Voya Insurance & Annuity 10Q 2007 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2007

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

For the transition period from ___________________ to

Commission File Number: 333-133154, 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

(State or other jurisdiction of incorporation or organization)

1475 Dunwoody Drive

West Chester, Pennsylvania

(Address of principal executive offices)

41-0991508

(IRS Employer Identification No.)

19380-1478

(Zip Code)

(610) 425-3400

(Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

Large accelerated filer o Accelerated filer o Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 250,000 shares of Common Stock, $10 par value, as of May 14, 2007, are authorized, issued, and outstanding, all of which were directly owned by Lion Connecticut Holdings Inc.

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

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Form 10-Q for period ended March 31, 2007

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

PART I. FINANCIAL INFORMATION (UNAUDITED)

Item 1. Financial Statements

Condensed Statements of Operations

(Unaudited)

(In millions)

				Three Months Ended March 31,
				2007		2006
Revenues:
	Net investment income		$	301.3	$	275.8
	Fee income			267.9		219.0
	Premiums			5.0		5.3
	Net realized capital losses			(61.9)		(75.0)
	Other income			0.1		-
Total revenue				512.4		425.1
Benefits and expenses:
	Interest credited and other benefits to contractowners			246.2		256.6
	Operating expenses			58.9		49.4
	Net amortization of deferred policy acquisition
		costs and value of business acquired		96.5		48.3
	Interest expense			7.2		7.8
	Other expense			7.0		8.9
Total benefits and expenses				415.8		371.0
Income before income taxes				96.6		54.1
Income tax expense				26.9		13.5
Net income			$	69.7	$	40.6

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

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Condensed Balance Sheets

(In millions, except share data)

				As of		As of
				March 31,		December 31,
				2007		2006
				(Unaudited)
Assets
Investments:
	Fixed maturities, available-for-sale, at fair value
		(amortized cost of $17,591.8 at 2007 and $17,071.8 at 2006)	$	17,639.5	$	17,054.4
	Equity securities, available-for-sale, at fair value
		(cost of $62.5 at 2007 and $39.1 at 2006)		64.8		40.6
	Short-term investments			42.9		134.3
	Mortgage loans on real estate			3,649.7		3,687.6
	Policy loans			161.0		162.5
	Other investments			629.3		642.9
	Securities pledged (amortized cost of $967.4 at 2007 and $875.5 at 2006)			963.0		864.0
Total investments				23,150.2		22,586.3
Cash and cash equivalents				201.0		608.6
Short-term investments under securities loan agreement				324.2		102.6
Accrued investment income				200.3		183.7
Receivable for securities sold				45.5		20.3
Deposits and reinsurance recoverable from affiliates				4,855.6		4,759.0
Deferred policy acquisition costs				2,671.8		2,669.9
Value of business acquired				105.4		110.1
Sales inducements to contractowners				644.8		630.7
Short-term loan to affiliate				45.0		-
Due from affiliates				11.7		29.7
Current income taxes				-		4.6
Other assets				36.9		43.8
Assets held in separate accounts				39,171.5		37,928.3
Total assets			$	71,463.9	$	69,677.6

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

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Condensed Balance Sheets

(In millions, except share data)

				As of		As of
				March 31,		December 31,
				2007		2006
				(Unaudited)
Liabilities and Shareholder's Equity
Future policy benefits and claims reserves			$	26,931.9	$	26,696.4
Payable for securities purchased				95.4		48.3
Payables under securities loan agreement				324.2		102.6
Borrowed money				682.9		769.6
Notes to affiliates				435.0		435.0
Due to affiliates				86.1		46.4
Current income taxes				51.3		-
Deferred income taxes				261.9		262.5
Other liabilities				348.5		399.4
Liabilities related to separate accounts				39,171.5		37,928.3
Total liabilities				68,388.7		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			3,978.9		3,978.4
	Accumulated other comprehensive income (loss)			8.6		(12.1)
	Retained earnings (deficit)			(914.8)		(979.7)
Total shareholder's equity				3,075.2		2,989.1
Total liabilities and shareholder's equity			$	71,463.9	$	69,677.6

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

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Condensed Statements of Changes in Shareholder’s Equity

(Unaudited)

(In millions)

