Voya Retirement Insurance & Annuity 10Q 2007 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2007

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

For the transition period from ___________________ to

Commission File Number: 333-141040, 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 May 14, 2007, 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 March 31, 2007

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)

				Three Months Ended March 31,
				2007		2006
Revenues:
	Net investment income		$	264.2	$	256.5
	Fee income			186.7		166.6
	Premiums			18.4		11.6
	Broker-dealer commission revenue			100.4		100.7
	Net realized capital gains (losses)			1.5		(6.4)
	Other income			7.9		3.5
Total revenue				579.1		532.5
Benefits and expenses:
	Interest credited and other benefits
		to contractowners		180.6		186.6
	Operating expenses			151.7		138.1
	Broker-dealer commission expense			100.4		100.7
	Net amortization of deferred policy acquisition
		costs and value of business acquired		43.4		25.8
	Interest expense			2.3		0.9
Total benefits and expenses				478.4		452.1
Income before income taxes				100.7		80.4
Income tax expense				28.5		21.6
Net income			$	72.2	$	58.8

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

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)

				As of		As of
				March 31,		December 31,
				2007		2006
				(Unaudited)
Assets
Investments:
	Fixed maturities, available-for-sale, at fair value
		(amortized cost of $14,503.9 at 2007 and $15,150.1 at 2006)	$	14,542.2	$	15,112.2
	Equity securities, available-for-sale, at fair value
		(cost of $369.4 at 2007 and $233.6 at 2006)		375.5		251.7
	Mortgage loans on real estate			1,908.7		1,879.3
	Policy loans			267.2		268.9
	Other investments			409.7		398.9
	Securities pledged (amortized cost of $1,219.8 at 2007 and
		$1,106.2 at 2006)		1,220.7		1,099.5
Total investments				18,724.0		19,010.5
Cash and cash equivalents				196.7		311.2
Short-term investments under securities loan agreement				418.1		283.1
Accrued investment income				190.2		180.4
Receivable for securities sold				19.9		90.1
Reinsurance recoverable				2,653.7		2,715.4
Deferred policy acquisition costs				642.8		623.6
Value of business acquired				1,280.1		1,342.9
Notes receivable from affiliate				175.0		175.0
Short-term loan to affiliate				63.0		45.0
Due from affiliates				11.2		9.1
Property and equipment				96.1		75.1
Other assets				70.6		73.8
Assets held in separate accounts				44,743.3		43,550.8
Total assets			$	69,284.7	$	68,486.0

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

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)

				As of		As of
				March 31,		December 31,
				2007		2006
				(Unaudited)
Liabilities and Shareholder's Equity
Future policy benefits and claims reserves			$	19,506.3	$	19,995.8
Payable for securities purchased				40.1		42.6
Payables under securities loan agreement				418.1		283.1
Borrowed money				804.4		833.2
Due to affiliates				121.4		82.8
Current income taxes				84.1		59.8
Deferred income taxes				239.0		246.0
Other liabilities				304.1		406.2
Liabilities related to separate accounts				44,743.3		43,550.8
Total liabilities				66,260.8		65,500.3

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			4,300.7		4,299.5
	Accumulated other comprehensive loss			(18.1)		(14.0)
	Retained earnings (deficit)			(1,261.5)		(1,302.6)
Total shareholder's equity				3,023.9		2,985.7
Total liabilities and shareholder's equity			$	69,284.7	$	68,486.0

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

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, 2005						$	2.8	$	4,549.6	$	(5.3)	$	(1,604.4)	$	2,942.7
	Comprehensive loss:
		Net income					-		-		-		58.8		58.8
		Other comprehensive loss,
			net of tax:
				Change in net unrealized capital gains
					(losses) on securities ($(25.8) pretax),
					including tax valuation allowance
					of $(64.9)		-		-		(77.1)		-		(77.1)
	Total comprehensive loss														(18.3)
	Dividends paid						-		(131.0)		-		-		(131.0)
	Employee share-based payments						-		0.8		-		-		0.8
Balance at March 31, 2006						$	2.8	$	4,419.4	$	(82.4)	$	(1,545.6)	$	2,794.2

Balance at December 31, 2006						$	2.8	$	4,299.5	$	(14.0)	$	(1,302.6)	$	2,985.7
	Cumulative effect of changes in
		accounting principles					-		-		-		(31.1)		(31.1)
Balance at January 1, 2007							2.8		4,299.5		(14.0)		(1,333.7)		2,954.6
	Comprehensive income:
		Net income					-		-		-		72.2		72.2
		Other comprehensive loss,
			net of tax:
				Change in net unrealized capital gains
					(losses) on securities ($(5.9) pretax)		-		-		(3.9)		-		(3.9)
				Pension liability ($(0.3) pretax)			-		-		(0.2)		-		(0.2)
	Total comprehensive income														68.1
	Employee share-based payments						-		1.2		-		-		1.2
Balance at March 31, 2007						$	2.8	$	4,300.7	$	(18.1)	$	(1,261.5)	$	3,023.9

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

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)

				Three Months Ended March 31,
				2007		2006


Net cash provided by operating activities			$	164.2	$	138.8

Cash Flows from Investing Activities:
	Proceeds from the sale, maturity, or redemption of:
		Fixed maturities, available-for-sale		2,912.2		2,714.4
		Equity securities, available-for-sale		20.9		34.0
		Mortgage loans on real estate		35.0		70.3
	Acquisition of:
		Fixed maturities, available-for-sale		(2,398.1)		(2,773.4)
		Equity securities, available-for-sale		(91.1)		(60.0)
		Mortgage loans on real estate		(64.4)		(67.3)
	Policy loans			1.7		1.2
	Other investments			(20.7)		(32.8)
	Purchases of fixed assets, net			(24.9)		(1.0)
Net cash provided by (used in) investing activities				370.6		(114.6)

