As filed with the Securities and Exchange Commission on April 21, 2008
Registration No. 333-133158

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

FORM S-1
POST-EFFECTIVE AMENDMENT NO. 2

TO

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ING LIFE INSURANCE AND ANNUITY COMPANY

Connecticut
(State or other jurisdiction of incorporation or organization)
6311
(Primary Standard Industrial Classification Code Number)
71-0294708
(I.R.S. Employer Identification No.)

ING
One Orange Way
Windsor, Connecticut 06095-4774
(860) 580-4646
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Michael A. Pignatella, Esq.
ING Life Insurance and Annuity Company One Orange Way
Windsor, Connecticut 06095-4774
(860) 580-2831
(Name and Address of Agent for Service of Process)

Copy to:
John S. (Scott) Kreighbaum, Esq.
ING Life Insurance and Annuity Company
1475 Dunwoody Drive
West Chester, PA 19380-1478
(610) 425-3404
_____________________________________________________________________________________________
Approximate date of commencement of proposed sale to the public:

It is proposed that the public offering will commence as soon as practicable after
effectiveness of this filing.
If any of the securities being registered to this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.	[ X ]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.	[   ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.	[   ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.	[   ]

PART I

INFORMATION REQUIRED IN THE PROSPECTUS

ING Life Insurance and Annuity Company
Single Premium Deferred Modified Guaranteed Annuity Contract

ING MULTI-RATE ANNUITY

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                                                                                                                                                                              April 28, 2008  

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The Contract. The contract described in this prospectus is a group or individual, single purchase payment,
modified guaranteed deferred annuity contract issued by ING Life Insurance and Annuity Company (the
“Company,” “we,” “us,” “our”). The contract is available as a nonqualified deferred annuity. Additionally, the
contract is available as a rollover to a traditional Individual Retirement Annuity (“IRA”) under section 408(b) of the
Internal Revenue Code of 1986, as amended (“Tax Code”) or a rollover to a Roth IRA under Tax Code section
408A. See “Purchase” in this prospectus for additional information.

Why Reading this Prospectus is Important. This prospectus contains facts about the contract that you should
know before investing. The information will help you determine if the contract is right for you. Read this
prospectus carefully. If you do invest in the contract, retain this document for future reference.

How it Works. Upon purchase, you may direct your purchase payment to different guaranteed terms ranging up to
and including ten years. Each guaranteed term has its own guaranteed interest rate. When the guaranteed term(s)
end, you can reinvest in another guaranteed term, begin receiving income phase payments, or withdraw your full
account value.

Withdrawals. You may withdraw all or part of your accumulated funds at any time. Withdrawals prior to the
end of a guaranteed term may be subject to a market value adjustment and certain fees. Upon a full
withdrawal, you could, therefore, receive less than your purchase payment. See the “Market Value
Adjustment” section and “Fees” section in this prospectus for additional information.

Additional Disclosure Information. Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed on the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense. We do not intend for this prospectus to be an
offer to sell or a solicitation of an offer to buy these securities in any state that does not permit their sale. We have
not authorized anyone to provide you with information different from that contained in this prospectus. The contract
is not a deposit with, obligation of, or guaranteed or endorsed by any bank, nor is it insured by the FDIC.

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Our Home Office:	Our Customer Service Center:
ING Life Insurance and Annuity	ING
Company	P.O. Box 9271
One Orange Way	Des Moines, IA 50306-9271
Windsor , CT 06095-4774	(800) 531-4547
(860) 580-4646

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ILIAC Multi-Rate Annuity – ILIACMRA

TABLE OF CONTENTS
	Page
CONTRACT OVERVIEW	1
GUARANTEED TERMS AND GUARANTEED INTEREST RATES	2
YOUR CHOICES AT THE END OF A GUARANTEED TERM	4
PURCHASE	5
RIGHT TO CANCEL	6
FEES	6
WITHDRAWALS	8
SYSTEMATIC DISTRIBUTION OPTIONS	9
MARKET VALUE ADJUSTMENT (MVA)	10
DEATH BENEFIT	11
INCOME PHASE	12
INVESTMENTS	14
TAXATION	16
OTHER TOPICS	25
APPENDIX I – Calculating a Market Value Adjustment (MVA)	I-1

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CONTRACT OVERVIEW

The following is intended as a summary. Please read each section of this prospectus for additional detail.

Questions: Contacting the Company. To answer your questions, contact your sales representative or write or call
our Customer Service Center:

ING
P.O. Box 9271
Des Moines, IA 50306-92711
(800) 531-4547

Contract Design:

The contract described in this prospectus is a group or individual, single purchase payment, modified guaranteed
deferred annuity contract issued by ING Life Insurance and Annuity Company. It is intended to be used as a
retirement savings vehicle that allows you to invest in fixed interest options in order to help meet long-term financial
goals.

Who’s Who:

The contract holder (you): The person to whom we issue an individual contract or a certificate under a group
contract.

The Company (we, us, our): ING Life Insurance and Annuity Company. We issue the contract.

The contract: Both individual contracts and certificates under a group contract are referred to in this prospectus as
the contract.

Contract Phases:

The Accumulation Phase

• At Investment. Upon purchase, you may direct your purchase payment to different guaranteed terms ranging up to and including ten years. Each guaranteed term has its own guaranteed interest rate.
  Generally, your purchase payment will earn interest at the guaranteed interest rate(s) for the duration of theguaranteed term(s) you select. If you withdraw or transfer amounts prior to the end of a guaranteed term,those amounts may be subject to a market value adjustment and certain fees. See “Market ValueAdjustment” and “Fees.”
• At Maturity. We will notify you at least 18 days before the guaranteed term ends. If you do not make any election before the guaranteed term ends, we will automatically renew the contract for a guaranteed term of the same or similar duration. If you do not want to automatically renew, contact us before the guaranteed term ends. Prior to the end of a guaranteed term, you can elect to reinvest in a different guaranteed term, begin income phase payments, or withdraw the full amount available at maturity.

The Income Phase

You may start receiving income phase payments any time after the first year of the contract. Several payment
options are available. See “Income Phase.” In general, you may receive payments for a specified period of time or
for life; receive payments monthly, quarterly, semi-annually or annually; and select an option that provides a death
benefit to beneficiaries.

Contract Facts:

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Free Look/Right to Cancel: You may cancel the contract within ten days of receipt (or as otherwise provided by
state law). See “Right to Cancel.”

Death Benefit: A beneficiary may receive a benefit in the event of your death prior to the income phase. Benefits
during the income phase depend upon the payment option selected. See “Death Benefit” and “Income Phase.”

Withdrawals: During the accumulation phase, you may withdraw all or part of your account value. Amounts
withdrawn may be subject to a market value adjustment, early withdrawal charge, maintenance fee, tax withholding
and taxation. See “Market Value Adjustment,” “Withdrawals,” “Fees” and “Taxation.”

Systematic Distribution Options: You may elect to receive regular payments from your account, while retaining
the account in the accumulation phase. See “Systematic Distribution Options.”

Fees: Certain fees may be deducted from your account value. See “Fees.”

Taxation: You will not generally pay taxes on any earnings from the annuity contract described in this prospectus
until they are withdrawn. Tax-qualified retirement arrangements (e.g., IRAs) also defer payment of taxes on
earnings until they are withdrawn. If you are considering funding a tax-qualified retirement arrangement with an
annuity contract, you should know that the annuity contract does not provide any additional tax deferral of earnings
beyond the tax deferral provided by the tax-qualified retirement arrangement. However, annuities do provide other
features and benefits which may be valuable to you. You should discuss your alternatives with your financial
representative.

Taxes will generally be due when you receive a distribution. Tax penalties may apply in some circumstances. See
“Taxation.”

Market Value Adjustment (MVA): If you withdraw all or part of your account value before a guaranteed term is
completed, an MVA may apply. The MVA reflects the change in the value of the investment due to changes in
interest rates since the date of investment, and may be positive or negative. See “Market Value Adjustment.”

GUARANTEED TERMS AND GUARANTEED INTEREST RATES

The contract offers fixed interest options called guaranteed terms. On the application or enrollment form, you select
the guaranteed term(s) you want to invest in from among the guaranteed terms we offer at that time. Your purchase
payment earns interest at the guaranteed interest rate applicable to that guaranteed term.

Guaranteed Terms
Start Date. Guaranteed terms always start on the first business day of the month.

Length. Guaranteed terms are offered at our discretion for various lengths of time ranging up to and including ten
years.

Minimum Payments. Your single purchase payment must be at least $10,000. You may divide your single
purchase payment among any of the various guaranteed terms we offer, but you must invest at least $1,000 in any
single guaranteed term.

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Guaranteed Interest Rates
We state the guaranteed interest rates as an effective annual rate of return. In other words, we credit the interest you
earn on your purchase payment at a rate that provides the guaranteed rate of return over a one-year period, assuming
you make no withdrawals. Guaranteed interest rates will never be less than the minimum guaranteed interest rate
stated in the contract. We reserve the right to offer, from time to time, guaranteed interest rates to prospective
investors that are higher than those offered to current contract holders with respect to guaranteed terms of the same
duration.

One Guaranteed Term/Multiple Guaranteed Interest Rates. More than one guaranteed interest rate may be
applicable during a guaranteed term greater than one year. For example, a guaranteed term of five years may apply
one guaranteed interest rate for the first year, a different guaranteed interest rate for the next two years, and a third
guaranteed interest rate for the last two years. You may not select a guaranteed term with multiple guaranteed
interest rates if your contract is issued in the State of New York.

Example of Interest Crediting at the Guaranteed Interest Rate. The example below shows how interest is
credited during a guaranteed term. The hypothetical guaranteed interest rate used in this example is illustrative only
and is not intended to predict future guaranteed interest rates to be offered under the contract. Actual guaranteed
interest rates offered may be more or less than those shown. The example assumes no withdrawals of any amount
during the entire seven-year guaranteed term illustrated. The example does not reflect any market value adjustment,
federal income taxes, possible tax penalties, or deductions of any early withdrawal charge, premium taxes, or
maintenance fees. See “Withdrawals,” “Market Value Adjustment,” “Fees” and “Taxation.”

Example:
Purchase payment:	$20,000
Guaranteed term:	7 years
Guaranteed interest rate:	6.00% per year

The guaranteed interest rate is applied in this example by using the formula:

1 + the guaranteed interest rate = 1.06
Account Value at End	Interest Earned at End
of Each Contract Year	of Each Contract Year
Contract year 1 = $21,200.00	Interest at end of contract year 1
($20,000.00 x 1.06)	= $1,200.00
Contract year 2 = $22,472.00	Interest at end of contract year 2
($21,200.00 x 1.06)	= $1,272.00
Contract year 3 = $23,820.32	Interest at end of contract year 3
($22,472.00 x 1.06)	= $1,348.32
Contract year 4 = $25,249.54	Interest at end of contract year 4
($23,820.32 x 1.06)	= $1,429.22
Contract year 5 = $26,764.51	Interest at end of contract year 5
($25,249.54 x 1.06)	= $1,514.97
Contract year 6 = $28,370.38	Interest at end of contract year 6
($26,764.51 x 1.06)	= $1,605.87
End of guaranteed term = $30,072.61	Interest at end of contract year 7
($28,370.38 x 1.06)	= $1,702.23

Total interest credited in guaranteed term = $10,072.61 ($30,072.61 - $20,000)

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Determination of Guaranteed Interest Rates. We will periodically determine the guaranteed interest rates we
offer at our sole discretion. We have no specific formula for determining the rate of interest we will declare as
future guaranteed interest rates. Our determination of guaranteed interest rates is influenced by, but does not
necessarily correspond to, interest rates available on the types of debt instruments in which we intend to invest the
amounts attributable to the contract. See “Investments.” The Company’s management will also consider various
factors in determining guaranteed interest rates for a given guaranteed term, including some or all of the following:

·  Regulatory and tax requirements; 

·  Sales commissions; 

·  Administrative expenses; 

·  General economic trends; and 

·  Competitive factors. 

The Company’s management determines the guaranteed interest rates we will offer. We cannot predict nor
guarantee future levels of guaranteed interest rates above the contractually guaranteed minimum rate nor
guarantee what rates will be offered in the future.

YOUR CHOICES AT THE END OF A GUARANTEED TERM

At least 18 calendar days prior to the end of a guaranteed term, we will notify you that the guaranteed term is about
to end. At the end of a guaranteed term, you can do three things with the amount you have accumulated for that
guaranteed term:

·  Reinvest all or part of it in another guaranteed term; 

·  Withdraw all or part of it; or 

·  Use all or part of it to start your income phase payments. 

These choices can also be combined. For example, you can withdraw part of the amount you have accumulated and
reinvest the balance or reinvest part and use the balance to start income phase payments. Each of these choices has
certain consequences, which you should consider carefully. See “Withdrawals,” “Income Phase” and “Taxation.”

Requesting Your Choice. Once you decide what you want to do with your account value for that guaranteed term,
you must advise us of your decision by completing an election form. We must receive your completed election form
at least five days prior to the end of the guaranteed term to which it applies.

If we do not receive your properly completed election form in time, or you do not submit an election form, your
account value at the end of the guaranteed term will be automatically reinvested in the following manner:

·  For a guaranteed term equal to the guaranteed term just ended; 

·  If no such guaranteed term is available, for the guaranteed term with the next shortest duration; or 

·  If no such shorter guaranteed term is available, for the guaranteed term with the next longest duration. 

Your account value will then earn interest at the guaranteed interest rate applicable to the guaranteed term
automatically selected for you. We will mail a confirmation statement to you the next business day after the
completion of the just-ended guaranteed term advising you of the new guaranteed term and guaranteed interest rate.

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PURCHASE

Contract Type. The contract may be purchased as one of the following:

(1)	A nonqualified deferred annuity;
(2)	A rollover to a traditional individual retirement annuity (IRA) under Tax Code section 408(b) (limitations apply, see “Purchasing a Traditional IRA” in this section); or
(3)	A rollover to a Roth IRA under Tax Code section 408A (limitations apply, see “Purchasing a Roth IRA” in this section).

How to Purchase. To purchase a contract, complete an application or enrollment form and submit it to the
Company along with your purchase payment.

Payment Methods. The following purchase payment methods are allowed:

• One lump-sum payment; or
• Transfer or rollover from a pre-existing plan or account.

We reserve the right to reject any payments without advance notice.

Payment Amount. The minimum purchase payment is $10,000. We may limit the amount of the maximum purchase
payment. All purchase payments over $1,000,000 will be allowed only with our consent. You may not make any
additional purchase payments under an existing contract. However, eligible persons may purchase additional
contracts at the then prevailing guaranteed interest rates and guaranteed terms.

Purchasing a Traditional IRA. To purchase the contract as a traditional IRA, your purchase payment must be a
transfer of amounts held in one of the following:

• A traditional individual retirement account under Tax Code section 408(a);
• A traditional individual retirement annuity under Tax Code section 408(b); or
• A retirement plan qualified under Tax Code section 401 or 403.

Purchasing a Roth IRA. A contract may be purchased as a Roth IRA under Tax Code section 408A, by
transferring amounts previously accumulated under another Roth IRA or from a traditional individual retirement
annuity or individual retirement account, provided certain conditions are met. See “Taxation.”

Acceptance or Rejection of Applications or Enrollment Forms. We must accept or reject your application or
enrollment form within two business days of receipt. If the application or enrollment form is incomplete, we may
hold it and any accompanying purchase payment for five days. Payments may be held for longer periods only with
your consent, pending acceptance of the application or enrollment form. If the application or enrollment form is
accepted, a contract will be issued to you. If the application or enrollment form is rejected, we will return it and any
payments to you, without interest.

We may also refuse to accept certain forms of premium payments or loan repayments, if applicable, (traveler’s
checks, for example) or restrict the amount of certain forms of premium payments or loan repayments. In addition,
we may require information as to why a particular form of payment was used (third party checks, for example) and
the source of the funds of such payment in order to determine whether or not we will accept it. Use of an
unacceptable form of payment may result in us returning your premium payment and not issuing the contract.

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What Happens to Your Purchase Payment? If we accept your application or enrollment form, your purchase
payment becomes part of our general assets and is credited to an account established for you. We will confirm the
crediting of your purchase payment within five business days of receipt of your properly completed application or
enrollment form. You start earning interest on your purchase payment beginning on the effective date of the
contract, which is the date your purchase payment is credited. During the period of time between the date your
purchase payment is credited and the start of the guaranteed term you selected, your purchase payment earns interest
at the guaranteed interest rate applicable to the guaranteed term you selected.

RIGHT TO CANCEL

You may cancel the contract within ten days of receiving it (or as otherwise provided by state law) by returning it to
our Service Center along with a written notice of cancellation. We will issue a refund within seven days of our
receipt of the contract and written notice of cancellation. The refund will equal the amount of your purchase
payment.

FEES

The following fees and other deductions may impact your account value:

• Early Withdrawal Charge (see below);
• Maintenance Fee (see below);
• Premium Taxes (see below);
• Market Value Adjustment (see “Market Value Adjustment”); and
• Taxation (see “Taxation”).

Early Withdrawal Charge
Withdrawals of all or a portion of your account value may be subject to a charge. In the case of a partial withdrawal
where you request a specified dollar amount, the amount withdrawn from your account will be the amount you
specified plus adjustment for any applicable early withdrawal charge.

Amount. The amount is a percentage of the purchase payment you withdraw. The percentage will be determined
by the early withdrawal charge schedule below.

Purpose. This is a deferred sales charge. It reimburses some of our sales and administrative expenses associated
with the contract.

Early Withdrawal Charge Schedule:
Years since purchase payment credited:	0	1	2	3	4	5	6	7
Fee as a percentage of payment withdrawn:	7%	7%	6%	6%	5%	4%	2%	0%

How We Apply the Schedule. For purposes of applying the early withdrawal charge, all time periods are measured
from the date your purchase payment is credited, even if you reinvest all or part of your account value in another
guaranteed term. Once the early withdrawal charge declines to 0%, it no longer applies, regardless of how long you
own the contract.

The early withdrawal charge applies only to withdrawals of your purchase payment. However, for the purposes of
this charge, we assume you are withdrawing all or part of your purchase payment first (not your earnings). This
assumption is not made for tax purposes. See “Taxation.”

Example. Assume the first guaranteed term you select is for five years. Further assume that at the end of this five-

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year guaranteed term, you decide to reinvest your account value for another guaranteed term of four years. Assume
you then make a withdrawal (but not a special withdrawal, as described below) during the second year of the new
guaranteed term. Because six years have passed since your purchase payment was credited, you would pay a 2%
early withdrawal charge, even though you could have withdrawn all or part of your account value at the end of the
first five-year guaranteed term without paying an early withdrawal charge. See “Waiver of Charge,” below.
However, if you make a withdrawal during the third year of the new guaranteed term, or anytime thereafter, you
would pay no early withdrawal charge, because seven years would have passed since your purchase payment was
credited.

Special Withdrawals. After 12 months from the contract effective date, you may make one withdrawal equal to
10% or less of your account value during any calendar year, valued at the time we receive your withdrawal request
in writing, and we will not deduct any early withdrawal charge. This special withdrawal is subject to the following
restrictions:

• It applies only to the first withdrawal each calendar year;
• All subsequent withdrawals that calendar year are subject to an early withdrawal charge, even if you did not withdraw the full 10% with your first withdrawal; and
• If your first withdrawal of the calendar year is in excess of 10% of your account value, the excess amount is subject to an early withdrawal charge.

Waiver of Charge. The early withdrawal charge is waived for amounts that are:

• Withdrawn at the end of a guaranteed term, provided that at least five days prior to the end of that guaranteed term we receive your withdrawal request in writing. (If you reinvest those amounts in another guaranteed term, future withdrawals will be subject to an early withdrawal charge as described above.); or
• $2,500 or less, provided that no withdrawal has been made from your account during the prior 12 months; or
• Withdrawn due to your election of a systematic distribution option (see “Systematic Distribution Options”); or
• Withdrawn due to an involuntary termination. This may occur if your account value is less than $2,500. See “Other Topics—Involuntary Terminations.”

Nursing Home Waiver. If approved in your state, you may withdraw all or a portion of your account value without
an early withdrawal charge if all of the following conditions are met:

• More than one account year has elapsed since the date your purchase payment was credited;
• The annuitant, designated under the contract, has spent at least 45 consecutive days in a licensed nursing facility (in New Hampshire, the facility may be non-licensed); and
• The withdrawal is requested within three years of the designated annuitant’s admission to a licensed nursing facility (in Oregon there is no three year limitation and in New Hampshire, the facility may be non- licensed).

We will not waive the early withdrawal charge if the annuitant was in a licensed nursing care facility at the time you
purchased the contract. The nursing home waiver may not be available in all states.

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Market Value Adjustment and Taxation. Except for withdrawals at the end of a guaranteed term as noted above,
and withdrawals under a systematic distribution option, a market value adjustment is applicable to any amounts you
withdraw. Regardless of when or how withdrawals are taken, you may also be required to pay taxes and tax
penalties. See “Market Value Adjustment” and “Taxation.”

Annual Maintenance Fee
Currently we do not charge a maintenance fee. However, prior to the time you enter the income phase, an annual
maintenance fee may be deducted from your account value on each anniversary of the contract’s effective date and
if you make a full withdrawal from the contract. The terms and conditions under which the maintenance fee may be
deducted are stated in the contract. A maintenance fee would be used to reimburse us for our administrative
expenses relating to establishing and maintaining the contract.

Premium Taxes
Maximum Amount. Some states and municipalities charge a premium tax on annuities. These taxes currently
range from 0% to 4%, depending upon the jurisdiction.

When/How. We reserve the right to deduct a charge for premium taxes from your account value or from your
payment to the account at any time, but not before there is a tax liability under state law. For example, we may
deduct a charge for premium taxes at the time of a complete withdrawal or we may reflect the cost of premium taxes
in our income phase payment rates when you commence income phase payments. If, at your death, your beneficiary
elects to receive a lump-sum distribution, a charge may be deducted for any premium taxes paid on your behalf for
which we have not been reimbursed. If we deduct premium taxes from your purchase payment, the amount invested
in a guaranteed term will be equal to the amount of your purchase payment reduced by any applicable premium tax.

WITHDRAWALS

You may withdraw all or part of your account value at any time during the accumulation phase. Amounts are
withdrawn on a pro-rata basis from each of the guaranteed terms under the contract. You may request that we
inform you in advance of the amount payable upon a withdrawal.

Steps for Making a Withdrawal.

Select the withdrawal amount.
(1)	Full withdrawal: You will receive, reduced by any required withholding tax, your account value, plus or minus any applicable market value adjustment, and minus any applicable early withdrawal charge and annual maintenance fee.
(2)	Partial Withdrawal (Percentage or Specified Dollar Amount): You will receive, reduced by any required withholding tax, the amount you specify, subject to the value available in your account.
	However, the amount actually withdrawn from your account will be adjusted for any applicable early withdrawal charge and any positive or negative market value adjustment, and accordingly, may be more or less than the amount requested.
Properly complete a disbursement form and submit it to our Service Center.

Delivery of Payment. Payment of withdrawal requests will be made in accordance with the SEC’s requirements.
Normally, payment will be sent not later than seven days following our receipt of the disbursement form in good
order. Generally, a request is considered to be in “good order” when it is signed, dated and made with such clarity
and completeness that we are not required to exercise any discretion in carrying it out. However, under certain
emergency situations, we may defer payment of any withdrawal for a period not exceeding six months from the date
we receive your withdrawal request.

Taxes, Fees and Deductions. Amounts withdrawn may be subject to one or more of the following:

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• Early Withdrawal Charge: Withdrawals of all or a portion of your account may be subject to an early withdrawal charge. This is a deferred sales charge that reimburses us for some of the sales and administrative expenses associated with the contract. See “Fees — Early Withdrawal Charge.”
• Annual Maintenance Fee: If you make a full withdrawal from the contract, we may deduct any applicable annual maintenance fee. See “Fees — Annual Maintenance Fee.”
• Market Value Adjustment (MVA): The MVA reflects changes in interest rates since the deposit period. The MVA may be positive or negative. If you make a withdrawal before the end of a guaranteed term, we will calculate an MVA and the amount withdrawn will be adjusted for any applicable positive or negative MVA. See “Market Value Adjustment.”
• Tax Penalty: If you make a withdrawal before you attain age 59 1/2, the amount withdrawn may be subject to a 10% penalty tax. See “Taxation.”
• Tax Withholding: Amounts withdrawn may be subject to withholding for federal income taxes. See “Taxation.”

All applicable fees and deductions are deducted from the amount of your withdrawal in accordance with the terms of
the contract. Any market value adjustment applicable to your withdrawal, taxes, fees and deductions may either
increase or decrease the amount paid to you. To determine which may apply, refer to the appropriate sections of this
prospectus, contact your sales representative or call our Service Center at the number listed in “Contract Overview.”

SYSTEMATIC DISTRIBUTION OPTIONS

Features of a Systematic Distribution Option
A systematic distribution option allows you to receive regular payments from the contract without moving into the
income phase. By remaining in the accumulation phase, certain rights and flexibility not available during the
income phase are retained.

These options may be exercised at any time during the accumulation phase of the contract.

The following systematic distribution options may be available:

• SWO—Systematic Withdrawal Option. SWO is a series of automatic partial withdrawals from your account based on a payment method you select. It is designed for those who want a periodic income while retaining investment flexibility for amounts accumulated under the contract.
  SWO allows you to withdraw either a specified amount or a specified percentage of the contract’s value, orto withdraw amounts over a specified time period that you determine, within certain limits described in thecontract. SWO payments can be made on a monthly or quarterly basis, and the amount of each payment isdetermined by dividing the designated annual amount by the number of payments due each calendar year.SWO payments are withdrawn pro-rata from each of the guaranteed terms under the contract.Under a contract purchased as a traditional IRA, if the SWO payment for any year is less than the requiredminimum distribution under the Tax Code, the SWO payment will be increased to an amount equal to theminimum distribution amount.If you participate in SWO, you may not utilize a special withdrawal to make additional withdrawals fromthe contract. See “Withdrawals — Special Withdrawals.”
• ECO—Estate Conservation Option. ECO offers the same investment flexibility as SWO, but is designed for those who want to receive only the minimum distribution the Tax Code requires each year.

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Under ECO, we calculate the minimum distribution amount required by law, and pay you that amount oncea year. ECO is not available under nonqualified contracts or under Roth IRA contracts. ECO payments arewithdrawn pro-rata from each of the guaranteed terms under the contract.We will, upon request, inform you in advance of the amount payable under ECO.If you participate in ECO, you may not utilize a special withdrawal to make additional withdrawals fromthe contract. See “Withdrawals — Special Withdrawals.”
• Other Systematic Distribution Options. We may add additional systematic distribution options from time to time. You may obtain additional information relating to any of the systematic distribution options from your sales representative or from our Service Center.

Availability. If allowed by applicable law, we reserve the right to discontinue the availability of one or all of the
systematic distribution options for new elections at any time and to change the terms of future elections.

Eligibility. To exercise one of these options you must meet certain age criteria and your account value must meet
certain minimum requirements. To determine if you meet the age and account value criteria and to assess terms and
conditions that may apply, contact your sales representative or our Service Center.

Termination. You may revoke a systematic distribution option at any time by submitting a written request to our
Service Center. However, once cancelled, you or your spousal beneficiary may not elect SWO again. In addition,
once cancelled, ECO may not be elected again until 36 months have elapsed.

Deductions and Taxation. When you elect a systematic distribution option, your account value remains in the
accumulation phase and subject to the applicable charges and deductions described in “Fees.” However, we will not
apply an early withdrawal charge or market value adjustment to any part of your account value paid under SWO or
ECO. Taking a withdrawal through a systematic distribution option may have tax consequences. If you are
concerned about tax implications consult a tax adviser before one of these options is elected. See “Taxation.”

MARKET VALUE ADJUSTMENT (MVA)

Purpose of the MVA. If you make an early withdrawal from the contract, we may need to liquidate certain assets
or use existing cash flow that would otherwise be available to invest at current interest rates. The assets we may
liquidate to provide your withdrawal amount may be sold at a profit or a loss, depending upon market conditions.
To lessen this impact, certain withdrawals are subject to an MVA.

What is an MVA? In certain situations described below, including when you make a withdrawal before the end of
a guaranteed term, we will calculate an MVA and either add or deduct that value from the amount withdrawn. The
calculation we use to determine the MVA reflects the change in the value of your investment due to changes in interest
rates since the start of the guaranteed term under the contract. When these interest rates increase, the value of the
investment decreases, and the MVA amount may be negative and cause a deduction from your withdrawal amount.
Conversely, when these interest rates decrease, the value of the investment increases, and the MVA amount may be
positive and cause an increase in your withdrawal amount.

Calculation of the MVA. For a further explanation of how the MVA is calculated, see Appendix I.

When Does an MVA Apply? An MVA may apply when:

• You request a withdrawal before the end of a guaranteed term. In this case the withdrawal amount may be increased or decreased by the application of the MVA.
• You initiate income phase payments before the end of your guaranteed term. In this case an MVA may be

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applied to any amounts used to start income phase payments. While either a positive or negative MVAmay apply to amounts used to start a nonlifetime payment option, only a positive MVA will apply toamounts used to start a lifetime payment option. See “Income Phase.”
• We terminate the contract because your account value is less than $2,500.
• You cancel the contract.
• A death benefit is paid upon the death of the annuitant, more than six months after the annuitant’s death. See “Death Benefit.”
• A death benefit is paid upon the death of a person other than the annuitant.

When Does an MVA Not Apply? An MVA will not be applied to:

• Withdrawals under the Systematic Withdrawal Option or Estate Conservation Option as described in “Systematic Distribution Options.”
• A death benefit payable upon death of an annuitant, if paid within six months of the annuitant’s death. See “Death Benefit.”
• Amounts withdrawn at the end of a guaranteed term, provided that at least five days prior to the end of that guaranteed term we receive your withdrawal request in writing. The MVA, however, remains applicable to any amount you reinvest for another guaranteed term.

DEATH BENEFIT

During the Accumulation Phase

Who Receives the Benefit? If you or the annuitant die during the accumulation phase, a death benefit will be paid
to your beneficiary in accordance with the terms of the contract subject to the following:

• Upon the death of a joint contract holder, the surviving joint contract holder will be deemed the designated beneficiary, and any other beneficiary on record will be treated as the beneficiary at the death of the surviving joint contract holder.
• If you are not a natural person, the death benefit will be payable at the death of the annuitant designated under the contract or upon any change of the annuitant.
• If you die and no beneficiary exists, the death benefit will be paid in a lump sum to your estate.

Designating a Beneficiary(ies). You may designate a beneficiary on your application or enrollment form, or by
providing a written request in good order to our Service Center. Generally, a request is considered to be in “good
order” when it is signed, dated and made with such clarity and completeness that we are not required to exercise any
discretion in carrying it out.

Calculation of the Benefit. The death benefit is calculated as of the date proof of death and the beneficiary’s right to
receive the death benefit are received in good order at our Service Center. The amount of the death benefit is
determined as follows:

• If the death benefit is paid within six months of the death of the annuitant, the amount equals your account value.

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• If the death benefit is paid more than six months after the date of death of the annuitant, or if paid upon your death and you are not the annuitant, it equals your account value as adjusted by any applicable market value adjustment.
• If you are not the annuitant, the death benefit payable may be subject to an early withdrawal charge.

Benefit Payment Options. If you are the annuitant and you die before income phase payments begin, or if you are
not a natural person and the annuitant dies before income phase payments begin, any beneficiary under the contract
who is an individual has several options for receiving payment of the death benefit. The death benefit may be paid:

• In one lump-sum payment;
• In accordance with any of the available income phase payment options. See “Income Phase —Payment Options;” or
• In certain circumstances, your beneficiary, spousal beneficiary or joint contract holder may have the option to continue the contract rather than receive the death benefit.

