriate). All of the
Company’s outstanding common stock is owned by its parent, Lion Connecticut
Holdings Inc. (“Lion” or “Parent”), a Connecticut holding and management company.
All of the outstanding common stock of Lion is owned by ING America Insurance
Holdings, Inc., whose ultimate parent is ING Groep N.V.

The Company’s ability to pay dividends to its parent is subject to the prior approval
of the Iowa Division of Insurance for payment of any dividend, which, when
combined with other dividends paid within the preceding twelve months, exceeds the
greater of (1) ten percent (10.0%) of the Company’s statutory surplus at the prior year
end or (2) the Company’s prior year statutory net gain from operations.

During 2007 and 2005, the Company did not pay any dividends or return of capital
distributions to Lion. During 2006, the Company paid $170.0 in a return of capital
distribution to Lion.

During 2007, the Company received $150.0 in capital contributions from Lion.
During 2006, the Company did not receive any capital contributions from its Parent.
During 2005, the Company received capital contributions of $100.0 from Lion to
support sales activities. On February 21, 2008, the Company received a $1.1 billion
capital contribution from Lion.

25

Item 6.	Selected Financial Data
	(Dollar amounts in millions, unless otherwise stated)
	ING USA ANNUITY AND LIFE INSURANCE COMPANY
	3-YEAR SUMMARY OF SELECTED FINANCIAL DATA
		2007	2006	2005
	OPERATING RESULTS
	Net investment income	$ 1,346.4	$ 1,156.4	$ 1,102.2
	Fee income	1,198.9	939.2	745.6
	Premiums	19.6	20.5	21.8
	Net realized capital losses	(391.2)	(90.4)	(2.9)
	Total revenue	2,173.8	2,025.7	1,867.4
	Interest credited and other benefits to
	contractowners	1,312.0	1,169.7	1,085.8
	Amortization of deferred policy acquisition
	costs and value of business acquired	408.1	293.0	318.9
	Net income	129.0	212.2	189.9
	FINANCIAL POSITION
	Total investments	$ 27,881.2	$ 22,586.3	$ 21,454.6
	Assets held in separate accounts	44,477.8	37,928.3	30,262.8
	Total assets	81,276.2	69,677.6	59,371.7
	Future policy benefits and claims reserves	31,461.6	26,696.4	24,225.3
	Notes to affiliates	435.0	435.0	435.0
	Liabilities related to separate accounts	44,477.8	37,928.3	30,262.8
	Total shareholder's equity	3,119.0	2,989.1	2,949.0
	ASSETS UNDER MANAGEMENT
	Variable annuities	$ 45,525.9	$ 38,801.6	$ 31,220.2
	Fixed annuities	17,167.4	17,084.1	15,632.1
	Guaranteed investment contracts
	and funding agreements	6,976.1	2,353.9	2,074.0
	Other insurance products	1,300.9	1,316.0	1,346.2
	Total assets under management	$ 70,970.3	$ 59,555.6	$ 50,272.5

26

Item 7. Management’s Narrative Analysis of the Results of Operations and Financial
Condition
(Dollar amounts in millions, unless otherwise stated)

Overview

The following narrative analysis presents a review of the results of operations of ING
USA Annuity and Life Insurance Company (“ING USA” or the “Company”, as
appropriate) for each of the three years ended December 31, 2007, 2006, and 2005,
and financial condition as of December 31, 2007 and 2006. This item should be read
in its entirety and in conjunction with the selected financial data, financial statements
and related notes, and other supplemental data, which can be found under Part II,
Item 6. and Item 8. contained herein.

Forward-Looking Information/Risk Factors

In connection with the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995, the Company cautions readers regarding certain forward-
looking statements contained in this report and in any other statements made by, or on
behalf of, the Company, whether or not in future filings with the Securities and
Exchange Commission (“SEC”). Forward-looking statements are statements not
based on historical information and which relate to future operations, strategies,
financial results, or other developments. Statements using verbs such as “expect,”
“anticipate,” “believe,” or words of similar import, generally involve forward-looking
statements. Without limiting the foregoing, forward-looking statements include
statements that represent the Company’s beliefs concerning future levels of sales and
redemptions of the Company’s products, investment spreads and yields, or the
earnings and profitability of the Company’s activities.

Forward-looking statements are necessarily based on estimates and assumptions that
are inherently subject to significant business, economic, and competitive uncertainties
and contingencies, many of which are beyond the Company’s control and many of
which are subject to change. These uncertainties and contingencies could cause actual
results to differ materially from those expressed in any forward-looking statements
made by, or on behalf of, the Company. Whether or not actual results differ
materially from forward-looking statements may depend on numerous foreseeable
and unforeseeable developments, including, but not limited to the following:

(1)	Equity market volatility could negatively impact profitability and financial condition;
(2)	Changes in interest rates could have a negative impact on profitability and financial condition;
(3)	The Company’s investment portfolio is subject to risks that may reduce the value of invested assets and adversely affect sales, profitability, and investment returns credited to contractowners;
(4)	Changes in underwriting and actual experience could materially affect profitability;

27

(5)	Changes in reserve estimates may reduce profitability;
(6)	A downgrade in the Company’s ratings may negatively affect profitability and financial condition;
(7)	The continued availability of capital may affect the ability to grow;
(8)	The Company’s results of operations and financial condition may be adversely affected by general economic and business conditions or adverse capital market conditions that are less favorable than anticipated;
(9)	A loss of key product distribution relationships could materially affect sales;
(10)	Competition could negatively affect the ability to maintain or increase profitability;
(11)	Changes in federal income tax law or interpretations of existing tax law could affect profitability and financial condition by making some products less attractive to contractowners and increasing tax costs of contractowners or the Company;
(12)	Litigation may adversely affect profitability and financial condition;
(13)	Changes in regulation in the United States and recent regulatory investigations may reduce profitability;
(14)	The Company’s products are subject to extensive regulation and failure to meet any of the complex product requirements may reduce profitability;
(15)	A failure of the Company’s operating systems or a compromise of security with respect to operating systems or portable electronic devices could adversely affect the Company’s results of operations and financial condition;
(16)	Reinsurance subjects the Company to the credit risk of reinsurers and may not be adequate to protect against losses arising from ceded reinsurance;
(17)	The occurrence of natural or man-made disasters may adversely affect the Company’s results of operations and financial condition; and
(18)	The occurrence of unidentified or unanticipated risks could negatively affect the Company’s business or result in losses.

Investors are also directed to consider the risks and uncertainties discussed in Items
1A., 7., and 7A. contained herein, as well as in other documents filed by the
Company with the SEC. Except as may be required by the federal securities laws, the
Company disclaims any obligation to update forward-looking information.

Basis of Presentation

The Company is a stock life insurance company domiciled in the State of Iowa and
provides financial products and services in the United States. ING USA is authorized
to conduct its insurance business in all states, except New York, and in the District of
Columbia.

ING USA is a direct, wholly-owned subsidiary of Lion Connecticut Holdings Inc.
(“Lion” or “Parent”), which is an indirect, wholly-owned subsidiary of ING Groep
N.V. (“ING”). ING is a global financial services holding company based in The
Netherlands, with American Depository Shares listed on the New York Stock
Exchange under the symbol “ING”.

The Company has one operating segment.

28

Critical Accounting Policies

General

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

The Company has identified the following estimates as critical in that they involve a
higher degree of judgment and are subject to a significant degree of variability:
reserves, valuation of investments and other-than-temporary impairments, valuation
of derivative instruments, and amortization of deferred policy acquisition costs
(“DAC”) and value of business acquired (“VOBA”). In developing these estimates,
management makes subjective and complex judgments that are inherently uncertain
and subject to material changes as facts and circumstances develop. Although
variability is inherent in these estimates, management believes the amounts provided
are appropriate based upon the facts available upon compilation of the financial
statements.

Reserves

The Company establishes and carries actuarially-determined reserves that are
calculated to meet its future obligations. Generally, reserves are calculated using
mortality and withdrawal rate assumptions based on relevant Company experience
and are periodically reviewed against both industry standards and experience.
Changes in, or deviations from, the assumptions used can significantly affect the
Company’s reserve levels and related future operations.

Future policy benefits and claims reserves include reserves for deferred annuities and
immediate annuities with and without life contingent payouts, universal and
traditional life insurance contracts, and guaranteed investment contracts and funding
agreements, collectively referred to as GICs.

Reserves for deferred annuity investment contracts and immediate annuities without
life contingent payouts are equal to cumulative deposits, less charges and
withdrawals, plus credited interest thereon. Deferred annuity crediting rates and
reserve interest rates varied by product up to 10.0% for 2007, 7.8% for 2006, and
8.0% for 2005.

29

Reserves for individual immediate annuities with life contingent payout benefits are
computed on the basis of assumed interest discount rate, mortality, and expenses,
including a margin for adverse deviations. Such assumptions generally vary by
annuity plan type, year of issue, and policy duration. For 2007, 2006, and 2005,
immediate annuity reserve interest discount rates varied up to 8.0% .

Reserves for fixed indexed annuities (“FIAs”) are computed in accordance with the
Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting
Standards (“FAS”) No. 97, “Accounting and Reporting by Insurance Enterprises for
Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of
Investments” (“FAS No. 97”), and FAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities” (“FAS No. 133”). Accordingly, the aggregate
initial liability is equal to the deposit received, plus a bonus, if applicable, and is split
into a host component and an embedded derivative component. Thereafter, the host
liability accumulates at a set interest rate, and the embedded derivative liability is
recognized at fair value, with the change in fair value recorded in the Statements of
Operations.

Reserves for universal life products are equal to cumulative deposits, less withdrawals
and charges, plus credited interest thereon. Reserves for traditional life insurance
contracts represent the present value of future benefits to be paid to or on behalf of
contractowners and related expenses, less the present value of future net premiums.

Under Statement of Position (“SOP”) 03-1, “Accounting and Reporting by Insurance
Enterprises for Certain Nontraditional Long-Duration Contracts for Separate
Accounts” (“SOP 03-1”), the Company calculates additional liabilities (“SOP 03-1
reserves”) for certain guaranteed benefits and for universal life products with certain
patterns of cost of insurance charges and certain other fees. The SOP 03-1 reserve
recognized for such products is in addition to the liability previously held and
recognizes the portion of contract assessments received in early years used to
compensate the insurer for services provided in later years.

The Company calculates a benefit ratio for each block of business subject to SOP 03-
1, and calculates an SOP 03-1 reserve by accumulating amounts equal to the benefit
ratio multiplied by the assessments for each period, reduced by excess death benefits
during the period. The SOP 03-1 reserve is accumulated at interest rates using the
contract-credited rate for the period. The calculated reserve includes a provision for
universal life contracts with patterns of cost of insurance charges that produce
expected gains from the insurance benefit function followed by losses from that
function in later years.

Guaranteed Minimum Accumulation Benefits (“GMABs”) and Guaranteed Minimum
Withdrawal Benefits (“GMWBs”) without life contingent payouts are considered to
be derivatives under FAS No. 133. The additional reserves for these guarantees are
recognized at fair value through the Statements of Operations.

30

Reserves for GICs are calculated using the amount deposited with the Company, less
withdrawals, plus interest accrued to the ending valuation date. Interest on these
contracts is accrued by a predetermined index, plus a spread or a fixed rate,
established at the issue date of the contract.

Valuation of Investments and Other-Than-Temporary Impairments

All of the Company’s fixed maturities and equity securities are currently designated
as available-for-sale. Available-for-sale securities are reported at fair value and
unrealized capital gains (losses) on these securities are recorded directly in
Shareholder’s equity, after adjustment for related changes in DAC, VOBA, and
deferred income taxes.

The fair values for fixed maturities are largely determined by one of two pricing
methods: published price quotations or valuation techniques with market inputs.
Security pricing is applied using a hierarchy or “waterfall” approach, whereby prices
are first sought from published price quotations, including pricing services or broker-
dealer quotations. Published price quotations may be unavailable or deemed
unreliable due to a limited market for securities that are rarely traded or are traded
only in privately negotiated transactions. As such, fair values for the remaining
securities, consisting primarily of privately placed bonds, are then determined using
risk-free interest rates, current corporate spreads, the credit quality of the issuer and
cash flow characteristics of the security.

The fair values for actively traded equity securities are based on quoted market prices.
For equity securities not actively traded, estimated fair values are based upon values
of issues of comparable yield and quality or conversion value, where applicable.

The fair values for short-term investments are based on quoted market prices.

See “Valuation of Derivative Instruments” for a discussion of the techniques used to
determine fair values of derivatives.

The fair value of a financial instrument is the amount at which the instrument could
be exchanged in a current transaction between knowledgeable, unrelated willing
parties. As such, the estimated fair value of a financial instrument may differ
significantly from the amount that could be realized if the security was sold
immediately.

The Company’s accounting policy requires that a decline in the value of an
investment below its amortized cost basis be assessed to determine if the decline is
other-than-temporary. If so, the investment is deemed to be other-than-temporarily
impaired, and a charge is recorded in Net realized capital gains (losses) equal to the
difference between fair value and the amortized cost basis of the investment. The fair
value of the other-than-temporarily impaired investment becomes its new cost basis.

31

The evaluation of other-than-temporary impairments included in the Company’s
general account is a quantitative and qualitative process, which is subject to risks and
uncertainties, and is intended to determine whether declines in the fair value of
investments should be recognized in current period earnings. The risks and
uncertainties include the length of time and extent to which the fair value has been
less than amortized cost, the issuer’s financial condition and near-term prospects,
future economic conditions and market forecasts, and the Company’s intent and
ability to retain the investment for a period of time sufficient to allow for recovery in
fair value.

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

Valuation of Derivative Instruments

Derivative instruments are reported at fair value primarily using the Company’s
derivative accounting system. The system uses key financial data, such as yield
curves, exchange rates, Standard and Poor’s (“S&P”) 500 Index prices, and London
Inter Bank Offered Rates (“LIBOR”), which are obtained from third party sources
and uploaded into the system. For those derivatives that are unable to be valued by
the accounting system, the Company typically utilizes values established by third
party brokers.

Embedded derivative instruments within investments are reported at fair value based
upon internally established valuations that are consistent with external valuation
models or market quotations. GMWBs without life contingent payouts and GMABs
represent embedded derivative liabilities in annuity contracts that are required to be
recorded separately from the host annuity contracts. The option component of an FIA
also represents an embedded derivative. These embedded derivatives are carried at
fair value based on actuarial assumptions related to projected cash flows, including
benefits and related contract charges, over the lives of the contracts, incorporating
expectations concerning contractowner behavior.

Amortization of Deferred Policy Acquisition Costs and Value of Business Acquired

DAC represents policy acquisition costs that have been capitalized and are subject to
amortization. Such costs consist principally of certain commissions, underwriting,
contract issuance, and certain agency expenses, related to the production of new and
renewal business.

32

VOBA represents the outstanding value of in force business capitalized in purchase
accounting when the Company was acquired and is subject to amortization. The
value is based on the present value of estimated profits embedded in the Company’s
contracts.

FAS No. 97 applies to universal life and investment-type products, such as fixed and
variable deferred annuities. Under FAS No. 97, DAC and VOBA are amortized, with
interest, over the life of the related contracts in relation to the present value of
estimated future gross profits from investment, mortality, and expense margins, plus
surrender charges. DAC related to GICs, however, are amortized on a straight-line
basis over the life of the contract

Contractowners may periodically exchange one contract for another, or make
modifications to an existing contract. These transactions are identified as internal
replacements and are accounted for in accordance with Statement of Position 05-1,
“Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection
with Modifications or Exchanges of Insurance Contracts” (“SOP 05-1”).

Internal replacements that are determined to result in substantially unchanged
contracts are accounted for as continuations of the replaced contracts. Any costs
associated with the issuance of the new contracts are considered maintenance costs
and expensed as incurred. Unamortized DAC and VOBA related to the replaced
contracts continue to be deferred and amortized in connection with the new contracts,
as follows:

§	For deferred annuities, the estimated future gross profits of the new contracts are treated as revisions to the estimated future gross profits of the replaced contracts in the determination of amortization.
§	As of January 1, 2007, internal replacements that are determined to result in contracts that are substantially changed are accounted for as extinguishments of the replaced contracts, and any unamortized DAC and VOBA related to the replaced contracts are written off to Amortization of deferred policy acquisition costs and value of business acquired in the Statements of Operations.

Changes in assumptions can have a significant impact on DAC and VOBA balances
and amortization rates. Several assumptions are considered significant in the
estimation of future gross profits associated with variable universal life and variable
deferred annuity products. One of the most significant assumptions involved in the
estimation of future gross profits is the assumed return associated with the variable
account performance. The overall return on the variable account is dependent on
multiple factors, including the relative mix of the underlying sub-accounts among
bond funds and equity funds, as well as equity sector weightings. Other significant
assumptions include surrender and lapse rates, estimated interest spread, and
estimated mortality.

Due to the relative size and sensitivity to minor changes in underlying assumptions of
DAC and VOBA balances, the Company performs quarterly and annual analyses of
DAC and VOBA for the annuity and life businesses, respectively. The DAC and
VOBA balances are also evaluated for recoverability.

33

At each evaluation date, actual historical gross profits are reflected, and estimated
future gross profits and related assumptions are evaluated for continued
reasonableness. Any adjustment in estimated future gross profits requires that the
amortization rate be revised (“unlocking”) retroactively to the date of the policy or
contract issuance. The cumulative unlocking adjustment is recognized as a
component of current period amortization. In general, sustained increases in
investment, mortality, and expense margins, and thus estimated future profits, lower
the rate of amortization. However, sustained decreases in investment, mortality, and
expense margins, and thus estimated future gross profits, increase the rate of
amortization.

For interest rate and equity sensitivity and related effects on DAC and VOBA, see
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Results of Operations

Overview

Products offered by the Company include immediate and deferred variable and fixed
annuities, designed to address individual customer needs for tax-advantaged savings,
retirement needs, and wealth-protection concerns, and GICs, sold primarily to
institutional investors and corporate benefit plans.

The Company derives its revenue mainly from (a) fee income generated on variable
assets under management (“AUM”), (b) investment income earned on fixed AUM,
and (c) certain other management fees. Fee income is primarily generated from
separate account assets supporting variable options under variable annuity contract
investments, as designated by contractowners. Investment income from fixed AUM
is mainly generated from annuity products with fixed investment options. The
Company’s expenses primarily consist of (a) interest credited and other benefits to
contractowners, (b) amortization of DAC and VOBA, (c) expenses related to the
selling and servicing of the various products offered by the Company, and (d) other
general business expenses.

Economic Analysis

The current economic environment presents challenges and opportunities for the
Company and the insurance industry. The Company’s sales and financial results
continue to be affected by economic trends.

Equity market performance affects the Company, as fee revenue from variable AUM
is generally affected by equity market performance. In addition, variable product
demand often mirrors consumer demand for equity market investments. The increase
in sales and investment performance in the variable product lines during 2007
favorably impacted variable AUM in 2007.

The changing market interest rate environment during 2007, in combination with the
slow economic growth resulted in a substantial increase in unrealized losses in 2007,
as compared to the same period for 2006.

34

While the interest rate environment during 2007 has resulted in an increase in
unrealized losses as compared to 2006, overall increases in market yields have
allowed for improved asset returns, and, therefore, improved margins on fixed
products during 2007.

Year ended December 31, 2007 compared to year ended December 31, 2006

The Company’s results of operations for the year ended December 31, 2007, and
changes therein, reflected positive product experience as a result of increased AUM,
primarily driven by higher sales of GICs and variable annuity products during 2007,
and a higher block of business in force. This positive product experience, however,
was more than offset by higher realized capital losses, interest credited and other
benefits to contractowners, and amortization of DAC and VOBA.

	Years Ended December 31,		$ Increase	% Increase
	2007	2006	(Decrease)	(Decrease)
Revenues:
Net investment income	$ 1,346.4	$ 1,156.4	$ 190.0	16.4%
Fee income	1,198.9	939.2	259.7	27.7%
Premiums	19.6	20.5	(0.9)	(4.4)%
Net realized capital losses	(391.2)	(90.4)	(300.8)	NM
Other income	0.1	-	0.1	NM
Total revenue	2,173.8	2,025.7	148.1	7.3%
Benefits and expenses:
Interest credited and other
benefits to contractowners	1,312.0	1,169.7	142.3	12.2%
Operating expenses	269.6	228.0	41.6	18.2%
Amortization of deferred policy
acquisition costs and value
of business acquired	408.1	293.0	115.1	39.3%
Interest expense	32.5	30.3	2.2	7.3%
Other expense	24.2	28.1	(3.9)	(13.9)%
Total benefits and expenses	2,046.4	1,749.1	297.3	17.0%
Income before income taxes	127.4	276.6	(149.2)	(53.9)%
Income tax (benefit) expense	(1.6)	64.4	(66.0)	(102.5)%
Net income	$ 129.0	$ 212.2	$ (83.2)	(39.2)%
Effective tax rate	(1.3)%	23.3%
NM - Not meaningful.

Revenues

Total revenue for the year ended December 31, 2007, increased mainly due to
increases in Fee income and Net investment income, partially offset by increases in
Net realized capital losses.

The increase inFee income for the year ended December 31, 2007, reflects an
increase in average variable AUM, primarily driven by higher sales of variable
annuities and a higher block of business in force.

35

Net investment income for the year ended December 31, 2007, increased as the result
of an increase in assets supporting fixed AUM and surplus, which reflects a larger
block of GICs, and fixed indexed annuities in force. In addition, the Company
experienced higher yields in 2007.

Net realized capital losses increased for the year ended December 31, 2007, primarily
due to higher losses on derivatives and fixed maturities. The changes in derivatives
were primarily driven by interest rate swaps and call options, partially offset by lower
losses on futures as a result of lower equity market performance. The losses on fixed
maturities for the year ended December 31, 2007, were due to other-than-temporary
impairments driven by the slow economic environment and widening of credit
spreads in 2007.

Benefits and Expenses

Total benefits and expenses for the year ended December 31, 2007, increased mainly
due to higher Interest credited and other benefits to contractowners, Amortization of
DAC and VOBA, and Operating expenses.

Interest credited and other benefits to contractowners increased for the year ended
December 31, 2007, primarily driven by (a) the increase in reserves on variable
annuities, driven by unfavorable equity market performance in 2007 compared to
2006, and (b) the increase in interest credited on GICs, mainly attributable to higher
average fixed AUM. The increases were partially offset by a lower increase in
reserves on fixed annuities due to unfavorable equity market performance in 2007.

Operating expenses increased for the year ended December 31, 2007, primarily due to
higher non-deferred asset-based commissions and marketing expenses, as well as the
continued growth of the business.

TheAmortization of DAC and VOBA increased for the year ended December 31,
2007, primarily due to refinements of the DAC model during the fourth quarter of
2007, partially offset by favorable mutual fund and mortality and persistency
unlocking.

Income Taxes

Income tax (benefit) expense decreased for the year ended December 31, 2007,
primarily due to lower Income before taxes relative to the deduction allowed for
dividends received.

36

Year ended December 31, 2006 compared to year ended December 31, 2005

The Company’s results of operations for the year ended December 31, 2006, and
changes therein, reflected positive product experience due to favorable equity market
performance and increased AUM driven by the rise in sales of annuity products. This
positive product experience, however, was partially offset by higher realized capital
losses, due to increased interest rates, as well as higher operating expenses.

Years Ended December 31,		$ Increase	% Increase
2006	2005	(Decrease)	(Decrease)

Revenues:
Net investment income	$ 1,156.4	$ 1,102.2	$ 54.2	4.9%
Fee income	939.2	745.6	193.6	26.0%
Premiums	20.5	21.8	(1.3)	(6.0)%
Net realized capital losses	(90.4)	(2.9)	(87.5)	NM
Other income	-	0.7	(0.7)	NM
Total revenue	2,025.7	1,867.4	158.3	8.5%
Benefits and expenses:
Interest credited and other
benefits to contractowners	1,169.7	1,085.8	83.9	7.7%
Operating expenses	228.0	192.5	35.5	18.4%
Amortization of deferred policy
acquisition costs and value
of business acquired	293.0	318.9	(25.9)	(8.1)%
Interest expense	30.3	29.6	0.7	2.4%
Other expense	28.1	16.5	11.6	70.3%
Total benefits and expenses	1,749.1	1,643.3	105.8	6.4%
Income before income taxes	276.6	224.1	52.5	23.4%
Income tax expense	64.4	34.2	30.2	88.3%
Net income	$ 212.2	$ 189.9	$ 22.3	11.7%
Effective tax rate	23.3%	15.3%

NM - Not meaningful.

Revenues

Total revenue for the year ended December 31, 2006, increased mainly due to higher
Fee income and Net investment income. The increase was partially offset, however,
by higher Net realized capital losses.

The increase inFee incomereflects a larger block of business in force, driven by an
increase in net investment returns and new sales exceeding withdrawals and
surrenders.

The increase inNet investment incomeis the result of an increase in assets supporting
average fixed AUM, due to strong sales of fixed indexed annuities.

37

The increase inNet realized capital lossesfor the year ended December 31, 2006,
reflects higher losses on investments in fixed maturities, primarily driven by the
increasing interest rate environment in 2006.

Benefits and Expenses

Total benefits and expenses for the year ended December 31, 2006, increased mainly
due to higher Interest credited and other benefits to contractowners and Operating
expenses, partially offset by the decrease in Amortization of DAC and VOBA.

Interest credited and other benefits to contractownersincreased due to (a) the
increase in reserves on fixed indexed annuities, driven by higher AUM and improved
equity market performance, and (b) the increase in interest credited on GICs, based
on higher interest rates and AUM in 2006. These increases were partially offset by
lower increase of guaranteed benefits reserves on variable annuities, mainly
attributable to the favorable equity market performance in 2006.

Operating expensesincreased for the year ended December 31, 2006 as a result of
larger non-capitalized asset-based commissions and marketing expenses.

TheAmortization of DAC and VOBAdecreased primarily due to higher expected
gross profits, which reflect revisions in prospective assumptions based on positive
persistency experience and favorable equity market performance. The unlocking of
assumptions resulted in deceleration of amortization of $62.4. This decrease was
partially offset, however, by an increase in amortization driven by higher actual gross
profits experienced in 2006.

Other expensesincreased for the year ended December 31, 2006 due to the
amortization of deferred negative ceding commission related to the coinsurance
agreement with Security Life, which became effective in the second quarter of 2005.

Income Taxes

Income tax expenseincreased for the year ended December 31, 2006, primarily due to
the Internal Revenue Service (“IRS”) audit settlement in the third quarter of 2005,
which related to the Company's tax returns for the years 2000 and 2001. The
provision for the year ended December 31, 2005, reflected non-recurring favorable
adjustments, due to a reduction in the tax liability that was no longer deemed
necessary based on the results of the IRS examination, monitoring the activities of the
IRS with respect to certain issues with other taxpayers, and the merits of the
Company's positions.

38

Financial Condition

Investments

Investment Strategy

The Company’s investment strategy focuses on diversification by asset class. The
Company seeks to achieve economic diversification, while reducing overall credit
risk and liquidity risks. In addition, the Company seeks to mitigate the impact of cash
flow variability from embedded options within certain investment products, such as
prepayment options and interest rate options embedded in collateralized mortgage
obligations and call options embedded in corporate bonds. The investment
management function is centralized under ING Investment Management LLC, an
affiliate, pursuant to an investment advisory agreement. Separate portfolios are
established for groups of products with similar liability characteristics within the
Company.

The Company’s general account invests primarily in fixed maturity investments,
including publicly issued bonds (including government bonds), privately placed notes
and bonds, mortgage-backed securities, and asset-backed securities. The primary
investment strategy is to optimize the risk-adjusted return through superior asset
selection predicated on a developed relative value approach, credit research and
monitoring, superior management of interest rate risk, and active exploration into new
investment product opportunities. Investments are purchased when market returns,
adjusted for risk and expenses, are sufficient to profitably support growth of the
liability block of business. In addition, assets and liabilities are analyzed and reported
for internal management purposes on an option-adjusted basis. The level of required
capital of given transactions is a primary factor in determining relative value among
different investment and liability alternatives, within the scope of each product type’s
objective. An active review of existing holdings identifies specific assets that could
be effectively traded in order to enhance the risk-adjusted returns of the portfolio,
while minimizing adverse tax and accounting impacts. The Company strives to
maintain a portfolio weighted average asset quality rating of A, based on S&P ratings
classifications. The weighted average excludes mortgage loans, but includes
mortgage-backed securities, which are reported with bonds.

The Company uses derivatives for hedging purposes to reduce the Company’s
exposure to cash flow variability of assets and liabilities, interest rate risk, credit risk,
and market risk. In addition, the Company uses credit default swaps to reduce the
credit loss exposure with respect to certain assets that the Company owns, or to
assume credit exposure on certain assets that the Company does not own. These
credit default swaps are similar in credit risk to bonds of the named issuer, and allow
the Company to gain access to a broader, more diversified pool of credit risks. See
“Liquidity and Capital Resources – Derivatives” for further discussion of the
Company’s use of derivatives.

39

Portfolio Composition

The following table presents the investment portfolio at December 31, 2007 and
2006.

	2007		2006
	Carrying		Carrying
	Value	%	Value	%
Fixed maturities, available-for-sale,
including securities pledged	$ 22,776.0	81.7%	$ 17,918.4	79.3%
Equity securities, available-for-sale	211.1	0.8%	40.6	0.2%
Short-term investments	188.0	0.7%	134.3	0.6%
Mortgage loans on real estate	3,701.7	13.3%	3,687.6	16.3%
Policy loans	155.8	0.5%	162.5	0.7%
Other investments	848.6	3.0%	642.9	2.9%
Total investments	$ 27,881.2	100.0%	$ 22,586.3	100.0%

The following table identifies the fair value of fixed maturities and equity securities,
available-for-sale, as well as short-term investments and derivatives by pricing
sources as of December 31, 2007 and 2006.