Cash Flows from Financing Activities:
	Deposits received for investment contracts			393.5		528.7
	Maturities and withdrawals from investment contracts			(996.0)		(607.5)
	Short-term borrowings			(46.8)		93.2
	Dividends to parent			-		(131.0)
Net cash used in financing activities				(649.3)		(116.6)
Net decrease in cash and cash equivalents				(114.5)		(92.4)
Cash and cash equivalents, beginning of period				311.2		257.7
Cash and cash equivalents, end of period			$	196.7	$	165.3

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

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”), Directed Services LLC (“DSL”), 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 December 1, 2006, Lion contributed to ILIAC, Directed Services, Inc. (“DSI”), a New York corporation registered as a broker-dealer under the Securities Exchange Act of 1934 and as an investment advisor under the Investment Advisors Act of 1940, whose primary functions are the distribution of variable insurance products and investment advisory services for open-end mutual funds. Additionally, on December 12, 2006, ILIAC organized DSL as a wholly-owned Delaware limited liability company. On December 31, 2006, DSI merged with and into DSL and ceased to exist. Upon merger, the operations and broker-dealer and investment advisor registrations of DSI were consolidated into DSL, the surviving company. Effective January 1, 2007, ILIAC’s investment advisory agreement with certain variable funds offered in Company products was assigned to DSL.

Statement of Financial Accounting Standards (“FAS”) No. 141, “Business Combinations”, excludes transfers of net assets or exchanges of shares between entities under common control, and notes that certain provisions under Accounting Principles Board (“APB”) Opinion No. 16, “Business Combinations”, provide a source of guidance for such transactions. In accordance with APB Opinion No. 16, financial information of the combined entity is presented as if the entities had been combined for the full year, and all comparative financial statements are restated and presented as if the entities had previously been combined, in a manner similar to a pooling-of-interests. The condensed consolidated financial statements give effect to the DSL consolidation transactions as if they had occurred on January 1, 2004.

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

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)

principal executive offices of the Company and as corporate offices for other Hartford based operations of the Company and its affiliates (the “Windsor Property”).

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

The condensed 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 2006 Annual Report on Form 10-K. The results of operations for the interim periods may not be considered indicative of results to be expected for the full year.

Description of Business

The Company offers 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 are generally 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 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.

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)

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 2006 Annual Report on Form 10-K. There have been no material changes to the Company’s significant accounting policies since the filing of the Company’s 2006 Annual Report on Form 10-K, except as noted in the Recently Adopted Accounting Standards footnote.

2.	Recently Adopted Accounting Standards

Accounting for Uncertainty in Income Taxes

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

FIN 48 was adopted by the Company on January 1, 2007. As a result of implementing FIN 48, the Company recognized a cumulative effect of change in accounting principle of $2.9 as a reduction to January 1, 2007 Retained earnings (deficit).

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:

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 which interest-only strips and principal-only strips are not subject to derivative accounting under FAS No. 133;

Requires that interests in securitized financial assets be analyzed to identify interests that are freestanding derivatives or that are hybrid instruments that contain embedded derivatives requiring bifurcation;

Clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and

Allows a qualifying special-purpose entity to hold derivative financial instruments that pertain to beneficial interests, other than another derivative financial instrument.

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

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

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

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

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)

SOP 05-1 was adopted by the Company on January 1, 2007, and is effective for internal replacements occurring on or after that date. As a result of implementing SOP 05-1, the Company recognized a cumulative effect of change in accounting principle of $43.4, before tax, or $28.2, net of $15.2 of income taxes, as a reduction to January 1, 2007 Retained earnings (deficit). In addition, the Company revised its accounting policy on the amortization of deferred policy acquisition costs ("DAC") and value of business acquired ("VOBA") to include internal replacements as follows:

Internal Replacements

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

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

3.	New Accounting Pronouncements

The Fair Value Option for Financial Assets and Financial Liabilities

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

Certain recognized financial assets and liabilities;

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)

Rights and obligations under certain insurance contracts that are not financial instruments;

Host financial instruments resulting from the separation of an embedded nonfinancial derivative instrument from a nonfinancial hybrid instrument; and

Certain commitments.

FAS No. 159 is generally effective for fiscal years beginning after November 15, 2007. As of the effective date, the fair value option may be elected for certain eligible items that exist on that date. The effect of the first remeasurement to fair value shall be reported as a cumulative effect adjustment to the opening balance of retained earnings (deficit). The Company is currently evaluating the items to which the fair value option may be applied.

Fair Value Measurements

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

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

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

ING 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

Other-Than-Temporary Impairments

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

		Three Months Ended March 31,
		2007			2006
			No. of			No. of
		Impairment	Securities		Impairment	Securities
U.S. Treasuries	$	-	-		6.4	4
U.S. corporate		9.1	25		8.4	17
Foreign⁽¹⁾		1.4	2		1.8	3
Residential mortgage-backed		0.6	7		9.2	46
Other asset-backed		-	-		7.0	1
Equity securities		-	-		0.1	3
Total	$	11.1	34	$	32.9	74

⁽¹⁾ Primarily U.S. dollar denominated.

The above schedule includes $0.6 and $9.3 in other-than-temporary write-downs for the three months ended March 31, 2007 and 2006, respectively, related to the analysis of credit risk and the possibility of significant prepayment risk. The remaining $10.5 and $23.6 in write-downs for the three months ended March 31, 2007 and 2006, respectively, are related to investments that the Company does not have the intent to retain for a period of time sufficient to allow for recovery in fair value. The following table summarizes these write-downs by type for the three months ended March 31, 2007 and 2006.

		Three Months Ended March 31,
		2007			2006
			No. of			No. of
		Impairment	Securities		Impairment	Securities
U.S. Treasuries	$	-	-	$	6.4	4
U.S. corporate		9.1	25		8.4	17
Foreign		1.4	2		1.8	3
Other asset-backed		-	-		7.0	1
Total	$	10.5	27	$	23.6	25

The remaining fair value of the fixed maturities with other-than-temporary impairments as of March 31, 2007 and 2006 was $975.4 and $721.5, respectively.

