Voya Retirement Insurance & Annuity 10-Q 2006 Q3 Quarterly report

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September30, 2006 OR
o		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:333-133151, 333-133157, 333-133158, 333-130833, 333-130827
ING LIFE INSURANCE AND ANNUITY COMPANY (Exact name of registrant as specified in its charter)
Connecticut (State or other jurisdiction of incorporation or organization) 151 Farmington Avenue Hartford, Connecticut (Address of principal executive offices)			71-0294708 (IRS Employer Identification No.) 06156 (Zip Code)
(860) 723-4646 (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: 55,000 shares of Common Stock, $50 par value, as of November 10, 2006, are issued and outstanding, all of which were directly owned by Lion Connecticut Holdings Inc.

NOTE: WHEREAS ING LIFE INSURANCE AND ANNUITY 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 Life Insurance and Annuity Company and Subsidiaries

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

Form 10-Q for the period ended September30, 2006

INDEX
		PAGE
PART I.	FINANCIAL INFORMATION (Unaudited)
Item 1.	Financial Statements:
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Changes in Shareholder's Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Narrative Analysis of the Results of Operations and Financial Condition	24
Item 4.	Controls and Procedures	41
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	44
Item 6.	Exhibits	50
Signature		56

2

ING Life Insurance and Annuity Company and Subsidiaries

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

 

PART I. FINANCIAL INFORMATION (UNAUDITED)

 

Item 1. Financial Statements

Condensed Consolidated Statements of Operations

(Unaudited)

(In millions)

				ThreeMonthsEndedSeptember30,				NineMonthsEndedSeptember30,
				2006		2005		2006		2005
Revenues:
	Net investment income		$	258.8	$	243.5	$	769.0	$	770.0
	Fee income			131.2		122.2		392.4		358.8
	Premiums			8.4		9.1		30.0		35.3
	Net realized capital gains (losses)			0.4		25.3		(9.1)		25.2
	Other income			3.5		3.8		10.2		5.2
Total revenue				402.3		403.9		1,192.5		1,194.5
Benefitsandexpenses:
	Interest credited and other benefits
		to contractowners		177.9		180.0		586.1		559.4
	Operating expenses			116.7		118.8		345.2		327.4
	Amortization of deferred policy acquisition
		costs and value of business acquired		38.7		29.6		20.9		122.9
	Interest expense			0.4		0.5		2.0		0.9
Total benefits and expenses				333.7		328.9		954.2		1,010.6
Income before income taxes				68.6		75.0		238.3		183.9
Income tax expense (benefit)				10.1		(46.0)		54.4		(14.3)
Net income			$	58.5	$	121.0	$	183.9	$	198.2

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

3

ING Life Insurance and Annuity Company and Subsidiaries

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

Condensed Consolidated Balance Sheets

(In millions, except share data)

				Asof		Asof
				September30,		December31,
				2006		2005
				(Unaudited)
Assets
Investments:
	Fixed maturities, available-for-sale, at fair value
		(amortized cost of $15,944.5 at 2006 and $16,749.5 at 2005)	$	15,919.1	$	16,740.5
	Equity securities, available-for-sale, at fair value
		(cost of $221.5 at 2006 and $166.9 at 2005)		233.7		170.1
	Mortgage loans on real estate			1,742.5		1,396.0
	Policy loans			267.9		262.4
	Other investments			223.7		144.6
	Securities pledged (amortized cost of $1,417.2 at 2006 and
		$1,260.8 at 2005)		1,396.7		1,247.6
Total investments				19,783.6		19,961.2
Cash and cash equivalents				121.2		212.5
Short-term investments under securities loan agreement				628.8		318.1
Accrued investment income				212.2		203.6
Receivables for securities sold				117.5		4.7
Reinsurance recoverable				2,735.7		2,796.7
Deferred policy acquisition costs				590.1		512.4
Value of business acquired				1,330.4		1,294.4
Notes receivable from affiliate				175.0		175.0
Short-term loan from affiliate				-		131.0
Due from affiliates				10.5		18.6
Other assets				84.0		61.8
Assets held in separate accounts				40,428.0		35,899.8
Total assets			$	66,217.0	$	61,589.8

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

4

ING Life Insurance and Annuity Company and Subsidiaries

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

Condensed Consolidated Balance Sheets

(In millions, except share data)

				Asof		Asof
				September30,		December31,
				2006		2005
				(Unaudited)
LiabilitiesandShareholder'sEquity
Future policy benefits and claims reserves			$	20,720.0	$	20,932.8
Payable for securities purchased				103.2		3.1
Payables under securities loan agreement				628.8		318.1
Borrowed money				810.8		941.1
Due to affiliates				77.1		63.8
Current income taxes				4.8		46.9
Deferred income taxes				253.0		183.3
Other liabilities				233.8		301.5
Liabilities related to separate accounts				40,428.0		35,899.8
Total liabilities				63,259.5		58,690.4
Shareholder's equity:
	Common stock (100,000 shares authorized, 55,000
		issued and outstanding; $50 per share value)		2.8		2.8
	Additional paid-in capital			4,452.5		4,579.6
	Accumulated other comprehensive loss			(4.0)		(5.3)
	Retained earnings (deficit)			(1,493.8)		(1,677.7)
Total shareholder's equity				2,957.5		2,899.4
Total liabilities and shareholder's equity			$	66,217.0	$	61,589.8

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

5

ING Life Insurance and Annuity Company and Subsidiaries

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

Condensed Consolidated 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, 2004						$	2.8	$	4,576.5	$	67.1	$	(1,922.2)	$	2,724.2
	Comprehensive income:
		Net income					-		-		-		198.2		198.2
		Other comprehensive loss,
			net of tax:
				Change in net unrealized capital gain (loss)
					on securities ($(48.8) pretax)		-		-		(37.6)		-		(37.6)
	Total comprehensive income														160.6
	Employee share-based payments						-		2.3		-		-		2.3
Balance at September 30, 2005						$	2.8	$	4,578.8	$	29.5	$	(1,724.0)	$	2,887.1
Balance at December 31, 2005						$	2.8	$	4,579.6	$	(5.3)	$	(1,677.7)	$	2,899.4
	Comprehensive income:
		Net income					-		-		-		183.9		183.9
		Other comprehensive loss,
			net of tax:
				Change in net unrealized capital gain
					(loss) on securities ($(5.0) pretax)		-		-		1.3		-		1.3
	Total comprehensive income														185.2
	Dividends paid						-		(131.0)		-		-		(131.0)
	Employee share-based payments						-		3.9		-		-		3.9
Balance at September 30, 2006						$	2.8	$	4,452.5	$	(4.0)	$	(1,493.8)	$	2,957.5

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

6

ING Life Insurance and Annuity Company and Subsidiaries

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

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In millions)

				NineMonthsEndedSeptember30,
				2006		2005
						(Restated)
Net cash provided by operating activities			$	815.1	$	826.2
Cash Flows from Investing Activities:
	Proceeds from the sale, maturity, or redemption of:
		Fixed maturities, available-for-sale		7,561.9		15,263.6
		Equity securities, available-for-sale		61.1		60.5
		Mortgage loans on real estate		167.2		151.7
	Acquisition of:
		Fixed maturities, available-for-sale		(7,078.5)		(15,573.8)
		Equity securities, available-for-sale		(110.8)		(61.1)
		Mortgage loans on real estate		(513.7)		(340.5)
	Policy loans			(5.5)		(0.3)
	Other investments			(86.4)		(51.8)
	Purchases of fixed assets, net			(25.4)		(9.5)
Net cash used in investing activities				(30.1)		(561.2)
Cash Flows from Financing Activities:
	Deposits received for investment contracts			1,521.4		1,587.6
	Maturities and withdrawals from investment contracts			(2,136.4)		(1,616.3)
	Short-term borrowings			(130.3)		(163.0)
	Dividends to parent			(131.0)		-
Net cash used in financing activities				(876.3)		(191.7)
Net (decrease) increase in cash and cash equivalents				(91.3)		73.3
Cash and cash equivalents, beginning of period				212.5		187.1
Cash and cash equivalents, end of period			$	121.2	$	260.4

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

7

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

 

1. Organization and Significant Accounting Policies

Basis of Presentation

ING Life Insurance and Annuity Company (“ILIAC”) is a stock life insurance company domiciled in the state of Connecticut. ILIAC and its wholly-owned subsidiaries (collectively, the “Company”) are providers of financial products and services in the United States. ILIAC is authorized to conduct its insurance business in all states and in the District of Columbia.

The condensed consolidated financial statements include ILIAC and its wholly-owned subsidiaries, ING Financial Advisers, LLC (“IFA”) and Northfield Windsor LLC (“NWL”). ILIAC 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”.

