Home » ING Direct Annual Reports » 2011 Annual Report

ING Direct 2011 Annual Report Download

Download and view the complete annual report

Please find the complete 2011 ING Direct annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

2011

Building strong businesses

in a challenging environment

ING Group Annual Report

Page 1
2011 Building strong businesses in a challenging environment ING Group Annual Report

Page 2

Page 3

Page 4
...Managing through the current crisis by building on strong capital, funding and liquidity positions > Making good progress on EC restructuring and further repayment of the Dutch State > Continued dialogue with stakeholders on fundamental review of the financial system 2 ING Group Annual Report 2011

Page 5
...Banking -Commercial Banking Insurance overview -Insurance -Investment management 12 16 20 24 25 26 28 32 40 45 48 55 3 Corporate governance 5 Parent company annual accounts Parent company balance sheet Parent company proï¬t and loss account Parent company statement of changes in equity Accounting...

Page 6
...consolidating and developing the strengths of the banking operations and on more efficient asset and liability management. At ING Insurance/Investment Management, the US, European and Asian businesses reported good progress in their initiatives to improve operating performance and strengthen capital...

Page 7
... 2 Report of the Executive Board 3 Corporate governance for financial operations, we will continue to prepare for the divestment of our insurance/investment management businesses. The most important priorities of these businesses are to improve performance and optimise returns and value. ING Bank...

Page 8
...to repay the Dutch state aid and to build stronger banking and insurance/investment management businesses, all based on sound business ethics and good corporate citizenship. Strong financial position Solid earnings and a strong capital and funding position enable ING to support its customers also in...

Page 9
...US Closed Block VA, Insurance Asia/Pacific and ING Investment Management. ING Investment Management provides a broad range of investment strategies and advisory services in Europe, the Americas, Asia/Pacific and the Middle East. 3 Corporate governance 4 Consolidated annual accounts 5 Parent company...

Page 10
... de Waal 0 0.7 3.2 3.7 2009 2010 2011 The current composition of the Supervisory Board Committees can be found on the Company's website (www.ing.com). * You can find more information on the members of the Executive Board on page 67 and on the members of the Supervisory Board on pages 70-71...

Page 11
... Annual Accounts. 5 Parent company annual accounts Capital ratios and other data 2011 2010 2009 Debt/equity ratio (1) Core Tier 1 ratio Insurance IGD Solvency I ratio (2) Underlying return on equity based on IFRS-EU equity Employees (FTEs, year-end, adjusted for divestments) Market capitalisation...

Page 12
...they directly affect the company's financing costs and hence profitability. For their part, the capital providers expect a dividend which reflects ING Group's financial results and is relatively predictable. ING's policy is to pay dividends in relation to the long-term underlying development of cash...

Page 13
... Corporate governance 2 Report of the Executive Board ING GROUP ING BANK - short term - long term - financial strength ING INSURANCE - short term - long term (1) (2) A A-1 A+ A1 Prime-1 Aa3 C+ Prime-2 Baa2 A F1+ A+ A-2 A- F2 A- 4 Consolidated annual accounts (3) Still valid on 12 March 2012...

Page 14
... affected. In these difficult market circumstances the performance of the ING share price was better than the FTSE 300 Banks Index but somewhat worse than the FTSE 300 Life Insurance Index over 2011, as shown in the 'ING share' chapter in this Annual Report. 12 ING Group Annual Report 2011

Page 15
... 2012, we announced that the base case of two IPOs is replaced by one in which ING will explore other options for its Asian insurance and investment management businesses. See the 'Strategy' chapter in this Annual Report for further elaboration. ING GROUP FINANCIAL DEVELOPMENTS Operating conditions...

Page 16
...) balance sheet with an exemption for equity, for deposits that are covered by a deposit guarantee scheme and for certain liabilities that relate to insurance business. The rate of short-term funding (less than one year) will be twice the rate of long-term funding (more than one year). Currently...

Page 17
..., ING has been in the process of carefully assessing the full judgment as well as its consequences. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 15

Page 18
... income and lowering risk and overall costs. RESTRUCTURING AND STREAMLINING THE PORTFOLIO The restructuring of the Group is on track, based on our work towards the separation of the banking and insurance/investment management activities and the execution of divestments. 16 ING Group Annual Report...

Page 19
... insurance and investment management activities. WestlandUtrecht Bank (WUB) became commercially independent of ING in November 2010 after which options were further explored in 2011 to divest WUB. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company...

Page 20
..., ING Bank aims for moderate balance sheet growth in line with GDP growth and a strong focus on deposits generation. It wants to evolve ING Direct units into full banks and develop selected growth markets. Our long-term ambition is to be a strong Northern European Bank with a low-risk balance sheet...

Page 21
...prudent manner in light of the current challenging and changing financial and regulatory environment. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 19

Page 22
... gas emissions in line with the Kyoto Protocol. In our Dutch home market in particular, we offer products like green car loans, a green savings product, a mortgage with a philanthropic component (linked to microfinance funding) and different advisory services. 20 ING Group Annual Report 2011

Page 23
... the sustainable product portfolio at ING Investment Management In 2011, ING Investment Management (ING IM) launched the EUR 200 million ING (L) Renta Fund - Euro Credit Sustainable. The new fund invests in euro-denominated debt securities issued by companies which pursue policies of sustainable...

Page 24
... sustainability strategies for ING Bank and the to-be-separated insurance/investment management operations will be in line with the Group strategy and based on a track record built up over the years. Energy use in MWh per FTE (3) Business travel by air in km per FTE Paper consumption in kg per FTE...

Page 25
...(Insurance US Management Council, Insurance EurAsia Management Council and Bank Management Council). The ING company score is the underlying SAM's corporate sustainability assessment (1-100). 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011...

Page 26
... with the Dutch State, such as the core Tier 1 securities and the Illiquid Assets Back-up Facility. Furthermore, Capital Management manages the different corporate lines of Bank and Insurance. Within these corporate lines, shareholders' expenses are recorded that cannot be directly allocated to ING...

Page 27
... form of life insurance contracts or pensions. Geographic transformation takes place through our international commercial banking network when we help corporate customers fund their international business plans. THREE LINES OF DEFENCE The key objective of risk management at ING is to make sure that...

Page 28
... organisational structure, how to set up the governance bodies for both entities and how to organise employee representation in the future. Group HR also assisted Insurance US in setting up a new, local Executive Team, which supports the Management Board America Insurance Holdings. In 2011, a number...

Page 29
... on full separation from the Group through a base case IPO, staff retention and talent management. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 27

Page 30
...market impacts) Net production client balances (EUR billion) Underlying risk costs in bp of average RWA Risk-weighted assets (year-end, EUR billion, adjusted for divestments) Underlying Return on Equity based on IFRS equity Underlying Return on Equity based on 10% core Tier 1** Employees (FTEs, year...

Page 31
... making selective investments to improve services to our clients. ING comfortably passed the 2011 EU-wide stress test conducted by the European Banking Authority (EBA) confirming the solid capital position of ING Bank thanks to the actions taken to de-risk and de-leverage the balance sheet. ING...

Page 32
... to asset-backed securities and to real estate development projects and investments declined sharply. For more information on ING's policies and measures for managing risks, see the chapter on 'Risk management'. In 2011, ING Bank realised a number of divestments. With the sale of ING Direct USA, ING...

Page 33
... constraints. ING Bank presented its banking strategy in January 2012. This strategy takes into account recent market, regulatory, consumer and technology trends. In the short-term the Bank's priorities are to manage through the crisis, limiting balance sheet and risk-weighted asset growth and...

Page 34
... result before tax Underlying cost/income ratio Underlying cost/income ratio (excl. market impacts) Net production client balances (EUR billion) Underlying risk costs in bp of average RWA Risk-weighted assets (year-end, EUR billion, adjusted for divestments) Underlying Return on Equity based on 10...

Page 35
...A key development in 2011 was the introduction of 'Customer Service Through Delivery Guarantees', the aim of which is to reduce the time it takes to act on customers' requests. To this end, 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual...

Page 36
... to the deposit guarantee scheme and higher marketing expenses. The addition to the provision for loan losses declined 9.4%, to EUR 145 million, or 77 basis points of average risk-weighted assets, mainly attributable to releases in the Mid-Corporate segment. 34 ING Group Annual Report 2011

Page 37
... Banking contributed favourably to Retail BE's overall results, despite the adverse economic climate. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011...

Page 38
... of average risk-weighted assets). The increase was driven by the lower anticipated recovery rates in the US, partially offset by lower risk costs in Germany. BUSINESS DEvELOPMENTS ING Direct offers a range of easy-to-understand financial products - savings, mortgages, retail investment products...

Page 39
...All of ING's business units focus on timely, efficient and flawless execution of customer services. Making banking easier for customers through innovation in distribution is an important aim of the business. ING Direct France launched an initiative allowing customers to open savings accounts through...

Page 40
...' product, the first savings account in Thailand with no minimum balance and no withdrawal or transfer fees. In its first month, 160,000 accounts were opened. A 'no-slip' service was introduced to make deposit and withdrawal transactions easier for the customer. 38 ING Group Annual Report 2011

Page 41
... to offering the right products and services to fit its customers' needs at every stage of their financial life cycles, and it will continue to develop its 'direct if possible, advice when needed' business model. In 2012, ING Direct will continue to work towards becoming a complete retail bank. It...

Page 42
... result before tax Underlying cost/income ratio Underlying cost/income ratio (excl. market impacts) Net production client balances (EUR billion) Underlying risk costs in bp of average RWA Risk-weighted assets (year-end, EUR billion, adjusted for divestments) Underlying Return on Equity based on 10...