										Accumulated
									Additional	Other			Retained	Total
							Common		Paid-In	Comprehensive			Earnings	Shareholder's
							Stock		Capital	Income (Loss)			(Deficit)	Equity
Balance at December 31, 2005						$	2.5	$	4,143.1	$	(4.7)	$	(1,191.9)	$	2,949.0
	Comprehensive loss:
		Net income					-		-		-		40.6		40.6
		Other comprehensive loss,
			net of tax:
				Change in net unrealized
					capital gains (losses) on
					securities ($(83.4) pretax), including
					tax valuation allowance of $(80.7)		-		-		(134.9)		-		(134.9)
	Total comprehensive loss														(94.3)
	Employee share-based payments						-		0.6		-		-		0.6
Balance at March 31, 2006						$	2.5	$	4,143.7	$	(139.6)	$	(1,151.3)	$	2,855.3

Balance at December 31, 2006						$	2.5	$	3,978.4	$	(12.1)	$	(979.7)	$	2,989.1
	Cumulative effect of changes in
		accounting principles					-		-		-		(4.8)		(4.8)
Balance at January 1, 2007							2.5		3,978.4		(12.1)		(984.5)		2,984.3
	Comprehensive income:
		Net income					-		-		-		69.7		69.7
		Other comprehensive loss,
			net of tax:
				Change in net unrealized
					capital gains (losses) on
					securities ($31.8 pretax)		-		-		20.7		-		20.7
	Total comprehensive income														90.4
	Employee share-based payments						-		0.5		-		-		0.5
Balance at March 31, 2007						$	2.5	$	3,978.9	$	8.6	$	(914.8)	$	3,075.2

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

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Condensed Statements of Cash Flows

(Unaudited)

(In millions)

				Three Months Ended March 31,
				2007		2006


Net cash provided by operating activities			$	371.4	$	287.5

Cash Flows from Investing Activities:
	Proceeds from the sale, maturity, or redemption of:
		Fixed maturities, available-for-sale		3,072.3		3,704.8
		Equity securities, available-for-sale		4.6		0.2
		Mortgage loans on real estate		185.3		147.7
	Acquisition of:
		Fixed maturities, available-for-sale		(3,683.0)		(4,106.2)
		Equity securities, available-for-sale		(28.0)		(14.0)
		Mortgage loans on real estate		(147.7)		(62.3)
	Short-term investments			91.4		36.6
	Other investments			(34.2)		(99.6)
	Other			1.5		2.8
Net cash used in investing activities				(537.8)		(390.0)

Cash Flows from Financing Activities:
	Deposits received for investment contracts			1,332.8		1,138.2
	Maturities and withdrawals from investment contracts			(1,385.5)		(1,201.2)
	Reinsurance recoverable on investment contracts			(56.8)		91.3
	Short-term loan to affiliate			(45.0)		32.8
	Short-term borrowings			(86.7)		24.6
Net cash (used in) provided by financing activities				(241.2)		85.7
Net decrease in cash and cash equivalents				(407.6)		(16.8)
Cash and cash equivalents, beginning of period				608.6		215.2
Cash and cash equivalents, end of period			$	201.0	$	198.4

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

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(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 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 condensed financial statements and notes as of March 31, 2007, and for the three months ended March 31, 2007 and 2006, have been prepared in accordance with accounting principles generally accepted in the United States and are unaudited.

The condensed financial statements reflect all adjustments (consisting only of normal, recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations, and cash flows, for the interim periods. These condensed financial statements and notes should be read in conjunction with the financial statements and related notes as presented in the Company’s 2006 Annual Report on Form 10-K. The results of operations for the interim periods may not be considered indicative of results to be expected for the full year.

Description of Business

The Company offers various insurance products, including immediate and deferred variable and fixed annuities. The Company’s annuity products are distributed by national wirehouses, regional securities firms, independent National Association of Securities Dealers, Inc. (“NASD”) firms with licensed registered representatives, banks, life insurance companies with captive agency sales forces, independent insurance agents, independent marketing organizations, and the ING broker-dealer network. The Company’s primary annuity customers are retail 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.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed 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.

Significant Accounting Policies

For a description of significant accounting policies, see the Organization and Significant Accounting Policies footnote to the Financial Statements included in the Company’s 2006 Annual Report on Form 10-K. There have been no material changes to the Company’s significant accounting policies since the filing of the Company’s 2006 Annual Report on Form 10-K, except as noted in the Recently Adopted Accounting Standards footnote.

2.	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).

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Accounting for Certain Hybrid Financial Instruments

In February 2006, the FASB issued Statement of Financial Accounting Standards (“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:

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 to have a material effect on the Company’s financial position, results of operations, or cash flows.

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 issued 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”), 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

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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, “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.

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, as follows:

Internal Replacements

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 Condensed Statement of Operations.

