ING Direct 2009 Annual Report Download - page 191

51 OPERATING SEGMENTS
ING Group has adopted IFRS 8 Operating Segments with effect from 1 January 2009. IFRS 8 requires operating segments to be identified
on the basis of internal reports about components of ING Group that are regularly reviewed by the chief operating decision maker in order
to allocate resources to the segment and to assess its performance. In contrast, the predecessor Standard (IAS 14 Segment Reporting)
required an entity to identify two sets of segments (business and geographical), using a risks and rewards approach, with the entity’s
system of internal financial reporting to key management personnel serving only as the starting point for the identification of such
segments. The identification of ING Group’s reportable segments has not changed as a result of the adoption of IFRS 8.
ING Group’s operating segments relate to the internal segmentation by business lines. These include the business lines: Retail Banking,
ING Direct, Commercial Banking, Insurance Europe, Insurance Americas and Insurance Asia/Pacific. Until 2008, the operating segment
Commercial Banking was named Wholesale Banking. The content of this segment remained unchanged. Other mainly includes items not
directly attributable to the business lines.
The Executive Board sets the performance targets and approves and monitors the budgets prepared by the business lines. Business lines
formulate strategic, commercial and financial policies in conformity with the strategy and performance targets set by the Executive Board.
The accounting policies of the operating segments are the same as those described under Accounting policies for the consolidated balance
sheet and profit and loss account. Transfer prices for inter-segment transactions are set at arm’s length. Corporate expenses are allocated
to business lines based on time spent by head office personnel, the relative number of staff, or on the basis of income and/or assets of
the segment.
The Corporate Line Banking and the Corporate Line Insurance are both included in Other. These are not separate reportable segments
as they do not qualify as an operating segment that engages in business activities from which it may earn revenue and incur expenses.
Corporate Line Banking is a reflection of capital management activities and certain expenses that are not allocated to the banking
businesses. ING Group applies a system of capital charging for its banking operations in order to create a comparable basis for the results
of business units globally, irrespective of the business units’ book equity and the currency they operate in. ING Group’s policy is that equity
held locally must be invested notionally at the local risk-free rate. The Corporate Line charges business units for the income they make on
the book equity invested. Business units receive a benefit equivalent to the risk free euro rate on the economic capital they employ.
Consequently, the results of the businesses as disclosed are the local results after Group overhead charges, while the investment returns
|on equity are based on the risk free euro rate on economic capital.
The Corporate Line Insurance includes items related to capital management, capital gains on public equities (net of impairments) and
run-off portfolios. All capital gains and losses on public equities net of equity impairments realised in the business units are transferred to
the Corporate Line. In return, a 3% notional return on those equities is transferred back to the business units. The remainder is presented
on the Corporate Line.
ING Group evaluates the results of its operating segments using a financial performance measure called underlying result. The information
presented in this note is in line with the information presented to the Executive Board. Underlying result is defined as result under IFRS
excluding the impact of divestments and special items.
The following table specifies the main sources of income of each of the segments.
Specification of the main sources of income of each of the segments
Segment Main source of income
Retail Banking Income from retail and private banking activities. The main products offered are savings accounts and mortgages.
ING Direct Income from direct retail banking activities. The main products offered are savings accounts and mortgages.
Commercial Banking
Income from wholesale banking activities. A full range of products is offered, from cash management to corporate
finance. Commercial Banking also includes ING Real Estate.
Insurance Europe
Income from life insurance, non-life insurance, investment management, asset management and retirement
services in Europe.
Insurance Americas
Income from life insurance, investment management, asset management and retirement services in the US and
Latin America.
Insurance Asia/Pacific Income from life insurance, investment management, asset management and retirement services in Asia/Pacific.
This note does not provide information on the revenue specified to each product or service as this is not reported internally and is
therefore not readily available.
2.1 Consolidated annual accounts
ING Group Annual Report 2009 189
Segment reporting
amounts in millions of euros, unless stated otherwise