Page 43
... 3.5 billion of such transfers were made in 2011, with a significant amount already planned for 2012. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 41

Page 44
... client research states that among large corporations we maintained our strong position as number 1 bank in the Netherlands both in terms of penetration and lead relationships. Global Finance named ING the Best Investment Bank in the Netherlands and 'Best Trade Finance Bank in the Netherlands'. ING...

Page 45
... clients. The key development during 2011 has been the transformation of the former independent corporate structure of the L&F product lines into two separate product businesses integrated within Commercial Banking. Furthermore, in the current economic environment, the L&F portfolio was reviewed...

Page 46
... 2011 ING finalised the strategic review of ING REIM Australia and its five listed real estate funds. Four funds have since been divested with strategic options being considered for the remaining business. For ING RED, the year started with the announcement of the sale of a number of Dutch projects...

Page 47
... divestments and special items. Underlying result before tax in EUR million 2011 2010 Benelux Central and Rest of Europe United States (excl. US Closed Block VA) US Closed Block VA Asia/Pacific ING Investment Management Corporate Line insurance Total Operating result** in EUR million 739 -198 618...

Page 48
...for the base case IPO for the US insurance/investment management businesses. LEGAL RESTRUCTURING AND GOvERNANCE In preparing for the future, Insurance/IM took steps to realign the legal structure and governance of its operations. Regulatory approvals were received to create a new holding company for...

Page 49
..., ING Insurance/IM will continue to focus on its customers and distributors by providing exemplary products and service, as it restructures in preparation for a stand-alone future. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts...

Page 50
... to tax rulings several years ago which gave bank-based long-term savings products the same fiscal advantages as insurance-based products. Both NN and ING Bank now offer pensions-related bank savings products but they focus on different target groups: ING Bank concentrates on the direct market and...

Page 51
...a new Universal Life savings product was brought to the market, which gives customers tax benefits and offers shortterm interest rate guarantees. In non-life insurance, NN launched a new general insurance package (Zekerheidspakket) that covers all general risks and offers discounts for self-employed...

Page 52
....7%, due to a short-term savings-based insurance product. The regional increase was offset by 10.4% lower pension sales compared to 2010, reflecting the regulatory changes for pension funds in Poland and Hungary. Despite this, there was APE growth in pensions in some markets including Bulgaria (+25...

Page 53
... prior year. Administrative expenses were 17.9% lower than in 2010 due to the implementation and completion of a significant cost reduction programme and due to a one-off benefit from changes in the company's pension plan. New sales (APE) in full service retirement plans and individual life business...

Page 54
... help it grow while delivering an appropriate riskadjusted return. In general, Insurance US intends to focus on profitable sales growth, disciplined pricing, prudent expense management, efficient capital usage, and preparation for the future as a standalone company. 52 ING Group Annual Report 2011

Page 55
... unit linked insurance products and bancassurance arrangements. Going forward, we believe that low life insurance penetration and 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011...

Page 56
.... The business is pursuing its vision of creating a best-in-class company for its customers, employees, agents and distribution partners through customer-focused product innovation, expanding and improving distribution and improving operational efficiency. 54 ING Group Annual Report 2011

Page 57
...market circumstances, ING IM's performance has improved in all client categories: general account (ING Insurance), affiliated distribution (business sold via ING channels) and thirdparty retail and institutional. 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts...

Page 58
.... During this period of change, ING's investment management business will remain focused on delivering excellent service, generating superior returns and providing a broad range of products and investment solutions in a wide variety of asset classes for its clients. 56 ING Group Annual Report 2011

Page 59
... management' and '2012 remuneration structure senior management' on page 85 are incorporated by reference in this Report of the Executive Board. AMSTERDAM, 12 MARCH 2012 THE ExECUTIvE BOARD 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual...

Page 60
... debt crisis in the eurozone, the execution of the EC restructuring plan and the intended repayment to the Dutch State. The Supervisory Board approved the medium-term plans and the proposed strategic directions for ING Bank, ING Insurance/IM as well as for ING Group. The 4Q 2010 and the 2010 annual...

Page 61
... Management Boards Banking and Insurance as well as the nomination of a candidate for the Executive 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 59

Page 62
... and member of the Executive Board of ING Group and as member of the Management Board Insurance as of 1 October 2011. Koos Timmermans was succeeded by Wilfred Nagel, who was appointed chief risk officer and member of the Management Board Banking and Management Board Insurance per 5 October 2011. The...

Page 63
... with the Dutch State regarding the Illiquid Assets Back-up Facility ('IABF'), as further described in note 33 to the consolidated annual accounts. During 2009, ING Bank N.V. issued various series of debt instruments under the 2008 Credit Guarantee Scheme of the Dutch State, for the first time on 30...

Page 64
... board structure used by most US companies. In the Netherlands, a public limited liability company (naamloze vennootschap) has an Executive Board as its management body and a Supervisory Board which advises and supervises the Executive Board. In general, members of the Executive Board are employees...

Page 65
... company law and the Corporate Governance Code, shareholder approval is only required for equity compensation plans (or changes thereto) for members of the Executive Board and Supervisory Board, and not for equity compensation plans for other groups of employees. CAPITAL AND SHARES CAPITAL STRUCTURE...

Page 66
...advance on ING Group's corporate website (www.ing.com). ING Group participates in several industry conferences and generally hosts one or two Investor Relations Days each year. These events are announced in advance on the company website, and presentation materials are made available in real time on...

Page 67
...proxy, the holder of depositary receipts may vote such shares according to his or her own discretion. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 65

Page 68
... insurance or banking activities. REPORTING Resolutions adopted at a general meeting are generally published on the website of ING Group (www.ing.com) within one week after the meeting. The draft minutes of the general meeting are, in accordance with the Corporate Governance Code, made available...

Page 69
...ING Group at the annual General Meeting on 14 May 2012. From 1 October 2011 until the appointment of Wilfred Nagel, Patrick Flynn has assumed the responsibility for Risk at ING Group level. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual...

Page 70
... OF THE SUPERvISORY BOARD The function of the Supervisory Board is to supervise the policy of the Executive Board and the general course of events of ING Group and its business, as well as to provide advice to the Executive Board. In line with Dutch company law, the Corporate Governance Code and the...

Page 71
... of ING Group (www.ing.com). A short description of the duties for the five Committees follows below. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 69

Page 72
...) Former managing director of F&C and country head for F&C Netherlands (asset management firm). Other business activities: member of the Supervisory Board of NSI N.V. (real estate fund) and non-executive director of F&C Sapphire hedge fund, Ireland (listed companies). Non-executive director of Brink...

Page 73
..., hybrid capital and debt instruments, reinsurance agreements and futures and option trading 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 71

Page 74
... statements of ING Group. Furthermore, Ernst & Young also audited and reported on the effectiveness of internal control over financial reporting on 31 December 2011. The external auditor attended the meetings of the Audit Committee and the 2011 annual General Meeting. In the 2012 annual General...

Page 75
...the share capital of ING Group (the 'Trust Conditions') in order to align the Trust Conditions with the Securities Giro Act (Wet giraal effectenverkeer), as amended 1 January 2011. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts...

Page 76
... to the Board on persons to be appointed as members of the Board. The Board informs them for such purpose and in good time when, for what reason and according to which profile a vacancy must be filled and in which manner a recommendation should take place. 74 ING Group Annual Report 2011

Page 77
[email protected] Website: www.ingtrustoffice.com 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts AMSTERDAM, 12 MARCH 2012 BOARD OF STICHTING ING AANDELEN 6 Other information 7 Additional information ING Group Annual Report 2011...

Page 78
... as of 12 May 2011 and Wim van Vonno. All members of the Board stated that they meet the conditions regarding independence as referred to in the Articles of Association of ING Continuity Foundation. AMSTERDAM, 12 MARCH 2012 BOARD OF STICHTING CONTINUÃTEIT ING 76 ING Group Annual Report 2011

Page 79
...year 2011 of ING Groep N.V. and the enterprises included in the consolidation taken as a whole, together with a description of the principal risks ING Groep N.V. is being confronted with. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts AMSTERDAM, 12 MARCH 2012...

Page 80
... over financial reporting. ING Group has long-established Business Principles and a strong internal control culture, which all staff must adhere to. SOX 404 activities are organised along the lines of the governance structure, and involve the participation of senior management across ING. Following...

Page 81
... Oversight Board (United States), the consolidated balance sheet of ING Groep N.V. as of 31 December 2011, the consolidated profit and loss account, consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity for the year then...

Page 82
...will account for estimated risks and costs of capital. In addition to financial indicators, performance will also be assessed based on non-financial drivers, by means of a number of targets regarding economic, environmental, customer satisfaction and social criteria. Pensions Executive Board members...

Page 83
... use of company cars, contributions to company savings plans and, if applicable, expatriate allowances). Executive Board members may obtain banking and insurance services from ING Group subsidiaries in the ordinary course of their business and on terms that apply to most other comparable employees...

Page 84
...Board members was set at the time of the introduction of the remuneration policy in 2010 and the Executive Board decided not to accept a base salary increase in 2011 as ING had not completely repaid all outstanding core Tier 1 securities that were issued to the Dutch State. As a consequence the base...

Page 85
...-share award. Depositary receipts obtained from exercised stock options may only be sold within a period of five years from the grant date of the options to pay tax over the exercised award. 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011...