Unless your beneficiary elects otherwise, the distribution will be made into an interest bearing account, backed by
our general account, that is accessed by the beneficiary through a checkbook feature. The beneficiary may access
death benefit proceeds at any time without penalty. Interest earned on this account may be less than interest paid on
other settlement options.

Taxation. The Tax Code requires distribution of death benefit proceeds within a certain period of time. Failure to
begin receiving death benefit payments within those time periods can result in tax penalties. Regardless of the
method of payment, death benefit proceeds will generally be taxed to the beneficiary in the same manner as if you
had received those payments. See “Taxation” for additional information.

Change of Beneficiary. You may change the beneficiary previously designated at any time by submitting notice in
writing to our Service Center. The change will not be effective until we receive and record it.

INCOME PHASE

During the income phase you receive payments from your accumulated account value. You may apply all or a
portion of your account value to provide these payments. Income phase payments are made to you or you can,
subject to availability, request that payments be deposited directly to your bank account. After your death, we will
send your designated beneficiary any income phase payments still due. You may be required to pay taxes on all or a
portion of the income phase payments you receive. See “Taxation.”

Partial Entry into the Income Phase. You may elect a payment option for a portion of your account value, while
leaving the remaining portion in a guaranteed term(s). Whether the Tax Code considers such payments taxable as
annuity payments or as withdrawals is currently unclear; therefore, you should consult with a qualified tax adviser
before electing this option.

Initiating Income Phase Payments. At least 30 days prior to the date you want to start receiving income phase
payments, you must notify us in writing of the following:

• Start date;
• Payment option (see the payment options table in this section); and
• Payment frequency (i.e., monthly, quarterly, semi-annually or annually).

The account will continue in the accumulation phase until you properly initiate income phase payments. You may
change your payment option election up to 30 days before income phase payments begin. Once you elect for

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income phase payments to begin, you may not elect a different payment option or elect to receive a lump-sum
payment.

What Affects Income Phase Payment Amounts? Some of the factors that may affect payment amounts include
your age, your gender, your account value, the payment option selected and number of guaranteed payments (if any)
selected.

Minimum Income Phase Payment Amounts. The payment option you select must result in one or both of the
following:

• A first payment of at least $50.
• Total yearly payments of at least $250.

If your account value is too low to meet these minimum payment amounts, you must elect a lump-sum payment.
We reserve the right to increase the minimum payment amount based upon increases in the Consumer Price Index—
Urban.

Payment Start Date. Income phase payments may start any time after the first year of the contract, and will start
the later of the annuitant’s 85th birthday or the tenth anniversary of your purchase payment, unless you elect
otherwise.

Regardless of your income phase payment start date, your income phase payments will not begin until you have
selected an income phase payment option. Failure to select a payment option by your payment start date, or
postponement of the start date past the later of the annuitant’s 85th birthday or the tenth anniversary of your
purchase payment, may have adverse tax consequences. You should consult with a qualified tax adviser if you are
considering either of these courses of action.

Payment Length. If you choose a lifetime income phase payment option with guaranteed payments, the age of the
annuitant plus the number of years for which payments are guaranteed must not exceed 95 at the time payments
begin. Additionally, federal income tax requirements currently applicable to traditional IRAs provide that the period
of years guaranteed may not be greater than the joint life expectancies of the payee and his or her designated
beneficiary.

Charges Deducted. No early withdrawal charge will be applied to amounts used to start income phase payments,
although a market value adjustment may be applicable.

Market Value Adjustment. If your income phase payments start before the end of your guaranteed term, a market
value adjustment will be applied to any amounts used to start income phase payments. If you select a lifetime
payment option, only a positive market value adjustment will be applied. See “Market Value Adjustment.”

Death Benefit During the Income Phase. Upon the death of either the annuitant or the surviving joint annuitant,
the amount payable, if any, to your beneficiary depends on the payment option currently in force. Any amounts
payable must be paid at least as rapidly as under the method of distribution in effect at the annuitant’s death. If you
die and you are not the annuitant, any remaining payments will continue to be made to your beneficiary at least as
rapidly as under the method of distribution in effect at your death.

Taxation. To avoid certain tax penalties, you or your beneficiary must meet the distribution rules imposed by the
Tax Code. See “Taxation.”

Income Phase Payment Options
The following table lists the income phase payment options and accompanying death benefits that may be available
during the income phase. We may offer additional payment options under the contract from time to time.

Terms Used in the Tables:

Annuitant: The person(s) on whose life expectancy the income phase payments are calculated.

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Beneficiary: The person designated to receive the death benefit payable under the contract.

Lifetime Income Phase Payment Options
Life Income	Length of Payments: For as long as the annuitant lives. It is possible only one payment
	will be made should the annuitant die prior to the second payment’s due date.
	Death Benefit—None: All payments end upon the annuitant’s death.
Life Income—	Length of Payments: For as long as the annuitant lives, with payments guaranteed for
Guaranteed	your choice of 5, 10, 15, or 20 years, or other periods specified in the contract.
Payments
	Death Benefit: If the annuitant dies before we have made all the guaranteed payments,
	payments will continue to the beneficiary.
Life Income—	Length of Payments: For as long as either annuitant lives. It is possible only one
Two Lives	payment will be made should both the annuitant and joint annuitant die before the second
	payment’s due date.
	Continuing Payments: When you select this option, you will also choose either:
	(a) 100%, 66 2/3%, or 50% of the payment to continue to the surviving annuitant after
	the first death; or
	(b) 100% of the payment to continue to the first annuitant on the second annuitant’s
	death, and 50% of the payment to continue to the second annuitant on the first
	annuitant’s death.
	Death Benefit—None: Payments cease upon the death of both annuitants.
Life Income—	Length of Payments: For as long as either annuitant lives, with payments guaranteed
Two Lives—	for a minimum of 120 months, or other periods specified in the contract.
Guaranteed
Payments	Continuing Payments: 100% of the payment will continue to the surviving annuitant
	after the first death.
	Death Benefit: If both annuitants die before the guaranteed payments have all been
	paid, payments will continue to the beneficiary.
Nonlifetime Income Phase Payment Options
Nonlifetime—	Length of Payments: Payments will continue for your choice of 10 through 30 years (or
Guaranteed	other periods specified in the contract).
Payments
	Death Benefit: If the annuitant dies before we make all the guaranteed payments,
	payment will continue to the beneficiary.

INVESTMENTS

Separate Account. Purchase Payments received under the contract and allocated to guaranteed terms will be
deposited to and accounted for in a nonunitized separate account that we established under Connecticut law. A
nonunitized separate account is a separate account in which you do not participate in the performance of the assets

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through unit values or any other interest.

Persons allocating amounts to the nonunitized separate account do not receive a unit value of ownership of assets
accounted for in the separate account. The assets accrue solely to our benefit and we bear the entire risk of
investment gain or loss. All of our obligations due to allocations to the nonunitized separate account are contractual
guarantees we have made and are accounted for in the separate account. All of our general assets are available to
meet the guarantees under the contracts. However, to the extent provided for in the applicable contracts, assets of
the nonunitized separate account are not chargeable with liabilities arising out of any other business we conduct.
Income, gains or losses of the separate account are credited to or charged against the assets of the separate account
without regard to other income, gains or losses of the Company.

Setting Guaranteed Interest Rates. We do not have any specific formula for setting guaranteed interest rates for the
guaranteed terms. We expect the guaranteed interest rates to be influenced by, but not necessarily correspond to,
yields on fixed income securities we acquire with amounts allocated to the guaranteed terms when the guaranteed
interest rates are set.

Types of Investments. Our assets will be invested in accordance with the requirements established by applicable
state laws regarding the nature and quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of investment. In general, these laws permit
investments, within specified limits and subject to certain qualifications, in federal, state, and municipal obligations,
corporate bonds, preferred and common stocks, real estate mortgages, and certain other investments.

We intend to invest in assets which, in the aggregate, have characteristics, especially cash flow patterns, reasonably
related to the characteristics of the liabilities. Various immunization techniques will be used to achieve the objective
of close aggregate matching of assets and liabilities. We will primarily invest in investment-grade fixed income
securities including:

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

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

While this section generally describes our investment strategy, we are not obligated to invest the assets
attributable to the contract according to any particular strategy, except as may be required by Connecticut
and other state insurance laws. The guaranteed interest rates we establish need not relate to the investment
performance of the nonunitized separate account.

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TAXATION

Introduction
This section discusses our understanding of current federal income tax laws affecting the contract. You should keep
the following in mind when reading it:

• Your tax position (or the tax position of the designated beneficiary, as applicable) determines federal taxation of amounts held or paid out under the contract;
• Tax laws change. It is possible that a change in the future could affect contracts issued in the past;
• This section addresses federal income tax rules and does not discuss federal estate and gift tax implications, state and local taxes, or any other tax provisions; and
• We do not make any guarantee about the tax treatment of the contract or transactions involving the contract.

We do not intend this information to be tax advice. For advice about the effect of federal income taxes or any other
taxes on amounts held or paid out under the contract, consult a tax adviser. For more comprehensive information,
contact the Internal Revenue Service (IRS).

Types of Contracts: Non-Qualified or Qualified
The Contract may be purchased on a non-tax-qualified basis (non-qualified contracts) or purchased on a tax-
qualified basis (qualified contracts).

Non-qualified contracts are purchased with after tax contributions and are not related to retirement plans that receive
special income tax treatment under the Tax Code.

Qualified Contracts are designed for use by individuals whose premium payments are comprised solely of proceeds
from and/or contributions under retirement plans that are intended to qualify for special income tax treatment under
Sections 401, 408 or 408A, and some provisions of 403 of the Tax Code.

Taxation of Non-Qualified Contracts

Taxation of Gains Prior to Distribution
Tax Code Section 72 governs taxation of annuities in general. We believe that if you are a natural person you
will generally not be taxed on increases in the value of a non-qualified Contract until a distribution occurs or until
annuity payments begin. This assumes that the Contract will qualify as an annuity contract for federal income tax
purposes. For these purposes, the agreement to assign or pledge any portion of the contract value generally will be
treated as a distribution. In order to be eligible to receive deferral of taxation, the following requirements must be
satisfied:

Diversification. Tax Code Section 817(h) requires that in a nonqualified contract the investments of the
funds be “adequately diversified” in accordance with Treasury Regulations in order for the Contract to qualify as an
annuity contract under federal tax law. The separate account, through the funds, intends to comply with the
diversification requirements prescribed by Tax Code Section 817(h) and by the Treasury in Reg. Sec. 1.817 -5,
which affects how the funds’ assets may be invested. If it is determined, however, that your Contract does not
satisfy the applicable diversification requirements and rulings because a subaccount’s corresponding fund fails to be
adequately diversified for whatever reason, we will take appropriate steps to bring your Contract into compliance
with such regulations and rulings, and we reserve the right to modify your Contract as necessary to do so.

Investor Control. Although earnings under non-qualified contracts are generally not taxed until
withdrawn, the IRS has stated in published rulings that a variable contract owner will be considered the owner of
separate account assets if the contract owner possesses incidents of investment control over the assets. In these
circumstances, income and gains from the separate account assets would be currently includible in the variable
contract owner’s gross income. Future guidance regarding the extent to which owners could direct their investments
among subaccounts without being treated as owners of the underlying assets of the separate account may adversely

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affect the tax treatment of existing contracts. The Company therefore reserves the right to modify the contract as
necessary to attempt to prevent the contract holder from being considered the federal tax owner of a pro rata share of
the assets of the separate account.

Required Distributions. In order to be treated as an annuity contract for federal income tax purposes, the
Tax Code requires any non-qualified Contract to contain certain provisions specifying how your interest in the
Contract will be distributed in the event of your death. The non-qualified Contracts contain provisions that are
intended to comply with these Tax Code requirements, although no regulations interpreting these requirements have
yet been issued. We intend to review such distribution provisions and modify them if necessary to assure that they
comply with the applicable requirements when such requirements are clarified by regulation or otherwise.

Non-Natural Holders of a Non-Qualified Contract. If you are not a natural person, a non-qualified
contract generally is not treated as an annuity for income tax purposes and the income on the contract for the taxable
year is currently taxable as ordinary income. Income on the contract is any increase over the year in the excess of
the contract value over the “investment in the contract” (generally, the premiums or other consideration you paid for
the contract less any nontaxable withdrawals) during the taxable year. There are some exceptions to this rule and a
non-natural person should consult with its tax adviser prior to purchasing the Contract. When the contract owner is
not a natural person, a change in the annuitant is treated as the death of the contract owner.

Delayed Annuity Starting Date. If the Contract’s annuity starting date occurs (or is scheduled to occur) at
a time when the annuitant has reached an advanced age (e.g., after age 85), it is possible that the Contract would not
be treated as an annuity for federal income tax purposes. In that event, the income and gains under the Contract
could be currently includible in your income.

Taxation of Distributions

General. When a withdrawal from a non-qualified Contract occurs, the amount received will be treated as
ordinary income subject to tax up to an amount equal to the excess (if any) of the contract value (unreduced by the
amount of any surrender charge) immediately before the distribution over the contract owner’s investment in the
contract at that time. Investment in the contract is generally equal to the amount of all contributions to the contract,
plus amounts previously included in your gross income as the result of certain loans, assignments or gifts, less the
aggregate amount of non-taxable distributions previously made.

In the case of a surrender under a non-qualified Contract, the amount received generally will be taxable only to the
extent it exceeds the contract owner’s cost basis in the contract.

10% Penalty Tax. A distribution from a non-qualified Contract may be subject to a federal tax penalty
equal to 10% of the amount treated as income. In general, however, there is no penalty on distributions:

• made on or after the taxpayer reaches age 59½;
• made on or after the death of a contract owner (the annuitant if the contract owner is a non-natural person);
• attributable to the taxpayer’s becoming disabled as defined in the Tax Code;
• made as part of a series of substantially equal periodic payments (at least annually)over your life or life expectancy or the joint lives or joint life expectancies of you and your designated beneficiary; or
• the distribution is allocable to investment in the contract before August 14, 1982.

The 10% penalty does not apply to distributions from an immediate annuity as defined in the Tax Code. Other
exceptions may be applicable under certain circumstances and special rules may be applicable in connection with
the exceptions enumerated above. A tax adviser should be consulted with regard to exceptions from the penalty tax.

Tax-Free Exchanges. Section 1035 of the Tax Code permits the exchange of a life insurance, endowment
or annuity contract for an annuity contract on a tax-free basis. In such instance, the “investment in the contract” in
the old contract will carry over to the new contract. You should consult with your tax advisor regarding procedures
for making Section 1035 exchanges.

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If your Contract is purchased through a tax-free exchange of a life insurance, endowment or annuity contract that
was purchased prior to August 14, 1982, then any distributions other than annuity payments will be treated, for tax
purposes, as coming:

• First, from any remaining “investment in the contract” made prior to August 14, 1982 and exchanged into the Contract;
• Next, from any “income on the contract” attributable to the investment made prior to August 14, 1982;
• Then, from any remaining “income on the contract;” and
• Lastly, from any remaining “investment in the contract.”

The IRS has concluded that in certain instances, the partial exchange of a portion of one annuity contract for another
contract will be tax-free. However, the IRS has reserved the right to treat transactions it considers abusive as
ineligible for favorable partial 1035 tax-free exchange treatment. It is not certain whether the IRS would treat an
immediate withdrawal or annuitization after a partial exchange as abusive. In addition, it is unclear how the IRS
will treat a partial exchange from a life insurance, endowment, or annuity contract directly into an immediate
annuity. Currently, we will accept a partial 1035 exchange from a non-qualified annuity into a deferred annuity or
an immediate annuity as a tax-free transaction unless we believe that we would be expected to treat the transaction
as abusive. We are not responsible for the manner in which any other insurance company, for tax reporting
purposes, or the IRS, with respect to the ultimate tax treatment, recognizes or reports a partial exchange. We
strongly advise you to discuss any proposed 1035 exchange with your tax advisor prior to proceeding with the
transaction.

Taxation of Annuity Payments. Although tax consequences may vary depending on the payment option
elected under an annuity contract, a portion of each annuity payment is generally not taxed and the remainder is
taxed as ordinary income. The non-taxable portion of an annuity payment is generally determined in a manner that
is designed to allow you to recover your investment in the contract ratably on a tax-free basis over the expected
stream of annuity payments, as determined when annuity payments start. Once your investment in the contract has
been fully recovered, however, the full amount of each subsequent annuity payment is subject to tax as ordinary
income. The tax treatment of partial annuitizations is unclear. We currently treat any partial annuitizations as
withdrawals rather than as annuity payments. Please consult your tax adviser before electing a partial annuitization.

Death Benefits. Amounts may be distributed from a Contract because of your death or the death of the
annuitant. Generally, such amounts are includible in the income of the recipient as follows: (i) if distributed in a
lump sum, they are taxed in the same manner as a surrender of the Contract, or (ii) if distributed under a payment
option, they are taxed in the same way as annuity payments. Special rules may apply to amounts distributed after a
Beneficiary has elected to maintain Contract value and receive payments.

Different distribution requirements apply if your death occurs:

• After you begin receiving annuity payments under the Contract; or
• Before you begin receiving such distributions.

If your death occurs after you begin receiving annuity payments, distributions must be made at least as rapidly as
under the method in effect at the time of your death.

If your death occurs before you begin receiving annuity payments, your entire balance must be distributed within
five years after the date of your death. For example, if you died on September 1, 2007, your entire balance must be
distributed by August 31, 2012. However, if distributions begin within one year of your death, then payments may
be made over one of the following timeframes:

• Over the life of the designated beneficiary; or
• Over a period not extending beyond the life expectancy of the designated beneficiary.

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If the designated beneficiary is your spouse, the contract may be continued with the surviving spouse as the new
contract owner. If the contract owner is a non-natural person and the primary annuitant dies, the same rules apply
on the death of the primary annuitant as outlined above for the death of a contract owner.

The Contract offers a death benefit that may exceed the greater of the premium payments and the contract value.
Certain charges are imposed with respect to the death benefit. It is possible that these charges (or some portion
thereof) could be treated for federal tax purposes as a distribution from the Contract.

Assignments and Other Transfers. A transfer, pledge or assignment of ownership of a non-qualified
contract, the selection of certain annuity dates, or the designation of an annuitant or payee other than an owner may
result in certain tax consequences to you that are not discussed herein. The assignment, pledge or agreement to
assign or pledge any portion of the contract value generally will be treated as a distribution. Anyone contemplating
any such transfer, pledge, assignment, or designation or exchange, should consult a tax adviser regarding the
potential tax effects of such a transaction.

Immediate Annuities. Under section 72 of the Tax Code, an immediate annuity means an annuity (1)
which is purchased with a single premium, (2) with annuity payments starting within one year from the date of
purchase, and (3) which provides a series of substantially equal periodic payments made annually or more
frequently. While this Contract is not designed as an immediate annuity, treatment as an immediate annuity would
have significance with respect to exceptions from the 10% early withdrawal penalty, to contracts owned by non-
natural persons, and for certain exchanges.

Multiple Contracts. Tax laws require that all non-qualified deferred annuity contracts that are issued by a
company or its affiliates to the same contract owner during any calendar year be treated as one annuity contract for
purposes of determining the amount includible in gross income under Tax Code Section 72(e). In addition, the
Treasury Department has specific authority to issue regulations that prevent the avoidance of Tax Code Section
72(e) through the serial purchase of annuity contracts or otherwise.

Withholding. We will withhold and remit to the IRS a part of the taxable portion of each distribution
made under a Contract unless the distributee notifies us at or before the time of the distribution that he or she elects
not to have any amounts withheld. Withholding is mandatory, however, if the distributee fails to provide a valid
taxpayer identification number or if we are notified by the IRS that the taxpayer identification number we have on
file is incorrect. The withholding rates applicable to the taxable portion of periodic annuity payments are the same
as the withholding rates generally applicable to payments of wages. In addition, a 10% withholding rate applies to the
taxable portion of non-periodic payments. Regardless of whether you elect not to have federal income tax withheld,
you are still liable for payment of federal income tax on the taxable portion of the payment.

If you or your designated beneficiary is a non-resident alien, then any withholding is governed by Tax Code Section
1441 based on the individual’s citizenship, the country of domicile and treaty status.

Taxation of Qualified Contracts

General
The Contracts are primarily designed for use with IRAs under Tax Code Section 408 and 408A
(We refer to these as “qualified plans”). The tax rules applicable to participants in these
qualified plans vary according to the type of plan and the terms and conditions of the plan itself. The ultimate effect
of federal income taxes on the amounts held under a Contract, or on annuity payments, depends on the type of
retirement plan and your tax status. Special favorable tax treatment may be available for certain types of
contributions and distributions. In addition, certain requirements must be satisfied in purchasing a qualified contract
with proceeds from a tax-qualified plan in order to continue receiving favorable tax treatment.

Adverse tax consequences may result from: contributions in excess of specified limits; distributions before age 59½
(subject to certain exceptions); distributions that do not conform to specified commencement and minimum
distribution rules; and in other specified circumstances. Some qualified plans may be subject to additional
distribution or other requirements that are not incorporated into the Contract. No attempt is made to provide more
than general information about the use of the Contracts with qualified plans. Contract owners, annuitants, and

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beneficiaries are cautioned that the rights of any person to any benefits under these qualified plans may be subject to
the terms and conditions of the plans themselves, regardless of the terms and conditions of the Contract. The
Company is not bound by the terms and conditions of such plans to the extent such terms contradict the Contract,
unless we consent.

Contract owners and beneficiaries generally are responsible for determining that contributions, distributions and
other transactions with respect to the contract comply with applicable law. Therefore, you should seek competent
legal and tax advice regarding the suitability of a contract for your particular situation. The following discussion
assumes that qualified contracts are purchased with proceeds from and/or contributions under retirement plans or
programs that qualify for the intended special federal tax treatment.

Tax Deferral
Under the federal tax laws, earnings on amounts held in annuity contracts are generally not taxed until they are
withdrawn. However, in the case of a qualified plan (as defined in this prospectus), an annuity contract is not
necessary to obtain this favorable tax treatment and does not provide any tax benefits beyond the deferral already
available to the qualified plan itself. Annuities do provide other features and benefits (such as guaranteed living
benefits and/or death benefits or the option of lifetime income phase options at established rates) that may be
valuable to you. You should discuss your alternatives with your financial representative taking into account the
additional fees and expenses you may incur in an annuity.

Individual Retirement Annuities. Section 408 of the Tax Code permits eligible individuals to contribute
to an individual retirement program known as an Individual Retirement Annuity ("IRA"). IRAs are subject to limits
on the amounts that can be contributed, the deductible amount of the contribution, the persons who may be eligible,
and the time when distributions commence. Contributions to IRAs must be made in cash or as a rollover or a
transfer from another eligible plan. Also, distributions from IRAs, individual retirement accounts, and other types of
retirement plans may be "rolled over" on a tax-deferred basis into an IRA. If you make a tax-free rollover of a
distribution from an IRA you may not make another tax-free rollover from the IRA within a 1-year period. Sales of
the contract for use with IRAs may be subject to special requirements of the IRS.

The IRS has not reviewed the contracts described in this prospectus for qualification as IRAs and has not addressed,
in a ruling of general applicability, whether the contract's death benefit provisions comply with IRS qualification
requirements.

Roth IRAs. Section 408A of the Tax Code permits certain eligible individuals to contribute to a Roth IRA.
Contributions to a Roth IRA are subject to limits on the amount of contributions and the persons who may be
eligible to contribute, are not deductible, and must be made in cash or as a rollover or transfer from another Roth
IRA or other IRA. Certain qualifying individuals may convert an IRA, SEP, or a SIMPLE to a Roth IRA. Such
rollovers and conversions are subject to tax, and other special rules may apply. If you make a tax-free rollover of a
distribution from a Roth IRA to another Roth IRA, you may not make another tax-free rollover from the Roth IRA
from which the rollover was made within a 1-year period. A 10% penalty may apply to amounts attributable to a
conversion to a Roth IRA if the amounts are distributed during the five taxable years beginning with the year in
which the conversion was made.

Sales of a contract for use with a Roth IRA may be subject to special requirements of the IRS. The IRS has not
reviewed the contracts described in this prospectus for qualification as IRAs and has not addressed, in a ruling of
general applicability, whether the contract's death benefit provisions comply with IRS qualification requirements.

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Contributions
In order to be excludable from gross income for federal income tax purposes, total annual contributions to
certain qualified plans are limited by the Tax Code. You should consult with your tax adviser in connection with
contributions to a qualified contract.

Distributions – General
Certain tax rules apply to distributions from the Contract. A distribution is any amount taken from a Contract
including withdrawals, annuity payments, rollovers, exchanges and death benefit proceeds. We report the taxable
portion of all distributions to the IRS.

Individual Retirement Annuities. All distributions from an IRA are taxed as received unless either one of
the following is true:

• The distribution is rolled over to another IRA or to a plan eligible to receive rollovers as permitted under the Tax Code; or
• You made after-tax contributions to the IRA. In this case, the distribution will be taxed according to rules detailed in the Tax Code.

The Tax Code imposes a 10% penalty tax on the taxable portion of any distribution from an IRA unless certain
exceptions, including one or more of the following, have occurred:

• You have attained age 59 1/2;
• You have become disabled, as defined in the Tax Code;
• You have died and the distribution is to your beneficiary;
• The distribution amount is rolled over into another eligible retirement plan or to an IRA in accordance with the terms of the Tax Code;
• The distribution is made due to an IRS levy upon your plan;
• The withdrawal amount is paid to an alternate payee under a Qualified Domestic Relations Order (QDRO); or
• The distribution is a qualified reservist distribution as defined under the Pension Protection Act of 2006.

In addition, the 10% penalty tax does not apply to a distribution made from an IRA to pay for health insurance
premiums for certain unemployed individuals, a qualified first-time home purchase, or for higher education
expenses.

Roth IRAs. A qualified distribution from a Roth IRA is not taxed when it is received. A qualified
distribution is a distribution:

• Made after the five-taxable year period beginning with the first taxable year for which a contribution was made to a Roth IRA of the owner; and
• Made after you attain age 59 1/2, die, become disabled as defined in the Tax Code, or for a qualified first-time home purchase.

If a distribution is not qualified, it will be taxable to the extent of the accumulated earning.
A partial distribution
will first be treated as a return of contributions which is not taxable and then as taxable accumulated earnings.

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21

The Tax Code imposes a 10% penalty tax on the taxable portion of any distribution from a Roth IRA that is not a
qualified distribution unless certain exceptions have occurred. In general, the exceptions for an IRA listed above
also apply to a distribution from a Roth IRA that is not a qualified distribution or a rollover to a Roth IRA that is not
a qualified rollover contribution. The 10% penalty tax is also waived on a distribution made from a Roth IRA to pay
for health insurance premiums for certain unemployed individuals, used for a qualified first-time home purchase, or
for higher education expenses.

Special Hurricane-Related Relief. The Katrina Emergency Tax Relief Act and the Gulf Opportunity
Zone Act provide tax relief to victims of Hurricanes Katrina, Rita and Wilma. The relief includes a waiver of the
10% penalty tax on qualified hurricane distributions from eligible retirement plans (IRA and 403(b)). In addition,
the 20% mandatory withholding rules do not apply to these distributions and the tax may be spread out ratably over
a three-year period. A recipient of qualified hurricane distribution may also elect to re-contribute all or a portion of
the distribution to an eligible retirement plan within three (3) years of receipt without tax consequences. Other relief
may also apply. You should consult a competent tax adviser for further information.

Lifetime Required Minimum Distributions (IRA only). To avoid certain tax penalties, you
and any designated beneficiary must also meet the minimum distribution requirements imposed by the Tax Code.
These rules may dictate the

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22

following:

• Start date for distributions;
• The time period in which all amounts in your account(s) must be distributed; and
• Distribution amounts.

Start Date and Time Period. Generally, you must begin receiving distributions
by April 1 of the calendar year following the calendar year in which you attain age 70½. We must pay out
distributions from the contract over a period not extending beyond one of the following time periods:

• Over your life or the joint lives of you and your designated beneficiary; or
• Over a period not greater than your life expectancy or the joint life expectancies of you and your designated beneficiary.

Distribution Amounts. The amount of each required distribution must be calculated in accordance
with Tax Code Section 401(a)(9). The entire interest in the account includes the amount of any outstanding rollover,
transfer, recharacterization, if applicable, and the actuarial present value of any other benefits provided under the
account, such as guaranteed death benefits.

50% Excise Tax. If you fail to receive the minimum required distribution for any tax year, a 50%
excise tax may be imposed on the required amount that was not distributed.

Lifetime Required Minimum Distributions are not applicable to Roth IRAs. Further information regarding required
minimum distributions may be found in your contract.

Required Distributions Upon Death (IRAs and Roth IRAs Only). Different
distribution requirements apply after your death, depending upon if you have been receiving required minimum
distributions. Further information regarding required distributions upon death may be found in your contract.

If your death occurs on or after you begin receiving minimum distributions under the contract, distributions
generally must be made at least as rapidly as under the method in effect at the time of your death. Tax Code section
401(a)(9) provides specific rules for calculating the required minimum distributions after your death.

If your death occurs before you begin receiving minimum distributions under the contract, your entire balance must
be distributed by December 31 of the calendar year containing the fifth anniversary of the date of your death. For
example, if you died on September 1, 2007, your entire balance must be distributed to the designated beneficiary
by December 31, 2012. However, if distributions begin by December 31 of the calendar year following the
calendar year of your death, and you have named a designated beneficiary, then payments may be made over either
of the following time frames:

• Over the life of the designated beneficiary; or
• Over a period not extending beyond the life expectancy of the designated beneficiary.

Start Dates for Spousal Beneficiaries. If the designated beneficiary is your spouse, distributions
must begin on or before the later of the following:

• December 31 of the calendar year following the calendar year of your death; or
• December 31 of the calendar year in which you would have attained age 70½.

No designated beneficiary. If there is no designated beneficiary, the entire interest generally must be
distributed by the end of the calendar containing the fifth anniversary of the contract owner’s death.

Special Rule for IRA Spousal Beneficiaries (IRAs and Roth IRAs Only). In lieu of taking a
distribution under these rules, if the sole designated beneficiary is the contract owner’s surviving spouse, the spousal
beneficiary may elect to treat the contract as his or her own IRA and defer taking a distribution until his or her own

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23

start date. The surviving spouse is deemed to have made such an election if the surviving spouse makes a rollover to
or from the contract or fails to take a distribution within the required time period.

Withholding
Any taxable distributions under the contract are generally subject to withholding. Federal income tax liability
rates vary according to the type of distribution and the recipient's tax status.

IRAs and Roth IRAs. Generally, you or, if applicable, a designated beneficiary may elect not to have tax
withheld from distributions.





Non-resident Aliens. If you or your designated beneficiary is a non-resident alien, then any withholding is
governed by Tax Code section 1441 based on the individual's citizenship, the country of domicile and treaty status.

Assignment and Other Transfers

IRAs and Roth IRAs. The Tax Code does not allow a transfer or assignment of your rights under the
contracts except in limited circumstances. Adverse tax consequences may result if you assign or transfer your
interest in the contract to persons other than your spouse incident to a divorce. Anyone contemplating such an
assignment or transfer should contact a qualified tax adviser regarding the potential tax effects of such a transaction.

