UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2006 OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to
Commission File Number: 333-133091
RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK (Exact name of registrant as specified in its charter)
New York (State or other jurisdiction of incorporation or organization) 1000 Woodbury Road, Suite 208, Woodbury, New York (Address of principal executive offices)		53-0242530 (IRS Employer Identification No.) 11797 (Zip Code)
(516) 682-8700 (Registrant's telephone number, including area code)

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

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 1,377,863 shares of Common Stock, $2 par value, as of August 11, 2006, are authorized, issued, and outstanding, all of which were directly owned by ReliaStar Life Insurance Company.

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

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Form 10-Q for the period ended June 30, 2006

	INDEX
		PAGE
PART I.	FINANCIAL INFORMATION (Unaudited)

Item 1.	Financial Statements:
	Condensed Statements of Operations	3
	Condensed Balance Sheets	4
	Condensed Statements of Changes in Shareholder's Equity	6
	Condensed Statements of Cash Flows	7
	Notes to Condensed Financial Statements	8

Item 2.	Management’s Narrative Analysis of the Results of Operations and Financial Condition	19

Item 4.	Controls and Procedures	36


PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 6.	Exhibits	44

Signature		46

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

PART I. FINANCIAL INFORMATION (UNAUDITED)

Item 1. Financial Statements

Condensed Statements of Operations

(Unaudited)

(In millions)

				Three Months Ended June 30,				Six Months Ended June 30,
				2006		2005		2006		2005
Revenues:
	Net investment income		$	28.5	$	29.1	$	56.4	$	58.3
	Fee income			27.3		25.2		53.3		50.0
	Premiums			6.4		17.7		27.6		36.3
	Net realized capital (losses) gains			(1.2)		5.9		(6.8)		7.0
	Other income			1.8		-		1.8		0.1
Total revenue				62.8		77.9		132.3		151.7
Benefits and expenses:
	Interest credited and other benefits
		to policyholders/contractowners		35.4		45.2		86.7		92.4
	Operating expenses			14.1		16.0		31.2		31.7
	Amortization of deferred policy acquisition
		costs and value of business acquired		3.0		3.3		5.0		3.7
	Interest expense			0.1		-		0.1		-
Total benefits and expenses				52.6		64.5		123.0		127.8
Income before income taxes				10.2		13.4		9.3		23.9
Income tax expense				3.6		4.7		3.2		8.3
Net income			$	6.6	$	8.7	$	6.1	$	15.6

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

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Condensed Balance Sheets

(In millions, except share data)

				As of		As of
				June 30,		December 31,
				2006		2005
				(Unaudited)
Assets
Investments:
	Fixed maturities, available-for-sale, at fair value
		(amortized cost of $1,591.4 at 2006 and $1,608.4 at 2005)	$	1,549.8	$	1,611.9
	Equity securities, available-for-sale, at fair value
		(cost of $4.9 at 2006 and $4.8 at 2005)		5.6		4.5
	Mortgage loans on real estate			174.8		191.0
	Policy loans			94.9		93.4
	Short-term investments			0.4		5.0
	Other investments			18.8		19.9
	Securities pledged
		(amortized cost of $124.4 at 2006 and $118.6 at 2005)		118.5		115.1
Total investments				1,962.8		2,040.8
Cash and cash equivalents				24.0		41.5
Short-term investments under securities loan agreement				51.0		17.3
Accrued investment income				17.8		18.2
Reinsurance recoverable				123.1		100.3
Due from affiliates				1.3		0.5
Deferred policy acquisition costs				106.4		92.7
Value of business acquired				51.7		43.3
Current income taxes				0.4		-
Deferred income taxes				37.6		39.2
Other assets				19.8		19.4
Assets held in separate accounts				724.6		653.7
Total assets			$	3,120.5	$	3,066.9

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

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Condensed Balance Sheets

(In millions, except share data)

				As of		As of
				June 30,		December 31,
				2006		2005
				(Unaudited)
Liabilities and Shareholder's Equity
Future policy benefits and claims reserves			$	1,821.3	$	1,803.5
Payables under securities loan agreement				51.0		17.3
Borrowed money				68.8		97.7
Due to affiliates				13.6		11.8
Current income taxes				-		0.1
Other liabilities				45.2		44.9
Liabilities related to separate accounts				724.6		653.7
Total liabilities				2,724.5		2,629.0

Shareholder's equity:
	Common stock (1,377,863 shares authorized, issued,
		and outstanding; $2 per share value)		2.8		2.8
	Additional paid-in capital			1,138.6		1,152.2
	Accumulated other comprehensive loss			(34.8)		(0.4)
	Retained earnings (deficit)			(710.6)		(716.7)
Total shareholder's equity				396.0		437.9
Total liabilities and shareholder's equity			$	3,120.5	$	3,066.9

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

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Condensed Statements of Changes in Shareholder’s Equity

(Unaudited)

(In millions)

											Accumulated
									Additional		Other		Retained		Total
							Common		Paid-In		Comprehensive		Earnings		Shareholder's
							Stock		Capital		Income (Loss)		(Deficit)		Equity
Balance at December 31, 2004						$	2.8	$	1,172.7	$	29.6	$	(753.5)	$	451.6
	Comprehensive income:
		Net income					-		-		-		15.6		15.6
		Other comprehensive income,
			net of tax:
				Change in net unrealized capital income
					(loss) on securities ($(7.7) pretax)		-		-		(5.0)		-		(5.0)
	Total comprehensive income														10.6
	Dividends paid						-		(10.4)		-		-		(10.4)
	Employee share-based payments						-		0.1		-		-		0.1
Balance at June 30, 2005						$	2.8	$	1,162.4	$	24.6	$	(737.9)	$	451.9