3.	New Accounting Standards

The Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued FASB Statement 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

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

reporting date. 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, 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 is currently evaluating the items to which the fair value option may be applied.

Fair Value Measurements

In September 2006, the FASB issued FASB Statement 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.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

4.	Investments

Other-Than-Temporary Impairments

The following table identifies the Company’s other-than-temporary impairments by type for the three months ended March 31, 2007 and 2006.

		Three Months Ended March 31,
		2007				2006
				No. of			No. of
		Impairment		Securities		Impairment	Securities
U.S. Treasuries	$	-	*	1	$	0.1	1
U.S. corporate		6.3		26		5.8	12
Foreign⁽¹⁾		2.2		8		1.3	3
Residential mortgage-backed		0.2		4		4.9	33
Other asset-backed		-		-		1.1	2
Limited partnerships		-		-		0.3	1
Total	$	8.7		39	$	13.5	52

⁽¹⁾ Primarily U.S. dollar denominated.
* Less than $0.1.

The above schedule includes $0.2 and $5.2 in other-than-temporary write-downs for the three months ended March 31, 2007 and 2006, respectively, related to the analysis of credit risk and the possibility of significant prepayment risk. The remaining $8.5 and $8.3 in write-downs for the three months ended March 31, 2007 and 2006, 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 three months ended March 31, 2007 and 2006.

	Three Months Ended March 31,
	2007				2006
				No. of			No. of
		Impairment		Securities		Impairment	Securities
U.S. Treasuries	$	-	*	1	$	0.1	1
U.S. corporate		6.3		26		5.8	12
Foreign		2.2		8		1.3	3
Other asset-backed		-		-		1.1	2
Total	$	8.5		35	$	8.3	18

* Less than $0.1.

The remaining fair value of fixed maturities with other-than-temporary impairments as of March 31, 2007 and 2006 was $771.9 and $301.0, respectively.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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.

5.	Deferred Policy Acquisition Costs and Value of Business Acquired

Activity within DAC was as follows for the three months ended March 31, 2007 and 2006.

				2007		2006
Balance at January 1			$	2,669.9	$	2,255.4
	Deferrals of commissions and expenses			139.8		166.4
	Amortization:
		Amortization		(134.3)		(75.5)
		Interest accrued at 5% to 6%		38.1		30.5
	Net amortization included in the Condensed
		Statements of Operations		(96.2)		(45.0)
	Change in unrealized capital (gains) losses on
		available-for-sale securities		(36.9)		118.0
	Implementation of SOP 05-1			(4.8)		-
Balance at March 31			$	2,671.8	$	2,494.8

Activity within VOBA was as follows for the three months ended March 31, 2007 and 2006.

				2007		2006
Balance at January 1			$	110.1	$	122.1
	Amortization:
		Amortization		(1.6)		(4.7)
		Interest accrued at 4% to 6%		1.3		1.4
	Net amortization included in the Condensed
		Statements of Operations		(0.3)		(3.3)
	Change in unrealized capital (gains) losses on
		available-for-sale securities		(4.4)		15.1
Balance at March 31			$	105.4	$	133.9

During the first quarter of 2007, the Company revised and unlocked the mutual fund revenue assumptions for its annuity products resulting in $20.1 reduction in Net amortization of DAC and VOBA for the three months ended March 31, 2007.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

During the first quarter of 2006, the Company revised and unlocked the separate account return assumptions for its annuity products resulting in $18.8 reduction in Net amortization of DAC and VOBA for the three months ended March 31, 2006.

6.	Capital Contributions and Distributions

During the three months ended March 31, 2007 and 2006, the Company did not receive any capital contributions from its Parent. On May 7, 2007, the Company received $150.0 in capital contributions from its Parent.

During the three months ended March 31, 2007 and 2006, the Company did not pay any dividends or return of capital distributions to its Parent.

7.	Income Taxes

The Company’s effective tax rates for the three months ended March 31, 2007 and 2006 were 27.8% and 25.0%, respectively. The effective rates differ from the expected rate primarily due to the benefit from the dividends received deduction. The increase in the effective tax rate from March 31, 2006 to March 31, 2007 is primarily due to an increase in Income before income taxes relative to the deduction allowed for dividends received.

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.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in Current income taxes and Income tax expense on the Condensed Balance Sheets and Condensed Statement of Operations, respectively. The Company had accrued interest of $2.6 as of January 1, 2007.