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24

Possible Changes in Taxation
Although the likelihood of legislative change and tax reform is uncertain, there is always the possibility that the tax
treatment of the Contracts could change by legislation or other means. It is also possible that any change could be
retroactive (that is, effective before the date of the change). You should consult a tax adviser with respect to
legislative developments and their effect on the Contract.

Taxation of Company
We are taxed as a life insurance company under the Tax Code. The Separate Account is not a separate entity from
us. Therefore, it is not taxed separately as a “regulated investment company,” but is taxed as part of the Company.

We automatically apply investment income and capital gains attributable to the separate account to increase reserves
under the contracts. Because of this, under existing federal tax law we believe that any such income and gains will
not be taxed to the extent that such income and gains are applied to increase reserves under the contracts. In
addition, any foreign tax credits attributable to the separate account will be first used to reduce any income taxes
imposed on the separate account before being used by the Company.

In summary, we do not expect that we will incur any federal income tax liability attributable to the separate account
and we do not intend to make any provision for such taxes. However, changes in federal tax laws and/or their
interpretation may result in our being taxed on income or gains attributable to the separate account. In this case, we
may impose a charge against the separate account (with respect to some or all of the Contracts) to set aside
provisions to pay such taxes. We may deduct this amount from the separate account, including from your account
value invested in the subaccounts.

OTHER TOPICS

The Company
We are a stock life insurance company organized under the insurance laws of the State of Connecticut in 1976 and
an indirect wholly-owned subsidiary of ING Groep, N.V., a global financial institution active in the fields of
insurance, banking and asset management. Although we are a subsidiary of ING, ING is not responsible for the
obligations under the Contract. The obligations under the Contract are solely the responsibility of ING Life
Insurance and Annuity Company.

Our principal executive offices are located at:

One Orange Way
Windsor, CT 06095-4774

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

Insurance and Retirement Plan Products and Other Regulatory Matters.
Federal and state regulators and self-regulatory agencies are conducting broad inquiries and
investigations involving the insurance and retirement industries. These initiatives currently focus on, among other
things, compensation, revenue sharing, and other sales incentives; potential conflicts of interest; potential anti-

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25

competitive activity; reinsurance; sales and marketing practices (including sales to seniors); specific product types
(including group annuities and indexed annuities); and disclosure. It is likely that the scope of these industry
investigations will further broaden before they conclude. The Company and certain of its U.S. affiliates have
received formal and informal requests in connection with such investigations, and are cooperating fully with each
request for information. Some of these matters could result in regulatory action involving the Company. These
initiatives also may result in new legislation and regulation that could significantly affect the financial services
industry, including businesses in which the Company is engaged. In light of these and other developments, U.S.
affiliates of ING, including the Company, periodically review whether modifications to their business practices are
appropriate.

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

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

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

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

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

Product Regulation. Our 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 governmental
and self-regulatory authorities. Specifically, U.S. federal income tax law imposes requirements relating to
nonqualified annuity product design, administration, and investments that are conditions for beneficial tax treatment
of such products under the Internal Revenue Code. (See “Federal Tax Considerations” for further discussion of
some of these requirements.) Failure to administer certain nonqualified contract features (for example, contractual
annuity start dates in nonqualified annuities) could affect such beneficial tax treatment. In addition, 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, unanticipated remediation, or other claims and costs.

Contract Distribution
The Company’s subsidiary, ING Financial Advisers, LLC, serves as the principal underwriter for the Contracts. ING
Financial Advisers, LLC, a Delaware limited liability company, is registered as a broker-dealer with the SEC. ING
Financial Advisers, LLC is also a member of the Financial Industry

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26

Regulatory Authority, Inc. (“FINRA”) and the Securities Investor Protection Corporation. ING Financial
Advisers, LLC’s principal office is located at One Orange Way, Windsor,
Connecticut 06095-4774.

The Contracts are offered to the public by individuals who are registered representatives of ING Financial Advisers,
LLC or other broker-dealers which have entered into a selling arrangement with ING Financial Advisers, LLC. We
refer to ING Financial Advisers, LLC and the other broker-dealers selling the Contracts as “distributors.”

All registered representatives selling the Contracts must also be licensed as insurance agents for the Company.

The following is a list of broker/dealers that are affiliated with the Company:

·  Bancnorth Investment Group, Inc. 

·  Directed Services LLC 

·  Financial Network Investment Corporation 

·  Guaranty Brokerage Services, Inc. 

·  ING America Equities, Inc. 

·  ING DIRECT Securities, Inc. 

·  ING Financial Markets LLC 

·  ING Financial Partners, Inc. 

·  ING Funds Distributor, LLC 

·  ING Investment Management Services LLC 

·  ING Private Wealth Management LLC 

·  Multi-Financial Securities Corporation 

·  PrimeVest Financial Services, Inc. 

·  ShareBuilder Securities Corporation 

·  Systematized Benefits Administrators, Inc. 

Registered representatives of distributors who solicit sales of the Contracts typically receive a portion of the
compensation paid to the distributor in the form of commissions or other compensation, depending upon the
agreement between the distributor and the registered representative. This compensation, as well as other
incentives or payments, is not paid directly by contract owners or the Separate Account. We intend to recoup this
compensation and other sales expenses paid to distributors through fees and charges imposed under the Contracts.

Commission Payments. Persons who offer and sell the contracts may be paid a commission. The maximum
percentage amount that may be paid with respect to a given purchase payment is the first-year percentage which
ranges from 0% to a maximum of 6.0% of the first year of payments to an account. Renewal commissions paid on
payments made after the first year and asset-based service fees may also be paid.

Individual registered representatives may receive all or a portion of compensation paid to their distributor,
depending upon the firm’s practices. Commissions and any annual payments, when combined, could exceed 6.0%
of total premium payments. To the extent permitted by SEC and FINRA rules and other applicable laws and
regulations, we may also pay or allow other promotional incentives or payments in the form of cash payments or
other compensation to distributors, which may require the registered representative to attain a certain threshold of
sales of Company products.

We may also enter into special compensation arrangements with certain distributors based on those firms’ aggregate
or anticipated sales of the Contracts or other criteria. These special compensation arrangements will not be offered
to all distributors, and the terms of such arrangements may differ among distributors based on various factors. Any
such compensation payable to a distributor will not result in any additional direct charge to you by us.

Some sales personnel may receive various types of non-cash compensation as special sales incentives, including
trips, and we may also pay for some sales personnel to attend educational and/or business seminars. Any such
compensation will be paid in accordance with SEC and FINRA rules. Management personnel of the
Company, and of its affiliated broker-dealers, may receive additional compensation if the overall amount of
investments in funds advised by the Company or its affiliates meets certain target levels or increases over time.
Compensation for certain management personnel, including sales management personnel, may be enhanced if the
overall amount of investments in the contracts and other products issued or advised by the Company or its affiliates
increases over time. Certain sales management personnel may also receive compensation that is a specific
percentage of the commissions paid to distributors or of purchase payments received under the contracts.

In addition to direct cash compensation for sales of Contracts described above, ING Financial Advisers, LLC may

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27

also pay distributors additional compensation or reimbursement of expenses for their efforts in selling the Contracts
to you and other customers. These amounts may include:

·	Marketing/distribution allowances which may be based on the percentages of premium received, the
	aggregate commissions paid and/or the aggregate assets held in relation to certain types of designated
	insurance products issued by the Company and/or its affiliates during the year;
·	Loans or advances of commissions in anticipation of future receipt of premiums (a form of lending to
	agents/registered representatives). These loans may have advantageous terms such as reduction or
	elimination of the interest charged on the loan and/or forgiveness of the principal amount of the loan,
	which terms may be conditioned on fixed insurance product sales;
·	Education and training allowances to facilitate our attendance at certain educational and training
	meetings to provide information and training about our products. We also hold training programs from
	time to time at our expense;
·	Sponsorship payments or reimbursements for broker/dealers to use in sales contests and/or meetings
	for their agents/registered representatives who sell our products. We do not hold contests based solely
	on the sales of this product;
·	Certain overrides and other benefits that may include cash compensation based on the amount of
	earned commissions, agent/representative recruiting or other activities that promote the sale of
	policies; and
·	Additional cash or noncash compensation and reimbursements permissible under existing law. This
	may include, but is not limited to, cash incentives, merchandise, trips, occasional entertainment, meals
	and tickets to sporting events, client appreciation events, business and educational enhancement items,
	payment for travel expenses (including meals and lodging) to pre-approved training and education
	seminars, and payment for advertising and sales campaigns.

We may pay commissions, dealer concessions, wholesaling fees, overrides, bonuses, other allowances and benefits
and the costs of all other incentives or training programs from our resources, which include the fees and charges
imposed under the contracts.

The following is a list of the top 25 selling firms that, during 2007, received the most compensation, in the
aggregate, from us in connection with the sale of registered variable annuity contracts issued by us, ranked by total
dollars received:

1.	Symetra Investment Services, Inc.
2.	AIG Financial Advisors, Inc.
3.	Financial Network Investment Corporation
4.	Linsco/Private Ledger Corporation
5.	Lincoln Investment Planning, Inc.
6.	Walnut Street Securities, Inc.
7.	Valor Insurance Agency, Inc.
8.	NFP Securities, Inc.
9.	ING Financial Partners, Inc.
10.	National Planning Corporation
11.	Multi-Financial Securities Corporation
12.	Jefferson Pilot Securities Corporation
13.	Securities America, Inc.

14.	Cadaret, Grant & Co., Inc.
15.	Wachovia Securities, LLC
16.	First Heartland Capital, Inc.
17.	Northwestern Mutual Investment Services, LLC
18.	A.G. Edwards & Sons, Inc.
19.	Financial Telesis Inc./JHW Financial &
	Insurance Services
20.	Tower Square Securities, Inc.
21.	Mutual Service Corporation
22.	Morgan Keegan and Company, Inc.
23.	Ameritas Investment Corporation
24.	Lincoln Financial Advisors Corporation
25.	Waterstone Financial Group

If the amounts paid to ING Financial Advisers, LLC were included, ING Financial Advisers, LLC would be at the
top of the list.

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This is a general discussion of the types and levels of compensation paid by us for the sale of our variable annuity
contracts. It is important for you to know that the payment of volume- or sales-based compensation to a distributor
or registered representative may provide that registered representative a financial incentive to promote our contracts
over those of another Company, and may also provide a financial incentive to promote one of our contracts over
another.

Contract Modification
Only an authorized officer of the Company may change the terms of the contract. We may change the contract as
required by federal or state law. In addition, we may, upon 30 days’ written notice to the contract holder, make
other changes to group contracts that would apply only to individuals who become participants under that contract
after the effective date of such changes. If the group contract holder does not agree to a change, we reserve the right
to refuse to establish new accounts under the contract. Certain changes will require the approval of appropriate state
or federal regulatory authorities.

Transfer of Ownership; Assignment
Your rights under a nonqualified contract may be assigned or transferred. An assignment of a contract will only be
binding on us if it is made in writing and sent to and accepted by us at our Service Center. We will use reasonable
procedures to confirm the assignment is authentic, including verification of signature. If we fail to follow our own
procedures, we will be liable for any losses to you directly resulting from the failure. Otherwise, we are not
responsible for the validity of any assignment. The rights of the contract holder and the interest of the annuitant and
any beneficiary will be subject to the rights of any assignee we have on our records. We reserve the right not to
accept any assignment or transfer to a non-natural person. In some cases, an assignment may have adverse tax
consequences. You should consult a tax adviser.

Involuntary Terminations
We reserve the right to terminate any account with a value of $2,500 or less immediately following a partial
withdrawal. However, an IRA may only be closed out when payments to the contract have not been received for a
24-month period and the paid-up annuity benefit at maturity would be less than $20 per month. If such right is
exercised, you will be given 90 days’ advance written notice. No early withdrawal charge will be deducted for
involuntary terminations. We do not intend to exercise this right in cases where the account value is reduced to
$2,500 or less solely due to investment performance.

Legal Matters
The Company’s organization and authority, and the contract’s legality and validity, have been passed on by the
Company’s legal department.

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

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

ING Financial Advisers, LLC, the principal underwriter and distributor of the contract, is a party to threatened or
pending lawsuits/arbitration that generally arise from the normal conduct of business. Some of these suits may seek

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29

class action status and sometimes include claims for substantial compensatory, consequential or punitive damages and
other types of relief. ING Financial Advisers, LLC is not involved in any legal proceeding which, in the opinion of
management, is likely to have material adverse effect on its ability to distribute the contract.

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

Securities and Exchange Commission 

100 F Street, N.E., Room 1580 

Washington, DC 20549

You may also obtain copies of these materials at prescribed rates from the Public Reference Room of the above
office. You may obtain information on the operation of the Public Reference Room by calling the SEC at either
(800) SEC-0330 or (202) 942-8090. You may also find more information about the Company by visiting the
Company’s homepage on the internet at www.ingretirementplans.com.

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

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

Incorporation of Certain Documents by Reference
We have incorporated by reference the Company’s latest Annual Report on Form 10-K, as filed with the SEC and in
accordance with the Securities and Exchange Act of 1934. The Annual Report must accompany this prospectus.
Form 10-K contains additional information about the Company including certified financial statements for the latest
fiscal year. We were not required to file any other reports pursuant to Section 13(a) or 15(d) of the Securities and
Exchange Act since the end of the fiscal year covered by that Form 10-K. The registration statement for this
prospectus incorporates some documents by reference. We will provide a free copy of any such documents upon the
written or oral request of anyone who has received this prospectus. We will not include exhibits to those documents
unless they are specifically incorporated by reference into the document. Direct requests to:

ING

Customer Service Center 

P.O. Box 9271

Des Moines, IA 50306-9271 

(800) 531-4547

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

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APPENDIX I

Calculating a Market Value Adjustment (MVA)

Market Value Adjustment Formula

The mathematical formula used to determine the MVA is:

	x
{ (1+i)	} 365
(1+j)

Where:

• i is the deposit period yield;
• j is the current yield; and
• x is the number of days remaining (computed from Wednesday of the week of withdrawal) in the guaranteed term.

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

Explanation of the Market Value Adjustment Formula
The MVA essentially involves a comparison of two yields: the yield available at the start of the current guaranteed
term of the contract (the deposit period yield) and the yield currently available (the current yield).

The MVA depends on the relationship between the following:

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

If the current yield is the lesser of the two, the MVA will decrease the amount withdrawn from the contract to satisfy
the withdrawal request (the MVA will be positive). If the current yield is the higher of the two, the MVA will
increase the amount withdrawn from the contract to satisfy the withdrawal request (the MVA will be negative, or
detrimental to the investor). As a result of the MVA imposed, the amount withdrawn from the contract prior to the
maturity date may be less than the amount paid into the contract.

To determine the deposit period yield and the current yield, certain information must be obtained about the prices of
outstanding U.S. Treasury Notes. This information may be found each business day in publications such as the Wall
Street Journal, which publishes the yield-to-maturity percentages for all Treasury Notes as of the preceding business
day. These percentages are used in determining the deposit period yield and the current yield for the MVA
calculation.

Deposit Period Yield
Determining the deposit period yield in the MVA calculation involves consideration of interest rates prevailing at
the start of the guaranteed term from which the withdrawal will be made, as follows:

• We identify the Treasury Notes that mature in the last three months of the guaranteed term; and
• We determine the yield-to-maturity percentages of these Treasury Notes for the last business day of each week in the deposit period.

ILIAC Multi-Rate Annuity – ILIACMRA

I-1

The resulting percentages are then averaged to determine the deposit period yield. The deposit period is the period
of time during which the purchase payment or any reinvestment may be made to available guaranteed terms. A deposit
period may be a month, a calendar quarter, or any other period of time we specify.

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

Examples of MVA Calculations
The following are examples of MVA calculations using several hypothetical deposit period yields and current
yields. These examples do not include the effect of any early withdrawal charge that may be assessed under the
contract upon withdrawal.

EXAMPLE I
Assumptions:

i, the deposit period yield, is 4%

j, the current yield, is 6%

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

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

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

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

Assumptions:

i, the deposit period yield, is 5%

j, the current yield, is 6%

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

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

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

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

ILIAC Multi-Rate Annuity – ILIACMRA

I-2

EXAMPLE II
Assumptions:

i, the deposit period yield, is 6%

j, the current yield, is 4%

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

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

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

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

Assumptions:

i, the deposit period yield, is 5%

j, the current yield, is 4%

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

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

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

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

ILIAC Multi-Rate Annuity – ILIACMRA

I-3

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2007

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	71-0294708
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
One Orange Way	06095-4774
Windsor, Connecticut	(Zip Code)

(Address of principal executive offices)

(860) 580-4646
(Registrant's telephone number, including area code)

151 Farmington Avenue
Hartford, Connecticut 06156

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for

the past 90 days.

Yesx

No£

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-K or any
amendment to this Form 10-K. Yesx No£

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

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

1

ING Life Insurance and Annuity Company and Subsidiaries
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Annual Report on Form 10-K
For the Year Ended December 31, 2007
	TABLE OF CONTENTS
		PAGE
PART I
Item 1.	Business**	3
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments****	18
Item 2.	Properties**	18
Item 3.	Legal Proceedings	19
Item 4.	Submission of Matters to a Vote of Security Holders*	19
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters	20
	and Issuer Purchases of Equity Securities
Item 6.	Selected Financial Data***	21
Item 7.	Management’s Narrative Analysis of the Results of Operations and	22
	Financial Condition**
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 8.	Financial Statements and Supplementary Data	61
Item 9.	Changes in and Disagreements With Accountants on Accounting and
	Financial Disclosure	119
Item 9A.	Controls and Procedures	119
Item 9B.	Other Information	120
PART III
Item 10.	Directors, Executive Officers, and Corporate Governance*	121
Item 11.	Executive Compensation*	121
Item 12.	Security Ownership of Certain Beneficial Owners and Management
	and Related Stockholder Matters*	121
Item 13.	Certain Relationships, Related Transactions, and Director Independence*	121
Item 14.	Principal Accounting Fees and Services	122
PART IV
Item 15.	Exhibits, Consolidated Financial Statement Schedules	124
	Index to Consolidated Financial Statement Schedules	125
	Signatures	129
	Exhibits Index	130

*	Item omitted pursuant to General Instruction I(2) of Form 10-K, except as to Part III, Item 10 with respect to compliance with Sections 406 and 407 of the Sarbanes-Oxley Act of 2002.
**	Items prepared in accordance with General Instruction I(2) of Form 10-K.
***	Although item may be omitted pursuant to General Instruction I(2) of Form 10-K, the Company has provided certain disclosure under this item.
****	Item omitted as registrant is neither an accelerated filer nor a well-known seasoned issuer.

2

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

Organization of Business

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 consolidated financial statements include ILIAC and its wholly-owned
subsidiaries, ING Financial Advisers, LLC (“IFA”) and Directed Services LLC
(“DSL”). 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 were 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 consolidated financial statements give effect to the DSL
consolidation transactions as if they had occurred on January 1, 2004 and include the
following:

	2006		2005
Total revenue	$ 594.9		$ 507.7
Net income		35.8		28.2
Additional paid-in capital:
Dividends paid		25.0		20.5
Employee share-based payments		0.1		0.2

3

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 One Orange Way,
Windsor, Connecticut (the “Windsor Property”). Effective October 1, 2007, the
principal executive office of ILIAC was changed to One Orange Way, Windsor,
Connecticut.

On October 31, 2007, ILIAC’s subsidiary, NWL merged with and into ILIAC. As of
the merger date, NWL ceased to exist, and ILIAC became the surviving corporation.
The merger did not have an impact on ILIAC’s consolidated results of operations and
financial position, as NWL was a wholly-owned subsidiary and already included in
the consolidated financial statements for all periods presented since its formation.

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.

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

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

Products and Services

Products offered by the Company include deferred and immediate (payout annuities)
annuity contracts. Company products also include programs offered to qualified
plans and nonqualified deferred compensation plans that package administrative and
record-keeping services along with a variety of investment options, including
affiliated and nonaffiliated mutual funds and variable and fixed investment options.
In addition, the Company offers wrapper agreements entered into with retirement
plans, which contain certain benefit responsive guarantees (i.e., liquidity guarantees
of principal and previously accrued interest for benefits paid under the terms of the
plan) with respect to portfolios of plan-owned assets not invested with the Company.
The Company also offers investment advisory services and pension and retirement
savings plan administrative services.

Annuity contracts offered by the Company contain variable and fixed investment
options. Variable options generally provide for assumption by the customer of
investment risks. Assets supporting variable annuity options are held in separate
accounts that invest in mutual funds managed and/or distributed by ILIAC, its
affiliates, or unaffiliated entities. Variable separate account investment income and
realized capital gains and losses are not reflected in the Consolidated Statements of
Operations.

4

Fixed options are either “fully-guaranteed” or “experience-rated”. Fully-guaranteed
fixed options provide guarantees on investment returns and maturity values.
Experience-rated fixed options require the contractowner to assume certain
investment risks, including realized capital gains and losses on the sale of invested
assets, and other risks subject to, among other things, principal and interest
guarantees.

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

Guaranteed Minimum Death Benefits (“GMDBs”):

§	Standard - Guarantees that, upon death, the death benefit will be no less than the premiums paid by the contractowner, adjusted for any contract withdrawals.
§	Annual Ratchet - Guarantees that, upon death, the death benefit will be no less than the greater of (1) Standard or (2) the maximum contract anniversary value of the variable annuity.
§	Five Year Ratchet - Guarantees that, upon death, the death benefit will be no less than the greater of (1) Standard or (2) the maximum contract quinquennial anniversary value of the variable annuity.
§	Combination Annual Ratchet and 5% RollUp - Guarantees that, upon death, the death benefit will be no less than the greater of (1) Annual Ratchet or (2) aggregate premiums paid by the contractowner accruing interest at 5% per annum.
§	Combination Seven-Year Ratchet and 4% RollUp - Guarantees that, upon death, the death benefit will be no less than the greater of (1) a seven year ratchet or (2) aggregate premiums paid by the contractowner accruing interest at 4% per annum.

Products offering Annual Ratchet, Five Year Ratchet, Combination Ratchet and 5%
RollUp, and Combination Seven-Year Ratchet and 4% RollUp, guarantees are no
longer being sold by the Company.

Variable annuity contracts containing guaranteed minimum death benefits expose the
Company to equity risk. A decrease in the equity markets may cause a decrease in
the account values, thereby increasing the possibility that the Company may be
required to pay amounts to customers due to guaranteed death benefits. An increase
in the value of the equity markets may increase account values for these contracts,
thereby decreasing the Company’s risk associated with the GMDBs. Most contracts
with GMDBs are reinsured to third party reinsurers to mitigate the risk produced by
such guaranteed death benefits.

Fees and Margins

Insurance and expense charges, investment management fees, and other fees earned
by the Company vary by product and depend on, among other factors, the funding
option selected by the customer under the product. For annuity products where assets
are allocated to variable funding options, the Company may charge the separate
account asset-based insurance and expense fees.

5

In addition, where the customer selects a variable funding option, the Company may
receive compensation from the fund’s adviser, administrator, or other affiliated entity,
for the performance of certain services. The Company may also receive
administrative service, distribution (12b-1), and/or service plan fees from the funds in
which customers invest, in addition to compensation from the fund’s adviser,
administrator, or other affiliated entity for the performance of certain services.

For fixed funding options, the Company earns a margin that is based on the difference
between income earned on the investments supporting the liability and interest
credited to customers.

In connection with programs offered to qualified plans and nonqualified deferred
compensation plans that package administrative and recordkeeping services along
with a menu of investment options, the Company may receive 12b-1 and service plan
fees, as well as compensation from the affiliated or nonaffiliated fund’s advisor,
administrator, or other affiliated entity for the performance of certain shareholder
services.

The Company may also receive other fees or charges depending on the nature of the
products.

Strategy, Method of Distribution, and Principal Markets

The Company’s products are offered primarily to individuals, pension plans, small
businesses, and employer-sponsored groups in not-for-profit organizations, and
corporate markets. The Company’s products generally are distributed through
pension professionals, independent agents and brokers, third party administrators,
banks, dedicated career agents, and financial planners.

The Company is not dependent upon any single customer and no single customer
accounted for more than 10% of consolidated revenue in 2007. In addition, the loss
of business from any one, or a few, independent brokers or agents would not have a
material adverse effect on the Company.

Assets Under Management and Administration

A substantial portion of the Company’s fees, or other charges and margins, are based
on general and separate account assets under management (“AUM”). General
account AUM represents assets in which the Company bears the investment risk,
while separate account AUM represent assets in which the contractowners bear the
investment risk. AUM is principally affected by net deposits (i.e., new deposits, less
surrenders and other outflows) and investment performance (i.e., interest credited to
contractowner accounts for fixed options or market performance for variable options).
A portion of the Company’s fee income is also based on assets under administration
(“AUA”), which are assets not included on the Company’s Consolidated Balance
Sheets and for which the Company provides administrative services only. The
general and separate account AUM, AUA, and deposits, were as follows at
December 31, 2007 and 2006.

6

	2007	2006
New deposits:
Variable annuities	$ 6,418.4	$ 5,884.9
Fixed annuities	1,531.9	1,808.7
Stabilizer	743.9	-
Total new deposits	$ 8,694.2	$ 7,693.6
Assets under management:
Variable annuities	$ 42,969.5	$ 39,992.9
Fixed annuities	15,145.7	16,287.5
Total annuities	58,115.2	56,280.4
Plan sponsored and other	1,383.2	4,709.9
Total assets under management	59,498.4	60,990.3
Assets under administration	27,876.7	25,950.4
Total assets under management
and administration	$ 87,375.1	$ 86,940.7

AUM are generally available for contractowner withdrawal and are generally subject
to market value adjustments and/or deferred surrender charges. To encourage
customer retention and recover acquisition expenses, contracts typically impose a
surrender charge on contractowner balances withdrawn within a period of time after
the contract’s inception. The period of time and level of the charge vary by product.
In addition, an approach incorporated into certain recent variable annuity contracts
with fixed funding options allows contractowners to receive an incremental interest
rate if withdrawals from the fixed account are spread over a period of five years.
Further, more favorable credited rates may be offered after policies have been in force
for a period of time. Existing tax penalties on annuity and certain custodial account
distributions prior to age 59-1/2 provide further disincentive to customers for
premature surrenders of account balances, but generally do not impede transfers of
those balances to products of competitors.

Competition

Within the retirement services business, competition from traditional insurance
carriers, as well as banks, mutual fund companies, and other investment managers,
offers consumers many choices. Principal competitive factors are reputation for
investment performance, product features, service, cost, and the perceived financial
strength of the investment manager. Competition may affect, among other matters,
both business growth and the pricing of the Company’s products and services.

Reserves

The Company records as liabilities reserves to meet the Company’s future obligations
under its variable annuity and fixed annuity products.

Future policy benefits and claims reserves include reserves for deferred annuities and
immediate annuities with and without life contingent payouts.

7

Reserves for individual and group deferred annuity investment contracts and
individual immediate annuities without life contingent payouts are equal to
cumulative deposits, less charges and withdrawals, plus credited interest thereon, net
of adjustments for investment experience that the Company is entitled to reflect in
future credited interest. Reserve interest rates vary by product and range from 1.6%
to 7.8% for the years 2007, 2006, and 2005. Certain reserves also include unrealized
gains and losses related to investments and unamortized realized gains and losses on
investments for experience-rated contracts. Reserves on experience-rated contracts
reflect the rights of contractowners, plan participants, and the Company. Reserves for
group immediate annuities without life contingent payouts are equal to the discounted
value of the payment at the implied break-even rate.

Reserves for individual immediate annuities with life contingent payout benefits are
computed on the basis of assumed interest discount rates, mortality, and expenses,
including a margin for adverse deviations. Such assumptions generally vary by
annuity type plan, year of issue, and policy duration. For the years 2007, 2006, and
2005, reserve interest rates ranged from 5.1% to 5.9% .

The Company’s domestic individual life insurance business was disposed of on
October 1, 1998 via an indemnity reinsurance agreement. The Company includes an
amount in Reinsurance recoverable on the Consolidated Balance Sheets, which equals
the Company’s total individual life reserves. Individual life reserves are included in
Future policy benefits and claims reserves on the Consolidated Balance Sheets.

As discussed under “Products and Services,” the Company also has guaranteed death
benefits included in variable annuities, which are included in reserves.

Reinsurance Arrangements

The Company utilizes indemnity reinsurance agreements to reduce its exposure to
losses from its annuity insurance business. Reinsurance permits recovery of a portion
of losses from reinsurers, although it does not discharge the Company’s primary
liability as the direct insurer of the risks. Reinsurance treaties are structured as yearly
renewable term, coinsurance, or modified coinsurance. All agreements that the
Company currently has relate to specifically-identified blocks of business or
contracts; therefore the agreements do not cover new contracts written, if any.

The Company has a significant concentration of reinsurance arising from the
disposition of its individual life insurance business. In 1998, the Company entered
into an indemnity reinsurance arrangement with certain subsidiaries of Lincoln
National Corporation (“Lincoln”). At December 31, 2007 and 2006, the Company
had $2.6 billion and $2.7 billion, respectively, related to reinsurance recoverable from
those subsidiaries of Lincoln. Effective March 1, 2007, the reinsurance agreements
were assigned to a single subsidiary of Lincoln, and that subsidiary established a trust
to secure its obligations to the Company under the reinsurance transaction.

The Company evaluates the financial strength of potential reinsurers and continually
monitors the financial strength and credit ratings of its reinsurers. Only those
reinsurance recoverable balances deemed probable of recovery are reflected as assets
on the Company’s Consolidated Balance Sheets.

8

Investment Overview and Strategy

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

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

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

Ratings

On August 23, 2005, S&P reaffirmed its AA (Very Strong) counterparty credit and
financial strength rating of ING’s primary U.S. insurance operating companies (“ING
U.S.”), including the Company. S&P also, on that date, affirmed the stable outlook
on the core insurance operating companies. There has been no change in S&P’s
rating of ING U.S., including the Company, since that date.

9

On July 25, 2007, Moody’s Investor’s Service, Inc. (“Moody’s”) affirmed the
financial strength rating of the Company, of Aa3 (Excellent) with a stable outlook.
On February 12, 2008, Moody’s assigned a short-term financial strength rating of
Prime-1 (P-1) and reaffirmed the long-term financial strength rating of Aa3. The
rating is based on the strong implicit support and financial strength of the parent
company, ING.

On May 11, 2007, A.M. Best Company, Inc. (“A.M. Best”) reaffirmed the financial
strength rating of A+ (Superior) of ING U.S., including the Company, with a stable
outlook. A.M. Best assigned an issuer credit rating of aa- to ILIAC at that time.

Regulation

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

ILIAC is subject to the insurance laws of the State of Connecticut, where it is
domiciled, and other jurisdictions in which it transacts business. The primary
regulators of the Company’s insurance operations are the insurance departments of
Connecticut and New York. Among other matters, these agencies may regulate trade
practices, agent licensing, policy forms, underwriting and claims practices, minimum
interest rates to be credited to fixed annuity contractowner accounts, and the
maximum interest rates that can be charged on policy loans.

The Securities and Exchange Commission (“SEC”), the Financial Industry
Regulatory Authority (“FINRA”), the self-regulatory organization which succeeded
to the regulatory functions of the National Association of Securities Dealers and the
New York Stock Exchange, and, to a lesser extent, the states, regulate the sales and
investment management activities and operations of the Company. Generally, the
Company’s variable annuity products and certain of its fixed annuities are registered
as securities with the SEC. Regulations of the SEC, Department of Labor, and
Internal Revenue Service also impact certain of the Company’s annuity and other
investment and retirement products. These products may involve separate accounts
and mutual funds registered under the Investment Company Act of 1940. The
Company also provides a variety of products and services to employee benefit plans
that are covered by the Employee Retirement Income Security Act of 1974.

