ING INSURANCE CO OF AMERICA - 10-Q Quarterly Report

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

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FORM 10-Q
(Mark One)

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

For the quarterly period ended June 30, 2004

OR

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

For the transition period from ___________________ to

Commission file number: 333-49581, 033-63657

ING INSURANCE COMPANY OF AMERICA
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Florida 06-1286272
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)

Corporate Center One, 2202 North Westshore Boulevard,
#350, Tampa, Florida 33607
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code (813) 281-3773

- --------------------------------------------------------------------------------
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 / /

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes / / 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: 25,500 shares of Common Stock
as of August 12, 2004, all of which were directly owned by ING Life Insurance
and Annuity Company.

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

1

ING INSURANCE COMPANY OF AMERICA
(A WHOLLY-OWNED SUBSIDIARY OF ING LIFE INSURANCE AND ANNUITY COMPANY)
FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2004

INDEX

2

ING INSURANCE COMPANY OF AMERICA
(A WHOLLY-OWNED SUBSIDIARY OF ING LIFE INSURANCE AND ANNUITY COMPANY)
FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2004

PART I. FINANCIAL INFORMATION (UNAUDITED)

ITEM 1. FINANCIAL STATEMENTS

CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Millions)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

3

CONDENSED BALANCE SHEETS
(Millions, except share data)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

4

CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(Unaudited)
(Millions)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

5

CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

6

ING INSURANCE COMPANY OF AMERICA
(A WHOLLY-OWNED SUBSIDIARY OF ING LIFE INSURANCE AND ANNUITY COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION

ING Insurance Company of America ("IICA" or the "Company"), is a
provider of financial products and services in the United States. The
Company is a wholly-owned subsidiary of ING Life Insurance and Annuity
Company ("ILIAC"). ILIAC is a wholly-owned subsidiary of Lion
Connecticut Holdings, Inc. ("Lion Connecticut"). Lion Connecticut's
ultimate parent is ING Groep N.V. ("ING"), a financial services
company based in The Netherlands.

The condensed financial statements and notes as of June 30, 2004 and
December 31, 2003 and for the three and six months ended June 30, 2004
and 2003 ("interim periods") have been prepared in accordance with
U.S. generally accepted accounting principles and are unaudited. The
condensed financial statements reflect all adjustments (consisting
only of normal recurring accruals) which are, in the opinion of
management, necessary for the fair presentation of the financial
position, results of operations and cash flows for the interim
periods. These condensed financial statements and notes should be read
in conjunction with the financial statements and related notes as
presented in the Company's 2003 Annual Report on Form 10-K. The
results of operations for the interim periods should not be indicative
of results to be expected for the full year.

The Company has one operating segment, U.S. Financial Services
("USFS"), and all revenue reported by the Company comes from external
customers.

2. RECENTLY ADOPTED ACCOUNTING STANDARDS

ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN
NONTRADITIONAL LONG-DURATION CONTRACTS AND FOR SEPARATE ACCOUNTS

The Company adopted Statement of Position ("SOP") 03-1, "Accounting
and Reporting by Insurance Enterprises for Certain Nontraditional
Long-Duration Contracts and for Separate Accounts," on January 1,
2004. SOP 03-1 establishes several new accounting and disclosure
requirements for certain nontraditional long-duration contracts and
for separate accounts including, among other things, a requirement
that assets and liabilities of separate account arrangements that do
not meet certain criteria be accounted for as general account assets
and liabilities, and that revenues and expenses related to such
arrangements be consolidated with the respective revenue and expense
lines in the Condensed Statement of Operations. In addition, the SOP
requires additional liabilities be established for certain guaranteed
death and other benefits and for Universal Life products with certain
patterns of cost of insurance charges, and that sales inducements
provided to contractholders be recognized on the balance sheet
separately from deferred acquisition costs and amortized as a
component of benefits expense using methodology and assumptions
consistent with those used for amortization of deferred policy
acquisition costs.

7

The Company evaluated all requirements of SOP 03-1 and determined that
it is affected by the SOP's requirements to account for certain
separate account arrangements as general account arrangements and to
defer, amortize and recognize separately sales inducements to
contractholders. Requirements to establish additional liabilities for
minimum guarantee benefits are applicable to the Company, however, the
Company's policies on policy liabilities have historically been, and
continue to be, in conformity with the requirements newly established.
Requirements for recognition of additional liabilities for Universal
Life products with certain patterns of cost of insurance charges are
not applicable to the Company.