Balance at December 31, 2005						$	2.8	$	1,152.2	$	(0.4)	$	(716.7)	$	437.9
	Comprehensive loss:
		Net income					-		-		-		6.1		6.1
		Other comprehensive loss,
			net of tax:
				Change in net unrealized capital gain (loss)
					on securities ($(33.2) pretax), including
					tax valuation allowance of $(13.0)		-		-		(34.4)		-		(34.4)
	Total comprehensive loss														(28.3)
	Dividends paid						-		(13.8)		-		-		(13.8)
	Employee share-based payments						-		0.2		-		-		0.2
Balance at June 30, 2006						$	2.8	$	1,138.6	$	(34.8)	$	(710.6)	$	396.0

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

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Condensed Statements of Cash Flows

(Unaudited)

(In millions)

				Six Months Ended June 30,
				2006		2005

Net cash provided by operating activities			$	29.3	$	9.8

Cash Flows from Investing Activities:
	Proceeds from the sale, maturity, or redemption of:
		Fixed maturities, available-for-sale		787.8		1,047.2
		Equity securities, available-for-sale		-		2.2
		Mortgage loans on real estate		16.6		11.3
	Acquisition of:
		Fixed maturities, available-for-sale		(787.2)		(1,073.5)
		Equity securities, available-for-sale		(0.1)		(0.1)
		Mortgage loans on real estate		-		(4.0)
	Short-term investments			4.9		(3.5)
	Other			(0.6)		(1.3)
Net cash provided by (used in) investing activities				21.4		(21.7)

Cash Flows from Financing Activities:
	Deposits received for investment contracts			78.9		94.0
	Maturities and withdrawals from investment contracts			(104.4)		(92.7)
	Short-term borrowings, net			(28.9)		(2.3)
	Dividends to Parent			(13.8)		(10.4)
Net cash used in financing activities				(68.2)		(11.4)
Net decrease in cash and cash equivalents				(17.5)		(23.3)
Cash and cash equivalents, beginning of period				41.5		33.5
Cash and cash equivalents, end of period			$	24.0	$	10.2

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

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

1.	Organization and Significant Accounting Policies

Basis of Presentation

ReliaStar Life Insurance Company of New York (“RLNY” or the “Company,” as appropriate) is a stock life insurance company domiciled in the State of New York and provides financial products and services in the United States. RLNY is authorized to conduct its insurance business in all states and the District of Columbia.

RLNY is a direct, wholly-owned subsidiary of ReliaStar Life Insurance Company (“ReliaStar Life” or “Parent”), which is a direct, wholly-owned subsidiary of Lion Connecticut Holdings Inc. (“Lion”), a Connecticut holding and management company. Lion is an indirect, wholly-owned subsidiary of ING Groep N.V. (“ING”). ING is a global financial services holding company based in The Netherlands, with American Depository Shares listed on the New York Stock Exchange under the symbol "ING".

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

The condensed financial statements reflect all adjustments (consisting only of normal, recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations, and cash flows, for the interim periods. These condensed financial statements and notes should be read in conjunction with the financial statements and related notes as presented in the Company’s 2005 Annual Report on Form 10-K. The results of operations for the interim periods may not be considered indicative of results to be expected for the full year.

Description of Business

The Company principally provides and distributes life insurance and related financial services products, including individual life insurance and annuities and group life and health insurance products and services. The Company’s strategy is to offer a wide variety of products and services designed to address customer needs for financial security, especially tax-advantaged savings for retirement and protection in the event of death.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements and accompanying notes. Actual results could differ from reported results using those estimates.

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

Reclassifications

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

Significant Accounting Policies

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

2.	Recently Adopted Accounting Standards

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

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

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

FSP FAS No. 115-1 was effective for reporting periods beginning after December 15, 2005, and was implemented by the Company during the fourth quarter of 2005. The Company recognized impairment losses of $0.2 and $3.5 for the three and six months ended June 30, 2006, respectively, related to investments that the Company does not have the intent to retain for a period of time sufficient to allow for recovery in fair value. The required disclosures are included in the Investments footnote.

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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

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

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

3.	New Accounting Standards

Accounting for Uncertainty in Income Taxes

In June 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which creates a single model to address the accounting for the uncertainty in income tax positions recognized in a company’s financial statements in accordance with FAS No. 109, “Accounting for Income Taxes.”

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

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

classification, interest and penalties, accounting in interim periods, disclosure, and transition.

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

Accounting for Servicing of Financial Assets

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

•

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

•

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

•

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

•

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

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

Accounting for Certain Hybrid Financial Instruments

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

•

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

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

•

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 is effective for all instruments acquired, issued, or subject to a remeasurement event, occurring after the beginning of the first fiscal year that commences after September 15, 2006. The Company is in the process of determining the impact of FAS No. 155.

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

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

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

SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006, with earlier adoption encouraged. The Company is in the process of determining the impact of adoption of SOP 05-1.

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

4.	Investments

Equity Securities

Equity securities, available-for-sale, included investments with a fair value of $3.0 in ING proprietary funds as of June 30, 2006. There were no investments in ING proprietary funds as of December 31, 2005.

Other-Than-Temporary Impairments

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

		Three Months Ended June 30,
		2006			2005
			No. of			No. of
		Impairment	Securities		Impairment	Securities
U.S. Treasuries/Agencies	$	0.2	2	$	-	-
Other asset-backed		-	-		0.5	1
Total	$	0.2	2	$	0.5	1

		Six Months Ended June 30,
		2006			2005
			No. of			No. of
		Impairment	Securities		Impairment	Securities
U.S. Treasuries/Agencies	$	0.8	2	$	-	-
U.S. corporate		2.4	10		-	-
Foreign⁽¹⁾		0.3	2		-	-
Other asset-backed		-	-		0.5	1
Total	$	3.5	14	$	0.5	1

⁽¹⁾ Primarily U.S. dollar denominated.