Insurance Holding Company Laws

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

10

Insurance Company Guaranty Fund Assessments

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

The Company accrues the cost of future guaranty fund assessments based on
estimates of insurance company insolvencies provided by the National Organization
of Life and Health Insurance Guaranty Associations and the amount of premiums
written in each state. The Company has estimated this liability to be $7.9 as of
December 31, 2007 and 2006. The Company has also recorded an asset of $5.9 and
$5.6 as of December 31, 2007 and 2006, respectively, for future credits to premium
taxes for assessments already paid.

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

Employees and Other Shared Services

ILIAC had 2,076 employees as of December 31, 2007, primarily focused on
managing new business processing, product distribution, marketing, customer service,
and product management for the Company, as well as, providing product
development, actuarial, and finance services to the Company. The Company also
utilizes services provided by ING North America Insurance Corporation and other
affiliates. These services include risk management, human resources, investment
management, information technology, and legal and compliance services, as well as
other new business processing, actuarial, and finance related services. The affiliated
companies are reimbursed for the Company’s use of various services and facilities
under a variety of intercompany agreements.

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.

11

§	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 be caused by either changes in the underlying risk free
rates or changes in the credit spreads required for various levels of risk within the
market. Changes in interest rates may negatively affect the Company’s attempts to
maintain profitable margins between the amounts earned on its general account
investments and the amounts paid under its annuity 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. In
addition, rising interest rates increase unrealized losses for fixed maturities and
certain derivatives where the Company assumes credit exposure. Significant or
sustained increases in interest rates may result in increased other-than-temporary
impairments.

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

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:

12

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

The Company prices its products based on long-term assumptions regarding
investment returns, mortality, 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:

13

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

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

Adverse capital market conditions, such as that recently experienced with the
decrease in the value and liquidity of asset-backed securities supported by subprime
mortgages, as well as other investments, could also impact the cost of and ability of
the Company to issue debt, including commercial paper borrowings. While the
Company has various sources of liquidity available, adverse market conditions could
impact the cost and availability of these borrowing sources.

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;

14

§	Perceived financial strength; and
§	Claims paying and credit ratings.

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

In recent years, there has been substantial consolidation among companies in the
financial services industry resulting in increased competition from large, well-

capitalized financial services firms.

Many of these firms also have been able to

increase their distribution systems through mergers or contractual arrangements.
Furthermore, larger competitors may lower operating costs and have an ability to
absorb greater risk, while maintaining financial strength ratings, allowing them to
price products more competitively. While the Company cannot predict the future
level of consolidation, the Company expects consolidation to continue and perhaps
accelerate in the future, increasing competitive pressure.

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

Annuity products that the Company sells currently benefit from one or more forms of
tax favored status under current federal tax law. The Economic Growth and Tax
Relief Reconciliation Act of 2001 and the Jobs 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.

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

Litigation may adversely affect profitability and financial condition

The Company is, and may be in the future, subject to legal actions in the ordinary
course of insurance, investment management, and other business operations. These
legal actions may include proceedings relating to aspects of businesses and operations
that are specific to the Company, and proceedings that are typical of the businesses in
which the Company operates. Some of these proceedings may be brought on behalf
of a class. Plaintiffs may seek large or indeterminate amounts of damage, including
compensatory, liquidated, treble, and/or punitive damages. Given the large or

15

indeterminate amounts sometimes sought, and the inherent unpredictability of
litigation, it is possible that an adverse outcome could, from time to time, have an
adverse effect on the Company’s reputation, results of operations, or cash flows, in
particular quarterly or annual periods.

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

The Company’s insurance and securities business is subject to comprehensive state
and federal regulation and supervision throughout the United States. The primary
purpose of state regulation is to protect contractowners, and not necessarily to protect

creditors and investors.

State insurance and securities regulators, state attorneys

general, the National Association of Insurance Commissioners, the SEC, the FINRA,
the Department of Labor and the IRS continually reexamine existing laws and
regulations and may impose changes in the future. Changes in legislation and
administrative policies, or new interpretations of existing laws, in areas such as
employee benefit plan regulation, financial services regulation, and federal taxation,
could lessen the competitive advantages of certain of the Company’s products, result
in the surrender of existing contracts and policies, increase costs, reduce new product
sales, or result in higher taxes affecting the Company, thus reducing the Company’s
profitability.

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

§	Inappropriate trading of fund shares;
§	Revenue sharing and directed brokerage;
§	Sales and marketing practices (including sales to seniors);
§	Suitability;
§	Arrangements with service providers;
§	Pricing;
§	Product cost and fees;
§	Compensation and sales incentives;
§	Potential conflicts of interest;
§	Potential anti-competitive activity;
§	Reinsurance;
§	Specific product types (including group annuities and indexed annuities); and
§	Adequacy of disclosure.

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

In some cases, this regulatory scrutiny has led to new proposed legislation and
regulation that could significantly affect the financial services industry, including
businesses in which the Company is engaged, or has resulted in regulatory penalties,
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

16

or not involving the Company, could influence the manner in which the Company
distributes its products, result in negative coverage of the industry by the media,
cause significant harm to the Company’s reputation, and adversely impact
profitability.

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

The Company’s insurance and annuity products are subject to a complex and
extensive array of state and federal tax, securities and insurance laws, and regulations,
which are administered and enforced by a number of different governmental and self-

regulatory

authorities,

including

state

insurance

regulators,

state

securities

administrators, the SEC, the FINRA, and the IRS.

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

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

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

17

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

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

§	Losses in the Company’s investment portfolio due to significant volatility in global financial markets or the failure of counterparties to perform.
§	Changes in the rate of mortality, lapses and surrenders of existing policies/contracts, as well as sales of new policies/contracts.
§	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 1B. Unresolved Staff Comments

Omitted as registrant is neither an accelerated filer nor a well-known seasoned issuer.

Item 2.

Properties

The Company’s home office is located at One Orange Way, Windsor, Connecticut,
06095-4774. All Company office space other than the home office is leased or
subleased by the Company or its other affiliates. The Company pays substantially all
expenses associated with its owned or leased and subleased office properties.

18

Affiliates within ING’s U.S. operations provide the Company with various
management, finance, investment management and other administrative services,
from facilities located at 5780 Powers Ferry Road, N.W., Atlanta, Georgia 30327-
4390. The affiliated companies are reimbursed for the Company’s use of these
services and facilities under a variety of intercompany agreements.

Item 3.

Legal Proceedings

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

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

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

19

PART II

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

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

ILIAC’s ability to pay dividends to its parent is subject to the prior approval of
insurance regulatory authorities of the State of Connecticut for payment of any
dividend, which, when combined with other dividends paid within the preceding 12
months, exceeds the greater of (1) ten percent (10%) of ILIAC’s statutory surplus at
the prior year end or (2) ILIAC’s prior year statutory net gain from operations.

During 2007, 2006 and 2005, ILIAC paid $145.0, $256.0, and $20.5, respectively, in
dividends on its common stock to Lion.

During 2006, Lion contributed to ILIAC, Directed Services, Inc., which had $50.5 in
equity on the date of contribution and was accounted for in a manner similar to a
pooling-of-interests. During 2007, 2006 and 2005, ILIAC did not receive any cash
capital contributions from Lion.

20

Item 6.

Selected Financial Data
(Dollar amounts in millions, unless otherwise stated)

ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
3-YEAR SUMMARY OF SELECTED FINANCIAL DATA

The following selected financial data has been derived from the consolidated
financial statements. The following selected financial data should be read in
conjunction with "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and the consolidated financial statements and notes thereto.
Due to the correction of an error related to the identification of unreconciled net
liabilities in 2007, Total shareholder’s equity, Total assets, and Future policy benefits
and claims reserves have been restated for 2006 and 2005. See Changes to Prior
Years Presentation for further discussion on the restatement.

		2006	2005
	2007	(Restated)	(Restated)
CONSOLIDATED OPERATING RESULTS
Net investment income	$ 1,054.7	$ 1,029.7	$ 1,037.1
Fee income	789.3	714.8	609.6
Premiums	46.8	37.5	43.2
Broker-dealer commission revenue	568.4	429.2	378.1
Net realized capital gains (losses)	(8.2)	3.0	22.0
Total revenue	2,451.9	2,229.9	2,097.7
Interest credited and other benefits to contractowners	822.2	783.7	739.6
Broker-dealer commission expense	568.4	429.2	378.1
Amortization of deferred policy acquisition
costs and value of business acquired	129.2	21.3	159.9
Net income	218.4	301.8	272.7
CONSOLIDATED FINANCIAL POSITION
Total investments	$ 17,898.4	$ 19,010.5	$ 19,961.2
Assets held in separate accounts	48,091.2	43,550.8	35,899.8
Total assets	71,621.0	68,482.3	61,685.7
Future policy benefits and claims reserves	18,569.1	19,984.1	20,921.1
Liabilities related to separate accounts	48,091.2	43,550.8	35,899.8
Total shareholder's equity	3,041.0	3,013.7	2,970.7
ASSETS UNDER MANAGEMENT AND
ADMINISTRATION
Variable annuities	$ 42,969.5	$ 39,992.9	$ 35,067.7
Fixed annuities	15,145.7	16,287.5	17,034.0
Plan sponsored and other	1,383.2	4,709.9	3,335.3
Total assets under management	59,498.4	60,990.3	55,437.0
Assets under administration	27,876.7	25,950.4	23,031.6
Total assets under management and administration	$ 87,375.1	$ 86,940.7	$ 78,468.6

21

Item 7. Management’s Narrative Analysis of the Results of Operations and Financial

Condition
(Dollar amounts in millions, unless otherwise stated)

Overview

The following narrative analysis presents a review of the 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 years ended
December 31, 2007, 2006 and 2005, and financial condition as of December 31, 2007
and 2006. This item should be read in its entirety and in conjunction with the
selected financial data, consolidated financial statements and related notes, and other
supplemental data, which can be found under Part II, Item 6. and Item 8. contained
herein.

Forward-Looking Information/Risk Factors

In connection with the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995, the Company cautions readers regarding certain
forward-looking statements contained in this report and in any other statements made
by, or on behalf of, the Company, whether or not in future filings with the Securities
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;

22

(6)	The Company’s results of operations and financial condition may be adversely affected by general economic and business conditions or adverse capital market conditions that are less favorable than anticipated;
(7)	Competition could negatively affect the ability to maintain or increase profitability;
(8)	Changes in federal income tax law or interpretations of existing tax law could affect profitability and financial condition by making some products less attractive to contractowners and increasing tax costs of contractowners or the Company;
(9)	Litigation may adversely affect profitability and financial condition;
(10)	Changes in regulation in the United States and recent regulatory investigations may reduce profitability;
(11)	The Company’s products are subject to extensive regulation and failure to meet any of the complex product requirements may reduce profitability;
(12)	A failure of the Company’s operating systems or a compromise of security with respect to operating systems or portable electronic devices could adversely affect the Company’s results of operations and financial condition;
(13)	The occurrence of natural or man-made disasters may adversely affect the Company’s results of operations and financial condition; and
(14)	The occurrence of unidentified or unanticipated risks could negatively affect the Company’s business or result in losses.

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

Basis of Presentation

ILIAC is a stock life insurance company domiciled in the state of Connecticut.
ILIAC and its wholly-owned subsidiaries 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 consolidated financial statements include ILIAC and its wholly-owned
subsidiaries, ING Financial Advisers, LLC (“IFA”) and Directed Services LLC
(“DSL”). ILIAC is a direct, wholly-owned subsidiary of Lion Connecticut Holdings
Inc., which is an indirect, wholly-owned subsidiary of ING Groep N.V. 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 were 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.

23

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 consolidated financial statements give effect to the DSL
consolidation transactions as if they had occurred on January 1, 2004 and include the
following:

	2006		2005
Total revenue	$ 594.9		$ 507.7
Net income		35.8		28.2
Additional paid-in capital:
Dividends paid		25.0		20.5
Employee share-based payments		0.1		0.2

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 One Orange Way,
Windsor, Connecticut (the “Windsor Property”). Effective October 1, 2007, the
principal executive office of ILIAC was changed to One Orange Way, Windsor,
Connecticut.

On October 31, 2007, ILIAC’s subsidiary, NWL merged with and into ILIAC. As of
the merger date, NWL ceased to exist, and ILIAC became the surviving corporation.
The merger did not have an impact on ILIAC’s consolidated results of operations and
financial position, as NWL was a wholly-owned subsidiary and already included in
the consolidated financial statements for all periods presented since its formation.

The Company has one operating segment.

Critical Accounting Policies

General

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the use of estimates and assumptions
in certain circumstances that affect amounts reported in the accompanying
consolidated 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.

24

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

Reserves

The Company records as liabilities reserves to meet the Company’s future obligations
under its variable annuity and fixed annuity products.

Future policy benefits and claims reserves include reserves for deferred annuities and
immediate annuities with and without life contingent payouts.

Reserves for individual and group deferred annuity investment contracts and
individual immediate annuities without life contingent payouts are equal to
cumulative deposits, less charges and withdrawals, plus credited interest thereon, net
of adjustments for investment experience that the Company is entitled to reflect in
future credited interest. Reserve interest rates vary by product and range from 1.6%
to 7.8% for the years 2007, 2006 and 2005. Certain reserves also include unrealized
gains and losses related to investments and unamortized realized gains and losses on
investments for experience-rated contracts. Reserves on experience-rated contracts
reflect the rights of contractowners, plan participants, and the Company. Reserves for
group immediate annuities without life contingent payouts are equal to the discounted
value of the payment at the implied break-even rate.

Reserves for individual immediate annuities with life contingent payout benefits are
computed on the basis of assumed interest discount rates, mortality, and expenses,
including a margin for adverse deviations. Such assumptions generally vary by
annuity type plan, year of issue, and policy duration. For the years 2007, 2006 and
2005, reserve interest rates ranged from 5.1% to 5.9% .

The Company has a significant concentration of reinsurance arising from the
disposition of its individual life insurance business. In 1998, the Company entered
into an indemnity reinsurance arrangement with certain subsidiaries of Lincoln
National Corporation (“Lincoln”). Effective March 1, 2007, the reinsurance
agreements were assigned to a single subsidiary of Lincoln, and that subsidiary
established a trust to secure its obligations to the Company under the reinsurance
transaction. The Company includes an amount in Reinsurance recoverable on the
Consolidated Balance Sheets, which equals the Company’s total individual life
reserves. Individual life reserves are included in Future policy benefits and claims
reserves of the Consolidated Balance Sheets.

25

Certain variable annuity contracts offer guaranteed minimum death benefits
(“GMDB”). The GMDB is accrued in the event the customer’s account value at death

is below the guaranteed value and is included in reserves.
“Products and Services”, for a description of the GMDBs.

See Item I, Business,

Valuation of Investments and Other-Than-Temporary Impairments

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

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

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

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

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

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

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

26

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

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

Amortization of Deferred Acquisition Costs and Value of Business Acquired

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

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 net cash flows 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.

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 (“SOP”) 05-1, “Accounting by Insurance Enterprises for
Deferred Acquisition Costs in Connection with Modifications or Exchanges of
Insurance Contracts” (“SOP 05-1”).

27

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

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

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

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

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

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

28

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
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 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. Sales and
favorable investment performance in the variable product lines during 2007 favorably
impacted variable AUM in 2007.

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

29

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

The Company’s results of operations for the year ended December 31, 2007, and
changes therein, were primarily impacted by net amortization of DAC and VOBA
and operating expenses, partially offset by fee income resulting from higher average
variable AUM and favorable net margins on average fixed AUM.

	Years Ended December 31,		$ Increase	% Increase
	2007	2006	(Decrease)	(Decrease)
Revenues:
Net investment income	$ 1,054.7	$ 1,029.7	$ 25.0	2.4%
Fee income	789.3	714.8	74.5	10.4%
Premiums	46.8	37.5	9.3	24.8%
Broker-dealer commission revenue	568.4	429.2	139.2	32.4
Net realized capital (loss) gains	(8.2)	3.0	(11.2)	NM
Other income	0.9	15.7	(14.8)	(94.3)%
Total revenue	2,451.9	2,229.9	222.0	10.0%
Benefits and expenses:
Interest credited and other
benefits to contractowners	822.2	783.7	38.5	4.9%
Operating expenses	652.2	568.3	83.9	14.8%
Broker-dealer commission expense	568.4	429.2	139.2	32.4%
Amortization of deferred policy
acquisition costs and value
of business acquired	129.2	21.3	107.9	NM
Interest expense	5.5	2.9	2.6	89.7%
Total benefits and expenses	2,177.5	1,805.4	372.1	20.6%
Income before income taxes	274.4	424.5	(150.1)	(35.4)%
Income tax expense	56.0	122.7	(66.7)	(54.4)%
Net income	$ 218.4	$ 301.8	$ (83.4)	(27.6)%
Effective tax rate	20.4%	28.9%

NM - Not meaningful.

Revenues

Total revenue increased for the year ended December 31, 2007, primarily reflecting
increases in Fee income and Net investment income and partially offset by an
increase in Net realized capital losses and a decrease in Other income.

Fee income increased for the year ended December 31, 2007, as overall average
variable AUM increased, driven by continuing increase in sales and favorable
investment performance in variable product lines.

The increase in Net investment income for the year ended December 31, 2007, was
mainly due to favorable yields on investments supporting average fixed AUM.

The increase in Premiums for the year ended December 31, 2007, was entirely offset
by the Interest credited and other benefits to contractowners.

30

The increase in Net realized capital losses for the year ended December 31, 2007,
was primarily due to realized losses on derivatives, primarily related to losses on
interest rate swaps and the widening of credit spreads.

Other income decreased for the year ended December 31, 2007 due to higher
commissions, primarily on the sales of retirement products, during 2006 as compared
to 2007.

Benefits and Expenses

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

The increase in Amortization of DAC and VOBA for the year ended December 31,
2007, was primarily driven by an increase in actual gross profits related to higher fee

income and fixed margins in 2007.

In addition, amortization for the year ended

December 31, 2006 was lower due to favorable unlocking, as a result of prospective
expense assumption changes.

Operating expenses for the year ended December 31, 2007 increased in conjunction
with the growth of the business and were primarily driven by higher operating
expenses and commissions. The increase in commissions was due to higher renewal
premiums and higher average variable AUM.

Interest credited and other benefits to contractowners increased for the year ended
December 31, 2007, primarily driven by the increase in reserves associated with
minimum guarantees on variable annuities due to the widening of credit spreads in
the fourth quarter of 2007.

Income Taxes

Income tax expense decreased for the year ended December 31, 2007, primarily due
to the audit settlement with the State of Connecticut, dividends received deduction,
and lower income before taxes.

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

The Company’s results of operations for the year ended December 31, 2006, and
changes therein, were primarily impacted by DAC and VOBA unlocking, as well as
increases in variable AUM which were driven by changing equity markets and cash
flows. Regulatory settlements and interest rate movements had an unfavorable
impact on the Company’s operations.

31

	Years Ended December 31,		$ Increase	% Increase
	2006	2005	(Decrease)	(Decrease)
Revenues:
Net investment income	$ 1,029.7	$ 1,037.1	$ (7.4)	(0.7)%
Fee income	714.8	609.6	105.2	17.3%
Premiums	37.5	43.2	(5.7)	(13.2)%
Broker-dealer commission revenue	429.2	378.1	51.1	13.5%
Net realized capital gains	3.0	22.0	(19.0)	(86.4)%
Other income	15.7	7.7	8.0	NM
Total revenue	2,229.9	2,097.7	132.2	6.3%
Benefits and expenses:
Interest credited and other
benefits to contractowners	783.7	739.6	44.1	6.0%
Operating expenses	568.3	524.3	44.0	8.4%
Broker-dealer commission expense	429.2	378.1	51.1	13.5%
Amortization of deferred policy
acquisition costs and value
of business acquired	21.3	159.9	(138.6)	(86.7)%
Interest expense	2.9	1.6	1.3	81.3%
Total benefits and expenses	1,805.4	1,803.5	1.9	0.1%
Income before income taxes	424.5	294.2	130.3	44.3%
Income tax expense	122.7	21.5	101.2	NM
Net income	$ 301.8	$ 272.7	$ 29.1	10.7%
Effective tax rate	28.9%	7.3%

NM - Not meaningful.

Revenues

Total revenue increased for the year ended December 31, 2006, primarily due to
increases in Fee income and Commission revenue, partially offset by a decrease in
Net realized capital gains.

Fee income increased as overall average variable AUM increased, driven by
favorable equity market conditions and net cashflow during 2006.

Net realized capital gains decreased due to higher losses on derivatives, partially
offset by realized capital gains on fixed maturities.

Benefits and Expenses

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

Interest credited and other benefits to contractowners increased for the year ended
December 31, 2006, primarily due to regulatory settlements.

32

Operating expenses for the year ended December 31, 2006 increased due to higher
non-deferred commission expense and the continued growth of the business during
2006.

The decrease in Amortization of DAC and VOBA in 2006, is primarily driven by
favorable unlocking of $83.3, due to assumption changes and model refinements. In
addition, the decrease in amortization reflects lower actual gross profits, primarily
due to legal a settlement incurred in 2006.

Income Taxes

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

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 of the Company, pursuant to an investment advisory agreement. Separate
portfolios are established for groups of products with similar liability characteristics
within the Company.

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

33

while minimizing adverse tax and accounting impacts.

The Company strives to

maintain a portfolio weighted average asset quality rating of A, based on Standard &

Poor’s (“S&P”) ratings classifications.

The weighted average excludes mortgage

loans, but includes mortgage-backed securities which are reported with bonds.

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

Portfolio Composition

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

	2007		2006
	Carrying Value	%	Carrying Value	%
Fixed maturities, available-for-sale,
including securities pledged	$ 14,250.4	79.6%	$ 16,211.7	85.3%
Equity securities, available-for-sale	446.4	2.5%	251.7	1.3%
Mortgage loans on real estate	2,089.4	11.7%	1,879.3	9.9%
Policy loans	273.4	1.5%	268.9	1.4%
Other investments	838.8	4.7%	398.9	2.1%
Total investments	$ 17,898.4	100.0%	$ 19,010.5	100.0%
Fair Values

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

			Valuation	Valuation
			Techniques	Techniques
		Published	with	without
		Price	Market	Market
2007		Quotations	Inputs	Inputs	Total
Assets:
Fixed maturities, available-for-sale,
including securities pledged	$ 11,333.8		$ 2,916.6	$ -	$ 14,250.4
Equity securities, available-for-sale		446.4	-	-	446.4
Other investments (primarily derivatives
and short-term investments)		168.0	34.7	-	202.7
Liabilities:
Other liabilities (primarily derivatives)		-	200.3	-	200.3

34

			Valuation	Valuation
			Techniques	Techniques
		Published	with	without
		Price	Market	Market
		Quotations	Inputs	Inputs	Total
2006
Assets:
Fixed maturities, available-for-sale,
including securities pledged	$ 13,891.2		$ 2,320.5	$ -	$ 16,211.7
Equity securities, available-for-sale		251.7	-	-	251.7
Other investments (primarily derivatives
and short-term investments)		5.7	33.6	0.4	39.7
Liabilities:
Other liabilities (primarily derivatives)		-	45.1	0.4	45.5
Fixed Maturities

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

	Gross	Gross
	Unrealized	Unrealized
Amortized	Capital	Capital	Fair
Cost	Gains	Losses	Value

Fixed maturities:

U.S. Treasuries	$ 11.2	$ 0.7	$ -	$ 11.9
U.S. government agencies and authorities	0.6	-	-	0.6
State, municipalities, and political subdivisions	66.1	0.1	2.2	64.0
U.S. corporate securities:
Public utilities	1,049.1	10.8	15.6	1,044.3
Other corporate securities	3,855.1	46.1	65.2	3,836.0
Total U.S. corporate securities	4,904.2	56.9	80.8	4,880.3
Foreign securities(1):
Government	379.3	17.1	6.6	389.8
Other	1,955.8	29.9	40.3	1,945.4
Total foreign securities	2,335.1	47.0	46.9	2,335.2
Residential mortgage-backed securities	4,146.1	101.8	63.5	4,184.4
Commercial mortgage-backed securities	1,927.3	10.7	52.3	1,885.7
Other asset-backed securities	924.3	5.5	41.5	888.3
Total fixed maturities, including
fixed maturities pledged	14,314.9	222.7	287.2	14,250.4
Less: fixed maturities pledged	940.2	8.0	14.1	934.1

Total fixed maturities  $ 13,374.7  $ 214.7  $ 273.1  $ 13,316.3 

⁽¹⁾ Primarily U.S. dollar denominated.

35

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

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 subdivisions	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
fixed maturities pledged	16,256.3	194.5	239.1	16,211.7
Less: fixed maturities 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.

At December 31, 2007 and 2006, the Company’s carrying value of fixed maturities,
available-for-sale, including securities pledged to creditors, (hereinafter referred to as
“total fixed maturities”) represented 79.6% and 85.3%, respectively, of the total
general account invested assets. For the same periods, $10,179.9, or 71.4% of total
fixed maturities, and $13,505.3, or 83.3% of total fixed maturities, respectively,
supported experience-rated products.

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. At December 31, 2007 and 2006, the average qualify rating of the
Company’s fixed maturities portfolio was AA-. Ratings are calculated using a rating
hierarchy that considers S&P, Moody’s Investor’s Service, Inc., and internal ratings.

36

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

	2007		2006
	Fair	% of	Fair	% of
	Value	Total	Value	Total
AAA	$ 6,446.7	45.3%	$ 7,824.0	48.2%
AA	956.4	6.7%	1,135.6	7.0%
A	2,114.4	14.8%	2,588.4	16.0%
BBB	3,932.9	27.6%	3,920.4	24.2%
BB	591.0	4.1%	652.8	4.0%
B and below	209.0	1.5%	90.5	0.6%
Total	$ 14,250.4	100.0%	$ 16,211.7	100.0%

94.4% and 95.4% of fixed maturities were invested in securities rated BBB and above
(Investment Grade) at December 31, 2007 and 2006, respectively.

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

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

	2007		2006
	Fair	% of	Fair	% of
	Value	Total	Value	Total
U.S. Treasuries	$ 11.9	0.1%	$ 25.6	0.2%
U.S. government agencies and authorities	0.6	0.0%	276.9	1.7%
U.S. corporate, state, and municipalities	4,944.3	34.7%	5,418.3	33.3%
Foreign	2,335.2	16.4%	2,489.7	15.4%
Residential mortgage-backed	4,184.4	29.4%	4,500.0	27.8%
Commercial mortgage-backed	1,885.7	13.2%	2,246.7	13.9%
Other asset-backed	888.3	6.2%	1,254.5	7.7%
Total	$ 14,250.4	100.0%	$ 16,211.7	100.0%

37

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

	Amortized	Fair
	Cost	Value
Due to mature:
One year or less	$ 363.4	$ 363.6
After one year through five years	2,440.7	2,451.6
After five years through ten years	2,779.9	2,761.2
After ten years	1,733.2	1,715.6
Mortgage-backed securities	6,073.4	6,070.1
Other asset-backed securities	924.3	888.3
Less: securities pledged to creditors	940.2	934.1
Fixed maturities, excluding securities pledged to creditors	$ 13,374.7	$ 13,316.3

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 at December 31, 2007 or 2006.

At December 31, 2007 and 2006, fixed maturities with fair values of $13.9 and $11.2,
respectively, were on deposit as required by regulatory authorities.

The Company invest in various categories of collateralized mortgage obligations
(“CMOs”) that are subject to different degrees of risk from changes in interest rates
and, for CMOs that are not agency-backed, defaults. The principal risks inherent in
holding CMOs are prepayment and extension risks related to dramatic decreases and
increases in interest rates resulting in the prepayment of principal from the underlying
mortgages, either earlier or later than originally anticipated. At December 31, 2007
and 2006, approximately 11.3% and 8.4%, respectively, of the Company’s CMO
holdings were invested in those types of CMOs which are subject to more
prepayment and extension risk than traditional CMOs, such as interest-only or
principal-only strips.

Equity Securities

Equity securities, available-for-sale, included investments with fair values of $279.5
and $219.5 in ING proprietary funds as of December 31, 2007 and 2006, respectively.

Subprime Mortgage Exposure

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

To date, this market disruption has had a limited impact on the Company, which does
not originate or purchase subprime or Alt-A whole-loan mortgages. Subprime lending
is the origination of loans to customers with weaker credit profiles. The Company
defines Alt-A Loans to include residential mortgage loans to customers who have
strong credit profiles but lack some element(s), such as documentation to substantiate

38

income. Commencing in the fourth quarter of 2007, the Company expanded its
definition of Alt-A loans to include residential mortgage loans to borrowers that
would otherwise be classified as prime but whose loan structure provides repayment
options to the borrower that increase the risk of default. Further, during the fourth
quarter, the industry coalesced around classifying any residential mortgage backed
securities (“RMBS”) not clearly identifiable as prime or subprime into the Alt-A

category and the Company is following that lead.

The following summarizes the

Company’s exposure to subprime and Alt-A mortgages as of December 31, 2007.

As of December 31, 2007, the fair value and gross unrealized losses related to the
Company’s exposure to subprime mortgages was $410.2 and $32.9, respectively,
representing 2.3% of total investments. 95.5% of these securities were rated “AAA”
or “AA”. This exposure was primarily in the form of asset-backed securities (“ABS”)
structures, collateralized by subprime residential mortgages (“ABS Home Equity”)
and one CDO position backed by ABS Home Equity. Of the total subprime
residential mortgage backed securities portfolio, 35.7% were issued in 2007, 14.8% in
2006, and 49.5% in 2005 and prior. The ABS CDO had no unrealized loss and a fair
value of $0.4 at December 31, 2007.

The Company’s exposure to Alt-A mortgages was concentrated in RMBS, and the
fair value and gross unrealized losses aggregated to $1.3 billion and $38.1,
respectively, representing 7.2% of total investments at December 31, 2007. 99.9% of
these securities were AAA-rated. The Alt-A mortgage backed securities portfolio
included 28.4% issued in 2007, 12.9% in 2006, and 58.7% in 2005 and prior.

Total RMBS (including CMO and ABS structures) was $4.2 billion with 9.8%
consisting of subprime residential mortgage backed securities and 30.4% consisting
of Alt-A mortgage backed securities. The RMBS portfolio is of high credit quality
with 100.0% of the portfolio rated AAA. Further, 12.4% of the RMBS portfolio was
issued by the Government National Mortgage Association (“GNMA” or “Ginnie
Mae”), the Federal National Mortgage Association (“FNMA” or “Fannie Mae”), or
the Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”), which
are government agencies or instrumentalities that guarantee the credit quality of the
underlying mortgage pools.

Commercial Mortgage-backed and Other Asset-backed Securities

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

At December 31, 2007, the fair value of the Company’s Commercial mortgage-
backed securities (“CMBS”) totaled $1.9 billion, and Other ABS, excluding subprime
exposure, totaled $512.8. CMBS investments represent pools of commercial
mortgages that are broadly diversified across property types and geographical areas.
The Other ABS is also broadly diversified both by type and issuer with credit card
receivables, automobile receivables, public utility and collateralized loan obligations
comprising 34.5%, 18.8%, 17.6% and 13.3%, respectively, of total Other ABS,
excluding subprime exposure.