The Company is under exam 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.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

8.	Financing Agreements

Reciprocal Loan Agreement

The Company maintains a reciprocal loan agreement with ING America Insurance Holdings, Inc. (“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 minimal interest expense for the three months ended March 31, 2007 and $0.7 for the three months ended March 31, 2006, and earned interest income of $2.6 and $0.4 for the three months ended March 31, 2007 and 2006, respectively. Interest expense and income are included in Interest expense and Net investment income, respectively, on the Condensed Statements of Operations. As of March 31, 2007, the Company had an outstanding net receivable of $45.0 from ING AIH under the reciprocal loan agreement. As of December 31, 2006, the Company had no amounts outstanding under the reciprocal loan agreement.

For information on the Company’s additional financing agreements, see the Financing Agreements footnote to the Company’s 2006 Annual Report on Form 10-K.

9.	Commitments and Contingent Liabilities

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.

As of March 31, 2007, the Company had off-balance sheet commitments to purchase investments equal to their fair value of $651.0, $207.9 of which was with related parties. As of 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 the three months ended March 31, 2007, $7.0 was funded to related parties under these commitments.

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Financial Guarantees

The Company owns 3-year credit-linked note arrangements, whereby the Company will reimburse the guaranteed parties 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 agreement by sale or collection of the received reference obligation. As of March 31, 2007, the maximum potential future exposure to the Company under the guarantees was $44.5.

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.

10.

Accumulated Other Comprehensive Income (Loss)

Shareholder’s equity included the following components of Accumulated other comprehensive income (loss) as of March 31, 2007 and 2006.

			2007		2006
Net unrealized capital gains (losses):
	Fixed maturities, available-for-sale	$	43.3	$	(231.5)
	Equity securities, available-for-sale		2.3		1.5
	DAC/VOBA adjustment on available-for-sale securities		(19.0)		140.8
	Sales inducements adjustment on available-for-sale securities		(0.2)		5.2
	Other investments		(5.4)		(0.6)
Unrealized capital gains (losses), before tax			21.0		(84.6)
Deferred income tax asset			(7.3)		29.6
Deferred tax asset valuation allowance			-		(80.7)
Net unrealized capital gains (losses):			13.7		(135.7)
Pension liability, net of tax			(5.1)		(3.9)
Accumulated other comprehensive income (loss)		$	8.6	$	(139.6)

ING USA Annuity and Life Insurance Company

(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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 three months ended March 31, 2007 and 2006.

			2007		2006
Net unrealized capital holding gains (losses) arising
	during the period⁽¹⁾	$	11.8	$	(63.8)
Less: reclassification adjustment for gains (losses) and
	other items included in Net income⁽²⁾		(8.9)		(9.6)
Net change in unrealized capital gains (losses) on securities		$	20.7	$	(54.2)

⁽¹⁾

Pretax unrealized capital holding gains (losses) arising during the period were $18.2 and $(98.1) for the three months ended March 31, 2007 and 2006, respectively.

⁽²⁾

Pretax reclassification adjustments for gains (losses) and other items included in net income were $(13.6) and $(14.7) for the three months ended March 31, 2007 and 2006, respectively.

Item 2.

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 months ended March 31, 2007 and 2006, and financial condition as of March 31, 2007 and December 31, 2006. This item should be read in its entirety and in conjunction with the condensed financial statements and related notes, which can be found under Part I, Item 1. contained herein, as well as the “Management’s Narrative Analysis of the Results of Operations and Financial Condition” section contained in the Company’s 2006 Annual Report on Form 10-K.

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;

(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)

A loss of key product distribution relationships could materially affect sales;

(9)

Competition could negatively affect the ability to maintain or increase profitability;

(10)

Changes in federal income tax law could make some products less attractive to contractowners and increase tax costs;

(11)

Litigation may adversely affect profitability and financial condition;

(12)

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

(13)

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

(14)

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;

(15)

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

(16)

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

(17)

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 this Item 2. and in Item 1A. of Part II 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.

Critical Accounting Policies

There have been no material changes to the Company’s critical accounting policies since the filing of the Company’s 2006 Annual Report on Form 10-K, except as noted below.

Amortization of Deferred Policy Acquisition Costs and Value of Business Acquired

General

Deferred policy acquisition costs (“DAC”) represent 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.

Value of business acquired (“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.

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”), 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.

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 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”).

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 also 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 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 gross profits, lower the rate of amortization. Sustained decreases in investment, mortality, and expense margins, and thus estimated future gross profits, however, increase the rate of amortization.

Results of Operations

Overview

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 guaranteed investment contracts and funding agreements (collectively referred to as “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 benefits and 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.