		Valuation	Valuation
		Techniques	Techniques
	Published	with	without
	Price	Market	Market
2007	Quotations	Inputs	Inputs	Total
Assets:
Fixed maturities, available-for-sale,

including securities pledged	$ 18,402.6	$ 4,373.4	$ -	$ 22,776.0
Equity securities, available-for-sale	211.1	-	-	211.1
Short-term investments	188.0	-	-	188.0
Other investments (primarily derivatives)	-	366.6	-	366.6
Liabilities:
Other liabilities (primarily derivatives)	-	273.8	-	273.8
2006
Assets:
Fixed maturities, available-for-sale,
including securities pledged	$ 14,519.3	$ 3,399.1	$ -	$ 17,918.4
Equity securities, available-for-sale	40.6	-	-	40.6
Short-term investments	134.3	-	-	134.3
Other investments (primarily derivatives)	-	472.0	0.5	472.5
Liabilities:
Other liabilities (primarily derivatives)	-	64.2	0.5	64.7

40

Fixed Maturities

Fixed maturities, available-for-sale, were as follows as of December 31, 2007.

		Gross	Gross
		Unrealized	Unrealized
	Amortized	Capital	Capital	Fair
	Cost	Gains	Losses	Value
Fixed maturities:
U.S. Treasuries	$ 18.4	$ 1.0	$ -	$ 19.4
U.S. government agencies and authorities	86.1	1.0	0.3	86.8
State, municipalities, and political subdivisions	49.7	-	2.5	47.2
U.S. corporate securities:
Public utilities	1,417.5	22.8	13.4	1,426.9
Other corporate securities	6,742.7	81.1	67.0	6,756.8
Total U.S. corporate securities	8,160.2	103.9	80.4	8,183.7
Foreign securities(1):
Government	525.2	14.9	7.1	533.0
Other	3,280.6	40.5	59.4	3,261.7
Total foreign securities	3,805.8	55.4	66.5	3,794.7
Residential mortgage-backed securities	4,988.4	53.3	85.8	4,955.9
Commercial mortgage-backed securities	3,842.2	37.6	36.4	3,843.4
Other asset-backed securities	1,947.5	5.7	108.3	1,844.9
Total fixed maturities, including securities pledged	22,898.3	257.9	380.2	22,776.0
Less: securities pledged	953.3	6.1	16.8	942.6
Total fixed maturities	$ 21,945.0	$ 251.8	$ 363.4	$ 21,833.4

⁽¹⁾Primarily U.S. dollar denominated.

41

Fixed maturities, available-for-sale, were as follows as of December 31, 2006.

		Gross	Gross
		Unrealized	Unrealized
	Amortized	Capital	Capital	Fair
	Cost	Gains	Losses	Value
Fixed maturities:
U.S. Treasuries	$ 276.9	$ 0.2	$ 1.4	$ 275.7
U.S. government agencies and authorities	220.9	0.6	2.2	219.3
State, municipalities, and political subdivisions	43.0	0.5	0.4	43.1
U.S. corporate securities:
Public utilities	1,324.5	21.1	17.8	1,327.8
Other corporate securities	5,138.6	50.3	49.7	5,139.2
Total U.S. corporate securities	6,463.1	71.4	67.5	6,467.0
Foreign securities(1):
Government	486.1	16.2	4.3	498.0
Other	2,843.9	32.3	46.6	2,829.6
Total foreign securities	3,330.0	48.5	50.9	3,327.6
Residential mortgage-backed securities	3,841.4	44.8	62.8	3,823.4
Commercial mortgage-backed securities	1,928.6	15.1	20.2	1,923.5
Other asset-backed securities	1,843.4	5.2	9.8	1,838.8

Total fixed maturities, including securities pledged	17,947.3	186.3	215.2	17,918.4
Less: securities pledged	875.5	2.4	13.9	864.0
Total fixed maturities	$ 17,071.8	$ 183.9	$ 201.3	$ 17,054.4

⁽¹⁾Primarily U.S. dollar denominated.

It is management’s objective that the portfolio of fixed maturities be of high quality
and be well diversified by market sector. The fixed maturities in the Company’s
portfolio are generally rated by external rating agencies and, if not externally rated,
are rated by the Company on a basis believed to be similar to that used by the rating
agencies. The average quality rating of the Company's fixed maturities portfolio was
AA- at December 31, 2007 and 2006, respectively. Ratings are calculated using a
rating hierarchy that considers S&P, Moody’s Investor’s Service, Inc., and internal
ratings.

42

Total fixed maturities by quality rating category, including securities pledged to
creditors, were as follows at December 31, 2007 and 2006.

	2007		2006
	Fair	% of	Fair	% of
	Value	Total	Value	Total
AAA	$ 10,023.0	43.9%	$ 7,243.8	40.4%
AA	1,743.6	7.7%	1,245.7	6.9%
A	4,112.4	18.1%	3,631.0	20.3%
BBB	5,945.3	26.1%	5,124.0	28.6%
BB	676.0	3.0%	575.1	3.2%
B and below	275.7	1.2%	98.8	0.6%
Total	$ 22,776.0	100.0%	$ 17,918.4	100.0%

95.8% and 96.2% of the fixed maturities were invested in securities rated BBB and
above (Investment Grade) at December 31, 2007 and 2006, respectively.

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

Total fixed maturities, including securities pledged to creditors, by market sector
were as follows at December 31, 2007 and 2006.

	2007		2006
	Fair	% of	Fair	% of
	Value	Total	Value	Total
U.S. Treasuries	$ 19.4	0.1%	$ 275.7	1.6%
U.S. government agencies and authorities	86.8	0.4%	219.3	1.2%
U.S. corporate, states, and municipalities	8,230.9	36.0%	6,510.1	36.3%
Foreign	3,794.7	16.7%	3,327.6	18.6%
Residential mortgage-backed	4,955.9	21.8%	3,823.4	21.3%
Commercial mortgage-backed	3,843.4	16.9%	1,923.5	10.7%
Other asset-backed	1,844.9	8.1%	1,838.8	10.3%
Total	$ 22,776.0	100.0%	$ 17,918.4	100.0%

43

The amortized cost and fair value of fixed maturities as of December 31, 2007, are
shown below by contractual maturity. Actual maturities may differ from contractual
maturities as securities may be restructured, called, or prepaid.

	Amortized	Fair
	Cost	Value
Due to mature:
One year or less	$ 550.8	$ 551.3
After one year through five years	5,800.7	5,856.5
After five years through ten years	3,797.6	3,776.3
After ten years	1,971.1	1,947.7
Mortgage-backed securities	8,830.6	8,799.3
Other asset-backed securities	1,947.5	1,844.9
Less: securities pledged	953.3	942.6
Fixed maturities, excluding securities pledged	$ 21,945.0	$ 21,833.4

The Company did not have any investments in a single issuer, other than obligations
of the U.S. government and government agencies, with a carrying value in excess of
10.0% of the Company’s shareholder’s equity at December 31, 2007 or 2006.

At December 31, 2007 and 2006, fixed maturities with fair values of $11.2 and $10.7,
respectively, were on deposit as required by regulatory authorities.

The Company invests in various categories of collateralized mortgage obligations
(“CMOs”) that are subject to different degrees of risk from changes in interest rates
and, for CMOs that are not agency-backed, defaults. The principal risks inherent in
holding CMOs are prepayment and extension risks related to dramatic decreases and
increases in interest rates resulting in the prepayment of principal from the underlying
mortgages, either earlier or later than originally anticipated. At December 31, 2007
and 2006, approximately 7.5% and 6.7%, respectively, of the Company’s CMO
holdings were invested in those types of CMOs which are subject to more
prepayment and extension risk than traditional CMOs, such as interest-only or
principal-only strips.

The Company is a member of the Federal Home Loan Bank of Des Moines (“FHLB”)
and is required to maintain a collateral deposit that backs funding agreements issued
to the FHLB. At December 31, 2007 and 2006, the Company had $2,898.7 and
$226.7, respectively, in non-putable funding agreements, including accrued interest,
issued to the FHLB. The level of funding agreements issued to the FHLB as of
December 31, 2007 increased significantly from the amount issued as of
December 31, 2006. During the second half of 2007, the Company took advantage of
the credit market dislocation to purchase highly rated assets and issue FHLB funding
agreements. At December 31, 2007 and 2006, assets with a carrying value of
approximately $3,270.1 and $703.0, respectively, collateralized the funding
agreements issued to the FHLB. Assets pledged to the FHLB are included in Fixed
maturities, available-for-sale, in the Balance Sheets.

44

Subprime Mortgage Exposure

Credit markets have recently become more turbulent amid concerns about subprime
mortgages and collateralized debt obligations (“CDOs”). This in turn has resulted in
a general widening of credit spreads, reduced price transparency, reduced liquidity,
increased rating agency downgrades and increased volatility across certain markets.

To date, this market disruption has had a limited impact on the Company, which does
not originate or purchase subprime or Alt-A whole-loan mortgages. Subprime
lending is the origination of loans to customers with weaker credit profiles. The
Company defines Alt-A Loans to include residential mortgage loans to customers
who have strong credit profiles but lack some element(s), such as documentation to
substantiate income. Commencing in the fourth quarter of 2007, the Company
expanded its definition of Alt-A loans to include residential mortgage loans to
borrowers that would otherwise be classified as prime but whose loan structure
provides repayment options to the borrower that increase the risk of default. Further,
during the fourth quarter, the industry coalesced around classifying any residential
mortgage backed securities (“RMBS”) not clearly identifiable as prime or subprime
into the Alt-A category and the Company is following that lead. The following
summarizes the Company’s exposure to subprime and Alt-A mortgages as of
December 31, 2007.

As of December 31, 2007, the fair value and gross unrealized losses related to the
Company’s exposure to subprime mortgages was $879.3 and $86.4, respectively,
representing 3.2% of total investments. 89.5% of these securities were rated “AAA”
or “AA”. This exposure was primarily in the form of asset-backed securities (“ABS”)
structures, collateralized by subprime residential mortgages (“ABS Home Equity”)
and one CDO position backed by ABS Home Equity. Of the total subprime
residential mortgage backed securities portfolio, 28.0% were issued in 2007, 11.5% in
2006, and 60.5% in 2005 and prior. The ABS CDO had no unrealized loss and fair
value of $0.8 at December 31, 2007.

The Company’s exposure to Alt-A mortgages was concentrated in RMBS, and the
fair value and gross unrealized losses aggregated to $1.9 billion and $69.9,
respectively, representing 6.8% of total investments at December 31, 2007. 99.9% of
these securities were AAA-rated. The Alt-A mortgage backed securities portfolio
included 36.2% issued in 2007, 24.0% in 2006, and 39.8% in 2005 and prior.

Total RMBS (including CMO and ABS structures) was $4.9 billion with 17.8%
consisting of subprime residential mortgage backed securities and 38.0% consisting
of Alt-A mortgage backed securities. The RMBS portfolio is of high credit quality
with 99.9% of the portfolio rated AAA. Further, 1.0% of the RMBS portfolio was
issued by the Government National Mortgage Association (“GNMA” or “Ginnie
Mae”), the Federal National Mortgage Association (“FNMA” or “Fannie Mae”), or
the Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”), which
are government agencies or instrumentalities that guarantee the credit quality of the
underlying mortgage pools.

45

Commercial Mortgage-backed and Other Asset-backed Securities

While the delinquency rates on commercial mortgages have been stable in recent
years, commercial real estate rents and property values have recently become more
volatile. In addition, there are growing concerns with consumer loans as a result of
the current economic environment, which includes lower family income and higher
unemployment rates.

At December 31, 2007, the fair value of the Company’s Commercial mortgage-
backed securities (“CMBS”) totaled $3.8 billion, and Other ABS, excluding subprime

exposure, totaled $984.1.

CMBS investments represent pools of commercial

mortgages that are broadly diversified across property types and geographical areas.
The Other ABS is also broadly diversified both by type and issuer with credit card
receivables, collateralized loan obligations and automobile receivables comprising
41.3%, 29.7% and 14.3%, respectively, of total Other ABS, excluding subprime
exposure.

The following tables summarize the Company’s exposure to CMBS and Other ABS
holdings by credit quality and vintage year as of December 31, 2007:

CMBS
% of Total CMBS		Vintage
AAA	95.1%	2007	39.4%
AA	2.5%	2006	13.2%
A	1.2%	2005 and prior	47.4%
BBB	1.0%
BB and below	0.2%
Other ABS
% of Total Other ABS		Vintage
AAA	59.3%	2007	30.5%
AA	5.9%	2006	11.8%
A	10.1%	2005 and prior	57.7%
BBB	24.5%
BB and below	0.2%

Mortgage Loans on Real Estate

Mortgage loans on real estate, primarily commercial mortgage loans, totaled $3,701.7
and $3,687.6 at December 31, 2007 and 2006, respectively. These loans are reported
at amortized cost, less impairment write-downs. If the value of any mortgage loan is
determined to be impaired (i.e., when it is probable that the Company will be unable
to collect on all amounts due according to the contractual terms of the loan
agreement), the carrying value of the mortgage loan is reduced to either the present
value of expected cash flows from the loan, discounted at the loan’s effective interest
rate, or fair value of the collateral. If the loan is in foreclosure, the carrying value is
reduced to the fair value of the underlying collateral, net of estimated costs to obtain
and sell. The carrying value of the impaired loans is reduced by establishing a

46

permanent write-down charged to Net realized capital gains (losses). At
December 31, 2007 and 2006, the Company had no allowance for mortgage loan
credit losses. The properties collateralizing mortgage loans are geographically
dispersed throughout the United States, with the largest concentration of 24.5% and
19.9% of properties in California at December 31, 2007 and 2006, respectively.

Unrealized Capital Losses

Fixed maturities, including securities pledged to creditors, comprise 81.7% and
79.3% of the Company’s total investment portfolio at December 31, 2007 and 2006,
respectively. Unrealized capital losses related to fixed maturities are analyzed in
detail in the following tables.

Unrealized capital losses in fixed maturities, including securities pledged to creditors,
for Investment Grade (“IG”) and Below Investment Grade (“BIG”) securities by
duration were as follows at December 31, 2007 and 2006.

		2007					2006
		% of IG			% of IG		% of IG			% of IG
	IG	and BIG		BIG	and BIG	IG	and BIG		BIG	and BIG
Less than six months
below amortized cost	$ 106.1	27.9%	$ 5.0		1.3%	$ 25.5	11.8%	$ 1.9		0.9%
More than six months
and less than twelve
months below
amortized cost	171.3	45.1%		12.7	3.3%	11.3	5.3%		0.5	0.2%
More than twelve months
below amortized cost	81.6	21.5%		3.5	0.9%	174.3	81.0%		1.7	0.8%
Total unrealized capital losses	$ 359.0	94.5%	$ 21.2		5.5%	$ 211.1	98.1%	$ 4.1		1.9%

Unrealized losses in fixed maturities at December 31, 2007 and 2006, were primarily
related to interest rate movement or changes in credit spreads to mortgage and other
asset-backed securities. Mortgage and other asset-backed securities include U.S.
government-backed securities, principal protected securities, and structured securities,
which did not have an adverse change in cash flows. The following table summarizes
the unrealized capital losses by duration and reason, along with the fair value of fixed
maturities, including securities pledged to creditors, in unrealized capital loss
positions at December 31, 2007 and 2006.

	Less than	More than
	Six Months	Six Months and	More than	Total
	Below	less than Twelve	Twelve Months	Unrealized
	Amortized	Months Below	Below	Capital
2007	Cost	Amortized Cost	Amortized Cost	Losses
Interest rate or spread widening	$ 37.8	$ 49.2	$ 62.7	$ 149.7
Mortgage and other asset-backed
securities	73.3	134.8	22.4	230.5
Total unrealized capital losses	$ 111.1	$ 184.0	$ 85.1	$ 380.2
Fair value	$ 5,322.0	$ 3,248.4	$ 3,300.6	$ 11,871.0
	47

Less than

More than

	Six Months	Six Months and	More than	Total
	Below	less than Twelve	Twelve Months	Unrealized
	Amortized	Months Below	Below	Capital
2006	Cost	Amortized Cost	Amortized Cost	Losses
Interest rate or spread widening	$ 12.8	$ 6.2	$ 103.4	$ 122.4
Mortgage and other asset-backed
securities	14.6	5.6	72.6	92.8
Total unrealized capital losses	$ 27.4	$ 11.8	$ 176.0	$ 215.2
Fair value	$ 3,095.9	$ 905.9	$ 6,026.5	$ 10,028.3

Unrealized capital losses in fixed maturities, including securities pledged to creditors,
by market sector and duration were as follows at December 31, 2007 and 2006.

		More than
	Less than	Six Months	More than
	Six Months	and less than	Twelve Months	Total
	Below	Twelve Months	Below	Unrealized
	Amortized	Below	Amortized	Capital
2007	Cost	Amortized Cost	Cost	Losses
U.S. government agencies and authorities	$ -	$ -	$ 0.3	$ 0.3
U.S. corporate, state, and municipalities	16.6	31.4	34.9	82.9
Foreign	21.2	17.8	27.5	66.5
Residential mortgage-backed	51.1	29.3	5.4	85.8
Commercial mortgage-backed	3.8	27.0	5.6	36.4
Other asset-backed	18.4	78.5	11.4	108.3
Total unrealized capital losses	$ 111.1	$ 184.0	$ 85.1	$ 380.2
2006
U.S. Treasuries	$ 1.4	$ -	$ -	$ 1.4
U.S. government agencies and authorities	0.3	-	1.9	2.2
U.S. corporate, state, and municipalities	7.8	1.8	58.3	67.9
Foreign	3.3	4.4	43.2	50.9
Residential mortgage-backed	11.5	2.9	48.4	62.8
Commercial mortgage-backed	2.0	1.4	16.8	20.2
Other asset-backed	1.1	1.3	7.4	9.8
Total unrealized capital losses	$ 27.4	$ 11.8	$ 176.0	$ 215.2

Of the unrealized losses aged more than twelve months, the average market value of
the related fixed maturities was 97.1% of the average book value as of December 31,
2007. In addition, this category includes 753 securities, which have an average
quality rating of A+. No other-than-temporary impairment loss was considered
necessary for these fixed maturities as of December 31, 2007.

48

Other-Than-Temporary Impairments

The Company analyzes the general account investments to determine whether there
has been an other-than-temporary decline in fair value below amortized cost basis.
Management considers the length of time and the extent to which the fair value has
been less than amortized cost, the issuer’s financial condition and near-term
prospects, future economic conditions and market forecasts, interest rate changes, and
the Company’s intent to retain the investment for a period of time sufficient to allow
for recovery in fair value. If it is probable that all amounts due according to the
contractual terms of an investment will not be collected, an other-than-temporary
impairment is considered to have occurred.

In addition, the Company invests in asset-backed securities. Determination of the
required impairment is based on the analysis discussed in the preceding paragraph, as
well as credit risk and the possibility of significant prepayment risk that restricts the
Company’s ability to recover the investment. An impairment is recognized if the fair
value of the security is less than book value and there has been an adverse change in
cash flow since the last remeasurement date.

When a decline in fair value is determined to be other-than-temporary, the individual
security is written down to fair value, and the loss is recorded in Net realized capital
gains (losses).

The following table identifies the Company’s other-than-temporary impairments by
type for the years ended December 31, 2007, 2006, and 2005.

		2007		2006		2005
			No. of		No. of		No. of
	Impairment		Securities	Impairment	Securities	Impairment	Securities
U.S. Treasuries	$ -	*	1	$ 0.1	1	$ 0.1	1
U.S. Corporate	81.0		173	15.8	63	3.0	12
Foreign	25.7		74	3.5	13	0.1	1
Residential mortgage-backed	3.0		24	12.7	68	16.4	86

Commercial mortgage-backed	-	-	-	-	1.2	1
Other asset-backed	43.3	91	1.2	2	0.5	2
Limited partnerships	0.3	1	0.5	2	0.5	1
Total	$ 153.3	364	$ 33.8	149	$ 21.8	104
* Less than $0.1.

The above schedule includes $31.0, $11.5, and $18.7 in other-than-temporary write-
downs for the years ended December 31, 2007, 2006, and 2005, respectively, related
to the analysis of credit risk and the possibility of significant prepayment risk. The
remaining $122.3, $22.3, and $3.1 in write-downs for the years ended December 31,
2007, 2006, and 2005, respectively, are related to investments that the Company does
not have the intent to retain for a period of time sufficient to allow for recovery in fair
value. The following table summarizes these write-downs by type for the years ended
December 31, 2007, 2006, and 2005.

49

		2007		2006		2005
			No. of		No. of		No. of
	Impairment		Securities	Impairment	Securities	Impairment	Securities
U.S. Treasuries	$ -	*	1	$ 0.1	1	$ 0.1	1
U.S. Corporate	70.6		161	15.8	63	2.6	11
Foreign	21.4		68	3.5	13	-	-
Residential mortgage-backed	1.0		5	1.7	4	0.4	1
Other asset-backed	29.3		84	1.2	2	-	-
Total	$ 122.3		319	$ 22.3	83	$ 3.1	13

* Less than $0.1.

The Company may sell securities during the period in which fair value has declined
below amortized cost for fixed maturities or cost for equity securities. In certain
situations new factors, including changes in the business environment, can change the
Company’s previous intent to continue holding a security.

Net Realized Capital Gains (Losses)

Net realized capital gains (losses) are comprised of the difference between the
amortized cost of investments and proceeds from sale, and redemption, as well as
losses incurred due to the other-than-temporary impairment of investments and
changes in fair value of derivatives. The cost of the investments on disposal is
determined based on specific identification of securities. Net realized capital gains
(losses) on investments were as follows for the years ended December 31, 2007,
2006, and 2005.

	2007	2006		2005
Fixed maturities, available-for-sale	$ (100.3)	$ (43.8)		$ 45.4
Equity securities, available-for-sale	0.5		0.9		0.2
Derivatives	(291.0)		(48.2)		(48.3)
Other	(0.4)		0.7		(0.2)
Net realized capital losses	$ (391.2)	$ (90.4)		$ (2.9)
After-tax net realized capital losses	$ (254.3)	$ (58.8)		$ (1.9)

Net realized capital losses increased for the year ended December 31, 2007, primarily
due to higher losses on derivatives, along with higher losses on fixed maturities. The
changes in derivatives were primarily driven by interest rate swaps and call options,
partially offset by lower losses on futures as a result of lower equity market
performance. The losses on fixed maturities for the year ended December 31, 2007,
were due to other-than-temporary impairments driven by the slow economic
environment and widening of credit spreads in 2007.

Liquidity and Capital Resources

Liquidity is the ability of the Company to generate sufficient cash flows to meet the
cash requirements of operating, investing, and financing activities.

50

Sources and Uses of Liquidity

The Company’s principal sources of liquidity are annuity product charges, GIC
deposits, investment income, proceeds from the maturing and sale of investments,
proceeds from debt issuance, and capital contributions. Primary uses of these funds
are payments of commissions and operating expenses, interest and premium credits,
payments under guaranteed death and living benefits, investment purchases,
repayment of debt, and contract maturities, withdrawals, and surrenders.

The Company’s liquidity position is managed by maintaining adequate levels of

liquid

assets,

such as

cash,

cash

equivalents,

and short-term

investments.

Asset/liability management is integrated into many aspects of the Company’s
operations, including investment decisions, product development, and determination
of crediting rates. As part of the risk management process, different economic
scenarios are modeled, including cash flow testing required for insurance regulatory
purposes, to determine that existing assets are adequate to meet projected liability
cash flows. Key variables in the modeling process include interest rates, anticipated
contractowner behavior, and variable separate account performance. Contractowners
bear the investment risk related to variable annuity products, subject to the minimum
guaranteed death and living benefits included in these contracts.

The fixed account liabilities are supported by a general account portfolio, principally
composed of fixed rate investments with matching duration characteristics that can
generate predictable, steady rates of return. The portfolio management strategy for
the fixed account considers the assets available-for-sale. This strategy enables the
Company to respond to changes in market interest rates, prepayment risk, relative
values of asset sectors and individual securities and loans, credit quality outlook, and
other relevant factors. The objective of portfolio management is to maximize returns,
taking into account interest rate and credit risk, as well as other risks. The
Company’s asset/liability management discipline includes strategies to minimize
exposure to loss as interest rates and economic and market conditions change.

Liquidity and Capital Resources

Additional sources of liquidity include borrowing facilities to meet short-term cash
requirements that arise in the ordinary course of business. The Company maintains
the following agreements:

§	A reciprocal loan agreement with ING America Insurance Holdings, Inc. (“ING AIH”), an affiliate, whereby either party can borrow from the other up to 3.0% of the Company’s statutory admitted assets as of the prior December 31. As of December 31, 2007 and 2006, the Company had no amounts due to or due from ING AIH under the reciprocal loan agreement.
§	A $100.0 uncommitted, perpetual revolving note facility with the Bank of New York. At December 31, 2007 and 2006, the Company had no amounts outstanding under the revolving note facility.

51

§	A $75.0 uncommitted line-of-credit agreement with PNC Bank. Borrowings are guaranteed by ING AIH, with maximum aggregate borrowings outstanding at anytime to ING AIH and its affiliates of $75.0. As of December 31, 2007 and 2006, the Company had no amounts outstanding under the line-of-credit agreement.
§	A $100.0 uncommitted line-of-credit agreement with Svenska Handelsbanken AB (Publ.), effective June 2, 2006. Borrowings are guaranteed by ING AIH, with maximum aggregate borrowings outstanding at anytime to ING AIH and its affiliates of $100.0. As of December 31, 2007 and 2006, the Company had no amounts outstanding under the line-of-credit agreement.

Management believes that these sources of liquidity are adequate to meet the
Company’s short-term cash obligations.

The Company is a member of the Federal Home Loan Bank of Des Moines (“FHLB”)
and is required to maintain a collateral deposit that backs funding agreements issued
to the FHLB. As of December 31, 2007 and 2006, the Company had $2,898.7 and
$226.7, respectively, in non-putable funding agreements, including accrued interest,
issued to FHLB. The level of funding agreements issued to the FHLB as of
December 31, 2007 increased significantly from the amount issued as of
December 31, 2006. During the second half of 2007, the Company took advantage of
the credit market dislocation to purchase highly rated assets and issue FHLB funding
agreements. As of December 31, 2007 and 2006, assets with a carrying value of
approximately $3,270.1 and $703.0, respectively, collateralized the funding
agreements issued to the FHLB. Assets pledged to the FHLB are included in Fixed
maturities, available-for-sale, on the Balance Sheets.

Funding Agreement

On August 10, 2007, the Company issued an extendable funding agreement to its
parent, Lion, upon receipt of a single deposit in the amount of $500.0. To fund the
purchase of the funding agreement, Lion issued a promissory note to its indirect
parent company, ING Verzekeringen N.V. ("ING V"), which has been guaranteed by
Lion’s immediate parent, ING AIH.

Under the terms of the funding agreement, the Company will pay Lion interest
quarterly at the credited interest rate until maturity, and on the maturity date, the
Company will pay Lion the single deposit and any accrued and unpaid interest. The
credited interest rate shall be the three-month London Interbank Offered Rate
(“LIBOR”), plus 0.05%, and shall be reset quarterly. The maturity date of the funding
agreement shall be August 10, 2009, or such later date to which the maturity date may
be extended; provided, however, that the maturity date may not be extended beyond
August 10, 2012.

52

Capital Contributions and Distributions

During 2007, the Company received $150.0 in capital contributions from Lion. During
2006, the Company did not receive any capital contributions from its Parent. During
2005, the Company received capital contributions of $100.0 from its Parent to support
sales activities.

During 2007 and 2005, the Company did not pay any dividends or return of capital
distributions on its common stock to Lion. During 2006, the Company paid $170.0 in
a return of capital distribution to its Parent. On February 21, 2008, the Company
received a $1.1 billion capital contribution from Lion.

Cash Collateral

Under the terms of the Company’s Over-The-Counter Derivative International Swaps
and Derivatives Association, Inc. Agreements (“ISDA Agreements”), the Company
may receive from, or deliver to, counterparties, collateral to assure that all terms of
the ISDA Agreements will be met with regard to the Credit Support Annex (“CSA”).
The terms of the CSA call for the Company to pay interest on any cash received equal
to the Federal Funds rate. As of December 31, 2007, the Company held $11.5 of cash
collateral, which was included in Collateral held, including payables under securities
loan agreement and was reinvested in Short-term investments under securities loan
agreement on the Balance Sheets. The Company held no cash collateral under the
ISDA Agreements as of December 31, 2006.

Facultative Reinsurance Agreement

The Company is a party to a Facultative Coinsurance Agreement with its affiliate,
Security Life of Denver Insurance Company (“Security Life”) effective August 20,
1999. Under the terms of this agreement, the Company facultatively cedes to
Security Life, from time to time, certain GICs on a 100% coinsurance basis. The
value of GIC reserves ceded by the Company under this agreement was $2.3 billion
and $2.2 billion at December 31, 2007 and 2006, respectively. The Company utilizes
this reinsurance facility primarily for diversification and asset-liability management
purposes in connection with this business, which is facilitated by the fact that Security
Life is also a major GIC issuer. Senior management of the Company has established
a current maximum of $4.0 billion for GIC reserves ceded under this agreement.