39

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

CMBS
% of Total CMBS		Vintage
AAA	84.1%	2007	25.4%
AA	9.3%	2006	11.5%
A	6.4%	2005 and prior	63.1%
BBB	0.2%
Other ABS
% of Total Other ABS		Vintage
AAA	60.1%	2007	26.2%
AA	5.8%	2006	12.9%
A	16.8%	2005 and prior	60.9%
BBB	16.7%
BB and below	0.6%

Mortgage Loans on Real Estate

Mortgage loans on real estate, primarily commercial mortgage loans, totaled $2,089.4
and $1,879.3 at December 31, 2007 and 2006, respectively. These loans are reported
at amortized cost, less impairment write-downs. If the value of any mortgage loan is
determined to be impaired (i.e., when it is probable that the Company will be unable
to collect on all amounts due according to the contractual terms of the loan
agreement), the carrying value of the mortgage loan is reduced to either the present
value of expected cash flows from the loan, discounted at the loan’s effective interest
rate, or fair value of the collateral. If the loan is in foreclosure, the carrying value is
reduced to the fair value of the underlying collateral, net of estimated costs to obtain
and sell. The carrying value of the impaired loans is reduced by establishing a
permanent write-down charged to Net realized capital gains (losses). At
December 31, 2007 and 2006, the Company had no allowance for mortgage loan
credit losses. The properties collateralizing mortgage loans are geographically
dispersed throughout the United States, with the largest concentration of 16.8% and
17.7% and of properties in California at December 31, 2007 and 2006, respectively.

Unrealized Capital Losses

Unrealized capital losses related to fixed maturities are analyzed in detail in the
following tables.

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

40

		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	$ 44.8	15.7%	$ 4.1		1.4%	$ 20.6	8.5%	$ 1.2		0.5%
More than six
months and less
than twelve months
below amortized cost	119.5	41.6%		11.8	4.1%	6.6	2.8%		0.7	0.3%
More than twelve
months below
amortized cost	102.0	35.5%		5.0	1.7%	208.9	87.4%		1.1	0.5%
Total unrealized capital loss	$ 266.3	92.8%	$ 20.9		7.2%	$ 236.1	98.7%	$ 3.0		1.3%

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

More than

Six Months

	Less than	and less than	More than
	Six Months	Twelve Months	Twelve Months	Total
	Below	Below	Below	Unrealized
	Amortized	Amortized	Amortized	Capital
2007	Cost	Cost	Cost	Loss
Interest rate or spread widening	$ 18.8	$ 62.3	$ 48.8	$ 129.9
Mortgage and other asset-backed
securities	30.1	69.0	58.2	157.3
Total unrealized capital loss	$ 48.9	$ 131.3	$ 107.0	$ 287.2
Fair value	$ 2,256.2	$ 2,217.7	$ 3,612.1	$ 8,086.0
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 at December 31, 2007 and 2006.

41

		More than
	Less than	Six Months	More than
	Six Months	and less than	Twelve Months	Total
	Below	Twelve Months	Below	Unrealized
	Amortized	Below Amortized	Amortized	Capital
2007	Cost	Cost	Cost	Loss
U.S. corporate, state, and
municipalities	$ 10.7	$ 40.7	$ 31.6	$ 83.0
Foreign	8.1	21.6	17.2	46.9
Residential mortgage-backed	17.3	18.2	28.0	63.5
Commercial mortgage-backed	4.2	33.4	14.7	52.3
Other asset-backed	8.6	17.4	15.5	41.5
Total unrealized capital loss	$ 48.9	$ 131.3	$ 107.0	$ 287.2
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 96.9% of the average book value as of
December 31, 2007. In addition, this category includes 761 securities, which have an
average quality rating of AA. No other-than-temporary impairment loss was
considered necessary for these fixed maturities as of December 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.

42

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

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

		2007		2006		2005
			No. of		No. of		No. of
		Impairment	Securities	Impairment	Securities	Impairment	Securities
Limited partnerships	$ 3.0		1	$ -	-	$ -	-
U.S. treasuries		-	-	6.4	4	0.1	2
U.S. corporate		36.3	113	24.4	67	3.9	15
Foreign		19.1	54	4.2	10	0.3	1
Residential mortgage-backed		7.1	30	16.6	76	44.7	82
Other asset-backed		10.5	21	7.0	1	-	-
Equity securities		-	-	0.1	3	-	-
Total	$ 76.0		219	$ 58.7	161	$ 49.0	100

The above schedule includes $16.4, $16.1, and $43.3 for the years ended
December 31, 2007, 2006, and 2005, respectively, in other-than-temporary write-
downs related to the analysis of credit-risk and the possibility of significant
prepayment risk. The remaining $59.6, $42.6, and $5.7 in write-downs for the years
ended December 31, 2007, 2006, and 2005, respectively, are related to investments
that the Company does not have the intent to retain for a period of time sufficient to
allow for recovery in fair value. The following table summarizes these write-downs
recognized by type for the years ended December 31, 2007, 2006, and 2005.

	2007		2006		2005
		No. of		No. of		No. of
	Impairment	Securities	Impairment	Securities	Impairment	Securities
U.S. Treasuries	$ -	-	$ 6.4	4	$ 0.1	2
U.S. corporate	31.6	102	24.4	67	2.3	13
Foreign	19.1	54	4.2	10	-	-
Residential mortgage-backed	2.6	2	0.6	1	3.3	2
Other asset-backed	6.3	16	7.0	1	-	-
Total	$ 59.6	174	$ 42.6	83	$ 5.7	17

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.

43

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 on disposal is determined
based on specific identification of securities. Net realized capital gains (losses) on
investments were as follows for the years ended December 31, 2007, 2006, and 2005.

	2007	2006	2005
Fixed maturities, available-for-sale	$ (50.3)	$ (67.0)	$ 1.0
Equity securities, available-for-sale	6.4	9.3	12.4
Derivatives	(123.0)	(3.9)	17.9
Other	(2.6)	-	(0.3)
Less: allocation to experience-rated contracts	161.3	(64.6)	9.0
Net realized capital (losses) gains	$ (8.2)	$ 3.0	$ 22.0
After-tax net realized capital (losses) gains	$ (5.3)	$ 2.0	$ 14.3

The increase in Net realized capital losses for the year ended December 31, 2007, was
primarily due to realized losses on derivatives, primarily related to losses on interest
rate swaps and widening of credit spreads.

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 Consolidated Balance
Sheets. Net unamortized realized capital gains allocated to experienced-rated
contractowners were $53.8, $164.5, and $240.3, at December 31, 2007, 2006, and
2005, respectively.

Liquidity and Capital Resources

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

Sources and Uses of Liquidity

The Company’s principal sources of liquidity are product charges, investment
income, proceeds from the maturity and sale of investments, and capital
contributions. Primary uses of these funds are payments of commissions and
operating expenses, interest 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

44

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 Resources

Additional sources of liquidity include borrowing facilities to meet short-term cash

requirements that arise in the ordinary course of business.

ILIAC maintains the

following agreements:

§	A reciprocal loan agreement with ING 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. As of December 31, 2007 and 2006, ILIAC had no amount due to ING AIH under the reciprocal loan agreement. As of December 31, 2007, ILIAC had no amount due from ING AIH under the reciprocal loan agreement and $45.0 receivable from ING AIH as of December 31, 2006.
§	A $100.0 uncommitted, perpetual revolving note facility with the Bank of New York. At December 31, 2007 and 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. At December 31, 2007 and 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 December 31, 2007 and 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.

Financing Agreement

As of June 1, 2007, the State of Connecticut, acting by the Department of Economic
and Community Development (“DECD”), loaned ILIAC $9.9 (the “DECD Loan”) in
connection with the development of the Windsor Property. The loan has a term of
twenty years and bears an annual interest rate of 1.00% . As long as no defaults have
occurred under the loan, no payments of principal or interest are due for the initial ten
years of the loan. For the second ten years of the DECD Loan term, ILIAC is
obligated to make monthly payments of principal and interest.

45

The DECD Loan provides for loan forgiveness at varying amounts up to $4.0 if
ILIAC and its affiliates meet certain employment thresholds at the Windsor Property
during the term of the loan. ILIAC’s obligations under the DECD Loan are secured
by an unlimited recourse guaranty from its affiliate, ING North America Insurance
Corporation.

Capital Contributions and Dividends

During 2006, Lion contributed to ILIAC DSI, which had $50.5 in equity on the date
of contribution and was accounted for in a manner similar to a pooling-of-interests.
During 2007, 2006, and 2005, ILIAC did not receive any cash capital contributions
from its parent.

During 2007, 2006, and 2005, ILIAC paid $145.0, $256.0, and $20.5, respectively, in
dividends on its common stock to its parent.

Separate Accounts

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

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

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

46

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

Minimum Guarantees

Variable annuity contracts containing minimum guarantees expose the Company to
additional risks. For guaranteed minimum death benefits, a decrease in the equity
markets may cause a decrease in the account values, thereby increasing the possibility
that the Company may be required to pay amounts to contractowners due to

guaranteed death benefits.

An increase in the value of the equity markets may

increase account values for these contracts, thereby decreasing the Company’s risk
associated with guaranteed death benefits.

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

Guaranteed Minimum Death Benefits (“GMDBs”):

§	Standard - Guarantees that, upon death, the death benefit will be no less than the premiums paid by the contractowner, adjusted for any contract withdrawals.
§	Annual Ratchet - Guarantees that, upon death, the death benefit will be no less than the greater of (1) Standard or (2) the maximum contract anniversary value of the variable annuity.
§	Five Year Ratchet - Guarantees that, upon death, the death benefit will be no less than the greater of (1) Standard or (2) the maximum contract quinquennial anniversary value of the variable annuity.
§	Combination Annual Ratchet and 5% RollUp - Guarantees that, upon death, the death benefit will be no less than the greater of (1) Annual Ratchet or (2) aggregate premiums paid by the contractowner accruing interest at 5% per annum.
§	Combination Seven-Year Ratchet and 4% RollUp - Guarantees that, upon death, the death benefit will be no less than the greater of (1) a seven year ratchet or (2) aggregate premiums paid by the contractowner accruing interest at 4% per annum.

Products offering Annual Ratchet, Five Year Ratchet, Combination Ratchet and 5%
RollUp, and Combination Seven-Year Ratchet and 4% RollUp, guarantees are no
longer being sold by the Company. Most contracts with GMDBs are reinsured to
third party reinsurers to mitigate the risk produced by such guaranteed death benefits.

Other Minimum Guarantees

Other variable annuity contracts contain minimum interest rate guarantees and allow
the contractholder to select either the market value of the account or the book value of
the account at termination. The book value of the account is equal to deposits plus
interest, less any withdrawals. These guarantees are accounted for as derivatives
under FAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”
(“FAS No. 133”). At December 31, 2007, the fair value of the guaranteed benefits
was $78.1. The guaranteed benefits had no fair value at December 31, 2006.

47

Reinsurance

The Company utilizes indemnity reinsurance agreements to reduce its exposure to
large losses from GMDBs in its annuity insurance business. Reinsurance permits
recovery of a portion of losses from reinsurers, although it does not discharge the
Company’s primary liability as direct insurer of the risks. The Company evaluates
the financial strength of potential reinsurers and continually monitors the financial
strength and credit ratings of its reinsurers.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

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

At December 31, 2007, the Company had off-balance sheet commitments to purchase
investments equal to their fair value of $357.8, $226.6 of which was with related
parties. At December 31, 2006, the Company had off-balance sheet commitments to
purchase investments equal to their fair value of $706.8, $322.3 of which was with
related parties. During 2007 and 2006, $87.3 and $79.4, respectively, was funded to
related parties under these commitments.

The Company has entered into various credit default swaps to assume credit exposure
to certain assets that the Company does not own. Credit default swaps involve a
transfer of credit risk from one party to another in exchange for periodic payments.
In the event of a default on the underlying credit exposure, the Company will either
receive an additional payment (purchased credit protection) or will be required to
make an additional payment (sold credit protection) equal to the notional value of the
swap contract. At December 31, 2007, the fair value of credit default swaps of $7.9
and $16.8 was included in Other investments and Other liabilities, respectively, on
the Balance Sheets. As of December 2007, the maximum potential future exposure to
the Company on the sale of credit protection under credit default swaps was $136.2.

The Company owns a 3-year credit-linked note arrangement, whereby the Company
agrees to reimburse the guaranteed party upon payment default of the referenced
obligation. Upon such default, the Company 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
December 31, 2007, the maximum potential future exposure to the Company under
the guarantee was $30.0.

48

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

Payments Due by Period

		Less than			More than
Contractual Obligations	Total	1 Year	1-3 Years	3-5 Years	5 Years
Operating lease obligations(1)	$ 13.5	$ 4.6	$ 5.9	$ 2.5	$ 0.5
Purchase obligations(2)	357.8	357.8	-	-	-
Reserves for insurance
obligations(3)	60,301.9	9,128.7	17,813.3	17,110.8	16,249.1
Construction agreement
obligations(4)	6.8	6.8	-	-	-
Pension obligations(5)	97.4	14.9	23.9	21.2	37.4
Total	$ 60,777.4	$ 9,512.8	$ 17,843.1	$ 17,134.5	$ 16,287.0

(1)	Operating lease obligations relate to the rental of office space under various noncancelable operating lease agreements, the longest term of which expires in April of 2014.
(2)	Purchase obligations consist primarily of outstanding commitments under limited partnerships that may occur any time within the terms of the partnership.
	The exact timing, however, of funding these commitments cannot be estimated. Therefore, the total amount of the commitments is included in the category “Less than 1 Year.”
(3)	Reserves for insurance obligations consist of amounts required to meet the Company’s future obligations under its variable annuity, fixed annuity, and other investment and retirement products.
(4)	Construction agreement obligations relate to the construction and development of the Windsor Property under various agreements, which was substantially complete by October 1, 2007, with final payments to be made in the second quarter of 2008.
(5)	Pension obligations consist of actuarially-determined pension obligations, contribution matching obligations, and other supplemental retirement and insurance obligations, under various benefit plans.

Repurchase Agreements

The Company engages in dollar repurchase agreements (“dollar rolls”) and
repurchase agreements to increase its return on investments and improve liquidity.
These transactions involve a sale of securities and an agreement to repurchase
substantially the same securities as those sold. Company policies require a minimum
of 95% of the fair value of securities pledged under dollar rolls and repurchase
agreement transactions to be maintained as collateral. Cash collateral received is
invested in fixed maturities, and the offsetting collateral liability is included in
Borrowed money on the Consolidated Balance Sheets. At December 31, 2007 and
2006, the carrying value of the securities pledged in dollar rolls and repurchase
agreement transactions was $757.6 and $832.4, respectively. The carrying value of
the securities pledged in dollar rolls and repurchase agreement transactions is
included in Securities pledged on the Consolidated Balance Sheets. The repurchase
obligation related to dollar rolls and repurchase agreements totaled $734.8 and $833.2
at December 31, 2007 and 2006, respectively. The repurchase obligation related to

49

dollar rolls and repurchase agreements is included in Borrowed money on the
Consolidated Balance Sheets.

The Company also enters into reverse purchase agreements. These transactions
involve a purchase of securities and an agreement to sell substantially the same
securities as those purchased. Company policies require a minimum of 102% of the
fair value of securities pledged under reverse repurchase agreements to be pledged as
collateral. At December 31, 2007 and 2006, the Company did not have reverse
repurchase agreements.

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

Securities Lending

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

Derivatives

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

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

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

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

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

Risk-Based Capital

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

Income Taxes

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

Income tax obligations include the allowance on uncertain tax benefits related to IRS
tax audits and state tax exams that have not been completed. The current liability of
$42.2 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 $18.6 cannot be reliably
estimated.

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Recently Adopted Accounting Standards

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

Accounting for Uncertainty in Income Taxes

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

In September 2005, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 05-1, “Accounting by Insurance Enterprises
for Deferred Acquisition Costs in Connection with Modifications or Exchanges of
Insurance Contracts”, 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”, as investment contracts.

52

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 DAC and VOBA to include internal
replacements.

Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans

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

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

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

The incremental effects of adopting the provisions of FAS No. 158 on the Company’s
Consolidated Balance Sheets at December 31, 2006 was $(0.5) .

New Accounting Pronouncements

Business Combinations

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

§	Acquisition-related costs to be recognized separately and generally expensed;
§	Non-obligatory restructuring costs to be recognized separately when the liability is incurred;
§	Contractual contingencies acquired to be recorded at acquisition-date fair values;

53

§	A bargain purchase, which occurs when the fair value of net assets acquired exceeds the consideration transferred plus any non-controlling interest in the acquiree, to be recognized as a gain; and
§	The nature and financial effects of the business combination to be disclosed.

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

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

The Fair Value Option for Financial Assets and Financial Liabilities

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

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

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

Fair Value Measurements

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

54

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

The provisions of FAS No. 157 are effective for financial statements issued for fiscal

years beginning after November 15, 2007.

The Company is in the process of

determining the impact of adoption of FAS No. 157.

Legislative Initiatives

Legislative proposals, which have been or are being considered by Congress, include
repealing/modifying the estate tax, reducing the taxation on annuity benefits,
changing the tax treatment of insurance products relative to other financial products,
and changing life insurance company taxation. Some of these proposals, if enacted,
could have a material adverse effect on life insurance, annuity, and other retirement
savings product sales, while others could have a material beneficial effect. There are
no indications at the present time, however, that Congress will enact tax changes that
will adversely effect the Company’s products in 2008. Legislation has also been
introduced in the House of Representatives to increase disclosure of 401(k) and other
defined contribution plan fees charged by plan investment and service providers. In
addition, the Department of Labor and the SEC have several regulatory initiatives
underway to improve fee disclosures in defined contribution plans and mutual funds.
Legislative or regulatory action to change fee disclosure requirements could adversely
impact the market for certain of the Company’s defined contribution retirement
services products, but the timing and content of such changes are uncertain at this
time. The IRS and the Treasury have published final regulations, effective in 2009,
that update and consolidate the rules applicable to 403(b) tax deferred annuity
arrangements. The final regulations impose broad written plan document and
operational compliance requirements on all 403(b) programs and contain new
restrictions on annuity exchanges. The final regulations have the potential to change
the marketplace for 403(b) service providers in a fundamental way and could have a
material beneficial effect on providers that position themselves to assist 403(b)
sponsors with plan document and operational compliance or otherwise assist with
streamlining overall plan administration. For a description of Revenue Ruling 2007-
61 issued by the IRS in September of 2007, see the “Liquidity and Capital Resources,
Income Taxes” section of “Management’s Narrative Analysis of the Results of
Operations and Financial Condition” above.

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Other Regulatory Matters

Regulatory Matters

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

Insurance and Retirement Plan Products and Other Regulatory Matters

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

Investment Product Regulatory Issues

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

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

56

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

Action may be taken with respect to certain ING affiliates before investigations

relating to fund trading are completed.

The potential outcome of such action is

difficult to predict but could subject certain affiliates to adverse consequences,
including, but not limited to, settlement payments, penalties, and other financial
liability. It is not currently anticipated, however, that the actual outcome of any such
action will have a material adverse effect on ING or ING’s U.S.-based operations,
including the Company.

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

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

57

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

(Dollar amounts in millions, unless otherwise stated)

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

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

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

Interest Rate Risk

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

The following schedule demonstrates the potential changes in the 2007 earnings from
an instantaneous parallel increase/decrease in interest rates of 1% on December 31,
2007. These changes to income could relate to future investment income, interest
paid to contractowners, market-value adjustments, amortization of DAC and VOBA,
sales levels, or any other net income item that would be affected by interest rate
changes. The effect of interest rate changes is different by product. A significant
portion of the Company’s contracts are close to the minimum contractual guaranteed
credited rates. In a down interest rate environment, the Company’s ability to reduce
credited rates is limited, which will cause margin compression and accelerate the
amortization of DAC and VOBA. In addition, the Company has estimated the impact
to December 31, 2007 Shareholder’s equity from the same instantaneous change in
interest rates. The effect on Shareholder’s equity includes the impact of interest rate

58

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

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

		Effect on
		Shareholder's
	Effect on Net	Equity as of
	Income for	December 31,
	2007	2007
Increase of 1%	$ 2.8	$ 2.8
Decrease of 1%	(7.0)	(7.0)

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

Interest rate sensitivity and effect on DAC and VOBA:

	Effect on	Effect on
	Amortization of	DAC and VOBA
	DAC and VOBA	Assets as of
	for	December 31,
	2007	2007
Increase of 1%	$ 2.3	$ 8.8
Decrease of 1%	0.6	(17.4)

Equity Market Risk

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

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

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

59

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

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

		Effect on
		Shareholder's
	Effect on Net	Equity as of
	Income for	December 31,
	2007	2007
Increase of 10%	$ 27.0	$ 27.0
Decrease of 10%	(27.7)	(27.7)

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

Equity sensitivity and effect on DAC and VOBA:

	Effect on	Effect on
	Amortization of	DAC and VOBA
	DAC and VOBA	Assets as of
	for	December 31,
	2007	2007
Increase of 10%	$ (10.3)	$ 45.8
Decrease of 10%	10.8	(48.2)

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Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

Page

Report of Independent Registered Public Accounting Firm	62
Consolidated Financial Statements:
Consolidated Statements of Operations for the years ended
December 31, 2007, 2006, and 2005	63
Consolidated Balance Sheets as of
December 31, 2007 and 2006	64
Consolidated Statements of Changes in Shareholder's Equity
for the years ended December 31, 2007, 2006, and 2005	66
Consolidated Statements of Cash Flows for the years ended
December 31, 2007, 2006, and 2005	67
Notes to Consolidated Financial Statements	69

Report of Independent Registered Public Accounting Firm

The Board of Directors
ING Life Insurance and Annuity Company

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

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

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

As discussed in Note 14 to the financial statements, the Company restated 2006 and 2005
retained earnings (deficit), asset, and liability amounts presented in their consolidated balance
sheets and changes in shareholder’s equity.

/s/ Ernst & Young LLP

Atlanta, Georgia
March 25, 2008

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

Consolidated Statements of Operations
(In millions)

	Year Ended December 31,
	2007	2006		2005
Revenue:
Net investment income	$ 1,054.7	$ 1,029.7	$ 1,037.1
Fee income	789.3	714.8		609.6
Premiums	46.8	37.5		43.2
Broker-dealer commission revenue	568.4	429.2		378.1
Net realized capital gains (losses)	(8.2)	3.0		22.0
Other income	0.9	15.7		7.7
Total revenue	2,451.9	2,229.9		2,097.7
Benefits and expenses:
Interest credited and other benefits
to contractowners	822.2	783.7		739.6
Operating expenses	652.2	568.3		524.3
Broker-dealer commission expense	568.4	429.2		378.1
Amortization of deferred policy acquisition
cost and value of business acquired	129.2	21.3		159.9
Interest expense	5.5	2.9		1.6
Total benefits and expenses	2,177.5	1,805.4		1,803.5
Income before income taxes	274.4	424.5		294.2
Income tax expense	56.0	122.7		21.5
Net income	$ 218.4	$ 301.8	$ 272.7

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

63

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

Consolidated Balance Sheets
(In millions, except share data)

	As of December 31,
	2007	2006
		(Restated)
Assets
Investments:
Fixed maturities, available-for-sale, at fair value
(amortized cost of $13,374.7 at 2007 and $15,150.1 at 2006)	$ 13,316.3	$ 15,112.2
Equity securities, available-for-sale, at fair value
(cost of $440.1 at 2007 and $233.6 at 2006)	446.4	251.7
Mortgage loans on real estate	2,089.4	1,879.3
Policy loans	273.4	268.9
Limited partnerships/corporations	636.1	359.2
Other investments	202.7	39.7
Securities pledged (amortized cost of $940.2 at 2007 and $1,106.2 at 2006)	934.1	1,099.5
Total investments	17,898.4	19,010.5
Cash and cash equivalents	252.3	311.2
Short-term investments under securities loan agreement	183.9	283.1
Accrued investment income	168.3	180.4
Receivables for securities sold	5.6	90.1
Reinsurance recoverable	2,594.4	2,715.4
Deferred policy acquisition costs	728.6	622.6
Value of business acquired	1,253.2	1,340.2
Notes receivable from affiliate	175.0	175.0
Short-term loan to affiliate	-	45.0
Due from affiliates	10.6	9.1
Property and equipment	147.4	75.1
Other assets	112.1	73.8
Assets held in separate accounts	48,091.2	43,550.8
Total assets	$ 71,621.0	$ 68,482.3

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

64

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

Consolidated Balance Sheets
(In millions, except share data)

	As of December 31,
	2007	2006
		(Restated)
Liabilities and Shareholder's Equity
Future policy benefits and claims reserves	$ 18,569.1	$ 19,984.1
Payables for securities purchased	0.2	42.6
Payables under securities loan agreement	165.1	283.1
Notes payable	9.9	-
Borrowed money	738.4	833.2
Due to affiliates	130.7	82.8
Current income taxes	56.8	59.8
Deferred income taxes	275.9	261.1
Other liabilities	542.7	371.1
Liabilities related to separate accounts	48,091.2	43,550.8
Total liabilities	68,580.0	65,468.6
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	4,159.3	4,299.5
Accumulated other comprehensive loss	(33.8)	(14.0)
Retained earnings (deficit)	(1,087.3)	(1,274.6)
Total shareholder's equity	3,041.0	3,013.7
Total liabilities and shareholder's equity	$ 71,621.0	$ 68,482.3

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

65

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

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

			Accumulated	Retained	Total
		Additional	Other	Earnings	Shareholder's
	Common	Paid-In	Comprehensive	(Deficit)	Equity
	Stock	Capital	Income (Loss)	(Restated)	(Restated)
Balance at December 31, 2004	$ 2.8	$ 4,566.8	$ 67.1	$ (1,877.1)	$ 2,759.6
Prior period adjustment ($43.1 pretax)	-	-	-	28.0	28.0
Balance at January 1, 2005	2.8	4,566.8	67.1	(1,849.1)	2,787.6
Comprehensive income:
Net income	-	-	-	272.7	272.7
Other comprehensive loss, net of tax:
Change in net unrealized capital gains (losses)
on securities ($(108.4) pretax)	-	-	(77.5)	-	(77.5)
Minimum pension liability ($(1.1) pretax)	-	-	5.1	-	5.1
Total comprehensive income					200.3
Dividends paid	-	(20.5)	-	-	(20.5)
Employee share-based payments	-	3.3	-	-	3.3
Balance at December 31, 2005	2.8	4,549.6	(5.3)	(1,576.4)	2,970.7
Comprehensive income:
Net income	-	-	-	301.8	301.8
Other comprehensive loss, net of tax:
Change in net unrealized capital gains (losses)
on securities ($(23.4) pretax)	-	-	(10.7)	-	(10.7)
Pension liability and FAS No. 158
transition adjustment ($3.9 pretax)	-	-	2.5	-	2.5
					293.6
Total comprehensive income
Cumulative effect of change in accounting
principle ($(0.8) pretax)			(0.5)	-	(0.5)
Dividends paid	-	(256.0)	-	-	(256.0)
Employee share-based payments	-	5.9	-	-	5.9
Balance at December 31, 2006	2.8	4,299.5	(14.0)	(1,274.6)	3,013.7
Cumulative effect of change in
accounting principle	-	-	-	(31.1)	(31.1)
Balance at January 1, 2007	2.8	4,299.5	(14.0)	(1,305.7)	2,982.6
Comprehensive income:
Net income	-	-	-	218.4	218.4
Other comprehensive loss, net of tax:
Change in net unrealized capital gains (losses)
on securities ($(27.7) pretax), including
tax valuation allowance of $(6.4)	-	-	(24.4)	-	(24.4)
Pension liability ($7.1 pretax)	-	-	4.6	-	4.6
Total comprehensive income					198.6
Dividends paid	-	(145.0)	-	-	(145.0)
Employee share-based payments	-	4.8	-	-	4.8
Balance at December 31, 2007	$ 2.8	$ 4,159.3	$ (33.8)	$ (1,087.3)	$ 3,041.0

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

66

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

Consolidated Statements of Cash Flows
(In millions)

	Year Ended December 31,
	2007	2006		2005
Cash Flows from Operating Activities:
Net income	$ 218.4	$ 301.8	$ 272.7
Adjustments to reconcile net income to
net cash provided by operating activities:
Capitalization of deferred policy acquisition costs, value
of business acquired, and sales inducements	(193.4)	(191.0)		(174.0)
Amortization of deferred policy acquisition costs,
value of business acquired, and sales inducements	133.9	25.9		165.8
Net accretion/decretion of discount/premium	72.7	83.8		115.5
Future policy benefits, claims reserves, and
interest credited	599.0	662.5		634.2
Provision for deferred income taxes	30.4	75.6		11.0
Net realized capital losses (gains)	8.2	(3.0)		(22.0)
Depreciation	18.2	12.6		12.0
Change in:
Accrued investment income	12.1	23.2		(21.6)
Reinsurance recoverable	121.0	81.3		104.6
Other receivable and assets accruals	(37.0)	(20.1)		2.6
Due to/from affiliates	46.4	20.4		4.6
Other payables and accruals	17.8	86.3		(49.8)
Other, net	(16.4)	5.9		3.3
Net cash provided by operating activities	1,031.3	1,165.2		1,058.9
Cash Flows from Investing Activities:
Proceeds from the sale, maturity, or redemption of:
Fixed maturities, available-for-sale	10,235.6	10,355.2		19,232.3
Equity securities, available-for-sale	113.8	91.7		119.8
Mortgage loans on real estate	205.4	197.0		179.0
Acquisition of:
Fixed maturities, available-for-sale	(8,425.5)	(8,802.1)		(19,435.9)
Equity securities, available-for-sale	(243.9)	(149.1)		(120.4)
Mortgage loans on real estate	(415.1)	(680.3)		(484.8)
Policy loans	(4.5)	(6.5)		0.3
Derivatives, net	32.2	1.4		4.2
Limited partnerships, net	(279.5)	(237.6)		(46.3)
Other investments	(182.1)	(4.0)		(1.5)
Purchases of property and equipment, net	(90.5)	(54.5)		(14.2)
Net cash provided by (used in) investing activities	945.9	711.2		(567.5)

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

67

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

Consolidated Statements of Cash Flows
(In millions)

	Year Ended December 31,
	2007	2006		2005
Cash Flows from Financing Activities:
Deposits received for investment contracts	1,600.0	1,875.7		2,024.2
Maturities and withdrawals from investment contracts	(3,451.2)	(3,420.7)		(2,237.5)
Short-term loans to affiliates	45.0	86.0		(106.0)
Short-term borrowings	(94.8)	(107.9)		(116.3)
Notes payable	9.9	-		-
Dividends to Parent	(145.0)	(256.0)		(20.5)
Net cash used in financing activities	(2,036.1)	(1,822.9)		(456.1)
Net (decrease) increase in cash and cash equivalents	(58.9)	53.5		35.3
Cash and cash equivalents, beginning of year	311.2	257.7		222.4
Cash and cash equivalents, end of year	$ 252.3	$ 311.2	$ 257.7
Supplemental cash flow information:
Income taxes paid, net	$ 45.1	$ 37.6	$ 47.1
Interest paid	$ 44.6	$ 40.8	$ 32.0

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

68

ING Life Insurance and Annuity Company and Subsidiaries
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Consolidated Financial Statements
(Dollar amount 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 consolidated financial statements include ILIAC and its wholly-owned subsidiaries,
ING Financial Advisers, LLC (“IFA”) and Directed Services LLC (“DSL”). 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 were 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
consolidated financial statements give effect to the DSL consolidation transactions as if
they had occurred on January 1, 2004 and include the following:

69

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

	2006		2005
Total revenue	$ 594.9		$ 507.7
Net income		35.8		28.2
Additional paid-in capital:
Dividends paid		25.0		20.5
Employee share-based payments		0.1		0.2

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 One Orange Way, Windsor, Connecticut (the “Windsor
Property”). Effective October 1, 2007, the principal executive office of ILIAC was
changed to One Orange Way, Windsor, Connecticut.