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

5.	Deferred Policy Acquisition Costs and Value of Business Acquired

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

				2007		2006
Balance at January 1			$	623.6	$	512.4
	Deferrals of commissions and expenses			35.8		34.5
	Amortization:
		Amortization		(20.1)		(13.7)
		Interest accrued at 5% to 7%		10.4		8.6
	Net amortization included in Condensed Consolidated
		Statements of Operations		(9.7)		(5.1)
	Change in unrealized capital (gains) losses on
		available-for-sale securities		(0.9)		1.1
	Implementation of SOP 05-1			(6.0)		-
Balance at March 31			$	642.8	$	542.9

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

				2007		2006
Balance at January 1			$	1,342.9	$	1,294.4
	Deferrals of commissions and expenses			10.6		11.9
	Amortization:
		Amortization		(55.1)		(41.8)
		Interest accrued at 5% to 7%		21.4		21.1
	Net amortization included in Condensed Consolidated
		Statements of Operations		(33.7)		(20.7)
	Change in unrealized capital (gains) losses on
		available-for-sale securities		(2.3)		3.2
	Implementation of SOP 05-1			(37.4)		-
Balance at March 31			$	1,280.1	$	1,288.8

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)

6.	Capital Contributions and Dividends

During the three months ended March 31, 2007 and 2006, ILIAC did not receive any cash capital contributions from its Parent.

During the three months ended March 31, 2007, ILIAC did not pay any dividends on its common stock to its Parent. During the three months ended March 31, 2006, ILIAC paid $131.0 in dividends to its Parent.

7.	Income Taxes

The Company’s effective tax rates for the three months ended March 31, 2007 and 2006 were 28.3% and 26.9%, respectively. The effective rates differ from the expected rate primarily due to the benefit from the dividends received deduction. The increase in the effective tax rate from March 31, 2006 to March 31, 2007 is primarily due to an increase in Income before income taxes relative to the deduction allowed for dividends received.

As a result of implementing FIN 48, the Company recognized a cumulative effect of change in accounting principle of $2.9 as a reduction to January 1, 2007 Retained earnings (deficit). In addition, the Company had $68.0 of unrecognized tax benefits as of January 1, 2007, of which $52.1 would affect the Company’s effective tax rate if recognized.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in Current income taxes and Income tax expense on the Condensed Consolidated Balance Sheets and Condensed Consolidated Statement of Operations, respectively. The Company had accrued interest of $18.0 as of January 1, 2007.

The Company is under exam by the Internal Revenue Service (“IRS”) for tax years 2002 through 2005, and is subject to state exams in Connecticut for years 1993 through 2000 and in New York for years 1995 through 2000. It is anticipated that the IRS audit of tax years 2002 and 2003 will be finalized within the next twelve months. Upon finalization of the IRS exam, it is reasonably possible that the unrecognized tax benefits will decrease by up to $10.0. It is also reasonably possible that one or both of the aforementioned state tax audits may be settled within the next twelve months. The range of possible change in the amount of uncertain tax positions for the New York and Connecticut audits cannot be estimated at this time.

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)

8.	Financing Agreements

Reciprocal Loan Agreement

ILIAC maintains a reciprocal loan agreement with ING America Insurance Holdings, Inc. (“ING AIH”), an affiliate, to facilitate the handling of unanticipated short-term cash requirements that arise in the ordinary course of business. Under this agreement, which became effective in 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 borrowings 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 $2.0 and $0.6 for the three months ended March 31, 2007 and 2006, respectively, and earned interest income of $0.2 and $0.9 for the three months ended March 31, 2007 and 2006, respectively. Interest expense and income are included in Interest expense and Net investment income, respectively, on the Condensed Consolidated Statements of Operations. As of March 31, 2007 and December 31, 2006, ILIAC had $63.0 and $45.0, respectively, 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 2006 Annual Report on Form 10-K.

9.	Commitments and Contingent Liabilities

Commitments

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

As of March 31, 2007, the Company had off-balance sheet commitments to purchase investments equal to their fair value of $695.3, $314.1 of which was with related parties. As of December 31, 2006, the Company had off-balance sheet commitments to purchase investments equal to their fair value of $706.8, $322.3 of which was with related parties. During the three months ended March 31, 2007, $8.2 was funded to related parties under these commitments.

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)

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 seek recovery of any losses under the agreement by sale or collection of the received reference obligation. As of March 31, 2007, the maximum liability to the Company under the guarantee was $30.0.

New Construction

During the second half of 2006, NWL entered into agreements for site development and facility construction at the Windsor Property (collectively, the "Construction Agreements"), with a maximum estimated cost of $81.5 under the Construction Agreements. Costs incurred under the Construction Agreements and other agreements associated with the construction, acquisition, and development of the corporate office facility totaled $17.3 for the three months ended March 31, 2007. These costs were capitalized in Property and equipment on the Condensed Consolidated Balance Sheet.

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.

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)

10.

Accumulated Other Comprehensive Income (Loss)

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

			2007		2006
Net unrealized capital gains (losses):
	Fixed maturities, available-for-sale	$	39.2	$	(269.9)
	Equity securities, available-for-sale		6.1		7.3
	DAC/VOBA adjustment on available-for-sale securities		0.7		9.4
	Sales inducements adjustment on available-for-sale securities		-		0.2
	Premium deficiency reserve adjustment		(36.6)		-
	Other investments		-		1.3
	Less: allocation to experience-rated contracts		22.1		(242.6)
Unrealized capital losses, before tax			(12.7)		(9.1)
Deferred income tax asset			4.4		3.2
Deferred tax asset valuation allowance			-		(64.9)
Net unrealized capital losses			(8.3)		(70.8)
Pension liability, net of tax			(9.8)		(11.6)
Accumulated other comprehensive loss		$	(18.1)	$	(82.4)

Net unrealized capital gains (losses) allocated to experience-rated contracts of $22.1 and $(242.6) as of March 31, 2007 and 2006, respectively, 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 (excluding the tax valuation allowance), related to changes in unrealized capital gains (losses) on securities, including securities pledged and excluding those related to experience-rated contracts, were as follows for the three months ended March 31, 2007 and 2006.

