ING Direct 2009 Annual Report Download - page 44

Insurance Americas (continued)
ING in Latin America continued to successfully reposition its
business to take advantage of powerful demographic and
economic trends in the region, delivering solid earnings for the
second consecutive year, despite the worldwide financial crisis.
US RETIREMENT SERVICES
ING continued to build on its strong market positions in retirement
services in the US, despite challenging markets. The ageing of the
US population creates significant long-term growth opportunities.
Those aged 45 or older control more than two-thirds of the
approximately USD 30 trillion of financial assets in the US and the
impending retirement of baby boomers and the recent financial
crisis are increasing their focus on retirement. The addition of the
CitiStreet business in July 2008, with its advanced, streamlined
technology platform and web capabilities has provided scale and
capacity to better serve the retirement needs of both plan
participants and the companies or organisations that sponsor the
plans. ING now serves the full spectrum of the retirement services
market from providing full service retirement savings plans to
offering only record-keeping services. The business is now uniquely
positioned to serve all sizes and segments of the market –
corporate, education, government, healthcare and not-for-profit.
Despite lingering uncertainty following the financial crisis,
most Americans continue to support their employer-sponsored
retirement savings plans. A survey by the ING Institute for
Retirement Research found that the majority (84%) believed their
employer’s plan was a very important part of their retirement
strategy and 92% said the best way to save was by having their
investments automatically deducted from their pay each month.
2009 marked the sixth consecutive year in which ING maintained
its rank as both number one in sales for kindergarten through to
12th grade education markets and number two in small corporate
plan sales.
US ANNUITIES
The US annuity business was restructured in 2009 to enable ING to
better meet the needs of retiring baby boomers. The business was
divided into two separate businesses: Individual Financial Solutions
and Legacy Annuity. Beginning in 2010, ING will offer a number
of lower cost rollover annuity products targeted primarily at people
retiring from companies, which have ING-provided retirement
plans. These rollover annuities will be part of a broad suite of
simple, lower cost, lower risk investment vehicles, which will be
introduced during the year. Their development is in line with ING’s
strategy of providing customers with more transparent, less risky,
less expensive and easier to understand products. Rollover IRA
(Individual Retirement Accounts) products, which are essentially
funds that provide retirement income, are expected to be the
fastest-growing segment of the US retirement market. By 2013,
almost USD 400 billion per year of retirement assets are projected
to roll out of retirement plans into IRAs or other retirement vehicles,
as the bulk of the 78 million baby boomer generation retires. ING is
well-positioned to capture the unprecedented opportunity in this
market because of the size of the current retirement business –
both in terms of assets and number of plan participants. ING
estimates that annual sales in the rollover market could rise to
at least USD 6 billion within five years.
COUNTRY DEVELOPMENTS
UNITED STATES
Premium income decreased 26.3% to EUR 13,812 million in 2009.
The decrease was mainly due to lower variable annuity sales, where
sales were intentionally reduced as fees were increased and benefit
guarantees reduced. Operating expenses declined 7.0%, or 7.4%
excluding currency impacts, due to lower staff cost, reflecting
12% reduction in FTEs since year-end 2008, and lower sales-related
expenses. On a same-store basis and excluding currency impact,
operating expenses decreased 20.7%. Underlying loss before
tax was EUR 219 million in 2009, representing a substantial
improvement from the EUR 1,117 million loss reported in 2008.
Lower negative DAC unlocking, lower investment losses and
impairments, and lower operating expenses led the recovery.
LATIN AMERICA
Premium income decreased 19.1% to EUR 161 million as ING Chile
exited the disability and survivorship market during 2009 due to
regulatory change. Operating expenses declined 16.2%, or 10.1%
excluding currency impacts, mainly due to lower staff-related costs,
including incentive compensation, and professional fees. Underlying
profit before tax improved EUR 121 million to EUR 280 million,
as a recovery in equity markets throughout the region led to an
improvement in the legally-required investment in the pension
business. Additionally, higher pension fee income and lower
operating expenses also contributed to the profit improvement.
BUSINESS DEVELOPMENTS
Insurance Americas is a market leader in providing retirement
services and pension products in both the US and Latin America.
As such, the company is well-positioned to take advantage of the
long-term demographic opportunities that arise from a combined
market of 700 million people in the seven countries in which ING
operates. In the US, ING operates three core businesses: Retirement
Services, Individual Life and Individual Financial Solutions (rollover
annuities). ING is the third largest provider of defined contribution
(DC) retirement plans in the US in terms of assets under
management and administration, the second largest in terms
of plan participants, and the largest in terms of retirement plans
provided. In Latin America, ING is the second largest provider
of mandatory pensions.
Since ING Group’s Back to Basics programme was announced
in April, Insurance Americas has made strong progress towards
creating a simpler, less complex organisation. During the year,
Insurance Americas divested non-core businesses including
annuities and mortgages in Chile, ING’s 70% shareholding in
ING Canada and the Argentine annuity business. In addition, it
announced an agreement to transfer the US reinsurance business
to RGA Incorporated and the divestment of the majority of the
ING Advisors Network (IAN) in the US. The US reinsurance transfer
closed on 1 January 2010 and the IAN sale was completed
31 January 2010.
In the US, ING focused on building its capital position and taking
risk out of the business by reducing costs and risky assets in the
portfolio, as well as executing hedge transactions to protect the
business from further reductions in the stock market. In addition,
the businesses focused on providing simpler products, competitive
returns and easier service.
1.2 Report of the Executive Board
ING Group Annual Report 2009
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