The adoption of SOP 03-1 did not have a significant effect on the
Company's results of operations, and had no impact on the Company's
net income.

THE MEANING OF OTHER-THAN-TEMPORARY IMPAIRMENT AND ITS APPLICATION
TO CERTAIN INVESTMENTS

In March 2004, the Emerging Issues Task Force ("EITF") reached a
final consensus on EITF Issue No. 03-1, "The Meaning of
Other-Than-Temporary Impairment and its Application to Certain
Investments," adopting a three-step impairment model for securities
within its scope. The three-step model is to be applied on a
security-by-security basis as follows:

Step 1: Determine whether an investment is impaired. An investment is
impaired if its fair value of the investment is less than its
cost basis.
Step 2: Evaluate whether an impairment is other-than-temporary.
Step 3: If the impairment is other-than-temporary, recognize an
impairment loss equal to the difference between the
investment's cost and its fair value.

The Company included this three-step model in the impairment
evaluation for the quarter ended June 30, 2004. This guidance resulted
in no additional impairments for the Company.

Earlier consensus reached by the EITF on this issue required that
certain quantitative and qualitative disclosures be made for
unrealized losses on debt and equity securities that have not been
recognized as other-than-temporary impairments. These disclosures
were adopted by the Company, effective December 31, 2003, and included
in the Investments footnote of the Notes to Financial Statements
included in the Company's 2003 Form 10-K. In addition to the
disclosure requirements adopted by the Company effective December 31,
2003, the final consensus of EITF 03-01 reached in March 2004 included
additional disclosure requirements that are effective for fiscal years
ended after June 15, 2004.

In 2003, the Derivative Implementation Group ("DIG") responsible for
issuing guidance on behalf of the FASB for implementation of FAS No.
133, "Accounting for Derivative Instruments and Hedging Activities"
issued Statement Implementation Issue No. B36, "Embedded Derivatives:
Modified Coinsurance Arrangements and Debt Instruments That
Incorporate Credit Risk Exposures That Are Unrelated or Only Partially
Related to the Credit Worthiness of the Obligor under Those
Instruments" ("DIG B36"). Under this interpretation, modified
coinsurance and coinsurance with funds withheld reinsurance agreements
as well as other types of receivables and payables where interest is
determined by reference to a pool of fixed maturity assets or total
return debt index may be determined to contain embedded derivatives
that are required to be bifurcated. The Company adopted DIG B36 on
October 1, 2003. The Company has no investment or insurance products
that are applicable to the guidance and, therefore, the guidance has
no impact on the Company's financial position, results of operations
or cash flows.

3. NEW ACCOUNTING PRONOUNCEMENTS

The implementation of the American Institute of Certified Public
Accountants ("AICPA") SOP 03-01, "Accounting and Reporting by
Insurance Enterprises for certain Nontraditional Long-Duration
Contracts and for Separate Accounts," has raised questions regarding
the interpretation of the requirements of SFAS No. 97, concerning when
it is appropriate to record an unearned revenue liability related to
the insurance benefit function. To clarify its position, in June of
2004 the Financial Accounting Standards Board ("FASB") issued FSP FAS
97-1, "Situations in which paragraphs 17(b) and 20 of FASB Statement
No. 97, Accounting and Reporting by Insurance Enterprises for certain
Long-Duration Contracts and for Realized Gains and Losses from the
Sale of Investments, Permit or Require Accrual of an Unearned Revenue
Liability." FSP FAS 97-1 outlines that SFAS No. 97 is clear in its
intent and language, and requires the recognition of an unearned
revenue liability for amounts that have been assessed to compensate
insurers for services provided over future periods. The requirement of
SOP 03-01 is not intended to amend or limit the requirement of SFAS
No. 97 to recognize a liability for unearned revenue only to those
situations where profits are expected to be

8

followed by a loss. The guidance contained in FSP FAS 97-1 is
effective for financial statements with fiscal periods beginning
subsequent to July 18, 2004. The Company is currently evaluating the
impact of FSP FAS 97-1 and related accounting guidance and anticipates
a potential increase in the (net) liability established under SOP
03-01 in future accounting periods.

4. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED

Deferred Policy Acquisition Costs ("DAC") is an asset, which
represents certain costs of acquiring certain insurance business,
which are deferred and amortized. These costs, all of which vary with
and are primarily related to the production of new and renewal
business, consist principally of commissions, certain underwriting and
contract issuance expenses, and certain agency expenses. Value of
business acquired ("VOBA") is an asset, which represents the present
value of estimated net cash flows embedded in the Company's contracts,
which existed at the time the Company was acquired by ING. DAC and
VOBA are evaluated for recoverability at each balance sheet date and
these assets would be reduced to the extent that gross profits are
inadequate to recover the asset.

The amortization methodology varies by product type based upon two
accounting standards: F AS No. 60, "Accounting and Reporting by
Insurance Enterprises" ("FAS No. 60") and FAS No. 97, "Accounting and
Reporting by Insurance Enterprises for Certain Long-Duration Contracts
and Realized Gains and Losses from the Sale of Investments"
("FAS No. 97").

Under FAS No. 60, acquisition costs for traditional life insurance
products, which primarily include whole life and term life insurance
contracts, are amortized over the premium payment period in proportion
to the premium revenue recognition.

Under FAS No. 97, acquisition costs for universal life and
investment-type products, which include universal life policies and
fixed and variable deferred annuities, are amortized over the life of
the blocks of policies (usually 25 years) in relation to the emergence
of estimated gross profits from surrender charges, investment margins,
mortality and expense margins, asset-based fee income, and actual
realized gains (losses) on investments. Amortization is adjusted
retrospectively when estimates of current or future gross profits to
be realized from a group of products are revised.

9

VOBA activity for the six month periods ended June 30, 2004 and 2003
was as follows:

5. SEPARATE ACCOUNTS

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

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

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

Assets and liabilities of separate account arrangements that do not
meet the criteria in SOP 03-1 for separate presentation in the
Condensed Balance Sheets (those arrangements supporting the guaranteed
interest option), and revenues and expenses related to such
arrangements, were reclassified to the general account on January 1,
2004, in accordance with the SOP requirements.

6. ADDITIONAL INSURANCE BENEFITS AND MINIMUM GUARANTEES

Under SOP 03-1, the Company calculates an additional liability (the
"SOP reserve") for certain guaranteed benefits in order to recognize
the expected value of death benefits in

10

excess of the projected account balance over the accumulation period
based on total expected assessments.

The SOP reserve calculated is the minimum guaranteed death benefits
("MGDB") reserve and is determined each period by estimating the
expected value of death benefits in excess of the projected account
balance and recognizing the excess ratably over the accumulation
period based on total expected assessments. The Company regularly
evaluates estimates used to adjust the additional liability balance,
with a related charge or credit to benefit expense, if actual
experience or other evidence suggests that earlier assumptions should
be revised. The following assumptions and methodology were used to
determine the MGDB SOP reserve at June 30, 2004:

As of June 30, 2004, the separate account liability subject to SOP
03-1 for minimum guaranteed benefits and the additional liability
recognized related to minimum guarantees is $532.0 million and $0.2
million, respectively. During the six months ended June 30, 2004,
there were no incurred guaranteed benefits and paid guaranteed
benefits. The net amount at risk (net of reinsurance) and the weighted
average attained age of contractholders is $7.2 million and 72,
respectively, as of June 30, 2004.

The aggregate fair value of equity securities (including mutual funds)
supporting separate accounts with additional insurance benefits and
minimum investment return guarantees as of June 30, 2004 is
$532.0 million.

7. INCOME TAXES

The Company's effective tax rates for the three months ended June 30,
2004 and 2003 were 33.3% and 17.9%, respectively. Effective tax rates
for the six months ended June 30, 2004 and 2003 were 30.0% and 16.7%,
respectively. The year over year increase in the effective tax rates
is attributable to a current year decrease in the deduction allowed
for dividends received and a non-recurring prior year refinement of
the deferred tax balance.

11

8. COMMITMENTS AND CONTINGENT LIABILITIES

LITIGATION

The Company is a party to threatened or pending lawsuits/arbitrations
arising from the normal conduct of business. Due to the climate in
insurance and business litigation, 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.