			2007		2006
Net unrealized capital holding gains (losses) arising
	during the period⁽¹⁾	$	(9.7)	$	(23.3)
Less: reclassification adjustment for gains (losses) and other
	items included in Net income⁽²⁾		(5.8)		(11.0)
Net unrealized capital gains (losses) on securities		$	(3.9)	$	(12.3)

⁽¹⁾

Pretax unrealized capital holding gains (losses) arising during the period were $(14.6) and $(48.8) for the three months ended March 31, 2007 and 2006, respectively.

⁽²⁾

Pretax reclassification adjustments for gains (losses) and other items included in Net income were $(8.7) and $(23.0) for the three months ended March 31, 2007 and 2006, respectively.

Item 2.

Management’s Narrative Analysis of the Results of Operations and Financial Condition

(Dollar amounts in millions, unless otherwise stated)

Overview

The following narrative analysis presents a review of the consolidated results of operations of ING Life Insurance and Annuity Company (“ILIAC”) and its wholly-owned subsidiaries (collectively, the “Company”) for each of the three months ended March 31, 2007 and 2006, and financial condition as of March 31, 2007 and December 31, 2006. This item should be read in its entirety and in conjunction with the condensed 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 2006 Annual Report on Form 10-K.

Forward-Looking Information/Risk Factors

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

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

(1)

Equity market volatility could negatively impact profitability and financial condition;

(2)

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

(3)

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

(4)

Changes in underwriting and actual experience could materially affect profitability;

(5)

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

(6)

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

(7)

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

(8)

Litigation may adversely affect profitability and financial condition;

(9)

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

(10)

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

(11)

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;

(12)

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

(13)

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

Investors are also directed to consider the risks and uncertainties discussed in this Item 2. and in Item 1A. of Part II contained herein, as well as in other documents filed by the Company with the SEC. Except as may be required by the federal securities laws, the Company disclaims any obligation to update forward-looking information.

Basis of Presentation

On December 1, 2006, Lion Connecticut Holdings Inc. (“Lion” or “Parent”) contributed to ILIAC, Directed Services, Inc. (“DSI”), a New York corporation registered as a broker-dealer under the Securities Exchange Act of 1934 and as an investment advisor under the Investment Advisors Act of 1940, whose primary functions are the distribution of variable insurance products and investment advisory services for open-end mutual funds. Additionally, on December 12, 2006, ILIAC organized Directed Services LLC (“DSL”) as a wholly-owned Delaware limited liability company. On December 31, 2006, DSI merged with and into DSL and ceased to exist. Upon merger, the operations and broker-dealer and investment advisor registrations of DSI were consolidated into DSL, the surviving company. Effective January 1, 2007, ILIAC’s investment advisory agreement with certain variable funds offered in Company products was assigned to DSL.

presented as if the entities had previously been combined, in a manner similar to a pooling-of-interests. The condensed consolidated financial statements give effect to the DSL consolidation transactions as if they had occurred on January 1, 2004.

On May 11, 2006, ILIAC organized Northfield Windsor LLC (“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”).

Critical Accounting Policies

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

Amortization of Deferred Acquisition Costs and Value of Business Acquired

General

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

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

FAS No. 97, “Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments” (“FAS No. 97”), applies to universal life and investment-type products, such as fixed and variable deferred annuities. Under FAS No. 97, DAC and VOBA are amortized, with interest, over the life of the related contracts in relation to the present value of estimated future gross profits from investment, mortality, and expense margins, plus surrender charges.

Internal Replacements

Contractowners may periodically exchange one contract for another, or make modifications to an existing contract. Beginning January 1, 2007, these transactions are identified as internal replacements and are accounted for in accordance with Statement of Position 05-1, “Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts” (“SOP 05-1”).

As a result of implementing SOP 05-1, the Company recognized a cumulative effect of change in accounting principle of $43.4, before tax, or $28.2, net of $15.2 of income taxes, as a reduction to January 1, 2007 Retained earnings (deficit).

Unlocking

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

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

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

Results of Operations

Overview

Products offered by the Company include 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) 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 benefits and expenses primarily consist of (a) interest credited and other benefits to contractowners, (b) amortization of DAC and VOBA, (c) expenses related to the selling and servicing of the various products offered by the Company, and (d) other general business expenses. In addition, the Company collects broker-dealer commissions through its subsidiary DSL, which are, in turn, paid to broker-dealers and expensed.

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.

Equity market performance also affects the Company, as fee revenue from variable AUM is generally affected by equity market performance. In addition, variable product demand often mirrors consumer demand for equity market investments. The strong equity market performance and favorable cashflows in the latter half of 2006 continued to favorably impact variable AUM in the first quarter of 2007.

While the flat interest rate curve continues to present challenges to the Company's business environment, overall increases in market yields have allowed for improved asset returns and, therefore, improved margins on fixed products.

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.

Results of Operations

The Company’s results of operation for the three months ended March 31, 2007 and changes therein, were primarily impacted by higher variable AUM and favorable yields on fixed AUM, partially offset by higher Operating expenses and Net amortization of DAC and VOBA.

