ING Direct 2009 Annual Report Download - page 40

Insurance
Insurance Europe
Key points
> Several new products launched across Europe
> Single operating model introduced for Central
and Rest of Europe
> Focus on derisking, capital preservation
and improved efficiency as part of Group’s
Back to Basics programme
Insurance Europe reacted to the weak economic environment
and volatile financial markets in 2009 by derisking its balance sheet,
strict expense control and a strategic focus on core products and
markets. The derisking initiatives were completed in 2009, whereas
cost containment and Back to Basics efforts will continue in 2010
to consolidate ING’s position in the European insurance markets.
In the Netherlands this will be achieved through integrating the
existing insurance businesses, whereas in Central and Rest of
Europe the focus is on simplification and streamlining the
operations in core markets.
FINANCIAL DEVELOPMENTS
Underlying profit before tax in 2009 slightly decreased to EUR 650
million from EUR 651 million in 2008, despite the recovery of
financial markets over the course of the year. Positive 2009 result
items included EUR 420 million higher private equity revaluations,
EUR 261 million in lower operating expenses and a EUR 190 million
improvement in the change in the provision for guarantees on
separate account pension contracts (net of hedging). These positive
elements were offset by lower public equity income of EUR 499
million due to lower corporate profits as well as ING’s derisking
policy through equity securities divestments. Also, the (net)
losses and impairments on fixed income investments increased
by EUR 154 million compared with 2008. Profit sharing for
policyholders in the Netherlands increased by EUR 88 million.
The result on equity index options to hedge equity investments fell
by EUR 56 million. Lastly, the Non-life underwriting result
decreased EUR 97 million.
The weak economy had an increasingly negative impact on
insurance premiums in Europe, especially in Central and Rest of
Europe. Total premiums declined by EUR 444 million to EUR 9,750
million, as Life premiums decreased by EUR 480 million to
EUR 8,025 million and Non-life premiums increased by EUR 36
million to EUR 1,725 million, in line with moderate inflation.
Premium income in the Netherlands decreased by EUR 207 million
and in Central and Rest of Europe by EUR 457 million, whereas
premiums in Belgium and Luxembourg grew by EUR 220 million.
In the Netherlands, premiums declined despite the one-time
favourable impact of EUR 127 million from a change in group
pension premium recognition, due to lower salary indexation on
group contracts and fierce competition in the market for retail
immediate annuities. Premium income in Belgium increased by
EUR 73 million in 2009 to EUR 1,068 million due to sales of a
variable annuity product introduced in early 2009. Premium income
in Luxembourg increased by EUR 148 million to EUR 274 million
driven by the introduction of a variable annuity product sold in Italy
through the private banking arm of UniCredit and proprietary sales
of a new whole life insurance product targeting affluent individuals
in Belgium and Luxembourg. In Central and Rest of Europe,
premiums decreased by EUR 457 million to EUR 2,029 million,
including a EUR 147 million reduction caused by lower exchange
rates of Central European currencies against the euro. The premium
decline was concentrated in Hungary, Poland and Spain and was
mainly due to lower retail single premium sales as well as a EUR 70
million group contract signed in Spain in 2008.
The underlying operating expenses of Insurance Europe decreased
by EUR 261 million or 14.8% in 2009 against 2008. EUR 25 million
of this decline was due to the depreciation of Central European
Financial overview
in EUR million 2009 2008
Underlying* premium income 9,750 10,194
Underlying* operating expenses 1,503 1,764
Underlying* result before tax 650 651
Total result before tax 261 651
Value of new life business 185 397
Internal rate of return 14.6% 17.1%
New sales 982 1,010
* Underlying numbers are derived from IFRS-EU numbers, excluding the
impact of divestments and special items.
Geographical breakdown of premium income
in EUR million 2009
Benelux 79% 7,721
Central and Rest of Europe* 21% 2,029
Total 100% 9,750
* Bulgaria, the Czech Republic, Greece, Hungary, Poland, Romania, Russia,
the Slovak Republic, Spain and Turkey.
Opportunities still available despite economic downturn
1.2 Report of the Executive Board
ING Group Annual Report 2009
38