Separate Accounts

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

53

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

Variable annuity deposits are allocated to various subaccounts established within the
separate account. Each subaccount represents a different investment option into
which the contractowner may allocate premiums. The account value of a variable
annuity contract is equal to the aggregate value of the subaccounts selected by the
contractowner (including the value allocated to any fixed account), less fees and
expenses. The Company offers investment options for its variable annuity contracts
covering a wide range of investment styles, including large, mid, and small cap equity
funds, as well as fixed income alternatives. Therefore, unlike fixed annuities, under
variable annuity contracts, contractowners bear the risk of investment gains and
losses associated with the selected investment allocation. The Company, however,
offers certain guaranteed death and living benefits (described below) under which it
bears specific risks associated with these benefits. Many of the variable annuity
contracts issued by the Company are combination contracts offering both variable and
fixed options under which some or all of the deposits may be allocated by the
contractowner to a fixed account available under the contract.

The Company’s major source of income from variable annuities is the base contract
mortality fees, expense fees, and guaranteed death and living benefit rider fees
charged to the contractowner, less the cost of administering the product, as well as the
cost of providing for the guaranteed death and living benefits.

Minimum Guarantees

Variable annuity contracts containing minimum guaranteed death and living benefits
expose the Company to equity risk. A decrease in the equity markets may cause a
decrease in the account values, thereby increasing the possibility that the Company
may be required to pay amounts to contractowners due to guaranteed death and living
benefits. An increase in the value of the equity markets may increase account values
for these contracts, thereby decreasing the Company’s risk associated with guaranteed
death and living benefits.

The Company’s variable annuities offer one or more of the following guaranteed
death and living benefits:

Guaranteed Minimum Death Benefits (“GMDBs”):

§	Standard - Guarantees that, upon death, the death benefit will be no less than the premiums paid by the contractowner, adjusted for any contract withdrawals.
§	Ratchet - Guarantees that, upon the death of the annuitant, the death benefit will be no less than the greater of (1) Standard or (2) the maximum contract anniversary (or quarterly) value of the variable annuity, adjusted for contract withdrawals.

54

§	Rollup (7.0% or 5.5% Solution) - Guarantees that, upon death, the death benefit will be no less than the aggregate premiums paid by the contractowner accruing interest at 7.0% or 5.5% per annum, adjusted for contract withdrawals, which may be subject to a maximum cap on the rolled up amount. (The Company has discontinued this option for new sales.)
§	Combo (Max 7) - Guarantees that, upon death, the death benefit will be no less than the greater of (1) Ratchet or (2) Rollup.

For contracts issued prior to January 1, 2000, most contracts with enhanced death
benefit guarantees were reinsured to third party reinsurers to mitigate the risk
produced by such guaranteed death benefits. For contracts issued after December 31,
1999, the Company instituted an equity hedging program in lieu of reinsurance. The
equity hedging program is based on the Company entering into derivative positions to
offset exposures to guaranteed minimum death benefits due to adverse changes in the
equity markets.

At December 31, 2007 and 2006, the guaranteed value of these death benefits in
excess of account values was estimated to be $2.7 billion and $2.2 billion,
respectively, before reinsurance. The increase was primarily driven by the decrease
in account values due to unfavorable equity market performance in the second half of
2007.

At December 31, 2007, the guaranteed value of minimum guaranteed death benefits
in excess of account values, net of reinsurance, was estimated to be $1.8 billion, of
which $537.6 was projected to be covered by the Company’s equity hedging
program. At December 31, 2006, the guaranteed value of minimum guaranteed death
benefits in excess of account values, net of reinsurance, was estimated to be $1.3
billion, of which $381.7 was projected to be covered by the Company’s equity
hedging program. As of December 31, 2007 and 2006, the Company recorded a
liability of $209.4 and $139.7, respectively, net of reinsurance, representing the
estimated net present value of the Company’s future obligation for guaranteed
minimum death benefits in excess of account values. The liability increased mainly
due to the accumulation of fees used to fund the reserve during 2007 and higher
future projected benefits in excess of account values.

Guaranteed Living Benefits:

§	Guaranteed Minimum Income Benefit - Guarantees a minimum income payout, exercisable each contract anniversary on or after a specified date, in most cases the 10th rider anniversary. This type of living benefit is the predominant selection in the Company’s sales of variable annuities.
§	Guaranteed Minimum Withdrawal Benefit (“GMWB”) - Guarantees annual withdrawals for life of a percentage of premiums received during the growth phase (before taking withdrawals and after age 60). The percentage may vary by age at first withdrawal, depending on the base annuity contract. For certain versions, before withdrawals begin there are annual step-up (for 10 years) and quarterly ratchet features that may increase the amount used to calculate the annual withdrawal amount. Other versions have a quarterly ratchet feature only.
	A joint life-time withdrawal benefit option is available to include coverage for spouses. Most versions of the withdrawal benefit have reset and/or step up

55

features that may increase the guaranteed withdrawal amount in certain conditions. Earlier versions of the withdrawal benefit guarantee that annual withdrawals of up to 7.0 % of eligible premiums may be made until eligible premiums previously paid by the contractowner are returned, regardless of account value performance. Asset allocation requirements apply at all times where withdrawals are guaranteed for life.

§

Guaranteed Minimum Accumulation Benefit - Guarantees that the account value will be at least 100% of the eligible premiums paid by the contractowner after 10 years, net of any contract withdrawals (GMAB 10). In the past, the Company offered an alternative design that guaranteed the account value to be at least 200% of the eligible premiums paid by contractowners after 20 years (GMAB 20).

All living benefits are covered by the Company’s equity hedging program.

At December 31, 2007 and 2006, the guaranteed value of these living benefits in
excess of account values was $506.5 and $227.4, respectively. The increase was
primarily driven by the decrease in account values due to unfavorable equity market
performance in the second half of 2007. As of December 31, 2007 and 2006, the
Company recorded a liability of $149.3 and $76.1, respectively, representing the
estimated net present value of its future obligation for living benefits in excess of
account values. The liability increased mainly due to the accumulation of fees used
to fund the reserve during 2007, as well as higher future projected benefits in excess
of account values.

Equity Hedging Program: In order to hedge equity risk associated with GMDBs and
guaranteed living benefits, the Company enters into futures positions on various
public market equity indices chosen to closely replicate contractowner variable fund
returns. The Company uses market consistent valuation techniques to establish its
derivative position and to rebalance the derivative positions in response to market
fluctuations. One aspect of the hedging program is designed to offset changes related
to equity experience in the liability and to pay excess claims not covered by the
contractowner account value. The Company also administers a hedging program that
mitigates both equity risk and equity volatility risk associated with its Principal Guard
GMWB product issued in 2005 and beyond. This hedge strategy primarily involves
entering into put options.

Other risks posed by market conditions, such as interest rate risk and the majority of
the Company’s equity volatility risk, and risks posed by contractowner experience,
such as surrender and mortality experience deviations, are not explicitly mitigated by
this program. In addition, certain funds, where there is no replicating market index
and where hedging is not appropriate, are excluded from the program.

For those risks addressed by the equity hedging program, the Company is exposed to
the risk that the market indices will not adequately replicate actual contractowner
variable fund growth. Any differences between actual results and the market indices
result in income volatility.

56

Fixed Indexed Annuities

The crediting mechanism for FIAs exposes the Company to changes in the equity
market (“S&P 500”). Under these contracts, the Company credits interest to the
contractowner accounts at the greater of a fixed interest rate or a rate based upon
performance of a specified equity index. The Company bears the investment risk as
the Company credits contractowner accounts with a stated interest rate, but cannot be
certain that the investment income earned on the general account assets will exceed
that rate. For accounting purposes, the equity return component of the FIA is
considered an embedded derivative. See Critical Accounting Policies “Reserves” for
further discussion.

S&P 500 call options are purchased and written to hedge equity risk associated with
the FIA contracts. During the fourth quarter of 2007, the Company began using
futures contracts to hedge certain FIA contracts. The FIA hedging program is limited
to currently accruing liabilities resulting from participation rates, that have already
been set, and measured using capital market valuation techniques. Future equity
returns, which may be reflected in FIA credited rates beyond the current policy term,
are not hedged.

Derivatives

The Company’s use of derivatives is limited mainly to hedging purposes to reduce the
Company’s exposure to cash flow variability of assets and liabilities, interest rate risk,
credit risk, and market risk. Generally, derivatives are not accounted for using hedge
accounting treatment under FAS No. 133, as the Company has not historically sought
hedge accounting treatment.

The Company enters into interest rate, equity market, credit default, total return, and
currency contracts, including swaps, caps, floors, and options, to reduce and manage
risks associated with changes in value, yield, price, cash flow, or exchange rates of
assets or liabilities held or intended to be held, or to assume or reduce credit exposure
associated with a referenced asset, index, or pool. The Company also utilizes options
and futures on equity indices to reduce and manage risks associated with its annuity
products. Open derivative contracts are reported as either Other investments or Other
liabilities, as appropriate, on the Balance Sheets. Changes in the fair value of such
derivatives are recorded in Net realized capital gains (losses) in the Statements of
Operations.

The Company also has investments in certain fixed maturity instruments, and has
issued certain retail annuity products, that contain embedded derivatives whose
market value is at least partially determined by, among other things, levels of or
changes in domestic and/or foreign interest rates (short- or long-term), exchange
rates, prepayment rates, equity markets, or credit ratings/spreads.

Embedded derivatives within fixed maturity instruments are included in Fixed
maturities, available-for-sale, on the Balance Sheets, and changes in fair value are
recorded in Net realized capital gains (losses) in the Statements of Operations.

57

Embedded derivatives within retail annuity products are included in Future policy
benefits and claims reserves on the Balance Sheets, and changes in the fair value are
recorded in Interest credited and other benefits to contractowners in the Statements of
Operations.

Deposits and Reinsurance Recoverable

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

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Through the normal course of investment operations, the Company commits to either
purchase or sell securities, commercial mortgage loans, or money market instruments,
at a specified future date and at a specified price or yield. The inability of
counterparties to honor these commitments may result in either a higher or lower
replacement cost. Also, there is likely to be a change in the value of the securities
underlying the commitments.

At December 31, 2007, the Company had off-balance sheet commitments to purchase
investments equal to their fair value of $616.3, $156.5 of which was with related
parties. At December 31, 2006, the Company had off-balance sheet commitments to
purchase investments equal to their fair value of $537.9, $143.2 of which was with
related parties. During 2007 and 2006, $33.1 and $32.4, respectively, was funded to
related parties under these commitments.

The Company has entered into various credit default swaps to assume credit exposure
to certain assets that the Company does not own. Credit default swaps involve a
transfer of credit risk from one party to another in exchange for periodic payments.
In the event of a default on the underlying credit exposure, the Company will either
receive an additional payment (purchased credit protection) or will be required to
make an additional payment (sold credit protection) equal to the notional value of the
swap contract. At December 31, 2007, the fair value of credit default swaps of $8.5
and $30.6 was included in Other investments and Other liabilities, respectively, on
the Balance Sheets. At December 31, 2006, the fair value of credit default swaps of
$0.6 and $0.7 was included in Other investments and Other liabilities, respectively,
on the Balance Sheets. As of December 2007, the maximum potential future
exposure to the Company on the sale of credit protection under credit default swaps
was $235.4.

58

The Company owns a 3-year credit-linked note arrangement, whereby the Company
agrees to reimburse the guaranteed party upon payment default of the referenced
obligation. Upon such default, the Company will reimburse the guaranteed party for
the loss under the reference obligation, and the Company receives that reference
obligation in settlement. The Company can then seek recovery of any losses under
the agreement by sale or collection of the received reference obligation. As of
December 31, 2007, the maximum potential future exposure to the Company under
the guarantee was $32.5.

As of December 31, 2007, the Company had certain contractual obligations due over
a period of time as summarized in the following table.

		Payments Due by Period
		Less than			More than
Contractual Obligations	Total	1 Year	1-3 Years	3-5 Years	5 Years
Long-term debt(1)	$ 1,181.9	$ 28.2	$ 56.4	$ 56.4	$ 1,040.9
Operating lease obligations(2)	59.6	8.6	15.6	11.2	24.2
Purchase obligations(3)	616.3	616.3	-	-	-
Reserves for insurance obligations(4)	117,729.3	10,544.0	19,616.6	21,548.6	66,020.1
Pension obligations(5)	21.0	1.8	3.9	4.3	11.0
Total	$ 119,608.1	$ 11,198.9	$ 19,692.5	$ 21,620.5	$ 67,096.2

(1)	Long-term debt, including interest, consists of the following:
	§	A surplus note in the principal amount of $35.0, and the related interest payable with its affiliate, Security Life. As of December 31, 2007, the outstanding principal, interest rate, and maturity date, of the surplus note were $35.0, 7.98%, and December 7, 2029, respectively.
	§	Surplus notes in the aggregate principal amount of $400.0 and the related interest payable, with its affiliates, ING Life Insurance and Annuity Company, ReliaStar Life Insurance Company, and Security Life of Denver International, Limited. As of December 31, 2007, the aggregate amount of outstanding principal, interest rate, and maturity date, of these surplus notes were $435.0, 6.26%, and December 29, 2034, respectively.
(2)	Operating lease obligations relate to the rental of office space under various non-cancelable operating lease agreements, the longest term of which expires in 2017.
(3)	Purchase obligations consist primarily of outstanding commitments under limited partnerships that may occur any time within the term of the partnership.
	The exact timing of funding these commitments, however, cannot be estimated. Therefore, the total amount of the commitments is included in the category “Less than 1 Year.”
(4)	Reserves for insurance obligations consist of amounts required to meet the Company’s future obligations under its variable annuity, fixed annuity, GIC, and other insurance products.

59

(5)      Pension obligations consist of actuarially-determined pension obligations, contribution matching obligations, and other supplemental retirement and insurance obligations, under various benefit plans.

Repurchase Agreements

The Company engages in dollar repurchase agreements (“dollar rolls”) and
repurchase agreements to increase its return on investments and improve liquidity.
These transactions involve a sale of securities and an agreement to repurchase
substantially the same securities as those sold. Company policies require a minimum
of 95% of the fair value of securities pledged under dollar rolls and repurchase
agreement transactions to be maintained as collateral. Cash collateral received is
invested in fixed maturities, and the offsetting collateral liability is included in
Borrowed money on the Balance Sheets. At December 31, 2007 and 2006, the
carrying value of the securities pledged in dollar rolls and repurchase agreement
transactions was $745.5 and $765.7, respectively. The carrying value of the securities
pledged in dollar rolls and repurchase agreement transactions is included in Securities
pledged on the Balance Sheets. The repurchase obligation related to dollar rolls and
repurchase agreements totaled $711.9 and $769.6 at December 31, 2007 and 2006,
respectively. The repurchase obligation related to dollar rolls and repurchase
agreements is included in Borrowed money on the Balance Sheets.

The Company also enters into reverse repurchase agreements. These transactions
involve a purchase of securities and an agreement to sell substantially the same
securities as those purchased. Company policies require a minimum of 102% of the
fair value of securities pledged under reverse repurchase agreements to be pledged as
collateral. At December 31, 2007, the Company did not have any securities pledged
under reverse repurchase agreements. At December 31, 2006, the carrying value of
the securities in reverse repurchase agreements was $16.4. Reverse repurchase
agreements are included in Cash and cash equivalents on the Balance Sheets.

The primary risk associated with short-term collateralized borrowings is that the
counterparty will be unable to perform under the terms of the contract. The
Company’s exposure is limited to the excess of the net replacement cost of the
securities over the value of the short-term investments, an amount that was
immaterial at December 31, 2007. The Company believes the counterparties to the
dollar roll, repurchase, and reverse repurchase agreements are financially responsible
and that the counterparty risk is minimal.

Securities Lending

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

60

Risk-Based Capital

The National Association of Insurance Commissioners (“NAIC”) risk-based capital
requirements require insurance companies to calculate and report information under a
risk-based capital formula. These requirements are intended to allow insurance
regulators to monitor the capitalization of insurance companies based upon the type
and mixture of risks inherent in a company’s operations. The formula includes
components for asset risk, liability risk, interest rate exposure, and other factors. The
Company has complied with the NAIC’s risk-based capital reporting requirements.
Amounts reported indicate that, as of December 31, 2007, the Company has total
adjusted capital above all required capital levels.

Income Taxes

On September 25, 2007, the Internal Revenue Service (“IRS”) issued Revenue Ruling
2007-61, which announced its intention to issue regulations with respect to certain
computational aspects of the dividend received deduction (“DRD”) on separate
account assets held in connection with variable annuity and life insurance contracts.
Revenue Ruling 2007-61 suspended Revenue Ruling 2007-54 issued in August 2007
that purported to change accepted industry and IRS interpretations of the statutes
governing these computational questions. Any regulations that the IRS ultimately
proposes for issuance in this area will be subject to public notice and comment, at
which time insurance companies and other members of the public will have the
opportunity to raise legal and practical questions about the content, scope and
application of such regulations. As a result, the ultimate timing, substance, and
effective date of any such regulations are unknown, but they could result in the
elimination of some or all of the separate account DRD tax benefit that the Company
receives. Management believes that such regulations will apply prospectively.

Income tax obligations include the allowance on uncertain tax benefits related to IRS
tax audits and state tax exams that have not been completed. The current liability of
$2.6 may be paid in less than one year, upon completion of such audits and exams.
The timing of the payment of the remaining allowance of $66.8 cannot be reliably
estimated.

Recently Adopted Accounting Standards

(See the Organization and Significant Accounting Policies footnote to the financial
statements for further information.)

Accounting for Uncertainty in Income Taxes

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”),
which creates a single model to address the accounting for the uncertainty in income
tax positions recognized in a company’s financial statements. FIN 48 prescribes a
recognition threshold and measurement criteria that must be satisfied to recognize a
financial statement benefit of tax positions taken, or expected to be taken, on an
income tax return. Additionally, FIN 48 provides guidance on derecognition,

61

classification, interest and penalties, accounting in interim periods, disclosure, and
transition.

FIN 48 was adopted by the Company on January 1, 2007. As a result of
implementing FIN 48, the Company recognized a cumulative effect of change in
accounting principle of $1.7 as a reduction to January 1, 2007 Retained earnings
(deficit).

Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection
With Modifications or Exchanges of Insurance Contracts

In September 2005, the American Institute of Certified Public Accountants
(“AICPA”) issued SOP 05-1, “Accounting by Insurance Enterprises for Deferred
Acquisition Costs in Connection with Modifications or Exchanges of Insurance
Contracts” (“SOP 05-1”), which states that when an internal replacement transaction
results in a substantially changed contract, the unamortized deferred acquisition costs,
unearned revenue liabilities, and deferred sales inducement assets, related to the
replaced contract should not be deferred in connection with the new contract.
Contract modifications that meet various conditions defined by SOP 05-1 and result
in a new contract that is substantially unchanged from the replaced contract, however,
should be accounted for as a continuation of the replaced contract.

SOP 05-1 defines an internal replacement as a modification in product benefits,
features, rights, or coverage, that occurs by the exchange of a contract for a new
contract, by amendment, endorsement, or rider, to a contract, or by the election of a
feature or coverage within a contract. SOP 05-1 applies to internal replacements
made primarily to contracts defined by FAS No. 60, “Accounting and Reporting by
Insurance Enterprises” (“FAS No. 60”), as short-duration and long-duration insurance
contracts, and by FAS No. 97 as investment contracts.

SOP 05-1 was adopted by the Company on January 1, 2007, and is effective for
internal replacements occurring on or after that date. As a result of implementing
SOP 05-1, the Company recognized a cumulative effect of change in accounting
principle of $4.8, before tax, or $3.1, net of $1.7 of income taxes, as a reduction to
January 1, 2007 Retained earnings (deficit). In addition, the Company revised its
accounting policy on the amortization of DAC and VOBA to include internal
replacements.

Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans

In September 2006, the FASB issued Statement of Financial Accounting Standards
(“FAS”) No. 158, “Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans - An Amendment of FASB Statements No. 87, 88, 106, and
132R” (“FAS No. 158”). FAS No. 158 requires an employer to:

§	Recognize in the statement of financial position, an asset for a plan’s overfunded status or a liability for a plan’s underfunded status;
§	Measure a plan’s assets and obligations that determine its funded status as of the end of the fiscal year; and

62

§      Recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur, reporting such changes in comprehensive income.

On December 31, 2006, the Company adopted the recognition and disclosure
provisions of FAS No. 158. The effect of adopting FAS No. 158 on the Company’s
financial condition at December 31, 2006 is included in the accompanying financial
statements. FAS No. 158 did not have a significant effect on the Company’s financial
condition at December 31, 2006. The provisions regarding the change in the
measurement date of postretirement benefit plans were not applicable, as the
Company already used a measurement date of December 31 for its pension plans.

The incremental effects of adopting the provisions of FAS No. 158 on the Company’s
Balance Sheets at December 31, 2006 was $(1.6) .

New Accounting Pronouncements

Business Combinations

In December 2007, the FASB issued FAS No. 141 (revised 2007), “Business
Combinations” (“FAS No. 141R”), which replaces FAS No. 141, “Business
Combinations,” as issued in 2001. FAS No. 141R requires most identifiable assets,
liabilities, noncontrolling interest, and goodwill acquired in a business combination to
be recorded at full fair value as of the acquisition date, even for acquisitions achieved
in stages. In addition, the statement requires:

§	Acquisition-related costs to be recognized separately and generally expensed;
§	Non-obligatory restructuring costs to be recognized separately when the liability is incurred;
§	Contractual contingencies acquired to be recorded at acquisition-date fair values;
§	A bargain purchase, which occurs when the fair value of net assets acquired exceeds the consideration transferred plus any non-controlling interest in the acquiree, to be recognized as a gain; and
§	The nature and financial effects of the business combination to be disclosed.

FAS No. 141R also amends or eliminates various other authoritative literature.

The provisions of FAS No. 141R are effective for fiscal years beginning on or after
December 15, 2008 for all business combinations occurring on or after that date. As
such, this standard will impact any Company acquisitions that occur on or after
January 1, 2009.

The Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“FAS No. 159”), which allows a
company to make an irrevocable election, on specific election dates, to measure
eligible items at fair value with unrealized gains and losses recognized in earnings at
each subsequent reporting date. The election to measure an item at fair value may be

63

determined on an instrument by instrument basis, with certain exceptions. If the fair
value option is elected, any upfront costs and fees related to the item will be
recognized in earnings as incurred. Items eligible for the fair value option include:

§	Certain recognized financial assets and liabilities;
§	Rights and obligations under certain insurance contracts that are not financial instruments;
§	Host financial instruments resulting from the separation of an embedded nonfinancial derivative instrument from a nonfinancial hybrid instrument; and
§	Certain commitments.

FAS No. 159 is generally effective for fiscal years beginning after November 15,
2007. As of the effective date, the fair value option may be elected for certain
eligible items that exist on that date. The effect of the first remeasurement to fair
value shall be reported as a cumulative effect adjustment to the opening balance of
Retained earnings (deficit). The Company will not be electing the fair value option
for any eligible assets or liabilities in existence on January 1, 2008.

Fair Value Measurements

In September 2006, the FASB issued FAS No. 157, “Fair Value Measurements”
(“FAS No. 157”). FAS No. 157 provides guidance for using fair value to measure
assets and liabilities whenever other standards require (or permit) assets or liabilities
to be measured at fair value. FAS No. 157 does not expand the use of fair value to
any new circumstances.

Under FAS No. 157, the FASB clarifies the principle that fair value should be based
on the assumptions market participants would use when pricing the asset or liability.
In support of this principle, FAS No. 157 establishes a fair value hierarchy that
prioritizes the information used to develop such assumptions. The fair value hierarchy
gives the highest priority to quoted prices in active markets and the lowest priority to
unobservable data. FAS No. 157 also requires separate disclosure of fair value
measurements by level within the hierarchy and expanded disclosure of the effect on
earnings for items measured using unobservable data.

The provisions of FAS No. 157 are effective for financial statements issued for fiscal
years beginning after November 15, 2007. The Company is in the process of
determining the impact of adoption of FAS No. 157.

Legislative Initiatives

Legislative proposals, which have been or are being considered by Congress, include
repealing/modifying the estate tax, reducing the taxation on annuity benefits,
changing the tax treatment of insurance products relative to other financial products,
and changing life insurance company taxation. Some of these proposals, if enacted,
could have a material adverse effect on life insurance, annuity, and other retirement
savings product sales, while others could have a material beneficial effect. There
are no indications at the present time, however, that Congress will enact tax changes
that will adversely affect the Company’s products in 2008. The SEC has a regulatory
initiative underway to improve fee disclosure in financial products and legislative
proposals on financial product fee disclosure may also be considered by Congress as

64

it undertakes a review of fee disclosures in the defined contribution plan arena.
However, the timing and content of legislative or regulatory action to change fee
disclosure requirements are uncertain at this time. The IRS and the Treasury have
published final regulations, effective in 2009, that update and consolidate the rules
applicable to 403(b) tax deferred annuity arrangements. The final regulations impose
broad written plan document and operational compliance requirements on all 403(b)
plan sponsors and contain new restrictions on annuity exchanges, which have the
potential to adversely impact the Company’s 403(b) annuity business. For a
description of Revenue Ruling 2007-61 issued by the IRS in September of 2007, see
the “Liquidity and Capital Resources, Income Taxes” section of “Management’s
Narrative Analysis of the Results of Operations and Financial Condition” above.

Other Regulatory Matters

Regulatory Matters

As with many financial services companies, the Company and its affiliates have
received informal and formal requests for information from various state and federal
governmental agencies and self-regulatory organizations in connection with inquiries
and investigations of the products and practices of the financial services industry. In
each case, the Company and its affiliates have been and are providing full
cooperation.

Insurance and Retirement Plan Products and Other Regulatory Matters

Federal and state regulators, and self-regulatory agencies are conducting broad
inquiries and investigations involving the insurance and retirement industries. These
initiatives currently focus on, among other things, compensation, revenue sharing,
and other sales incentives; potential conflicts of interest; potential anti-competitive
activity; reinsurance; sales and marketing practices (including sales to seniors);
specific product types (including group annuities and indexed annuities); and
disclosure. It is likely that the scope of these industry investigations will further
broaden before they conclude. The Company and certain of its U.S. affiliates have
received formal and informal requests in connection with such investigations, and are
cooperating fully with each request for information. Some of these matters could
result in regulatory action involving the Company. These initiatives also may result
in new legislation and regulation that could significantly affect the financial services
industry, including businesses in which the Company is engaged. In light of these
and other developments, U.S. affiliates of ING, including the Company, periodically
review whether modifications to their business practices are appropriate.

Investment Product Regulatory Issues

Since 2002, there has been increased governmental and regulatory activity relating to
mutual funds and variable insurance products. This activity has primarily focused on
inappropriate trading of fund shares; directed brokerage; compensation; sales
practices, suitability, and supervision; arrangements with service providers; pricing;
compliance and controls; adequacy of disclosure; and document retention.

65

In addition to responding to governmental and regulatory requests on fund trading
issues, ING management, on its own initiative, conducted, through special counsel
and a national accounting firm, an extensive internal review of mutual fund trading in
ING insurance, retirement, and mutual fund products. The goal of this review was to
identify any instances of inappropriate trading in those products by third parties or by
ING investment professionals and other ING personnel.

The internal review identified several isolated arrangements allowing third parties to
engage in frequent trading of mutual funds within the variable insurance and mutual
fund products of ING, and identified other circumstances where frequent trading
occurred despite measures taken by ING intended to combat market timing. Each of
the arrangements has been terminated and disclosed to regulators, to the independent
trustees of ING Funds (U.S.), and in Company reports previously filed with the SEC
pursuant to the Securities Exchange Act of 1934, as amended.

Action may be taken by regulators with respect to the Company or certain affiliates
before investigations relating to fund trading are completed. The potential outcome
of such action is difficult to predict but could subject the Company or certain
affiliates to adverse consequences, including, but not limited to, settlement payments,
penalties, and other financial liability. It is not currently anticipated, however, that
the actual outcome of any such action will have a material adverse effect on ING or
ING’s U.S.-based operations, including the Company.

ING has agreed to indemnify and hold harmless the ING Funds from all damages
resulting from wrongful conduct by ING or its employees or from ING’s internal
investigation, any investigations conducted by any governmental or self-regulatory
agencies, litigation or other formal proceedings, including any proceedings by the
SEC. Management reported to the ING Funds Board that ING management believes
that the total amount of any indemnification obligations will not be material to ING or
ING’s U.S.-based operations, including the Company.

For further discussion of the risks to the Company as a result of recent regulatory
inquiries and possible changes in U.S. regulation, see Part I, Item 1A. Risk Factors.

66

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
(Dollar amounts in millions, unless otherwise stated)

Asset/liability management is integrated into many aspects of the Company’s

operations, including investment decisions, product development, and determination
of crediting rates. As part of the risk management process, different economic
scenarios are modeled, including cash flow testing required for insurance regulatory
purposes, to determine that existing assets are adequate to meet projected liability
cash flows. Key variables in the modeling process include interest rates, anticipated
contractowner behavior, and variable separate account performance. Contractowners
bear the investment risk related to variable annuity products, subject to the minimum
guaranteed death and living benefits included in these contracts.

The fixed account liabilities are supported by a general account portfolio principally
composed of fixed rate investments with matching duration characteristics that can
generate predictable, steady rates of return. The portfolio management strategy for the
fixed account considers the assets available-for-sale. This enables the Company to
respond to changes in market interest rates, prepayment risk, relative values of asset
sectors and individual securities and loans, credit quality outlook, and other relevant
factors. The objective of portfolio management is to maximize returns, taking into
account interest rate and credit risk, as well as other risks. The Company’s
asset/liability management discipline includes strategies to minimize exposure to loss
as interest rates and economic and market conditions change.

On the basis of these analyses, management believes there is currently no material
solvency risk to the Company.