				Three Months Ended March 31,				$ Increase	% Increase
				2007		2006		(Decrease)	(Decrease)
Revenues:
	Net investment income		$	264.2	$	256.5	$	7.7	3.0%
	Fee income			186.7		166.6		20.1	12.1%
	Premiums			18.4		11.6		6.8	58.6%
	Broker-dealer commission revenue			100.4		100.7		(0.3)	(0.3)%
	Net realized capital gains (losses)			1.5		(6.4)		7.9	NM
	Other income			7.9		3.5		4.4	NM
Total revenue				579.1		532.5		46.6	8.8%
Benefits and expenses:
	Interest credited and other
		benefits to contractowners		180.6		186.6		(6.0)	(3.2)%
	Operating expenses			151.7		138.1		13.6	9.8%
	Broker-dealer commission expense			100.4		100.7		(0.3)	(0.3)%
	Net amortization of deferred policy
		acquisition costs and value
		of business acquired		43.4		25.8		17.6	68.2%
	Interest expense			2.3		0.9		1.4	NM
Total benefits and expenses				478.4		452.1		26.3	5.8%
Income before income taxes				100.7		80.4		20.3	25.2%
Income tax expense				28.5		21.6		6.9	31.9%
Net income			$	72.2	$	58.8	$	13.4	22.8%
Effective tax rate				28.3%		26.9%

NM - Not meaningful.

Revenues

Total revenue increased for the three months ended March 31, 2007, primarily due to increases in Fee income, Net investment income, Net realized capital gains (losses), and Premiums.

Fee income increased as overall average variable AUM increased, driven by favorable cash flows and strong market performance in 2006.

Net investment income increased mainly due to favorable yields on investments supporting fixed AUM.

Net realized capital gains (losses) increased primarily due to gains on the sale of seed money investments and lower other-than-temporary credit related impairments.

The increase in Premiums is mainly due to the rise in annuitizations in rollover/payout products, which is entirely offset by an increase in Interest credited and other benefits to contractoweners.

Benefits and Expenses

Total benefits and expenses increased for the three months ended March 31, 2007, primarily due to increases in Operating expenses and Net amortization of DAC and VOBA, partially offset by a decrease in Interest credited and other benefits to contractowners.

Operating expenses increased due to the continued growth of the business driven by higher variable AUM.

The increase in Net amortization of DAC and VOBA is primarily driven by higher actual gross profits related to higher fee income and fixed margins, as well as unlocking related to favorable equity performance in the first quarter of 2006 versus flat performance in the first quarter of 2007.

Interest credited and other benefits to contractowners decreased mainly due to lower fixed AUM, which was partially offset by higher annuitization in rollover/payout products.

Income Taxes

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

Financial Condition

Investments

Investment Strategy

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

Portfolio Composition

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

			2007			2006
			Carrying Value	%		Carrying Value	%
Fixed maturities, available-for-sale,
	including securities pledged	$	15,762.9	84.2%	$	16,211.7	85.3%
Equity securities, available-for-sale			375.5	2.0%		251.7	1.3%
Mortgage loans on real estate			1,908.7	10.2%		1,879.3	9.9%
Policy loans			267.2	1.4%		268.9	1.4%
Other investments			409.7	2.2%		398.9	2.1%
Total investments		$	18,724.0	100.0%	$	19,010.5	100.0%

Fixed Maturities

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

						Gross		Gross
						Unrealized		Unrealized
				Amortized		Capital		Capital		Fair
				Cost		Gains		Losses		Value
Fixed maturities:
	U.S. Treasuries		$	61.3		0.4		-	$	61.7
	U.S. government agencies and authorities			249.7		3.3		2.2		250.8
	State, municipalities, and political subdivisions			45.2		1.1		0.1		46.2

	U.S. corporate securities:
		Public utilities		1,118.5		11.3		10.2		1,119.6
		Other corporate securities		3,862.8		47.7		39.9		3,870.6
	Total U.S. corporate securities			4,981.3		59.0		50.1		4,990.2

	Foreign securities⁽¹⁾:
		Government		466.3		30.5		2.1		494.7
		Other		2,168.2		32.7		28.0		2,172.9
	Total foreign securities			2,634.5		63.2		30.1		2,667.6

	Residential mortgage-backed securities			4,434.1		72.5		64.9		4,441.7
	Commercial mortgage-backed securities			2,148.0		12.4		23.5		2,136.9
	Other asset-backed securities			1,169.6		6.4		8.2		1,167.8

	Total fixed maturities, including securities pledged			15,723.7		218.3		179.1		15,762.9
	Less: securities pledged			1,219.8		11.9		11.0		1,220.7

Total fixed maturities			$	14,503.9	$	206.4	$	168.1	$	14,542.2

⁽¹⁾	Primarily U.S. dollar denominated.

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

						Gross		Gross
						Unrealized		Unrealized
				Amortized		Capital		Capital		Fair
				Cost		Gains		Losses		Value
Fixed maturities:
	U.S. Treasuries		$	25.5	$	0.1	$	-	$	25.6
	U.S. government agencies and authorities			276.6		3.6		3.3		276.9
	State, municipalities, and political subdivisioins			45.4		1.1		0.1		46.4

	U.S. corporate securities:
		Public utilities		1,111.4		9.1		15.7		1,104.8
		Other corporate securities		4,281.8		47.6		62.3		4,267.1
	Total U.S. corporate securities			5,393.2		56.7		78.0		5,371.9

	Foreign securities⁽¹⁾:
		Government		466.0		31.8		3.5		494.3
		Other		2,000.4		28.3		33.3		1,995.4
	Total foreign securities			2,466.4		60.1		36.8		2,489.7

	Residential mortgage-backed securities			4,529.8		52.4		82.2		4,500.0
	Commercial mortgage-backed securities			2,261.3		14.0		28.6		2,246.7
	Other asset-backed securities			1,258.1		6.5		10.1		1,254.5

	Total fixed maturities, including securities pledged			16,256.3		194.5		239.1		16,211.7
	Less: securities pledged			1,106.2		6.4		13.1		1,099.5

Total fixed maturities			$	15,150.1	$	188.1	$	226.0	$	15,112.2

⁽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. As of March 31, 2007 and December 31, 2006, the average quality rating of the Company’s fixed maturities portfolio was AA-. Ratings are calculated using a rating hierarchy that considers Standard & Poor’s, Moody’s Investor’s Service, Inc., and internal ratings.