The remaining fair value of investments with other-than-temporary impairments at June 30, 2006 was $32.1.

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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

5.	Deferred Policy Acquisition Costs and Value of Business Acquired

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

				2006		2005
Balance at January 1			$	92.7	$	77.7
	Deferrals of commission and expenses			13.5		8.8
	Amortization:
		Amortization		(5.1)		(2.2)
		Interest accrued at 5% to 7%		2.4		2.0
	Net amortization included in the Condensed
		Statements of Operations		(2.7)		(0.2)
	Change in unrealized capital (gains) losses on
		available-for-sale securities		2.9		(0.8)
Balance at June 30			$	106.4	$	85.5

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

				2006		2005
Balance at January 1			$	43.3	$	33.7
	Deferrals of commission and expenses			0.3		0.3
	Amortization:
		Amortization		(3.4)		(4.5)
		Interest accrued at 3% to 7%		1.1		1.0
	Net amortization included in the Condensed
		Statements of Operations		(2.3)		(3.5)
	Change in unrealized capital (gains) losses on
		available-for-sale securities		10.4		2.6
Balance at June 30			$	51.7	$	33.1

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

6.	Capital Contributions and Dividends

During the six months ended June 30, 2006 and 2005, the Company did not receive any capital contributions from its parent.

During the six months ended June 30, 2006 and 2005, the Company paid $13.8 and $10.4, respectively, in dividends on its common stock to its parent.

7.	Income Taxes

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

The effective tax rates for the three months ended June 30, 2006 and 2005, were 34.7% and 35.1%, respectively. The effective tax rates for the six months ended June 30, 2006 and 2005, were 34.2% and 34.7%, respectively. The decrease in effective tax rate for both the three months ended and the six months ended June 30, 2006 and June 30, 2005 is primarily due to an increase in the deduction allowed for dividends received.

A $13.0 valuation allowance was established as of June 30, 2006 related to unrealized capital losses on investments and is included in Accumulated other comprehensive income (loss). The Company had no valuation allowance as of December 31, 2005.

8.	Financing Agreements

Line-of-Credit

The Company maintains a $30.0 uncommitted line-of-credit agreement with Svenska Handelsbanken AB (Publ.) (“Svenska”), effective June 2, 2006. Borrowings are guaranteed by ING AIH, with maximum aggregate borrowings outstanding at anytime to ING AIH and its affiliates of $100.0. Interest on any of the Company 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 no interest expense for the three months ended June 30, 2006. As of June 30, 2006, the Company had no amounts outstanding under the line-of-credit agreement.

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

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

9.	Commitments and Contingent Liabilities

Commitments

Through the normal course of investment operations, the Company commits to either purchase or sell securities, commercial mortgage loans, or money market instruments, at a specified future date and at a specified price or yield. The inability of counterparties to honor these commitments may result in either a higher or lower replacement cost. Also, there is likely to be a change in the value of the securities underlying the commitments. At June 30, 2006, the Company had off-balance sheet commitments to purchase investments equal to their fair value of $13.8, $5.5 of which was with related parties. At December 31, 2005, the Company had off-balance sheet commitments to purchase investments equal to their fair value of $10.2, $0.7 of which was with related parties. During the three and six months ended June 30, 2006, $0.1 was funded to related parties under these commitments.

Financial Guarantees

The Company owns a 3-year credit-linked note arrangement whereby the Company will reimburse the guaranteed party upon payment default of the referenced obligation. Upon such default, the Company reimburses the guaranteed party for the loss under the reference obligation, and the Company receives that reference obligation in settlement. The Company can then recover any losses under the agreement by sale or collection of the received reference obligation. As of June 30, 2006, the maximum potential future exposure to the Company under the guarantee was $3.0.

Litigation

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

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

10.

Accumulated Other Comprehensive Income (Loss)

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

			2006		2005
Net unrealized capital gains (losses):
	Fixed maturities, available-for-sale	$	(47.5)	$	49.2
	Equity securities, available-for-sale		0.7		0.7
	DAC/VOBA adjustment on available-for-sale securities		13.3		(12.3)
Unrealized capital (losses) gains before tax			(33.5)		37.6
Deferred income tax asset (liability)			11.7		(13.0)
Deferred tax asset valuation allowance			(13.0)		-
Accumulated other comprehensive (loss) income		$	(34.8)	$	24.6

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

			2006		2005
Net unrealized capital holding (losses) gains arising
	during the period⁽¹⁾	$	(25.8)	$	0.5
Less: reclassification adjustment for (losses) gains and other
	items included in net income⁽²⁾		(4.4)		5.5
Net change in unrealized capital losses on securities		$	(21.4)	$	(5.0)

⁽¹⁾

Pretax unrealized capital holding (losses) gains arising during the period were $(40.1) and $0.7 for the six months ended June 30, 2006 and 2005, respectively.

⁽²⁾

Pretax reclassification adjustments for (losses) gains and other items included in net income were $(6.9) and $8.4, for the six months ended June 30, 2006 and 2005, respectively.

ReliaStar Life Insurance Company of New York

(A wholly-owned subsidiary of ReliaStar Life Insurance Company)

Notes to Condensed Financial Statements (Unaudited)

(Dollar amounts in millions, unless otherwise stated)

11.