Although equity market performance was less favorable during the first quarter of 2007 as compared to the first quarter of 2006, the strong equity market performance in the latter half of 2006 continued to favorably impact variable AUM in the first

quarter of 2007. Fee income from variable products has a direct correlation with the level of AUM, which are impacted by equity market performance.

Market interest rates decreased slightly during the first quarter of 2007 and positively impacted the fair value of the Company's fixed maturities portfolio resulting in a decrease in realized net capital losses.

In addition, the continuation of tight credit spreads in the market made it difficult to find attractive investments to match GIC liabilities. In the first quarter of 2007, the market experienced an inverted yield curve, with longer term bonds having a lower yield than shorter term bonds. The inverted yield curve has hurt the competitiveness of fixed annuities, as compared to short-term instruments.

Results of Operations

The Company’s results of operations for the three months ended March 31, 2007, and changes therein, reflected positive product experience due to favorable equity market performance in the latter half of 2006 and increased AUM mainly driven by a larger block of annuity business in force in 2007. This positive product experience, however, was partially offset by higher Net amortization of DAC and VOBA and Operating expenses.

				Three Months Ended March 31,				$ Increase	% Increase
				2007		2006		(Decrease)	(Decrease)
Revenues:
	Net investment income		$	301.3	$	275.8	$	25.5	9.2%
	Fee income			267.9		219.0		48.9	22.3%
	Premiums			5.0		5.3		(0.3)	(5.7)%
	Net realized capital losses			(61.9)		(75.0)		13.1	17.5%
	Other income			0.1		-		0.1	NM
Total revenue				512.4		425.1		87.3	20.5%
Benefits and expenses:
	Interest credited and other
		benefits to contractowners		246.2		256.6		(10.4)	(4.1)%
	Operating expenses			58.9		49.4		9.5	19.2%
	Net amortization of deferred policy
		acquisition costs and value
		of business acquired		96.5		48.3		48.2	99.8%
	Interest expense			7.2		7.8		(0.6)	(7.7)%
	Other expense			7.0		8.9		(1.9)	(21.3)%
Total benefits and expenses				415.8		371.0		44.8	12.1%
Income before income taxes				96.6		54.1		42.5	78.6%
Income tax expense				26.9		13.5		13.4	99.3%
Net income			$	69.7	$	40.6	$	29.1	71.7%
Effective tax rate				27.8%		25.0%

NM - Not meaningful.

Revenues

Total revenue for the three months ended March 31, 2007, increased mainly due to increases in Fee income and Net investment income, as well as decreases in Net realized capital losses.

Net investment income increased as the result of an increase in assets supporting average fixed AUM, which reflects a larger block of fixed indexed annuities in force and higher yields experienced in the first quarter of 2007.

The increase in Fee income reflects growth in AUM, due to sales and strong equity market performance in 2006.

Net realized capital losses decreased primarily due to the decrease in interest rates during the first quarter of 2007.

Benefits and Expenses

Total benefits and expenses for the three months ended March 31, 2007, increased mainly due to higher Net amortization of DAC and VOBA and Operating expenses, partially offset by lower Interest credited and other benefits to contractowners.

Interest credited and other benefits to contractowners decreased due to a lower increase in reserves, mainly attributable to the less favorable equity market performance during the first quarter of 2007 compared to 2006. In addition, the decrease reflects favorable development related to certain contingencies during the first quarter of 2007.

Operating expenses increased as a result of larger non-deferred asset-based commissions and marketing expenses, as well as the continued growth of the business.

Net amortization of DAC and VOBA increased primarily due to higher actual gross profits related to higher average AUM and lower net realized capital losses.

Income Taxes

Income tax expense increased for the three months ended March 31, 2007, primarily due to higher Income before income taxes.

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, 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.

Portfolio Composition

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

			2007			2006
			Carrying Value	%		Carrying Value	%
Fixed maturities, available-for-sale,
	including securities pledged	$	18,602.5	80.4%	$	17,918.4	79.3%
Equity securities, available-for-sale			64.8	0.3%		40.6	0.2%
Short-term investments			42.9	0.1%		134.3	0.6%
Mortgage loans on real estate			3,649.7	15.8%		3,687.6	16.3%
Policy loans			161.0	0.7%		162.5	0.7%
Other investments			629.3	2.7%		642.9	2.9%
Total investments		$	23,150.2	100.0%	$	22,586.3	100.0%

Fixed Maturities

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

						Gross		Gross
						Unrealized		Unrealized
				Amortized		Capital		Capital		Fair
				Cost		Gains		Losses		Value
Fixed maturities:
	U.S. Treasuries		$	21.2	$	0.2	$	-	$	21.4
	U.S. government agencies and authorities			263.6		0.5		2.1		262.0
	State, municipalities, and political subdivisions			43.0		0.4		0.5		42.9