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

		2007			2006
		Fair	% of		Fair	% of
		Value	Total		Value	Total
AAA	$	7,535.0	47.8%	$	7,824.0	48.2%
AA		1,047.4	6.6%		1,135.6	7.0%
A		2,358.0	15.0%		2,588.4	16.0%
BBB		3,972.0	25.2%		3,920.4	24.2%
BB		672.3	4.3%		652.8	4.0%
B and below		178.2	1.1%		90.5	0.6%
Total	$	15,762.9	100.0%	$	16,211.7	100.0%

94.6% and 95.4% of fixed maturities were invested in securities rated BBB and above (Investment Grade) as of March 31, 2007 and December 31, 2006, respectively.

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

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

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

		2007			2006
		Fair	% of		Fair	% of
		Value	Total		Value	Total
U.S. Treasuries	$	61.7	0.4%	$	25.6	0.2%
U.S. government agencies and authorities		250.8	1.6%		276.9	1.7%
U.S. corporate, states, and municipalities		5,036.4	31.9%		5,418.3	33.3%
Foreign		2,667.6	16.9%		2,489.7	15.4%
Residential mortgage-backed		4,441.7	28.2%		4,500.0	27.8%
Commercial mortgage-backed		2,136.9	13.6%		2,246.7	13.9%
Other asset-backed		1,167.8	7.4%		1,254.5	7.7%
Total	$	15,762.9	100.0%	$	16,211.7	100.0%

The Company did not have any investments in a single issuer, other than obligations of the U.S. government and government agencies, with a carrying value in excess of 10% of the Company’s Shareholder’s equity as of March 31, 2007 and December 31, 2006.

Mortgage Loans on Real Estate

Mortgage loans on real estate, primarily commercial mortgage loans, totaled $1,908.7 and $1,879.3 as of March 31, 2007 and December 31, 2006, respectively. These loans are reported at amortized cost, less impairment write-downs. If the value of any mortgage loan is determined to be impaired (i.e., when it is probable that the Company will be unable to collect on all amounts due according to the contractual terms of the loan agreement), the carrying value of the mortgage loan is reduced to either the present value of expected cash flows from the loan, discounted at the loan’s effective interest rate, or fair value of the collateral. If the loan is in foreclosure, the carrying value is reduced to the fair value of the underlying collateral, net of estimated costs to obtain and sell. The carrying value of the impaired loans is reduced by establishing a permanent write-down charged to Net realized capital gains (losses). As of March 31, 2007 and December 31, 2006, the Company had no allowance for mortgage loan credit losses. The properties collateralizing mortgage loans are geographically dispersed throughout the United States, with the largest concentration of 17.9% and 17.7% of properties in California as of March 31, 2007 and December 31, 2006, respectively.

Unrealized Capital Losses

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

			2007						2006
				% of IG			% of IG			% of IG			% of IG
			IG	and BIG		BIG	and BIG		IG	and BIG	BIG		and BIG
Less than six months
	below amortized cost	$	27.8	15.5%	$	2.3	1.3%	$	20.6	8.5%	$	1.2	0.5%
More than six months
	and less than twelve
	months below
	amortized cost		3.1	1.7%		0.1	0.1%		6.6	2.8%		0.7	0.3%
More than twelve months
	below amortized cost		143.0	79.8%		2.8	1.6%		208.9	87.4%		1.1	0.5%
Total unrealized capital loss		$	173.9	97.0%	$	5.2	3.0%	$	236.1	98.7%	$	3.0	1.3%

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

					More than
			Less than		Six Months		More than
			Six Months		and less than		Twelve Months
			Below		Twelve Months		Below
			Amortized		Below		Amortized
2007			Cost		Amortized Cost		Cost		Total
Interest rate or spread widening		$	18.6	$	2.6	$	61.3	$	82.5
Mortgage and other asset-backed
	securities		11.5		0.6		84.5		96.6
Total unrealized capital loss		$	30.1	$	3.2	$	145.8	$	179.1
Fair value		$	2,858.4	$	235.7	$	5,669.8	$	8,763.9

2006
Interest rate or spread widening		$	10.8	$	4.8	$	102.6	$	118.2
Mortgage and other asset-backed
	securities		11.0		2.5		107.4		120.9
Total unrealized capital loss		$	21.8	$	7.3	$	210.0	$	239.1
Fair value		$	2,447.4	$	501.5	$	6,726.2	$	9,675.1

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

				More than
		Less than		Six Months		More than
		Six Months		and less than		Twelve Months		Total
		Below		Twelve Months		Below		Unrealized
		Amortized		Below		Amortized		Capital
2007		Cost		Amortized Cost		Cost		Loss
U.S. government agencies and authorities	$	0.3	$	1.9	$	-	$	2.2
U.S. corporate, state, and municipalities		12.2		0.1		37.9		50.2
Foreign		6.1		0.6		23.4		30.1
Residential mortgage-backed		5.8		0.6		58.5		64.9
Commercial mortgage-backed		4.5		-		19.0		23.5
Other asset-backed		1.2		-		7.0		8.2
Total unrealized capital loss	$	30.1	$	3.2	$	145.8	$	179.1

2006
U.S. government agencies and authorities	$	2.1	$	1.1	$	0.1	$	3.3
U.S. corporate, state, and municipalities		6.2		1.6		70.3		78.1
Foreign		2.5		2.1		32.2		36.8
Residential mortgage-backed		6.6		0.8		74.8		82.2
Commercial mortgage-backed		3.5		0.2		24.9		28.6
Other asset-backed		0.9		1.5		7.7		10.1
Total unrealized capital loss	$	21.8	$	7.3	$	210.0	$	239.1

Of the unrealized capital losses aged more than twelve months, the average market value of the related fixed maturities was 97.5% of the average book value as of March 31, 2007. In addition, this category includes 1,066 securities, which have an average quality rating of AA-. No other-than-temporary impairment loss was considered necessary for these fixed maturities as of March 31, 2007.

