ING Direct 2009 Annual Report Download - page 305

FINANCIAL ASSET
Any asset that is:
cash;•
an equity instrument of another company;•
a contractual right to;•
receive cash or another financial asset from another company; •
or
exchange financial instruments with another company under •
conditions that are potentially favourable; or
certain contract that will or may be settled in ING’s own •
equity instruments.
FINANCIAL INSTRUMENTS
Contracts that give rise to both a financial asset for one company
and a financial liability or equity instrument for another company.
FINANCIAL LIABILITY
Any liability that is a contractual obligation:
to deliver cash or another financial asset to another company; or•
to exchange financial instruments with another company under •
conditions that are potentially unfavourable; or
certain contracts that will or may be settled in ING’s own equity •
instruments.
FOREIGN EXCHANGE RATE RISK
Probability of loss occurring from an adverse movement in foreign
exchange rates.
FORWARD CONTRACTS
Commitments to exchange currencies or to buy or sell other
financial instruments at specified future dates.
FUTURE CONTRACTS
Commitments to exchange currencies or to buy or sell other
financial instruments at specified future dates. Exchanges act
as intermediaries and require daily cash settlement and
collateral deposits.
GROSS PREMIUMS WRITTEN
Total premiums (whether or not earned) for insurance contracts
written or assumed (including deposits for investment contracts
with limited or no life contingencies written) during a specific
period, without deduction for premiums ceded.
HELD-TO-MATURITY INVESTMENTS
Non-derivative financial assets with fixed or determinable payments
and fixed maturity that ING Group has the positive intention and
ability to hold to maturity other than:
a. those that ING Group upon initial recognition designates as at
fair value through profit and loss;
b. those that ING Group designates as available-for-sale; and
c. those that meet the definition of loans and receivables.
HISTORICAL SIMULATION
A model to calculate Value at Risk, assuming that future changes in
risk factors will have the same distribution as they had in the past
taking into account the non-linear behaviour of financial products.
DISCOUNTED BILLS
Bills that are sold under deduction of interest giving the owner the
right to receive an amount of money on a given date.
DISCRETIONARY PARTICIPATION FEATURE
A contractual right to receive, as a supplement to guaranteed
benefits, additional benefits that: are likely to be a significant
portion of the total contractual benefits, whose amount or timing
is contractually at the discretion of the insurer, that are contractually
based on the performance of a specified pool or type of contract,
(un)realised investment returns on a specified pool of assets held by
the insurer, or the profit of the company, fund, or other entity that
issues the contract.
EARNINGS AT RISK (EAR)
Measures the impact on earnings resulting from changes in market
rates over a one-year horizon.
ECONOMIC CAPITAL
The minimum amount of capital that is required to absorb
unexpected losses in times of severe stress. Given ING Group’s A
target rating, ING calculates economic capital requirements at a
99.95% level of confidence. This confidence level is derived from
the historical default frequency of AA-rated companies (probability
of default of 1 in 2000 years or 0.05%).
EFFECTIVE INTEREST METHOD
A method of calculating the amortised cost of a financial asset or
liability and of allocating the interest income or interest expense
over the relevant period.
ELIMINATION
A process by which intercompany transactions are matched with
each other and deducted, so that the assets, liabilities, income and
expenses are not inflated.
EMBEDDED VALUE (EV)
Embedded value is the present value of all future cash flows from
the contracts being owned today (embedded value does not take
into account future sales). The discount rate used is equal to
Weighted average cost of capital.
EMBEDDED VALUE PROFIT (EVP)
Embedded value profit is the change in embedded value over a
given period over and above the amount related to the unwinding
of the discount rate.
EMPLOYEE BENEFITS
All forms of consideration given by a company in exchange for
service rendered by (current and former) employees.
FAIR VALUE
The amount for which an asset could be exchanged, or a
liability settled, between knowledgeable, willing parties in an
arm’s length transaction.
FINANCE LEASE
A lease that transfers substantially all the risks and rewards
associated with ownership of an asset to the lessee. Title may or
may not eventually be transferred.
2.4 Additional information
ING Group Annual Report 2009 303
Financial glossary (continued)