On October 31, 2007, ILIAC’s subsidiary, NWL merged with and into ILIAC. As of the
merger date, NWL ceased to exist, and ILIAC became the surviving corporation. The
merger did not have an impact on ILIAC’s consolidated results of operations and
financial position, as NWL was a wholly-owned subsidiary and already included in the
consolidated financial statements for all periods presented since its formation.

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.

Products offered by the Company include deferred and immediate (payout annuities)
annuity contracts. Company products also include programs offered to qualified plans
and nonqualified deferred compensation plans that package administrative and record-
keeping services along with a variety of investment options, including affiliated and
nonaffiliated mutual funds and variable and fixed investment options. In addition, the
Company offers wrapper agreements entered into with retirement plans, which contain
certain benefit responsive guarantees (i.e. liquidity guarantees of principal and previously
accrued interest for benefits paid under the terms of the plan) with respect to portfolios of
plan-owned assets not invested with the Company. The Company also offers investment
advisory services and pension and retirement savings plan administrative services.

The Company has one operating segment.

70

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

Recently Adopted Accounting Standards

Accounting for Uncertainty in Income Taxes

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which
creates a single model to address the accounting for the uncertainty in income tax

positions recognized in a company’s financial statements.

FIN 48 prescribes a

recognition threshold and measurement criteria that must be satisfied to recognize a
financial statement benefit of tax positions taken, or expected to be taken, on an income
tax return. Additionally, FIN 48 provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure, and transition.

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

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

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

SOP 05-1 defines an internal replacement as a modification in product benefits, features,
rights, or coverage that occurs by the exchange of a contract for a new contract, by
amendment, endorsement, or rider, to a contract, or by the election of a feature or
coverage within a contract. SOP 05-1 applies to internal replacements made primarily to
contracts defined by 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.

71

ING Life Insurance and Annuity Company and Subsidiaries
(A wholly-owned subsidiary of Lion Connecticut Holdings Inc.)
Notes to Consolidated Financial Statements
(Dollar amount 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.

Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans

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

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

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

The incremental effects of adopting the provisions of FAS No. 158 on the Company’s
Consolidated Balance Sheets at December 31, 2006 was $(0.5) .

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:

72

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

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

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

New Accounting Pronouncements

Business Combinations

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

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

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

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

73

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

The Fair Value Option for Financial Assets and Financial Liabilities

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

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

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

Fair Value Measurements

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

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

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.

74

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

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from reported
results using those estimates.

Reclassifications

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

Cash and Cash Equivalents

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

Investments

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

Other-Than-Temporary Impairments

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

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

75

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

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 accounted for as a change in Net
realized capital gains (losses).

Experience-Rated Products

Included in available-for-sale securities are investments that support experience-rated
products. Experience-rated products are products where the customer, not the Company,
assumes investment (including realized capital gains and losses) and other risks, subject
to, among other things, minimum principal and interest guarantees. Unamortized realized
capital gains (losses) on the sale of and unrealized capital gains (losses) on investments
supporting these products are included in Future policy benefits and claims reserves on
the Consolidated Balance Sheets. Net realized capital gains (losses) on all other
investments are reflected in the Consolidated Statements of Operations. Unrealized
capital gains (losses) on all other investments are reflected in Accumulated other
comprehensive income (loss) in Shareholder’s equity, net of DAC and VOBA
adjustments for unrealized capital gains (losses), and related income taxes.

Purchases and Sales

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

Valuation

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

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

76

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

Mortgage loans on real estate are reported at amortized cost, less impairment write-
downs. If the value of any mortgage loan is determined to be impaired (i.e., when it is
probable the Company will be unable to collect all amounts due according to the
contractual terms of the loan agreement), the carrying value of the mortgage loan is
reduced to the present value of expected cash flows from the loan, discounted at the
loan’s effective interest rate, or fair value of the collateral. If the loan is in foreclosure,
the carrying value is reduced to the fair value of the underlying collateral, net of
estimated costs to obtain and sell. The carrying value of the impaired loans is reduced by
establishing a permanent write-down recorded in Net realized capital gains (losses). At
December 31, 2007 and 2006, the Company had no allowance for mortgage loan credit
losses. The properties collateralizing mortgage loans are geographically dispersed
throughout the United States, with the largest concentration of and 16.8% and 17.7% of
properties in California at December 31, 2007 and 2006, respectively.

Policy loans are carried at unpaid principal balances.

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

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

Repurchase Agreements

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

77

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

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

Securities Lending

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

Derivatives

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

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

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

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

78

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

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

Deferred Policy Acquisition Costs and Value of Business Acquired

General

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

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

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

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.

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
Consolidated Statements of Operations.

79

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

As a result of implementing SOP 05-1, the Company recognized a cumulative effect of
change in accounting principle of $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 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.

Property and Equipment

Property and equipment are carried at cost, less accumulated depreciation. Expenditures
for replacements and major improvements are capitalized; maintenance and repair
expenditures are expensed as incurred.

At December 31, 2007 and 2006, total accumulated depreciation and amortization was
$120.7 and $107.5, respectively. Depreciation on property and equipment is provided on
a straight-line basis over the estimated useful lives of the assets with the exception of
land and artwork, which are not depreciated or amortized. The Company’s property and
equipment are depreciated using the following estimated useful lives.

80

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

	Estimated Useful Lives
Buildings	40 years
Furniture and fixtures	5 years
Leasehold improvements	10 years, or the life of the lease, whichever is shorter
Equipment	3 years
Software	3 years

Reserves

The Company records as liabilities reserves to meet the Company’s future obligations
under its variable annuity and fixed annuity products.

Future policy benefits and claims reserves include reserves for deferred annuities and
immediate annuities with and without life contingent payouts.

Reserves for individual and group deferred annuity investment contracts and individual
immediate annuities without life contingent payouts are equal to cumulative deposits, less
charges and withdrawals, plus credited interest thereon, net of adjustments for investment
experience that the Company is entitled to reflect in future credited interest. Reserves
interest rates vary by product and ranged from 1.6% to 7.8% for the years 2007, 2006,
and 2005. Certain reserves also include unrealized gains and losses related to
investments and unamortized realized gains and losses on investments for experience-
rated contracts. Reserves on experienced-rated contracts reflect the rights of
contractowners, plan participants, and the Company. Reserves for group immediate
annuities without life contingent payouts are equal to the discount value of the payment at
the implied break-even rate.

Reserves for individual immediate annuities with life contingent payout benefits are
computed on the basis of assumed interest discount rates, mortality, and expenses,
including a margin for adverse deviations. Such assumptions generally vary by annuity
type plan, year of issue, and policy duration. For the years 2007, 2006, and 2005, reserve
interest rates ranged from 5.1% to 5.9% .

The Company has a significant concentration of reinsurance arising from the disposition
of its individual life insurance business. In 1998, the Company entered into an indemnity
reinsurance arrangement with certain subsidiaries of Lincoln National Corporation
(“Lincoln”). Effective March 1, 2007, the reinsurance agreements were assigned to a
single subsidiary of Lincoln, and that subsidiary established a trust to secure its
obligations to the Company under the reinsurance transaction. The Company includes an
amount in Reinsurance recoverable on the Consolidated Balance Sheets, which equals the
Company’s total individual life reserves. Individual life reserves are included in Future
policy benefits and claims reserves on the Consolidated Balance Sheets.

Unpaid claims and claim expenses for all lines of insurance include benefits for reported
losses and estimates of benefits for losses incurred but not reported.

81

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

Certain variable annuities offer guaranteed minimum death benefits (“GMDB”). The
GMDB is accrued in the event the contractowner account value at death is below the
guaranteed value and is included in reserves.

Revenue Recognition

For most annuity contracts, charges assessed against contractowner funds for the cost of
insurance, surrenders, expenses, and other fees are recorded as revenue as charges are
assessed. Other amounts received for these contracts are reflected as deposits and are not
recorded as premiums or revenue. When annuity payments with life contingencies begin
under contracts that were initially investment contracts, the accumulated balance in the
account is treated as a single premium for the purchase of an annuity and reflected in both
Premiums and Interest credited and other benefits to contractowners in the Consolidated
Statements of Operations.

Premiums on the Consolidated Statements of Operations primarily represent amounts
received for immediate annuities with life contingent payouts.

Separate Accounts

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

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

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

82

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

Assets and liabilities of separate account arrangements that do not meet the criteria for
separate presentation in the Consolidated Balance Sheets (primarily the guaranteed
interest option), and revenue and expenses related to such arrangements, are consolidated
in the financial statements with the general account. At December 31, 2007 and 2006,
unrealized capital losses of $11.0 and $7.3, respectively, after taxes, on assets supporting
a guaranteed interest option are reflected in Shareholder’s equity.

Reinsurance

The Company utilizes indemnity reinsurance agreements to reduce its exposure to losses

from GMDBs in its annuity insurance business.

Reinsurance permits recovery of a

portion of losses from reinsurers, although it does not discharge the Company’s primary
liability as the direct insurer of the risks. The Company evaluates the financial strength
of potential reinsurers and continually monitors the financial strength and credit ratings of
its reinsurers. Only those reinsurance recoverable balances deemed probable of recovery
are reflected as assets on the Company’s Consolidated Balance Sheets.

Of the Reinsurance recoverable on the Consolidated Balance Sheets, $2.6 billion and
$2.7 billion at December 31, 2007 and 2006, respectively, is related to the reinsurance
recoverable from certain subsidiaries of Lincoln arising from the disposal of the
Company’s individual life insurance business in 1998 (see the Reinsurance footnote).
Effective March 1, 2007, the reinsurance agreements were assigned to a single subsidiary
of Lincoln, and that subsidiary established a trust to secure its obligations to the
Company under the reinsurance transaction.

Income Taxes

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

83

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

2.	Investments
	Fixed Maturities and Equity Securities
	Fixed maturities and equity securities, available-for-sale, were as follows as of
	December 31, 2007.
				Gross	Gross
				Unrealized	Unrealized
			Amortized	Capital	Capital	Fair
			Cost	Gains	Losses	Value
	Fixed maturities:
	U.S. Treasuries	$ 11.2		$ 0.7	$ -	$ 11.9
	U.S. government agencies and authorities		0.6	-	-	0.6
	State, municipalities, and political subdivisions		66.1	0.1	2.2	64.0
	U.S. corporate securities:
	Public utilities		1,049.1	10.8	15.6	1,044.3
	Other corporate securities		3,855.1	46.1	65.2	3,836.0
	Total U.S. corporate securities		4,904.2	56.9	80.8	4,880.3
	Foreign securities(1):
	Government		379.3	17.1	6.6	389.8
	Other		1,955.8	29.9	40.3	1,945.4
	Total foreign securities		2,335.1	47.0	46.9	2,335.2
	Residential mortgage-backed securities		4,146.1	101.8	63.5	4,184.4
	Commercial mortgage-backed securities		1,927.3	10.7	52.3	1,885.7
	Other asset-backed securities		924.3	5.5	41.5	888.3
	Total fixed maturities, including
	securities pledged		14,314.9	222.7	287.2	14,250.4
	Less: securities pledged		940.2	8.0	14.1	934.1
	Total fixed maturities		13,374.7	214.7	273.1	13,316.3
	Equity securities		440.1	13.8	7.5	446.4
	Total investments, available-for-sale	$ 13,814.8		$ 228.5	$ 280.6	$ 13,762.7
	(1) Primarily U.S. dollar denominated.

84

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

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

		Gross	Gross
		Unrealized	Unrealized
	Amortized	Capital	Capital	Fair
	Cost	Gains	Losses	Value
Fixed maturities:
U.S. Treasuries	$ 25.5	$ 0.1	$ -	$ 25.6
U.S. government agencies and authorities	276.6	3.6	3.3	276.9
State, municipalities, and political subdivisions	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
Equity securities	233.6	20.4	2.3	251.7
Total investments, available-for-sale	$ 15,383.7	$ 208.5	$ 228.3	$ 15,363.9

⁽¹⁾ Primarily U.S. dollar denominated.

At December 31, 2007 and 2006, net unrealized losses were $58.2 and $26.5,
respectively, on total fixed maturities, including securities pledged to creditors, and
equity securities. At December 31, 2007 and 2006, $16.4 and $52.4, respectively, of net
unrealized capital gains (losses) was related to experience-rated contracts and was not
reflected in Shareholder’s equity but in Future policy benefits and claim reserves.

85

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

The amortized cost and fair value of total fixed maturities as of December 31, 2007, are

shown below by contractual maturity. Actual maturities may differ from contractual
maturities as securities may be restructured, called, or prepaid.
	Amortized	Fair
	Cost	Value
Due to mature:
One year or less	$ 363.4	$ 363.6
After one year through five years	2,440.7	2,451.6
After five years through ten years	2,779.9	2,761.2
After ten years	1,733.2	1,715.6
Mortgage-backed securities	6,073.4	6,070.1
Other asset-backed securities	924.3	888.3
Less: securities pledged	940.2	934.1
Fixed maturities, excluding securities pledged	$ 13,374.7	$ 13,316.3

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 at December 31, 2007 or 2006.

At December 31, 2007 and 2006, fixed maturities with fair values of $13.9 and $11.2,
respectively, were on deposit as required by regulatory authorities.

The Company invests in various categories of collateralized mortgage obligations
(“CMOs”) that are subject to different degrees of risk from changes in interest rates and,
for CMOs that are not agency-backed, defaults. The principal risks inherent in holding
CMOs are prepayment and extension risks related to dramatic decreases and increases in
interest rates resulting in the prepayment of principal from the underlying mortgages,
either earlier or later than originally anticipated. At December 31, 2007 and 2006,
approximately 11.3% and 8.4%, respectively, of the Company’s CMO holdings were
invested in those types of CMOs which are subject to more prepayment and extension
risk than traditional CMOs, such as interest-only or principal-only strips.

Equity Securities

Equity securities, available-for-sale, included investments with fair values of $279.5 and
$219.5 in ING proprietary funds as of December 31, 2007 and 2006, respectively.

Repurchase Agreements

The Company engages in dollar repurchase agreements (“dollar rolls”) and repurchase
agreements. At December 31, 2007 and 2006, the carrying value of the securities
pledged in dollar rolls and repurchase agreement transactions was $757.6 and $832.4,
respectively. The repurchase obligation related to dollar rolls and repurchase agreements
totaled $734.8 and $833.2 at December 31, 2007 and 2006, respectively.

86

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

The Company also engages in reverse repurchase agreements. At December 31, 2007
and 2006, the Company did not have any reverse repurchase agreements.

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

Unrealized Capital Losses

Unrealized capital losses in fixed maturities at December 31, 2007 and 2006, were
primarily related to interest rate movement or spread widening 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, in unrealized capital loss positions at
December 31, 2007 and 2006.

	Less than	More than	More than
	Six	Six Months	Twelve
	Months	and less than	Months	Total
	Below	Twelve Months	Below	Unrealized
	Amortized	Below Amortized	Amortized	Capital
2007	Cost	Cost	Costs	Loss
Interest rate or spread widening	$ 18.8	$ 62.3	$ 48.8	$ 129.9
Mortgage and other
asset-backed securities	30.1	69.0	58.2	157.3
Total unrealized capital losses	$ 48.9	$ 131.3	$ 107.0	$ 287.2
Fair value	$ 2,256.2	$ 2,217.7	$ 3,612.1	$ 8,086.0

87

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

	Less than	More than	More than
	Six	Six Months	Twelve
	Months	and less than	Months	Total
	Below	Twelve Months	Below	Unrealized
	Amortized	Below Amortized	Amortized	Capital
2006	Cost	Cost	Costs	Loss
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 losses	$ 21.8	$ 7.3	$ 210.0	$ 239.1
Fair value	$ 2,447.4	$ 501.5	$ 6,726.2	$ 9,675.1

Of the unrealized capital losses aged more than twelve months, the average market value
of the related fixed maturities is 96.9% of the average book value. In addition, this
category includes 761 securities, which have an average quality rating of AA. No other-
than-temporary impairment loss was considered necessary for these fixed maturities as of
December 31, 2007.

Other-Than-Temporary Impairments

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

	2007		2006		2005
		No. of		No. of		No. of
	Impairment	Securities	Impairment	Securities	Impairment	Securities
Limited partnerships	$ 3.0	1	$ -	-	$ -	-
U.S. Treasuries	-	-	6.4	4	0.1	2
U.S. corporate	36.3	113	24.4	67	3.9	15
Foreign	19.1	54	4.2	10	0.3	1
Residential mortgage-backed	7.1	30	16.6	76	44.7	82
Other asset-backed	10.5	21	7.0	1	-	-
Equity securities	-	-	0.1	3	-	-
Total	$ 76.0	219	$ 58.7	161	$ 49.0	100

The above schedule includes $16.4, $16.1, and $43.3 for the years ended December 31,
2007, 2006, and 2005, respectively, in other-than-temporary write-downs related to the
analysis of credit-risk and the possibility of significant prepayment risk. The remaining
$59.6, $42.6, and $5.7 in write-downs for the years ended December 31, 2007, 2006, and
2005, respectively, are related to investments that the Company does not have the intent
to retain for a period of time sufficient to allow for recovery in fair value. The following
table summarizes these write-downs recognized by type for the years ended
December 31, 2007, 2006, and 2005.

88

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

	2007		2006		2005
		No. of		No. of		No. of
	Impairment	Securities	Impairment	Securities	Impairment	Securities
U.S. Treasuries	$ -	-	$ 6.4	4	$ 0.1	2
U.S. corporate	31.6	102	24.4	67	2.3	13
Foreign	19.1	54	4.2	10	-	-
Residential mortgage-backed	2.6	2	0.6	1	3.3	2
Other asset-backed	6.3	16	7.0	1	-	-
Total	$ 59.6	174	$ 42.6	83	$ 5.7	17

The remaining fair value of the fixed maturities with other-than-temporary impairments
at December 31, 2007, 2006, and 2005 was $1,210.8, $704.4, and $475.0, respectively.

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

Net Investment Income

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

Fixed maturities, available-for-sale
Equity securities, available-for-sale
Mortgage loans on real estate
Policy loans
Short-term investments and cash equivalents
Other
Gross investment income
Less: investment expenses
Net investment income

2007	2006	2005
$ 895.5	$ 969.0	$ 978.9
38.5	10.5	9.7
118.5	93.6	73.0
14.1	13.2	30.0
2.2	2.4	2.7
88.3	44.5	38.7
1,157.1	1,133.2	1,133.0
102.4	103.5	95.9
$ 1,054.7	$ 1,029.7	$ 1,037.1

Net Realized Capital Gains (Losses)

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

89

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

	2007	2006	2005
Fixed maturities, available-for-sale	$ (50.3)	$ (67.0)	$ 1.0
Equity securities, available-for-sale	6.4	9.3		12.4
Derivatives	(123.0)	(3.9)		17.9
Other	(2.6)	-		(0.3)
Less: allocation to experience-rated contracts	161.3	(64.6)		9.0
Net realized capital (loss) gains	$ (8.2)	$ 3.0	$ 22.0
After-tax net realized capital (loss) gains	$ (5.3)	$ 2.0	$ 14.3

The increase in Net realized capital losses for the year ended December 31, 2007, was
primarily due to realized losses on derivatives, primarily related to losses on interest rate
swaps and widening of credit spreads.

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 Consolidated Balance Sheets. Net unamortized
realized capital gains allocated to experienced-rated contractowners were $53.8, $164.5,
$240.3, at December 31, 2007, 2006, and 2005, respectively.

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

	2007	2006	2005
Proceeds on sales	$ 5,738.8	$ 6,481.2	$ 10,062.3
Gross gains	66.4	109.0	161.1
Gross losses	(101.2)	110.9	93.9

3. Financial Instruments

Estimated Fair Value

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

90

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

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

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

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

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

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

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

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

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

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

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

91

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

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

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

		2007		2006
	Carrying	Fair	Carrying	Fair
	Value	Value	Value	Value
Assets:
Fixed maturities, available-for-sale,
including securities pledged	$ 14,250.4	$ 14,250.4	$ 16,211.7	$ 16,211.7
Equity securities, available-for-sale	446.4	446.4	251.7	251.7
Mortgage loans on real estate	2,089.4	2,099.3	1,879.3	1,852.6
Policy loans	273.4	273.4	268.9	268.9
Cash, cash equivalents, and
short-term investments under
securities loan agreement	436.2	436.2	594.3	594.3
Other investments	838.8	838.8	398.9	398.9
Assets held in separate accounts	48,091.2	48,091.2	43,550.8	43,550.8
Liabilities:
Investment contract liabilities:
With a fixed maturity	1,251.1	1,308.7	1,475.1	1,529.2
Without a fixed maturity	13,421.9	13,379.1	14,407.2	14,367.8
Derivatives	200.3	200.3	45.1	45.1

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

92

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

Derivative Financial Instruments

	Notional Amount		Fair Value
	2007	2006	2007	2006
Interest Rate Swaps
Interest rate swaps are used to manage the interest
rate risk in the Company’s fixed maturities portfolio,
as well as the Company’s liabilities. Interest rate
swaps represent contracts that require the exchange
of cash flows at regular interim periods, typically
monthly or quarterly.	$ 7,680.0	$ 3,277.8	$ (111.6) $	16.4
Foreign Exchange Swaps
Foreign exchange swaps are used to reduce the risk
of a change in the value, yield, or cash flow with
respect to invested assets. Foreign exchange
swaps represent contracts that require the
exchange of foreign currency cash flows for
U.S. dollar cash flows at regular interim periods,
typically quarterly or semi-annually.	224.5	204.4	(45.3)	(30.9)
Credit Default Swaps
Credit default swaps are used to reduce the credit loss
exposure with respect to certain assets that the
Company owns, or to assume credit exposure to
certain assets that the Company does not own.
Payments are made to or received from the
counterparty at specified intervals and amounts
for the purchase or sale of credit protection.
In the event of a default on the underlying credit
exposure, the Company will either receive
an additional payment (purchased credit
protection) or will be required to make an additional
payment (sold credit protection) equal to the notional
value of the swap contract.	335.9	756.8	(8.8)	(2.5)
Total Return Swaps
Total return swaps are used to assume credit
exposure to a referenced index or asset pool.
The difference between different floating-rate
interest amounts calculated by reference to an
agreed upon notional principal amount is exchanged
with other parties at specified intervals.	-	139.0	-	0.3

93

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

	Notional Amount		Fair Value
	2007	2006	2007	2006
Swaptions
Swaptions are used to manage interest rate risk in the
Company’s collateralized mortgage obligation portfolio.
Swaptions are contracts that give the Company the
option to enter into an interest rate swap at a specific
future date.	$ 542.3	$ 1,112.0	$ 0.2 $	5.2
Embedded Derivatives
The Company also has investments in certain fixed

maturity instruments that contain embedded derivatives
whose market value is at least partially determined by,
among other things, levels of or changes in domestic

and/or foreign interest rates (short- or long-term),
exchange rates, prepayment rates, equity rates, or
credit ratings/spreads.
Within securities	N/A*	N/A*	40.8	(2.7)
Within annuity products	N/A*	N/A*	78.1	-

* N/A - not applicable.

Credit Default Swaps

As of December 31, 2007, the maximum potential future exposure to the Company on the
sale of credit protection under credit default swaps was $136.2.

94

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

4. Deferred Policy Acquisition Costs and Value of Business Acquired

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

2005.
Balance at January 1, 2005	$ 414.5
Prior period adjustment	(1.0)
Balance at January 1, 2005 (restated)	413.5
Deferrals of commissions and expenses	123.1
Amortization:
Amortization	(59.6)
Interest accrued at 5% to 7%	30.7
Net amortization included in the Consolidated Statements of Operations	(28.9)
Change in unrealized capital gains (losses) on available-for-sale securities	3.7
Balance at December 31, 2005	511.4
Deferrals of commissions and expenses	136.0
Amortization:
Amortization	(62.1)
Interest accrued at 6% to 7%	37.5
Net amortization included in the Consolidated Statements of Operations	(24.6)
Change in unrealized capital gains (losses) on available-for-sale securities	(0.2)
Balance at December 31, 2006	622.6
Deferrals of commissions and expenses	147.1
Amortization:
Amortization	(80.9)
Interest accrued at 5% to 7%	44.8
Net amortization included in the Consolidated Statements of Operations	(36.1)
Change in unrealized capital gains (losses) on available-for-sale securities	1.0
Implementation of SOP 05-01	(6.0)
Balance at December 31, 2007	$ 728.6

The estimated amount of DAC to be amortized, net of interest, is $45.1, $44.1, $46.0,
$42.4, and $42.1, for the years 2008, 2009, 2010, 2011 and 2012, respectively. Actual
amortization incurred during these years may vary as assumptions are modified to
incorporate actual results.

95

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

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

2005.
Balance at January 1, 2005	$ 1,365.2
Prior period adjustment	(2.7)
Balance at January 1, 2005 (restated)	1,362.5
Deferrals of commissions and expenses	49.3
Amortization:
Amortization	(219.4)
Interest accrued at 5% to 7%	88.4
Net amortization included in the Consolidated Statements of Operations	(131.0)
Change in unrealized capital gains (losses) on available-for-sale securities	10.9
Balance at December 31, 2005	1,291.7
Deferrals of commissions and expenses	46.2
Amortization:
Amortization	(82.4)
Interest accrued at 5% to 7%	85.7
Net amortization included in the Consolidated Statements of Operations	3.3
Change in unrealized capital gains (losses) on available-for-sale securities	(1.0)
Balance at December 31, 2006	1,340.2
Deferrals of commissions and expenses	40.5
Amortization:
Amortization	(177.3)
Interest accrued at 5% to 7%	84.2
Net amortization included in the Consolidated Statements of Operations	(93.1)
Change in unrealized capital gains (losses) on available-for-sale securities	2.9
Implementation of SOP 05-1	(37.3)
Balance at December 31, 2007	$ 1,253.2

The estimated amount of VOBA to be amortized, net of interest, is $99.4, $90.8, $88.0,
$82.4, and $77.1, for the years 2008, 2009, 2010, 2011, and 2012, respectively. Actual
amortization incurred during these years may vary as assumptions are modified to
incorporate actual results.

Analysis of DAC and VOBA

The increase in Amortization of DAC and VOBA for the year ended December 31, 2007,
was primarily driven by unfavorable unlocking of $131.3 attributable to an increase in
actual gross profits related to higher fee income and fixed margins in 2007. In addition,
amortization for the year ended December 31, 2006 was lower due to favorable
unlocking, as a result of prospective expense assumption changes.

96

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

The decrease in Amortization of DAC and VOBA in 2006 is primarily driven by
favorable unlocking of $83.3, resulting from the refinements of the Company’s estimates
of persistency, expenses and other assumptions. In addition, the decrease in amortization
reflects lower actual gross profits, primarily due to a legal settlement incurred in 2006.

Amortization of DAC and VOBA increased in 2005 primarily due to increased gross
profits, which were driven by higher fixed margins and variable fees because of higher
average assets under management (“AUM”), partially offset by higher expenses. The
Company revised long-term separate account return and certain contractowner
withdrawal behavior assumptions, as well as reflected current experience during 2005,
resulting in a deceleration of amortization of DAC and VOBA of $11.7.

5. Dividend Restrictions and Shareholder’s Equity

ILIAC’s ability to pay dividends to its parent is subject to the prior approval of insurance
regulatory authorities of the State of Connecticut for payment of any dividend, which,
when combined with other dividends paid within the preceding 12 months, exceeds the
greater of (1) ten percent (10%) of ILIAC’s statutory surplus at the prior year end or (2)
ILIAC’s prior year statutory net gain from operations.

During 2007, 2006, and 2005, ILIAC paid $145.0, $256.0, and $20.5, respectively, in
dividends on its common stock to its parent.

During 2006, Lion contributed to ILIAC DSI, which had $50.5 in equity on the date of
contribution and was accounted for in a manner similar to a pooling-of-interests. During
2007, 2006, and 2005, ILIAC did not receive any cash capital contributions from its
parent.

The Insurance Department of the State of Connecticut (the “Department”) recognizes as
net income and capital and surplus those amounts determined in conformity with
statutory accounting practices prescribed or permitted by the Department, which differ in
certain respects from accounting principles generally accepted in the United States.
Statutory net income was $245.5, $138.3, and $258.5, for the years ended December 31,
2007, 2006, and 2005, respectively. Statutory capital and surplus was $1,388.0 and
$1,447.5 as of December 31, 2007 and 2006, respectively.

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

97

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

6.	Additional Insurance Benefits and Minimum Guarantees
	The Company calculates an additional liability for certain GMDBs and other minimum guarantees in order to recognize the expected value of these benefits in excess of the projected account balance 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.
	As of December 31, 2007, the separate account liability for guaranteed minimum benefits and the additional liability recognized related to minimum guarantees were $7.1 billion and $80.4, respectively. As of December 31, 2006, the separate account liability for guaranteed minimum benefits and the additional liability recognized related to minimum guarantees were $6.4 billion and $0.7, respectively.
	The aggregate fair value of equity securities, including mutual funds, supporting separate accounts with additional insurance benefits and minimum investment return guarantees as of December 31, 2007 and 2006 was $7.1 billion and $6.4 billion, respectively.
7.	Income Taxes
	Effective January 1, 2006, ILIAC files a consolidated federal income tax return with ING America Insurance Holdings (“ING AIH”) and certain other subsidiaries of ING AIH that are eligible corporations qualified to file consolidated federal income tax returns as part of the ING AIH affiliated group. Effective January 1, 2006, ILIAC is party to a federal tax allocation agreement with ING AIH and its subsidiaries that are part of the group whereby ING AIH charges its subsidiaries for federal taxes each subsidiary would have incurred were it not a member of the consolidated group and credits each subsidiary for losses at the statutory federal tax rate. For calendar year 2005, ILIAC filed a consolidated federal income tax return with its (former) subsidiary, ING Insurance Company of America.

	2007	2006	2005
Current tax expense (benefit):
Federal	$ 28.6	$ 23.3	$ 4.9
State	(9.0)	20.0	4.9
Total current tax expense	19.6	43.3	9.8
Deferred tax expense:
Federal	36.4	79.4	11.7
Total deferred tax expense	36.4	79.4	11.7
Total income tax expense	$ 56.0	$ 122.7	$ 21.5

98

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

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

	2007	2006	2005
Income before income taxes	$ 274.4	$ 424.5	$ 294.2
Tax rate	35.0%	35.0%	35.0%
Income tax at federal statutory rate	96.0	148.6	103.0
Tax effect of:
Dividend received deduction	(26.2)	(36.5)	(25.8)
IRS audit settlement	-	-	(58.2)
State audit settlement	(21.8)	-	-
State tax expense	-	13.0	3.2
Other	8.0	(2.4)	(0.7)
Income tax expense	$ 56.0	$ 122.7	$ 21.5
Temporary Differences

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

	2007	2006
Deferred tax assets:
Insurance reserves	$ 216.6	$ 250.3
Net unrealized capital loss	6.4	-
Unrealized losses allocable to experience-rated contracts	5.7	18.3
Investments	6.7	3.5
Postemployment benefits	75.9	74.7
Compensation	27.3	25.1
Other	32.4	19.9
Total gross assets before valuation allowance	371.0	391.8
Less: valuation allowance	(6.4)	-
Assets, net of valuation allowance	364.6	391.8
Deferred tax liabilities:
Value of business acquired	(436.7)	(469.1)
Net unrealized capital gains	-	(15.9)
Deferred policy acquisition costs	(203.8)	(167.9)
Total gross liabilities	(640.5)	(652.9)
Net deferred income tax liability	$ (275.9)	$ (261.1)

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

99

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

Valuation allowances are provided when it is considered unlikely that deferred tax assets
will be realized. As of December 31, 2007, the Company had a $6.4 valuation allowance
related to unrealized capital losses on investments, which is included in Accumulated
other comprehensive income (loss). The Company had no valuation allowance as of
December 31, 2006.