Subsequent Event

On August 4, 2006, an arbitration panel (“Panel”) issued an interim award in favor of the Company in an arbitration relating to a dispute over two modified coinsurance agreements (“Agreements”). Under the terms of the interim award, the Agreements remain in force and the Company was awarded outstanding settlements, including interest, through April 30, 2006 and monthly settlements after April, 30, 2006. In addition, the interim award directs the Company to pay the reinsurer for various oversights and omissions. As a result the Company recognized $5.1 in net after-tax income in the second quarter of 2006. The interim award establishes a timeline whereby the parties are required to try to reach an agreement regarding their respective roles in managing the reinsured block of business going forward and the amounts of various oversights and omissions and, if the parties cannot reach agreement on these issues for the Panel to issue an additional award.

Item 2.

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

(Dollar amounts in millions, unless otherwise stated)

Overview

The following narrative analysis presents a review of the results of operations of ReliaStar Life Insurance Company of New York (“RLNY” or the “Company,” as appropriate) for the three and six months ended June 30, 2006 and 2005 and financial condition as of June 30, 2006 and December 31, 2005. This item should be read in its entirety and in conjunction with the condensed financial statements and related notes, which can be found under Part I, Item 1 contained herein, as well as the “Management’s Narrative Analysis of the Results of Operations and Financial Condition” section contained in the Company’s 2005 Annual Report on Form 10-K.

Forward-Looking Information/Risk Factors

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

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

(1)

changes in underwriting and actual experience could materially affect profitability;

(2)

changes in reserve estimates may reduce profitability;

(3)

efforts to reduce the impact of interest rate changes on profitability and financial condition may not be effective;

(4)

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 policyholders and contractowners;

(5)

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

(6)

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

(7)

the continued availability of capital may affect the ability to grow;

(8)

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

(9)

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

(10)

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

(11)

litigation may adversely affect profitability and financial condition;

(12)

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

(13)

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

(14)

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

(15)

reinsurance may be unavailable at historical levels and prices, which may limit the ability to sell new business; and

(16)

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

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

Critical Accounting Policies

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

Results of Operations

Overview

The Company principally provides and distributes life insurance and related financial services products, including individual life insurance and annuities and group life and health products and services. The Company’s strategy is to offer a wide variety of products and services designed to address customer needs for financial security, especially tax-advantaged savings for retirement and protection in the event of death.

The Company derives its revenue mainly from (a) investment income earned on fixed assets under management (“AUM”), (b) fee income consisting of mortality, expense, and surrender charges on universal life, variable life, and annuity products, and (c) premiums on individual term life, group life, and health insurance products. The

Company’s expenses primarily consist of (a) interest credited on annuity and life insurance products, (b) claims paid on term life insurance, universal life, and variable universal life policies, as well as benefits paid on health insurance policies, (c) other policy maintenance and general business expenses, and (d) amortization of deferred policy acquisition costs (“DAC”) and value of business acquired (“VOBA”).

Economic Analysis

The current economic environment presents challenges and opportunities for the Company and the insurance industry. The Company’s sales and financial results continue to be affected by economic trends.

On the positive side, regardless of the drop in the second quarter of 2006, the equity market performance improved in comparison with 2005. This improvement has presented opportunities for life insurers, as fee revenue from variable products has a direct correlation with equity market performance. Also, variable product demand has grown with consumer demand for equity investments.

On the opposite side, rising interest rates negatively impacted the fair value of the Company's fixed maturities portfolio and resulted in realized capital losses on the sale of investments. Furthermore, during the first half of 2006, the market experienced a flat yield curve, with negligible extra yield on a ten-year bond versus a five-year bond. This flat yield curve hurt the competitiveness of fixed annuities as compared to other short-term instruments.

The Company’s results of operations for the three and six months ended June 30, 2006, and changes therein, were primarily impacted by an arbitration panel interim award ("Interim Award") in an arbitration relating to a dispute over reinsurance agreements, as well as changing interest rate and equity market conditions. As a result of the Interim Award, the Company recognized $5.1 in net after-tax income in the second quarter of 2006. The increase in interest rates had a negative impact on fixed AUM and resulted in higher realized capital losses on the sale of investments. Improved performance of equity markets, however, had a favorable effect on the sales of variable annuity products and on the Company’s variable AUM.

				Three Months Ended June 30,				$ Increase	% Increase
				2006		2005		(Decrease)	(Decrease)
Revenues:
	Net investment income		$	28.5	$	29.1	$	(0.6)	(2.1)%
	Fee income			27.3		25.2		2.1	8.3%
	Premiums			6.4		17.7		(11.3)	(63.8)%
	Net realized capital (losses) gains			(1.2)		5.9		(7.1)	(120.3)%
	Other income			1.8		-		1.8	NM
Total revenue				62.8		77.9		(15.1)	(19.4)%
Benefits and expenses:
	Interest credited and other
		benefits to policyholders/
		contractowners		35.4		45.2		(9.8)	(21.7)%
	Operating expenses			14.1		16.0		(1.9)	(11.9)%
	Amortization of deferred policy
		acquisition costs and value
		of business acquired		3.0		3.3		(0.3)	(9.1)%
	Interest expense			0.1		-		0.1	NM
Total benefits and expenses				52.6		64.5		(11.9)	(18.4)%
Income before income taxes				10.2		13.4		(3.2)	(23.9)%
Income tax expense				3.6		4.7		(1.1)	(23.4)%
Net income			$	6.6	$	8.7	$	(2.1)	(24.1)%
Effective tax rate				34.7%		35.1%

NM - Not meaningful.