On May 11, 2006, ILIAC organized NWL as a wholly-owned subsidiary for the purpose of purchasing, constructing, developing, leasing, and managing a new corporate office facility to be located at 200 Northfield Drive, Windsor, Connecticut that will serve as the principal executive offices of the Company and as corporate offices for other Hartford based operations of the Company and its affiliates (the “Windsor Property”).

On December 31, 2005, ILIAC’s subsidiary, ING Insurance Company of America (“IICA”), merged with and into ILIAC. As of the merger date, IICA ceased to exist and ILIAC became the surviving corporation. The merger did not have an impact on ILIAC, as IICA was a wholly-owned subsidiary and already included in the consolidated financial statements for all periods presented.

The condensed consolidated financial statements and notes as of September 30, 2006, and for the three and nine months ended September 30, 2006 and 2005, have been prepared in accordance with accounting principles generally accepted in the United States and are unaudited.

The condensed consolidated 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 consolidated financial position, results of operations, and cash flows, for the interim periods. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and related notes as presented in the Company’s 2005 Annual Report on Form 10-K/A. The results of operations for the interim periods may not be considered indicative of results to be expected for the full year.

8

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Description of Business

The Company offers qualified and nonqualified annuity contracts that include a variety of funding and payout options for individuals and employer-sponsored retirement plans qualified under Internal Revenue Code Sections 401, 403, 408, and 457, as well as nonqualified deferred compensation plans. The Company’s products are offered primarily to individuals, pension plans, small businesses, and employer-sponsored groups in the health care, government, and education markets (collectively “not-for-profit” organizations) and corporate markets. The Company’s products generally are distributed through pension professionals, independent agents and brokers, third party administrators, banks, dedicated career agents, and financial planners.

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 consolidated 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 (see the Reclassifications and Changes to Prior Year Presentation footnote).

Significant Accounting Policies

For a description of significant accounting policies, see the Organization and Significant Accounting Policies footnote to the Consolidated Financial Statements included in the Company’s 2005 Annual Report on Form 10-K/A.

2. Recently Adopted Accounting Standards

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

On November 3, 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) Statement of Financial Accounting Standards (“FAS”) No. 115-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“FSP FAS No. 115-1”). FSP FAS No. 115-1 replaces the impairment evaluation guidance of the Emerging Issues Tax Force (“EITF”) Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“EITF 03-1”).

9

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

FSP FAS No. 115-1 addresses the determination of when an investment is considered impaired, whether that impairment is other-than-temporary, and the measurement of an impairment loss. In addition, it includes considerations for accounting subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporarily impaired. FSP FAS No. 115-1 further clarifies that an impairment loss should be recognized no later than when the impairment is deemed other-than-temporary, even if a decision to sell an impaired security has not been made. FSP FAS No. 115-1 references existing guidance on other-than-temporary impairments.

FSP FAS No. 115-1 was effective for reporting periods beginning after December 15, 2005, and was implemented by the Company during the fourth quarter of 2005. The Company recognized impairment losses of $2.0 and $25.9 for the three and nine months ended September 30, 2006, respectively, 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 required disclosures are included in the Investments footnote.

Investor’s Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights

In June 2005, the EITF reached a consensus on EITF Issue No. 04-5, “Investor’s Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights” (“EITF 04-5”), which states that the general partner in a limited partnership should presume that it controls and, thus, should consolidate the limited partnership, unless the limited partners have either (a) substantive ability to dissolve the limited partnership or otherwise remove the general partner without cause or (b) substantive participating rights. EITF 04-5 applies to limited partnerships that are not variable interest entities under FASB Interpretation (“FIN”) No. 46R: “Consolidation of Variable Interest Entities” (“FIN 46R”). EITF 04-5 was effective immediately for all new limited partnerships formed and for existing limited partnerships for which partnership agreements were modified after June 29, 2005, and was effective for all other limited partnerships at the commencement of the first reporting period beginning after December 15, 2005.

The adoption of EITF 04-5 had no impact on the Company, as the Company’s investments in limited partnerships are generally considered variable interest entities under FIN 46R, and are accounted for using the cost or equity method of accounting since the Company is not the primary beneficiary. Investments in limited partnerships are included in Other investments on the Condensed Consolidated Balance Sheets.

10

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

3. New Accounting Standards

Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans

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

§ recognize in the statement of financial position, an asset for a plan’s overfunded status or a liability for a plan’s underfunded status;

§ measure a plan’s assets and obligations that determine its funded status as of the end of the fiscal year; and

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

Recognition and disclosure requirements are effective for the Company as of December 31, 2006. The requirement to measure plan assets and benefit obligations as of the date of the year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The Company does not expect the adoption of FAS No. 158 to have a material effect on the Company’s financial position, results of operations, or cash flows.

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 in any new circumstances.

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

11

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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

Considering the Effects of Prior Year Misstatements

In September 2006, the Securities and Exchange Commission (“SEC”) staff issued SEC Staff Accounting Bulletin (“SAB”) Topic 1N, “Financial Statements - Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 states that a registrant should quantify the effect of an error on the financial statements using a dual approach. Specifically, the amount should be computed using both the “rollover” (current year income statement perspective) and “iron curtain” (year-end balance sheet perspective) methods.

SAB 108 is effective for fiscal years ending after November 15, 2006. A change in the method of quantifying errors represents a change in accounting policy, which is generally accounted for on a retrospective basis. Accordingly, if the use of the dual approach results in a larger, material misstatement, the registrant must adjust its financial statements. The Company does not expect the adoption of SAB 108 to have a material impact on the Company’s financial position.

Accounting for Uncertainty in Income Taxes

In June 2006, the FASB issued FIN 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 in accordance with FAS No. 109, “Accounting for Income Taxes.”

FIN 48 prescribes a two-step process for determining the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The first step is recognition: A company first determines whether a tax position is more likely than not to be sustained upon examination, based on the technical merits of the position. The second is measurement: A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit recognized in the financial statements. The benefit under step two is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. No benefit will be recognized on tax positions that do not meet the more-likely-than-not recognition standard. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is in the process of determining the impact of FIN 48.

12

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Accounting for Servicing of Financial Assets

In March 2006, the FASB issued FAS No. 156, “Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140” (“FAS No. 156”). FAS No. 156 requires the separate recognition of servicing assets and servicing liabilities each time an obligation to service a financial asset is undertaken by entering into a servicing contract and permits the fair value measurement of servicing assets and servicing liabilities. In addition, FAS No. 156 does the following:

§ Clarifies when a servicer should separately recognize servicing assets and liabilities;

§ Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable;

§ Permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, provided that the available-for-sale securities are identified in some manner as offsetting the exposure to changes in fair value of servicing assets and servicing liabilities that are subsequently measured at fair value; and

§ Requires additional disclosures for all separately recognized servicing assets and servicing liabilities.

FAS No. 156 requirements for recognition and initial measurement of servicing assets and servicing liabilities should be applied prospectively to all transactions entered into after the beginning of the first fiscal year that commences after September 15, 2006. The Company has determined that the adoption of FAS No. 156 will not have a material effect on the financial position, results of operations, or cash flows.

Accounting for Certain Hybrid Financial Instruments

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

§ 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;

13

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

§ 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 is effective for all instruments acquired, issued, or subject to a remeasurement event, occurring after the beginning of the first fiscal year that commences after September 15, 2006. The provisions of FAS No. 155 are not expected to have an impact upon initial adoption; however, the standard could affect future income recognition for securitized financial assets because there may be more embedded derivatives identified with changes in fair value recognized in net income.

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

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

SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages, that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider, to a contract, or by the election of a feature or coverage within a contract. SOP 05-1 applies to internal replacements made primarily to contracts defined by FAS No. 60, “Accounting and Reporting by Insurance Enterprises” (“FAS No. 60”), as short-duration and long-duration life 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 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006, with earlier adoption encouraged. Additional implementation guidance for SOP 05-1 is currently being considered by the AICPA. The outcome of these discussions is uncertain at this time. As a result, the Company is not currently able to estimate the impact of adoption.

14

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

4. Investments

Equity Securities

Equity securities, available-for-sale, included investments with fair values of $50.1 and $49.5 in ING proprietary funds as of September 30, 2006 and December 31, 2005, respectively.

Other-Than-Temporary Impairments

The following tables identify the Company’s other-than-temporary impairments, included in Net realized capital gains (losses), by type for the three and nine months ended September 30, 2006 and 2005.