	U.S. corporate securities:
		Public utilities		1,396.7		23.6		12.3		1,408.0
		Other corporate securities		5,469.2		56.1		40.6		5,484.7
	Total U.S. corporate securities			6,865.9		79.7		52.9		6,892.7

	Foreign securities⁽¹⁾:
		Government		511.3		16.7		3.5		524.5
		Other		3,094.7		40.2		36.8		3,098.1
	Total foreign securities			3,606.0		56.9		40.3		3,622.6

	Residential mortgage-backed securities			3,703.8		52.8		44.4		3,712.2
	Commercial mortgage-backed securities			2,212.1		15.1		17.9		2,209.3
	Other asset-backed securities			1,843.6		4.2		8.4		1,839.4

	Total fixed maturities, including securities pledged			18,559.2		209.8		166.5		18,602.5
	Less: securities pledged			967.4		7.3		11.7		963.0

Total fixed maturities			$	17,591.8	$	202.5	$	154.8	$	17,639.5

⁽¹⁾Primarily U.S. dollar denominated.

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- as of March 31, 2007 and December 31, 2006. Ratings are calculated using a rating hierarchy that considers Standard & Poor’s, Moody’s Investor’s Service, Inc., and internal ratings.

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

		2007			2006
		Fair	% of		Fair	% of
		Value	Total		Value	Total
AAA	$	7,359.6	39.6%	$	7,243.8	40.4%
AA		1,383.1	7.4%		1,245.7	6.9%
A		3,717.4	20.0%		3,631.0	20.3%
BBB		5,342.2	28.7%		5,124.0	28.6%
BB		615.7	3.3%		575.1	3.2%
B and below		184.5	1.0%		98.8	0.6%
Total	$	18,602.5	100.0%	$	17,918.4	100.0%

95.7% and 96.2% of fixed maturities were invested in securities rated BBB and above (Investment Grade) both as of March 31, 2007 and December 31, 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.

The Company does not have any significant exposure to subprime mortgage loans. The only exposure, if any, would arise from the Company's investment in mortgage-backed securities. These securities are primarily agency-backed and are highly rated. The average rating of these mortgage-backed securities was AAA at March 31, 2007.

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

		2007			2006
		Fair	% of		Fair	% of
		Value	Total		Value	Total
U.S. Treasuries	$	21.4	0.1%	$	275.7	1.6%
U.S. government agencies and authorities		262.0	1.4%		219.3	1.2%
U.S. corporate, state, and municipalities		6,935.6	37.3%		6,510.1	36.3%
Foreign		3,622.6	19.5%		3,327.6	18.6%
Residential mortgage-backed		3,712.2	19.9%		3,823.4	21.3%
Commercial mortgage-backed		2,209.3	11.9%		1,923.5	10.7%
Other asset-backed		1,839.4	9.9%		1,838.8	10.3%
Total	$	18,602.5	100.0%	$	17,918.4	100.0%

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% of the Company’s Shareholder’s equity as of March 31, 2007 and December 31, 2006.

Mortgage Loans

Mortgage loans on real estate, primarily commercial mortgage loans, totaled $3,649.7 and $3,687.6 as of March 31, 2007 and December 31, 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 permanent write-down charged to Net realized capital gains (losses). As of March 31, 2007 and December 31, 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 21.1% and 19.9% of properties in California as of March 31, 2007 and December 31, 2006, respectively.

Unrealized Capital Losses

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 as of March 31, 2007 and December 31, 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	$	31.0	18.6%	$	2.9	1.7%	$	25.5	11.8%	$	1.9	0.9%
More than six months
	and less than twelve
	months below
	amortized cost		2.8	1.7%		0.1	0.1%		11.3	5.3%		0.5	0.2%
More than twelve months
	below amortized cost		127.3	76.5%		2.4	1.4%		174.3	81.0%		1.7	0.8%
Total unrealized capital loss		$	161.1	96.8%	$	5.4	3.2%	$	211.1	98.1%	$	4.1	1.9%

Unrealized losses in fixed maturities as of March 31, 2007 and December 31, 2006, were primarily related to interest rate movement, or spread widening, and 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 as of March 31, 2007 and December 31, 2006.