Page 86
... Loans and advances to Executive Board members The table below presents the loans and advances provided to Executive Board members and outstanding on 31 December 2011, 2010 and 2009. These loans were concluded in the normal course of business and on terms generally applicable to comparable Company...

Page 87
... structure as set out above is based on information currently available. Should it become clear that adjustments are necessary, ING will amend the structure as deemed appropriate. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts...

Page 88
... figures for 2011 reflect the partial year as members of the Supervisory Board. Compensation of former members of the Supervisory Board who are not included in the above table amounted to nil in 2011, EUR 80 thousand in 2010 and EUR 277 thousand in 2009. 86 ING Group Annual Report 2011

Page 89
... Supervisory Board members may obtain banking and insurance services from ING Group subsidiaries in the ordinary course of their business and on terms that are customary in the sector. The table below presents the loans and advances to Supervisory Board members outstanding on 31 December 2011, 2010...

Page 90
... Dinsbach, Robert Milewski, Gerrit Riphagen, Havva Tasgil, Gerard Veldman, Jelte Wiersinga, the Netherlands Mieczyslaw Bielawski, Krystov Burnat, Mariusz Cieslik, Poland Mihai Ailincai, Romania Miguel Hernandez, Raul Lopez, Spain Sam Chaudhuri, Rina Goldenberg, UK. 88 ING Group Annual Report 2011

Page 91
... accounts Risk management Capital management 90 91 93 94 96 98 117 213 279 2 Report of the Executive Board 3 Corporate governance 5 Parent company annual accounts Parent company balance sheet Parent company proï¬t and loss account Parent company statement of changes in equity Accounting policies...

Page 92
Consolidated balance sheet of ING Group as at 31 December amounts in millions of euros 2011 2010 ASSETS Cash and balances with central banks 1 Amounts due from banks 2 Financial assets at fair value through profit and loss 3 - trading assets - investments for risk of policyholders - non-trading ...

Page 93
... 7,271 711 6,593 48,765 -1,837 -613 -1,224 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 114 995 1,109 216 100 216 100 5,853 2,916 -1,124 6 Other information 7 Additional information ING Group Annual Report 2011 91

Page 94
...Amounts for 2010 and 2009 are restated for the change in accounting policy as disclosed in the section 'Changes in accounting policies' on page 99. References relate to the notes starting on page 117. These form an integral part of the consolidated annual accounts. 92 ING Group Annual Report 2011

Page 95
Consolidated statement of comprehensive income of ING Group for the years ended 31 December amounts in millions of euros 2011 2010 2009 1 Who we are Net result Unrealised revaluations after taxation (1) Realised gains/losses transferred to profit and loss (1) Changes in cash flow hedge reserve ...

Page 96
... - customer deposits and other funds on deposit - trading liabilities - other financial liabilities at fair value through profit and loss - other liabilities Net cash flow from operating activities - group companies - associates - available-for-sale investments - held-to-maturity investments - real...

Page 97
... to the notes starting on page 117. These form an integral part of the consolidated annual accounts. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 95

Page 98
... reserve Transfer to insurance liabilities/DAC Exchange rate differences Other revaluations Total amount recognised directly in equity Net result Total comprehensive income Employee stock option and share plans Changes in the composition of the group Dividend Purchase/sale of treasury shares Balance...

Page 99
...Consolidated statement of changes in equity of ING Group continued amounts in millions of euros Share capital Share premium Total shareholders' equity Reserves (parent) Non-voting equity securities Minority interests Total equity 2 Report of the Executive Board Balance as at 1 January 2011...

Page 100
... in accounting policies. ING Group's accounting policies under these standards and its decision on the options available are set out in the section 'Principles of valuation and determination of results' below. In this document the term 'IFRS-EU' is used to refer to International Financial Reporting...

Page 101
...Who we are Accounting policies for the consolidated annual accounts of ING Group continued The presentation of, and certain terms used in, the consolidated balance sheet, the consolidated profit and loss account, consolidated statement of cash flows, consolidated statement of changes in equity and...

Page 102
... of net result and shareholders' equity to insurance, interest rate, equity, foreign currency and real estate risks. These sensitivities are based on changes in assumptions that management considers reasonably likely at the balance sheet date. LOAN LOSS PROvISIONS Loan loss provisions are recognised...

Page 103
... goodwill. The recoverable amount is estimated as the higher of fair value less cost to sell and value in use. Several methodologies 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 101

Page 104
... vehicles, the existence of control is determined taking into account both ING Group's financial interests for own risk and its role as investment manager. The results of the operations and the net assets of subsidiaries are included in the profit and loss account and the balance sheet from the date...

Page 105
...group companies. Reference is also made to Note 13 'Shareholders' equity (parent)/non-voting equity securities', which discloses the amounts included in the profit and loss account. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts...

Page 106
.... Interest income from debt securities and loans and receivables classified as at fair value through profit and loss is recognised in Interest income banking operations and Investment income in the profit and loss account, using the effective interest method. 104 ING Group Annual Report 2011

Page 107
... risk comprises the credit default and migration risk that is associated with ING Group's investment portfolio and mainly relates to the balance sheet classification Investments (available-for-sale and held-to-maturity); â€¢ Money market risk arises when ING Group places short term deposits...

Page 108
... cash flows in scheduled time buckets falls below the designated amount of that bucket. ING Group applies fair value hedge accounting for portfolio hedges of interest rate risk (macro hedging) under the EU 'carve-out' to its retail operations. The net exposures of retail funding (savings and current...

Page 109
.... Non-trading derivatives are measured at fair value with changes in the fair value taken to the profit and loss account. OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES Financial assets and financial liabilities are offset, and the net amount reported, in the balance sheet when the Group...

Page 110
... of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. The reporting dates of all material associates are consistent with the reporting date of the Group. 108 ING Group Annual Report 2011

Page 111
... to investment. For real estate investments held through (minority shares in) real estate investment funds, the valuations are performed under the responsibility of the funds' asset manager. 5 Parent company annual accounts 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual...

Page 112
...the profit and loss account) if ING Group has the intention to recognise the property under development after completion as real estate investments. Equipment Equipment is stated at cost less accumulated depreciation and any impairment losses. The cost of the assets is depreciated on a straight line...

Page 113
... products DAC is adjusted for the impact of unrealised results on allocated investments through equity. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011...

Page 114
... using market consistent interest rates and other current estimates and assumptions. This relates mainly to Guaranteed Minimum Withdrawal Benefits for Life on the Insurance US Closed Block VA book and certain guarantees embedded in insurance contracts in Japan. 112 ING Group Annual Report 2011

Page 115
... units in the Business Line, the shortfall is recognised immediately in the profit and loss account. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011...

Page 116
... past service costs. The defined benefit obligation is calculated annually by internal and external actuaries using the projected unit credit method. The expected value of the assets is calculated using the expected rate of return on plan assets. Differences between the expected return and...

Page 117
... that it is intended to compensate. In such case, the grant is deducted from the related expense in the profit and loss account. 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 115

Page 118
..., investing and financing activities. In the net cash flow from operating activities, the result before tax is adjusted for those items in the profit and loss account, and changes in balance sheet items, which do not result in actual cash flows during the year. For the purposes of the statement of...

Page 119
... Board Amounts held at central banks Cash and bank balances Short term deposits insurance operations 26,481 3,974 739 31,194 7,983 4,264 825 13,072 2 AMOUNTS DUE FROM BANKS Amounts due from banks Netherlands 2011 2010 2011 International 2010 2011 Total 2010 3 Corporate governance Loans...

Page 120
...consolidated annual accounts of ING Group continued As at 31 December 2011, Trading assets included receivables of EUR 40,904 million (2010: EUR 47,894 million) with regard to reverse repurchase transactions. Investments for risk of policyholders by type 2011 2010 Equity securities Debt securities...

Page 121
... ING Group's exposure to debt securities is included in the following balance sheet lines: Debt securities 2011 2010 Available-for-sale investments Held-to-maturity investments Loans and advances to customers Due from banks Available-for-sale investments and Assets at amortised cost Trading assets...

Page 122
...annual accounts of ING Group continued Debt securities by type and balance sheet line (banking operations) Available-for-sale investments 2011 2010 Held-to-maturity investments 2011 2010 2011 Loans and advances to customers 2010 Due from banks 2011 2010 2011 Total Banking operations 2010 Government...

Page 123
... to the consolidated annual accounts of ING Group continued Debt securities by type and balance sheet line (total) Available-for-sale investments 2011 2010 Held-to-maturity investments 2011 2010 2011 Loans and advances to customers 2010 Due from banks 2011 2010 Total Banking and Insurance operations...

Page 124
... by fair value hierarchy and Note 37 'Investment income' for impairments on available-for-sale debt securities. Further information on ING Group's risk exposure with regard to Greece, Italy, Ireland, Portugal and Spain is provided in the 'Risk management' section. 122 ING Group Annual Report 2011

Page 125
... consolidated annual accounts of ING Group continued Changes in available-for-sale and held-to-maturity investments Available-for-sale equity securities 2011 2010 2011 Available-for-sale debt securities 2010 2011 Held-to-maturity 2010 2011 Total 2010 2 Report of the Executive Board Opening balance...

Page 126
... to the consolidated annual accounts of ING Group continued Reclassifications to Loans and advances to customers and Amounts due from banks Q2 2009 Q1 2009 Q4 2008 As per reclassification date Fair value Range of effective interest rates (weighted average) Expected recoverable cash flows Unrealised...

Page 127
... by type - banking operations Netherlands 2011 2010 2011 International 2010 2011 Total 2010 5 Parent company annual accounts Loans to, or guaranteed by, public authorities Loans secured by mortgages Loans guaranteed by credit institutions Personal lending Asset backed securities Corporate loans 29...