9. RECLASSIFICATION AND CHANGES TO PRIOR YEAR PRESENTATION

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

During 2003, certain changes were made to the classification of MGDB
excess claims, which previously were included as a reduction to fee
income period. These changes had no impact on net income or
shareholder's equity of the Company. The following summarizes the
change in classification to each financial statement line item (in
millions):

13

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

OVERVIEW

The following narrative analysis of the results of operations and
financial condition presents a review of ING Insurance Company of
America ("IICA", or the "Company") as of June 30, 2004 and December
31, 2003 and for the three and six month periods ended June 30, 2004
and 2003. This review should be read in conjunction with the condensed
financial statements and other data presented herein, as well as the
"Management's Narrative Analysis of the Results of Operations and
Financial Condition" section contained in the Company's 2003 Annual
Report on Form 10-K.

NATURE OF BUSINESS

The Company and principally offers annuity contracts to individuals
on a qualified and nonqualified basis and to employer sponsored
retirementb plans qualified under Internal Revenue Code Sections 401,
403, and 408. The Company's products are offered primarily to
individuals and employer-sponsored groups in the education market. The
Company's products are generally sold through a managed network of
broker/dealers and dedicated career agents.

RECENTLY ADOPTED ACCOUNTING STANDARDS

ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN
NONTRADITIONAL LON-DURATION CONTRACTS AND FOR SEPARATE ACCOUNTS

The Company adopted Statement of Position ("SOP") 03-1, "Accounting
and Reporting by Insurance Enterprises for Certain Nontraditional
Long-Duration Contracts and for Separate Accounts," on January 1,
2004. SOP 03-1 establishes several new accounting and disclosure
requirements for certain nontraditional long-duration contracts and
for separate accounts including, among other things, a requirement
that assets and liabilities of separate account arrangements that do
not meet certain criteria be accounted for as general account assets
and liabilities, and that revenues and expenses related to such
arrangements, be consolidated with the respective revenue and expense
lines in the Condensed Statement of Operations. In addition, the SOP
requires additional liabilities be established for certain guaranteed
death and other benefits and for Universal Life products with certain
patterns of cost of insurance charges, and that sales inducements
provided to contractholders be recognized on the balance sheet
separately from deferred acquisition costs and amortized as a
component of benefits expense using methodology and assumptions
consistent with those used for amortization of deferred policy
acquisition costs.

The Company evaluated all requirements of SOP 03-1 and determined that
it is affected by the SOP's requirements to account for certain
separate account arrangements as general account arrangements and to
defer, amortize and recognize separate sales inducements to
contractholders. Requirements to establish additional liabilities for
minimum guarantee benefits are applicable to the Company, however, the
Company's policies on policy liabilities have historically been, and
continue to be, in conformity with the requirements newly established.
Requirements for recognition

14

of additional liabilities for Universal Life products with certain
patterns of cost of insurance charges are not applicable to the
Company.

The adoption of SOP 03-1 did not have a significant effect on
the Company's results of operations, and had no impact on the
Company's net income.

THE MEANING OF OTHER-THAN-TEMPORARY IMPAIRMENT AND ITS APPLICATION
TO CERTAIN INVESTMENTS

In March 2004, the Emerging Issues Task Force ("EITF") reached a
final consensus on EITF Issue No. 03-1, "The Meaning of
Other-Than-Temporary Impairment and its Application to Certain
Investments," adopting a three-step impairment model for securities
within its scope. The three-step model is to be applied on a
security-by-security basis as follows:

Step 1: Determine whether an investment is impaired. An investment is
impaired if its fair value of the investment is less than its
cost basis.
Step 2: Evaluate whether an impairment is other-than-temporary.
Step 3: If the impairment is other-than-temporary, recognize an
impairment loss equal to the difference between the
investment's cost and its fair value.

The Company included this three-step model in the impairment
evaluation for the quarter ended June 30, 2004. This guidance resulted
in no additional impairments for the Company.

Earlier consensus reached by the EITF on this issue required that
certain quantitative and qualitative disclosures be made for
unrealized losses on debt and equity securities that have not been
recognized as other-than-temporary impairments. These disclosures were
adopted by the Company, effective December 31, 2003, and included in
the Investments footnote of the Notes to Financial Statements included
in the Company's 2003 Form 10-K. In addition to the disclosure
requirements adopted by the Company effective December 31, 2003,
the final consensus of EITF 03-01 reached in March 2004 included
additional disclosure requirements that are effective for fiscal years
ended after June 15, 2004.