				Six Months Ended June 30,				$ Increase	% Increase
				2006		2005		(Decrease)	(Decrease)
Revenues:
	Net investment income		$	56.4	$	58.3	$	(1.9)	(3.3)%
	Fee income			53.3		50.0		3.3	6.6%
	Premiums			27.6		36.3		(8.7)	(24.0)%
	Net realized capital (losses) gains			(6.8)		7.0		(13.8)	NM
	Other income			1.8		0.1		1.7	NM
Total revenue				132.3		151.7		(19.4)	(12.8)%
Benefits and expenses:
	Interest credited and other
		benefits to policyholders/
		contractowners		86.7		92.4		(5.7)	(6.2)%
	Operating expenses			31.2		31.7		(0.5)	(1.6)%
	Amortization of deferred policy
		acquisition costs and value
		of business acquired		5.0		3.7		1.3	35.1%
	Interest expense			0.1		-		0.1	NM
Total benefits and expenses				123.0		127.8		(4.8)	(3.8)%
Income before income taxes				9.3		23.9		(14.6)	(61.1)%
Income tax expense				3.2		8.3		(5.1)	(61.4)%
Net income			$	6.1	$	15.6	$	(9.5)	(60.9)%
Effective tax rate				34.2%		34.7%

NM - Not meaningful.

Revenues

The decrease in total revenue for the three and six months ended June 30, 2006, was primarily driven by premiums ceded related to the Interim Award and higher Net realized capital losses on investments in fixed maturities. The decrease in Premiums for the three and six months ended June 30, 2006, is primarily related to reinsurance premiums ceded related to the Interim Award, partially offset by higher sales of stop-loss products and an increase in the Company’s participation in the Servicemembers Group Life Insurance reinsurance program.

Net realized capital losses are attributable to the increasing interest rate environment during the first half of 2006 and higher other-than-temporary impairments recognized in the first quarter of 2006.

Fee income increased for the three and six months ended June 30, 2006, due to higher variable AUM, as a result of favorable equity market returns and higher sales of variable annuity products, especially those with minimum guarantees.

Other income increased for the three and six months ended June 30, 2006, due to interest on the reinsurance settlement included in the Interim Award.

Benefits and Expenses

Total benefits and expenses decreased primarily due to the Interim Award. The decrease in Interest credited and other benefits to policyholders/contractowners is primarily related to the ceding of reinsurance benefits related to the Interim Award, partially offset by unfavorable claim experience on the stop-loss block of business and discontinued group products.

Operating expenses decreased for the three and six months ended June 30, 2006, mainly due to the ceding of expenses in conjunction with the Interim Award, partially offset by an increase in expenses associated with employee benefit costs, information technology, and other strategic projects.

Amortization of DAC and VOBA decreased for the three months ended June 30, 2006, and increased for the six months ended in June 30, 2006. The three-month decrease is primarily related to lower amortization on individual life products as a result of higher persistency during the second quarter of 2006. This decrease is partially offset by an increase in amortization on certain group products due to higher actual gross profits, reflecting lower mortality. The six-month increase is a result of higher amortization rates for certain individual life insurance products, primarily related to model refinements in the first quarter of 2005.

Income Taxes

The variance in Income tax reflects the decrease in Income before income taxes, as well as adjustments primarily related to the dividends received deduction.

Financial Condition

Investments

Investment Strategy

The Company’s investment strategy focuses on diversification by asset class. The Company seeks to achieve economic diversification while reducing overall credit risk and liquidity risk. The investment management function is centralized under ING Investment Management LLC, an affiliate of the Company, pursuant to an investment advisory agreement. Separate portfolios are established for groups of products with similar liability characteristics within the Company.

Portfolio Composition

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

			2006			2005
			Carrying Value	%		Carrying Value	%
Fixed maturities, available-for-sale,
	including securities pledged	$	1,668.3	85.0%	$	1,727.0	84.6%
Equity securities, available-for-sale			5.6	0.3%		4.5	0.2%
Mortgage loans on real estate			174.8	8.9%		191.0	9.4%
Policy loans			94.9	4.8%		93.4	4.6%
Short-term investments			0.4	0.0%		5.0	0.2%
Other investments			18.8	1.0%		19.9	1.0%
Total investments		$	1,962.8	100.0%	$	2,040.8	100.0%

Fixed Maturities

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

						Gross		Gross
						Unrealized		Unrealized
				Amortized		Capital		Capital		Fair
				Cost		Gains		Losses		Value
Fixed maturities:
	U.S. government and government
		agencies and authorities	$	44.3	$	0.1	$	0.6	$	43.8
	State, municipalities, and political
		subdivisions		1.5		0.1		-		1.6

	U.S. corporate securities:
		Public utilities		166.4		1.7		6.1		162.0
		Other corporate securities		586.3		7.3		20.5		573.1
	Total U.S. corporate securities			752.7		9.0		26.6		735.1

	Foreign securities⁽¹⁾:
		Government		15.5		0.3		0.6		15.2
		Other		182.5		1.2		10.0		173.7
	Total foreign securities			198.0		1.5		10.6		188.9

	Residential mortgage-backed securities			377.8		0.2		12.4		365.6
	Commercial mortgage-backed securities			209.6		0.8		7.6		202.8
	Other asset-backed securities			131.9		0.6		2.0		130.5

	Total fixed maturities, including fixed
		maturities pledged		1,715.8		12.3		59.8		1,668.3
	Less: fixed maturities pledged			124.4		-		5.9		118.5

Total fixed maturities			$	1,591.4	$	12.3	$	53.9	$	1,549.8

⁽¹⁾Primarily U.S. dollar denominated.