Page 128
Notes to the consolidated annual accounts of ING Group continued Loans and advances to customers by type - insurance operations Netherlands 2011 2010 2011 International 2010 2011 Total 2010 Policy loans Loans secured by mortgages Unsecured loans Asset backed securities Other 44 6,450 2,187 6,681 ...

Page 129
...the consolidated annual accounts of ING Group continued Loan loss provisions analysed by type - banking operations Netherlands 2011 2010 2011 International 2010 2011 Total 2010 Loans to, or guaranteed by, public authorities Loans secured by mortgages Loans guaranteed by credit institutions Personal...

Page 130
... to the consolidated annual accounts of ING Group continued 6 INvESTMENTS IN ASSOCIATES Investments in associates 2011 Interest held (%) Fair value of listed Balance sheet value investment Total assets Total liabilities Total income Total expenses TMB Public Company Limited Sul America S.A. CBRE...

Page 131
... 5 Parent company annual accounts 6 Other information In 2011, Transfers to and from Investments relates mainly to the real estate funds for which significant influence ceased to exist due to the sale of ING Real Estate Investment Management. In 2011, share of results of EUR 241 million (2010: EUR...

Page 132
... annual accounts of ING Group continued 7 REAL ESTATE INvESTMENTS Changes in real estate investments 2011 2010 Opening balance Additions Changes in the composition of the group Transfers to and from Property in own use Transfers to and from Other assets Fair value gains/(losses) Disposals Exchange...

Page 133
... 2011 2010 Banking operations Insurance operations 1,244 291 1,535 1,329 313 1,642 3 Corporate governance Changes in property in own use 2011 2010 Opening balance Additions Changes in the composition of the group Transfers to and from Real estate investments Transfers to and from Other assets...

Page 134
... to the consolidated annual accounts of ING Group continued Changes in equipment Data processing equipment 2011 2010 Fixtures and fittings and other equipment 2011 2010 2011 Total 2010 Opening balance Additions Changes in the composition of the group Disposals Depreciation Impairments Exchange rate...

Page 135
... to reporting units 2011 2010 5 Parent company annual accounts Retail Central Europe Retail Belgium Retail Netherlands ING Direct Commercial Banking - Lease ING Real Estate Commercial Banking - Other Insurance Benelux Insurance Central & Rest of Europe Insurance Latin America Insurance Asia...

Page 136
... these reporting units was fully supported in the first step. ING Real Estate During 2011 the ING Real Estate business changed significantly. The Real Estate Development business was reduced by selling/closing development projects and ING sold REIM (the ING Real Estate Investment Management business...

Page 137
... Investment Management (ING REIM) and Clarion Real Estate Securities. Reference is made to Note 30 'Companies acquired and companies disposed' for more details on occurred and expected significant disposals. Assets held for sale 2011 2010 3 Corporate governance 4 Consolidated annual accounts Cash...

Page 138
... the consolidated annual accounts of ING Group continued 12 OTHER ASSETS Other assets by type 2011 2010 Reinsurance and insurance receivables Deferred tax assets Property development and obtained from foreclosures Income tax receivable Accrued interest and rents Other accrued assets Pension assets...

Page 139
...561 495 424 919 5 Parent company annual accounts No changes have occurred in the issued share capital in 2011 and 2010. Share premium Changes in Share premium are disclosed in the Consolidated statement of changes in equity of ING Group. Rights issue (2009) On 27 November 2009 existing holders of...

Page 140
... the holders of its ordinary shares. Pursuant to the Dutch Civil Code, dividends can only be paid up to an amount equal to the excess of the company's own funds over the sum of the paid-up capital, and reserves required by law. Moreover, ING Groep N.V.'s ability to pay dividends is dependent on the...

Page 141
...'Insurance and investment contracts, reinsurance contracts'. Changes in currency translation reserve 2011 2010 2009 5 Parent company annual accounts Opening balance Unrealised revaluations after taxation Realised gains/losses transferred to profit and loss Exchange rate differences Closing balance...

Page 142
... repayment premium (EUR 346 million) on the repayment of EUR 5 billion non-voting equity securities. Changes in treasury shares Amount 2011 2010 2009 2011 2010 Number 2009 Opening balance Purchased/sold Rights issue Share-based payments Other Closing balance 715 -17 -19 -14 665 737 48 -23 -47 715...

Page 143
... in which the subsidiaries operate, or other limitations which may exist in certain countries. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 141

Page 144
... N.V. and ING Bank N.V. under the same conditions as the original bonds as follows: Subordinated loans provided by ING Groep N.v. to ING Bank N.v. and ING verzekeringen N.v. 2011 2010 ING Bank N.V. ING Verzekeringen N.V. 6,141 1,957 8,098 7,147 2,003 9,150 142 ING Group Annual Report 2011

Page 145
... Scheme of the State of the Netherlands and are part of ING Group's regular medium-term funding operations. ING Group pays a fee of 84 basis points over the issued bonds to the Dutch State to participate in the Credit Guarantee Scheme: â€¢ ING Bank issued 3 year government guaranteed senior...

Page 146
... to the consolidated annual accounts of ING Group continued 16 OTHER BORROWED FUNDS Other borrowed funds by remaining term 2011 2012 2013 2014 2015 2016 Years after 2016 Total Subordinated loans of group companies Preference shares of group companies Loans contracted Loans from credit institutions...

Page 147
... changes Closing balance Where discounting is used in the calculation of life insurance provisions, the rate is within the range 2.8% to 5.5% (2010: 2.3% to 4.7%) based on weighted averages. Insurance provisions include a provision for the estimated cost of the agreement with regard to unit-linked...

Page 148
...123 13 -3 3,203 Exchange rate differences Other changes Closing balance 92 100 ING Group had an outstanding balance of EUR 35 million as at 31 December 2011 (2010: EUR 41 million) relating to environmental and asbestos claims of the insurance operations. In establishing the liability for unpaid...

Page 149
... to the consolidated annual accounts of ING Group continued Changes in investment contracts liabilities 2011 2010 Opening balance Current year liabilities Prior year provisions - payments to contract holders - interest accrual - valuation changes investments 11,974 7,867 11,302 4,920 2 Report of...

Page 150
... on deposit 2011 2010 Savings accounts Credit balances on customer accounts Corporate deposits Other 291,516 114,867 49,668 11,496 467,547 324,581 127,177 55,024 4,580 511,362 Customer deposits and other funds on deposit by type Netherlands 2011 2010 2011 International 2010 2011 Total 2010 Non...

Page 151
... as at fair value through profit and loss is EUR 13,726 million (2010: EUR 12,438 million). 21 OTHER LIABILITIES Other liabilities by type 2011 2010 4 Consolidated annual accounts Deferred tax liabilities Income tax payable Pension benefits Post-employment benefits Other staff-related liabilities...

Page 152
... to the consolidated annual accounts of ING Group continued Changes in deferred tax Net liability 2010 Change through equity Change through net result Changes in the composition of the group Exchange rate differences Other Net liability 2011 Investments Real estate investments Financial assets and...

Page 153
... 19 5 Parent company annual accounts 1,102 6 Other information In 2011 the deferred tax assets for banking operations for which the utilisation is dependent on future taxable profits, as disclosed above, decreased significantly compared to 2010, as a result of the announced sale of ING Direct USA...

Page 154
... included in other provisions are based on best estimates with regard to amounts and timing of cash flows required to settle the obligation. Pension and post-employment benefits Summary of pension benefits 2011 2010 2009 2008 2007 Defined benefit obligation Fair value of plan assets 16,212 20,077...

Page 155
... than pensions 2011 2010 3 Corporate governance 4 Consolidated annual accounts Opening balance Current service cost Interest cost Employer's contribution Participants contributions Benefits paid Actuarial gains and losses Past service cost Changes in the composition of the group and other changes...

Page 156
Notes to the consolidated annual accounts of ING Group continued Changes in fair value of plan assets Pension benefits 2011 2010 Opening balance Expected return on plan assets Employer's contribution Participants contributions Benefits paid Actuarial gains and losses Changes in the composition of ...

Page 157
... Postemployment benefits other than pensions 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 2012 2013 2014 2015 2016 Years 2017 - 2021 577 549 534 567 554 3,511 15 15 15 14 14 45 6 Other information 7 Additional information ING Group Annual Report 2011...

Page 158
... sheet. Assets by contractual maturity 2011 Less than 1 month (1) 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total Cash and balances with central banks Amounts due from banks Financial assets at fair value through profit and loss - trading assets - investments for risk...

Page 159
... risk is managed. Liabilities by maturity 2011 Less than 1 month (1) 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Adjustment (2) Total 2 Report of the Executive Board Subordinated loans Debt securities in issue Other borrowed funds Amounts due to banks Customer deposits...

Page 160
... consolidated annual accounts of ING Group continued Liabilities by maturity 2010 Less than 1 month (1) 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Adjustment (2) Total Subordinated loans Debt securities in issue Other borrowed funds Amounts due to banks Customer deposits...

Page 161
... income and interest expense on non-trading derivatives is EUR 2,966 million (2010: EUR 3,613 million) and EUR 2,959 million (2010: EUR 3,138 million), respectively, relating to derivatives used in cash flow hedges. 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual...

Page 162
... the Latin American pensions, life insurance and investment management operations that were divested for the year (and comparative years) and the result recognised on disposal are presented below: Results from discontinued operations 2011 2010 2009 Total income Total expenses Result before tax from...