In 2003, the Derivative Implementation Group ("DIG") responsible for
issuing guidance on behalf of the FASB for implementation of FAS No.
133, "Accounting for Derivative Instruments and Hedging Activities"
issued Statement Implementation Issue No. B36, "Embedded Derivatives:
Modified Coinsurance Arrangements and Debt Instruments That
Incorporate Credit Risk Exposures That Are Unrelated or Only Partially
Related to the Credit Worthiness of the Obligor under Those
Instruments" ("DIG B36"). Under this interpretation, modified
coinsurance and coinsurance with funds withheld reinsurance agreements
as well as other types of receivables and payables where interest is
determined by reference to a pool of fixed maturity assets or total
return debt index may be determined to contain embedded derivatives
that are required to be bifurcated. The Company adopted DIG B36 on
October 1,2003. The Company has no investment or insurance products
that are applicable to the guidance and, therefore, the guidance has
no impact on the Company's financial position, results of operations
or cash flows.

NEW ACCOUNTING PRONOUNCEMENTS

The implementation of the American Institute of Certified Public
Accountants ("AICPA") SOP 03-01, "Accounting and Reporting by
Insurance Enterprises for certain Nontraditional Long-Duration
Contracts and for Separate Accounts," has raised questions regarding
the interpretation of the requirements of SFAS No. 97, concerning when
it is appropriate to record an unearned revenue liability related to
the insurance benefit function. To clarify its position, in June of
2004 the Financial Accounting Standards Board ("FASB") issued FSP FAS
97-1, "Situations in which paragraphs 17(b) and 20 of FASB Statement
No. 97, Accounting and Reporting by Insurance Enterprises for certain
Long-Duration Contracts and for Realized Gains and Losses from the
Sale of Investments, Permit or Require Accrual of an Unearned Revenue
Liability." FSP FAS 97-1 outlines that SFAS No. 97 is clear in its
intent and language, and requires the recognition of an unearned
revenue liability for amounts that have been assessed to compensate
insurers for services provided over future periods. The requirement of
SOP 03-01 is not intended to amend or limit the requirement of SFAS
No. 97 to recognize a liability for unearned revenue only to those
situations where profits are expected to be followed by a loss. The
guidance contained in FSP FAS 97-1 is effective for financial
statements with fiscal periods beginning subsequent to July 18, 2004.
The Company is currently evaluating the impact of FSP FAS 97-1 and
related accounting guidance and anticipates a potential increase in
the (net) liability established under SOP 03-01 in future accounting
periods.

CRITICAL ACCOUNTING POLICIES

GENERAL

15

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

The Company has identified the following estimates as critical in that
they involve a higher degree of judgment and are subject to a
significant degree of variability. In developing these estimates
management makes subjective and complex judgments that are inherently
uncertain and subject to material change as facts and circumstances
develop. Although variability is inherent in these estimates,
management believes the amounts provided are appropriate based upon
the facts available upon compilation of the condensed financial
statements.

INVESTMENT IMPAIRMENT TESTING

The Company reviews the general account investments for impairments by
considering the length of the time and the extent to which the fair
value has been less than amortized cost; the financial condition and
near-term prospects of the issuer; future economic conditions and
market forecasts; and the Company's intent and ability to retain the
investment in the issuer for a period of time sufficient to allow for
recovery in fair value. Based on the facts and circumstances of each
case, management uses judgment in deciding whether any calculated
impairments are temporary or other than temporary. For those
impairments judged to be other than temporary, the Company reduces the
carrying value of those investments to the current fair value and
records impairment losses for the difference.

AMORTIZATION OF DEFERRED ACQUISITION COSTS AND VALUE OF BUSINESS
ACQUIRED

Deferred policy acquisition costs ("DAC") and value of business
acquired ("VOBA") are amortized with interest over the life of the
contracts (usually 25 years) in relation to the present value of
estimated gross profits from projected interest margins, asset-based
fees, policy administration and surrender charges less policy
maintenance fees.

Changes in assumptions can have a significant impact on the
calculation of DAC/VOBA and its related amortization patterns. Due to
the relative size of the DAC/VOBA balance and the sensitivity of the
calculation to minor changes in the underlying assumptions and the
related volatility that could result in the reported DAC/VOBA balance,
the Company performs a quarterly analysis of DAC/VOBA. At each balance
sheet date, actual historical gross profits are reflected and expected
future gross profits and related assumptions are evaluated for
continued reasonableness.