Interest Rate Risk

The Company defines interest rate risk as the risk of an economic loss due to adverse
changes in interest rates. This risk arises from the Company’s primary activity of
investing fixed annuity premiums and guaranteed investment contract deposits
received in interest-sensitive assets and carrying these funds as interest-sensitive
liabilities. The Company manages the interest rate risk in its general account
investments relative to the interest rate risk in its liabilities. The current product
portfolio also includes products where interest rate risks are entirely or partially
passed on to the contractowner, thereby reducing the Company’s exposure to interest
rate movements. Changes in interest rates can impact present and future earnings, the
levels of new sales, surrenders, or withdrawals.

The following schedule demonstrates the potential changes in the 2007 earnings from
an instantaneous, parallel increase/decrease in interest rates of 1% on December 31,
2007. These changes to income could relate to future investment income, interest
paid to contractowners, market-value adjustments, amortization of DAC and VOBA,
sales levels, or any other net income item that would be affected by interest rate
changes. The effect of interest rate changes is different by product. In addition, the
Company has estimated the impact to December 31, 2007 Shareholder’s equity from
the same instantaneous change in interest rates. The effect on Shareholder’s equity
includes the impact of interest rate fluctuations on income, unrealized capital gains

67

(losses) on available-for-sale securities, and DAC and VOBA adjustments for
unrealized capital gains (losses) on available-for-sale securities.

Interest rate sensitivity and effect on Net income and Shareholder’s equity:

		Effect on
		Shareholder's
	Effect on Net	Equity as of
	Income for	December 31,
	2007	2007
Increase of 1%	$ (9.6)	$ (23.7)
Decrease of 1%	(14.3)	0.9

The above analysis includes the following changes in DAC and VOBA related to an
instantaneous, parallel increase/decrease in interest rates.

Interest rate sensitivity and effect on DAC and VOBA:

	Effect on	Effect on
	Amortization of	DAC and VOBA
	DAC and VOBA	Assets as of
	for	December 31,
	2007	2007
Increase of 1%	$ 94.1	$ 25.1
Decrease of 1%	(16.0)	(111.6)

Equity Market Risk

The Company’s operations are significantly influenced by changes in the equity
markets. The Company’s profitability depends largely on the amount of assets under
management (“AUM”), which is primarily driven by the level of sales, equity market
appreciation and depreciation, and the persistency of the in force block of business.

Prolonged and precipitous declines in the equity markets can have a significant
impact on the Company’s operations. As a result, sales of variable products may
decline and surrender activity may increase, as contractowner sentiment towards the
equity market turns negative. Lower AUM will have a negative impact on the
Company’s financial results, primarily due to lower fee income on variable annuities.
Furthermore, the Company may experience a reduction in profit margins if a
significant portion of the assets held in the variable annuity separate account move to
the general account and the Company is unable to earn an acceptable investment
margin, particularly in light of the low interest rate environment and the presence of
contractually guaranteed interest credited rates.

68

In addition, prolonged declines in the equity market may also decrease the
Company’s expectations of future gross profits, which are utilized to determine the
amount of DAC and VOBA to be amortized in a given financial statement period. A
significant decrease in the Company’s estimated gross profits would require the
Company to accelerate the amount of amortization of DAC and VOBA in a given
period, potentially causing a material adverse deviation in the period’s Net income.

The following schedule demonstrates the potential changes in the 2007 earnings
resulting from an instantaneous increase/decrease in equity markets of 10% on
December 31, 2007. These changes to income could relate to future fee income,
unrealized or realized capital gains (losses), amortization of DAC and VOBA, sales
levels, or any other net income item that would be affected by a substantial change to
equity markets. In addition, the Company has estimated the impact to Shareholder’s
equity as of December 31, 2007 from the same instantaneous change in equity
markets. The effect on Shareholder’s equity include the impact of equity market
fluctuations on income, unrealized gains or losses on available-for-sale securities, and
DAC and VOBA adjustments for unrealized capital gains (losses) on available-for-
sale securities.

Equity sensitivity and effect on Net income and Shareholder’s equity

		Effect on
		Shareholder's
	Effect on Net	Equity as of
	Income for	December 31,
	2007	2007
Increase of 10%	$ 56.5	$ 56.5
Decrease of 10%	(49.5)	(49.5)

The above analysis includes the following changes in DAC and VOBA related to an
instantaneous increase/decrease in equity markets.

Equity sensitivity and effect on DAC and VOBA:

	Effect on	Effect on
	Amortization of	DAC and VOBA
	DAC and VOBA	Assets as of
	for	December 31,
	2007	2007
Increase of 10%	$ (137.8)	$ 137.8
Decrease of 10%	116.6	(116.6)

69

Hedging of Minimum Guarantees

The Company sells variable annuities that offer various guaranteed death and living
benefits, including guaranteed minimum death benefits (“GMDBs”), guaranteed
minimum income benefits (“GMIBs”), guaranteed minimum withdrawals benefits
(“GMWBs”), and guaranteed minimum accumulation benefits (“GMABs”). See Part
II, Item 7., discussion of Minimum Guarantees under Liquidity and Capital
Resources.

The liabilities associated with GMDBs, GMIBs, and GMWBs with life contingent
payouts, are recorded in accordance with Statement of Position (“SOP”) 03-1,
“Accounting and Reporting by Insurance Enterprises for Certain Nontraditional
Long-Duration Contracts for Separate Accounts” (“SOP 03-1”). The liabilities
associated with GMABs and GMWBs without life contingent payouts represent
embedded derivative liabilities within variable annuities, which are required to be
reported separately from the host variable annuity contract. These guarantees are
carried at fair value in accordance with Statement of Financial Accounting Standards
(“FAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities”
(“FAS No. 133”), and are reported in Future policy benefits and claims reserves in the
Balance Sheets.

Both the liabilities recorded in accordance with SOP 03-1, and the liabilities carried at
fair value in accordance with FAS No. 133, are calculated based on actuarial
assumptions related to projected cash flows, including benefits and related contract
charges, over the lives of the contracts, incorporating expectations concerning
contractowner behavior. These liability assumptions, such as lapses, partial
withdrawals, and mortality, are based on Company experience and are, where
appropriate, consistent with those used for DAC and VOBA.

Declines in the equity market may increase the Company’s net exposure to the death
and living benefit guarantees offered under these contracts. Such declines would
cause a decrease in account values, and increase the possibility that the Company may
be required to pay amounts related to these guarantees. The following schedule
demonstrates the potential change in the 2007 reserve liabilities for minimum
guarantees resulting from an instantaneous increase/decrease in equity markets of
10% on December 31, 2007.

		Effect on Reserves
	GMDBs	GMIBs	GMABs	GMWBs
		$ $		$
Increase of 10%	$ (36.7)	(33.0)	(4.4)	(7.2)
	56.6	45.7	4.4	7.2
Decrease of 10%

In order to hedge equity risk associated with guaranteed death and living benefits, the
Company enters into futures positions on various public market indices chosen to
closely replicate contractowner variable fund returns. The Company uses market
consistent valuation techniques to establish its derivative positions and to rebalance
the derivative positions in response to market fluctuation. One aspect of the hedging

70

program is designed to offset changes related to equity experience in the liability and
to pay excess claims not covered by the contractowner account value. The Company
also administers a hedging program that mitigates both equity risk and equity
volatility risk associated with its Principal Guard GMWB product issued in 2005 and
beyond. This hedge strategy primarily involves entering into put options.

Other risks posed by market conditions, such as interest rate risk and the majority of
the Company’s equity volatility risk, and risks posed by contractowner experience,
such as surrender and mortality experience deviations, are not explicitly mitigated by
this program. In addition, certain funds where there is no replicating market index
and where hedging is not appropriate are excluded from the program.

For those risks addressed by the equity hedging program, the Company is exposed to
the risk that the market indices will not adequately replicate actual contractowner
variable fund growth. Any differences between actual results and the market indices
result in income volatility.

Hedging of Indexed Annuity Guarantees

The crediting mechanism for fixed indexed annuities (“FIA”) exposes the Company
to changes in the equity market (“S&P 500”). The Company mitigates this exposure
by purchasing over-the-counter S&P 500 call options from broker-dealer derivative
counterparties who generally have a minimum credit rating of Aa3 from Moody’s
Investor’s Service, Inc., and AA- from Standard & Poor’s. For each broker-dealer
counterparty, the Company’s derivative exposure to that counterparty is aggregated
with any fixed income exposure to the same counterparty, and is maintained within
applicable state requirements and National Association of Insurance Commissioners
insurance regulatory guidelines. The FIA hedging program is limited to currently
accruing liabilities resulting from participation rates that have been determined using
capital market valuation techniques. Future equity returns, which may be reflected in
FIA credited rates beyond the current policy term, are not hedged.

The following schedule demonstrates the potential change in the 2007 FIA reserve
liabilities resulting from instantaneous increase/decrease in equity markets of 10% on
December 31, 2007.

	Effect on
	Reserves
Increase of 10%	$ 166.2
Decrease of 10%	(113.8)

71

Item 8.	Financial Statements and Supplementary Data
	Index to Financial Statements
		Page
	Report of Independent Registered Public Accounting Firm	73
	Financial Statements:
	Statements of Operations for the years ended
	December 31, 2007, 2006, and 2005	74
	Balance Sheets as of December 31, 2007 and 2006	75
	Statements of Changes in Shareholder's Equity for the years ended
	December 31, 2007, 2006, and 2005	77
	Statements of Cash Flows for the years ended
	December 31, 2007, 2006, and 2005	78
	Notes to Financial Statements	80

Report of Independent Registered Public Accounting Firm

The Board of Directors
ING USA Annuity and Life Insurance Company

We have audited the accompanying balance sheets of ING USA Annuity and Life Insurance
Company as of December 31, 2007 and 2006, and the related statements of operations, changes
in shareholder’s equity, and cash flows for each of the three years in the period ended
December 31, 2007. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Company’s internal control over
financial reporting. Our audits include consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of ING USA Annuity and Life Insurance Company as of December 31,
2007 and 2006, and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2007, in conformity with U.S. generally accepted accounting
principles.

/s/ Ernst & Young LLP

Atlanta, Georgia
March 25, 2008

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
	Statements of Operations
	(In millions)
		Year Ended December 31,
		2007	2006		2005
Revenue:
Net investment income	$ 1,346.4		$ 1,156.4	$ 1,102.2
Fee income		1,198.9	939.2		745.6
Premiums		19.6	20.5		21.8
Net realized capital losses		(391.2)	(90.4)		(2.9)
Other income		0.1	-		0.7
Total revenue		2,173.8	2,025.7		1,867.4
Benefits and expenses:
Interest credited and other benefits to contractowners		1,312.0	1,169.7		1,085.8
Operating expenses		269.6	228.0		192.5
Amortization of deferred policy acquisition
costs and value of business acquired		408.1	293.0		318.9
Interest expense		32.5	30.3		29.6
Other expense		24.2	28.1		16.5
Total benefits and expenses		2,046.4	1,749.1		1,643.3
Income before income taxes		127.4	276.6		224.1
Income tax (benefit) expense		(1.6)	64.4		34.2
Net income	$ 129.0		$ 212.2	$ 189.9

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

74

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Balance Sheets
(In millions, except share data)
	As of December 31,
	2007		2006
Assets
Investments:
Fixed maturities, available-for-sale, at fair value
(amortized cost of $21,945.0 at 2007 and $17,071.8 at 2006)	$ 21,833.4	$ 17,054.4
Equity securities, available-for-sale, at fair value
(cost of $216.6 at 2007 and $39.1 at 2006)	211.1		40.6
Short-term investments	188.0		134.3
Mortgage loans on real estate	3,701.7		3,687.6
Policy loans	155.8		162.5
Limited partnerships/corporations	454.5		149.4
Other investments	394.1		493.5
Securities pledged
(amortized cost of $953.3 at 2007 and $875.5 at 2006)	942.6		864.0
Total investments	27,881.2		22,586.3
Cash and cash equivalents	204.4		608.6
Short-term investments under securities loan agreement	128.5		102.6
Accrued investment income	216.9		183.7
Receivable for securities sold	4.6		20.3
Deposits and reinsurance recoverable from affiliate	4,616.1		4,759.0
Deferred policy acquisition costs	2,908.4		2,669.9
Value of business acquired	128.7		110.1
Sales inducements to contractowners	645.4		630.7
Due from affiliates	22.9		29.7
Current income taxes	-		4.6
Other assets	41.3		43.8
Assets held in separate accounts	44,477.8		37,928.3
Total assets	$ 81,276.2	$ 69,677.6

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

75

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Balance Sheets
(In millions, except share data)
	As of December 31,
	2007		2006
Liabilities and Shareholder's Equity
Future policy benefits and claims reserves	$ 31,461.6	$ 26,696.4
Payables for securities purchased	-		48.3
Collateral held, including payables under securities loan agreement	140.0		102.6
Borrowed money	715.5		769.6
Notes to affiliates	435.0		435.0
Due to affiliates	95.6		46.4
Current income taxes	40.7		-
Deferred income taxes	184.5		262.5
Other liabilities	606.5		399.4
Liabilities related to separate accounts	44,477.8		37,928.3
Total liabilities	78,157.2		66,688.5
Shareholder's equity
Common stock (250,000 shares authorized, issued
and outstanding; $10 per share value)	2.5		2.5
Additional paid-in capital	4,132.7		3,978.4
Accumulated other comprehensive loss	(160.7)		(12.1)
Retained earnings (deficit)	(855.5)		(979.7)
Total shareholder's equity	3,119.0		2,989.1
Total liabilities and shareholder's equity	$ 81,276.2	$ 69,677.6

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

76

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

Statements of Changes in Shareholder’s Equity
(In millions)

		Accumulated
	Additional	Other	Retained	Total
Common	Paid-In	Comprehensive	Earnings	Shareholder's

	Stock	Capital	Income (Loss)	(Deficit)	Equity
Balance at December 31, 2004	$ 2.5	$ 4,041.1	$ 112.7	$ (1,381.8)	$ 2,774.5
Comprehensive income:
Net income	-	-	-	189.9	189.9
Other comprehensive loss, net of tax:
Change in net unrealized capital gains (losses)
on securities ($(185.2) pretax)	-	-	(118.4)	-	(118.4)
Minimum pension liability ($(1.1) pretax)	-	-	1.0	-	1.0
Total comprehensive income					72.5
Contribution of capital	-	100.0	-	-	100.0
Employee share-based payments	-	2.0	-	-	2.0
Balance at December 31, 2005	2.5	4,143.1	(4.7)	(1,191.9)	2,949.0
Comprehensive income:
Net income	-	-	-	212.2	212.2
Other comprehensive loss, net of tax:
Change in net unrealized capital gains (losses)
on securities ($(10.7) pretax)	-	-	(7.3)	-	(7.3)
Pension liability ($0.6 pretax)	-	-	0.4	-	0.4
Other	-	-	1.1	-	1.1
Total comprehensive income					206.4
Cumulative effect of change of accounting
principle ($(2.4) pretax)	-	-	(1.6)	-	(1.6)
Capital distribution paid	-	(170.0)	-	-	(170.0)
Employee share-based payments	-	4.1	-	-	4.1
Other	-	1.2	-	-	1.2
Balance at December 31, 2006	2.5	3,978.4	(12.1)	(979.7)	2,989.1
Cumulative effect of change of accounting principles	-	-	-	(4.8)	(4.8)
Balance at January 1, 2007	2.5	3,978.4	(12.1)	(984.5)	2,984.3
Comprehensive loss:
Net income	-	-	-	129.0	129.0
Other comprehensive loss, net of tax:
Change in net unrealized capital gains (losses)
on securities ($(158.7) pretax), including
valuation allowance of $(46.9)	-	-	(149.7)	-	(149.7)
Pension liability ($3.4 pretax)	-	-	2.2	-	2.2
Other	-	-	(1.1)	-	(1.1)
Total comprehensive loss					(19.6)
Capital contribution	-	150.0	-	-	150.0
Employee share-based payments	-	4.3	-	-	4.3
Balance at December 31, 2007	$ 2.5	$ 4,132.7	$ (160.7)	$ (855.5)	$ 3,119.0

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

77

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Statements of Cash Flows
(In millions)
		Year Ended December 31,
		2007	2006	2005
Cash Flows from Operating Activities:
Net income	$ 129.0 $		212.2 $	189.9
Adjustments to reconcile net income to
net cash provided by operating activities:
Capitalization of deferred policy acquisition costs
and sales inducements		(864.5)	(831.9)	(715.3)
Amortization of deferred policy acquisition costs,
value of business acquired, and sales inducements		528.3	367.1	387.7
Net accretion/decretion of discount/premium		52.2	57.7	93.1
Future policy benefits, claims reserves, and
interest credited		1,368.5	1,179.9	1,078.4
Provision for deferred income taxes		(69.0)	131.4	192.0
Net realized capital losses		391.2	90.4	2.9
Change in:
Accrued investment income		(33.2)	(8.7)	26.7
Reinsurance recoverable (excluding GICs)		117.6	(52.1)	(31.1)
Other receivables and asset accruals		2.5	(13.9)	(1.6)
Due to/from affiliates		56.0	(8.0)	(18.9)
Other payables and accruals		42.9	(3.1)	39.3
Employee share-based payments		4.3	4.1	2.0
Other, net		2.2	1.1	-
Net cash provided by operating activities		1,728.0	1,126.2	1,245.1
Cash Flows from Investing Activities:
Proceeds from the sale, maturity, or redemption of:
Fixed maturities, available-for-sale		10,631.8	10,496.1	16,027.0
Equity securities, available-for-sale		16.5	15.8	20.7
Mortgage loans on real estate		776.1	523.7	739.7
Acquisition of:
Fixed maturities, available-for-sale		(15,767.5)	(11,446.3)	(17,518.1)
Equity securities, available-for-sale		(193.5)	(25.4)	(14.1)
Mortgage loans on real estate		(790.6)	(444.4)	(658.0)
Derivatives, net		22.9	(198.1)	(139.9)
Limited partnerships, net		(305.4)	(69.9)	(23.4)
Short-term investments, net		(53.8)	(79.7)	(49.1)
Other, net		13.4	4.7	(21.2)
Net cash used in investing activities		(5,650.1)	(1,223.5)	(1,636.4)

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

78

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Statements of Cash Flows
	(In millions)
		Year Ended December 31,
		2007	2006		2005
Cash Flows from Financing Activities:
Deposits received for investment contracts	$ 10,458.9		$ 5,788.4	$ 5,225.6
Maturities and withdrawals from investment contracts		(7,062.2)	(4,497.2)		(5,039.7)
Reinsurance recoverable on investment contracts		25.3	(638.8)		(120.5)
Notes to affiliates		-	45.0		-
Short-term loan to affiliate		-	-		139.2
Short-term borrowings		(54.1)	(36.7)		92.9
Capital distribution to Parent		-	(170.0)		-
Capital contribution from Parent		150.0	-		100.0
Net cash provided by financing activities		3,517.9	490.7		397.5
Net (decrease) increase in cash and cash equivalents		(404.2)	393.4		6.2
Cash and cash equivalents, beginning of year		608.6	215.2		209.0
Cash and cash equivalents, end of year	$ 204.4		$ 608.6	$ 215.2
Supplemental cash flow information:
Income taxes paid (received), net	$ 21.3		$ (30.2)	$ (174.7)
Interest paid	$ 67.1		$ 66.2	$ 52.1

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

79

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

1. Organization and Significant Accounting Policies

Basis of Presentation

ING USA Annuity and Life Insurance Company (“ING USA” or the “Company,” as
appropriate) is a stock life insurance company domiciled in the State of Iowa and
provides financial products and services in the United States. ING USA is authorized to
conduct its insurance business in all states, except New York, and in the District of
Columbia.

ING USA is a direct, wholly-owned subsidiary of Lion Connecticut Holdings Inc.
(“Lion” or “Parent”), which is an indirect, wholly-owned subsidiary of ING Groep N.V.
(“ING”). ING is a global financial services holding company based in The Netherlands,
with American Depository Shares listed on the New York Stock Exchange under the
symbol “ING”.

Description of Business

The Company offers various insurance products, including immediate and deferred
variable and fixed annuities. The Company’s annuity products are distributed by national
wirehouses, regional securities firms, independent broker-dealers, banks, life insurance
companies with captive agency sales forces, independent insurance agents, independent
marketing organizations, and affiliated broker-dealers. The Company’s primary annuity
customers are individual consumers.

The Company also offers guaranteed investment contracts and funding agreements
(collectively referred to as “GICs”), sold primarily to institutional investors and corporate
benefit plans. These products are marketed by home office personnel or through
specialty insurance brokers.

The Company previously provided interest-sensitive, traditional life insurance, and health
insurance. The Company no longer issues these products. The life insurance business is
in run-off, and the Company has ceded to other insurers all health insurance.

The Company has one operating segment.

80

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Recently Adopted Accounting Standards

Accounting for Uncertainty in Income Taxes

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which
creates a single model to address the accounting for the uncertainty in income tax
positions recognized in a company’s financial statements. FIN 48 prescribes a
recognition threshold and measurement criteria that must be satisfied to recognize a
financial statement benefit of tax positions taken, or expected to be taken, on an income
tax return. Additionally, FIN 48 provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure, and transition.

FIN 48 was adopted by the Company on January 1, 2007. As a result of implementing
FIN 48, the Company recognized a cumulative effect of change in accounting principle of
$1.7 as a reduction to January 1, 2007 Retained earnings (deficit).

Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection With
Modifications or Exchanges of Insurance Contracts

In September 2005, the American Institute of Certified Public Accountants (“AICPA”)
issued Statement of Position (“SOP”) 05-1, “Accounting by Insurance Enterprises for
Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance
Contracts” (“SOP 05-1”), which states that when an internal replacement transaction
results in a substantially changed contract, the unamortized deferred acquisition costs,
unearned revenue liabilities, and deferred sales inducement assets, related to the replaced
contract should not be deferred in connection with the new contract. Contract
modifications that meet various conditions defined by SOP 05-1 and result in a new
contract that is substantially unchanged from the replaced contract, however, should be
accounted for as a continuation of the replaced contract.

SOP 05-1 defines an internal replacement as a modification in product benefits, features,
rights, or coverage, that occurs by the exchange of a contract for a new contract, by
amendment, endorsement, or rider, to a contract, or by the election of a feature or
coverage within a contract. SOP 05-1 applies to internal replacements made primarily to
contracts defined by Statement of Financial Accounting Standards (“FAS”) No. 60,
“Accounting and Reporting by Insurance Enterprises” (“FAS No. 60”), as short-duration
and long-duration insurance contracts, and by FAS No. 97, “Accounting and Reporting
by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and
Losses from the Sale of Investments” (“FAS No. 97”), as investment contracts.

81

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

SOP 05-1 was adopted by the Company on January 1, 2007, and is effective for internal
replacements occurring on or after that date. As a result of implementing SOP 05-1, the
Company recognized a cumulative effect of change in accounting principle of $4.8,
before tax, or $3.1, net of $1.7 of income taxes, as a reduction to January 1, 2007
Retained earnings (deficit). In addition, the Company revised its accounting policy on
the amortization of deferred policy acquisition costs (“DAC”) and value of business
acquired (“VOBA”) to include internal replacements.

Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans

In September 2006, FASB issued No. 158, “Employers' Accounting for Defined Benefit
Pension and Other Postretirement Plans - An Amendment of FASB Statements No. 87,
88, 106, and 132R” (“FAS No. 158”). FAS No. 158 requires an employer to:

§	Recognize in the statement of financial position, an asset for a plan’s overfunded status or a liability for a plan’s underfunded status;
§	Measure a plan’s assets and obligations that determine its funded status as of the end of the fiscal year; and
§	Recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur, reporting such changes in comprehensive income.

On December 31, 2006, the Company adopted the recognition and disclosure provisions
of FAS No. 158. The effect of adopting FAS No. 158 on the Company’s financial
condition at December 31, 2006 is included in the accompanying financial statements.
FAS No. 158 did not have a significant effect on the Company’s financial condition at
December 31, 2006. The provisions regarding the change in the measurement date of
postretirement benefit plans are not applicable, as the Company already uses a
measurement date of December 31 for its pension plans.

The incremental effects of adopting the provisions of FAS No. 158 on the Company’s
Balance Sheets at December 31, 2006 was $(1.6) .

Accounting for Certain Hybrid Financial Instruments

In February 2006, the FASB issued FAS No. 155, “Accounting for Certain Hybrid
Financial Instruments - an amendment of FASB Statements No. 133 and 140” (“FAS No.
155”), which permits the application of fair value accounting to certain hybrid financial
instruments in their entirety if they contain embedded derivatives that would otherwise
require bifurcation under FAS No. 133, “Accounting for Derivative Instruments and
Hedging Activities” (“FAS No. 133”). Under this approach, changes in fair value would
be recognized currently in earnings. In addition, FAS No. 155 does the following:

82

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

§	Clarifies which interest-only strips and principal-only strips are not subject to derivative accounting under FAS No. 133;
§	Requires that interests in securitized financial assets be analyzed to identify interests that are freestanding derivatives or that are hybrid instruments that contain embedded derivatives requiring bifurcation;
§	Clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and
§	Allows a qualifying special-purpose entity to hold derivative financial instruments that pertain to beneficial interests, other than another derivative financial instrument.

FAS No. 155 was adopted by the Company on January 1, 2007, and is effective for all
instruments acquired, issued, or subject to a remeasurement event, occurring on or after
that date. The adoption of FAS No. 155 did not have a material effect on the Company’s
financial position, results of operations, or cash flows.

New Accounting Pronouncements

Business Combinations

In December 2007, the FASB issued FAS No. 141 (revised 2007), “Business
Combinations” (“FAS No. 141R”), which replaces FAS No. 141, “Business
Combinations,” as issued in 2001. FAS No. 141R requires most identifiable assets,
liabilities, noncontrolling interest, and goodwill, acquired in a business combination to be
recorded at full fair value as of the acquisition date, even for acquisitions achieved in
stages. In addition, the statement requires:

§	Acquisition-related costs to be recognized separately and generally expensed;
§	Non-obligatory restructuring costs to be recognized separately when the liability is incurred;
§	Contractual contingencies acquired to be recorded at acquisition-date fair values;
§	A bargain purchase, which occurs when the fair value of net assets acquired exceeds the consideration transferred plus any non-controlling interest in the acquiree, to be recognized as a gain; and
§	The nature and financial effects of the business combination to be disclosed.

FAS No. 141R also amends or eliminates various other authoritative literature.

The provisions of FAS No. 141R are effective for fiscal years beginning on or after
December 15, 2008 for all business combinations occurring on or after that date. As
such, this standard will impact any Company acquisitions that occur on or after
January 1, 2009.

83

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

The Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities” (“FAS No. 159”), which allows a company to make an
irrevocable election, on specific election dates, to measure eligible items at fair value.
The election to measure an item at fair value may be determined on an instrument by
instrument basis, with certain exceptions. If the fair value option is elected, unrealized
gains and losses will be recognized in earnings at each subsequent reporting date, and any
upfront costs and fees related to the item will be recognized in earnings as incurred.
Items eligible for the fair value option include:

§	Certain recognized financial assets and liabilities;
§	Rights and obligations under certain insurance contracts that are not financial instruments;
§	Host financial instruments resulting from the separation of an embedded nonfinancial derivative instrument from a nonfinancial hybrid instrument; and
§	Certain commitments.

FAS No. 159 is effective for fiscal years beginning after November 15, 2007. As of the
effective date, the fair value option may be elected for eligible items that exist on that
date. The effect of the first remeasurement to fair value shall be reported as a cumulative
effect adjustment to the opening balance of Retained earnings (deficit). The Company
will not be electing the fair value option for any eligible assets or liabilities in existence
on January 1, 2008.

Fair Value Measurements

In September 2006, the FASB issued FAS No. 157, “Fair Value Measurements” (“FAS
No. 157”). FAS No. 157 provides guidance for using fair value to measure assets and
liabilities whenever other standards require (or permit) assets or liabilities to be measured
at fair value. FAS No. 157 does not expand the use of fair value in any new
circumstances.

Under FAS No. 157, the FASB clarifies the principle that fair value should be based on
the assumptions market participants would use when pricing the asset or liability. In
support of this principle, FAS No. 157 establishes a fair value hierarchy that prioritizes
the information used to develop such assumptions. The fair value hierarchy gives the
highest priority to quoted prices in active markets and the lowest priority to unobservable
data. FAS No. 157 also requires separate disclosure of fair value measurements by level
within the hierarchy and expanded disclosure of the effect on earnings for items
measured using unobservable data.

84

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

The provisions of FAS No. 157 are effective for financial statements issued for fiscal
years beginning after November 15, 2007. The Company is in the process of determining
the impact of adoption of FAS No. 157.

Use of Estimates

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

Reclassifications

Certain reclassifications have been made to prior year financial information to conform to
the current year classifications.

Cash and Cash Equivalents

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

Investments

All of the Company’s fixed maturities and equity securities are currently designated as
available-for-sale. Available-for-sale securities are reported at fair value and unrealized
capital gains (losses) on these securities are recorded directly in Shareholder’s equity,
after adjustment for related changes in DAC, VOBA, and deferred income taxes.

Other-Than-Temporary-Impairments

The Company analyzes the general account investments to determine whether there has
been an other-than-temporary decline in fair value below the amortized cost basis.
Management considers the length of the time and the extent to which the fair value has
been less than amortized cost, the issuer’s financial condition and near-term prospects,
future economic conditions and market forecasts, and the Company’s intent and ability to
retain the investment for a period of time sufficient to allow for recovery in fair value. If
it is probable that all amounts due according to the contractual terms of a debt security
will not be collected, an other-than-temporary impairment is considered to have occurred.

85

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

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

When a decline in fair value is determined to be other-than-temporary, the individual
security is written down to fair value, and the loss is recorded in Net realized capital
gains (losses).