		ThreeMonthsEndedSeptember30,
		2006				2005
				No.of			No.of
		Impairment		Securities		Impairment	Securities
U.S. Treasuries/Agencies	$	-	*	1	$	-	-
U.S. corporate		2.0		7		-	-
Residential mortgage-backed		0.6		17		3.3	11
Total	$	2.6		25	$	3.3	11
* Less than $0.1
		NineMonthsEndedSeptember30,
		2006				2005
				No.of			No.of
		Impairment		Securities		Impairment	Securities
U.S. Treasuries/Agencies	$	6.4		4	$	-	-
U.S. corporate		10.7		27		-	-
Foreign(1)		1.8		3		-	-
Residential mortgage-backed		15.2		69		37.1	78
Other asset-backed		7.0		1		-	-
Equity		0.1		3		-	-
Total	$	41.2		107	$	37.1	78
(1) Primarily U.S. dollar denominated.

15

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The above schedules for the three and nine months ended September 30, 2006 include $0.6 and $15.3, respectively, in other-than-temporary write-downs related to the analysis of credit-risk and the possibility of significant prepayment risk. The remaining $2.0 and $25.9 in write-downs for the three and nine months ended September 30, 2006, respectively, relate 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, based upon the requirements of FSP FAS No. 115-1. The following tables summarize these write-downs by type for the three and nine months ended September 30, 2006.

		ThreeMonthsEndedSeptember30,2006
		Impairment		No.ofSecurities
U.S. Treasuries/Agencies	$	-	*	1
U.S. corporate		2.0		7
Total	$	2.0		8
* Less than $0.1
		NineMonthsEndedSeptember30,2006
		Impairment		No.ofSecurities
U.S. Treasuries/Agencies	$	6.4		4
U.S. corporate		10.7		27
Foreign(1)		1.8		3
Other asset-backed		7.0		1
Total	$	25.9		35
(1) Primarily U.S. dollar denominated.

The remaining fair value of investments with other-than-temporary impairments at September 30, 2006 and 2005 was $427.0 and $174.3, respectively.

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

16

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

5. Deferred Policy Acquisition Costs and Value of Business Acquired

Activity for the nine months ended September 30, 2006 and 2005, within deferred policy acquisition costs (“DAC”), was as follows:

				2006		2005
Balance at January 1			$	512.4	$	414.5
	Deferrals of commissions and expenses			100.3		92.6
	Amortization:
		Amortization		(50.2)		(44.3)
		Interest accrued at 5% to 7%		27.5		22.4
	Net amortization included in Condensed Consolidated
		Statements of Operations		(22.7)		(21.9)
	Change in unrealized capital (gains) losses on
		available-for-sale securities		0.1		3.2
Balance at September 30			$	590.1	$	488.4

Activity for the nine months ended September 30, 2006 and 2005, within value of business acquired (“VOBA”), was as follows:

				2006		2005
Balance at January 1			$	1,294.4	$	1,365.2
	Deferrals of commissions and expenses			34.4		36.9
	Amortization:
		Amortization		(62.0)		(167.6)
		Interest accrued at 5% to 7%		63.8		66.6
	Net amortization included in Condensed Consolidated
		Statements of Operations		1.8		(101.0)
	Change in unrealized capital (gains) losses on
		available-for-sale securities		(0.2)		9.1
Balance at September 30			$	1,330.4	$	1,310.2

In determining its DAC and VOBA balances, the Company continuously evaluates its assumptions and estimates of gross profit. Adjustments to estimated gross profits require that the amortization 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 the nine months ended September 30, 2006, the Company refined its estimates of persistency, expenses, and other assumptions for DAC and VOBA, which resulted in net positive unlocking of $62.0.

17

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

6. Capital Contributions and Dividends

During the nine months ended September 30, 2006 and 2005, ILIAC did not receive any capital contributions from its parent.

During the nine months ended September 30, 2006, ILIAC paid $131.0 in cash dividends on its common stock to its parent. During the nine months ended September 30, 2005, ILIAC did not pay any dividends to its parent.

7. Income Taxes

Effective January 1, 2006, ILIAC files a consolidated federal income tax return with ING America Insurance Holdings (“ING AIH”), an affiliate, and certain other subsidiaries of ING AIH that are eligible corporations qualified to file consolidated federal income tax returns as part of the ING AIH affiliated group. Effective January 1, 2006, ILIAC is party to a federal tax allocation agreement with ING AIH and its subsidiaries that are part of the group, whereby ING AIH charges its subsidiaries for federal taxes each subsidiary would have incurred were it not a member of the consolidated group and credits each subsidiary for losses at the statutory federal tax rate.

The Company’s effective tax rates for the three months ended September 30, 2006 and 2005 were 14.7% and (61.3)%, respectively. The effective rates for the nine months ended September 30, 2006 and 2005, were 22.8% and (7.8)%, respectively. The effective rates differ from the expected rate due to the following items:

		ThreeMonthsEndedSeptember30,		NineMonthsEndedSeptember30,
		2006	2005	2006	2005
Statutory tax rate		35.0%	35.0%	35.0%	35.0%
IRS audit settlement		0.0%	(77.6)%	0.0%	(31.7)%
Dividends received
	deduction	(20.4)%	(18.6)%	(12.3)%	(11.2)%
Other		0.1%	(0.1)%	0.1%	0.1%
Net income		14.7%	(61.3)%	22.8%	(7.8)%

In 2005 the Internal Revenue Service ("IRS") completed its examination of the Company's returns for tax years 2000 and 2001. The provision as of September 30, 2005 reflected non-recurring favorable adjustments, resulting from a reduction in the tax liability that was no longer deemed necessary based on the results of the IRS examination, monitoring the activities of the IRS with respect to certain issues with other taxpayers, and the merits of the Company's positions.

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ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

The IRS is currently examining the Company’s returns for tax years 2002 and 2003. Management is not aware of any adjustments as a result of this examination that would have a material impact on the Company’s financial statements.

8. Financing Agreements

Line-of-Credit

ILIAC maintains a $100.0 uncommitted line-of-credit agreement with Svenska Handelsbanken AB (Publ.) (“Svenska”), effective June 2, 2006. Borrowings are guaranteed by ING AIH, with maximum aggregate borrowings outstanding at anytime to ING AIH and its affiliates of $100.0. Interest on any of ILIAC’s borrowing accrues at an annual rate equal to the rate quoted by Svenska to ILIAC for the borrowing. Under this agreement, ILIAC incurred minimal interest expense for the three and nine months ended September 30, 2006. As of September 30, 2006, ILIAC had no amounts outstanding under the line-of-credit agreement.

Reciprocal Loan Agreement

ILIAC maintains a reciprocal loan agreement with ING AIH, an affiliate, to facilitate the handling of unanticipated short-term cash requirements that arise in the ordinary course of business. Under this agreement, which became effective in June 2001 and expires on April 1, 2011, either party can borrow from the other up to 3% of ILIAC’s statutory admitted assets as of the preceding December 31. Interest on any ILIAC 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, ILIAC incurred interest expense of $0.2 and $1.2 for the three and nine months ended September 30, 2006, respectively, and incurred interest expense of $0.3 and $0.3 for the three and nine months ended September 30, 2005, respectively. ILIAC earned interest income of $0.7 and $2.3 for the three and nine months ended September 30, 2006, respectively, and $0.2 and $0.8 for the three and nine months ended September 30, 2005, respectively. Interest expense and income are included in Interest expense and Net investment income, respectively, on the Condensed Consolidated Statements of Operations. At September 30, 2006, ILIAC did not have any receivable or payable from/to ING AIH under the reciprocal loan agreement. At December 31, 2005, ILIAC had $131.0 receivable from ING AIH under the reciprocal loan agreement.

For information on the Company’s additional financing agreements, see the Financing Agreements footnote to the Company’s 2005 Annual Report on Form 10-K/A.

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ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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.

At September 30, 2006, the Company had off-balance sheet commitments to purchase investments equal to their fair value of $739.3, $342.7 of which was with related parties. At December 31, 2005, the Company had off-balance sheet commitments to purchase investments equal to their fair value of $516.7, $398.0 of which was with related parties. During the three and nine months ended September 30, 2006, $25.1 and $59.1, respectively, was funded to related parties under these commitments.

Financial Guarantees

The Company owns a 3-year credit-linked note arrangement whereby the Company will reimburse the guaranteed party upon payment default of the referenced obligation. Upon such default, the Company reimburses the guaranteed party for the loss under the reference obligation, and the Company receives that reference obligation in settlement. The Company can then recover any losses under the agreement by sale or collection of the received reference obligation. As of September 30, 2006, the maximum potential future exposure to the Company under the guarantee was $30.0.

New Construction

During the second quarter of 2006, NWL entered into several agreements related to the construction and development of the Windsor Property, including the following:

§ An agreement with Spazzarini Construction Company, Inc. for site development work at the Windsor Property, with a maximum estimated cost of $11.0.

§ A Sales and Use Tax Relief Program Implementing Agreement (“Program Implementing Agreement”) with the Connecticut Development Authority (“CDA”) for a Connecticut sales and use tax exemption of up to $3.1 over a three year period related to the acquisition of up to $51.6 of certain tangible personal property and services for use in connection with the Windsor Property. ILIAC entered into an agreement with the CDA guaranteeing certain payment and performance obligations of NWL under the Program Implementing Agreement.