Page 163
...deposits from De Nederlandsche Bank (the Dutch central bank) and other banks and serve to secure margin accounts or are used for other purposes required by law. The assets not freely disposable are as follows: Assets not freely disposable 2011 2010 2 Report of the Executive Board Investments Loans...

Page 164
..., ING Group has transferred a substantial part of the credit risk related to these loan portfolios to third-party investors. In general, the third-party investors in securities issued by the SPE have recourse only to the assets of the SPE and not to ING Group. 162 ING Group Annual Report 2011

Page 165
... funds in a fiduciary capacity. These funds are therefore generally not included in the consolidated financial statements of ING Group. 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011...

Page 166
... America Insurance Corporation Lion Connecticut Holdings Inc. ReliaStar Life Insurance Company ReliaStar Life Insurance Company of New York Security Life of Denver Insurance Company ING USA Annuity and Life Insurance Company ING Investment Management Co Security Life of Denver International Limited...

Page 167
... ING Real Estate. ING Investment Management Australia In October 2011 ING completed the sale of ING Investment Management (ING IM) Australia to UBS AG. ING IM Australia's business provided a number of investment strategies and products directly to the Australian institutional and wholesale markets...

Page 168
... companies disposed in 2011 Latin American pensions, life insurance and investment management operations Clarion Real Clarion Partners Estate securities ING REIM Asia and Europe ING Car Lease Pacific Antai Life Insurance Company Ltd Total General Primary line of business Sales proceeds Cash...

Page 169
...the non-life insurance operations in Greece for a total consideration of EUR 4 million. The sale was completed in July 2010. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group...

Page 170
...annual accounts of ING Group continued Most significant companies disposed in 2010 Asia Private Banking business (3) Swiss Private ING Summit Banking business (3) Industrial Fund LP Total General Primary line of business Sales proceeds Cash proceeds (1) Sales proceeds Assets Cash assets Investments...

Page 171
... consolidated annual accounts of ING Group continued 3W Holding B.V. General Primary line of business Bank 1 September 2009 5 2 Report of the Executive Board Date of full consolidation Purchase consideration payable Assets Miscellaneous other assets Liabilities Customer deposits and other funds...

Page 172
... consolidated annual accounts of ING Group continued Most significant companies disposed in 2009 ING Life Taiwan (5) ING Canada Annuity and Mortgage business of Chile Australia/ New Zealand Total General Primary line of business Sales proceeds Cash proceeds (1) Non-cash proceeds Sales proceeds...

Page 173
...for indexing pensions insured with Stichting Pensioenfonds ING (the Dutch ING Pension Fund) per 1 January 2011. In July 2011, also the Interest Group ING General Managers' Pensions (Belangenvereniging ING-Directiepensioenen), together with a number of individual retired Dutch General Managers of ING...

Page 174
... report therefore are part of the annual accounts. For the post-employment benefit plans see Note 21 'Other liabilities'. In 2011 ING made a number of changes in the structure and composition of the Management Boards for Insurance and Banking. As of November 2011 the members of the Management Board...

Page 175
... Board and Management Boards) 2010 amounts in thousands of euros Executive Board of ING Groep N.V. Management Boards of ING Bank N.V. and ING Verzekeringen N.V. (1) 4 Consolidated annual accounts Total Base salary and variable compensation in cash Pension costs Termination benefit Fair market...

Page 176
... a funding fee and a management fee. As a result of the transaction ING derecognised 80% of the Alt-A portfolio from its balance sheet and recognised a receivable from the Dutch State. The transferred Alt-A portfolio was previously included in Available-for-sale debt securities. The Dutch State also...

Page 177
... the Dutch State in the form of fee adjustments relating to the Illiquid Assets Back-Up Facility which resulted in a one-off pre-tax charge to ING of EUR 1.3 billion in the fourth quarter of 2009; 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company...

Page 178
...â€¢ ING Group must develop a sustainable remuneration policy for the Executive Board and Senior Management that is aligned to new international standards and submit this to its General Meeting for adoption. This remuneration policy shall include incentive schemes which are linked to long-term value...

Page 179
... fair value 2011 2010 2011 Balance sheet value 2010 2 Report of the Executive Board Financial assets Cash and balances with central banks Amounts due from banks Financial assets at fair value through profit and loss - trading assets - investments for risk of policyholders - non-trading derivatives...

Page 180
... or more pricing services or by a valuation technique that discounts expected future cash flows using a market interest rate curves, referenced credit spreads, maturity of the investment and estimated prepayment rates where applicable. Certain asset backed securities in the United States are valued...

Page 181
... issue and other borrowed funds The fair value of debt securities in issue and other borrowed funds is generally based on quoted market prices or, if not available, on estimated prices by discounting expected future cash flows using a current market interest rate and credit spreads applicable to the...

Page 182
...for example illiquid debt securities, complex OTC and credit derivatives, certain complex loans (for which current market information about similar assets to use as observable, corroborated data for all significant inputs into a valuation model is not available) and asset backed securities for which...

Page 183
... Board 3 Corporate governance 2011 Non-trading derivatives Availablefor-sale investments Total Opening balance Amounts recognised in the profit and loss account during the year Revaluation recognised in equity during the year Purchase of assets Sale of assets Maturity/settlement Transfers...

Page 184
...Changes in Level 3 Assets Investments for risk of policy-holders Financial assets designated as at Non-trading fair value through derivatives profit and loss Available-for-sale investments 2010 Trading assets Total Opening balance Amounts recognised in the profit and loss account during the year...

Page 185
... 183 113 342 3 Corporate governance Amounts recognised in the profit and loss account during the year (Level 3) 2010 Held at balance sheet date Derecognised during the year Total Assets Trading assets Investments for risk of policyholders Non-trading derivatives Financial assets designated as at...

Page 186
... 4 'Investments', EUR 5.3 billion is classified as available-for-sale and is measured at fair value (with the revaluation recognised in equity, taking into account impairments that are recognised in the profit and loss account). The table below provide the fair value hierarchy per year-end 2011 for...

Page 187
... annual accounts of ING Group continued 35 INTEREST RESULT BANKING OPERATIONS Interest result banking operations 2011 2010 2009 2 Report of the Executive Board Interest income on loans Interest income on impaired loans Total interest income on loans Interest income on available-for-sale securities...

Page 188
... bonds and an impairment of EUR 189 million was recognised on subordinated debt from Irish banks both are included in Impairments of available-for-sale debt securities. Reference is made to the 'Risk management' section for further information on these impairments. 186 ING Group Annual Report 2011

Page 189
... investments per operating segment Impairments 2011 2010 2009 Reversal of impairments 2011 2010 2009 2 Report of the Executive Board Retail Belgium ING Direct Commercial Banking (excluding Real Estate) Insurance Benelux Insurance CRE Insurance US Insurance Asia/Pacific ING IM Corporate Line Banking...

Page 190
Notes to the consolidated annual accounts of ING Group continued 39 COMMISSION INCOME Gross fee and commission income Banking operations 2011 2010 2009 2011 Insurance operations 2010 2009 2011 2010 Total 2009 Funds transfer Securities business Insurance broking Asset management fees Brokerage and ...

Page 191
...are Notes to the consolidated annual accounts of ING Group continued 41 NET TRADING INCOME Net trading income Banking operations 2011 2010 2009 2011 Insurance operations 2010 2009 2011 2010 Total 2009 2 Report of the Executive Board Securities trading results Foreign exchange transactions results...

Page 192
... consolidated annual accounts of ING Group continued Underwriting expenditure 2011 2010 2009 Expenditure from life underwriting Reinsurance and retrocession premiums Gross benefits Reinsurance recoveries Change in life insurance provisions for risk of company Costs of acquiring insurance business...

Page 193
...to the consolidated annual accounts of ING Group continued ING has completed a separate annual review of the policyholder behaviour assumptions for the VA Japan business, which has not resulted in material adjustments. In 2010, the Change in life insurance provisions for risk of company includes an...

Page 194
... to the consolidated annual accounts of ING Group continued 45 STAFF ExPENSES Staff expenses Banking operations 2011 2010 2009 2011 Insurance operations 2010 2009 2011 2010 Total 2009 Salaries Pension and other staff-related benefit costs Social security costs Share-based compensation arrangements...

Page 195
... average price of EUR 7.39 per share. Changes in option rights outstanding Options outstanding (in numbers) 2011 2010 2009 Weighted average exercise price (in euros) 2011 2010 2009 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts...

Page 196
... to the consolidated annual accounts of ING Group continued The weighted average share price at the date of exercise for options exercised during 2011 is EUR 8.09 (2010: EUR 7.46; 2009: 8.57). Changes in option rights non-vested Options non-vested (in numbers) 2011 2010 2009 Weighted average grant...

Page 197
... million is presented in the following lines in the profit and loss account. Total net interest income 2011 2010 2009 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information Interest result banking operations 35 Investment income - insurance operations 37 Other interest...

Page 198
... operating lease has terms and conditions that materially affect the amount, timing and certainty of the consolidated cash flows of the Group. The External advisory fees include fees for audit services and non-audit services provided by the Group's auditors. Fees of Group's auditors 2011 2010...

Page 199
.... 5 Parent company annual accounts 6 Other information Comprehensive income Income tax related to components of other comprehensive income 2011 2010 2009 Unrealised revaluations Realised gains/losses transferred to profit and loss (reclassifications from equity to profit and loss) Changes in cash...