16

Any adjustment in estimated profit requires that the amortization rate
be revised retroactively to the date of policy or contract issuance
("unlocking"), which could be significant. The cumulative difference
related to prior periods is recognized as a component of the current
period's amortization, along with amortization associated with the
actual gross profits of the period. In general, increases in estimated
returns result in increased expected future profitability and may
lower the rate of amortization, while increases in lapse/surrender and
mortality assumptions or decreases in returns reduce the expected
future profitability of the underlying business and may increase the
rate of amortization.

One of the most significant assumptions involved in the estimation of
future gross profits for variable universal life and deferred annuity
products is the assumed return associated with future separate account
performance. To reflect the near-term and long-term volatility in the
equity markets this assumption involves a combination of near-term
expectations and a long-term assumption about market performance. The
overall return generated by the separate account is dependent on
several factors, including the relative mix of the underlying
sub-accounts among bond funds and equity funds as well as equity
sector weightings.

FORWARD-LOOKING INFORMATION/RISK FACTORS

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

Forward-looking statements are necessarily based on estimates and
assumptions that are inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of
which are beyond the Company's control and many of which are subject
to change. These uncertainties and contingencies could cause actual
results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company.

Whether or not actual results differ materially from forward-looking
statements may depend on numerous foreseeable and unforeseeable
developments. Some may be national in scope, such as general economic
conditions, changes in tax law and changes in interest rates (for
additional information, see the Legislative Initiatives section
below). Some may relate to the insurance industry generally, such as
pricing competition, regulatory developments and industry
consolidation. Others may relate to the Company specifically, such as
credit, volatility and other risks associated with the Company's
investment portfolio. Investors are also directed to consider other

17

risks and uncertainties discussed in documents filed by the Company
with the SEC. The Company disclaims any obligation to update
forward-looking information.

RESULTS OF OPERATIONS

Fee income for the three and six month periods ended June 30, 2004
decreased by $0.5 million compared to the same periods in 2003. The
decrease in fee income during the comparative periods was primarily
due to lower single premium immediate annuity sales in 2004 versus
2003.

Net investment income decreased by $0.1 and $0.2 for the three and six
month periods ended June 30, 2004, respectively, compared to the same
periods in 2003. The decrease is primarily due to lower investment
yields and a decrease in average assets under management with fixed
options.

Net realized capital gains decreased by $0.9 million and $0.8 million
for the three and six month periods ended June 30, 2004, respectively,
compared to the same periods in 2003. Net realized gains result from
sales of fixed maturities having a fair value greater than book value
and are dependent on the volume of trades in the current interest rate
environment. The 10-year treasury yield has risen from an average of
3.77% in the first half of 2003 to 4.31 % in the first half of 2004,
an increase of 54 basis points. In a rising rate environment, the
market value of fixed maturities held in the Company's portfolio
decreases. The decrease in net realized gains reflects the impact of
this variable on the overall sale of fixed maturities.

Interest credited and other benefits to contractholders for the three
months ended June 30, 2004 in contrast to the comparative period in
2003, increased by $0.1 million. A decrease of $0.8 million between
the six months ended June 30, 2004 and six months ended June 30, 2003,
was primarily due to a decrease in credited rates to contractholders
and a decline in average assets under management with fixed options.

Underwriting, acquisition, and insurance expenses for the three and
six month periods ended June 30, 2004 compared to the same periods in
2003 remained relatively stable.

Amortization of DAC and VOBA for the three and six months ended June
30, 2004, increased by $0.2 million and decreased by $0.5 million,
respectively, compared to the same periods in 2003. Amortization of
long-duration products is recorded in proportion to actual and
estimated future gross profits. Estimated gross profits are computed
based on underlying assumptions related to the underlying contracts,
including but not limited to interest margins, mortality, lapse,
premium persistency, expenses, and asset growth. The increase in the
amortization of deferred policy acquisition costs and value of
insurance acquired reflects the impact of these variables on the
overall book of business.

Net income decreased by $1.5 million and $0.4 million for the three
and six months ended June 30, 2004, respectively, compared to the same
periods in 2003. The decline in earnings is primarily the result of
decreased net realized gains in addition to an increase in total
benefits, expenses and amortization of long-duration products.

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The Company's annuity deposits and assets under management are as
follows:

(1) Excludes net unrealized capital gains of $2.5 million and $9.3
million at June 30, 2004 and 2003, respectively.
(2) Includes $412.0 million and $408.5 million at June 30, 2004 and
2003, respectively, of assets invested through the Company's
products in unaffiliated mutual funds.