20

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

During the third quarter of 2006, NWL entered into an agreement with John Moriarty & Associates, Inc. (“the Contractor”) to provide certain construction services for the new corporate office facility at the Windsor Property. The new corporate facility is scheduled to be completed in three major phases, starting in the fourth quarter of 2007 and ending by January 2008. The sum of the cost of work, the Contractor’s fee and cost of subguard bonding associated with this agreement is guaranteed by the Contractor not to exceed $70.5, subject to Contractor’s incentive fee and additions and deductions by change order under this agreement. Costs associated with the construction of the corporate office facility totaled $16.3 for the nine months ended September 30, 2006.

Litigation

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

Regulatory Matters

As with many financial services companies, the Company and its affiliates have received informal and formal requests for information from various state and federal governmental agencies and self-regulatory organizations in connection with inquiries and investigations of the products and practices of the financial services industry. For information on the focus of such regulatory inquiries and the actions undertaken by ING in connection therewith, see the Commitments and Contingent Liabilities footnote to the Consolidated Financial Statements included in the Company’s 2005 Annual Report on Form 10-K/A.

One topic of the New York Attorney General (“NYAG”) inquiries and investigations related to endorsement of the Company’s products by the New York State United Teachers Union Members Benefits Trust (“NYSUT”) and the sale of the Company’s products to NYSUT members. On October 10, 2006, the Company entered into an assurance of discontinuance (settlement agreement) with the NYAG (the “NYAG Agreement”) regarding the endorsement of the Company’s products by NYSUT and the sale of the Company’s products to NYSUT members. Under the terms of the NYAG Agreement, the Company, without admitting or denying the NYAG’s findings, will distribute $30.0 to NYSUT members, and or former members, who participated in the NYSUT endorsed Company product at any point between January 1, 2001 and June 30,

21

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

2006. The Company also agreed with the NYAG’s office to develop a one-page disclosure to further improve transparency and disclosure regarding retirement product fees (the “One-Page Disclosure”). Pursuant to the terms of the NYAG Agreement, the Company has agreed for a five year period to provide its retirement product customers with the One-Page Disclosure.

In connection with another investigation, the Company and its subsidiary, ING Financial Advisers, LLC (“IFA”), were named in a petition for relief and cease and desist order filed by the New Hampshire Bureau of Securities Regulation (“NH Bureau”) concerning ING’s administration of the New Hampshire state employees deferred compensation plan. On October 10, 2006, the Company and IFA entered into a consent agreement with the NH Bureau (the “NH Agreement”) to resolve the petition for relief and cease and desist order filed by the NH Bureau. Under the terms of the NH Agreement, the Company and IFA, without admitting or denying the NH Bureau’s claims, have agreed to pay a total of $3.0 to resolve the matter, and for a five year period to provide their retirement product customers with the One-Page Disclosure.

The effect of these settlements had no significant impact on the results of operations for the three months ended September 30, 2006, given established reserves.

Other federal and state regulators could initiate similar actions in this or other areas of ING’s business.

10. Accumulated Other Comprehensive Income (Loss)

Shareholder’s equity included the following components of Accumulated other comprehensive income (loss) as of September 30, 2006 and 2005.

				2006		2005
Net unrealized capital gains (losses):
	Fixed maturities, available-for-sale		$	(45.9)	$	124.8
	Equity securities, available-for-sale			12.2		7.8
	DAC/VOBA adjustment on available-for-sale securities			5.0		2.8
	Sales inducements adjustment on available-for-sale
		securities		0.1		-
	Premium deficiency reserve adjustment			(5.9)		-
	Other investments			1.1		7.3
	Less: allocation to experience-rated contracts			(45.0)		66.5
Unrealized capital gains, before tax				11.6		76.2
Deferred income tax liability				(4.0)		(30.0)
Net unrealized capital gains				7.6		46.2
Minimum pension liability, net of tax				(11.6)		(16.7)
Accumulated other comprehensive (loss) income			$	(4.0)	$	29.5

22

ING Life Insurance and Annuity Company and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Net unrealized capital gains (losses) allocated to experience-rated contracts at September 30, 2006 and 2005, are reflected on the Condensed Consolidated Balance Sheets in Future policy benefits and claims reserves and are not included in Shareholder’s equity.

Changes in Accumulated other comprehensive income (loss), net of DAC, VOBA, and tax, related to changes in unrealized capital gains (losses) on securities, including securities pledged, were as follows for the nine months ended September 30, 2006 and 2005.

			2006		2005
Net unrealized capital holding gains (losses) arising
	during the period(1)	$	25.0	$	1.8
Less: reclassification adjustment for gains (losses) and other
	items included in net income(2)		23.7		39.4
Net unrealized capital gains (losses) on securities		$	1.3	$	(37.6)

⁽¹⁾ Pretax unrealized capital holding gains (losses) arising during the period were $(96.0) and $2.4 for the nine months ended September 30, 2006 and 2005, respectively.

⁽²⁾ Pretax reclassification adjustments for gains (losses) and other items included in net income were $(91.0) and $51.2 for the nine months ended September 30, 2006 and 2005, respectively.

 

11. Reclassifications and Changes to Prior Year Presentation

During 2006, certain changes were made to the Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2005, to reflect the correct balances, primarily related to derivatives. As a result of these adjustments, the Company labeled the Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2005, as restated. The following summarizes the adjustments:

			Previously
NineMonthsEndedSeptember30,2005			Reported		Adjustment		Restated
	Net cash provided by operating activities	$	829.3	$	(3.1)	$	826.2
	Net cash used in investing activities		(564.5)		3.3		(561.2)

23

 

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

(Dollar amounts in millions, unless otherwise stated)

Overview

The following narrative analysis presents a review of the consolidated results of operations of ING Life Insurance and Annuity Company (“ILIAC”) and its wholly-owned subsidiaries (collectively, the “Company”) for the three and nine months ended September 30, 2006 and 2005 and financial condition as of September 30, 2006 and December 31, 2005. This item should be read in its entirety and in conjunction with the condensed consolidated 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 2005 Annual Report on Form 10-K/A.

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 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 which represent the Company’s beliefs concerning future levels of sales and redemptions of the Company’s products, investment spreads and yields, or the earnings and profitability of the Company’s activities.

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

24

(4) the occurrence of natural or man-made disasters may adversely affect the Company's results of operations and financial condition;

(5) changes in underwriting and actual experience could materially affect profitability;

(6) a downgrade in the Company’s ratings may negatively affect profitability and financial condition;

(7) competition could negatively affect the ability to maintain or increase profitability;

(8) changes in federal income tax law could make some products less attractive to contractowners and increase tax costs;

(9) litigation may adversely affect profitability and financial condition;

(10) changes in regulation in the United States and recent regulatory investigations may reduce profitability;

(11) changes in accounting standards issued by the Financial Accounting Standards Board or other standard-setting bodies may adversely affect profitability and financial condition; and

(12) 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.

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.

Basis of Presentation

On May 11, 2006, ILIAC organized Northfield Windsor LLC as a wholly-owned subsidiary for the purpose of purchasing, constructing, developing, leasing, and managing a new corporate office facility to be located at 200 Northfield Drive, Windsor, Connecticut that will serve as the principal executive offices of the Company and as corporate offices for other Hartford based operations of the Company and its affiliates (the “Windsor Property”).

On December 31, 2005, ILIAC’s subsidiary ING Insurance Company of America (“IICA”) merged with and into ILIAC. As of the merger date, IICA ceased to exist and ILIAC became the surviving corporation. The merger did not have an impact on ILIAC, as IICA was a wholly-owned subsidiary and already included in the consolidated financial statements for all periods presented.

Critical Accounting Policies

There have been no material changes to the Company’s critical accounting policies since the filing of the Company’s 2005 Annual Report on Form 10-K/A.

25

Results of Operations

Overview

Products offered by the Company include qualified and nonqualified annuity contracts that include a variety of funding and payout options for individuals and employer-sponsored retirement plans qualified under Internal Revenue Code Sections 401, 403, 408, and 457, as well as nonqualified deferred compensation plans.

The Company derives its revenue mainly from (a) fee income generated from separate account assets supporting variable options under variable annuity contract investments, as designated by contractowners, (b) net investment income earned on assets supporting fixed assets under management (“AUM”), mainly generated from annuity products with fixed investment options, and (c) certain other fees. The Company’s expenses primarily consist of (a) interest credited and other benefits to contractowners, (b) amortization of deferred policy acquisition costs (“DAC”) and value of business acquired (“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 for the Company and the insurance industry. The Company’s sales and financial results continue to be affected by economic trends.