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

						Gross		Gross
						Unrealized		Unrealized
				Amortized		Capital		Capital		Fair
				Cost		Gains		Losses		Value
Fixed maturities:
	U.S. government and government
		agencies and authorities	$	35.5	$	0.2	$	0.2	$	35.5
	State, municipalities, and political
		subdivisions		1.5		0.1		-		1.6

	U.S. corporate securities:
		Public utilities		170.7		3.9		2.6		172.0
		Other corporate securities		612.3		14.8		8.6		618.5
	Total U.S. corporate securities			783.0		18.7		11.2		790.5

	Foreign securities⁽¹⁾:
		Government		17.3		0.7		0.1		17.9
		Other		177.8		3.0		4.7		176.1
	Total foreign securities			195.1		3.7		4.8		194.0

	Residential mortgage-backed securities			410.7		0.4		7.1		404.0
	Commercial mortgage-backed securities			188.8		3.1		2.7		189.2
	Other asset-backed securities			112.4		0.9		1.1		112.2

	Total fixed maturities, including
		fixed maturities pledged		1,727.0		27.1		27.1		1,727.0
	Less: fixed maturities pledged			118.6		-		3.5		115.1

Total fixed maturities			$	1,608.4	$	27.1	$	23.6	$	1,611.9

⁽¹⁾ Primarily U.S. dollar denominated.

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

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

		2006			2005
		Fair	% of		Fair	% of
		Value	Total		Value	Total
AAA	$	736.2	44.2%	$	730.7	42.3%
AA		108.6	6.5%		85.0	4.9%
A		357.8	21.4%		412.6	23.9%
BBB		419.3	25.1%		439.8	25.5%
BB		38.1	2.3%		50.8	2.9%
B and below		8.3	0.5%		8.1	0.5%
Total	$	1,668.3	100.0%	$	1,727.0	100.0%

97.2% and 96.6% of fixed maturities were invested in securities rated BBB and above (Investment Grade) at June 30, 2006 and December 31, 2005, respectively.

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

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

		2006			2005
		Fair	% of		Fair	% of
		Value	Total		Value	Total
U.S. corporate, states, and municipalities	$	736.7	44.2%	$	792.1	45.8%
Residential mortgage-backed		365.6	21.9%		404.0	23.4%
Commercial mortgage-backed		202.8	12.2%		189.2	11.0%
Foreign		188.9	11.3%		194.0	11.2%
Other asset-backed		130.5	7.8%		112.2	6.5%
U.S. Treasuries/Agencies		43.8	2.6%		35.5	2.1%
Total	$	1,668.3	100.0%	$	1,727.0	100.0%

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

Equity Securities

Mortgage Loans

Mortgage loans, primarily commercial mortgage loans, totaled $174.8 and $191.0 at June 30, 2006 and December 31, 2005, respectively. These loans are reported at amortized cost, less impairment write-downs. If the value of any mortgage loan is determined to be impaired (i.e., when it is probable that the Company will be unable to collect on all amounts due according to the contractual terms of the loan agreement), the carrying value of the mortgage loan is reduced to either the present value of expected cash flows from the loan, discounted at the loan’s effective interest rate, or fair value of the collateral. If the loan is in foreclosure, the carrying value is reduced to the fair value of the underlying collateral, net of estimated costs to obtain and sell. The carrying value of the impaired loans is reduced by establishing a permanent write-down charged to realized loss. At June 30, 2006 and December 31, 2005, the Company had no allowance for mortgage loan credit losses. The properties collateralizing mortgage loans are geographically dispersed throughout the United States, with the largest concentration of 24.2% and 22.5% of properties in California at June 30, 2006 and December 31, 2005, respectively.

Unrealized Capital Losses

Fixed maturities, including securities pledged to creditors, comprise 85.0% and 84.6% of the Company’s total investment portfolio at June 30, 2006 and December 31, 2005, respectively. Unrealized capital losses related to fixed maturities are analyzed in detail in the following tables.

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

			2006						2005
				% 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	$	13.0	21.8%		0.7	1.2%	$	10.4	38.3%	$	0.4	1.5%
More than six months
	and less than twelve
	months below
	amortized cost		22.3	37.3%		0.8	1.3%		6.5	24.0%		0.1	0.4%
More than twelve months
	below amortized cost		22.8	38.1%		0.2	0.3%		9.6	35.4%		0.1	0.4%
Total unrealized capital loss		$	58.1	97.2%	$	1.7	2.8%	$	26.5	97.7%	$	0.6	2.3%

Unrealized capital losses in fixed maturities at June 30, 2006 and December 31, 2005, were primarily related to interest rate movement or spread widening and to mortgage and other asset-backed securities. Mortgage and 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 June 30, 2006 and December 31, 2005.

					More than
			Less than		Six Months		More than
			Six Months		and less than		Twelve Months
			Below		Twelve Months		Below
			Amortized		Below		Amortized
2006			Cost		Amortized Cost		Cost		Total
Interest rate or spread widening		$	7.2	$	15.0	$	15.6	$	37.8
Mortgage and other asset-backed
	securities		6.5		8.1		7.4		22.0
Total unrealized capital loss		$	13.7	$	23.1	$	23.0	$	59.8
Fair value		$	426.1	$	436.2	$	428.0	$	1,290.3

2005
Interest rate or spread widening		$	5.0	$	3.3	$	7.9	$	16.2
Mortgage and other asset-backed
	securities		5.8		3.3		1.8		10.9
Total unrealized capital loss		$	10.8	$	6.6	$	9.7	$	27.1
Fair value		$	547.2	$	261.4	$	246.1	$	1,054.7