					More than
			Less than		Six Months		More than
			Six Months		and less than		Twelve Months
			Below		Twelve Months		Below
			Amortized		Below		Amortized
2007			Cost		Amortized Cost		Cost		Total
Interest rate or spread widening		$	20.0	$	1.2	$	74.6	$	95.8
Mortgage and other asset-backed
	securities		13.9		1.7		55.1		70.7
Total unrealized capital loss		$	33.9	$	2.9	$	129.7	$	166.5
Fair value		$	3,678.2	$	197.9	$	5,897.0	$	9,773.1

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 loss		$	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 as of March 31, 2007 and December 31, 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		Loss
U.S. government agencies and authorities	$	0.8	$	-	$	1.3	$	2.1
U.S. corporate, state, and municipalities		13.0		0.2		40.2		53.4
Foreign		6.2		1.0		33.1		40.3
Residential mortgage-backed		8.6		1.5		34.3		44.4
Commercial mortgage-backed		3.3		-		14.6		17.9
Other asset-backed		2.0		0.2		6.2		8.4
Total unrealized capital loss	$	33.9	$	2.9	$	129.7	$	166.5

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 loss	$	27.4	$	11.8	$	176.0	$	215.2

Of the unrealized capital losses aged more than twelve months, the average market value of the related fixed maturities is 97.9% of the average book value as of March 31, 2007. In addition, this category includes 1,091 securities, which have an average quality rating of AA-. No other-than-temporary impairment loss was considered necessary for these fixed maturities as of March 31, 2007.

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 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 tables identify the Company’s other-than-temporary impairments by type for the three months ended March 31, 2007 and 2006.

		Three Months Ended March 31,
		2007				2006
				No. of			No. of
		Impairment		Securities		Impairment	Securities
U.S. Treasuries	$	-	*	1	$	0.1	1
U.S. corporate		6.3		26		5.8	12
Foreign		2.2		8		1.3	3
Residential mortgage-backed		0.2		4		4.9	33
Other asset-backed		-		-		1.1	2
Limited partnerships		-		-		0.3	1
Total	$	8.7		39	$	13.5	52

* Less than $0.1.

	Three Months Ended March 31,
	2007				2006
				No. of			No. of
		Impairment		Securities		Impairment	Securities
U.S. Treasuries	$	-	*	1	$	0.1	1
U.S. corporate		6.3		26		5.8	12
Foreign		2.2		8		1.3	3
Other asset-backed		-		-		1.1	2
Total	$	8.5		35	$	8.3	18

* Less than $0.1.

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 upon disposal is determined based on specific identification of securities. Net realized capital gains (losses) on investments were as follows for the three months ended March 31, 2007 and 2006.

		Three Months Ended March 31,
		2007		2006
Fixed maturities, available-for-sale	$	(8.0)	$	(26.4)
Derivatives		(52.2)		(49.5)
Other		(1.7)		0.9
Net realized capital losses	$	(61.9)	$	(75.0)
After-tax net realized capital losses	$	(40.2)	$	(48.8)

The decrease in Net realized capital losses for the three months ended March 31, 2007, reflects lower losses on investments in fixed maturities, primarily driven by the lower interest rate environment experienced in the first quarter of 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.

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 March 31, 2007, the Company had an outstanding net receivable of $45.0 from ING AIH under the reciprocal loan agreement. As of December 31, 2006, the Company had no amounts outstanding under the reciprocal loan agreement.

A $100.0 uncommitted, perpetual revolving note facility with the Bank of New York. As of March 31, 2007 and December 31, 2006, the Company had no amounts outstanding under the revolving note facility.

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 March 31, 2007 and December 31, 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 March 31, 2007 and December 31, 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 March 31, 2007 and December 31, 2006, the Company had $426.8 and $226.7, respectively, in non-putable funding agreements, including accrued interest, issued to FHLB. As of March 31, 2007 and December 31, 2006, assets with a carrying value of approximately $634.7 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 Condensed Balance Sheets.

Capital Contributions and Distributions

During the three months ended March 31, 2007 and 2006, the Company did not receive any capital contributions from Lion Connecticut Holdings, Inc. (“Lion” or “Parent”). On May 7, 2007, the Company received $150.0 in capital contributions from its Parent.

During the three months ended March 31, 2007 and 2006, the Company did not pay any dividends or return of capital distributions to its Parent.

Financial Guarantees

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:

Standard - Guarantees that, upon the death of the annuitant, 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.

Rollup (7.0% or 5.5% Solution) - Guarantees that, upon the death of the annuitant, 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, 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 the death of the annuitant, 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.

As of March 31, 2007 and December 31, 2006, the guaranteed value of these death benefits in excess of account values was estimated to be $2.2 billion before reinsurance.