Page 200
... consolidated annual accounts of ING Group continued 49 EARNINGS PER ORDINARY SHARE Earnings per ordinary share Amount (in millions of euros) 2011 2010 2009 Weighted average number of ordinary shares outstanding during the period (in millions) 2011 2010 2009 2011 Per ordinary share (in euros) 2010...

Page 201
... of Europe (CRE) Insurance United States (US) * Insurance US Closed Block VA Insurance Asia/Pacific ING Investment Management (IM) Corporate Line Insurance 5 Parent company annual accounts In 2011 the operating segment Insurance Latin America is not included in the segment reporting anymore as its...

Page 202
.... The main products offered are savings accounts and mortgages. Income from wholesale banking activities. A full range of products is offered from cash management to corporate finance. Income from real estate activities. Income from life insurance, non-life insurance and retirement services in the...

Page 203
... operations. Operating segments ING Group Total 2010 Total Banking Total Insurance Eliminations Total 3 Corporate governance 4 Consolidated annual accounts Underlying income - Gross premium income - Net interest result - banking operations - Commission income - Total investment and other income...

Page 204
... Nederlanden Industry Pension fund portfolio, the Annuity and Mortgage businesses in Chile, three US independent retail broker-dealer units (three quarters of ING Advisors Network) and ING Australia Pty Limited as well as the operating result of the in 2009, 2010 and 2011 divested units. Special...

Page 205
...Operating segments Banking 2011 Retail Netherlands Retail Belgium ING Direct Retail CE Retail Asia Commercial Banking ING Real Corporate Estate Line Banking Total Banking 2 Report of the Executive Board Underlying income - Net interest result - Commission income - Total investment and other income...

Page 206
... annual accounts of ING Group continued Operating segments Banking 2009 Retail Netherlands Retail Belgium ING Direct Retail CE Retail Asia Commercial Banking ING Real Estate Corporate Line Banking Total Banking Underlying income - Net interest result - Commission income - Total investment...

Page 207
... Insurance US Insurance Asia/ Pacific ING IM Corporate Line Insurance Total Insurance 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts Investment margin Fees and premium based revenues Technical margin Income non-modelled life business Life & ING IM operating...

Page 208
... Group continued Operating segments Insurance 2010 Insurance Benelux Insurance CRE Insurance US Insurance US Closed Block VA Insurance Asia/ Pacific Corporate ING IM Line Insurance Total Insurance Investment margin Fees and premium based revenues Technical margin Income non-modelled life business...

Page 209
... to the consolidated annual accounts of ING Group continued Interest income and interest expenses breakdown by operating segments Banking 2011 Retail Netherlands Retail Belgium ING Direct Retail CE Commercial Retail Asia Banking ING Real Estate Corporate Line Banking Total Banking 2 Report of the...

Page 210
...not reported internally to, and not managed by, the chief operating decision maker. IFRS-EU balance sheet information is prepared, and disclosed below, for the Banking operations as a whole and for the Insurance operations as a whole and by segment. Total assets and Total liabilities by segment 2011...

Page 211
... and other eligible bills included in cash and cash equivalents 2011 2010 2009 4 Consolidated annual accounts Treasury bills and other eligible bills included in trading assets Treasury bills and other eligible bills included in available-for-sale investments 1,471 1,140 2,611 1,697 2,744 4,441...

Page 212
... for sale Other assets Total assets EQUITY Shareholders' equity (parent) Non-voting equity securities Minority interests Total equity LIABILITIES Subordinated loans Debt securities in issue Other borrowed funds Insurance and investment contracts Amounts due to banks Customer deposits and other funds...

Page 213
...we are Notes to the consolidated annual accounts of ING Group continued Deferred acquisition costs (Restated) Changes in deferred acquisition costs Investment contracts Life insurance Non-life insurance 2 Report of the Executive Board Total Opening balance 1 January 2009 Capitalised Amortisation...

Page 214
... to the consolidated annual accounts of ING Group continued Other liabilities (Restated) Other liabilities by type 31 December 2009 1 January 2009 Deferred tax liabilities Income tax payable Pension benefits Post-employment benefits Other staff-related liabilities Other taxation and social security...

Page 215
...2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information Chief Risk Ofï¬cer ING Bank Deputy Chief Risk Ofï¬cer Eurasia Chief Risk Ofï¬cer US 7 Additional information ING Group uses an integrated risk management...

Page 216
... 4 'Investments' of the Annual Accounts. ABS portfolio The RMBS and ABS portfolio changed from EUR 51.2 billion at year-end 2010 to 31.5 billion, excluding ING Direct USA. The RMBS and ABS exposure of ING Direct USA is EUR 15.0 billion. ING Group continued to manage its asset-backed securities (ABS...

Page 217
... by internal stress tests. Throughout 2011 ING has reduced its positions in especially government bonds for some of the weaker countries as a result of these risk analyses. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other...

Page 218
..., in the base case and under several stressed scenarios. Like most insurance companies, in normal circumstances liquidity risk is quite remote to ING Insurance. Also under the current challenging market circumstances ING Insurance liquidity position is comfortable. 216 ING Group Annual Report 2011

Page 219
...of internal controls, including financial and operational risk management and forms the third line of defence. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report...

Page 220
... financial policies and corporate structure). For the risk management purposes the Supervisory Board is assisted by two sub-committees: - The Audit Committee, which assists the Supervisory Board in reviewing and assessing ING Bank's major risk exposures and the operation of internal risk management...

Page 221
... 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts Risk Integration and Analytics Bank Model Validation Bank Credit Risk Management Bank Market Risk Management Bank Operational Risk Management Bank Compliance Risk Management Bank 5 Parent company annual...

Page 222
...Luxemburg); â€¢ Retail Banking Direct & International contains Retail Central Europe, Retail Asia and ING Direct; â€¢ Commercial Banking corresponds to Commercial Banking (including ING Real Estate); and â€¢ Bank Corporate Line coincides with the Corporate Line. 220 ING Group Annual Report 2011

Page 223
...Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts Determine correlations 6 Other information Determine stressed correlations Calculate diversiï¬cation ratio per risk type 7 Additional information Economic capital per risk type...

Page 224
... due to limited historic data observations. Expert opinion is used for aggregating business and operational risk. The Economic Capital for ING Bank involves the aggregation of the underlying EC of five risk types, namely credit, transfer, market, operational and business risks. Model disclosures are...

Page 225
... moment of statistical default. Collectively, these amounts are called 'credit risk outstandings'. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 223

Page 226
... are consolidated with the corresponding Economic Capital components from other disciplines. Economic and Regulatory Capital (Bank diversified only) by risk type Economic Capital 2011 2010 2011 Regulatory Capital 2010 Credit risk 14,365 15,245 22,473 22,452 224 ING Group Annual Report 2011

Page 227
... limits on a daily basis. Country risk limits are assigned for transfer risk mainly for emerging markets. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011...

Page 228
... policies During the assessment process of creating new loans, trading limits, or making investments, as well as reviewing existing loans trading positions and investments, ING Bank determines the amount and type of collateral, if any, that a customer may be required to pledge to ING Bank. Generally...

Page 229
... Money Market is directly related to deposits given to central banks. Risk classes ING Bank portfolio per credit risk type, as % of total outstandings (1) Lending 2011 2010 2011 Investment 2010 Money Market 2011 2010 Pre-settlement 2011 2010 Total ING Bank 2011 2010 5 Parent company annual accounts...

Page 230
... the residential mortgage portfolio. The Americas was the second region in terms of growth which corresponds with the region's economic recovery in 2011. Exchange rate effects had further impact on the regional division. In line with ING Bank's de-risking strategy, the portfolio developments in most...

Page 231
... tables show the credit risk outstandings and cover values per line of business: Retail Banking (comprising both Benelux, Direct & International) and Commercial Banking. Outstandings for Retail Banking are reported for the most relevant retail product being Residential Mortgages while the remaining...

Page 232
... portfolio and other secondary covers, such as life insurance policies, savings and investment products. The average LTV in the Netherlands is 81% (2010: 80%). When available, indexation is applied to revaluate the collateral to the present value. In the LTV calculation the following property...

Page 233
...4 Consolidated annual accounts Commercial Banking 2011 2010 Retail Banking Benelux 2011 2010 Retail Banking Direct & International 2011 2010 Total ING Bank 2011 2010 Opening balance Changes in the composition of the group Write-offs Recoveries Increase/(decrease) in loan loss provision Exchange...

Page 234
... Capital for market risk is calculated for exposures both in trading portfolios and non-trading portfolios and includes real estate risk, foreign exchange rate risk, equity price risk, interest rate risk and model risks. Economic capital for market risk is calculated using internally developed...

Page 235
... of the previous year. ING Bank uses VaR with a 1-day horizon for internal risk measurement, control and back testing, and VaR with a 10-day horizon for determining regulatory capital. 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 233

Page 236
... event risk number for the ING Commercial Banking trading activity is generated on a weekly basis. Like VaR, event risk is limited by ALCO Bank. ING Bank's event risk policy basically consists of defined stress parameters per country and per market (fixed income, equity, foreign exchange, credit and...

Page 237
...of the ING Commercial Banking trading portfolio for 2011 and 2010 are provided in the table below. Consolidated vaR trading books: ING Commercial Bank Minimum 2011 2010 2011 Maximum 2010 2011 Average 2010 2011 Year end 2010 Interest rate (1) Equity Foreign exchange Credit spread (1) Diversification...

Page 238
... ING Bank The risk figures in the table below only relate to the CAD2 trading books for which the internal model approach is applied. Risk measures for Internal Model Approach Portfolios 2011 Minimum Maximum Average 2011 Year end 2010 Interest rate VaR (1) Equity VaR Foreign exchange VaR Credit...