Purchases and Sales

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

Valuation

The fair values for fixed maturities are largely determined by one of two pricing methods:
published price quotations or valuation techniques with market inputs. Security pricing is
applied using a hierarchy or “waterfall” approach, whereby prices are first sought from
published price quotations, including pricing services or broker-dealer quotations.
Published price quotations may be unavailable or deemed unreliable due to a limited
market for securities that are rarely traded or are traded only in privately negotiated
transactions. As such, fair values for the remaining securities, consisting primarily of
privately placed bonds, are then determined using risk-free interest rates, current
corporate spreads, the credit quality of the issuer and cash flow characteristics of the
security. The fair values for actively traded equity securities are based on quoted market
prices. For equity securities not actively traded, estimated fair values are based upon
values of issues of comparable yield and quality or conversion value, where applicable.

Mortgage loans on real estate are reported at amortized cost, less impairment write-
downs. If the value of any mortgage loan is determined to be impaired (i.e., when it is
probable that the Company will be unable to collect all amounts due according to the
contractual terms of the loan agreement), the carrying value of the mortgage loan is
reduced to either the present value of expected cash flows from the loan, discounted at
the loan’s effective interest rate, or fair value of the collateral. If the loan is in
foreclosure, the carrying value is reduced to the fair value of the underlying collateral, net
of estimated costs to obtain and sell. The carrying value of the impaired loans is reduced
by establishing a permanent write-down recorded in Net realized capital gains (losses).
At December 31, 2007 and 2006, the Company had no allowance for mortgage loan

86

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

credit losses. The properties collateralizing mortgage loans are geographically dispersed
throughout the United States, with the largest concentration of 24.5% and 19.9% of
properties in California at December 31, 2007 and 2006, respectively.

Policy loans are carried at unpaid principal balances.

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

Derivative instruments are reported at fair value primarily using the Company’s
derivative accounting system. The system uses key financial data, such as yield curves,
exchange rates, Standard & Poor’s (“S&P”) 500 Index prices, and London Inter Bank
Offered Rates (“LIBOR”), which are obtained from third party sources and uploaded into
the system. For those derivatives that are unable to be valued by the accounting system,
the Company utilizes values established by third party brokers.

Embedded derivative instruments within investments are reported at fair value based
upon internally established valuations that are consistent with external valuation models
or market quotations. Guaranteed minimum withdrawals benefits (“GMWBs”) without
life contingent payouts and guaranteed minimum accumulation benefits (“GMABs”)
represent an embedded derivative liability in the variable annuity contract that is required
to be reported separately from the host variable annuity contract. The option component
of a fixed indexed annuity (“FIA”) also represents an embedded derivative. These
embedded derivatives are carried at fair value based on actuarial assumptions related to
projected cash flows, including benefits and related contract charges, over the lives of the
contracts, incorporating expectations concerning contractowner behavior.

Repurchase Agreements

The Company engages in dollar repurchase agreements (“dollar rolls”) and repurchase
agreements to increase the return on investments and improve liquidity. These
transactions involve a sale of securities and an agreement to repurchase substantially the
same securities as those sold. Company policies require a minimum of 95% of the fair
value of securities pledged under dollar rolls and repurchase agreement transactions to be
maintained as collateral. Cash collateral received is invested in fixed maturities, and the
carrying value of the securities pledged in dollar rolls and repurchase agreement
transactions is included in Securities pledged on the Balance Sheets. The repurchase
obligation related to dollar rolls and repurchase agreements is included in Borrowed
money on the Balance Sheets.

87

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

The Company also enters into reverse repurchase agreements. These transactions involve
a purchase of securities and an agreement to sell substantially the same securities as those
purchased. Company policies require a minimum of 102% of the fair value of securities
pledged under reverse repurchase agreements to be pledged as collateral. Reverse
repurchase agreements are included in Cash and cash equivalents on the Balance Sheets.

Securities Lending

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

Derivatives

The Company’s use of derivatives is limited mainly to hedging purposes to reduce the
Company’s exposure to cash flow variability of assets and liabilities, interest rate risk,
credit risk, and market risk. Generally, derivatives are not accounted for using hedge
accounting treatment under FAS No. 133, as the Company has not historically sought
hedge accounting treatment.

The Company enters into interest rate, equity market, credit default, total return, and
currency contracts, including swaps, caps, floors, and options, to reduce and manage risks
associated with changes in value, yield, price, cash flow, or exchange rates of assets or
liabilities held or intended to be held, or to assume or reduce credit exposure associated
with a referenced asset, index, or pool. The Company also utilizes options and futures on
equity indices to reduce and manage risks associated with its annuity products. Open
derivative contracts are reported as either Other investments or Other liabilities, as
appropriate, on the Balance Sheets. Changes in the fair value of such derivatives are
recorded in Net realized capital gains (losses) in the Statements of Operations.

The Company also has investments in certain fixed maturity instruments, and has issued
certain retail annuity products, that contain embedded derivatives whose market value is
at least partially determined by, among other things, levels of or changes in domestic
and/or foreign interest rates (short-term or long-term), exchange rates, prepayment rates,
equity markets, or credit ratings/spreads.

Embedded derivatives within fixed maturity instruments are included in Fixed maturities,
available-for-sale, on the Balance Sheets, and changes in fair value are recorded in Net
realized capital gains (losses) in the Statements of Operations.

88

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Embedded derivatives within retail annuity products are included in Future policy
benefits and claims reserves on the Balance Sheets, and changes in the fair value are
recorded in Interest credited and other benefits to contractowners in the Statements of
Operations.

Deferred Policy Acquisition Costs and Value of Business Acquired

General

DAC represents policy acquisition costs that have been capitalized and are subject to
amortization. Such costs consist principally of certain commissions, underwriting,
contract issuance, and agency expenses, related to the production of new and renewal
business.

VOBA represents the outstanding value of in force business capitalized in purchase
accounting when the Company was acquired and is subject to amortization. The value is
based on the present value of estimated profits embedded in the Company’s contracts.

FAS No. 97 applies to universal life and investment-type products, such as fixed and
variable deferred annuities. Under FAS No. 97, DAC and VOBA are amortized, with
interest, over the life of the related contracts in relation to the present value of estimated
future gross profits from investment, mortality, and expense margins, plus surrender
charges. DAC related to GICs, however, is amortized on a straight-line basis over the life
of the contract.

Internal Replacements

Contractowners may periodically exchange one contract for another, or make
modifications to an existing contract. Beginning January 1, 2007, these transactions are
identified as internal replacements and are accounted for in accordance with SOP 05-1.

Internal replacements that are determined to result in substantially unchanged contracts
are accounted for as continuations of the replaced contracts. Any costs associated with
the issuance of the new contracts are considered maintenance costs and expensed as
incurred. Unamortized DAC and VOBA related to the replaced contracts continue to be
deferred and amortized in connection with the new contracts. For deferred annuities, the
estimated future gross profits of the new contracts are treated as revisions to the estimated
future gross profits of the replaced contracts in the determination of amortization.

Internal replacements that are determined to result in contracts that are substantially
changed are accounted for as extinguishments of the replaced contracts, and any
unamortized DAC and VOBA related to the replaced contracts are written off to Net
amortization of deferred policy acquisition costs and value of business acquired in the
Statements of Operations.

89

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

As a result of implementing SOP 05-1, the Company recognized a cumulative effect of
change in accounting principle of $4.8, before tax, or $3.1, net of $1.7 of income taxes, as
a reduction to January 1, 2007 Retained earnings (deficit).

Unlocking

Changes in assumptions can have a significant impact on DAC and VOBA balances and
amortization rates. Several assumptions are considered significant in the estimation of
future gross profits associated with variable universal life and variable deferred annuity
products. One of the most significant assumptions involved in the estimation of future
gross profits is the assumed return associated with the variable account performance. To
reflect the volatility in the equity markets, this assumption involves a combination of
near-term expectations and long-term assumptions regarding market performance. The
overall return on the variable account is dependent on multiple factors, including the
relative mix of the underlying sub-accounts among bond funds and equity funds, as well
as equity sector weightings. Other significant assumptions include surrender and lapse
rates, estimated interest spread, and estimated mortality.

Due to the relative size and sensitivity to minor changes in underlying assumptions of
DAC and VOBA balances, the Company performs quarterly and annual analyses of DAC
and VOBA for the annuity and life businesses, respectively. The DAC and VOBA
balances are evaluated for recoverability.

At each evaluation date, actual historical gross profits are reflected, and estimated future
gross profits and related assumptions are evaluated for continued reasonableness. Any
adjustment in estimated profit requires that the amortization rate be revised
(“unlocking”), retroactively to the date of the policy or contract issuance. The
cumulative unlocking adjustment is recognized as a component of current period
amortization. In general, sustained increases in investment, mortality, and expense
margins, and thus estimated future profits, lower the rate of amortization. Sustained
decreases in investment, mortality, and expense margins, and thus estimated future
profits, however, increase the rate of amortization.

Reserves

Future policy benefits and claims reserves include reserves for deferred annuities and
immediate annuities with and without life contingent payouts, universal and traditional
life insurance contracts, and GICs. Generally, reserves are calculated using mortality and
withdrawal rate assumptions based on relevant Company experience and are periodically
reviewed against both industry standards and experience.

90

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Reserves for deferred annuity investment contracts and immediate annuities without life
contingent payouts are equal to cumulative deposits, less charges and withdrawals, plus
credited interest thereon. Deferred annuity crediting rates and reserve interest rates
varied by product up to 10.0% for 2007, 7.8% for 2006, and 8.0% for 2005.

Reserves for individual immediate annuities with life contingent payout benefits are
computed on the basis of assumed interest discount rate, mortality, and expenses,
including a margin for adverse deviations. Such assumptions generally vary by annuity
plan type, year of issue, and policy duration. For 2007, 2006, and 2005, immediate
annuity reserve interest discount rates varied up to 8.0% .

Reserves for FIAs are computed in accordance with FAS No. 97 and FAS No. 133.
Accordingly, the aggregate initial liability is equal to the deposit received, plus a bonus,
if applicable, and is split into a host component and an embedded derivative component.
Thereafter, the host liability accumulates at a set interest rate, and the embedded
derivative liability is recognized at fair value, with the change in fair value recorded in
the Statements of Operations.

Reserves for universal life products are equal to cumulative deposits, less withdrawals
and charges, plus credited interest thereon. Reserves for traditional life insurance
contracts represent the present value of future benefits to be paid to or on behalf of
contractowners and related expenses, less the present value of future net premiums.

Under Statement of Position 03-1, “Accounting and Reporting by Insurance Enterprises
for Certain Nontraditional Long-Duration Contracts for Separate Accounts” (“SOP 03-
1”), the Company calculates additional liabilities (“SOP 03-1 reserves”) for certain
guaranteed benefits and for universal life products with certain patterns of cost of
insurance charges and certain other fees. The SOP 03-1 reserve recognized for such
products is in addition to the liability previously held and recognizes the portion of
contract assessments received in early years used to compensate the insurer for services
provided in later years.

The Company calculates a benefit ratio for each block of business subject to SOP 03-1,
and calculates an SOP 03-1 reserve by accumulating amounts equal to the benefit ratio
multiplied by the assessments for each period, reduced by excess death benefits during
the period. The SOP 03-1 reserve is accumulated at interest rates using the contract-
credited rate for the period. The calculated reserve includes a provision for universal life
contracts with patterns of cost of insurance charges that produce expected gains from the
insurance benefit function followed by losses from that function in later years.

GMABs and GMWBs without life contingent payouts are considered to be derivatives
under FAS No. 133. The additional reserves for these guarantees are recognized at fair
value through the Statements of Operations.

91

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Reserves for GICs are calculated using the amount deposited with the Company, less
withdrawals, plus interest accrued to the ending valuation date. Interest on these contracts
is accrued by a predetermined index, plus a spread or a fixed rate, established at the issue
date of the contract.

Sales Inducements

Sales inducements represent benefits paid to contractowners for a specified period that
are incremental to the amounts the Company credits on similar contracts and are higher
than the contract’s expected ongoing crediting rates for periods after the inducement.
Sales inducements are amortized as a component of Interest credited and other benefits to
contractowners using methodologies and assumptions consistent with those used for
amortization of DAC.

Revenue Recognition

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

Premiums on the Statements of Operations primarily represent amounts received under
traditional life insurance policies.

For GICs, deposits made to the Company are not recorded as revenue in the Statements
of Operations, but are recorded directly to Future policy benefits and claims reserves on
the Balance Sheets.

Separate Accounts

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

92

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Separate account assets supporting variable options under variable annuity contracts are
invested, as designated by the contractowner or participant (who bears the investment
risk subject, in limited cases, to minimum guaranteed rates) under a contract, in shares of
mutual funds that are managed by the Company or its affiliates, or in other selected
mutual funds not managed by the Company or its affiliates.

Separate account assets and liabilities are carried at fair value and shown as separate
captions in the Balance Sheets. Deposits, investment income, and net realized and
unrealized capital gains (losses) of the separate accounts, however, are not reflected in
the Statements of Operations (with the exception of realized and unrealized capital gains
(losses) on the assets supporting the guaranteed interest option). The Statements of Cash
Flows do not reflect investment activity of the separate accounts.

Assets and liabilities of separate account arrangements that do not meet the criteria in
SOP 03-1 for separate presentation in the Balance Sheets (primarily guaranteed interest
options), and revenue and expenses related to such arrangements, are consolidated in the
financial statements with the general account. At December 31, 2007 and 2006,
unrealized capital gains (losses) of $21.1 and $(4.1), respectively, after taxes, on assets
supporting a guaranteed interest option are reflected in Shareholder’s equity.

Reinsurance

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

Participating Insurance

Participating business approximates 8.5% of the Company’s ordinary life insurance in
force and 27.1% of life insurance premium income. The amount of dividends to be paid
is determined annually by the Board of Directors. Amounts allocable to participating
contractowners are based on published dividend projections or expected dividend scales.
Dividends to participating policyholders of $14.8, $15.4, and $15.8, were incurred during
the years ended December 31, 2007, 2006, and 2005, respectively.

93

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Income Taxes

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

2. Investments

Fixed Maturities and Equity Securities

Fixed maturities and equity securities, available-for-sale, were as follows as of
December 31, 2007.

		Gross	Gross
		Unrealized	Unrealized
	Amortized	Capital	Capital	Fair
	Cost	Gains	Losses	Value
Fixed maturities:
U.S. Treasuries	$ 18.4	$ 1.0	$ -	$ 19.4
U.S. government agencies and authorities	86.1	1.0	0.3	86.8
State, municipalities, and political subdivisions	49.7	-	2.5	47.2
U.S. corporate securities:
Public utilities	1,417.5	22.8	13.4	1,426.9
Other corporate securities	6,742.7	81.1	67.0	6,756.8
Total U.S. corporate securities	8,160.2	103.9	80.4	8,183.7
Foreign securities(1):
Government	525.2	14.9	7.1	533.0
Other	3,280.6	40.5	59.4	3,261.7
Total foreign securities	3,805.8	55.4	66.5	3,794.7
Residential mortgage-backed securities	4,988.4	53.3	85.8	4,955.9
Commercial mortgage-backed securities	3,842.2	37.6	36.4	3,843.4
Other asset-backed securities	1,947.5	5.7	108.3	1,844.9
Total fixed maturities, including securities pledged	22,898.3	257.9	380.2	22,776.0
Less: securities pledged	953.3	6.1	16.8	942.6
Total fixed maturities	21,945.0	251.8	363.4	21,833.4
Equity securities	216.6	2.8	8.3	211.1
Total investments, available-for-sale	$ 22,161.6	$ 254.6	$ 371.7	$ 22,044.5
(1)Primarily U.S. dollar denominated.

94

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Fixed maturities and equity securities, available-for-sale, were as follows as of
December 31, 2006.

		Gross	Gross
		Unrealized	Unrealized
	Amortized	Capital	Capital	Fair
	Cost	Gains	Losses	Value
Fixed maturities:
U.S. Treasuries	$ 276.9	$ 0.2	$ 1.4	$ 275.7
U.S. government agencies and authorities	220.9	0.6	2.2	219.3
State, municipalities, and political subdivisions	43.0	0.5	0.4	43.1
U.S. corporate securities:
Public utilities	1,324.5	21.1	17.8	1,327.8
Other corporate securities	5,138.6	50.3	49.7	5,139.2
Total U.S. corporate securities	6,463.1	71.4	67.5	6,467.0
Foreign securities(1):
Government	486.1	16.2	4.3	498.0
Other	2,843.9	32.3	46.6	2,829.6
Total foreign securities	3,330.0	48.5	50.9	3,327.6
Residential mortgage-backed securities	3,841.4	44.8	62.8	3,823.4
Commercial mortgage-backed securities	1,928.6	15.1	20.2	1,923.5
Other asset-backed securities	1,843.4	5.2	9.8	1,838.8
Total fixed maturities, including securities pledged	17,947.3	186.3	215.2	17,918.4
Less: securities pledged	875.5	2.4	13.9	864.0
Total fixed maturities	17,071.8	183.9	201.3	17,054.4
Equity securities	39.1	1.5	-	40.6
Total investments, available-for-sale	$ 17,110.9	$ 185.4	$ 201.3	$ 17,095.0

⁽¹⁾Primarily U.S. dollar denominated.

At December 31, 2007 and 2006, net unrealized loss was $127.8 and $27.4, respectively,
on total fixed maturities, including securities pledged to creditors, and equity securities.

95

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

The amortized cost and fair value of fixed maturities as of December 31, 2007, are shown
below by contractual maturity. Actual maturities may differ from contractual maturities
as securities may be restructured, called, or prepaid.

	Amortized	Fair
	Cost	Value
Due to mature:
One year or less	$ 550.8	$ 551.3
After one year through five years	5,800.7	5,856.5
After five years through ten years	3,797.6	3,776.3
After ten years	1,971.1	1,947.7
Mortgage-backed securities	8,830.6	8,799.3
Other asset-backed securities	1,947.5	1,844.9
Less: securities pledged	953.3	942.6
Fixed maturities, excluding securities pledged	$ 21,945.0	$ 21,833.4

The Company did not have any investments in a single issuer, other than obligations of
the U.S. government and government agencies, with a carrying value in excess of 10.0%
of the Company’s Shareholder’s equity at December 31, 2007 or 2006.

At December 31, 2007 and 2006, fixed maturities with fair values of $11.2 and $10.7,
respectively, were on deposit as required by regulatory authorities.

The Company invests in various categories of collateralized mortgage obligations
(“CMOs”) that are subject to different degrees of risk from changes in interest rates and,
for CMOs that are not agency-backed, defaults. The principal risks inherent in holding
CMOs are prepayment and extension risks related to dramatic decreases and increases in
interest rates resulting in the prepayment of principal from the underlying mortgages,
either earlier or later than originally anticipated. At December 31, 2007 and 2006,
approximately 7.5% and 6.7%, respectively, of the Company’s CMO holdings were
invested in those types of CMOs which are subject to more prepayment and extension
risk than traditional CMOs, such as interest-only or principal-only strips.

The Company is a member of the Federal Home Loan Bank of Des Moines (“FHLB”)
and is required to maintain a collateral deposit that backs funding agreements issued to
the FHLB. At December 31, 2007 and 2006, the Company had $2,898.7 and $226.7,
respectively, in non-putable funding agreements, including accrued interest, issued to the
FHLB. The level of funding agreements issued to the FHLB as of December 31, 2007
increased significantly from the amount issued as of December 31, 2006. During the
second half of 2007, the Company took advantage of the credit market dislocation to
purchase highly rated assets and issue FHLB funding agreements. At December 31, 2007
and 2006, assets with a carrying value of approximately $3,270.1 and $703.0,
respectively, collateralized the funding agreements to the FHLB. Assets pledged to the
FHLB are included in Fixed maturities, available-for-sale, in the Balance Sheets.

96

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Repurchase Agreements

The Company engages in dollar repurchase agreements (“dollar rolls”) and repurchase
agreements. At December 31, 2007 and 2006, the carrying value of the securities
pledged in dollar rolls and repurchase agreement transactions was $745.5 and $765.7,
respectively. The repurchase obligation related to dollar rolls and repurchase agreements
totaled $711.9 and $769.6 at December 31, 2007 and 2006, respectively.

The Company also enters into reverse repurchase agreements. At December 31, 2007,
the Company did not have any securities in reverse repurchase agreements. At
December 31, 2006, the carrying value of the securities in reverse repurchase agreements
was $16.4.

The primary risk associated with short-term collateralized borrowings is that the
counterparty will be unable to perform under the terms of the contract. The Company’s
exposure is limited to the excess of the net replacement cost of the securities over the
value of the short-term investments, an amount that was immaterial at December 31,
2007 and 2006. The Company believes the counterparties to the dollar rolls, repurchase,
and reverse repurchase agreements are financially responsible and that the counterparty
risk is minimal.

Unrealized Capital Losses

Unrealized capital losses in fixed maturities at December 31, 2007 and 2006, were
primarily related to interest rate movement or changes in credit spreads to mortgage and
other asset-backed securities. Mortgage and other asset-backed securities include U.S.
government-backed securities, principal protected securities, and structured securities,
which did not have an adverse change in cash flows. The following table summarizes the
unrealized capital losses by duration and reason, along with the fair value of fixed
maturities, including securities pledged to creditors, in unrealized capital loss positions at
December 31, 2007 and 2006.

97

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

	Less than	More than
	Six Months	Six Months and	More than	Total
	Below	less than Twelve	Twelve Months	Unrealized
	Amortized	Months Below	Below	Capital
2007	Cost	Amortized Cost	Amortized Cost	Losses
Interest rate or spread widening	$ 37.8	$ 49.2	$ 62.7	$ 149.7
Mortgage and other asset-backed securities	73.3	134.8	22.4	230.5
Total unrealized capital losses	$ 111.1	$ 184.0	$ 85.1	$ 380.2
Fair value	$ 5,322.0	$ 3,248.4	$ 3,300.6	$ 11,871.0
2006
Interest rate or spread widening	$ 12.8	$ 6.2	$ 103.4	$ 122.4
Mortgage and other asset-backed securities	14.6	5.6	72.6	92.8
Total unrealized capital losses	$ 27.4	$ 11.8	$ 176.0	$ 215.2
Fair value	$ 3,095.9	$ 905.9	$ 6,026.5	$ 10,028.3

Of the unrealized capital losses aged more than twelve months, the average market value
of the related fixed maturities is 97.1% of the average book value. In addition, this
category includes 753 securities, which have an average quality rating of A+. No other-
than-temporary impairment loss was considered necessary for these fixed maturities as of
December 31, 2007.

Other-Than-Temporary Impairments

The following table identifies the Company’s other-than-temporary impairments by type
for the years ended December 31, 2007, 2006, and 2005.

		2007			2006			2005
			No. of			No. of			No. of
	Impairment		Securities	Impairment		Securities	Impairment		Securities
U.S. Treasuries	$ -	*	1	$ 0.1		1	$ 0.1		1
U.S. Corporate	81.0		173	15.8		63	3.0		12
Foreign	25.7		74	3.5		13	0.1		1
Residential mortgage-backed	3.0		24	12.7		68	16.4		86
Commercial mortgage-backed	-		-	-		-	1.2		1
Other asset-backed	43.3		91	1.2		2	0.5		2
Limited partnerships	0.3		1	0.5		2	0.5		1
Total	$ 153.3		364	$ 33.8		149	$ 21.8		104

^*Less than $0.1.

The above schedule includes $31.0, $11.5, and $18.7 in other-than-temporary write-
downs for the years ended December 31, 2007, 2006, and 2005, respectively, related to
the analysis of credit risk and the possibility of significant prepayment risk. The

98

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

remaining $122.3, $22.3, and $3.1 in write-downs for the years ended December 31,
2007, 2006, and 2005, respectively, are related to investments that the Company does not
have the intent to retain for a period of time sufficient to allow for recovery in fair value.

The following table summarizes these write-downs by type for the years ended
December 31, 2007, 2006, and 2005.

		2007		2006		2005
			No. of		No. of		No. of
	Impairment		Securities	Impairment	Securities	Impairment	Securities
U.S. Treasuries	$ -	*	1	$ 0.1	1	$ 0.1	1
U.S. Corporate	70.6		161	15.8	63	2.6	11
Foreign	21.4		68	3.5	13	-	-
Residential mortgage-backed	1.0		5	1.7	4	0.4	1
Other asset-backed	29.3		84	1.2	2	-	-
Total	$ 122.3		319	$ 22.3	83	$ 3.1	13
* Less than $0.1.

The remaining fair value of fixed maturities with other-than-temporary impairments at
December 31, 2007, 2006, and 2005 was $2,353.8, $437.4, and $275.1, respectively.

The Company may sell securities during the period in which fair value has declined
below amortized cost for fixed maturities or cost for equity securities. In certain
situations new factors, including changes in the business environment, can change the
Company’s previous intent to continue holding a security.

Net Investment Income

Sources of Net investment income were as follows for the years ended December 31,
2007, 2006, and 2005.

	2007	2006	2005
Fixed maturities, available-for-sale	$ 1,176.1	$ 1,009.7	$ 936.4
Equity securities, available-for-sale	3.3	1.9	1.2
Mortgage loans on real estate	233.1	225.3	238.4
Policy loans	9.0	9.1	9.1
Short-term investments and cash equivalents	6.7	5.5	4.1
Other	35.1	13.9	10.5
Gross investment income	1,463.3	1,265.4	1,199.7
Less: investment expenses	116.9	109.0	97.5
Net investment income	$ 1,346.4	$ 1,156.4	$ 1,102.2

At December 31, 2007 and 2006, the Company had $60.3 and $30.5, respectively, of
non-income producing investments in fixed maturities.

99

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Net Realized Capital Gains (Losses)

Net realized capital gains (losses) are comprised of the difference between the amortized
cost of investments and proceeds from sale, and redemption, as well as losses incurred
due to the other-than-temporary impairment of investments and changes in fair value of
derivatives. The cost of the investment on disposal is determined based on specific
identification of securities using the first-in, first-out method. Net realized capital gains
(losses) on investments were as follows for the years ended December 31, 2007, 2006,
and 2005.

	2007	2006		2005
Fixed maturities, available-for-sale	$ (100.3)	$ (43.8)		$ 45.4
Equity securities, available-for-sale	0.5		0.9		0.2
Derivatives	(291.0)		(48.2)		(48.3)
Other	(0.4)		0.7		(0.2)
Net realized capital losses	$ (391.2)	$ (90.4)		$ (2.9)
After-tax net realized capital losses	$ (254.3)	$ (58.8)		$ (1.9)

Net realized capital losses increased for the year ended December 31, 2007, primarily due
to higher losses on derivatives, along with higher losses on fixed maturities. The
changes in derivatives were primarily driven by interest rate swaps and call options,
partially offset by improvements in futures as a result of lower equity market
performance. The losses on fixed maturities for the year ended December 31, 2007, were
due to other-than-temporary impairments driven by the slow economic environment and
widening of credit spreads in 2007.

Proceeds from the sale of fixed maturities and equity securities, available-for-sale, and
the related gross gains and losses were as follows for the years ended December 31,
2007, 2006, and 2005.

	2007	2006	2005
Proceeds on sales	$ 5,859.3	$ 5,543.1	$ 9,317.1
Gross gains	41.1	64.5	97.2
Gross losses	57.0	78.0	75.2

100

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

3. Financial Instruments

Estimated Fair Value

The following disclosures are made in accordance with the requirements of FAS No. 107,
“Disclosures about Fair Value of Financial Instruments” (“FAS No. 107”). FAS No. 107
requires disclosure of fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques are significantly affected
by the assumptions used, including the discount rate and estimates of future cash flows.
In that regard, the derived fair value estimates, in many cases, could not be realized in
immediate settlement of the instrument.

FAS No. 107 excludes certain financial instruments, including insurance contracts, and
all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate
fair value amounts presented do not represent the underlying value of the Company.

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

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

Equity securities, available-for-sale: Fair values of these securities are based upon quoted
market price. For equity securities not actively traded, estimated fair values are based
upon values of issues of comparable yield and quality or conversion price, where
applicable.

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

101

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Cash and cash equivalents, Short-term investments under securities loan agreement, and
Policy loans: The carrying amounts for these assets approximate the assets’ fair values.

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

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

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

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

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

Other financial instruments reported as assets and liabilities: The carrying amounts for
these financial instruments (primarily derivatives and limited partnerships) approximate
the fair value of the assets and liabilities. Derivatives are carried at fair value, which is
determined using the Company’s derivative accounting system in conjunction with key
financial data from third party sources or through values established by third party
brokers, on the Balance Sheets.

The carrying values and estimated fair values of certain of the Company’s financial
instruments were as follows at December 31, 2007 and 2006.