Tax Sharing Agreement

ILIAC had a payable of $ 56.8 and $ 59.8 to ING AIH at December 31, 2007 and 2006,
respectively, for federal income taxes under the inter-company tax sharing agreement.

See Related Party Transactions footnote for more information.

Unrecognized Tax Benefits

As a result of implementing FIN 48, the Company recognized a cumulative effect of
change in accounting principle of $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.

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

Balance at January 1, 2007	$ 68.0
Additions for tax positions related to current year	2.9
Additions (reductions) for tax positions related to prior years	(23.5)
Balance at December 31, 2007	$ 47.4

The Company had $42.6 of unrecognized tax benefits as of December 31, 2007 that
would affect the Company’s effective tax rate if recognized.

Interest and Penalties

The Company recognizes accrued interest and penalties related to unrecognized tax
benefits in Current income taxes and Income tax expense on the Balance Sheets and
Statements of Operations, respectively. The Company had accrued interest of $16.9 as of
December 31, 2007.

Regulatory Matters

The Company is under audit by the Internal Revenue Service (“IRS”) for tax years 2002
through 2005, and is subject to state audit 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 $17.7. It is also reasonably possible that

100

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

the aforementioned state tax audits may be settled within the next twelve months. It is
reasonably possible that the unrecognized tax benefit on uncertain tax positions related to
the New York state tax audit will decrease by up to $11.4. The timing of the settlement
and any potential future payment of the remaining allowance of $18.3 cannot be reliably
estimated.

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

Under prior law, life insurance companies were allowed to defer from taxation a portion
of income. Deferred income of $17.2 was accumulated in the Policyholders Surplus
Account and would only become taxable under certain conditions, which management
believed to be remote. In 2004, Congress passed the American Jobs Creation Act of
2004 allowing certain tax-free distributions from the Policyholders’ Surplus Account
during 2005 and 2006. During 2006, the Company made a dividend distribution of
$256.0, which eliminated the $17.2 balance in the Policyholders Surplus Account and,
therefore, any potential tax on the accumulated balance.

8. Benefit Plans

Defined Benefit Plan

ING North America Insurance Corporation (“ING North America”) sponsors the ING
Americas Retirement Plan (the “Retirement Plan”), effective as of December 31, 2001.
Substantially all employees of ING North America and its affiliates (excluding certain
employees) are eligible to participate, including the Company’s employees other than
Company agents. The Retirement Plan is a tax-qualified defined benefit plan, the
benefits of which are guaranteed (within certain specified legal limits) by the Pension
Benefit Guaranty Corporation (“PBGC”). As of January 1, 2002, each participant in the
Retirement Plan (except for certain specified employees) earns a benefit under a final
average compensation formula. Subsequent to December 31, 2001, ING North America
is responsible for all Retirement Plan liabilities. The costs allocated to the Company for
its employees’ participation in the Retirement Plan were $17.2, $23.8, and $22.5, for
2007, 2006, and 2005, respectively, and are included in Operating expenses in the
Consolidated Statements of Operations.

101

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

Defined Contribution Plan

ING North America sponsors the ING Americas Savings Plan and ESOP (the “Savings
Plan”). Substantially all employees of ING North America and its affiliates (excluding
certain employees, including but not limited to Career Agents) are eligible to participate,
including the Company’s employees other than Company agents. Career Agents are
certain, full-time insurance salespeople who have entered into a career agent agreement
with the Company and certain other individuals who meet specified eligibility criteria.
The Savings Plan is a tax-qualified profit sharing and stock bonus plan, which includes
an employee stock ownership plan (“ESOP”) component. Savings Plan benefits are not
guaranteed by the PBGC. The Savings Plan allows eligible participants to defer into the
Savings Plan a specified percentage of eligible compensation on a pre-tax basis. ING
North America matches such pre-tax contributions, up to a maximum of 6% of eligible
compensation. Matching contributions are subject to a 4-year graded vesting schedule
(although certain specified participants are subject to a 5-year graded vesting schedule).
All contributions made to the Savings Plan are subject to certain limits imposed by
applicable law. Pre-tax charges to operations of the Company for the Savings Plan were
$10.1 , $9.7, and $8.9, for the years ended December 31, 2007, 2006, and 2005,
respectively, and are included in Operating expenses in the Consolidated Statements of
Operations.

Non-Qualified Retirement Plans

Through December 31, 2001, the Company, in conjunction with ING North America,
offered certain eligible employees (other than Career Agents) a Supplemental Executive
Retirement Plan and an Excess Plan (collectively, the “SERPs”). Benefit accruals under
the SERPs ceased, effective as of December 31, 2001. Benefits under the SERPs are
determined based on an eligible employee’s years of service and average annual
compensation for the highest five years during the last ten years of employment.

The Company, in conjunction with ING North America, sponsors the Pension Plan for
Certain Producers of ING Life Insurance and Annuity Company (formerly the Pension
Plan for Certain Producers of Aetna Life Insurance and Annuity Company) (the “Agents
Non-Qualified Plan”). This plan covers certain full-time insurance salespeople who have
entered into a career agent agreement with the Company and certain other individuals
who meet the eligibility criteria specified in the plan (“Career Agents”). The Agents
Non-Qualified Plan was terminated effective January 1, 2002. In connection with the
termination, all benefit accruals ceased and all accrued benefits were frozen.

102

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

The SERPs and Agents Non-Qualified Plan, are non-qualified defined benefit pension
plans, which means all the SERPs benefits are payable from the general assets of the
Company and Agents Non-Qualified Plan benefits are payable from the general assets of
the Company and ING North America. These non-qualified defined benefit pension
plans are not guaranteed by the PBGC.

Obligations and Funded Status

The following tables summarize the benefit obligations, fair value of plan assets, and
funded status, for the SERPs and Agents Non-Qualified Plan, for the years ended
December 31, 2007 and 2006.

	2007	2006
Change in Projected Benefit Obligation:
Projected benefit obligation, January 1	$ 97.7	$ 106.8
Interest cost	5.4	5.5
Benefits paid	(9.3)	(8.3)
Actuarial loss on obligation	(8.2)	(6.3)
Projected benefit obligation, December 31	$ 85.6	$ 97.7
Fair Value of Plan Assets:
Fair value of plan assets, December 31	$ -	$ -
Amounts recognized in the Consolidated Balance Sheets consist of:
	2007	2006
Accrued benefit cost	$ (85.6)	$ (97.7)
Intangible assets	-	-
Accumulated other comprehensive income	4.9	14.1
Net amount recognized	$ (80.7)	$ (83.6)

At December 31, 2007 and 2006, the projected benefit obligation was $85.6 and $97.7,
respectively.

Assumptions

The weighted-average assumptions used in the measurement of the December 31, 2007
and 2006 benefit obligation for the SERPs and Agents Non-Qualified Plan, were as
follows:

	2007	2006
Discount rate at beginning of period	5.90%	5.50%
Rate of compensation increase	4.20%	4.00%

103

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

In determining the discount rate assumption, the Company utilizes current market
information provided by its plan actuaries (particularly the Citigroup Pension Discount
Curve Liability Index), including a discounted cash flow analysis of the Company’s
pension obligation and general movements in the current market environment. The
discount rate modeling process involves selecting a portfolio of high quality, noncallable
bonds that will match the cash flows of the Retirement Plan. Based upon all available
information, it was determined that 6.5% was the appropriate discount rate as of
December 31, 2007, to calculate the Company’s accrued benefit liability. Accordingly,
as prescribed by SFAS No. 87, “Employers’ Accounting for Pensions”, the 6.5% discount
rate will also be used to determine the Company’s 2008 pension expense. December 31
is the measurement date for the SERP’s and Agents Non-Qualified Plan.

The weighted-average assumptions used in calculating the net pension cost were as
follows:

	2007	2006	2005
Discount rate	6.50%	5.90%	6.00%
Rate of increase in compensation levels	4.20%	4.00%	4.00%

The weighted average assumptions used in calculating the net pension cost for 2007
were, as indicated above, a 6.5% discount rate and a 4.2% rate of compensation increase.
Since the benefit plans of the Company are unfunded, an assumption for return on plan
assets is not required.

Net Periodic Benefit Costs

Net periodic benefit costs for the SERPs and Agents Non-Qualified Plan, for the years
ended December 31, 2007, 2006, and 2005, were as follows:

	2007		2006		2005
Interest cost	$ 5.4		$ 5.5		$ 6.0
Net actuarial loss recognized in the year		0.7		2.0		1.3
Unrecognized past service cost recognized in the year		-		0.2		0.2
The effect of any curtailment or settlement		0.4		0.4		0.3
Net periodic benefit cost	$ 6.5		$ 8.1		$ 7.8

Cashflows

In 2008, the employer is expected to contribute $5.5 to the SERPs and Agents Non-
Qualified Plan. Future expected benefit payments related to the SERPs, and Agents Non-
Qualified Plan, for the years ended December 31, 2008 through 2012, and thereafter
through 2017, are estimated to be $5.5, $4.0, $4.0, $4.3, $4.4 and $21.1, respectively.

104

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

Other

On October 4, 2004, the President signed into law The Jobs Creation Act (“Jobs Act”).
The Jobs Act affects nonqualified deferred compensation plans, such as the Agents
Nonqualified Plan. ING North America will make changes to impacted nonqualified
deferred compensation plans, as necessary to comply with the requirements of the Jobs
Act.

Stock Option and Share Plans

ING sponsors the ING Group Long Term Equity Ownership Plan (“leo”), which provides
employees of the Company who are selected by the ING Board of Directors to be granted
options and/or performance shares. The terms applicable to an award under leo are set
out in an award agreement, which is signed by the participant when he or she accepts the
award.

Options granted under leo are nonqualified options on ING shares in the form of
American Depository Receipts (“ADRs”). Leo options have a ten (10) year term and vest
three years from the grant date. Options awarded under leo may vest earlier in the event
of the participant’s death, permanent disability or retirement. Retirement for purposes of
leo means a participant terminates service after attaining age 55 and completing 5 years
of service. Early vesting in all or a portion of a grant of options may also occur in the
event the participant is terminated due to redundancy or business divestiture. Unvested
options are generally subject to forfeiture when a participant voluntarily terminates
employment or is terminated for cause (as defined in leo). Upon vesting, participants
generally have up to seven years in which to exercise their vested options. A shorter
exercise period applies in the event of termination due to redundancy, business
divestiture, voluntary termination or termination for cause. An option gives the recipient
the right to purchase an ING share in the form of ADRs at a price equal to the fair market
value of one ING share on the date of grant. On exercise, participant’s have three options
(i) retain the shares and remit a check for applicable taxes due on exercise, (ii) request the
administrator to remit a cash payment for the value of the options being exercised, less
applicable taxes, or (iii) retain some of the shares and have the administrator liquidate
sufficient shares to satisfy the participant’s tax obligation. The share price is in Euros and
converted to U.S. dollars, as determined by ING.

Awards of performance shares may also be made under leo. Performance shares are a
contingent grant of ING stock, and, on vesting, the participant has the right to receive a
cash amount equal to the closing price per ING share on the Euronext Amsterdam Stock
Market on the vesting date times the number of vested Plan shares. Performance shares
generally vest three years from the date of grant, with the amount payable based on
ING’s share price on the vesting date. Payments made to participants on vesting are
based on the performance targets established in connection with leo and payments can
range from 0% to 200% of target. Performance is based on ING’s total shareholder
return relative to a peer group as determined at the end of the vesting period. To vest, a
participant must be actively employed on the vesting date, although vesting will continue

105

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

to occur in the event of the participant’s death, disability or retirement. If a participant is
terminated due to redundancy or business divestiture, vesting will occur but in only a
portion of the award. Unvested shares are generally subject to forfeiture when an
employee voluntarily terminates employment or is terminated for cause (as defined in
leo). Upon vesting, participants have three options (i) retain the shares and remit a check
for applicable taxes due on exercise, (ii) request the administrator to remit a cash
payment for the value of the shares, less applicable taxes, or (iii) retain some of the shares
and have the administrator liquidate sufficient shares to satisfy the participant’s tax
obligation. The amount is converted from Euros to U.S. dollars based on the daily
average exchange rate between the Euro and the U.S. dollar, as determined by ING.

The Company recognized compensation expense for the leo options and performance
shares of $4.5, $10.1, and $5.6 for the years ended December 31, 2007, 2006, and 2005
respectively.

For leo, the Company recognized tax benefits of $3.2, $0.1, and $0.3 in 2007, 2006, and
2005, respectively.

Other Benefit Plans

In addition, the Company, in conjunction with ING North America, sponsors the
following benefit plans:

§	The ING 401(k) Plan for ILIAC Agents, which allows participants to defer a specified percentage of eligible compensation on a pre-tax basis. Effective January 1, 2006, the Company match equals 60% of a participant’s pre-tax deferral contribution, with a maximum of 6% of the participant’s eligible pay.
§	The Producers’ Incentive Savings Plan, which allows participants to defer up to a specified portion of their eligible compensation on a pre-tax basis. The Company matches such pre-tax contributions at specified amounts.
§	The Producers’ Deferred Compensation Plan, which allows participants to defer up to a specified portion of their eligible compensation on a pre-tax basis.
§	Certain health care and life insurance benefits for retired employees and their eligible dependents. The post retirement health care plan is contributory, with retiree contribution levels adjusted annually. The life insurance plan provides a flat amount of noncontributory coverage and optional contributory coverage.

The benefit charges allocated to the Company related to these plans for the years ended
December 31, 2007, 2006, and 2005, were $0.4, $1.4, and $1.3, respectively.

9. Related Party Transactions

Operating Agreements

ILIAC has certain agreements whereby it generates revenues and expenses with affiliated
entities, as follows:

106

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

§	Investment Advisory agreement with ING Investment Management LLC (“IIM”), an affiliate, in which IIM provides asset management, administrative, and accounting services for ILIAC’s general account. ILIAC incurs a fee, which is paid quarterly, based on the value of the assets under management. For the years ended December 31, 2007, 2006, and 2005, expenses were incurred in the amounts of $60.5, $62.2, and $61.7, respectively.
§	Services agreement with ING North America for administrative, management, financial, and information technology services, dated January 1, 2001 and amended effective January 1, 2002. For the years ended December 31, 2007, 2006, and 2005, expenses were incurred in the amounts of $167.9, $175.3, and $138.5, respectively.
§	Services agreement between ILIAC and its U.S. insurance company affiliates dated January 1, 2001, and amended effective January 1, 2002 and December 31, 2007.
	For the years ended December 31, 2007, 2006, and 2005, net expenses related to the agreement were incurred in the amount of $21.7, $12.4, and $17.8, respectively.

Management and service contracts and all cost sharing arrangements with other affiliated
companies are allocated in accordance with the Company’s expense and cost allocation
methods.

DSL has certain agreements whereby it generates revenues and expenses with affiliated
entities, as follows:

§	Underwriting and distribution agreements with ING USA Annuity and Life Insurance Company (“ING USA”) and ReliaStar Life Insurance Company of New York (“RLNY”), affiliated companies, whereby DSL serves as the principal underwriter for variable insurance products. In addition, DSL is authorized to enter into agreements with broker-dealers to distribute the variable insurance products and appoint representatives of the broker-dealers as agents. For the years ended December 31, 2007, 2006, and 2005, commissions were collected in the amount of $568.4, $429.2, and $378.1. Such commissions are, in turn, paid to broker-dealers.
§	Services agreements with ING USA and RLNY, whereby DSL receives managerial and supervisory services and incurs a fee that is calculated as a percentage of average assets of each company’s variable separate accounts deposited in ING
	Investors Trust. On August 9, 2007, DSL and ING USA entered into an amendment to the service agreement effective July 31, 2007 to modify the method for calculating the compensation owed to ING USA under the service agreement. As a result of this amendment, DSL pays ING USA the total net revenue associated with ING USA deposits into ING Investors Trust. For the years ended December 31, 2007, 2006, and 2005, expenses were incurred under these services agreements in the amount of $124.4, $70.8, and $46.3, respectively.

107

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

§      Administrative and advisory services agreements with ING Investment LLC and IIM, affiliated companies, in which DSL receives certain services for a fee. The fee for these services is calculated as a percentage of average assets of ING Investors Trust. For the years ended December 31, 2007, 2006, and 2005, expenses were incurred in the amounts of $13.1, $8.8, and $6.4, respectively.

Investment Advisory and Other Fees

During 2006 and 2005, ILIAC served as investment advisor to certain variable funds
offered in Company products (collectively, the “Company Funds”). The Company Funds
paid ILIAC, as investment advisor, daily fees that, on an annual basis, ranged, depending
on the Fund, from 0.5% to 1.0% of their average daily net assets. Each of the Company
Funds managed by ILIAC were subadvised by investment advisors, in which case ILIAC
paid a subadvisory fee to the investment advisors, which included affiliates. Effective
January 1, 2007, ILIAC’s investment advisory agreement with the Company Funds was
assigned to DSL. ILIAC is also compensated by the separate accounts for bearing
mortality and expense risks pertaining to variable life and annuity contracts. Under the
insurance and annuity contracts, the separate accounts pay ILIAC daily fees that, on an
annual basis are, depending on the product, up to 3.4% of their average daily net assets.
The total amount of compensation and fees received by the Company from the Company
Funds and separate accounts totaled $312.7, $289.9, and $263.0, (excludes fees paid to
ING Investment Management Co.) in 2007, 2006, and 2005, respectively.

DSL has been retained by ING Investors Trust (the “Trust”), an affiliate, pursuant to a
management agreement to provide advisory, management, administrative and other
services to the Trust. Under the management agreement, DSL provides or arranges for
the provision of all services necessary for the ordinary operations of the Trust. DSL
earns a monthly fee based on a percentage of average daily net assets of the Trust. DSL
has entered into an administrative services subcontract with ING Fund Services, LLC, an
affiliate, pursuant to which ING Fund Services, LLC, provides certain management,
administrative and other services to the Trust and is compensated a portion of the fees
received by DSL under the management agreement. For the years ended December 31,
2007, 2006, and 2005, revenue received by DSL under the management agreement
(exclusive of fees paid to affiliates) was $343.8, $233.9, and $174.6, respectively. At
December 31, 2007 and 2006, DSL had $26.7 and $22.1, respectively, receivable from
the Trust under the management agreement.

Financing Agreements

ILIAC maintains a reciprocal loan agreement with ING AIH, an affiliate, to facilitate the
handling of unanticipated short-term cash requirements that arise in the ordinary course
of business. Under this agreement, which became effective in June 2001 and expires on
April 1, 2011, either party can borrow from the other up to 3% of ILIAC’s statutory
admitted assets as of the preceding December 31. Interest on any ILIAC borrowing is
charged at the rate of ING AIH’s cost of funds for the interest period, plus 0.15% .

108

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

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 $3.9, $1.8, and $0.7, for the
years ended December 31, 2007, 2006, and 2005, respectively, and earned interest
income of $1.7, $3.3, and $1.1, for the years ended December 31, 2007, 2006, and 2005,
respectively. Interest expense and income are included in Interest expense and Net
investment income, respectively, on the Consolidated Statements of Operations. At
December 31, 2007, ILIAC had no amount due from ING AIH under the reciprocal loan
agreement and $45.0 receivable from ING AIH at December 31, 2006.

Note with Affiliate

On December 29, 2004, ING USA issued a surplus note in the principal amount of
$175.0 (the “Note”) scheduled to mature on December 29, 2034, to ILIAC, in an offering
that was exempt from the registration requirements of the Securities Act of 1933.
ILIAC’s $175.0 Note from ING USA bears interest at a rate of 6.26% per year. Any
payment of principal and/or interest is subject to the prior approval of the Iowa Insurance
Commissioner. Interest is scheduled to be paid semi-annually in arrears on June 29 and
December 29 of each year, commencing on June 29, 2005. Interest income for the years
ended December 31, 2007 and 2006 was $11.1.

Tax Sharing Agreements

Effective January 1, 2006, ILIAC is a party to a federal tax allocation agreement with
ING AIH and its subsidiaries that are part of the ING AIH consolidated group. Under the
federal tax allocation agreement, ING AIH charges its subsidiaries for federal taxes each
subsidiary would have incurred were it not a member of the consolidated group and
credits each subsidiary for losses at the statutory federal tax rate.

For the years ended December 31, 2006 and 2005, DSI, which merged with and into DSL
on December 31, 2006, was party to the ING AIH federal tax allocation agreement, as
described above. Income from DSL, a single member limited liability company, is taxed
at the member level (ILIAC).

ILIAC has also entered into a state tax sharing agreement with ING AIH and each of the
specific subsidiaries that are parties to the agreement. The state tax agreement applies to
situations in which ING AIH and all or some of the subsidiaries join in the filing of a
state or local franchise, income tax, or other tax return on a consolidated, combined, or
unitary basis.

109

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

10.	Financing Agreements
	ILIAC maintains a $100.0 uncommitted, perpetual revolving note facility with the Bank of New York ("BONY"). Interest on any of ILIAC’s borrowing accrues at an annual rate equal to a rate quoted by BONY to ILIAC for the borrowing. Under this agreement, ILIAC incurred minimal interest expense for the years ended December 31, 2007, 2006, and 2005. At December 31, 2007 and 2006, ILIAC had no amounts outstanding under the revolving note facility.
	ILIAC also maintains a $75.0 uncommitted line-of-credit agreement with PNC Bank (“PNC”), effective December 19, 2005. Borrowings are guaranteed by ING AIH, with maximum aggregate borrowings outstanding at anytime to ING AIH and its affiliates of $75.0. Interest on any of ILIAC’s borrowing accrues at an annual rate equal to a rate quoted by PNC to ILIAC for the borrowing. Under this agreement, ILIAC incurred minimal interest expense for the years ended December 31, 2007 and 2006. At December 31, 2007 and 2006, ILIAC had no amounts outstanding under the line-of-credit agreement.
	ILIAC also maintains $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. Interest on any of the Company’s borrowing accrues at an annual rate equal to the rate quoted by Svenska to the Company for the borrowing. Under this agreement, the Company incurred minimal interest expense for the year ended December 31, 2007. At December 31, 2007, ILIAC had no amounts outstanding under the line-of-credit agreement.
	Also see Financing Agreements in the Related Party Transactions footnote.
11.	Reinsurance
	At December 31, 2007, the Company had reinsurance treaties with 8 unaffiliated reinsurers covering a significant portion of the mortality risks and guaranteed death benefits under its variable contracts. At December 31, 2007, the Company did not have any outstanding cessions under any reinsurance treaties with affiliated reinsurers. The Company remains liable to the extent its reinsurers do not meet their obligations under the reinsurance agreements.

On, October 1, 1998, the Company disposed of its individual life insurance business
under an indemnity reinsurance arrangement with certain subsidiaries of Lincoln for $1.0
billion in cash. Under the agreement, Lincoln contractually assumed from the Company
certain policyholder liabilities and obligations, although the Company remains obligated
to contractowners. Effective March 1, 2007, the reinsurance agreements were assigned to
a single subsidiary of Lincoln, and that subsidiary established a trust to secure its
obligations to the Company under the reinsurance transaction.

110

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

The Company assumed $25.0 of premium revenue from Aetna Life, for the purchase and
administration of a life contingent single premium variable payout annuity contract. In
addition, the Company is also responsible for administering fixed annuity payments that
are made to annuitants receiving variable payments. Reserves of $16.1 and $17.4 were
maintained for this contract as of December 31, 2007 and 2006, respectively.

Reinsurance ceded in force for life mortality risks were $20.9 billion and $22.4 billion at
December 31, 2007 and 2006, respectively. At December 31, 2007 and 2006, net
receivables were comprised of the following:

	2007	2006
Claims recoverable from reinsurers	$ 2,595.2	$ 2,727.1
Payable for reinsurance premiums	(0.9)	(1.2)
Reinsured amounts due to reinsurer	(5.9)	(0.5)
Reserve credits	0.1	0.8
Other	5.9	(10.8)
Total	$ 2,594.4	$ 2,715.4

Premiums and Interest credited and other benefits to contractowners were reduced by the
following amounts for reinsurance ceded for the years ended December 31, 2007, 2006,
and 2005.

	2007	2006	2005
Deposits ceded under reinsurance	$ 188.5	$ 199.0	$ 215.5
Premiums ceded under reinsurance	0.4	0.5	0.4
Reinsurance recoveries	419.7	359.0	363.7

12. Commitments and Contingent Liabilities

Leases

The Company leases certain office space and certain equipment under various operating
leases, the longest term of which expires in 2014.

For the years ended December 31, 2007, 2006, and 2005, rent expense for leases was
$17.7, $17.8, and $17.4, respectively. The future net minimum payments under
noncancelable leases for the years ended December 31, 2008 through 2012 are estimated
to be $4.6, $3.5, $2.4, $1.7, and $0.8, respectively, and $0.5, thereafter. The Company
pays substantially all expenses associated with its leased and subleased office properties.
Expenses not paid directly by the Company are paid for by an affiliate and allocated back
to the Company.

111

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

Commitments

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

At December 31, 2007, the Company had off-balance sheet commitments to purchase
investments equal to their fair value of $357.8, $226.6 of which was with related parties.
At December 31, 2006, the Company had off-balance sheet commitments to purchase
investments equal to their fair value of $706.8, $322.3 of which was with related parties.
During 2007 and 2006, $87.3 and $79.4, respectively, was funded to related parties under
off-balance sheet commitments.

Financial Guarantees

The Company owns a 3-year credit-linked note arrangement, whereby the Company will
reimburse the guaranteed party upon payment default of the referenced obligation. Upon
such default, the Company reimburses the guaranteed party for the loss under the
reference obligation, and the Company receives that reference obligation in settlement.
The Company can then seek recovery of any losses under the agreement by sale or
collection of the received reference obligation. As of December 31, 2007, the maximum
liability to the Company under the guarantee was $30.0.

Windsor Property 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"). Construction of the Windsor Property is complete, and costs incurred
under the Construction Agreements and other agreements associated with the
construction, acquisition, and development of the corporate office facility totaled $62.4
and $27.6 for the years ended December 31, 2007 and 2006, respectively. These costs
were capitalized in Property and equipment on the Consolidated Balance Sheets.

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,

112

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

it is the opinion of management that the disposition of such lawsuits/arbitrations will not
have a materially adverse effect on the Company’s operations or financial position.

Other Regulatory Matters

Regulatory Matters

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

Insurance and Retirement Plan Products and Other Regulatory Matters

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

Investment Product Regulatory Issues

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

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

113

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

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

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

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

114

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

13.	Accumulated Other Comprehensive Income (Loss)
	Shareholder’s equity included the following components of Accumulated other
	comprehensive income (loss) as of December 31, 2007, 2006, and 2005.
		2007	2006	2005
	Net unrealized capital gains (losses):
	Fixed maturities, available-for-sale	$ (64.5)	$ (44.6)	$ (18.0)
	Equity securities, available-for-sale	6.3	18.1	3.2
	DAC/VOBA adjustment on
	available-for-sale securities	7.8	3.9	5.1
	Sales inducements adjustment on
	available-for-sale securities	0.2	0.1	0.1
	Premium deficiency reserve adjustment	-	(37.5)	(23.6)
	Other investments	(0.7)	0.8	1.2
	Less: allocation to experience-rated contracts	(16.4)	(52.4)	(48.6)
	Unrealized capital gains (losses), before tax	(34.5)	(6.8)	16.6
	Deferred income tax asset (liability)	12.1	2.4	(10.3)
	Asset valuation allowance	(6.4)	-	-
	Net unrealized capital gains (losses)	(28.8)	(4.4)	6.3
	Pension liability, net of tax	(5.0)	(9.6)	(11.6)
	Accumulated other comprehensive
	(loss) income	$ (33.8)	$ (14.0)	$ (5.3)

Net unrealized capital gains (losses) allocated to experience-rated contracts of $(16.4)
and $(52.4) at December 31, 2007 and 2006, respectively, are reflected on the
Consolidated Balance Sheets in Future policy benefits and claims reserves and are not
included in Shareholder’s equity.

115

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

Changes in Accumulated other comprehensive income (loss), net of DAC, VOBA, and
tax (excluding the tax valuation allowance), related to changes in unrealized capital gains
(losses) on securities, including securities pledged and excluding those related to
experience-rated contracts, were as follows for the years ended December 31, 2007,
2006, and 2005.

	2007	2006	2005
Fixed maturities, available-for-sale	$ (19.9)	$ (26.6)	$ (500.1)
Equity securities, available-for-sale	(11.8)	14.9	(5.5)
DAC/VOBA adjustment on
available-for-sale securities	3.9	(1.2)	14.6
Sales inducements adjustment on
available-for-sale securities	0.1	-	0.2
Premium deficiency reserve adjustment	37.5	(13.9)	(23.6)
Other investments	(1.5)	(0.4)	(0.1)
Less: allocation to experience-rated contracts	36.0	(3.8)	(406.1)
Unrealized capital gains (losses), before tax	(27.7)	(23.4)	(108.4)
Deferred income tax asset (liability)	9.7	12.7	30.9
Net change in unrealized capital gains (losses)	$ (18.0)	$ (10.7)	$ (77.5)

		2007	2006	2005
Net unrealized capital holding gains (losses) arising
during the year (1)	$ (66.9)		$ (43.6)	$ (38.2)
Less: reclassification adjustment for gains
(losses) and other items included in Net income(2)		(48.9)	(32.9)	39.3
Net change in unrealized capital gains (losses) on securities $		(18.0)	$ (10.7)	$ (77.5)

(1)	Pretax unrealized holding gains (losses) arising during the year were $(102.9), $(95.4), and $(53.4), for the years ended December 31, 2007, 2006, and 2005, respectively.
(2)	Pretax reclassification adjustments for gains (losses) and other items included in Net income were $(75.2), $(72.0), and $55.0, for the years ended December 31, 2007, 2006, and 2005, respectively.

116

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

14. Changes to Prior Years Presentation

During 2007, the Company identified $43.1 in unreconciled net liabilities. While the
correction of this error is not material to the prior period financial statements, correction
of the error through the current period income statement would be material to the 2007
Statements of Operations. In accordance with the guidance provided in SEC Staff
Accounting Bulletin (“SAB”) Topic IN, “Financial Statements - Considering the Effects
of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial
Statements” (“SAB 108”), the Company has restated the prior period financial statements
to correct this error by adjusting January 1, 2005 Retained earnings and December 31,
2006 DAC, VOBA, Future policy benefits and claims reserves, Other liabilities, and
Deferred taxes as follows:

	Previously
	Reported	Adjustment	Restated
January 1, 2005
Retained earnings (net of tax)	$ (1,877.1)	$ 28.0	$ (1,849.1)
Total shareholder's equity (net of tax)	2,759.6	28.0	2,787.6
December 31, 2006
Deferred policy acquisition cost	$ 623.6	$ (1.0)	$ 622.6
Value of business acquired	1,342.9	(2.7)	1,340.2
Total assets	68,486.0	(3.7)	68,482.3
Future policy benefits and claims reserves	$ 19,995.8	$ (11.7)	$ 19,984.1
Other liabilities	406.2	(35.1)	371.1
Deferred taxes	246.0	15.1	261.1
Total liabilities	65,500.3	(31.7)	65,486.6

117

QUARTERLY DATA (UNAUDITED)
(Dollar amounts in millions, unless otherwise stated)
2007		First	Second	Third		Fourth
Total revenue	$ 579.1		$ 594.9	$ 601.4	$ 676.5
Income (loss) before income taxes		100.7	115.8	85.8		(27.9)
Income tax expense (benefit)		28.5	33.6	22.3		(28.4)
Net income	$ 72.2		$ 82.2	$ 63.5	$ 0.5
2006		First*	Second*	Third*		Fourth
Total revenue	$ 532.5		$ 551.2	$ 548.5	$ 597.7
Income before income taxes		80.4	116.9	84.3		142.9
Income tax expense		21.6	34.2	16.6		50.3
Net income	$ 58.8		$ 82.7	$ 67.7	$ 92.6
*Amounts have been restated to reflect the contribution of Directed Services, Inc. on December 1, 2006. See the "Organization
and Significant Accounting Policies" footnote for further information regarding the contribution.