Other-Than-Temporary Impairments

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

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

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

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

		Three Months Ended March 31,
		2007			2006
			No. of			No. of
		Impairment	Securities		Impairment	Securities
U.S. Treasuries	$	-	-	$	6.4	4
U.S. corporate		9.1	25		8.4	17
Foreign		1.4	2		1.8	3
Residential mortgage-backed		0.6	7		9.2	46
Other asset-backed		-	-		7.0	1
Equity securities		-	-		0.1	3
Total	$	11.1	34	$	32.9	74

respectively, are related to investments that the Company does not have the intent to retain for a period of time sufficient to allow for recovery in fair value. The following table summarizes these write-downs by type for the three months ended March 31, 2007 and 2006.

		Three Months Ended March 31,
		2007			2006
			No. of			No. of
		Impairment	Securities		Impairment	Securities
U.S. Treasuries	$	-	-	$	6.4	4
U.S. corporate		9.1	25		8.4	17
Foreign		1.4	2		1.8	3
Other asset-backed		-	-		7.0	1
Total	$	10.5	27	$	23.6	25

Net Realized Capital Gains (Losses)

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

		Three Months Ended March 31,
		2007		2006
Fixed maturities, available-for-sale	$	(17.1)	$	(43.1)
Equity securities, available-for-sale		4.5		3.1
Derivatives		(16.9)		16.0
Other investments		(0.1)		-
Less: allocation to experience-rated contracts		(31.1)		(17.6)
Net realized capital gains (losses)	$	1.5	$	(6.4)
After-tax net realized capital gains (losses)	$	1.0	$	(4.2)

During the three months ended March 31, 2007, Net realized capital gains increased primarily due to gains on the sale of seed money investments and lower credit related other-than-temporary impairments.

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 allocated to experienced-rated

contractowners were $134.7 and $164.5 at March 31, 2007 and December 31, 2006, 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 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.

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 Reserves

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 had

$63.0 and $45.0 receivable from ING AIH under the reciprocal loan agreement as of March 31, 2007 and December 31, 2006, respectively.

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

A $75.0 uncommitted line-of-credit agreement with PNC Bank. Borrowings are guaranteed by ING AIH, with maximum aggregate borrowings outstanding at anytime to ING AIH and its affiliates of $75.0. As of March 31, 2007 and December 31, 2006, 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 March 31, 2007 and December 31, 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 three months ended March 31, 2007 and 2006, ILIAC did not receive any cash capital contributions from Lion.

During the three months ended March 31, 2007, ILIAC did not pay any dividends on its common stock to Lion. During the three months ended March 31, 2006, ILIAC paid $131.0 in dividends to Lion.

Financial Guarantees

Income Taxes

Income tax obligations consist of the allowance on uncertain tax benefits related to Internal Revenue Service tax audits and state tax exams that have not been completed. The current liability of $20.5 may be paid in less than one year, upon completion of such audits and exams. The timing of the payment of the remaining allowance of $63.9 cannot be reliably estimated.

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. Some tax reform proposals, including certain recommendations made in late 2005 by the President’s Tax Advisory Panel on Federal Tax Reform could adversely affect the market for some life insurance and annuity products if enacted by Congress. There are no indications at the present time, however, that Congress will enact fundamental tax reforms in 2007, or that it has a favorable view of the Tax Panel’s recommendations regarding tax-preferred savings. The United States Government Accountability Office (“GAO”) issued a report in late 2006 recommending legislative and regulatory changes to provide 401(k) plan participants and the Department of Labor with better information on fees charged by plan investment and service providers. The House Committee on Education and Labor held the first of several anticipated hearings on the GAO report in March 2007. The Department of Labor is expected to testify at a subsequent hearing on the status of several regulatory initiatives to improve fee disclosure. Legislative or regulatory action to implement the GAO recommendations could negatively influence the market for certain of the Company’s defined contribution retirement services products, but the likelihood of such changes is uncertain at this time.

Item 4.

Controls and Procedures

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

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

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

As with many financial services companies, the Company and its affiliates have received informal and formal requests for information from various state and federal governmental agencies and self-regulatory organizations in connection with inquiries and investigations of the products and practices of the financial services industry. In each case, the Company and its affiliates have been and are providing full cooperation. For information on the focus of such regulatory inquiries and the actions undertaken by ING in connection therewith, see the “Other Regulatory Matters” section of “Management’s Narrative Analysis of the Results of Operations and Financial Condition” included in the Company’s 2006 Annual Report on Form 10-K filed on April 2, 2007 (SEC File No. 033-23376).

Item 1A.

Risk Factors

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

Equity market volatility could negatively impact profitability and financial condition

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

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

Account values of separate accounts that support variable 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 and value of business acquired, as applicable, 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 margins 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 and value of business acquired, as applicable, relating to such contracts, further reducing profits.

As interest rates decline, borrowers may prepay or redeem mortgages and bonds with embedded call options that are owned as investments by the Company. This may force the Company to reinvest the proceeds at lower interest rates.

All of the Company’s fixed annuity products, and the fixed account options included in some of the Company’s annuity products, contain minimum interest rate guarantees that limit the Company’s ability to lower interest rates credited to contractowners in response to lower investment returns. A decrease in the difference between earned investment income and the interest credited to contractowners further reduces profits. This decrease in profits may also require the Company to accelerate amortization of deferred policy acquisition costs and value of business acquired, as applicable.

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

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

An increase in defaults or delinquency in investment portfolios, including derivative contracts;

Greater difficulty selling privately placed and certain asset-backed fixed maturity securities and commercial mortgage loans at attractive prices and in a timely manner, as both are less liquid than publicly traded fixed maturity securities;

Borrower prepayment or redemption, prior to maturity, of mortgages that back mortgage-backed securities and bonds with embedded call options could force the Company to reinvest proceeds at lower interest rates;

An increase in environmental liability exposure from the Company’s commercial mortgage loan portfolio; and

Losses in the commercial mortgage loan portfolio as a result of economic downturns or natural disasters.