102

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

		2007			2006
	Carrying		Fair	Carrying		Fair
	Value		Value	Value		Value
Assets:
Fixed maturities, available-for-sale,
including securities pledged	$ 22,776.0	$ 22,776.0		$ 17,918.4	$ 17,918.4
Equity securities, available-for-sale	211.1		211.1	40.6		40.6
Mortgage loans on real estate	3,701.7		3,739.4	3,687.6		3,657.0
Policy loans	155.8		155.8	162.5		162.5
Cash, cash equivalents,
and Short-term investments
under securities loan agreement	332.9		332.9	711.2		711.2
Other investments	1,036.6		1,045.3	777.2		782.1
Assets held in separate accounts	44,477.8		44,477.8	37,928.3		37,928.3
Liabilities:
Investment contract liabilities:
Deferred annuities	19,733.8		18,150.4	19,732.4		18,108.0
Guaranteed investment contracts
and funding agreements	9,415.1		9,498.2	4,603.8		4,591.1
Supplementary contracts and
immediate annuities	900.3		900.3	931.1		931.1
Derivatives	273.8		273.8	64.2		64.2
Notes to affiliates	435.0		420.6	435.0		459.2

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

103

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Derivative Financial Instruments

		Notional Amount		Fair Value
		2007	2006	2007	2006
Interest Rate Caps
Interest rate caps are used to manage the interest
rate risk in the Company’s fixed maturity portfolio.
Interest rate caps are purchased contracts that
provide the Company with an annuity in an
increasing interest rate environment.	$ 50.0		$ -	$ 0.1 $	-
Interest Rate Swaps
Interest rate swaps are used to manage the interest
rate risk in the Company’s fixed maturity portfolio,
as well as the Company’s liabilities. Interest rate
swaps represent contracts that require the exchange
of cash flows at regular interim periods, typically
monthly or quarterly.		8,533.5	3,856.1	(138.2)	40.8
Foreign Exchange Swaps
Foreign exchange swaps are used to reduce the risk
of a change in the value, yield, or cash flow with
respect to invested assets. Foreign exchange
swaps represent contracts that require the
exchange of foreign currency cash flows for
U.S. dollar cash flows at regular interim periods,
typically quarterly or semi-annually.		288.3	244.8	(44.0)	(28.7)
Credit Default Swaps
Credit default swaps are used to reduce the credit loss
exposure with respect to certain assets that the
Company owns, or to assume credit exposure on
certain assets that the Company does not own.
Payments are made to or received from the
counterparty at specified intervals and amounts
for the purchase or sale of credit protection. In the
event of a default on the underlying credit exposure,
the Company will either receive an additional
payment (purchased credit protection) or will be
required to make an additional payment (sold credit
protection) equal to the notional value of the swap
contract.		488.9	260.3	(22.1)	(0.1)

104

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

		Notional Amount		Fair Value
		2007	2006	2007		2006
Total Return Swaps
Total return swaps are used to assume credit exposure
to a referenced index or asset pool. The difference
between different floating-rate interest amounts
calculated by reference to an agreed upon notional
principal amount is exchanged with other parties
at specified intervals.	$ -		$ 65.0	$ -	$ 0.1
Swaptions
Swaptions are used to manage interest rate risk in
the Company’s collateralized mortgage obligations
portfolio. Swaptions are contracts that give the
Company the option to enter into an interest rate
swap at a specific future date.		302.5	665.0	-	**	3.7
Futures
Futures contracts are used to hedge against a decrease
in certain equity indices. Such decrease may result
in a decrease in variable annuity account values,
which would increase the possibility of the Company
incurring an expense for guaranteed benefits in
excess of account values. The futures income would
serve to offset this increased expense. Futures
contracts are also used to hedge against an increase
in certain equity indices. Such increase may result
in increased payments to contract holders of fixed
indexed annuity contracts, and the futures income
offset this increased expense. The underlying
reserve liabilities are valued under either
SOP 03-01, or FAS No. 133 (see discussion under
“Reserves” section) and the change in reserve
liability is recorded in Interest credited and other
benefits to contractowners. The gain or loss on
futures is recorded in Net realized capital gains
(losses).		1,584.6	1,265.9	(6.4)		3.8

105

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

	Notional Amount		Fair Value
	2007	2006	2007	2006
Options
Call options are used to hedge against an increase
in the various equity indices. Such increase may
result in increased payments to contract holders
of fixed indexed annuity contracts, and the options
offset this increased expense. Put options are used
to hedge the liability associated with embedded
derivatives in certain variable annuity contracts.
Both the options and the embedded derivative
reserve are carried at fair value. The change in value
of the options are recorded in Net realized capital
gains (losses); the change in value of the embedded
derivative is recorded in Interest credited and
other benefits to contractowners.	6,666.0	6,341.7	303.5	387.0
Embedded Derivatives
The Company also has investments in certain fixed
maturity instruments, and has issued certain retail
annuity products, that contain embedded derivatives
whose market value is at least partially determined by,
among other things, levels of or changes in domestic
and/or foreign interest rates (short- or long-term),
exchange rates, prepayment rates, equity rates, or
credit ratings/spreads.
Within securities	N/A*	N/A*	33.8	5.1
Within retail annuity products	N/A*	N/A*	960.4	820.2

* N/A - not applicable.
**Less than $0.1.

Interest Rate Swaps

Interest rate swaps included two interest rate swaps with Security Life of Denver
Insurance Company (“Security Life”), an affiliate, each with notional amounts of $100.0
and fair values of $(1.6) and $(0.1), respectively, as of the date of termination at
August 31, 2007.

See Related Party Transactions footnote for further information.

Credit Default Swaps

As of December 31, 2007, the maximum potential future exposure to the Company on the
sale of credit protection under credit default swaps was $235.4.

106

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

4. Deferred Policy Acquisition Costs and Value of Business Acquired

Activity within DAC was as follows for the years ended December 31, 2007, 2006, and
2005.

Balance at January 1, 2005	$ 1,704.1
Deferrals of commissions and expenses	614.0
Amortization:
Amortization	(400.2)
Interest accrued at 5% to 6%	105.5
Net amortization included in the Statements of Operations	(294.7)
Change in unrealized capital gains (losses) on available-for-sale securities	232.0
Balance at December 31, 2005	2,255.4
Deferrals of commissions and expenses	681.9
Amortization:
Amortization	(421.7)
Interest accrued at 5% to 6%	138.1
Net amortization included in the Statements of Operations	(283.6)
Change in unrealized capital gains (losses) on available-for-sale securities	16.2
Balance at December 31, 2006	2,669.9
Deferrals of commissions and expenses	729.1
Amortization:
Amortization	(592.0)
Interest accrued at 5% to 6%	162.2
Net amortization included in the Statements of Operations	(429.8)
Change in unrealized capital gains (losses) on available-for-sale securities	(56.0)
Implementation of SOP 05-1	(4.8)
Balance at December 31, 2007	$ 2,908.4

The estimated amount of DAC to be amortized, net of interest, is $478.9, $444.2, $414.2,
$360.4, and $311.3, for the years 2008, 2009, 2010, 2011, and 2012, respectively. Actual
amortization incurred during these years may vary as assumptions are modified to
incorporate actual results.

107

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Activity within VOBA was as follows for the years ended December 31, 2007, 2006, and
2005.

Balance at January 1, 2005	$ 112.2
Amortization:
Amortization	(30.8)
Interest accrued at 4% to 5%	6.6
Net amortization included in the Statements of Operations	(24.2)
Change in unrealized capital gains (losses) on available-for-sale securities	34.1
Balance at December 31, 2005	122.1
Amortization:
Amortization	(15.0)
Interest accrued at 4% to 5%	5.6
Net amortization included in the Statements of Operations	(9.4)
Change in unrealized capital gains (losses) on available-for-sale securities	(2.6)
Balance at December 31, 2006	110.1
Amortization:
Amortization	16.8
Interest accrued at 4% to 6%	4.9
Net amortization included in the Statements of Operations	21.7
Change in unrealized capital gains (losses) on available-for-sale securities	(3.1)
Balance at December 31, 2007	$ 128.7

The estimated amount of VOBA to be amortized, net of interest, is $13.4, $13.1, $11.9,
$10.6, and $9.7, for the years 2008, 2009, 2010, 2011, and 2012, respectively. Actual
amortization incurred during these years may vary as assumptions are modified to
incorporate actual results.

Analysis of DAC and VOBA - Annuity Products

The increase in Amortization of DAC and VOBA in 2007 compared to 2006 is due in
part to a $67.0 change in estimate recorded during the fourth quarter of 2007. This
change resulted from refinements of the DAC model, partially offset by favorable
unlocking of mutual fund and mortality and persistency unlocking.

The decrease in Amortization of DAC and VOBA in 2006 compared to 2005 is due to
higher expected gross profits, which reflect revisions in prospective assumptions based
on positive persistency experience and favorable equity market performance. The
decrease was partially offset, however, by an increase in amortization driven by higher
actual gross profits experience in 2006.

108

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

The Company revised and unlocked certain assumptions for its fixed and variable annuity
products during 2007, 2006, and 2005. Unlocking adjustments and their acceleration
(deceleration) impact on Amortization of DAC and VOBA were as follows for the years
ended December 31, 2007, 2006, and 2005.

			2007	2006	2005
	Impact of separate account growth and contractowner
	withdrawal behavior favorable to assumptions	$ 1.3		$ (42.6)	$ (13.3)
	Unlock of contractowner withdrawal behavior
	assumptions for certain fixed deferred annuities		-	-	17.7
	Unlock of future rate of spread income assumptions
	on some fixed annuity liabilities		-	-	2.3
	Unlock on long-term separate account growth assumption		-	-	4.8
	Unlock of mortality and persistency assumptions		(12.0)	(19.8)	(4.2)
	Impact of DAC model refinements		67.0	-	-
	Unlock of mutual fund revenue sharing assumptions		(31.6)	-	-
	Total unlocking effect on Amortization of DAC and VOBA	$ 24.7		$ (62.4)	$ 7.3
5.	Dividend Restrictions and Shareholder’s Equity

The Company’s ability to pay dividends to its parent is subject to the prior approval of
the Insurance Division of the State of Iowa (the “Division”) for payment of any dividend,
which, when combined with other dividends paid within the preceding twelve months,
exceeds the greater of (1) ten percent (10.0%) of the Company’s statutory surplus at the
prior year end or (2) the Company’s prior year statutory net gain from operations.

During 2007 and 2005, the Company did not pay any dividends or return of capital
distributions to Lion. During 2006, the Company paid $170.0 in a return of capital
distribution to its Parent.

During 2007, the Company received $150.0 in capital contributions from Lion. During
2006, the Company did not receive any capital contributions from its Parent. During
2005, the Company received capital contributions of $100.0 from its Parent to support
sales activities. On February 21, 2008, the Company received a $1.1 billion capital
contribution from Lion.

109

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

The Division recognizes as net income and capital and surplus those amounts determined
in conformity with statutory accounting practices prescribed or permitted by the Division,
which differ in certain respects from accounting principles generally accepted in the
United States. Statutory net income (loss) was $(40.1), $(1.6), and $6.9, for the years
ended December 31, 2007, 2006, and 2005, respectively. Statutory capital and surplus
was $2,552.6 and $1,660.7 as of December 31, 2007 and 2006, respectively. As
specifically required by statutory accounting practices, statutory surplus as of December
31, 2007 includes the impact of the $1.1 billion capital contribution.

As of December 31, 2007, the Company did not utilize any statutory accounting practices
that are not prescribed by state regulatory authorities that, individually or in the
aggregate, materially affected statutory capital and surplus.

6. Additional Insurance Benefits and Minimum Guarantees

Under SOP 03-1, the Company calculates SOP 03-1 reserves for certain guaranteed
benefits and for universal life products with certain patterns of cost of insurance charges
and certain other fees.

The following assumptions and methodology were used to determine the GMDB SOP
03-1 reserve at December 31, 2007.

Area	Assumptions/Basis for Assumptions
Data used	Based on 100 investment performance scenarios stratified based on
10,000 random generated scenarios
Mean investment performance	8.125%
Volatility	18.0%
Mortality	1999 and prior issues – 80.0%, 80.0%, 90.0%, 90.0%, grading to 100%
	from age 80 to 120, of the 90-95 ultimate mortality table for standard,
	ratchet, rollup, and combination rollup and ratchet, respectively.
	2000 and later issues – 60.0%, 60.0%, 75.0%, 75.0%, grading to 100%
	from age 80 to 120, of the 90-95 ultimate mortality table for standard,
	ratchet, rollup, and combination rollup and ratchet, respectively.
Lapse rates	Vary by contract type and duration; range between 1.0% and 40.0%
Discount rates	6.5%, based on the portfolio earned rate of the general account

The assumptions used for calculating the additional GMIB and Guaranteed Minimum
Withdrawal for Life Benefit (LifePay and LifePay Plus) liabilities at December 31, 2007,
are consistent with those used for the calculating the additional GMDB liability. In
addition, the calculation of the GMIB liability assumes dynamic surrenders and dynamic
annuitization reflecting the extent to which the benefit, at the time of payment, has a
positive value.

110

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

The separate account liabilities subject to SOP 03-1 for minimum guaranteed benefits,
and the additional liabilities recognized related to minimum guarantees, by type, as of
December 31, 2007 and 2006, and the paid and incurred amounts by type for the years
ended December 31, 2007 and 2006, were as follows:

	Guaranteed	Guaranteed	Guaranteed	Guaranteed
	Minimum	Minimum	Minimum	Withdrawal
	Death	Accumulation/	Income	For Life
	Benefit	Withdrawal Benefit	Benefit	Benefit
	(GMDB)	(GMAB/GMWB)	(GMIB)	(LP/LPP)
Separate account liability
at December 31, 2007	$ 44,477.8	$ 2,556.4	$ 20,066.1	$ 5,900.0
Separate account liability
at December 31, 2006	$ 37,928.3	$ 2,759.3	$ 18,036.9	$ 1,846.8
Additional liability balance:
Balance at January 1, 2006	$ 112.8	$ 9.4	$ 60.9	$ -
Incurred guaranteed benefits	43.4	(18.3)	22.4	1.7
Paid guaranteed benefits	(16.5)	-	-	-
Balance at December 31, 2006	139.7	(8.9)	83.3	1.7
Incurred guaranteed benefits	88.9	20.1	48.9	4.2
Paid guaranteed benefits	(19.2)	-	-	-
Balance at December 31, 2007	$ 209.4	$ 11.2	$ 132.2	$ 5.9

The net amount at risk, net of reinsurance, and the weighted average attained age of

contractowners by type	of	minimum	guaranteed benefit,	were as	follows as of
December 31, 2007 and 2006.
		Guaranteed	Guaranteed	Guaranteed		Guaranteed
		Minimum	Minimum	Minimum		Minimum
		Death	Accumulation/	Income		Income
		Benefit	Withdrawal Benefit	Benefit		GMWB-For-Life
2007		(GMDB)	(GMAB/GMWB)	(GMIB)		(LP/LPP)
Net amount at risk, net of reinsurance	$ 1,796.0		$ 109.0	$ 391.9	$ 5.6
Weighted average attained age		63	63	59		63
2006
Net amount at risk, net of reinsurance	$ 1,252.7		$ 27.4	$ 200.0	$ -
Weighted average attained age		62	64	58		-

The aggregate fair value of equity securities, including mutual funds, supporting separate
accounts with additional insurance benefits and minimum investment return guarantees as
of December 31, 2007 and 2006 was $44.5 billion and $37.9 billion, respectively.

111

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

7.	Sales Inducements
	During the year ended December 31, 2007, the Company capitalized and amortized $135.4 and $120.2, respectively, of sales inducements. During the year ended December 31, 2006, the Company capitalized and amortized $150.0 and $74.1, respectively, of sales inducements. The unamortized balance of capitalized sales inducements, net of unrealized capital gains (losses) on available-for-sale securities, was $645.4 and $630.7 as of December 31, 2007 and 2006, respectively.
8.	Income Taxes
	Effective January 1, 2005, the Company files a consolidated federal income tax return with ING America Insurance Holdings, Inc. (“ING AIH”), an affiliate, and certain other subsidiaries of ING AIH that are eligible corporations qualified to file consolidated federal income tax returns as part of the ING AIH affiliated group. Effective January 1, 2005, the Company is a party to a federal tax allocation agreement with ING AIH and its subsidiaries that are part of the group, whereby ING AIH charges its subsidiaries for federal taxes each subsidiary would have incurred were it not a member of the consolidated group and credits each subsidiary for losses at the statutory federal tax rate.
	Income tax expense (benefit) consisted of the following for the years ended December 31, 2007, 2006, and 2005.

2007

2006

2005

Current tax expense (benefit):

Federal	$ 26.6	$ (67.6)	$ (156.7)
Total current tax expense (benefit)	26.6	(67.6)	(156.7)
Deferred tax (benefit) expense:
Operations and capital loss carryforwards	-	151.0	43.6
Other federal deferred tax	(28.2)	(19.0)	147.3
Total deferred tax (benefit) expense	(28.2)	132.0	190.9
Total income tax (benefit) expense	$ (1.6)	$ 64.4	$ 34.2

112

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Income taxes were different from the amount computed by applying the federal income
tax rate to income before income taxes for the following reasons for the years ended
December 31, 2007, 2006, and 2005.

Income before income taxes
Tax rate
Income tax at federal statutory rate
Tax effect of:
Meals and entertainment
Dividend received deduction
IRS audit settlements
Other
Income tax (benefit) expense

2007	2006	2005
$ 127.4	$ 276.6	$ 224.1
35.0%	35.0%	35.0%
44.6	96.8	78.4
0.7	0.6	0.4
(49.5)	(42.9)	(20.4)
-	-	(24.4)
2.6	9.9	0.2
$ (1.6)	$ 64.4	$ 34.2

Temporary Differences

The tax effects of temporary differences that give rise to Deferred tax assets and Deferred
tax liabilities at December 31, 2007 and 2006, are presented below.

	2007	2006
Deferred tax assets:
Operations and capital loss carryforwards	$ 14.6	$ -
Future policy benefits	731.1	734.5
Goodwill	5.1	6.5
Investments	103.8	6.9
Employee compensation and benefits	45.4	31.3
Unrealized losses on investments	59.6	3.8
Other	68.0	9.7
Total gross assets before valuation allowance	1,027.6	792.7
Less: valuation allowance	(46.9)	-
Total gross assets, net of valuation allowance	980.7	792.7
Deferred tax liabilities:
Deferred policy acquisition cost	(1,120.3)	(1,018.9)
Value of purchased insurance in force	(42.7)	(34.4)
Other	(2.2)	(1.9)
Total gross liabilities	(1,165.2)	(1,055.2)
Net deferred income tax liability	$ (184.5)	$ (262.5)

Net unrealized capital gains (losses) are presented as a component of Other
comprehensive income (loss) in Shareholder’s equity, net of deferred taxes.

113

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Valuation allowances are provided when it is considered unlikely that deferred tax assets
will be realized. As of December 31, 2007, the Company had a $46.9 valuation
allowance related to unrealized capital losses on investments, which is included in
Accumulated other comprehensive income (loss). The Company had no valuation
allowance as of December 31, 2006.

Tax Sharing Agreement

The Company had a payable to ING AIH of $40.7 and a receivable from ING AIH of
$4.6 at December 31, 2007 and 2006, respectively, for federal income taxes under the
intercompany tax sharing agreement.

See Related Party Transactions footnote for more information.

Unrecognized Tax Benefits

As a result of implementing FIN 48, the Company recognized a cumulative effect of
change in accounting principle of $1.7 as a reduction to January 1, 2007 Retained
earnings (deficit). In addition, the Company had $61.5 of unrecognized tax benefits as of
January 1, 2007, of which $41.4 would affect the Company’s effective tax rate if
recognized.

A reconciliation of the change in the unrecognized income tax benefits for the years is as
follows:

Balance at January 1, 2007	$ 61.5
Additions for tax positions related to the current year	6.9
Additions (reduction) for tax positions related to prior years	(2.0)
Balance at December 31, 2007	$ 66.4

The Company had $43.2 of unrecognized tax benefits as of December 31, 2007 that
would affect the Company’s effective tax rate if recognized.

Interest and Penalties

The Company recognizes accrued interest and penalties related to unrecognized tax
benefits in Current income taxes and Income tax expense on the Balance Sheets and
Statements of Operations, respectively. The Company had accrued interest of $4.7 as of
December 31, 2007.

114

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Regulatory Matters

The Company is under audit by the Internal Revenue Service (“IRS”) for tax years 2002
through 2005. It is anticipated that the IRS audit of tax years 2002 and 2003 will be
finalized within the next twelve months. The settlement is not expected to have a
material impact on the Company’s financial position. The timing of the settlement and
any potential future payment of the remaining allowance related to the IRS audit of tax
years 2004 and 2005 cannot be reliably estimated.

On September 25, 2007, the IRS issued Revenue Ruling 2007-61, which announced its
intention to issue regulations with respect to certain computational aspects of the
dividend received deduction (“DRD”) on separate account assets held in connection with
variable annuity and life insurance contracts. Revenue Ruling 2007-61 suspended
Revenue Ruling 2007-54 issued in August 2007 that purported to change accepted
industry and IRS interpretation of the statutes governing these computational questions.
Any regulations that the IRS ultimately proposes for issuance in this area will be subject
to public notice and comment, at which time insurance companies and other members of
the public will have the opportunity to raise legal and practical questions about the
content, scope and application of such regulations. As a result, the ultimate timing,
substance, and effective date of any such regulations are unknown, but they could result
in the elimination of some or all of the separate account DRD tax benefit that the
Company receives.

Under prior law, life insurance companies were allowed to defer from taxation a portion
of income. Prior to 2006, deferred income of $14.4 was accumulated in the
Policyholder’s Surplus Account and would only become taxable under certain conditions,
which management believed to be remote. In 2004, Congress passed the American Jobs
Creation Act of 2004, allowing certain tax-free distributions from the Policyholders’
Surplus Account during 2005 and 2006. During 2006, the Company made a return of
capital distribution of $170.0, which eliminated the $14.4 balance in the Policyholders’
Surplus Account and, therefore, any potential tax on the accumulated balance.

9. Benefit Plans

Defined Benefit Plan

ING North America Insurance Corporation (“ING North America”) sponsors the ING
Americas Retirement Plan (the “Retirement Plan”), effective as of December 31, 2001.
Substantially all employees of ING North America and its affiliates (excluding certain
employees) are eligible to participate, including the Company’s employees.

115

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

The Retirement Plan is a tax-qualified defined benefit plan, the benefits of which are
guaranteed (within certain specified legal limits) by the Pension Benefit Guaranty
Corporation (“PBGC”). As of January 1, 2002, each participant in the Retirement Plan
(except for certain specified employees) earns a benefit under a final average
compensation formula. Subsequent to December 31, 2001, ING North America is
responsible for all Retirement Plan liabilities. The costs allocated to the Company for its
employees’ participation in the Retirement Plan were $13.0, $17.1, and $15.9, for the
years ended 2007, 2006, and 2005, respectively, and are included in Operating expenses
in the Statements of Operations.

Defined Contribution Plan

ING North America sponsors the ING Savings Plan and ESOP (the “Savings Plan”).
Substantially all employees of ING North America and its affiliates (excluding certain
employees) are eligible to participate, including the Company’s employees other than
Company agents. The Savings Plan is a tax-qualified profit sharing and stock bonus plan,
which includes an employee stock ownership plan (“ESOP”) component. Savings Plan
benefits are not guaranteed by the PBGC. The Savings Plan allows eligible participants
to defer into the Savings Plan a specified percentage of eligible compensation on a pre-
tax basis. ING North America matches such pre-tax contributions, up to a maximum of
6.0% of eligible compensation. Matching contributions are subject to a 4-year graded
vesting schedule, although certain specified participants are subject to a 5-year graded
vesting schedule. All contributions made to the Savings Plan are subject to certain limits
imposed by applicable law. Pre-tax charges to operations of the Company for the
Savings Plan were $4.9, $4.6, and $4.2, for the years ended December 31, 2007, 2006,
and 2005, respectively, and are included in Operating expenses in the Statements of
Operations.

Stock Option and Share Plans

ING sponsors the ING Group Long Term Equity Ownership Plan (“leo”), which provides
employees of the Company who are selected by the ING Board of Directors to be granted
options and/or performance shares. The terms applicable to an award under leo are set
out in an award agreement which is signed by the participant when he or she accepts the
award.

Options granted under leo are nonqualified options on ING shares in the form of
American Depository Receipts (“ADRs”). Leo options have a ten (10) year term and vest
three years from the grant date. Options awarded under leo may vest earlier in the event
of the participant’s death, permanent disability or retirement. Retirement for purposes of
leo means a participant terminates service after attaining age 55 and completing 5 years
of service. Early vesting in all or a portion of a grant of options may also occur in the
event the participant is terminated due to redundancy or business divestiture. Unvested
options are generally subject to forfeiture when a participant voluntarily terminates

116

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

employment or is terminated for cause (as defined in leo). Upon vesting, participants
generally have up to seven years in which to exercise their vested options. A shorter
exercise period applies in the event of termination due to redundancy, business
divestiture, voluntary termination or termination for cause. An option gives the recipient
the right to purchase an ING share in the form of ADRs at a price equal to the fair market
value of one ING share on the date of grant. On exercise, participant’s have three options
(i) retain the shares and remit a check for applicable taxes due on exercise, (ii) request the
administrator to remit a cash payment for the value of the options being exercised, less
applicable taxes, or (iii) retain some of the shares and have the administrator liquidate
sufficient shares to satisfy the participant’s tax obligation. The share price is in Euros and
converted to U.S. dollars, as determined by ING.

Awards of performance shares may also be made under leo. Performance shares are a
contingent grant of ING stock and on vesting, the participant has the right to receive a
cash amount equal to the closing price per ING share on the Euronext Amsterdam Stock
Market on the vesting date times the number of vested Plan shares. Performance shares
generally vest three years from the date of grant, with the amount payable based on
ING’s share price on the vesting date. Payments made to participants on vesting are
based on the performance targets established in connection with leo and payments can
range from 0% to 200% of target. Performance is based on ING’s total shareholder
return relative to a peer group as determined at the end of the vesting period. To vest, a
participant must be actively employed on the vesting date, although vesting will continue
to occur in the event of the participant’s death, disability or retirement. If a participant is
terminated due to redundancy or business divestiture, vesting will occur but in only a
portion of the award. Unvested shares are generally subject to forfeiture when an
employee voluntarily terminates employment or is terminated for cause (as defined in
leo). Upon vesting, participants have three options (i) retain the shares and remit a check
for applicable taxes due on exercise, (ii) request the administrator to remit a cash
payment for the value of the shares, less applicable taxes, or (iii) retain some of the shares
and have the administrator liquidate sufficient shares to satisfy the participant’s tax
obligation. The amount is converted from Euros to U.S. dollars based on the daily
average exchange rate between the Euro and the U.S. dollar, as determined by ING.

The Company recognized compensation expense for the leo options and performance
shares of $4.7, $7.4, and $4.0 for the years ended December 31, 2007, 2006, and 2005
respectively.

For leo, the Company recognized tax benefits of $2.5 in 2007 and minimal tax benefits in
2006 and 2005.

117

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Other Benefit Plans

In addition to providing retirement plan benefits, the Company, in conjunction with ING
North America, provides certain supplemental retirement benefits to eligible employees
and health care and life insurance benefits to retired employees and other eligible
dependents. The supplemental retirement plan includes a non-qualified defined benefit
pension plan and a non-qualified defined contribution plan, which means all benefits are
payable from the general assets of the Company. The post-retirement health care plan is
contributory, with retiree contribution levels adjusted annually. The life insurance plan
provides a flat amount of noncontributory coverage and optional contributory coverage.
The benefits charges allocated to the Company related to all of these plans for the years
ended December 31, 2007, 2006, and 2005, were $0.6, $1.3, and $1.1, respectively.

10.	Related Party Transactions
	Operating Agreements
	The Company has certain agreements whereby it generates revenues and incurs expenses with affiliated entities. The agreements are as follows:
	§	Underwriting and distribution agreement with Directed Services LLC (“DSL”) (successor by merger to Directed Services, Inc.), an affiliated broker-dealer, whereby DSL serves as the principal underwriter for variable insurance products issued by the Company. DSL is authorized to enter into agreements with broker-dealers to distribute the Company’s variable products and appoint representatives of the broker- dealers as agents. For the years ended December 31, 2007, 2006, and 2005, commissions were incurred in the amounts of $553.8, $418.0, and $371.5, respectively.
	§	Asset management agreement with ING Investment Management LLC (“IIM”), an affiliate, in which IIM provides asset management, administration, and accounting services for ING USA’s general account. The Company records a fee, which is paid quarterly, based on the value of the assets under management. For the years ended December 31, 2007, 2006, and 2005, expenses were incurred in the amounts of $78.0, $69.5, and $71.8, respectively.

118

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

§	Service agreement with DSL, in which the Company provides managerial and supervisory services to DSL and earns a fee that is calculated as a percentage of average assets in the Company’s variable separate accounts deposited in ING
	Investors Trust. On August 9, 2007, the Company and DSL entered into an amendment to the service agreement effective July 31, 2007, which modifies the method for calculating the compensation owed to the Company for its provision of managerial and supervisory services to DSL. As a result of this amendment, DSL pays the Company the total net revenue associated with the Company’s deposits in ING Investors Trust. For the years ended December 31, 2007, 2006, and 2005, revenue for these services was $109.0, $62.0, and $43.0, respectively.
§	Services agreements with ING North America, dated September 1, 2000 and January 1, 2001, respectively, for administrative, management, financial, information technology, and finance and treasury services. For the years ended December 31, 2007, 2006, and 2005, expenses were incurred in the amounts of $96.6, $95.4, and $82.5, respectively.
§	Services agreement between the Company and its U.S. insurance company affiliates dated January 1, 2001, amended effective January 1, 2002 and December 31, 2007, for administrative, management, professional, advisory, consulting, and other services. For the years ended December 31, 2007, 2006, and 2005, expenses related to the agreements were incurred in the amount of $19.0, $6.1, and $5.7, respectively.
§	Administrative Services Agreement between the Company, ReliaStar Life Insurance Company of New York (“RLNY”), an affiliate, and other U.S. insurance company affiliates dated March 1, 2003, amended effective August 1, 2004, in which the Company and affiliates provide services to RLNY. For the years ended December 31, 2007, 2006, and 2005, revenue related to the agreement was $6.3, $5.8, and $2.5, respectively.
§	ING Advisors Network, a group of broker-dealers affiliated with the Company, distributes the Company’s annuity products. For the years ended December 31, 2007, 2006, and 2005, ING Advisors Network sold new contracts of $1,429.3, $1,255.4, and $1,082.0, respectively.

Management and service contracts and all cost sharing arrangements with other affiliated
companies are allocated in accordance with the Company’s expense and cost allocation
methods.