A low general level of short-, intermediate-, and long-term interest rates has put pressure on interest spreads on existing blocks of business, as declining investment portfolio spread draws closer to minimum crediting rates on certain products. The compression of the yields between interest credited on spread-based products and declining asset yields will be a concern until new money rate investments are higher than overall investment portfolio yields. Although interest rates decreased at the end of the third quarter of 2006, increasing interest rates during 2006 have negatively impacted the fair value of the Company’s fixed maturity portfolio and resulted in capital losses.

Volatile equity market performance has also presented challenges for the Company, as fee revenue from variable AUM is affected by equity market performance. In addition, variable product demand often mirrors consumer demand for equity market investments. During 2006, gains in the equity markets have led to increases in the Company’s AUM.

The improving economy and a recovery in the employment market, combined with higher corporate confidence, have improved the demand for retirement and savings-type products.

26

Results of Operations

The Company’s results of operations for the three months and nine months ended September 30, 2006, and changes therein, were primarily impacted by DAC and VOBA unlocking and changing equity markets. In addition, interest rate movements had an unfavorable impact on the Company’s operations, resulting in higher realized capital losses on sales of securities.

				ThreeMonthsEndedSeptember30,				$Increase	%Increase
				2006		2005		(Decrease)	(Decrease)
Revenues:
	Net investment income		$	258.8	$	243.5	$	15.3	6.3%
	Fee income			131.2		122.2		9.0	7.4%
	Premiums			8.4		9.1		(0.7)	(7.7)%
	Net realized capital gains			0.4		25.3		(24.9)	(98.4)%
	Other income			3.5		3.8		(0.3)	(7.9)%
Total revenue				402.3		403.9		(1.6)	(0.4)%
Benefitsandexpenses:
	Interest credited and other
		benefits to contractowners		177.9		180.0		(2.1)	(1.2)%
	Operating expenses			116.7		118.8		(2.1)	(1.8)%
	Amortization of deferred policy
		acquisition costs and value
		of business acquired		38.7		29.6		9.1	30.7%
	Interest expense			0.4		0.5		(0.1)	(20.0)%
Total benefits and expenses				333.7		328.9		4.8	1.5%
Income before income taxes				68.6		75.0		(6.4)	(8.5)%
Income tax expense (benefit)				10.1		(46.0)		56.1	NM
Net income			$	58.5	$	121.0	$	(62.5)	NM
Effective tax rate				14.7%		(61.3)%
NM - Not meaningful.

27

				NineMonthsEndedSeptember30,				$Increase	%Increase
				2006		2005		(Decrease)	(Decrease)
Revenues:
	Net investment income		$	769.0	$	770.0	$	(1.0)	(0.1)%
	Fee income			392.4		358.8		33.6	9.4%
	Premiums			30.0		35.3		(5.3)	(15.0)%
	Net realized capital (losses) gains			(9.1)		25.2		(34.3)	NM
	Other income			10.2		5.2		5.0	96.2%
Total revenue				1,192.5		1,194.5		(2.0)	(0.2)%
Benefitsandexpenses:
	Interest credited and other
		benefits to contractowners		586.1		559.4		26.7	4.8%
	Operating expenses			345.2		327.4		17.8	5.4%
	Amortization of deferred policy
		acquisition costs and value
		of business acquired		20.9		122.9		(102.0)	(83.0)%
	Interest expense			2.0		0.9		1.1	NM
Total benefits and expenses				954.2		1,010.6		(56.4)	(5.6)%
Income before income taxes				238.3		183.9		54.4	29.6%
Income tax expense (benefit)				54.4		(14.3)		68.7	NM
Net income			$	183.9	$	198.2	$	(14.3)	(7.2)%
Effective tax rate				22.8%		(7.8)%
NM - Not meaningful.

Revenues

Total revenue decreased for the three and nine months ended September 30, 2006, primarily due to an increase in Net realized capital losses, partially offset by an increase in Fee income. In addition, for the three months ended September 30, 2006, net investment income increased.

Net investment income increased for the three months ended September 30, 2006 due to higher overall average fixed AUM. Total Net investment income for the nine months ended September 30, 2006, remained fairly consistent.

Fee income increased for the three and nine months ended September 30, 2006, as overall average variable AUM increased, driven by favorable equity market conditions and net cashflow during 2006.

During the nine months ended September 30, 2006, Net realized capital losses increased due to higher losses on derivatives. During the three months ended September 30, 2006, Net realized capital gains decreased primarily due to higher losses on derivatives, partially offset by realized capital gains on fixed maturities, as interest rates declined during the final portion of the third quarter of 2006.

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Benefits and Expenses

Total benefits and expenses for the three months ended September 30, 2006 remained fairly consistent while the nine month period for 2006 decreased due to a decrease in Amortization of DAC and VOBA, partially offset by higher Interest credited and other benefits to contractowners and Operating expenses.

Interest credited and other benefits to contractowners increased for the nine months ended September 30, 2006, primarily due to regulatory settlements.

Operating expenses increased for the nine months ended September 30, 2006 in conjunction with higher non-deferred commission expense and the continued growth of the business during 2006.

The decrease in Amortization of DAC and VOBA for the nine months ended September 30, 2006, is primarily driven by unfavorable unlocking of $13.6 in the third quarter of 2006, and favorable unlocking of $75.6 in the second quarter of 2006 due to assumption changes and model refinements.

Income Taxes

Income tax expense increased for the three and nine months ended September 30, 2006 primarily due to the Internal Revenue Service (“IRS”) audit settlement in the third quarter of 2005, which related to the Company's tax returns for the years 2000 and 2001. The provision as of September 30, 2005, reflected non-recurring favorable adjustments, due to a reduction in the tax liability that was no longer deemed necessary based on the results of the IRS examination, monitoring the activities of the IRS with respect to certain issues with other taxpayers, and the merits of the Company's positions.

29

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 risk. In addition, the Company seeks to mitigate the impact of cash flow variability from embedded options within certain investment products, such as prepayment options and interest rate options embedded in collateralized mortgage obligations and call options embedded in corporate bonds. The investment management function is centralized under ING Investment Management LLC, an affiliate of the Company, pursuant to an investment advisory agreement. Separate portfolios are established for groups of products with similar liability characteristics within the Company.

Portfolio Composition

The following table presents the investment portfolio at September 30, 2006 and December 31, 2005.

			2006			2005
			CarryingValue	%		CarryingValue	%
Fixed maturities, available-for-sale,
	including securities pledged	$	17,315.8	87.5%	$	17,988.1	90.1%
Equity securities, available-for-sale			233.7	1.2%		170.1	0.9%
Mortgage loans on real estate			1,742.5	8.8%		1,396.0	7.0%
Policy loans			267.9	1.4%		262.4	1.3%
Other investments			223.7	1.1%		144.6	0.7%
Total investments		$	19,783.6	100.0%	$	19,961.2	100.0%

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Fixed Maturities

Fixed maturities, available-for-sale, were as follows as of September 30, 2006.

						Gross		Gross
						Unrealized		Unrealized
				Amortized		Capital		Capital		Fair
				Cost		Gains		Losses		Value
Fixed maturities:
	U.S. government and government
		agencies and authorities	$	405.9	$	3.8	$	6.1	$	403.6
	State, municipalities, and political
		subdivisions		41.7		1.0		0.2		42.5
	U.S. corporate securities:
		Public utilities		1,186.7		11.9		21.9		1,176.7
		Other corporate securities		4,875.0		69.5		79.0		4,865.5
	Total U.S. corporate securities			6,061.7		81.4		100.9		6,042.2
	Foreign securities(1):
		Government		545.8		25.4		6.5		564.7
		Other		2,029.7		29.2		39.5		2,019.4
	Total foreign securities			2,575.5		54.6		46.0		2,584.1
	Residential mortgage-backed securities			4,570.6		53.9		77.0		4,547.5
	Commercial mortgage-backed securities			2,384.8		21.1		28.3		2,377.6
	Other asset-backed securities			1,321.5		7.4		10.6		1,318.3
	Total fixed maturities, including
		fixed maturities pledged		17,361.7		223.2		269.1		17,315.8
	Less: fixed maturities pledged			1,417.2		5.8		26.3		1,396.7
Total fixed maturities			$	15,944.5	$	217.4	$	242.8	$	15,919.1
(1)	Primarily U.S. dollar denominated.

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Fixed maturities, available-for-sale, were as follows as of December 31, 2005.