FINANCIAL CONDITION

INVESTMENTS

FIXED MATURITIES

At June 30, 2004 and December 31, 2003, the Company's carrying value
of available for sale fixed maturities including securities pledged
under securities lending agreement (hereinafter referred to as "total
fixed maturities") represented 100.0% of the total general account for
2004 and 2003. For the same periods, $78.7 million, or 40.7% of total
fixed maturities, and $92.3 million, or 69.3% of total fixed
maturities, respectively, supported experience-rated products. Total
fixed maturities reflected net unrealized capital gains of $2.5
million and $5.2 million at June 30, 2004 and December 31, 2003,
respectively.

It is management's objective that the portfolio of fixed maturities be
of high quality and be well diversified by market sector. The fixed
maturities in the Company's portfolio are generally rated by external
rating agencies and, if not externally rated, are rated by the Company
on a basis believed to be similar to that used by the rating agencies.
The average quality rating of the Company's fixed maturities portfolio
was AA- at June 30, 2004 and 2003.

Fixed maturities rated BBB and below 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.

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The percentage of total fixed maturities by quality rating category is
as follows:

The percentage of total fixed maturities by market sector is as
follows:

(1) Primarily U.S. dollar denominated.

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 in accordance with F AS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities".
Management considers the length of the time and the extent to which
the fair value has been less than amortized cost; the financial
condition and near-term prospects of the issuer; future economic
conditions and market forecasts; and the Company's intent and ability
to retain the investment in the issuer for a period of time sufficient
to allow for recovery in fair value. If it is probable that all
amounts due according to the contractual terms of a fixed maturity
investment will not be collected, an other than temporary impairment
is considered to have occurred.

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
accounted for as a realized loss.

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. The Company's principal sources of liquidity are
product charges, investment income and maturing investments. Primary
uses of these funds are payments of commissions and operating
expenses, interest credits, investment purchases, as well as
withdrawals and surrenders.

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Management believes that its sources of liquidity are adequate to meet
the Company's short-term cash obligations. The Company has entered
into agreements with ILIAC under which ILIAC has agreed to cause the
Company to have sufficient capital to meet certain capital and surplus
levels.

The National Association of Insurance Commissioners' ("NAIC")
risk-based capital requirements require insurance companies to
calculate and report information under a risk-based capital formula.
These requirements are intended to allow insurance regulators to
monitor the capitalization of insurance companies based upon the type
and mixture of risks inherent in a Company's operations. The formula
includes components for asset risk, liability risk, interest rate
exposure, and other factors. The Company has complied with the NAIC's
risk-based capital reporting requirements.

Amounts reported indicate that the Company has total adjusted capital
above all required capital levels.

LEGISLATIVE INITIATIVES

The Jobs and Growth Tax Relief Reconciliation Act of 2003 which was
enacted in the second quarter of 2003 may impact the Company. The
Act's provisions, which reduce the tax rates on long-term capital
gains and corporate dividends, impact the relative competitiveness of
the Company's products, especially variable annuities.

Other legislative proposals under consideration include repealing the
estate tax, changing the taxation of products, changing life insurance
company taxation and making changes to nonqualified deferred
compensation arrangements. Some of these proposals, if enacted, could
have a material effect on life insurance, annuity and other retirement
savings product sales.

The impact on the tax position of the Company's products cannot be
predicted.

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ITEM 4. CONTROLS AND PROCEDURES

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

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

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is a party to threatened or pending lawsuits arising from
the normal conduct of business. Due to the climate in insurance and
business litigation, 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, in light of existing insurance, reinsurance and established
reserves, it is the opinion of management that the disposition of such
lawsuits will not have a materially adverse effect on the Company's
operations or financial position.

As with many financial services companies, affiliates of the Company
have received requests for information from various governmental and
self-regulatory agencies in connection with investigations related to
trading in investment company shares. In each case, full cooperation
and responses are being provided. The Company is also reviewing its
policies and procedures in this area.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

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.

(b) Reports on Form 8-K.

None.

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SIGNATURES

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

ING INSURANCE COMPANY OF AMERICA
--------------------------------
(Registrant)

August 12, 2004 By/s/ David A. Wheat
- ---------------- ------------------------------------------
(Date) David A. Wheat
Director, Senior Vice President, and
Chief Financial Officer

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