Reinsurance Agreements

Effective May 1, 2005, ING USA entered into a coinsurance agreement with its affiliate,
Security Life. Under the terms of the agreement, Security Life assumed and accepted the
responsibility for paying, when due, 100% of the liabilities arising under the multi-year
guaranteed fixed annuity contracts issued by ING USA between January 1, 2001 and
December 31, 2003. In addition, ING USA assigned to Security Life all future premiums
received by ING USA attributable to the ceded contracts.

119

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Under the terms of the agreement, ING USA ceded $2.5 billion in account balances and
transferred a ceding commission and $2.7 billion in assets to Security Life, resulting in a
realized capital gain of $47.9 to the Company.

The coinsurance agreement is accounted for using the deposit method. As such, $2.7
billion of Deposit receivable from affiliate was established on the Balance Sheets. The
receivable will be adjusted over the life of the agreement based on cash settlements and
the experience of the contracts, as well as for amortization of the ceding commission.
The Company incurred amortization expense of the negative ceding commission of $21.2
and $23.5 for the years ended December 31, 2007 and 2006, respectively, which is
included in Other expenses in the Statements of Operations.

In addition, the Company entered into a 100% coinsurance agreement with Security Life
dated January 1, 2000, covering certain universal life policies which had been issued and
in force as of, as well as any such policies issued after, the effective date of the
agreement. As of December 31, 2007 and 2006, the value of reserves ceded by the
Company under this agreement was $16.6 and $16.0, respectively.

The Company is a party to a Facultative Coinsurance Agreement with its affiliate,
Security Life, effective August 20, 1999. Under the terms of this agreement, the
Company facultatively cedes to Security Life, from time to time, certain GICs on a 100%
coinsurance basis. The value of GIC reserves ceded by the Company under this
agreement was $2.3 billion and $2.2 billion at December 31, 2007 and 2006, respectively.

Financing Agreements

The Company maintains a reciprocal loan agreement with ING AIH, an affiliate, to
facilitate the handling of unanticipated short-term cash requirements that arise in the
ordinary course of business. Under this agreement, which became effective in January
2004 and expires on January 14, 2014, either party can borrow from the other up to 3.0%
of the Company's statutory admitted assets as of the preceding December 31. Interest on
any ING USA borrowing is charged at the rate of ING AIH’s cost of funds for the
interest period, plus 0.15% . Interest on any ING AIH borrowing is charged at a rate
based on the prevailing interest rate of U.S. commercial paper available for purchase with
a similar duration.

Under this agreement, the Company incurred interest expense of $3.5, $1.5, and $0.9, for
the years ended December 31, 2007, 2006, and 2005, respectively. The Company earned
interest income of $6.7, $4.9, and $4.3, for the years ended December 31, 2007, 2006,
and 2005, respectively. Interest expense and income are included in Interest expense and
Net investment income, respectively, on the Statements of Operations. At December 31,
2007 and 2006, the Company had no amounts outstanding with ING AIH under the
reciprocal loan agreement.

120

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Notes with Affiliates

The Company issued a 30-year surplus note in the principal amount of $35.0 on
December 8, 1999, to its affiliate, Security Life, which matures on December 7, 2029.
Interest is charged at an annual rate of 7.98% . Payment of the note and related accrued
interest is subordinate to payments due to contractowners and claimant and beneficiary
claims, as well as debts owed to all other classes of debtors, other than surplus note
holders, of ING USA. Any payment of principal and/or interest made is subject to the
prior approval of the Iowa Insurance Commissioner. Interest expense was $2.8, for each
of the years ended December 31, 2007, 2006, and 2005, respectively.

On December 29, 2004, the Company issued surplus notes in the aggregate principal
amount of $400.0 (the “Notes”), scheduled to mature on December 29, 2034, to its
affiliates, ING Life Insurance and Annuity Company, ReliaStar Life Insurance Company,
and Security Life of Denver International, Limited, in an offering that was exempt from
the registration requirements of the Securities Act of 1933. The Notes bear interest at a
rate of 6.26% per year. Any payment of principal and/or interest is subject to the prior
approval of the Iowa Insurance Commissioner. Interest is scheduled to be paid semi-
annually in arrears on June 29 and December 29 of each year, commencing on June 29,
2005. Interest expense was $25.4 for each of the years ended December 31, 2007, 2006,
and 2005, respectively.

Funding Agreement

On August 10, 2007, the Company issued an extendable funding agreement to its parent,
Lion, upon receipt of a single deposit in the amount of $500.0. To fund the purchase of
the funding agreement, Lion issued a promissory note to its indirect parent company,
ING Verzekeringen N.V. ("ING V"), which has been guaranteed by Lion’s immediate
parent, ING AIH.

Under the terms of the funding agreement, the Company will pay Lion interest quarterly
at the credited interest rate until maturity, and on the maturity date, the Company will pay
Lion the single deposit and any accrued and unpaid interest. The credited interest rate
shall be the three-month LIBOR, plus 0.05%, and shall be reset quarterly. The maturity
date of the funding agreement shall be August 10, 2009, or such later date to which the
maturity date may be extended; provided, however, that the maturity date may not be
extended beyond August 10, 2012.

121

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Proprietary Alpha Fund

On September 4, 2007, ING USA invested $125.0 into the ING Proprietary Alpha Fund,
LLC (“PAF”). PAF is a newly-formed multi-strategy investment fund established as a
U.S. domiciled limited liability company managed by ING Alternative Asset
Management LLC (“IAAM”). PAF’s initial capital of $300.0 was provided by ING

USA’s affiliated insurance and non-insurance companies.

The investment strategies

within PAF include both long and short exposures to various investments and utilize
various fixed income, equity and derivative financial instruments.

Tax Sharing Agreements

Effective January 1, 2005, the Company is a party to a federal tax allocation agreement
with ING AIH and its subsidiaries that are part of the ING AIH consolidated group.
Under the federal tax allocation agreement, ING AIH charges its subsidiaries for federal
taxes each subsidiary would have incurred were it not a member of the consolidated
group and credits each subsidiary for losses at the statutory federal tax rate.

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

Derivatives

On August 31, 2007, ING USA terminated two interest rate swaps with Security Life to
reduce the Company’s exposure to cash flow variability of assets and liabilities. Under
the terms of the agreement, the Company paid the quarterly quoted 3-month LIBOR rate
and received a fixed rate of 4.8% and 4.9% for swaps that mature on December 30, 2010
and 2015, respectively. The notional amount of each swap was $100.0. The fair values
of the swaps were $(1.6) and $(0.1) for the December 30, 2010 and 2015 swaps,
respectively, at the date of termination.

As of December 31, 2007 and 2006, the Company had call options with a notional
amount of $167.8 and $935.4 respectively, and market value of $42.6 and $78.6,
respectively, with ING Bank, an affiliate. Each of these contracts was entered into as a
result of a competitive bid, which included unaffiliated counterparties.

122

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Purchase of Investments

On September 27, 2007, the Company purchased at fair value financial assets with a fair
value of $435.0 from Security Life, an affiliate. The investments, which primarily
consisted of AAA rated collateralized mortgage obligations were purchased by the
Company with the intent to use them as part of the FHLB funding agreement program.
These assets are included in fixed maturities on the Balance Sheets.

On August 21, 2007, ING USA purchased at fair value U.S. commercial mortgage loans
with a fair value of $17.9 from ING Bank of Canada, an affiliate.

11. Financing Agreements

The Company maintains a $100.0 uncommitted, perpetual revolving note facility with the
Bank of New York ("BONY"). Interest on any of the Company borrowing accrues at an
annual rate equal to a rate quoted by BONY to the Company for the borrowing. Under
this agreement, the Company incurred minimal interest expense for the years ended
December 31, 2007, 2006, and 2005. At December 31, 2007 and 2006, the Company had
no amounts outstanding under the revolving note facility.

The Company also maintains a $75.0 uncommitted line-of-credit agreement with PNC
Bank (“PNC”), effective December 19, 2005. Borrowings are guaranteed by ING AIH,
with maximum aggregate borrowings outstanding at anytime to ING AIH and its
affiliates of $75.0. Interest on any of the Company borrowing accrues at an annual rate
equal to the rate quoted by PNC to the Company for the borrowing. Under this
agreement, the Company incurred minimal interest expense for the year ended
December 31, 2007 and 2006. At December 31, 2007 and 2006, the Company had no
amounts outstanding under the line-of-credit agreement.

The Company maintains a $100.0 uncommitted line-of-credit agreement with Svenska
Handelsbanken AB (Publ.) (“Svenska”), effective June 2, 2006. Borrowings are
guaranteed by ING AIH, with maximum aggregate borrowings outstanding at anytime to
ING AIH and its affiliates of $100.0. Interest on any of the Company’s borrowing
accrues at an annual rate equal to the rate quoted by Svenska to the Company for the
borrowing. Under this agreement, the Company incurred minimal interest expense for the
year ended December 31, 2007. At December 31, 2007, the Company had no amounts
outstanding under the line-of-credit agreement.

Also see Financing Agreements in the Related Party Transactions footnote.

123

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

12. Reinsurance

At December 31, 2007, the Company had reinsurance treaties with 16 unaffiliated
reinsurers covering a portion of the mortality risks and guaranteed death and living
benefits under its annuity contracts. The Company also has reinsurance treaties with one
affiliate, Security Life, related to GICs, fixed annuities, and universal life insurance
policies. The Company remains liable to the extent its reinsurers do not meet their
obligations under the reinsurance agreements.

Reinsurance ceded in force for life mortality risks were $689.1 and $755.3 at
December 31, 2007 and 2006, respectively. Net receivables were comprised of the
following at December 31, 2007 and 2006.

	2007	2006
Claims recoverable from reinsurers	$ 6.9	$ 7.2
Payable for reinsurance premiums	1.4	(2.3)
Reinsured amounts due to reinsurers	(36.2)	(29.9)
Reserve credits	5.1	9.1
Reinsurance ceded	2,452.1	2,265.7
Deposits	2,153.2	2,478.4
Other	33.6	30.8
Total	$ 4,616.1	$ 4,759.0

Premiums and Interest credited and other benefits to contractowners were reduced by the
following amounts for reinsurance ceded for the years ended December 31, 2007, 2006,
and 2005.

	2007	2006	2005
Deposits ceded under reinsurance	$ 1,309.1	$ 1,144.3	$ 722.2
Premiums ceded under reinsurance	2.4	2.5	3.0
Reinsurance recoveries	1,723.2	657.6	703.4

Also see Reinsurance Agreements in the Related Party Transactions footnote.

13. Commitments and Contingent Liabilities

Leases

The Company leases its office space and certain equipment under operating leases, the
longest term of which expires in 2017.

124

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

For the years ended December 31, 2007, 2006, and 2005, rent expense for leases was

$7.9, $8.3, and $8.0, respectively.

The future net minimum payments under

noncancelable leases for the years ended December 31, 2008 through 2012 are estimated
to be $8.6, $8.6, $7.0, $5.7, and $5.5, respectively, and $24.2, thereafter. The Company
pays substantially all expenses associated with its leased and subleased office properties.
Expenses not paid directly by the Company are paid for by an affiliate and allocated back
to the Company.

Commitments

Through the normal course of investment operations, the Company commits to either
purchase or sell securities, commercial mortgage loans, or money market instruments, at
a specified future date and at a specified price or yield. The inability of counterparties to
honor these commitments may result in either a higher or lower replacement cost. Also,
there is likely to be a change in the value of the securities underlying the commitments.

At December 31, 2007, the Company had off-balance sheet commitments to purchase
investments equal to their fair value of $616.3, $156.5 of which was with related parties.
At December 31, 2006, the Company had off-balance sheet commitments to purchase
investments equal to their fair value of $537.9, $143.2 of which was with related parties.
During 2007 and 2006, $33.1 and $32.4, respectively, was funded to related parties under
these commitments.

Financial Guarantees

The Company owns a 3-year credit-linked note arrangement, whereby the Company will
reimburse the guaranteed party upon payment default of the referenced obligation. Upon
such default, the Company will reimburse the guaranteed party for the loss under the
reference obligation, and the Company receives that reference obligation in settlement.
The Company can seek recovery of any losses under the agreements by sale or collection
of the received reference obligation. As of December 31, 2007, the maximum potential
future exposure to the Company under the guarantee was $32.5.

Cash Collateral

Under the terms of the Company’s Over-The-Counter Derivative International Swaps and
Derivatives Association, Inc. Agreements (“ISDA Agreements”), the Company may
receive from, or deliver to, counterparties, collateral to assure that all terms of the ISDA
Agreements will be met with regard to the Credit Support Annex (“CSA”). The terms of
the CSA call for the Company to pay interest on any cash received equal to the Federal
Funds rate. As of December 31, 2007, the Company held $11.5 of cash collateral, which
was included in Collateral held, including payables under securities loan agreement and
was reinvested in Short-term investments under securities loan agreement on the

125

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Condensed Balance Sheets. The Company held no cash collateral under the ISDA
Agreements as of December 31, 2006.

Litigation

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

Other Regulatory Matters

Regulatory Matters

As with many financial services companies, the Company and its affiliates have received
informal and formal requests for information from various state and federal governmental
agencies and self-regulatory organizations in connection with inquiries and investigations
of the products and practices of the financial services industry. In each case, the
Company and its affiliates have been and are providing full cooperation.

Insurance and Retirement Plan Products and Other Regulatory Matters

Federal and state regulators, and self-regulatory agencies are conducting broad inquiries
and investigations involving the insurance and retirement industries. These initiatives
currently focus on, among other things, compensation, revenue sharing, and other sales
incentives; potential conflicts of interest; potential anti-competitive activity; reinsurance;
sales and marketing practices (including sales to seniors); specific product types
(including group annuities and indexed annuities); and disclosure. It is likely that the
scope of these industry investigations will further broaden before they conclude. The
Company and certain of its U.S. affiliates have received formal and informal requests in
connection with such investigations, and are cooperating fully with each request for
information. Some of these matters could result in regulatory action involving the
Company. These initiatives also may result in new legislation and regulation that could
significantly affect the financial services industry, including businesses in which the
Company is engaged. In light of these and other developments, U.S. affiliates of ING,
including the Company, periodically review whether modifications to their business
practices are appropriate.

126

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Investment Product Regulatory Issues

Since 2002, there has been increased governmental and regulatory activity relating to
mutual funds and variable insurance products. This activity has primarily focused on
inappropriate trading of fund shares; directed brokerage; compensation; sales practices,
suitability, and supervision; arrangements with service providers; pricing; compliance
and controls; adequacy of disclosure; and document retention.

In addition to responding to governmental and regulatory requests on fund trading issues,
ING management, on its own initiative, conducted, through special counsel and a
national accounting firm, an extensive internal review of mutual fund trading in ING
insurance, retirement, and mutual fund products. The goal of this review was to identify
any instances of inappropriate trading in those products by third parties or by ING
investment professionals and other ING personnel.

The internal review identified several isolated arrangements allowing third parties to
engage in frequent trading of mutual funds within the variable insurance and mutual fund
products of ING, and identified other circumstances where frequent trading occurred
despite measures taken by ING intended to combat market timing. Each of the
arrangements has been terminated and disclosed to regulators, to the independent trustees
of ING Funds (U.S.) and in Company reports previously filed with the Securities and
Exchange Commission (“SEC”) pursuant to the Securities Exchange Act of 1934, as
amended.

Action may be taken by regulators with respect to the Company or certain affiliates
before investigations relating to fund trading are completed. The potential outcome of
such action is difficult to predict but could subject the Company or certain affiliates to
adverse consequences, including, but not limited to, settlement payments, penalties, and
other financial liability. It is not currently anticipated, however, that the actual outcome
of any such action will have a material adverse effect on ING or ING’s U.S.-based
operations, including the Company.

ING has agreed to indemnify and hold harmless the ING Funds from all damages
resulting from wrongful conduct by ING or its employees or from ING’s internal
investigation, any investigations conducted by any governmental or self-regulatory
agencies, litigation or other formal proceedings, including any proceedings by the SEC.
Management reported to the ING Funds Board that ING management believes that the
total amount of any indemnification obligations will not be material to ING or ING’s
U.S.-based operations, including the Company.

127

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

14.	Accumulated Other Comprehensive Income (Loss)
	Shareholder’s equity included the following components of Accumulated			other
	comprehensive income (loss) as of December 31, 2007, 2006, and 2005.
		2007	2006	2005
	Net unrealized capital (losses) gains:
	Fixed maturities, available-for-sale	$ (122.3) $	(28.9) $	(6.9)
	Equity securities, available-for-sale	(5.5)	1.5	1.1
	DAC/VOBA adjustment on
	available-for-sale securities	(36.9)	21.1	7.5
	Sales inducements adjustment on
	available-for-sale securities	0.5	1.0	2.5

Other investments
Unrealized capital (losses) gains , before tax

(6.4)	(6.6)	(5.4)
(170.6)	(11.9)	(1.2)

Deferred income tax asset (liability)	59.7	3.8	0.4
Deferred tax asset valuation allowance	(46.9)	-	-
Net unrealized capital (losses) gains	(157.8)	(8.1)	(0.8)
Pension liability, net of tax	(2.9)	(5.1)	(3.9)
Other	-	1.1	-
Accumulated other comprehensive (loss) income	$ (160.7)	$ (12.1)	$ (4.7)
Changes in Accumulated other comprehensive income (loss), net of DAC, VOBA, and
tax (excluding the tax valuation allowance), related to changes in unrealized capital gains
(losses) on securities, including securities pledged, were as follows for the years ended
December 31, 2007, 2006, and 2005.
	2007	2006	2005
Fixed maturities, available-for-sale	$ (93.4)	$ (22.0)	$ (458.3)
Equity securities, available-for-sale	(7.0)	0.4	0.6
DAC/VOBA adjustment on
available-for-sale securities	(58.0)	13.6	266.1
Sales inducements adjustment on
available-for-sale securities	(0.5)	(1.5)	9.2
Other investments	0.2	(1.2)	(2.8)
Unrealized capital (losses) gains, before tax	(158.7)	(10.7)	(185.2)
Deferred income tax asset (liability)	55.9	3.4	66.8
Net change in unrealized capital (losses) gains	$ (102.8)	$ (7.3)	$ (118.4)

128

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)

Net unrealized capital holding (losses) gains
arising during the year⁽¹⁾
Less: reclassification adjustment for (losses) gains
and other items included in Net income⁽²⁾
Net change in unrealized capital (losses)
gains on securities

2007	2006	2005
$ (210.5)	$ (49.5)	$ (69.2)
(107.7)	(42.2)	49.2
$ (102.8)	$ (7.3)	$ (118.4)

(1)	Pretax unrealized capital holding gains (losses) arising during the year were $(324.9), $(72.6), and $(108.3), for the years ended December 31, 2007, 2006, and 2005, respectively.
(2)	Pretax reclassification adjustments for gains (losses) and other items included in Net income were $(166.2), $(61.9), and $76.9, for the years ended December 31, 2007, 2006, and 2005, respectively.

129

QUARTERLY DATA (UNAUDITED)
(Dollar amounts in millions, unless otherwise stated)
2007		First	Second	Third	Fourth
Total revenue	$ 512.4		$ 632.7	$ 534.7	$ 494.0
Income (loss) before income taxes		96.6	138.1	37.1	(144.4)
Income tax expense (benefit)		26.9	41.0	(11.1)	(58.4)
Net income (loss)	$ 69.7		$ 97.1	$ 48.2	$ (86.0)
2006		First	Second	Third	Fourth
Total revenue	$ 425.1		$ 502.2	$ 535.6	$ 562.8
Income before income taxes		54.1	54.2	75.6	92.7
Income tax expense		13.5	13.0	2.1	35.8
Net income	$ 40.6		$ 41.2	$ 73.5	$ 56.9

130

Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial
	Disclosure
	None.
Item 9A.	Controls and Procedures
	Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the
participation of its management, including its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the Company’s
disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of the end of the
period covered by this report. Based on that evaluation, the Chief Executive Officer
and the Chief Financial Officer have concluded that the Company’s current disclosure
controls and procedures are effective in ensuring that material information relating to
the Company required to be disclosed in the Company’s periodic SEC filings is made
known to them in a timely manner.

Management’s Annual Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) for the Company. The Company’s internal
control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of the financial statements of
the Company in accordance with U.S. generally accepted accounting principles. The
Company’s internal control over financial reporting includes those policies and
procedures that:

§	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
§	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and
§	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

131

Management has assessed the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2007. In making its assessment, management
has used the criteria set forth in “Internal Control – Integrated Framework” issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based
upon its assessment, management has concluded that the Company’s internal control
over financial reporting was effective as of December 31, 2007.

This annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit the Company to provide only management’s report in this
annual report.

Changes in Internal Control Over Financial Reporting

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

Item 9B. Other Information

None.

132

PART III

Item 10. Directors, Executive Officers, and Corporate Governance

Omitted pursuant to General Instruction I(2) of Form 10-K, except with respect to
compliance with Sections 406 and 407 of the Sarbanes-Oxley Act of 2002.

a)	Code of Ethics for Financial Professionals
	The Company has approved and adopted a Code of Ethics for Financial Professionals (which was filed as Exhibit 14 to the Company’s Form 10-K, as filed with the Securities and Exchange Commission on March 29, 2004, File No. 033-87270), pursuant to the requirements of Section 406 of the Sarbanes- Oxley Act of 2002. Any waiver of the Code of Ethics will be disclosed by the Company by way of a Form 8-K filing.
b)	Designation of Board Financial Expert
	The Company has designated David A. Wheat, Director, Executive Vice President and Chief Financial Officer of the Company, as its Board Financial Expert, pursuant to the requirements of Section 407 of the Sarbanes-Oxley Act of 2002. Because the Company is not subject to the requirements of Exchange Act Rule 10A-3, it does not have any outside directors sitting on its board.

Item 11. Executive Compensation

Omitted pursuant to General Instruction I(2) of Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

Omitted pursuant to General Instruction I(2) of Form 10-K.

Item 13. Certain Relationships, Related Transactions, and Director Independence

Omitted pursuant to General Instruction I(2) of Form 10-K.

133

Item 14. Principal Accounting Fees and Services

(Dollar amounts in millions, unless otherwise stated)

In 2007 and 2006, Ernst & Young LLP (“Ernst & Young”) served as the principal

external auditing firm for ING, including ING USA.

ING subsidiaries, including

ING USA, are allocated Ernst & Young fees attributable to services rendered by Ernst
& Young to each subsidiary. Ernst & Young fees allocated to the Company for the
years ended December 31, 2007 and 2006 are detailed below, along with a
description of the services rendered by Ernst & Young to the Company.

	2007			2006
Audit fees	$ 3.2		$ 3.5
Audit-related fees		0.2			0.1
Tax fees		-	*		-	*
All other fees		-	*		-	*
	$ 3.4		$ 3.6
*Less than $0.1.
Audit Fees

Fees for audit services include fees associated with professional services rendered by
the auditors for the audit of the annual financial statements of the Company and
review of the Company’s interim financial statements.

Audit-related Fees

Audit-related fees were allocated to ING USA for assurance and related services that
are reasonably related to the performance of the audit or review of the financial
statements and are not reported under the audit fee item above. These services
consisted primarily of the audit of SEC product filings.

Tax Fees

There were minimal tax fees allocated to ING USA in 2007 and 2006. Tax fees
allocated to ING USA were primarily for tax compliance and accounting for income
taxes. These services consisted of tax compliance, including the review of tax
disclosures and proper completion of tax forms, assistance with questions regarding
tax audits, and tax planning and advisory services relating to common forms of
domestic taxation (i.e., income tax and capital tax).

All Other Fees

There were minimal fees allocated to ING USA in 2007 and 2006 under the category
“all other fees.” Other fees allocated to ING USA under this category typically
include fees paid for products and services other than the audit fees, audit-related
fees, and tax fees described above, and consist primarily of non-recurring support and
advisory services.

134

Pre-approval Policies and Procedures

ING USA has adopted the pre-approval policies and procedures of ING. Audit, audit-
related, and non-audit, services provided to the Company by ING’s independent
auditors are pre-approved by ING’s audit committee. Pursuant to ING’s pre-approval
policies and procedures, the ING audit committee is required to pre-approve all
services provided by ING’s independent auditors to ING and its affiliates, including
the Company. The ING pre-approval policies and procedures distinguish five types
of services: (1) audit services, (2) audit-related services, (3) tax services, (4) other
services that are not audit, audit-related, tax, or prohibited services, and (5) prohibited
services (as described in the Sarbanes-Oxley Act).

The ING pre-approval procedures consist of a general pre-approval procedure and a
specific pre-approval procedure.

General Pre-approval Procedure

ING’s audit committee pre-approves audit, audit-related, tax, and other, services to be
provided by ING’s external audit firms on an annual basis. The audit committee also
sets the maximum annual amount for such pre-approved services. Throughout the
year, ING’s audit committee receives from ING’s external audit firms an overview of
all services provided, including related fees and supported by sufficiently detailed
information. ING’s audit committee evaluates this overview periodically on a
retrospective basis during the year. Additionally, ING’s external audit firms and
Corporate Audit Services monitor the amounts paid versus the pre-approved amounts
throughout the year.

Specific Pre-approval Procedure

In addition to the general pre-approval procedure, each proposed independent auditor
engagement that is expected to generate fees in excess of the pre-approved amounts,
must be approved by the audit committee after recommendation of local management
on a case-by-case basis.

In 2007 and 2006, 100% of each of the audit related services, tax services, and all
other services were pre-approved by ING’s audit committee.

135

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)	The following documents are filed as part of this report:
	1.	Financial statements. See Item 8. on page 72.
	2.	Financial statement schedules. See Index to Financial Statement Schedules on page 137.
	3.	Exhibits. See Exhibit Index on page 142.

136

Index to Financial Statement Schedules
		Page
Report of Independent Registered Public Accounting Firm		138
I.	Summary of Investments - Other than Investments in Affiliates as of
	December 31, 2007	139
IV.	Reinsurance Information as of and for the years ended
	December 31, 2007, 2006, and 2005	140

Schedules other than those listed above are omitted because they are not required or
not applicable.

Report of Independent Registered Public Accounting Firm

The Board of Directors
ING USA Annuity and Life Insurance Company

We have audited the financial statements of ING USA Annuity and Life Insurance Company as
of December 31, 2007 and 2006, and for each of the three years in the period ended
December 31, 2007, and have issued our report thereon dated March 25, 2008. Our audits also
included the financial statement schedules listed in Item 15. These schedules are the
responsibility of the Company’s management. Our responsibility is to express an opinion based
on our audits.

In our opinion, the financial statement schedules referred to above, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all material respects, the
information set forth therein.

/s/ Ernst & Young LLP

Atlanta, Georgia
March 25, 2008

ING USA Annuity and Life Insurance Company
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
	Schedule I
Summary of Investments – Other than Investments in Affiliates
As of December 31, 2007
	(In millions)
				Amount
				Shown on
Type of Investments		Cost	Value*	Balance Sheets
Fixed maturities, available-for-sale:
U.S. Treasuries	$ 18.4		$ 19.4	$ 19.4
U.S. government agencies and authorities		86.1	86.8	86.8
State, municipalities, and political subdivisions		49.7	47.2	47.2
Public utilities securities		1,417.5	1,426.9	1,426.9
Other U.S. corporate securities		6,742.7	6,756.8	6,756.8
Foreign securities(1)		3,805.8	3,794.7	3,794.7
Residential mortgage-backed securities		4,988.4	4,955.9	4,955.9
Commercial mortgage-backed securities		3,842.2	3,843.4	3,843.4
Other asset-backed securities		1,947.5	1,844.9	1,844.9
Total fixed maturities, available-for-sale, including
securities pledged to creditors	$ 22,898.3		$ 22,776.0	$ 22,776.0
Equity securities, available-for-sale	$ 216.6		$ 211.1	$ 211.1
Mortgage loans on real estate	$ 3,701.7		$ 3,739.4	$ 3,701.7
Policy loans		155.8	155.8	155.8
Other investments		1,030.9	1,045.3	1,036.6
Total investments	$ 28,003.3		$ 27,927.6	$ 27,881.2
* See Notes 2 and 3 of Notes to Financial Statements.

⁽¹⁾      The term "foreign" includes foreign governments, foreign political subdivisions, foreign public utilities, and all other bonds of foreign issuers. Substantially all of the Company's foreign securities are denominated in U.S. dollars.

139

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

Schedule IV
Reinsurance Information
As of and for the years ended December 31, 2007, 2006, and 2005
(In millions)

					Percentage of
	Gross	Ceded	Assumed	Net	Assumed to Net
Year ended December 31, 2007
Life insurance in force	$ 8,351.5	$ 689.1	$ -	$ 7,662.4	0.0%
Premiums:
Life insurance	21.8	2.2	-	19.6
Accident and health insurance	0.2	0.2	-	-
Total premiums	$ 22.0	$ 2.4	$ -	$ 19.6

Year ended December 31, 2006
Life insurance in force	$ 6,596.5	$ 755.3	$ - $	5,841.2	0.0%
Premiums:
Life insurance	22.8	2.3	-	20.5
Accident and health insurance	0.2	0.2	-	-
Total premiums	$ 23.0	$ 2.5	$ - $	20.5
Year ended December 31, 2005
Life insurance in force	$ 7,012.4	$ 822.2	$ - $	6,190.2	0.0%
Premiums:
Life insurance	24.5	2.7	-	21.8
Accident and health insurance	0.3	0.3	-	-
Total premiums	$ 24.8	$ 3.0	$ - $	21.8

140

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

March 25, 2008	ING USA Annuity and Life Insurance Company
(Date)	(Registrant)

By: /s/

David A. Wheat
David A. Wheat

Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities indicated on or
before March 25, 2008.