						Gross		Gross
						Unrealized		Unrealized
				Amortized		Capital		Capital		Fair
				Cost		Gains		Losses		Value
Fixed maturities:
	U.S. government and government
		agencies and authorities	$	504.1	$	0.6	$	8.4	$	496.3
	State, municipalities, and political
		subdivisions		40.0		0.5		0.9		39.6
	U.S. corporate securities:
		Public utilities		1,260.3		24.1		16.8		1,267.6
		Other corporate securities		5,981.9		109.8		89.7		6,002.0
	Total U.S. corporate securities			7,242.2		133.9		106.5		7,269.6
	Foreign securities(1):
		Government		704.4		30.0		7.7		726.7
		Other		1,815.5		41.8		28.8		1,828.5
	Total foreign securities			2,519.9		71.8		36.5		2,555.2
	Residential mortgage-backed securities			4,453.7		33.6		98.9		4,388.4
	Commercial mortgage-backed securities			2,099.1		29.7		27.0		2,101.8
	Other asset-backed securities			1,151.3		5.8		19.9		1,137.2
	Total fixed maturities, including
		fixed maturities pledged		18,010.3		275.9		298.1		17,988.1
	Less: fixed maturities pledged			1,260.8		5.2		18.4		1,247.6
Total fixed maturities			$	16,749.5	$	270.7	$	279.7	$	16,740.5
(1) Primarily U.S. dollar denominated.

It is management’s objective that the portfolio of fixed maturities be of high quality and be well diversified by market sector. The fixed maturities in the Company’s portfolio are generally rated by external rating agencies and, if not externally rated, are rated by the Company on a basis believed to be similar to that used by the rating agencies. The average quality rating of the Company's fixed maturities portfolio was AA- at September 30, 2006 and December 31, 2005. Ratings are calculated using a rating hierarchy that considers Standard & Poor’s, Moody’s Investor’s Service, Inc., and internal ratings.

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Total fixed maturities by quality rating category, including fixed maturities pledged to creditors, were as follows at September 30, 2006 and December 31, 2005.

		2006			2005
		Fair	%of		Fair	%of
		Value	Total		Value	Total
AAA	$	8,194.2	47.3%	$	7,951.3	44.2%
AA		1,164.9	6.7%		1,148.5	6.4%
A		3,100.5	17.9%		3,984.8	22.2%
BBB		4,171.2	24.1%		4,270.5	23.7%
BB		623.9	3.6%		540.4	3.0%
B and below		61.1	0.4%		92.6	0.5%
Total	$	17,315.8	100.0%	$	17,988.1	100.0%

96.0% and 96.5% of fixed maturities were invested in securities rated BBB and above (Investment Grade) at September 30, 2006 and December 31, 2005, respectively.

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

Total fixed maturities by market sector, including fixed maturities pledged to creditors, were as follows at September 30, 2006 and December 31, 2005.

		2006			2005
		Fair	%of		Fair	%of
		Value	Total		Value	Total
U.S. Treasuries/Agencies	$	403.6	2.3%	$	496.3	2.8%
U.S. corporate, states, and municipalities		6,084.7	35.2%		7,309.2	40.6%
Foreign		2,584.1	14.9%		2,555.2	14.2%
Residential mortgage-backed		4,547.5	26.3%		4,388.4	24.4%
Commercial mortgage-backed		2,377.6	13.7%		2,101.8	11.7%
Other asset-backed		1,318.3	7.6%		1,137.2	6.3%
Total	$	17,315.8	100.0%	$	17,988.1	100.0%

The Company did not have any investments in a single issuer, other than obligations of the U.S. government, with a carrying value in excess of 10% of the Company’s shareholder’s equity at September 30, 2006 or December 31, 2005.

Equity Securities

Equity securities, available-for-sale, included investments with fair values of $50.1 and $49.5 in ING proprietary funds as of September 30, 2006 and December 31, 2005, respectively.

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Mortgage Loans

Mortgage loans, primarily commercial mortgage loans, totaled $1,742.5 and $1,396.0 at September 30, 2006 and December 31, 2005, 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). At September 30, 2006 and December 31, 2005, 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 18.5% and 22.0% of properties in California at September 30, 2006 and December 31, 2005, respectively.

Unrealized Capital Losses

Fixed maturities, including securities pledged to creditors, comprise 87.5% and 90.1% of the Company’s total investment portfolio at September 30, 2006 and December 31, 2005, respectively. Unrealized capital losses related to fixed maturities are analyzed in detail in the following tables.

Unrealized capital losses in fixed maturities, including securities pledged to creditors, for Investment Grade (“IG”) and Below Investment Grade (“BIG”) securities by duration were as follows at September 30, 2006 and December 31, 2005.

			2006						2005
				%ofIG			%ofIG			%ofIG			%ofIG
			IG	andBIG		BIG	andBIG		IG	andBIG	BIG		andBIG
Less than six months
	below amortized cost	$	12.7	4.8%		1.6	0.6%	$	99.3	33.3%		3.1	1.0%
More than six months
	and less than twelve
	months below
	amortized cost		22.6	8.4%		2.0	0.7%		75.2	25.2%		1.8	0.6%
More than twelve months
	below amortized cost		226.9	84.3%		3.3	1.2%		117.3	39.4%		1.4	0.5%
Total unrealized capital loss		$	262.2	97.5%	$	6.9	2.5%	$	291.8	97.9%	$	6.3	2.1%

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Unrealized capital losses in fixed maturities at September 30, 2006 and December 31, 2005, 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 at September 30, 2006 and December 31, 2005.

					Morethan
			Lessthan		SixMonths		Morethan
			SixMonths		andlessthan		TwelveMonths
			Below		TwelveMonths		Below
			Amortized		Below		Amortized
2006			Cost		AmortizedCost		Cost		Total
Interest rate or spread widening		$	7.4	$	20.0	$	125.8	$	153.2
Mortgage and other asset-backed
	securities		6.9		4.6		104.4		115.9
Total unrealized capital loss		$	14.3	$	24.6	$	230.2	$	269.1
Fair value		$	899.6	$	2,124.4	$	7,233.0	$	10,257.0
2005
Interest rate or spread widening		$	55.7	$	33.9	$	62.7	$	152.3
Mortgage and other asset-backed
	securities		46.7		43.1		56.0		145.8
Total unrealized capital loss		$	102.4	$	77.0	$	118.7	$	298.1
Fair value		$	5,936.2	$	2,790.7	$	2,643.6	$	11,370.5

35

Unrealized capital losses in fixed maturities, including securities pledged to creditors, by market sector and duration were as follows at September 30, 2006 and December 31, 2005.

					Morethan
			Lessthan		SixMonths		Morethan
			SixMonths		andlessthan		TwelveMonths		Total
			Below		TwelveMonths		Below		Unrealized
			Amortized		Below		Amortized		Capital
2006			Cost		AmortizedCost		Cost		Loss
U.S. Treasuries/Agencies		$	3.1	$	-	$	3.0	$	6.1
U.S. corporate, state, and
	municipalities		0.9		14.2		86.0		101.1
Foreign			3.4		5.8		36.8		46.0
Residential mortgage-backed			6.8		1.1		69.1		77.0
Commercial mortgage-backed			-		1.0		27.3		28.3
Other asset-backed			0.1		2.5		8.0		10.6
Total unrealized capital loss		$	14.3	$	24.6	$	230.2	$	269.1
2005
U.S. Treasuries/Agencies		$	3.1	$	3.8	$	1.5	$	8.4
U.S. corporate, state, and
	municipalities		40.4		18.9		48.1		107.4
Foreign			12.2		11.2		13.1		36.5
Residential mortgage-backed			29.1		33.1		36.7		98.9
Commercial mortgage-backed			13.7		6.4		6.9		27.0
Other asset-backed			3.9		3.6		12.4		19.9
Total unrealized capital loss		$	102.4	$	77.0	$	118.7	$	298.1

Of the unrealized capital losses aged more than twelve months, the average market value of the related fixed maturities is 97.0% of the average book value as of September 30, 2006. In addition, this category includes 1,244 securities, which have an average quality rating of AA-. No other-than-temporary impairment loss was considered necessary for these fixed maturities as of September 30, 2006.

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.

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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 and nine months ended September 30, 2006 and 2005.

		ThreeMonthsEndedSeptember30,
		2006				2005
				No.of			No.of
		Impairment		Securities		Impairment	Securities
U.S. Treasuries/Agencies	$	-	*	1	$	-	-
U.S. corporate		2.0		7		-	-
Residential mortgage-backed		0.6		17		3.3	11
Total	$	2.6		25	$	3.3	11
* Less than $0.1
		NineMonthsEndedSeptember30,
		2006				2005
				No.of			No.of
		Impairment		Securities		Impairment	Securities
U.S. Treasuries/Agencies	$	6.4		4	$	-	-
U.S. corporate		10.7		27		-	-
Foreign(1)		1.8		3		-	-
Residential mortgage-backed		15.2		69		37.1	78
Other asset-backed		7.0		1		-	-
Equity		0.1		3		-	-
Total	$	41.2		107	$	37.1	78
(1) Primarily U.S. dollar denominated.