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

					More than
			Less than		Six Months		More than
			Six Months		and less than		Twelve Months		Total
			Below		Twelve Months		Below		Unrealized
			Amortized		Below		Amortized		Capital
2006			Cost		Amortized Cost		Cost		Loss
U.S. Treasuries/Agencies		$	0.4	$	-	$	0.2	$	0.6
U.S. corporate, state, and
	municipalities		5.3		11.4		9.9		26.6
Foreign			1.5		3.6		5.5		10.6
Residential mortgage-backed			4.9		4.2		3.3		12.4
Commercial mortgage-backed			1.1		3.5		3.0		7.6
Other asset-backed			0.5		0.4		1.1		2.0
Total		$	13.7	$	23.1	$	23.0	$	59.8

2005
U.S. Treasuries/Agencies		$	0.1	$	0.1	$	-	$	0.2
U.S. corporate, state, and
	municipalities		3.7		3.0		4.5		11.2
Foreign			1.3		0.2		3.3		4.8
Residential mortgage-backed			4.6		1.3		1.2		7.1
Commercial mortgage-backed			1.0		1.5		0.2		2.7
Other asset-backed			0.1		0.5		0.5		1.1
Total		$	10.8	$	6.6	$	9.7	$	27.1

Of the unrealized capital losses aged more than twelve months, the average market value of the related fixed maturities is 95.0% of the average book value as of June 30, 2006. In addition, this category includes 160 securities, which have an average quality rating of AA-. No other-than-temporary impairment loss was considered necessary for these fixed maturities as of June 30, 2006.

Overall, there has been an increase in unrealized losses from December 31, 2005 to June 30, 2006. This increase is largely caused by an increase in prevailing market interest rates, which tends to have a negative market value impact on fixed maturities.

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 the 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 analyses 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 market value of the security is less than book value and there has been an adverse change in cash flow since the last remeasurement date.

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

The following tables identify the Company’s other-than-temporary impairments by type for the three and six months ended June 30, 2006 and 2005.

		Three Months Ended June 30,
		2006			2005
			No. of			No. of
		Impairment	Securities		Impairment	Securities
U.S. Treasuries/Agencies	$	0.2	2	$	-	-
Other asset-backed		-	-		0.5	1
Total	$	0.2	2	$	0.5	1

		Six Months Ended June 30,
		2006			2005
			No. of			No. of
		Impairment	Securities		Impairment	Securities
U.S. Treasuries/Agencies	$	0.8	2	$	-	-
U.S. corporate		2.4	10		-	-
Foreign		0.3	2		-	-
Other asset-backed		-	-		0.5	1
Total	$	3.5	14	$	0.5	1

All of the Company’s other-than-temporary impairments for the three and six months ended June 30, 2006 in the above schedule are write-downs 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, based upon the requirements of Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) Statement of Financial Accounting Standards (“FAS”) No. 115-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.”

Net Realized Capital Gains (Losses)

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

		Three Months Ended June 30,
		2006		2005
Fixed maturities, available-for-sale	$	(1.0)	$	5.9
Derivatives		(0.2)		-
Net realized capital (losses) gains	$	(1.2)	$	5.9
After-tax net realized capital (losses) gains	$	(0.8)	$	3.8

		Six Months Ended June 30,
		2006		2005
Fixed maturities, available-for-sale	$	(6.8)	$	6.9
Equity securities, available-for-sale		-		0.1
Derivatives		(0.2)		-
Other		0.2		-
Net realized capital (losses) gains	$	(6.8)	$	7.0
After-tax net realized capital (losses) gains	$	(4.4)	$	4.6

Income Taxes

An $13.0 valuation allowance was established as of June 30, 2006 related to unrealized capital losses on investments and is included in Accumulated other comprehensive income (loss). The Company had no valuation allowance as of December 31, 2005.

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 premiums and product charges, investment income, proceeds from the maturity and sale of investments, proceeds from debt issuance, and capital contributions. Primary uses of these funds are payments of commissions and operating expenses, interest and premium credits, investment purchases, repayment of debt, and contract maturities, withdrawals, and surrenders.

The Company’s liquidity position is managed by maintaining adequate levels of liquid assets, such as cash, cash equivalents, and short-term investments. Asset/liability management is integrated into many aspects of the Company’s operations, including investment decisions, product development, and determination of crediting rates. As part of the risk management process, different economic scenarios are modeled, including cash flow testing required for insurance regulatory purposes, to determine that existing assets are adequate to meet projected liability cash flows. Key variables in the modeling process include interest rates, anticipated policyholder/contractowner behavior, and variable separate account performance. Policyholders/contractowners bear the investment risk related to variable insurance products, subject to certain minimum guaranteed death and living benefits included in these contracts.

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

Liquidity and Capital Resources

Additional sources of liquidity include borrowing facilities to meet short-term cash requirements that arise in the ordinary course of business. The Company maintains the following agreements:

•

A reciprocal loan agreement with ING America Insurance Holdings, Inc. (“ING AIH”), an affiliate, whereby either party can borrow from the other up to 5% of the Company’s statutory admitted assets as of the prior December 31. The Company did not have any receivable or payable from/to ING AIH under the reciprocal loan agreement as of June 30, 2006 and December 31, 2005.

•

A $30.0 uncommitted, perpetual revolving note facility with the Bank of New York. At June 30, 2006 and December 31, 2005, the Company had no amounts outstanding under the revolving loan facility.

•

A $30.0 uncommitted line-of-credit agreement with PNC Bank, effective December 19, 2005. Borrowings are guaranteed by ING AIH, with maximum aggregate borrowings outstanding at any time to ING AIH and its affiliates of $75.0. As of June 30, 2006 and December 31, 2005, the Company had no amounts outstanding under the line-of-credit agreement.