118

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial

Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Management’s Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) for the Company. The Company’s internal
control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of the consolidated financial
statements of the Company in accordance with U.S. generally accepted accounting
principles. The Company’s internal control over financial reporting includes those
policies and procedures that:

§	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
§	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and
§	provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

119

Management has assessed the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2007. In making its assessment, management
has used the criteria set forth in “Internal Control – Integrated Framework” issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based
upon its assessment, management has concluded that the Company’s internal control
over financial reporting was effective as of December 31, 2007.

This annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit the Company to provide only management’s report in this
annual report.

Changes in Internal Control Over Financial Reporting

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

Item 9B. Other Information

None.

120

PART III

Item 10. Directors, Executive Officers, and Corporate Governance

Omitted pursuant to General Instruction I(2) of Form 10-K, except with respect to
compliance with Sections 406 and 407 of the Sarbanes-Oxley Act of 2002.

a)	Code of Ethics for Financial Professionals
	The Company has approved and adopted a Code of Ethics for Financial Professionals (which was filed as Exhibit 14 to the Company’s Form 10-K, as filed with the Securities and Exchange Commission on March 29, 2004, File No. 033-23376), pursuant to the requirements of Section 406 of the Sarbanes-Oxley Act of 2002. Any waiver of the Code of Ethics will be disclosed by the Company by way of a Form 8-K filing.
b)	Designation of Board Financial Expert
	The Company has designated David A. Wheat, Director, Executive Vice President and Chief Financial Officer of the Company, as its Board Financial Expert, pursuant to the requirements of Section 407 of the Sarbanes-Oxley Act of 2002. Because the Company is not subject to the requirements of Exchange Act Rule 10A-3, it does not have any outside directors sitting on its board.

Item 11. Executive Compensation

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

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

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

Item 13. Certain Relationships, Related Transactions, and Director Independence

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

121

Item 14. Principal Accounting Fees and Services

(Dollar amounts in millions, unless otherwise stated)

In 2007 and 2006, Ernst & Young LLP (“Ernst & Young”) served as the principal
external auditing firm for ING, including ILIAC. ING subsidiaries, including ILIAC,
are allocated Ernst & Young fees attributable to services rendered by Ernst & Young
to each subsidiary. Ernst & Young fees allocated to the Company for the years ended
December 31, 2007 and 2006 are detailed below, along with a description of the
services rendered by Ernst & Young to the Company.

	2007			2006
Audit fees	$ 3.3		$ 3.7
Audit-related fees		0.2			0.1
Tax fees		-	*		-	*
All other fees		-	*		-	*
	$ 3.5		$ 3.8
*Less than $0.1.

Audit Fees

Fees for audit services include fees associated with professional services rendered by
the auditors for the audit of the annual financial statements of the Company and
review of the Company’s interim financial statements.

Audit-related Fees

Audit-related fees were allocated to ILIAC for assurance and related services that are
reasonably related to the performance of the audit or review of the financial
statements and are not reported under the audit fee item above. These services
consisted primarily of the audit of SEC product filings.

Tax Fees

There were minimal tax fees allocated to ILIAC in 2007 and 2006. Tax fees allocated
to ILIAC were primarily for tax compliance and accounting for income taxes. These
services consist of tax compliance, including the review of tax disclosures and proper
completion of tax forms, assistance with questions regarding tax audits, and tax
planning and advisory services relating to common forms of domestic taxation (i.e.,
income tax and capital tax).

All Other Fees

There were minimal fees allocated to ILIAC in 2007and 2006 under the category “all
other fees.” Other fees allocated to ILIAC under this category typically include fees
paid for products and services other than the audit fees, audit-related fees, and tax
fees described above, and consist primarily of non-recurring support and advisory
services.

122

Pre-approval Policies and Procedures

ILIAC has adopted the pre-approval policies and procedures of ING. Audit, audit-
related, and non-audit, services provided to the Company by ING’s independent
auditors are pre-approved by ING’s audit committee. Pursuant to ING’s pre-approval
policies and procedures, the ING audit committee is required to pre-approve all
services provided by ING’s independent auditors to ING and its affiliates, including
the Company. The ING pre-approval policies and procedures distinguish five types
of services: (1) audit services, (2) audit-related services, (3) tax services, (4) other
services that are not audit, audit-related, tax, or prohibited services, and (5) prohibited
services (as described in the Sarbanes-Oxley Act).

The ING pre-approval procedures consist of a general pre-approval procedure and a
specific pre-approval procedure.

General Pre-approval Procedure

ING’s audit committee pre-approves audit, audit-related, tax, and other, services to be
provided by ING’s external audit firms on an annual basis. The audit committee also
sets the maximum annual amount for such pre-approved services. Throughout the
year, ING’s audit committee receives from ING’s external audit firms an overview of
all services provided, including related fees and supported by sufficiently detailed
information. ING’s audit committee evaluates this overview periodically on a
retrospective basis during the year. Additionally, ING’s external audit firms and
Corporate Audit Services monitor the amounts paid versus the pre-approved amounts
throughout the year.

Specific Pre-approval Procedure

In addition to the general pre-approval procedures, each proposed independent
auditor engagement that is expected to generate fees in excess of the pre-approved
amounts, must be approved by the audit committee after recommendation of local
management on a case-by-case basis.

In 2007 and 2006, 100% of each of the audit-related services, tax services, and all
other services were pre-approved by ING’s audit committee.

123

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)	The following documents are filed as part of this report:
	1.	Financial statements. See Item 8. on page 61.
	2.	Financial statement schedules. See Index to Consolidated Financial Statement Schedules on page 125.
	3.	Exhibits. See Exhibit Index on page 130.

124

	Index to Consolidated Financial Statement Schedules
		Page
Report of Independent Registered Public Accounting Firm		126
I.	Summary of Investments - Other than Investments in Affiliates as of
	December 31, 2007	127
IV.	Reinsurance Information as of and for the years ended
	December 31, 2007, 2006, and 2005	128
Schedules other than those listed above are omitted because they are not required
or not applicable.

125

Report of Independent Registered Public Accounting Firm

The Board of Directors
ING Life Insurance and Annuity Company

We have audited the consolidated financial statements of ING Life Insurance and Annuity
Company as of December 31, 2007 and 2006, and for each of the three years in the period ended
December 31, 2007, and have issued our report thereon dated March 25, 2008. Our audits also
included the financial statement schedules listed in Item 15. These schedules are the
responsibility of the Company’s management. Our responsibility is to express an opinion based
on our audits.

In our opinion, the financial statement schedules referred to above, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all material respects, the
information set forth therein.

Ernst & Young LLP

Atlanta, Georgia
March 25, 2008

126

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

Schedule I

Summary of Investments – Other than Investments in Affiliates
As of December 31, 2007
(In millions)

			Amount
			Shown on
			Consolidated
Type of Investments	Cost	Value*	Balance Sheets
Fixed maturities, available-for-sale:
U.S. Treasuries	$ 11.2	$ 11.9	$ 11.9
U.S. government agencies and authorities	0.6	0.6	0.6
State, municipalities, and political subdivisions	66.1	64.0	64.0
Public utilities securities	1,049.1	1,044.3	1,044.3
Other U.S. corporate securities	3,855.1	3,836.0	3,836.0
Foreign securities (1)	2,335.1	2,335.2	2,335.2
Residential mortgage-backed securities	4,146.1	4,184.4	4,184.4
Commercial mortgage-backed securities	1,927.3	1,885.7	1,885.7
Other asset-backed securities	924.3	888.3	888.3
Total fixed maturities, available-for-sale, including
securities pledged to creditors	$ 14,314.9	$ 14,250.4	$ 14,250.4
Equity securities, available-for-sale	$ 440.1	$ 446.4	$ 446.4
Mortgage loans on real estate	$ 2,089.4	$ 2,099.3	$ 2,089.4
Policy loans	273.4	273.4	273.4
Other investments	808.4	838.8	838.8
Total investments	$ 17,926.2	$ 17,908.3	$ 17,898.4

* See Notes 2 and 3 of Notes to Consolidated Financial Statements.

⁽¹⁾      The term “foreign” includes foreign governments, foreign political subdivisions, foreign public utilities, and all other bonds of foreign issuers. Substantially all of the Company’s foreign securities are denominated in U.S. dollars.

127

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

Schedule IV

Reinsurance Information
As of and for the years ended December 31, 2007, 2006, and 2005
(In millions)

					Percentage
					of Assumed
	Gross	Ceded	Assumed	Net	to Net
Year Ended December 31, 2007
Life insurance in force	$ 20,379.0	$ 20,938.9	$ 559.9	$ -	NM
Premiums:
Life	1.2	-	-	1.2
Accident and health insurance	0.4	0.4	-	-
Annuities	45.4	-	0.2	45.6
Total premiums	$ 47.0	$ 0.4	$ 0.2	$ 46.8
Year Ended December 31, 2006
Life insurance in force	$ 21,844.6	$ 22,450.5	$ 605.9	$ -	NM
Premiums:
Accident and health insurance	0.5	0.5	-	-
Annuities	37.3	-	0.2	37.5
Total premiums	$ 37.8	$ 0.5	$ 0.2	$ 37.5
Year Ended December 31, 2005
Life insurance in force	$ 24,151.5	$ 24,151.5	$ -	$ -	0.0%
Premiums:
Accident and health insurance	0.4	0.4	-	-
Annuities	43.2	-	-	43.2
Total premiums	$ 43.6	$ 0.4	$ -	$ 43.2

NM - Not meaningful

128

SIGNATURES

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

March 25, 2008	ING Life Insurance and Annuity Company
(Date)	(Registrant)

By: /s/

David A. Wheat
David A. Wheat

Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities indicated on or
before March 25, 2008.

	Signatures	Title
/s/	David A. Wheat	Director, Executive Vice President and
	David A. Wheat	Chief Financial Officer
/s/	Bridget M. Healy	Director
	Bridget M. Healy
/s/	Robert G. Leary	Director
	Robert G. Leary
/s/	Thomas J. McInerney	Director and Chairman
	Thomas J. McInerney
/s/	Kathleen A. Murphy	Director
	Kathleen A. Murphy
/s/	Catherine H. Smith	Director
	Catherine H. Smith
/s/	Brian D. Comer	President
	Brian D. Comer
/s/	Steven T. Pierson	Senior Vice President and
	Steven T. Pierson	Chief Accounting Officer

129

	ING LIFE INSURANCE AND ANNUITY COMPANY
	FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 2007
	Exhibit Index
Exhibit	Description of Exhibit
Number
3.1+	Certificate of Incorporation as amended and restated October 1, 2007.
3.2+	Amended and Restated ING Life Insurance and Annuity Company By-Laws,
	effective October 1, 2007.

4.1	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.
4.2	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.
4.3	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.
4.4	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.
4.5	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.
4.6	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.
4.7	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.
4.8	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.
4.9	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.
4.10	Incorporated by reference to Registration Statement on Form N-4 (File No. 333- 01107), as filed on February 21, 1996.
4.11	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.
4.12	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.
4.13	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.

130

4.14	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.
4.15	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.
4.16	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.
4.17	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.
4.18	Incorporated by reference to Registration Statement on Form N-4 (File No. 333- 56297), as filed on June 8, 1998.
4.19	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.
4.20	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.
4.21	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.
4.22	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.
4.23	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.
4.24	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.
4.25	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.
4.26	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.
4.27	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.
4.28	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.
4.29	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.
4.30	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.

131

4.31	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.
4.32	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.
4.33	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.
4.34	Incorporated by reference to the Registration Statement on Form S-2 (File No. 33- 64331), as filed on November 16, 1995.
4.35	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.
4.36	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.
4.37	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.
4.38	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.
4.39	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.
4.40	Incorporated by reference to Registration Statement on Form N-4 (File No. 333- 109860), as filed on October 21, 2003.
4.41	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.
4.42	Incorporated by reference to Initial Registration Statement on Form N-4 (File No. 333-130822), as filed on January 3, 2006.
4.43	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.
4.44	Incorporated by reference to Registration Statement on Form N-4 (File No. 33- 59749), as filed on June 1, 1995.
4.45	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.
4.46	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.
4.47	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.

132

4.48	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.
4.49	Incorporated by reference to Registration Statement on Form S-2 (File No. 33- 63657), as filed on October 25, 1995.
4.50	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.
4.51	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.
4.52	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.
4.53	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.
4.54	Incorporated by reference to Registration Statement on Form N-4 (File No. 33- 59749), as filed on June 1, 1995.
4.55	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.
10.1	Tax Sharing Agreement, dated as of December 13, 2000, among Aetna Inc. renamed Lion, Aetna U.S. Healthcare, Inc. renamed Aetna Inc. and ING America Insurance Holdings, Inc., incorporated by reference to the Company’s Form 10-K filed on March 30, 2001 (File No. 33-23376).
10.2	Lease Agreement, dated as of December 13, 2000, by and between Aetna Life Insurance Company and ILIAC, incorporated by reference to the Company’s Form 10-K filed on March 30, 2001 (File No. 33-23376).
10.3	Real Estate Services Agreement, dated as of December 13, 2000, between Aetna Inc. and ILIAC, incorporated by reference to the Company’s Form 10-K filed on March 30, 2001 (File No. 33-23376).
10.4	Tax Sharing Agreement between ILIAC and ING Insurance Company of America, effective January 1, 2001, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.5	Tax Sharing Agreement between ILIAC, ING America Insurance Holdings, Inc. and affiliated companies, effective January 1, 2001, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.6	Investment Advisory Agreement between ILIAC and ING Investment Management LLC, dated March 31, 2001, as amended effective January 1, 2003, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033- 23376).

133

10.7	Reciprocal Loan Agreement between ILIAC and ING America Insurance Holdings, Inc., effective June 1, 2001, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.8	Services Agreement between ILIAC and the affiliated companies listed in Exhibit B to the Agreement, dated as of January 1, 2001, as amended effective January 1, 2002, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.9	Services Agreement between ILIAC and ING North America Insurance Corporation, dated as of January 1, 2001, as amended effective January 1, 2002, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033- 23376).
10.10	Services Agreement between ILIAC and ING Financial Advisers, LLC., effective June 1, 2002, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.11	Administrative Services Agreement between ILIAC, ReliaStar Life Insurance Company of New York and the affiliated companies specified in Exhibit A to the Agreement, effective March 1, 2003, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.12	First Amendment to the Administrative Services Agreement between ILIAC, RLNY and the affiliated companies specified in Exhibit A to the Agreement, effective as of August 1, 2004, incorporated by reference to the Company’s Form 10-K filed on March 31, 2005 (File No. 033-23376).
10.13	Amendment to Investment Advisory Agreement between ILIAC and ING Investment Management LLC, effective October 14, 2003, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
10.14	Surplus Note for $175,000,000 aggregate principal amount, dated December 29, 2004 issued by ING USA Annuity and Life Insurance Company to its affiliate, ILIAC, incorporated by reference to the Company’s Form 10-K filed on March 31, 2005 (File No. 033-23376).
10.15	Joinder Number 2006-1 to Tax Sharing Agreement, dated January 20, 2006, between ILIAC and ING America Insurance Holdings, Inc. and its subsidiaries, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2006 (File No. 033- 23376).
10.16	Amendment Number 2006-1 to Services Agreement, dated as of September 11, 2006, between ILIAC and ING North America Insurance Corporation, incorporated by reference to the Company’s Form 10-Q filed on November 13, 2006 (File No. 033- 22376).
10.17	First Amendment, dated August 14, 2006, to Lease Agreement, dated as of December 13, 2000, between Aetna Life Insurance Company and ILIAC, incorporated by reference to the Company’s Form 10-Q filed on November 13, 2006 (File No. 033- 23376).

134

10.18	Second Amendment, dated October 13, 2006, to the Lease Agreement, dated as of December 13, 2000, between Aetna Life Insurance Company and ILIAC, incorporated by reference to the Company’s Form 10-K filed on April 2, 2007 (File No. 033-23376).
10.19	Agreement A1A document A111-1997 Standard Form of Agreement between Owner and Contractor, as modified, dated September 6, 2006 between Northfield Windsor LLC and John Moriarty & Associates, Inc., incorporated by reference to the Company’s Form 8-K filed on September 11, 2006 (File/Film No. 033- 23376/061083829).
10.20	Form of Agreement, titled Assurance of Discontinuance Pursuant to Executive Law Sec. 63(15), between the Attorney General of the State of New York and ING Life Insurance and Annuity Company dated October 10, 2006, incorporated by reference to the Company’s Form 8-K filed on October 11, 2006 (File No. 033-23376).
10.21	Form of Agreement, titled Consent Agreement among the State of New Hampshire, Department of State, Bureau of Securities Regulation, ING Life Insurance and Annuity Company, and ING Financial Advisors, LLC dated October 10, 2006, incorporated by reference to the Company’s Form 8-K filed on October 11, 2006 (File No. 033-23376).

10.22+	Amendment Number 2007-1 to Reciprocal Loan Agreement, dated as of December
	31, 2007, between ILIAC and ING America Insurance Holdings, Inc.
10.23+	Amendment Number 2007-1 to Services Agreement, dated as of December 31, 2007,
	between ILIAC and affiliated insurance companies listed on Exhibit B to the
	Agreement.

10.24	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, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.25	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, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.26	Coinsurance Agreement, dated as of October 1, 1998, between Aetna Life Insurance and Annuity Company (nka ILIAC) and The Lincoln National Life Insurance Company, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.27	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, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).

135

10.28	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, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.29	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, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.30	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, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.31	Amendment No. 1 to Coinsurance Agreement, effective March 1, 2007, between ILIAC and Lincoln Life & Annuity Company of New York, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.32	Amendment No. 1 to Coinsurance Agreement, effective March 1, 2007, between ILIAC and Lincoln Life & Annuity Company of New York, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.33	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, incorporated by reference to the Company’s Form 10-Q filed on May 15, 2007 (File No. 033-23376).
10.34	+ Services Agreement, effective as of January 1, 1994 and dated March 7, 1995, as

amended March 7, 1995 and as amended July 31, 2007, between Golden American
Life Insurance Company (nka ING USA Annuity and Life Insurance Company) &
Directed Services Inc. (nka Directed Services LLC).

14.	ING Code of Ethics for Financial Professionals, incorporated by reference to the Company’s Form 10-K filed on March 29, 2004 (File No. 033-23376).
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.

⁺ Filed herewith.

136

Exhibit 31.1

CERTIFICATION

I, David A. Wheat, certify that:

1.	I have reviewed this annual report on Form 10-K of ING Life Insurance and Annuity Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	March 25, 2008
By: /s/	David A. Wheat
	David A. Wheat
	Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)

Exhibit 31.2

CERTIFICATION

I, Brian D. Comer, certify that:

1.	I have reviewed this annual report on Form 10-K of ING Life Insurance and Annuity Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	March 25, 2008
By: /s/	Brian D. Comer
	Brian D. Comer
	President
	(Duly Authorized Officer and Principal Officer)

Exhibit 32.1

CERTIFICATION

Pursuant to 18 U.S.C. §1350, the undersigned officer of ING Life Insurance and Annuity Company
(the “Company”) hereby certifies that, to the officer’s knowledge, the Company’s Annual Report
on Form 10-K for the year ended December 31, 2007 (the “Report”) fully complies with the
requirements of Section 13 or 15(d), as applicable, of the Securities Exchange Act of 1934 and
that the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.

March 25, 2008	By: /s/	David A. Wheat
(Date)		David A. Wheat
		Executive Vice President and
		Chief Financial Officer

Exhibit 32.2

CERTIFICATION

Pursuant to 18 U.S.C. §1350, the undersigned officer of ING Life Insurance and Annuity Company
(the “Company”) hereby certifies that, to the officer’s knowledge, the Company’s Annual Report
on Form 10-K for the year ended December 31, 2007 (the “Report”) fully complies with the
requirements of Section 13 or 15(d), as applicable, of the Securities Exchange Act of 1934 and
that the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.

March 25, 2008	By: /s/	Brian D. Comer
(Date)		Brian D. Comer
		President

	PART II
	INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.	Other Expenses of Issuance and Distribution

Not Applicable.

Item 14. Indemnification of Directors and Officers

Section 33-779 of the Connecticut General Statutes (“CGS”) provides that a corporation may provide
indemnification of or advance expenses to a director, officer, employee or agent only as permitted by Sections 33-
770 to 33-778, inclusive, of the Connecticut General Statutes, as amended by Sections 12 to 20, inclusive, of the
CGS. Reference is hereby made to Section 33-771(e) of the CGS regarding indemnification of directors and Section
33-776(d) of CGS regarding indemnification of officers, employees and agents of Connecticut corporations. These
statutes provide in general that Connecticut corporations incorporated prior to January 1, 1997 shall, except to the
extent that their certificate of incorporation expressly provides otherwise, indemnify their directors, officers,
employees and agents against “liability” (defined as the obligation to pay a judgment, settlement, penalty, fine,
including an excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with
respect to a proceeding) when (1) a determination is made pursuant to Section 33-775 that the party seeking
indemnification has met the standard of conduct set forth in Section 33-771 or (2) a court has determined that
indemnification is appropriate pursuant to Section 33-774. Under Section 33-775, the determination of and the
authorization for indemnification are made (a) by two or more disinterested directors, as defined in Section 33-
770(3); (b) by special legal counsel; (c) by the shareholders; or (d) in the case of indemnification of an officer, agent
or employee of the corporation, by the general counsel of the corporation or such other officer(s) as the board of
directors may specify. Also, Section 33-772 with Section 33-776 provide that a corporation shall indemnify an
individual who was wholly successful on the merits or otherwise against reasonable expenses incurred by him in
connection with a proceeding to which he was a party because he is or was a director, officer, employee, or agent of
the corporation. Pursuant to Section 33-771(d), in the case of a proceeding by or in the right of the corporation or
with respect to conduct for which the director, officer, agent or employee was adjudged liable on the basis that he
received a financial benefit to which he was not entitled, indemnification is limited to reasonable expenses incurred
in connection with the proceeding against the corporation to which the individual was named a party.

Section 33-777 of the statute does specifically authorize a corporation to procure indemnification insurance on
behalf of an individual who was a director, officer, employee or agent of the corporation. Consistent with the
statute, ING Groep N.V. maintains an umbrella insurance policy with an international insurer. The policy covers
ING Groep N.V. and any company in which ING Groep N.V. has controlling interest of 50% or more. This would
encompass the principal underwriter as well as the depositor. The policy provides for the following types of
coverage: errors and omissions, directors and officers, employment practices, fiduciary and fidelity.

Section 20 of the ING Financial Advisers, LLC Limited Liability Company Agreement executed as of November
28, 2000 provides that ING Financial Advisers, LLC will indemnify certain persons against any loss, damage, claim
or expenses (including legal fees) incurred by such person if he is made a party or is threatened to be made a party to
a suit or proceeding because he was a member, officer, director, employee or agent of ING Financial Advisers, LLC,
as long as he acted in good faith on behalf of ING Financial Advisers, LLC and in a manner reasonably believed to
be within the scope of his authority. An additional condition requires that no person shall be entitled to indemnity if
his loss, damage, claim or expense was incurred by reason of his gross negligence or willful misconduct. This
indemnity provision is authorized by and is consistent with Title 8, Section 145 of the General Corporation Law of
the State of Delaware.

Item 15. Recent Sales of Unregistered Securities

Not Applicable.

Item 16. Exhibits and Financial Statement Schedules

(a)	Furnish the exhibits as required by Item 601 of Regulation S-K (§229.601):
	(1)(a)	Underwriting Agreement dated November 17, 2000 between Aetna Life Insurance and
		Annuity Company and Aetna Investment Services, LLC · Incorporated by reference to Pre-
		Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 33-49176), as
		filed on November 30, 2000.
	(1)(b)	Confirmation of Underwriting Agreement · Incorporated by reference to Registration
		Statement on Form S-1 (File No. 333-133158, Accession No. 0000836687-06-000199), as
		filed on April 10, 2006.
	(3)(a)	Restated Certificate of Incorporation (amended and restated as of January 1, 2002) of ING Life
		Insurance and Annuity Company (formerly Aetna Life Insurance and Annuity Company) ·
		Incorporated by reference to ING Life Insurance and Annuity Company annual report on Form
		10-K (File No. 033-23376), as filed on March 28, 2002.
	(3)(b)	Amended and Restated By-Laws of ING Life Insurance and Annuity Company, effective
		January 1, 2005 · Incorporated by reference to the ILIAC 10-Q, as filed on May 13, 2005 (File
		No. 033-23376, Accession No. 0001047469-05-014783).
	(4)(a)	Group Annuity Contract (Form No. G1-MGA-95) · Incorporated by reference to the
		Registration Statement on Form S-2 (File No. 33-64331), as filed on November 16, 1995.
	(4)(b)	Individual Annuity Contract (Form No. I1-MGA-95) · Incorporated by reference to Pre-
		Effective Amendment No. 2 to Registration Statement on Form S-2 (File No. 33-64331), as
		filed on January 17, 1996.
	(4)(c)	Certificate (G1CC-MGA-95) to Group Annuity Contract Form No. G1-MGA-95 ·
		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.
	(4)(d)	Endorsement (E1-MGAIRA-95-2) to Group Annuity Contract Form No. G1-MGA-95 and
		Certificate No. G1CC-MGA-95 · 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.
	(4)(e)	Endorsement (E1-MGAROTH-97) to Group Annuity Contract Form No. G1-MGA-95 and
		Certificate No. G1CC-MGA-95 · 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.
	(4)(f)	Endorsement ENMCHGI (5/02) (Name Change) · Incorporated by reference to the
		Registration Statement on Form S-2 (File No. 333-86276), as filed on April 15, 2002.
	(5)	Opinion as to Legality, attached.
	(10)	Material contracts are listed under Item 15 in the Company’s Form 10-K for the fiscal year
		ended December 31, 2007 (File No. 33-23376), as filed with the commission on March 31,
		2008. Each of the Exhibits so listed is incorporated by reference as indicated in the Form 10-K.
	(21)	Subsidiaries of the Registrant · Incorporated herein by reference to Item 26 in Post-Effective
		Amendment No. 10 to Registration Statement on Form N-4 for Variable Annuity Account C of
		ING Life Insurance and Annuity Company (File No. 333-105479), as filed with the Securities
		and Exchange Commission on April 11, 2008.
	(23)(a)	Consent of Independent Registered Public Accounting Firm, attached.

	(23)(b)	Consent of Legal Counsel (included in Exhibit (5) above).
	(24)(a)	Powers of Attorney, attached.
	(24)(b)	Certificate of Resolution Authorizing Signature by Power of Attorney · 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.
(b)	ING Life Insurance and Annuity Company Form 10-K for the fiscal year ended December 31, 2007 is
incorporated in Part I within the Prospectus.
Exhibits other than these listed are omitted because they are not required or are not applicable.
Item 17. Undertakings
The undersigned registrant hereby undertakes as follows, pursuant to Item 512 of Regulation S-K:
(a)	Rule 415 offerings:
	(1)	To file, during any period in which offers or sales of the registered securities are being made, a
		post-effective amendment to this registration statement:
		(i)	To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
		(ii)	To reflect in the prospectus any facts or events arising after the effective date of the
			registration statement (or the most recent post-effective amendment thereof) which,
			individually or in the aggregate, represent a fundamental change in the information set
			forth in the registration statement; and
		(iii)	To include any material information with respect to the plan of distribution not previously
			disclosed in the registration statement or any material changes to such information in the
			registration statement.
	(2)	That, for the purpose of determining any liability under the Securities Act of 1933, each such
		post-effective amendment shall be deemed to be a new registration statement relating to the
		securities offered therein, and the offering of such securities at that time shall be deemed to be
		the initial bona fide offering thereof.
	(3)	To remove from registration by means of a post-effective amendment any of the securities being
		registered which remain unsold at the termination of the offering.
	(5)(ii)	That for, the purpose of determining liability under the Securities Act of 1933 to any purchaser,
		each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an
		offering, other than registration statements relying on Rule 430B or other than prospectuses
		filed in reliance on Rule 430A shall be deemed to be part of and included in the registration
		statement as of the date it is first used after effectiveness. Provided, however, that no statement
		made in a registration statement or prospectus that is part of the registration statement or made
		in a document incorporated or deemed incorporated by reference into the registration statement
		or prospectus that is part of the registration statement will, as to a purchaser with a time of
		contract of sale prior to such first use, supersede or modify any statement that was made in the
		registration statement or prospectus that was part of the registration statement or made in any
		such document immediately prior to such date of first use.
	(6)	That, for the purpose of determining liability of the registrant under the Securities Act of 1933
		to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes

that in a primary offering of securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to the purchaser, if
the securities are offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such purchaser: (i) any preliminary prospectus or
prospectus of the undersigned registrant relating to the offering required to be filed pursuant to
Rule 424; (ii) any free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned registrant; (iii) the portion of
any other free writing prospectus relating to the offering containing material information about
the undersigned registrant or its securities provided by or on behalf of the undersigned
registrant; and (iv) any other communication that is an offer in the offering made by the
undersigned registrant to the purchaser.

(h)	Request for Acceleration of Effective Date:
	Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to
	directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or
	otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission
	such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In
	the event that a claim for indemnification against such liabilities (other than the payment by the registrant
	of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful
	defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in
	connection with the securities being registered, the registrant will, unless in the opinion of its counsel the
	matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question
	whether such indemnification by it is against public policy as expressed in the Act and will be governed by
	the final adjudication of such issue.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Post-Effective
Amendment No. 2 to the Registration Statement on Form S-1 (File No. 333-133158) to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of West Chester, Commonwealth of Pennsylvania, on this 21^st
day of April, 2008.

By:	ING LIFE INSURANCE AND ANNUITY COMPANY
	(REGISTRANT)
By:
	Richard T. Mason*
	President (Principal Executive Officer)

By:	/s/ John S. Kreighbaum
	John S. (Scott) Kreighbaum as
	Attorney-in-Fact

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 2 to the Registration
Statement has been signed by the following persons in the capacities and on April 21, 2008.

Signature	Title
Richard T. Mason*	President
	(Principal Executive Officer)
Thomas J. McInerney*	Director and Chairman
Kathleen A. Murphy*	Director
Catherine H. Smith*	Director
Bridget M. Healy*	Director
Robert G. Leary*	Director
David A. Wheat*	Director and Chief Financial Officer
Steven T. Pierson*	Chief Accounting Officer
By: /s/ John S. Kreighbaum
John S. (Scott) Kreighbaum as Attorney-in-Fact

*Executed by John S. (Scott) Kreighbaum on behalf of those indicated pursuant to Powers of Attorney.

	EXHIBIT INDEX
Exhibit No.	Exhibit
(5)	Opinion as to Legality	EX-5
(23)(a)	Consent of Independent Registered Public Accounting Firm	EX-23.A
(23)(b)	Consent of Legal Counsel	*
(24)(a)	Powers of Attorney	EX-24.A
*Included in Exhibit (5) above