The above schedules for the three and nine months ended September 30, 2006, include $0.6 and $15.3, respectively, in other-than-temporary write-downs related to the analysis of credit-risk and the possibility of significant prepayment risk. The remaining $2.0 and $25.9 in write-downs for the three and nine months ended September 30, 2006, respectively, relate 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, based upon the requirements of Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) Statement of Financial Accounting Standards (“FAS”) No. 115-1, “The Meaning of Other-Than-Temporary Impairment and Its

37

Application to Certain Investments.” The following tables summarize these write-downs by type for the three and nine months ended September 30, 2006.

		ThreeMonthsEndedSeptember30,2006
		Impairment		No.ofSecurities
U.S. Treasuries/Agencies	$	-	*	1
U.S. corporate		2.0		7
Total	$	2.0		8
* Less than $0.1
		NineMonthsEndedSeptember30,2006
		Impairment		No.ofSecurities
U.S. Treasuries/Agencies	$	6.4		4
U.S. corporate		10.7		27
Foreign(1)		1.8		3
Other asset-backed		7.0		1
Total	$	25.9		35
(1) Primarily U.S. dollar denominated.

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

Net Realized Capital Gains (Losses)

Net realized capital gains (losses) are comprised of the difference between the carrying value of investments and proceeds from sale, maturity, and redemption, as well as losses incurred due to other-than-temporary impairment of investments and changes in fair value of derivatives. Net realized capital gains (losses) on investments were as follows for the three and nine months ended September 30, 2006 and 2005.

		ThreeMonthsEndedSeptember30,
		2006		2005
Fixed maturities, available-for-sale	$	11.1	$	18.2
Equity securities, available-for-sale		-		4.5
Derivatives		(37.3)		2.9
Other		-		(0.2)
Less: allocation to experience-rated contracts		(26.6)		0.1
Net realized capital gains	$	0.4	$	25.3
After-tax net realized capital gains	$	0.3	$	16.4

38

		NineMonthsEndedSeptember30,
		2006		2005
Fixed maturities, available-for-sale	$	(84.1)	$	23.3
Equity securities, available-for-sale		4.8		6.2
Derivatives		(7.2)		9.8
Other		-		(0.2)
Less: allocation to experience-rated contracts		(77.4)		13.9
Net realized capital (losses) gains	$	(9.1)	$	25.2
After-tax net realized capital (losses) gains	$	(5.9)	$	16.4

During the three and nine months ended September 30, 2006, Net realized capital losses increased due to higher other-than-temporary impairments recognized in 2006 and higher losses on derivatives. For the three months ended September 30, 2006, these losses were partially offset by realized capital gains on fixed maturities, as interest rates declined during the third quarter of 2006.

Net realized capital gains (losses) allocated to experience-rated contracts were deducted from Net realized capital gains (losses) and an offsetting amount was reflected in Future policy benefits and claim reserves on the Condensed Consolidated Balance Sheets. Net unamortized realized capital gains (losses) allocated to experienced-rated contracts were $154.2 and $240.3, at September 30, 2006 and December 31, 2005, respectively.

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 product charges, investment income, proceeds from the maturity and sale of investments, and capital contributions. Primary uses of these funds are payments of commissions and operating expenses, interest and premium credits, investment purchases, 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, in limited cases, to certain minimum guaranteed rates.

39

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. ILIAC 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% of ILIAC’s statutory admitted assets as of the prior December 31. ILIAC did not have any receivable or payable from/to ING AIH under the reciprocal loan agreement as of September 30, 2006. ILIAC had $131.0 receivable from ING AIH under the reciprocal loan agreement as of December 31, 2005.

§ A $100.0 uncommitted, perpetual revolving note facility with the Bank of New York. At September 30, 2006 and December 31, 2005, ILIAC had no amounts outstanding under the revolving note facility.

§ A $75.0 uncommitted line-of-credit agreement with PNC Bank, effective December 19, 2005. Borrowings are guaranteed by ING AIH, with maximum aggregate borrowings outstanding at anytime to ING AIH and its affiliates of $75.0. At September 30, 2006 and December 31, 2005, ILIAC 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 September 30, 2006, ILIAC 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.

Capital Contributions and Dividends

During the nine months ended September 30, 2006 and 2005, ILIAC did not receive any capital contributions from its parent.

During the nine months ended September 30, 2006, ILIAC paid $131.0 in cash dividends on its common stock to its parent. During the nine months ended September 30, 2005, ILIAC did not pay any dividends to its parent.

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Financial Guarantees

The Company owns a 3-year credit-linked note arrangement whereby the Company will reimburse the guaranteed party upon payment default of the referenced obligation. Upon such default, the Company reimburses the guaranteed party for the loss under the reference obligation, and the Company receives that reference obligation in settlement. The Company can then recover any losses under the agreement by sale or collection of the received reference obligation. As of September 30, 2006, the maximum potential future exposure to the Company under the guarantee was $30.0.

Recently Adopted Accounting Standards

(See the Recently Adopted and New Accounting Standards footnotes to the condensed consolidated 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. 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. However, there are no indications at the present time that Congress will enact fundamental tax reforms in 2006, or that it has a favorable view of the Tax Panel’s recommendations regarding tax-preferred savings.

 

Item 4. Controls and Procedures

a) The Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the 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.

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

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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

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

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. 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 2005 Annual Report on Form 10-K/A filed on April 7, 2006 (SEC File No. 033-23376).

One topic of the New York Attorney General (“NYAG”) inquiries and investigations related to endorsement of the Company’s products by the New York State United Teachers Union Members Benefit Trust (“NYSUT”) and the sale of the Company’s products to NYSUT members. On October 10, 2006, the Company entered into an assurance of discontinuance (settlement agreement) with the NYAG (the “NYAG Agreement”) regarding the endorsement of the Company’s products by NYSUT and the sale of the Company’s products to NYSUT members. Under the terms of the NYAG Agreement, the Company, without admitting or denying the NYAG’s findings, will distribute $30.0 million to NYSUT members, and or former members, who participated in the NYSUT endorsed Company product at any point between January 1, 2001 and June 30, 2006. The Company also agreed with the NYAG’s office to develop a one-page disclosure to further improve transparency and disclosure regarding retirement product fees (the “One-Page Disclosure”). Pursuant to the terms of the NYAG Agreement, the Company has agreed for a five year period to provide its retirement product customers with the One-Page Disclosure.

In connection with another investigation, the Company and its subsidiary, ING Financial Advisers, LLC (“IFA”), were named in a petition for relief and cease and desist order filed by the New Hampshire Bureau of Securities Regulation (“NH Bureau”) concerning ING’s administration of the New Hampshire state employees deferred compensation plan. On October 10, 2006, the Company and IFA entered into a consent agreement with the NH Bureau (the “NH Agreement”) to resolve the petition for relief and cease and desist order filed by the NH Bureau. Under the terms

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of the NH Agreement, the Company and IFA, without admitting or denying the NH Bureau’s claims, have agreed to pay a total of $3.0 million to resolve the matter, and for a five year period to provide their retirement product customers with the One-Page Disclosure.

The effect of these settlements had no significant impact on the results of operations for the three months ended September 30, 2006, given established reserves.

Other federal and state regulators could initiate similar actions in this or other areas of ING’s business.

 

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 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 variable annuity products may decrease as prospective customers seek products with higher returns.

§ Account values of separate accounts that support annuity products 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.

§ 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.

§ If the Company’s net amount at risk under certain guaranteed minimum death benefits increases, the amount of required reserve increases. If reserves are not adequate, the Company may need to increase reserves through a charge to earnings.

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 spreads between the amounts earned on its general account investments and the amounts paid under its annuity 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.

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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. All of the Company’s fixed annuity products, and the fixed account options included in some of the Company’s variable 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’sinvestment 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.

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.

§ 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.

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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.

Changes in underwriting and actual experience could materially affect profitability

The Company prices its products based on long-term assumptions regarding investment returns, mortality, 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 new business emerges over a period of years, depending on the nature and life of the product, and is subject to variability 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, 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.

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 assets under management, which will result in lower fee income as follows:

§ Increase in annuity 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 sales.

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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;

§ Views of the rating organization;

§ 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.

Competition could negatively affect the ability to maintain or increase profitability

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

 

§ Name recognition and reputation;

§ Service;

§ Investment performance;

§ Product features;

§ Price;

§ Perceived financial strength; and

§ Claims paying and credit ratings.

 

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

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

Changes in federal income tax law 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 Act 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

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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 SEC, and the NASD continually reexamine existing laws and regulations and may impose changes in the future. Changes in legislation and administrative policies 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.

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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, settlements, and litigation. At this time, the Company does not believe that any of this regulatory scrutiny will have a material adverse affect on it. However, the Company cannot guarantee that new laws, regulations and other regulatory actions 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.

