ING Direct 2007 Annual Report Download - page 12

Growth in mature markets was shown in
the Benelux, where loans and advances to
customers increased by EUR 39 billion.
Improved returns
ING focuses on balancing growth and
returns to maximise value creation. Effi cient
capital allocation and pricing discipline
received continued attention. The underlying
after-tax risk-adjusted return on capital
(RAROC) of the Banking operations
improved to 22.3% from 20.5%, refl ecting
lower tax charges. The internal rate of
return on new life insurance sales improved
from 13.3% in 2006 to 14.3% in 2007.
Expenses under control
Investing in profi table and sustainable
future growth is a priority for ING.
Operating expenses remained under control,
with continued investments in new growth
initiatives. Total operating expenses
increased by 7.8% and underlying operating
expenses (excluding the impact of
divestments and special items) grew by 5.9%.
Attractive increase in dividend
At the annual General Meeting of
Shareholders on 22 April 2008, ING will
propose a total dividend for 2007 of
EUR 1.48 per (depositary receipt for an)
ordinary share, up from EUR 1.32 in 2006.
Taking into account the interim dividend of
EUR 0.66 paid in August 2007, the fi nal
dividend will amount to EUR 0.82 to be
paid fully in cash. ING’s shares will be
quoted ex-dividend as of 24 April 2008
and the dividend will be paid on 5 May
2008 (NYSE Euronext) and 12 May 2008
(NYSE) respectively.
Strong capital position
The capital position of ING Group remained
robust during 2007. All major capital ratios
met their target as at year-end 2007. The
debt/equity ratio of ING Group increased to
9.53% compared with 9.01% at the end
of 2006. The debt/equity ratio of Insurance
ended the year at 13.63% slightly down
from 14.15% at year-end 2006. The
Tier-1 ratio of ING Bank stood at 7.39%
at the end of 2007, down from 7.63%.
The solvency ratio (BIS ratio for the bank)
decreased from 11.02% to 10.32%. The
Tier-1 ratio under Basel II as of 1 January
2008 is approximately 9.9% and the BIS
ratio is approximately 13.8%. These
numbers are preliminary as ING Bank will
only report under Basel II as of the fi rst
quarter of 2008. The target Tier-1 ratio
for ING Bank will remain unchanged at
7.20% under Basel II.
INSURANCE OPERATIONS
Total profi t before tax from Insurance
operations increased 32.9%. Underlying
profi t before tax (excluding the impact of
divestments and special items) from
insurance rose 27.1% to EUR 6,110 million.
Underlying profi t before tax from life
insurance increased 48.3%, while from
non-life insurance it declined 22.5%.
Underlying gross premium income from life
insurance policies increased 1.1% (8.1%
excluding currency effects), driven mainly
by the US, Asia and Central and Rest of
Europe. Underlying gross premium income
from non-life insurance policies decreased
2.1% (1.2% excluding currency effects),
with lower premiums in Europe only partly
offset by higher premiums in Canada and
Latin America.
Underlying operating expenses from the
Insurance operations increased 5.7%.
Embedded value and value
of new business
Embedded value of ING’s life insurance
businesses increased 17.1% before dividends
and capital injections to EUR 32,460 million
in 2007. After the dividend payment of
EUR 5,468 million to ING Group, the year-end
embedded value was EUR 26,993 million.
Embedded value profi t, an important
measure of value creation, increased 41.4%
to EUR 2,802 million.
The value of new business increased 37.9%
to EUR 1,113 million in 2007, with the largest
contributions coming from the developing
markets in Asia/Pacifi c and Central and Rest
of Europe.
BANKING OPERATIONS
Underlying profi t before tax (excluding the
impact of divestments and special items)
decreased 1.7% to EUR 4,967 million.
Underlying income increased 3.5% to
EUR 14,614 million. The interest result
declined 2.0% as volume growth
was offset by the impact of fl attening
and inverse yield curves and by intensifi ed
competition for savings and deposits.
The total interest margin narrowed to
0.94% from 1.06% in 2006.
Underlying operating expenses rose 6.1%
to EUR 9,522 million, primarily due to
investments to support growth of the
Profi t and loss account
in EUR million 2007 2006 change
Total income 76,587 73,621 4.0%
Total expenditures 65,544 63,681 2.9%
Profi t before tax 11,043 9,940 11.1%
Taxation 1,534 1,907 –19.6%
Minority interests 267 341 –21.7%
Net profi t 9,241 7,692 20.1%
Divestments/special items –69 –11
Underlying net profi t 9,172 7,6 81 19.4%
Profi t before tax 11,043 9,940 11.1%
Divestments/special items 34 –81
Underlying profi t before tax 11,077 9,859 12.4%
10 Our performance
Financial review
ING Group Annual Review 2007