	Signatures	Title
/s/	David A. Wheat	Director, Executive Vice President and
	David A. Wheat	Chief Financial Officer
/s/	Bridget M. Healy	Director
	Bridget M. Healy
/s/	Robert G. Leary	Director
	Robert G. Leary
/s/	Thomas J. McInerney	Director and Chairman
	Thomas J. McInerney
/s/	Kathleen A. Murphy	Director
	Kathleen A. Murphy
/s/	Catherine H. Smith	Director
	Catherine H. Smith
/s/	Harry N. Stout	President
	Harry N. Stout
/s/	Steven T. Pierson	Senior Vice President and
	Steven T. Pierson	Chief Accounting Officer

141

	ING USA ANNUITY AND LIFE INSURANCE COMPANY
	Form 10-K for Fiscal Year Ended December 31, 2007
	Exhibit Index
Exhibit Number	Description of Exhibit
2.1	Agreement and Plan of Merger dated June 25, 2003, by and between USG
	Annuity & Life Company, United Life & Annuity Insurance Company,
	Equitable Life Insurance Company of Iowa and Golden American Life
	Insurance Company, incorporated by reference in Exhibit 99-8 in the
	Company’s Form 8K filed with the SEC on January 2, 2004 (File No. 333-
	87270).

3.1 Restated Articles of Incorporation Providing for the Redomestication of Golden

American Life Insurance Company dated July 2 and 3, 2003, effective January
1, 2004, incorporated by reference to Company’s 10-K, as filed with the SEC
on March 29, 2004 (File No. 033-87270).

3.2 Amendment to Articles of Incorporation Providing for the Name Change of
Golden American Life Insurance Company dated November 20, 2003, effective
January 1, 2004, incorporated by reference to the Company’s 10-K, as filed
with the SEC on March 29, 2004 (File No. 033-87270).

3.3 Amendment to Articles of Incorporation Providing for the Change in Purpose
and Powers of ING USA Annuity and Life Insurance Company dated March 3
and 4, 2004, effective March 11, 2004, incorporated by reference to the
Company’s 10-Q, as filed with the SEC on May 17, 2004 (File No. 033-87270).

3.4 Amended and Restated By-Laws of ING USA Annuity and Life Insurance
Company effective January 1, 2005, incorporated by reference to the
Company’s Form 10-Q, as filed with the SEC on May 13, 2005 (File No. 033-
87270).

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

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

142

4.3 Individual Retirement Annuity Rider; Roth Individual Retirement Annuity

Rider; Simple Retirement Account Rider; and 403(b) Rider - Incorporated
herein by reference to Post-Effective Amendment No. 34 to Registration
Statement on Form N-4 for Golden American Life Insurance Company
Separate Account B, as filed with the SEC on April 15, 2003 (File No. 033-
23351).

4.4 403(b) Rider - Incorporated herein by reference to Initial Registration Statement
on Form S-2 for Golden American Life Insurance Company, as filed with the
SEC on April 15, 2003 (File No. 333-104547).

4.5 Single Premium Deferred Equity Indexed Modified Guaranteed Annuity

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

4.6 Interest in Fixed Account I under Variable Annuity Contracts - Incorporated
herein by reference to: Post-Effective Amendment No. 12 to Registration
Statement on Form N-4 for Golden American Life Insurance Company
Separate Account B, as filed with the Securities and Exchange Commission on
April 23, 1999 (File Nos. 033-59261, 811-5626); Incorporated by reference to
Post-Effective Amendment No. 3 to Registration Statement on Form N-4 for
Golden American life Insurance Company, as filed with the SEC on April 23,
1999 (File Nos. 333-28769, 811-5626); and Incorporated by reference to Pre-
Effective Amendment No. 1 to Registration statement on Form N-4 for Golden
American Life Insurance Company Separate Account B, as filed with the SEC
on June 24, 2000 (File Nos. 333-33914, 811-5626).

4.7 Interests in Fixed Account II under Variable Annuity Contracts - Incorporated
herein by reference to Post-Effective Amendment No. 7 to Registration
Statement on Form N-4 for Separate Account B of Golden American Life
Insurance Company as filed with the SEC on October 2, 2000 (File No. 333-
28679, 811-5626), Incorporated herein by reference to Post-Effective
Amendment No. 2 to Registration Statement on Form N-4 for Separate Account
B of Golden American Life Insurance Company as filed with the SEC on
October 2, 2000 (File No. 333-30180, 811-5626), Incorporated herein by
reference to Post-Effective Amendment No. 5 to Registration Statement on
Form N-4 for Separate Account B of Golden American Life Insurance
Company as filed with the SEC on April 23, 1999 (File No. 333-28755, 811-
5626), Incorporated herein by reference to Post-Effective Amendment No. 1 to
Registration Statement on Form N-4 for Separate Account B of Golden
American Life Insurance Company as filed with the SEC on April 23, 1999
(File No. 333-66757, 811-5626), Incorporated herein by reference to Pre-
Effective Amendment No. 1 to Registration Statement on Form N-4 for
Separate Account B of Golden American Life Insurance Company as filed with
the SEC on October 26, 2001 (File No. 333-63692, 811-5626), Incorporated
herein by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-4 for Separate Account B of Golden American Life
Insurance Company as filed with the SEC on December 11, 2001 (File No.333-

143

70600, 811-5626), Incorporated by reference to Post-Effective Amendment No.
1 to Registration Statement on Form N-4 for Golden American Life Insurance
Company Separate Account B, as filed with the SEC on April 16, 2003 (File
No. 333-90516, 811-5626) and Incorporated by reference to Pre-Effective
Amendment No. 1 to Registration Statement on Form N-4 for Golden
American Life Insurance Company Separate Account B, as filed with the SEC
on July 3, 2003 (File No. 333-101487, 811-5626).

4.8 Interest in the Guaranteed Account under Variable Annuity Contracts -
Incorporated herein by reference to Pre-Effective Amendment No. 1 to

Registration Statement on Form S-2 for Golden American Life Insurance

Company, as filed with the SEC on June 29, 2001 (File No. 333-57212).

10.1 Service Agreement, dated as of January 1, 1994, as amended March 7, 1995,
between Golden American and Directed Services, Inc., incorporated by

reference from Exhibit 10(b) to a Registration Statement on Form S-1 filed with
the SEC on April 29, 1998 (File No. 333-51353).

10.2 Asset Management Agreement, dated January 20, 1998, between Golden
American and ING Investment Management LLC, incorporated by reference
from Exhibit 10(f) to Golden American’s Form 10-Q filed with the SEC on
August 14, 1998 (File No. 033-87270).

10.3 Reciprocal Loan Agreement dated January 1, 2004, between ING USA Annuity
and Life Insurance Company and ING America Insurance Holdings, Inc.,
incorporated by reference from Exhibit 10.A(a) to ING USA Annuity and Life
Insurance Company’s Form 10-Q filed with the SEC on or about May 17, 2004
(File No. 333-87270).

10.4 Surplus Note, dated December 8, 1999, between Golden American and First
Columbine Life Insurance Company, incorporated by reference from Exhibit
10(g) to Amendment No. 7 to a Registration Statement for Golden American on
Form S-1 filed with the SEC on or about January 27, 2000 (File No. 333-
28765).

10.5 Services Agreement between Golden American and the affiliated companies
listed in Exhibit B to that Agreement, dated as of January 1, 2001, as amended
effective January 1, 2002, incorporated by reference from Exhibit 10.A (k) to
ING USA Annuity and Life Insurance Company’s Form 10-K filed with the
SEC on March 29, 2004 (File No. 033-87270).

10.6 Services Agreement between Golden American and ING North America
Insurance Corporation effective January 1, 2001, incorporated by reference
from Exhibit 10.A (g) to ING USA Annuity and Life Insurance Company’s
Form 10-K filed with the SEC on March 29, 2004 (File No. 033-87270).

10.7 Form of Shared Services Center Services Agreement by and among ING North
America Insurance Corporation (“Service Provider”) and Ameribest Life
Insurance Company, a Georgia corporation; Equitable Life Insurance Company
of Iowa, an Iowa corporation; USG Annuity & Life Company, an Oklahoma
corporation; Golden American, a Delaware corporation; First Columbine Life

144

Insurance Company, a Colorado corporation; Life Insurance Company of
Georgia, a Georgia corporation; Southland Life Insurance Company, a Texas
corporation; Security Life of Denver Insurance Company, a Colorado
corporation; Midwestern United Life Insurance Company, an Indiana
corporation; and United Life & Annuity Insurance Company, a Texas
corporation, incorporated by reference from Exhibit 10(r) to Pre-Effective
Amendment No. 1 to a Registration Statement on Form S-1 filed by Registrant
with the SEC on or about December 11, 2001 (File No. 333-70602).

10.8 Tax Sharing Agreement between Golden American, ING America Insurance

Holdings, Inc. and affiliated companies, effective January 1, 2001, incorporated
by reference from Exhibit 10.A (j) to ING USA Annuity and Life Insurance
Company’s Form 10-K filed with the SEC on March 29, 2004 (File No. 033-
87270).

10.9 Administrative Services Agreement between Golden American, ReliaStar Life

Insurance Company of New York and affiliated companies listed on Exhibit A
to the Agreement, effective March 1, 2003, incorporated by reference from
Exhibit 10.A (m) to ING USA Annuity and Life Insurance Company’s Form
10-K filed with the SEC on March 29, 2004 (File No. 033-87270).

10.10 First Amendment to the Administrative Services Agreement between ING USA
Annuity and Life Insurance Company and its affiliates, effective as of August
1, 2004, incorporated by reference from Exhibit 10.(i) to ING USA Annuity
and Life Insurance Company’s Form 10-K filed with the SEC on March 18,
2005 (File No. 033-87270).

10.11 Amendments to Asset Management Agreement between Golden American and
ING Investment Management LLC, effective January 1, 2003, incorporated by
reference from Exhibit 10.A (l) to ING USA Annuity and Life Insurance
Company’s Form 10-K filed with the SEC on March 29, 2004 (File No. 033-
87270).

10.12 Third Amendment to the Asset Management Agreement, between Golden
American and ING Investment Management LLC, effective August 18, 2003,
incorporated by reference from Exhibit 10.A (n) to ING USA Annuity and Life
Insurance Company’s Form 10-K filed with the SEC on March 29, 2004 (File
No. 033-87270).

10.13 Lease Agreement, dated as of April 16, 1998, by and between Golden
American and Dunwoody Associates, incorporated by reference from Exhibit
10.A (o) to ING USA Annuity and Life Insurance Company’s Form 10-K filed
with the SEC on March 29, 2004 (File No. 033-87270).

10.14 First Amendment to Lease Agreement, dated November 4, 1998, between
Golden American and Dunwoody Associates, incorporated by reference from
Exhibit 10.A (p) to ING USA Annuity and Life Insurance Company’s Form 10-
K filed with the SEC on March 29, 2004 (File No. 033-87270).

145

10.15 Second Amendment to Lease Agreement, dated June 1, 2000, between Golden

American and Dunwoody Associates, incorporated by reference from Exhibit
10.A (q) to ING USA Annuity and Life Insurance Company’s Form 10-K filed
with the SEC on March 29, 2004 (File No. 033-87270).

10.16 Services Agreement with ING Financial Advisers, LLC (“INGFA”), entered

into June 1, 2002 by Equitable Life Insurance Company of Iowa, as subsumed
by ING USA pursuant to the January 1, 2004 merger, incorporated by reference
from Exhibit 10.(p) to ING USA Annuity and Life Insurance Company’s Form
10-K filed with the SEC on March 18, 2005 (File No. 033-87270).

10.17 Surplus Note for $50,000,000 aggregate principal amount, dated December 29,

2004, issued by ING USA Annuity and Life Insurance Company to its affiliate,
Security Life of Denver International Limited, incorporated by reference from
Exhibit 10.(q) to ING USA Annuity and Life Insurance Company’s Form 10-K
filed with the SEC on March 18, 2005 (File No. 033-87270).

10.18 Surplus Note for $175,000,000 aggregate principal amount, dated December
29, 2004, issued by ING USA Annuity and Life Insurance Company to its
affiliate, ING Life Insurance and Annuity Company, incorporated by reference
from Exhibit 10.(r) to ING USA Annuity and Life Insurance Company’s Form
10-K filed with the SEC on March 18, 2005 (File No. 033-87270).

10.19 Surplus Note for $175,000,000 aggregate principal amount, dated December
29, 2004, issued by ING USA Annuity and Life Insurance Company to its
affiliate, ReliaStar Life Insurance Company, incorporated by reference from
Exhibit 10.(s) to ING USA Annuity and Life Insurance Company’s Form 10-K
filed with the SEC on March 18, 2005 (File No. 033-87270).

10.20 Lease Agreement dated August 31, 1995, between The Graham Group, Inc. and
Equitable Life Insurance Company of Iowa, as subsumed by ING USA Annuity
and Life Insurance Company pursuant to the January 1, 2004 merger,
incorporated by reference from Exhibit 10.(t) to ING USA Annuity and Life
Insurance Company’s Form 10-K filed with the SEC on March 18, 2005 (File
No. 033-87270).

10.21 Joinder Number 2005-1 to Tax Sharing Agreement, dated January 20, 2006,
between ING USA Annuity and Life Insurance Company and ING America
Insurance Holdings Inc., incorporated by reference from Exhibit 10. to ING
USA Annuity and Life Insurance Company’s Form 10-Q filed with the SEC on
May 12, 2006 (File No. 001-32625).

10.22 Coinsurance Agreement, effective May 1, 2005, between ING USA Annuity
and Life Insurance Company and Security Life of Denver Insurance Company,
incorporated by reference from Exhibit 10. to ING USA Annuity and Life
Insurance Company’s Form 10-Q filed with the SEC on May 13, 2005 (File No.
033-87270).

146

10.23

10.24+

10.25+

10.26+

10.27

12.⁺

14.

31.1+

31.2+

32.1+

32.2+

⁺Filed herewith.

Amendment Number 2006-1, dated as of September 11, 2006, to the Services
Agreement between ING USA Annuity and Life Insurance Company and ING
North America Insurance Company, incorporated by reference from Exhibit 10.
to ING USA Annuity and Life Insurance Company’s Form 10-Q filed with the
SEC on November 14, 2006 (File No. 001-32625).

Second Amendment, effective as of July 31, 2007, to Services Agreement,
between Golden American Life Insurance Company (nka ING USA Annuity
and Life Insurance Company) & Directed Services Inc. (nka Directed Services
LLC).

Amendment Number 2007-1 to Reciprocal Loan Agreement, dated as of
December 31, 2007, between ING USA and ING America Insurance Holdings,
Inc.

Amendment Number 2007-1 to Services Agreement, dated as of December 31,
2007, between ING USA and the affiliated companies listed on Exhibit B to the
Agreement.

ING USA Guaranteed Funding Agreement, effective August 10, 2007, issued
by ING USA Annuity and Life Insurance Company to Lion Connecticut
Holdings, Inc., incorporated by reference from Exhibit 10.2 to ING USA
Annuity and Life Insurance Company’s Form 10-Q filed with the SEC on
November 13, 2007 (File No. 001-32625).

Computation of Ratio of Earnings to Fixed Charges, filed herewith.

ING Code of Ethics for Financial Professionals, incorporated by reference from
Exhibit 14 to ING USA Annuity and Life Insurance Company’s Form 10-K
filed with the SEC on March 29, 2004 (File No. 033-87270).

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

Certificate of Harry N. Stout pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.

Certificate of David A. Wheat pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

Certificate of Harry N. Stout pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.

147

							Exhibit 12
ING USA ANNUITY AND LIFE INSURANCE COMPANY
COMPUTATION OF EARNINGS TO FIXED CHARGES RATIO
		2007	2006	2005		2004	2003
	Earnings:
1.	Income before income taxes and cumulative
	effect of changes in accounting principles	$ 127.4	$ 276.6	$ 224.1	$ 173.6		$ 56.5
	Fixed Charges:
2.	Interest expense	32.5	30.3	29.6		5.1	8.2
3.	Interest factor on rental expense	5.5	6.5	8.0		5.0	5.3
4.	Interest credited to contractowners	1,067.0	980.8	946.5		903.6	896.7
5.	Net (undistributed) distributed income from
	equity investees	(11.7)	(1.7)	(1.6)		(1.8)	13.7
6.	Total fixed charges (2 + 3 + 4 + 5)	1,093.3	1,015.9	982.5		911.9	923.9
7.	Total fixed charges excluding interest
	credited to contractowners (6 - 4)	26.3	35.1	36.0		8.3	27.2
8.	Earnings and fixed charges (1 + 6)	1,220.7	1,292.5	1,206.6		1,085.5	980.4
9.	Earnings and fixed charges, excluding
	interest credited to contractowners (1 + 7)	153.7	311.7	260.1		181.9	83.7
	Ratios:
10. Earnings and fixed charges, to total fixed charges (8 / 6)		1.1	1.3	1.2		1.2	1.1
11. Earnings and fixed charges, excluding interest credited to
	contractowners to total fixed charges (9 / 7)	5.8	8.9	7.2		21.9	3.1
12. Deficiency of earnings to fixed charges (6 - 8)*		$ -	$ -	$ -	$ -		$ -
*Represents additional earnings that would be necessary to result in a one to one ratio of earnings to fixed charges.
NM - Not meaningful.

Exhibit 31.1

CERTIFICATION

I, David A. Wheat, certify that:

1.	I have reviewed this annual report on Form 10-K of ING USA Annuity and Life Insurance Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	March 25, 2008
By: /s/	David A. Wheat
	David A. Wheat
	Executive Vice President and Chief Financial Officer
	(Duly Authorized Officer and Principal Financial Officer)

Exhibit 31.2

CERTIFICATION

I, Harry N. Stout, certify that:

1.	I have reviewed this annual report on Form 10-K of ING USA Annuity and Life Insurance Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	March 25, 2008
By: /s/	Harry N. Stout
	Harry N. Stout
	President
	(Duly Authorized Officer and Principal Officer)

Exhibit 32.1

CERTIFICATION

Pursuant to 18 U.S.C. §1350, the undersigned officer of ING USA Annuity and Life Insurance
Company (the “Company”) hereby certifies that, to the officer’s knowledge, the Company’s
Annual Report on Form 10-K for the year ended December 31, 2007 (the “Report”) fully
complies with the requirements of Section 13 or 15(d), as applicable, of the Securities Exchange
Act of 1934 and that the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.

March 25, 2008	By: /s/	David A. Wheat
(Date)		David A. Wheat
		Executive Vice President and
		Chief Financial Officer

Exhibit 32.2

CERTIFICATION

Pursuant to 18 U.S.C. §1350, the undersigned officer of ING USA Annuity and Life Insurance
Company (the “Company”) hereby certifies that, to the officer’s knowledge, the Company’s
Annual Report on Form 10-K for the year ended December 31, 2007 (the “Report”) fully
complies with the requirements of Section 13 or 15(d), as applicable, of the Securities Exchange
Act of 1934 and that the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.

March 25, 2008	By: /s/	Harry N. Stout
(Date)		Harry N. Stout
		President

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Not Applicable

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

ING USA Annuity and Life Insurance Company (ING USA) shall indemnify (including therein the prepayment of
expenses) any person who is or was a director, officer or employee, or who is or was serving at the request of ING
USA as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise for
expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him with respect to any threatened, pending or completed action, suit or proceedings against him by
reason of the fact that he is or was such a director, officer or employee to the extent and in the manner permitted by
law.

ING USA may also, to the extent permitted by law, indemnify any other person who is or was serving ING USA in
any capacity. The Board of Directors shall have the power and authority to determine who may be indemnified
under this paragraph and to what extent (not to exceed the extent provided in the above paragraph) any such person
may be indemnified.

A corporation may procure indemnification insurance on behalf of an individual who is or was a director of the
corporation. ING America Insurance Holdings, Inc. maintains a Professional Liability umbrella insurance policy
issued by an international insurer. The policy covers ING America Insurance Holdings, Inc. and any company in
which ING America Insurance Holdings, Inc. has a controlling interest of 50% or more. This would encompass the
principal underwriter as well as the depositor. Additionally, the parent company of ING America Insurance
Holdings, Inc., ING Groep N.V., maintains an excess umbrella cover with limits in excess of $125,000,000. The
policy provides for the following types of coverage: errors and omissions/professional liability, directors and
officers, employment practices, fiduciary and fidelity.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of the Registrant, as provided above or otherwise, the Registrant has been
advised that in the opinion of the SEC such indemnification by the Depositor is against public policy, as expressed
in the Securities Act of 1933, and therefore may be unenforceable. In the event that a claim of such indemnification
(except insofar as it provides for the payment by the Depositor of expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action, suit or proceeding) is asserted against the Depositor by
such director, officer or controlling person and the SEC is still of the same opinion, the Depositor or Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by the Depositor is against public policy as
expressed by the Securities Act of 1933 and will be governed by the final adjudication of such issue.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Not Applicable

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)
	3(a)	Amendment to Articles of Incorporation Providing for the Name Change of Golden American
		Life Insurance Company, dated (11/21/03), incorporated herein by reference to Post-Effective
		Amendment No. 1 to a Registration Statement on Form S-1 for ING USA Annuity and Life
		Insurance Company filed with the Securities and Exchange Commission on April 9, 2007 (File
		Nos. 333-133076).
	3(b)	Amendment to Articles of Incorporation Providing for the Change in Purpose and Powers of ING

	USA Annuity and Life Insurance Company, dated (03/04/04), incorporated herein by reference to
	Post-Effective Amendment No. 1 to a Registration Statement on Form S-1 for ING USA Annuity
	and Life Insurance Company filed with the Securities and Exchange Commission on April 9,
	2007 (File Nos. 333-133076).
3(c)	Amended and Restated By-Laws of ING USA Annuity and Life Insurance Company, dated
	(12/15/04), incorporated herein by reference to Post-Effective Amendment No. 1 to a Registration
	Statement on Form S-1 for ING USA Annuity and Life Insurance Company filed with the
	Securities and Exchange Commission on April 9, 2007 (File Nos. 333-133076).
3(d)	Resolution of Board of Directors for Powers of Attorney, dated (04/23/99), incorporated herein by
	reference to Post Effective Amendment No. 5 to a Registration Statement on Form N-4 for
	Golden American Life Insurance Company Separate Account B filed with the Securities and
	Exchange Commission on April 23, 1999 (File Nos. 333-28679, 811-05626).
3(e)	Articles of Merger and Agreement and Plan of Merger of USGALC, ULAIC, ELICI into GALIC
	and renamed ING USA Annuity and Life Insurance Company, effective date (01/01/04), dated
	(06/25/03), incorporated herein by reference to Post-Effective Amendment No. 25 to a
	Registration Statement on Form N-4 for ING USA Annuity and Life Insurance Company Separate
	Account B filed with the Securities and Exchange Commission on February 13, 2004 (File Nos.
	333-28679, 811-05626).
4(a)	Single Premium Deferred Modified Guaranteed Annuity Contract, incorporated herein by
	reference to Pre-Effective Amendment No. 1 to a Registration Statement on Form S-2 for Golden
	American Life Insurance Company Separate Account B filed with the Securities and Exchange
	Commission on June 29, 2001 (File No. 333-57212).
4(b)	Single Premium Deferred Modified Guaranteed Annuity Master Contract, incorporated herein by
	reference to Pre-Effective Amendment No. 1 to a Registration Statement on Form S-2 for Golden
	American Life Insurance Company Separate Account B filed with the Securities and Exchange
	Commission on June 29, 2001 (File No. 333-57212).
4(c)	Single Premium Deferred Modified Guaranteed Annuity Certificate, incorporated herein by
	reference to Pre-Effective Amendment No. 1 to a Registration Statement on Form S-2 for Golden
	American Life Insurance Company Separate Account B filed with the Securities and Exchange
	Commission on June 29, 2001 (File No. 333-57212).
4(d)	Individual Deferred Variable Annuity Application, incorporated herein by reference to Post-
	Effective Amendment No. 5 to Registration Statement on Form N-4 for Golden American Life
	Insurance Company Separate Account B filed with the Securities and Exchange Commission on
	April 16, 2003 (File Nos. 333-57218, 811-05626).
4(e)	Individual Retirement Annuity Rider, incorporated herein by reference to Post-Effective
	Amendment No. 34 to Registration Statement on Form N-4 for Golden American Life Insurance
	Company Separate Account B filed on April 15, 2003 (File Nos. 033-23351, 811-05626).
4(f)	Roth Individual Retirement Annuity Rider, incorporated herein by reference to Post-Effective
	Amendment No. 34 to Registration Statement on Form N-4 for Golden American Life Insurance
	Company Separate Account B filed on April 15, 2003 (File Nos. 033-23351, 811-05626).
4(g)	Simple Retirement Account Rider, incorporated herein by reference to Post-Effective Amendment
	No. 34 to Registration Statement on Form N-4 for Golden American Life Insurance Company
	Separate Account B filed on April 15, 2003 (File Nos. 033-23351, 811-05626).
4(h)	403(b) Rider, incorporated herein by reference to Post-Effective Amendment No. 34 to
	Registration Statement on Form N-4 for Golden American Life Insurance Company Separate

		Account B filed on April 15, 2003 (File Nos. 033-23351, 811-05626).
	4(i)	Company Address and Name Change Endorsement, incorporated herein by reference to Post-
		Effective Amendment No. 25 to a Registration Statement on Form N-4 for ING USA Annuity and
		Life Insurance Company Separate Account B filed with the Securities and Exchange Commission
		on February 13, 2004 (File Nos. 333-28679, 811-05626).
	5	Opinion of Counsel, attached.
	10	Material contracts are listed under exhibit 10 in the Company's Form 10-K for the fiscal year
		ended December 31, 2007 (File Nos. 333-133076, 333-133156, 333-133154, 333-133155, 333-
		133153, 333-133152), as filed with the Commission on March 28, 2008. Each of the Exhibits so
		listed is incorporated by reference as indicated in the Form 10-K.
	21	Subsidiaries of the Registrant, incorporated herein by reference to Item 26 in Post-Effective
		Amendment No. 10 to Registration Statement on Form N-4 for Variable Annuity Account C of
		ING Life Insurance and Annuity Company (File No. 333-105479), as filed with the Securities and
		Exchange Commission on April 11, 2008.
	23(a)	Consent of Independent Registered Public Accounting Firm, attached.
	23(b)	Consent of Counsel, incorporated in Item 5 of this Part II, together with the Opinion of Counsel.
	24	Powers of Attorney, attached.
		Exhibits other than those listed above are omitted because they are not required or are not
		applicable.
(b)
		ING USA Annuity and Life Insurance Company Form 10-K for the fiscal year ended December
		31, 2007 is incorporated in Part I within the Prospectus.

ITEM 17. UNDERTAKINGS

(a) Rule 415 offerings. The undersigned registrant hereby undertakes as follows, pursuant to Item 512 of Regulation
S-K:

(1) To file, during any period in which offers or sales of the registered securities are being made, a post-effective
amendment to this registration statement:

(i)	To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii)	To reflect in the prospectus any facts or events arising after the effective date of the registration statement
	(or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a
	fundamental change in the information set forth in the registration statement; and
(iii)	To include any material information with respect to the plan of distribution not previously
	disclosed in the registration statement or any material changes to such information in the registration
	statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.

(5) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

(ii)	Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering,
	other than registration statements relaying on Rule 430B or other than prospectuses filed in reliance on
	Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is
	first used after effectiveness. Provided, however, that no statement made in a registration statement or
	prospectus that is part of the registration statement or made in a document incorporated or deemed
	incorporated by reference into the registration statement or prospectus that is part of the registration
	statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or
	modify any statement that was made in the registration statement or prospectus that was part of the
	registration statement or made in any such document immediately prior to such date of first use.

(6)     That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)	Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to
	be filed pursuant to Rule 424;
(ii)	Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant
	or used or referred to by the undersigned registrant;
(iii)       The portion of any other free writing prospectus relating to the offering containing material information
	about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv)      Any other communication that is an offer in the offering made by the undersigned registrant to the
	purchaser.

(h) Request for Acceleration of Effective Date: 

         Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, 

         officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the 

         registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification 

         is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for 

         indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by 

         a director, officer or controlling person of the registrant in the successful defense of any action, suit or 

         proceeding) is asserted by such director, officer or controlling person in connection with the securities being 

         registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling 

         precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is 

         against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment to 

Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of West 

Chester, Commonwealth of Pennsylvania, on this 18th day of April, 2008. 

By:ING USA ANNUITY AND LIFE INSURANCE COMPANY 

                           (Registrant) 

By:_______________ 

      Valerie G. Brown* 

      President (Principal Executive Officer) 

By:/s/ John S. Kreighbaum 

      John S. (Scott) Kreighbaum as 

      Attorney-in-Fact 

As required by the Securities Act of 1933, this Amendment to the Registration Statement has been signed by the
following persons in the capacities indicated on April 18, 2008.

SIGNATURE	TITLE
Valerie G. Brown*	President (Principal Executive Officer)
Steven T. Pierson*	Chief Accounting Officer
DIRECTORS
David A. Wheat*	Chief Financial Officer
Bridget M. Healy*
Robert G. Leary*
Thomas J. McInerney*	Chairman
Kathleen A. Murphy*
Catherine H. Smith*
By:/s/ John S. Kreighbaum
John S. (Scott) Kreighbaum as
Attorney-in-Fact
*Executed by John S. (Scott) Kreighbaum on behalf of those indicated pursuant to Powers of Attorney.

	EXHIBIT INDEX
ITEM	EXHIBIT	PAGE #
5	Opinion of Counsel	EX-5
23(a)	Consent of Independent Registered Public Accounting Firm	EX-23.A
23(b)	Consent of Counsel	*
24	Powers of Attorney	EX-24
*Included in Exhibit 5 above