Changes in accounting standards issued by the Financial Accounting Standards Board or other standard-setting bodies may adversely affect profitability and financial condition

The Company’s financial statements are subject to the application of generally accepted accounting principles, or GAAP, which is periodically revised and/or expanded. Accordingly, the Company is required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the Financial Accounting Standards Board. The adoption of new or revised accounting standards could change the Company’s current accounting treatment and have a material adverse effect on the timing and/or amount of its reported profitability and financial condition.

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

The Company is highly dependent on automated systems to record and process Company and customer transactions. The Company may experience a failure of its operating systems or a compromise of their 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 customers. 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.

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Item 6. Exhibits

3.(i) Certificate of Incorporation as amended and restated January 1, 2002, incorporated by reference to the ILIAC Form 10-K, as filed with the SEC on March 28, 2002 (File No. 33-23376).

3.(ii) Amended and Restated ING Life Insurance and Annuity Company By-Laws, effective January 1, 2005, incorporated by reference to the ILIAC Form 10-Q, as filed with the SEC on May 13, 2005 (File No. 033-23376).

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

Incorporated by reference to Post-Effective Amendment No. 14 to Registration Statement on Form N-4 (File No. 33-75964), as filed on July 29, 1997.

Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-75980), as filed on February 12, 1997.

Incorporated by reference to Post-Effective Amendment No. 12 to Registration Statement on Form N-4 (File No. 33-75964), as filed on February 11, 1997.

Incorporated by reference to Post-Effective Amendment No. 5 to Registration Statement on Form N-4 (File No. 33-75986), as filed on April 12, 1996.

Incorporated by reference to Post-Effective Amendment No. 12 to Registration Statement on Form N-4 (File No. 333-01107), as filed on February 4, 1999.

Incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement on Form N-4 (File No. 33-75988), as filed on April 15, 1996.

Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File No. 33-81216), as filed on April 17, 1996.

Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File No. 33-91846), as filed on April 15, 1996.

Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-91846), as filed on August 6, 1996.

Incorporated by reference to Registration Statement on Form N-4 (File No. 333-01107), as filed on February 21, 1996.

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Incorporated by reference to Post-Effective Amendment No. 12 to Registration Statement on Form N-4 (File No. 33-75982), as filed on February 20, 1997.

Incorporated by reference to Post-Effective Amendment No. 7 to Registration Statement on Form N-4 (File No. 33-75992), as filed on February 13, 1997.

Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-75974), as filed on February 28, 1997.

Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-75962), as filed on April 17, 1996.

Incorporated by reference to Post-Effective Amendment No. 14 to Registration Statement on Form N-4 (File No. 33-75962), as filed on April 17, 1998.

Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-75982), as filed on April 22, 1996.

Incorporated by reference to Post-Effective Amendment No. 8 to Registration Statement on Form N-4 (File No. 33-75980), as filed on August 19, 1997.

Incorporated by reference to Registration Statement on Form N-4 (File No. 333-56297), as filed on June 8, 1998.

Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File No. 33-79122), as filed on August 16, 1995.

Incorporated by reference to Post-Effective Amendment No. 32 to Registration Statement on Form N-4 (File No. 33-34370), as filed on December 16, 1997.

Incorporated by reference to Post-Effective Amendment No. 30 to Registration Statement on Form N-4 (File No. 33-34370), as filed on September 29, 1997.

Incorporated by reference to Post-Effective Amendment No. 26 to Registration Statement on Form N-4 (File No. 33-34370), as filed on February 21, 1997.

Incorporated by reference to Post-Effective Amendment No. 35 to Registration Statement on Form N-4 (File No. 33-34370), as filed on April 17, 1998.

Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 33-87932), as filed on September 19, 1995.

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Incorporated by reference to Post-Effective Amendment No. 8 to Registration Statement on Form N-4 (File No. 33-79122), as filed on April 17, 1998.

Incorporated by reference to Post-Effective Amendment No. 7 to Registration Statement on Form N-4 (File No. 33-79122), as filed on April 22, 1997.

Incorporated by reference to Post-Effective Amendment No. 21 to Registration Statement on Form N-4 (File No. 33-75996), as filed on February 16, 2000.

Incorporated by reference to Post-Effective Amendment No. 13 to Registration Statement on Form N-4 (File No. 333-01107), as filed on April 7, 1999.

Incorporated by reference to Post-Effective Amendment No. 37 to Registration Statement on Form N-4 (File No. 33-34370), as filed on April 9, 1999.

Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 333-87305), as filed on December 13, 1999.

Incorporated by reference to Post-Effective Amendment No. 18 to Registration Statement on Form N-4 (File No. 33-56297), as filed on August 30, 2000.

Incorporated by reference to Post-Effective Amendment No.17 to Registration Statement on Form N-4 (File No. 33-75996), as filed on April 7, 1999.

Incorporated by reference to Post-Effective Amendment No. 19 to Registration Statement on From N-4 (File No. 333-01107), as filed on February 16, 2000.

Incorporated by reference to the Registration Statement on Form S-2 (File No. 33- 64331), as filed on November 16, 1995.

Incorporated by reference to Pre-Effective Amendment No. 2 to the Registration Statement on Form S-2 (File No. 33-64331), as filed on January 17, 1996.

Incorporated by reference to Post-Effective Amendment No. 30 to Registration Statement on Form N-4 (File No. 33-75988), as filed on December 30, 2003.

Incorporated by reference to Post-Effective Amendment No. 18 to Registration Statement on Form N-4 (File No. 33-75980), as filed on April 16, 2003.

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Incorporated by reference to Post-Effective Amendment No. 30 to Registration Statement on Form N-4 (File No. 333-01107), as filed on April 10, 2002.

Incorporated by reference to Post-Effective Amendment No. 24 to Registration Statement on Form N-4 (File No. 33-81216), as filed on April 11, 2003.

Incorporated by reference to Registration Statement on Form N-4 (File No. 333-109860), as filed on October 21, 2003.

Incorporated by reference to Post-Effective Amendment No. 39 to Registration Statement on Form N-4 (File No. 33-75962), as filed on December 17, 2004.

Incorporated by reference Initial Registration Statement on Form N-4 (File No. 333-130822), as filed on January 3, 2006.

Incorporated by reference Initial Registration Statement on Form N-4 (File No. 333-130822), as filed on January 3, 2006.

Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 333-87131), as filed on December 15, 1999.

Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 333-87131), as filed on December 15, 1999.

Incorporated by reference to Registration Statement on Form N-4 (File No. 33-59749), as filed on June 1, 1995.

Incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement on Form N-4 (File No. 33-59749), as filed on April 16, 1997.

Incorporated by reference to Post-Effective Amendment No. 9 to Registration Statement on Form N-4 (File No. 33-80750), as filed on April 17, 1998.

Incorporated by reference to Post-Effective Amendment No. 8 to Registration Statement on Form N-4 (File No. 33-80750), as filed on April 23, 1997.

Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-59749), as filed on November 26, 1997.

Incorporated by reference to Registration Statement on Form S-2 (File No. 33-63657), as filed on October 25, 1995.

Incorporated by reference to Pre-Effective Amendment No. 3 to Registration Statement on Form S-2 (File No. 33-63657), as filed on January 17, 1996.

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Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form S-2 (File No. 33-63657), as filed on November 24, 1997.

Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form S-2 (File No. 33-64331), as filed on November 24, 1997.

Incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement on Form N-4 (File No. 33-59749), as filed on November 26, 1997.

Incorporated by reference to Registration Statement on Form N-4 (File No. 33-59749), as filed on June 1, 1995.

Incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement on Form N-4 (File No. 33-59749), as filed on April 16, 1997.

Incorporated by reference to Post-Effective Amendment No. 43 to Registration Statement on Form N-4 (File No. 33-75962), as filed on April 11, 2006.

Incorporated by reference to Post-Effective Amendment No. 43 to Registration Statement on Form N-4 (File No. 333-01107), as filed on April 14, 2006.

10. Material Contracts

10. (a)    First Amendment, dated August 14, 2006, to Lease Agreement, dated as of December 13, 2000, between Aetna Life Insurance Company and ILIAC.

(b) Amendment Number 2006-1, dated as of September 11, 2006, to the Services Agreement between ILIAC and ING North America Insurance Corporation.

(c) Agreement AIA document A111-1997 Standard Form of Agreement between Owner and Contractor, as modified, dated September 6, 2006 between Northfield Windsor LLC and John Moriarty & Associates, Inc., incorporated by reference to the Company’s Form 8-K filed on September 11, 2006 (File/Film No. 033-23376/061083829).

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

31.2 Certificate of Brian D. Comer 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 Brian D. Comer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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.

November 10, 2006 (Date)	ING Life Insurance and Annuity 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)

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