Changes in underwriting and actual experience could materially affect profitability

The Company prices its products based on long-term assumptions regarding investment returns, mortality, persistency, and operating costs. Management establishes target returns for each product based upon these factors and the average amount of regulatory and rating agency capital that the Company must hold to support in-force contracts. The Company monitors and manages pricing and sales mix to achieve target returns. Profitability from a new business emerges over a period of years, depending on the nature and life of the product, and is subject to variability 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 value of business acquired, as applicable; 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 margins and fee income due to lower assets under management, resulting from:

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.

The Company cannot predict what actions rating organizations may take, or what actions the Company 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;

Preceived financial strength; and

Claims paying and credit ratings.

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

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

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

The Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs 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 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, or new interpretations of existing laws, in areas such as employee benefit plan regulation, financial services regulation, and federal taxation, could lessen the competitive advantages of certain of the Company’s products, result in the surrender of existing contracts and policies, increase costs, or reduce new product sales, thus reducing the Company’s profitability.

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

Inappropriate trading of fund shares;

Revenue sharing and directed brokerage;

Sales and marketing practices;

Suitability;

Arrangements with service providers;

Pricing;

Compensation and sales incentives;

Potential conflicts of interest;

Potential anti-competitive activity;

Reinsurance;

Specific product types (including group annuities and indexed annuities); and

Adequacy of disclosure.

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

In some cases, this regulatory scrutiny has led to new proposed legislation and regulation that could significantly affect the financial services industry, including businesses in which the Company is engaged, or has resulted in regulatory penalties, 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. The Company cannot guarantee, however, 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.

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

Company insurance and annuity products are subject to a complex and extensive array of state and federal tax, securities and insurance laws, and regulations, which are administered and enforced by a number of different governmental and self-regulatory authorities, including state insurance regulators, state securities administrators, the Securities and Exchange Commission, the National Association of Securities Dealers, and the Internal Revenue Service.

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

The Company is highly dependent on automated systems to record and process Company and contractowner transactions. The Company may experience a failure of its operating systems or a compromise of its security due to technical system flaws,

clerical or record-keeping errors, or tampering or manipulation of those systems by employees or unauthorized third parties. Information security risks also exist with respect to the use of portable electronic devices, such as laptops, which are particularly vulnerable to loss and theft. The Company may also be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control (for example, natural disasters, acts of terrorism, epidemics, computer viruses, and electrical/telecommunications outages). All of these risks are also applicable where the Company relies on outside vendors to provide services to it and its contractowners. Operating system failures or disruptions or the compromise of security with respect to operating systems or portable electronic devices could subject the Company to regulatory sanctions, or other claims, harm the Company’s reputation, interrupt the Company’s operations, and adversely affect the Company’s business, results of operations, or financial condition.

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.

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

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

The Company has developed risk management policies and procedures and expects to continue to do so in the future. Nonetheless, the Company's policies and procedures to identify, monitor, and manage risks may not be fully effective. Many of the Company's methods of managing risk and exposures are based upon observed historical market behavior or statistics based on historical models. As a result, these methods may not predict future exposures, which could be significantly greater than historical measures indicate. Other risk management methods depend on the evaluation of information regarding markets, clients, catastrophe occurrence, or other matters, that is publicly available or otherwise accessible to the Company. This

information may not always be accurate, complete, up-to-date or properly evaluated. Management of operational, legal, and regulatory risks requires, among other things, policies and procedures to record and verify large numbers of transactions and events. These policies and procedures may not be fully effective.

Item 6.

Exhibits

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).

(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.

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.

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.

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 to 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 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.

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.

10.

Material Contracts

(a)

Administrative Services Agreement, dated as of October 1, 1998, among Aetna Life Insurance and Annuity Company (nka ILIAC), Aetna Life Insurance Company and The Lincoln National Life Insurance Company.

(b)

Administrative Services Agreement, dated as of October 1, 1998, among Aetna Life Insurance and Annuity Company (nka ILIAC), Aetna Life Insurance Company and Lincoln Life & Annuity Company of New York.

(c)

Coinsurance Agreement, dated as of October 1, 1998, between Aetna Life Insurance and Annuity Company (nka ILIAC) and The Lincoln National Life Insurance Company.

(d)

Coinsurance Agreement, dated as of October 1, 1998, between Aetna Life Insurance and Annuity Company (nka ILIAC) and Lincoln Life & Annuity Company of New York.

(e)

Modified Coinsurance Agreement, dated as of October 1, 1998, between Aetna Life Insurance and Annuity Company (nka ILIAC) and The Lincoln National Life Insurance Company.

(f)

Modified Coinsurance Agreement, dated as of October 1, 1998, between Aetna Life Insurance and Annuity Company (nka ILIAC) and Lincoln Life & Annuity Company of New York.

(g)

Assignment and Assumption Agreement, dated as of March 19, 2007, effective as of March 1, 2007, between ILIAC, The Lincoln National Life Insurance Company and Lincoln Life & Annuity Company of New York.

(h)

Amendment No. 1 to Coinsurance Agreement, effective March 1, 2007, between ILIAC and Lincoln Life & Annuity Company of New York.

(i)

Amendment No. 1 to Coinsurance Agreement, effective March 1, 2007, between ILIAC and Lincoln Life & Annuity Company of New York.

(j)

Grantor Trust Agreement, dated as of March 19, 2007 and effective as of March 1, 2007, among ILIAC, Lincoln Life & Annuity Company of New York and The Bank of New York.

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.

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

May 14, 2007

(Date)

ING 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)

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

Voya Retirement Insurance & Annuity 10-Q2007 Q1 Quarterly report

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