Page 239
... company annual accounts Basis Point Value (BPV) measures the impact on value of a 1 basis point increase in interest rates or credit spreads. ING Bank Market risk in Banking Books ING Bank makes a distinction between trading and banking (non-trading) books. Positions in trading books can change...

Page 240
... ING Bank ING Bank distinguishes three types of activities: investment of own capital (by Capital Management), commercial business (ING Direct, Retail Banking and Commercial Bank) and the strategic interest rate position (Financial Markets ALM). The scheme below presents the ALM framework: ING Bank...

Page 241
... in interest rates. In line with NPV-at-Risk, the bank's overall BPV position is dominated by the long-term investment of capital, as the present value of this position is significantly impacted if interest rates move up by 1 basis point. 7 Additional information ING Group Annual Report 2011 239

Page 242
...risk-weighted assets are equally sensitive in relative terms to changing FX rates. Risk proï¬le - FX Translation result The following table presents the currency exposures in the banking books for the most important currencies: Net currency exposures banking books Foreign Investments 2011 2010 2011...

Page 243
...). Investments in associates are measured in accordance with the equity method of accounting and the balance sheet value and therefore not directly linked to equity security prices. Equities Unrealised Gains and Losses in the AFS portfolio 2011 2010 3 Corporate governance 4 Consolidated annual...

Page 244
...types (e.g. unsecured deposits, commercial paper, long term bonds or repurchase agreements), fund providers (e.g. professional money market players, wholesale and retail clients), geographic markets and currencies; â€¢ Actively managing access to the capital markets by regularly issuing public debt...

Page 245
... balance sheet prudently, whereby short-term funding is primarily utilised for short-term assets, a decrease of these type of funding sources is manageable. The table below shows the funding mix. ING Bank Funding Mix 2011 2010 2 Report of the Executive Board Funding type Retail deposits Corporate...

Page 246
... officer is in place. The functional reporting line has clear accountabilities with regard to objective setting, remuneration, performance management and appointment of new ORM staff. Operational risk framework ING Bank has developed a comprehensive framework supporting and governing the process of...

Page 247
... management in managing Compliance Risk within that business unit. The Regional or Universal Bank Compliance Officer has a management and 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011...

Page 248
...doing business involving certain specified countries should be discontinued, which includes that ING Bank has a policy not to enter into new relationships with clients from these countries and processes remain in place to discontinue existing relationships involving these countries. At present these...

Page 249
... separately, and combined to one business risk figure via the variance-covariance methodology. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 247

Page 250
... pensions, life insurance and investment management operations. This transaction is the first major step in the divestment of ING's insurance and investment management activities. Governance Risk management within ING is the primary responsibility of the ING Group Chief Risk Officer. The ING Group...

Page 251
... to life insurance reserves and the accounting for such reserves, although the timing and extent of further changes to statutory reserves and reporting requirements are uncertain. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts...

Page 252
... line of defence G ro u p L Product Risk Committee Regional and BU Level Local and Regional Risk Committees BU Line Management, Regional & Local Managers Insurance Risk Management Function Regional and BU Risk Managers 1st line of defence 2nd line of defence 250 ING Group Annual Report 2011

Page 253
... to the Deputy CRO. The Deputy CRO department consists of several risk functions that support the overall Risk Management function. 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 251

Page 254
...assumed investment earnings are a combination of the run-off of portfolio yields on existing assets and new money and reinvestment rates. For short-term and reinvestments, new money rates are used. For other reinvestments, long-term best estimate assumptions are taken into account. For many products...

Page 255
... given the crisis, the IRD was further adapted to reflect more details and new views on some of the risks in ING Insurance Eurasia's investment portfolios. 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 253

Page 256
.... The Economic Capital model is based on a 99.5% level of confidence interval on a one-year time horizon. Model disclosure ING quantifies the impact of the following types of risk in its EC model: â€¢ Market risk - Assets and Liabilities are replicated by the business units using a finite set of...

Page 257
... the risk management paragraph of ING Insurance Eurasia, the EC on a comparable basis to 2011 is used. Economic Capital 2010 reconciliation amounts in billions of euros 2010 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts As reported for ING Insurance excluding...

Page 258
... insurance products. The Economic Capital assigned to Corporate Line Insurance Eurasia primarily relates to foreign exchange translation risk of the market value surplus of the business units in non-euro countries to the euro. The table below shows the breakdown of the Economic capital per risk type...

Page 259
...-49 3 Corporate governance Overall exposure to insurance risks did not change significantly during 2011. Annual review of actuarial assumptions for Insurance risk is reflected in the numbers. Mitigation In general, insurance risk cannot be (easily) hedged directly via the financial markets and are...

Page 260
... traditional Life products in Korea - guaranteed separate account pension business in the Netherlands - VA business in Japan Equity Impact of changes in equity prices which impacts direct equity exposure and loss of fee income from unit linked, Variable Annuity (VA), pension and fund business. AFR...

Page 261
... Capital ING Insurance Eurasia (99.5% undiversified) by Risk Category 2011 2010 2 Report of the Executive Board Market Risk 7,651 9,411 Economic capital mainly reduced due to a decrease in equity risk caused by market conditions and additional hedges which were put in place for the direct equity...

Page 262
... is on managing business developments within the business lines by means of top-down concentration limits for individual borrowers and certain asset classes. Model disclosure The table below shows the main risk categories for credit risk within ING Insurance Eurasia. EC numbers are based on a 99...

Page 263
... estate investments. Risk Concentration: ING Insurance Eurasia portfolio, by economic sector (1) (2) 2011 2010 4 Consolidated annual accounts Non-Bank Financial Institutions Central Governments Commercial Banks Private Individuals Real Estate Utilities Natural Resources Food, Beverages & Personal...

Page 264
... is made to credit risk management classification as included in the accounting policies for the consolidated annual accounts for a reconciliation between credit risk outstandings categories and financial assets. Collateral Collateral is a security interest in assets. If the customer defaults on its...

Page 265
...If the arrear still exists after 60 days, the obligation is transferred to one of the departments that deals with these problem loans. Aging analysis (past due but not impaired): outstandings (1) (2) 2011 2010 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information Past...

Page 266
... reported here relate to personal loans and mortgages, and are mainly present in Benelux. Provisions: ING Insurance Eurasia portfolio ING Insurance Eurasia 2011 2010 Opening balance Write-offs Recoveries Increase/(decrease) in loan loss provision Exchange differences Other changes Closing balance...

Page 267
... company annual accounts 6 Other information 7 Additional information Main developments in 2011 â€¢ Building Customer Trust - As part of ING Insurance Eurasia's customer centric commitment, Compliance Risk Management and the business worked closely together to optimise both products and services...

Page 268
... controls, business continuity, and information security. Implemented and monitored ING Group's operational risk policies across business units. In the last quarter of 2011, ING Insurance US transitioned to an expanded risk governance structure as described below. 266 ING Group Annual Report 2011

Page 269
...Risk Committee Investment Committee Talent & Organisation Committee 3 Corporate governance Asset Liability Committee Operational Risk Committee Product Committee Model Committee 4 Consolidated annual accounts Business Unit Level Business Unit Line Management & Local Managers Business Unit...

Page 270
... CEO (OCEO) Executive Committee (EC) Operations Committee Risk Committee Investment Committee Talent & Organisation Development Committee Asset Liability Committee Product Committee Operational Risk Committee Model Committee Business Unit Risk Committees 268 ING Group Annual Report 2011

Page 271
... Insurance Risk Capital Markets Risk Enterprise Risk Management CRO Annuity Mfg. & Closed Block VA CRO Retail Life Operational Risk Model Risk CRO Financial Products CRO Employee Beneï¬ts Risk Integration Risk Governance 5 Parent company annual accounts Product Approval and Review...

Page 272
... Group level. Under the new governance structure this will be the responsibility of the ING Insurance US Model Committee. ING INSURANCE US RISK FRAMEWORK In order to manage the risk on a day-to-day basis and balance value, earnings and capital decisions, ING Insurance US has implemented a risk limit...

Page 273
...main risk categories for insurance risks within ING Insurance US. IFRS Earnings sensitivities are defined on a shock scenario at the 90% confidence level. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts Description Key Drivers...

Page 274
... risk limitations related to insurance policy terms and conditions agreed with the client. Risk not mitigated by diversification is managed through concentration and exposure limits and through reinsurance and/or securitisations: â€¢ Tolerance limits for life insurance risk are set per insured life...

Page 275
... estate and real estate from foreclosed loans. Real Estate Exposure 2011 2010 4 Consolidated annual accounts 5 Parent company annual accounts Total 125 121 CREDIT RISK ING Insurance US credit exposure arises from the investment of insurance premiums in assets subject to credit risk, largely in...

Page 276
... that issue RMBS, ABS and CMBS securities. Risk concentration: ING Insurance US portfolio, by economic sector (1) ING Insurance US 2011 2010 Non-Bank Financial Institutions Real Estate Central Governments Natural Resources Utilities Commercial Banks Food, Beverages & Personal Care Chemicals, Health...

Page 277
... related to a reduction in the exposure to the Dutch state. Largest economic exposures: ING Insurance US portfolio, by geographic area (1) ING Insurance US 2011 2010 2 Report of the Executive Board United States Netherlands Rest of Europe Rest of Americas Asia/Pacific Rest of World Total (1) 77...

Page 278
... works with the ING Operational Risk Management (ORM) Scorecard process to evaluate yearly the embedding level of the Operational Risk Management Framework in each business. Policies and minimum standards governing the framework are kept in the policy house. During 2011 Operational Risk started...