As of March 31, 2007, 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 $371.3 was projected to be covered by the Company’s equity hedging program. As of December 31, 2006, the guaranteed value of minimum guaranteed death benefits in excess of account value, 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 March 31, 2007 and December 31, 2006, the Company recorded a liability of $157.4 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. The increase in liability was partially offset by the payment of claims in excess of account values.

Guaranteed Living Benefits:

Guaranteed Minimum Income Benefit - Guarantees a minimum income payout, exercisable each contract anniversary on or after 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 - Guarantees annual withdrawals for life of a percentage of premiums received during the growth phase (before taking withdrawals). The percentage may vary by age at first withdrawal, depending on the base annuity contract. Until withdrawals begin, there is a quarterly ratchet feature which may increase the amount used to calculate the annual withdrawal amount. In addition, in 2006 the Company introduced a joint life-time withdrawal benefit option to include coverage for spouses. 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. Most versions of the withdrawal benefit have reset and/or step up features that may increase the guaranteed withdrawal amount in certain conditions. 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 premiums paid by the contractowner after 10 years, net of any contract withdrawals (GMAB10). In the past, the Company offered an alternative design that guaranteed the account value to be at least 200% of premiums paid by contractowners after 20 years (GMAB 20).

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

As of March 31, 2007 and December 31, 2006, the guaranteed value of these living benefits in excess of account values was $243.9 and $227.4, respectively. The increase was primarily driven by an increase in new business. As of March 31, 2007 and December 31, 2006, the Company recorded a liability of $85.4 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.

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 indices chosen to closely replicate contractowner variable fund returns. The Company hedges economic risk using market consistent valuation techniques. 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 GMWBs issued in 2005. This hedge strategy involves purchasing put options in combination with entering into futures positions.

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 addressed by the hedging 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 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.

Income Taxes

Income tax obligations consist of the allowance on uncertain tax benefits related to Internal Revenue Service tax audits and state tax exams that have not been completed. The current liability of $2.0 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 $61.2 cannot be reliably estimated.

Recently Adopted Accounting Standards

(See the Recently Adopted and New Accounting Standards footnotes to the condensed financial statements.)

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. The Pension Protection Act of 2006, which was passed by Congress and signed by the President in August 2006, contains a number of provisions which are likely to have a beneficial effect on annuity and defined contribution products. Some tax reform proposals, including certain recommendations made in late 2005 by the President’s Tax Advisory Panel on Federal Tax Reform could adversely affect the market for some life insurance and annuity products if enacted by Congress. There are no indications at the present time, however, that Congress will enact fundamental tax reforms in 2007, or that it has a favorable view of the Tax Panel’s recommendations regarding tax preferred savings.

Item 4.

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

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.

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

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. For information on the focus of such regulatory inquiries and the actions undertaken by ING in connection therewith, see the “Other Regulatory Matters” section of “Management’s Narrative Analysis of the Results of Operations and Financial Condition” included in the Company’s 2006 Annual Report on Form 10-K, filed March 30, 2007 (SEC File No. 001-32625).

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 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.

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.

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 both 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 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:

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.

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.

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;

Preceived 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 could make some products less attractive to contractowners and increase tax costs

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.

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 regulators, state attorneys general, the National Association of Insurance Commissioners, the Securities and Exchange Commission, and the National Association of Securities Dealers, Inc. 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, or reduce new product sales, 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;

Suitability;

Arrangements with service providers;

Pricing;

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, cause significant harm to the Company’s reputation, and adversely impact profitability.

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

Company 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 Securities and Exchange Commission, the National Association of Securities Dealers, and the Internal Revenue Service.

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.

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 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 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.

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 6.

Exhibits

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, 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.(i)

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).

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).

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).

(ii)

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).

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

(a)

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).

(b)

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).

(c)

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).

(c.1)

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).

(d)

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).

(e)

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).

(f)

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.333-70600, 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).

(g)

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).

12.

Computation of Ratio of Earnings to Fixed Charges, filed herewith.

31.1

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

31.2

Certificate of Harry N. Stout pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certificate of David A. Wheat pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certificate of Harry N. Stout pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURE

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.

May 14, 2007

(Date)

ING USA Annuity and Life Insurance Company

(Registrant)

By:

/s/ David A. Wheat

David A. Wheat

Director, Executive Vice President and

Chief Financial Officer

(Duly Authorized Officer and Principal Financial Officer)

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. freshman Avg

Voya Insurance & Annuity Inactive 10-Q2007 Q1 Quarterly report

Content analysis