•

A $30.0 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 June 30, 2006, the Company had no amounts outstanding under the line-of-credit agreement.

Management believes that these sources of liquidity are adequate to meet the Company’s short-term cash obligations.

Capital Contributions and Dividends

During the six months ended June 30, 2006 and 2005, the Company did not receive any capital contributions from its parent.

During the six months ended June 30, 2006 and 2005, the Company paid $13.8 and $10.4, respectively, in dividends on its common stock to its parent.

Financial Guarantees

The Company owns a 3-year credit-linked note arrangement, whereby the Company agreed 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 recover any losses under the agreement by sale or collection of the received reference obligation. As of June 30, 2006, the maximum potential future exposure to the Company under the guarantee was $3.0.

Recently Adopted Accounting Standards

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

Legislative Initiatives

Legislative proposals which have been or are being considered by Congress include repealing/modifying the estate tax, reducing the taxation on annuity benefits, changing the tax treatment of insurance products relative to other financial products, and changing life insurance company taxation. Some of these proposals, if enacted, could have a material adverse effect on life insurance, annuity, and other retirement savings product sales, while others could have a material beneficial effect. Private pension reform legislation, which Congress passed in early August 2006 (Presidential signature now pending but expected to occur in August), contains a number of provisions which are likely to have a beneficial effect on annuity and defined contribution products. Certain recommendations made in late 2005 by the President’s Tax Advisory Panel on Federal Tax Reform could adversely affect the market for some life insurance and annuity products if enacted by Congress. However, there are no indications at the present time that Congress will enact fundamental tax reforms in 2006, or that it has a favorable view of the Tax Panel’s recommendations regarding tax-preferred savings.

Item 4.

Controls and Procedures

(a)

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

(b)

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

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

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

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. Reference is made to the “Other Regulatory Matters” section of “Management’s Narrative Analysis of the Results of Operations and Financial Condition” included in the Company’s 2005 Annual Report on Form 10-K, filed March 29, 2006 (SEC File No. 333-75938); and the Company’s Form 8-K Current Report filed on June 29, 2006 (SEC File No. 333-75938).

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.

Changes in underwriting and actual experience could materially affect profitability

The Company prices its products based on long-term assumptions regarding investment returns, mortality, morbidity, persistency, and operating costs. Management establishes target returns for each product based upon these factors and the average amount of regulatory and rating agency capital that the Company must hold to support in-force contracts. The Company monitors and manages pricing and sales mix to achieve target returns. Profitability from a new business emerges over a period of years, depending on the nature and life of the product, and is subject to variability as actual results may differ from pricing assumptions.

The Company’s profitability depends on the following:

•

Adequacy of investment margins;

•

Management of market and credit risks associated with investments;

•

Ability to maintain premiums and contract charges at a level adequate to cover mortality and morbidity benefits and contract administration expenses;

•

Adequacy of contract charges on variable contracts to cover the cost of product features;

•

Persistency of policies to ensure recovery of acquisition expenses; and

•

Management of operating costs and expenses within anticipated pricing allowances.

Changes in reserve estimates may reduce profitability

The Company establishes reserves based upon estimates of how much the Company will pay for future benefits and claims. The Company calculates reserves based on many assumptions and estimates including future investment yields, mortality, morbidity, policy terminations, and expenses. The assumptions and estimates used in connection with the reserve estimation process are inherently uncertain. The Company periodically reviews the adequacy of reserves. However, the Company cannot determine with precision the amounts that the Company will pay for, or the timing of payment of, actual benefits and claims or whether the assets supporting the policy liabilities will grow to the level assumed prior to payment of benefits or claims. If actual experience differs significantly from assumptions or estimates, reserves may not be adequate. As a result, the Company would incur a charge to earnings in the quarter in which the reserves are increased.

Efforts to reduce the impact of interest rate changes on profitability and financial condition may not be effective

Changes in interest rates may negatively affect the Company’s attempts to maintain profitable spreads between the amounts earned on its general account investments and the amounts paid under its annuity and insurance contracts.

As interest rates rise, life insurance surrenders and fixed annuity contract surrenders and withdrawals may increase as policyholders and contractowners seek higher returns. To raise the cash necessary to fund such surrenders and withdrawals, the Company may need to sell assets at capital losses. An increase in contract surrenders and withdrawals may also require the Company to accelerate amortization of deferred policy acquisition costs relating to such contracts, further reducing profits.

As interest rates decline, borrowers may prepay or redeem mortgages and bonds with embedded call options that are owned as investments by the Company. This may force the Company to reinvest the proceeds at lower interest rates. In addition, some of the Company’s products contain minimum interest rate guarantees that limit the Company’s ability to lower interest rates credited to

policyholders and contractowners in response to lower investment returns. A decrease in the difference between earned investment income and interest credited to policyholders and contractowners further reduces profits. This decrease in profits may also require the Company to accelerate amortization of deferred policy acquisition costs.

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

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

•

An increase in defaults or delinquency in investment portfolios;

•

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

•

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

•

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

•

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

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

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

•

Payment of benefits at higher levels and/or earlier than anticipated, which may lead to unexpected changes in persistency.

•

Losses in the Company’s investment portfolio due to significant volatility in global financial markets or the failure of counterparties to perform.

•

Changes in the rate of lapses and surrenders of existing policies/contracts, as well as sales of new policies/contracts.

•

Increased reinsurance prices and/or reduced collectibility of reinsurance.

•

Disruption of the Company’s normal business operations due to catastrophic property damage, loss of life, or disruption of public and private infrastructure, including communications and financial services.

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

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 fee income as follows:

•

RELIASTAR LIFE INSURANCE CO OF NEW YORK 10-Q