Page 279
... various market stress events calculated by taking into account the correlations between risk types. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 277

Page 280
... and Risk functions of ING Group. From a risk perspective a key element of this structure is support from Group functions such as Credit Risk, Market Risk, Operational Risk and Legal & Compliance and Internal Audit and from the Functional Controller Insurance. 278 ING Group Annual Report 2011

Page 281
...long-term funding against EUR 10.7 billion of ING Bank's (including subsidiaries) longterm debt maturing. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011...

Page 282
... 2010 (1) 2011 Bank 2010 2011 Insurance 2010 Shareholders' equity (parent) Core Tier 1 securities Group hybrid capital (2) Group leverage (3) Total capitalisation Adjustments to equity: Revaluation reserve debt securities Revaluation reserve crediting to life policyholders Revaluation reserve cash...

Page 283
... of sovereign debt in the Held-to-Maturity and Loans and receivables portfolios, reflecting current market prices. Capital position of ING Bank 2011 2010 2 Report of the Executive Board 3 Corporate governance Shareholders' equity (parent) Minority interests (1) Subordinated loans qualifying as...

Page 284
... the business in Latin America. Capital base and financial leverage of ING Insurance 2011 2010 (1) Shareholders' equity (parent) Revaluation reserve debt securities Revaluation reserve crediting to life policyholders Revaluation reserve cash flow hedge Goodwill Minority interests Capital base Group...

Page 285
... between IGD capital and Capital base 2011 2010 2 Report of the Executive Board IGD Capital Hybrids issued by ING Group Hybrids issued by ING Insurance Revaluation reserve debt securities Revaluation reserve crediting to life policyholders Required regulatory adjustments Capital base 21,406...

Page 286
Capital management continued ING GROUP The debt/equity ratio of ING Group as at year-end 2011 was 12.71% (2010: 13.44%). ING Group reports to the Dutch Central Bank as required under the Dutch implementation of the financial conglomerates directive (FICO). The directive mainly covers risk ...

Page 287
... 2010 and also 9.62% at the end of 2011. ING expects the BIS ratio to lose its meaning. 2 Report of the Executive Board Main credit ratings of ING at 31 December 2011 Standard & Poor's rating outlook Moody's rating outlook Fitch rating outlook ING Groep N.v. - long-term ING Bank N.v. - short-term...

Page 288
Parent company balance sheet of ING Group as at 31 December before appropriation of result amounts in millions of euros 2011 2010 Assets Investments in wholly owned subsidiaries 1 Other assets 2 Total assets Equity 3 Share capital Share premium Non-voting equity securities Legal reserves (1) Other ...

Page 289
...account of ING Group for the years ended 31 December amounts in millions of euros 2011 2010 1 Who we are Result of group companies after taxation Other results after taxation Net result 5,337 429 5,766 3,004 -194 2,810 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual...

Page 290
...plans Purchases/sales of treasury shares Balance as at 31 December 2010 Unrealised revaluations after taxation Realised gains/losses transferred to profit and loss Transfer to insurance liabilities/DAC Change in cash flow hedge reserve Unrealised revaluations from net investment hedges Exchange rate...

Page 291
... in accounting policies' in the Accounting principles for the consolidated annual accounts. 1 Who we are 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011...

Page 292
Notes to the parent company annual accounts of ING Group amounts in millions of euros, unless stated otherwise 1 INvESTMENTS IN WHOLLY OWNED SUBSIDIARIES Investments in wholly owned subsidiaries Balance sheet value 2011 2010 ING Bank N.V. ING Verzekeringen N.V. ING Insurance Topholding N.V. Other...

Page 293
... in the Parent company statement of changes in equity of ING Group. Changes in other reserves and unappropriated result 2011 Retained earnings Treasury shares Other reserves Total Other reserves Unappropriated result 3 Corporate governance Total Opening balance Result for the year Unrealised...

Page 294
... 13 'Shareholders' equity (parent)/non-voting equity securities' in the consolidated annual accounts for additional information, including restrictions with respect to dividend and repayment of capital. Change in treasury shares Amount 2011 2010 2011 Number 2010 Opening balance Purchased/sold Share...

Page 295
...are payable within one year. Derivatives from group companies by remaining term 2011 2010 5 Parent company annual accounts Within 1 year More than 1 year but less than 5 years More than 5 years 28 125 153 25 211 236 6 Other information 7 Additional information ING Group Annual Report 2011 293

Page 296
Notes to the parent company annual accounts of ING Group continued 6 OTHER Guarantees As at 31 December 2011, ING Group had no guarantees outstanding on behalf of third parties (2010: nil). ING Group has issued statements of liability in connection with Section 403, Book 2 of the Dutch Civil Code ...

Page 297
... Aman Mehta Luc A.C.P. Vandewalle Lodewijk J. de Waal THE ExECUTIvE BOARD Jan H.M. Hommen, CEO and chairman Patrick G. Flynn, CFO 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 295

Page 298
... annual accounts and the parent company annual accounts. The consolidated annual accounts comprise the consolidated balance sheet as at 31 December 2011, the profit and loss account, statement of comprehensive income, statement of cash flows and statement of changes in equity for the year...

Page 299
... Article 37 (5) of the Articles of Association Dividend of EUR 0.00 per ordinary share 5,766 5,766 0 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 297

Page 300
... insurance products, and our capital base. We also offer a number of insurance and financial products that expose us to risks associated with fluctuations in interest rates, securities prices, corporate and private default rates, the value of real estate assets, exchange rates and credit spreads...

Page 301
... source of material adverse changes to our business, results of operations and financial condition. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 299

Page 302
...property, financial assets, trading positions, insurance and pension benefits to employees and also to key personnel. If our business continuity plans are not able to be put into action or do not take such events into account, our financial condition could be adversely affected. We operate in highly...

Page 303
... Risk Board and a European Insurance and Occupational Pensions Authority, may also affect the Group's operations. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual...

Page 304
... certain consumer products, such as mortgage lending. Insurance products and services are not within the BCFP's general jurisdiction, and brokerâˆ'dealers and investment advisers are not subject to the BCFP's jurisdiction when acting in their registered capacity; 302 ING Group Annual Report 2011

Page 305
... similar problems in the future. In many respects, this work is being led by the Financial Stability 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 303

Page 306
... a number of jurisdictions in which the Group's subsidiaries conduct business have already begun introducing legislative and regulatory changes consistent with G20 and FSB recommendations, including proposals governing consolidated regulation of insurance holdings companies by the Financial Services...

Page 307
... Instruments of this nature are key assets on the balance sheets of financial institutions and are widely used as collateral by financial institutions to meet their day-to-day cash flows in the short-term debt market. A downgrade of the sovereign credit ratings of the US government and the perceived...

Page 308
...our market share, which may have an adverse effect on our results of operations. There is substantial competition in the Netherlands and the other countries in which we do business for the types of insurance, commercial banking, investment banking, asset management and other products and services we...

Page 309
... which is most likely to occur during periods of illiquidity and depressed asset valuations, such as 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 307

Page 310
... profitability as the result of a decrease in the spread between interest rates charged to policyholders and returns on our investment portfolios; â€¢ lower profitability since we may not be able to fully track the decline in interest rates in our savings rate. 308 ING Group Annual Report 2011

Page 311
... our overall ability to hedge our risks and adversely affecting our business, operations, financial condition and liquidity. 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 309

Page 312
... and unrecognised past service costs. We determine our defined benefit plan obligations based on internal and external actuarial models and calculations using the projected unit credit method. Inherent in these actuarial models are assumptions including discount rates, rates of increase in future...

Page 313
... insurance businesses in a number of jurisdictions, such as the US and the EU, downgrades of assets will similarly affect the capital requirements for ING Insurance in those jurisdictions. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual...

Page 314
... surrenders of certain life & savings products, particularly, those with fixed rates below market rates; (3) require us, as an issuer of securities, to pay higher interest rates on debt securities we issue in the financial markets from time to time to finance our operations which would increase...

Page 315
... insurance or investment management business in the public markets or succeed in turning the relevant subsidiaries into viable stand-alone businesses. A divestment may also release less regulatory capital than we would otherwise expect. 3 Corporate governance 4 Consolidated annual accounts 5 Parent...

Page 316
... terms. The limitations described above will impose significant restrictions on our banking business operations and on our ability to take advantage of market conditions and growth opportunities. Such restrictions could adversely affect our ability to maintain or grow market share in key markets...

Page 317
... of the measure of and/or requiring a higher minimum overall return on the Securities than 10% p.a. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 315

Page 318
... general market circumstances. There can be no assurance that we will pay dividends on our ordinary shares in the future. It is ING's policy to pay dividends in relation to the long-term underlying development of cash earnings. Dividends can only be declared by shareholders when the Executive Board...

Page 319
... the regulatory Operational Risk capital. ALT-A RESIDENTIAL MORTGAGE BACKED SECURITY (ALT-A RMBS) A type of United States residential mortgage which is considered riskier than 'prime' and less risky than 'sub-prime' mortgages. Parameters generally taken into account are borrower credit scores...

Page 320
...-backed security which provides investors exposure to the credit risk of a pool of fixed income assets. COLLATERALISED LOAN OBLIGATION (CLO) A type of CDO which is backed primarily by leveraged bank loans. COMBINED RATIO The sum of the claims ratio and the cost ratio for a non-life insurance company...

Page 321
... 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. DISPOSAL GROUP HELD FOR SALE When groups of assets are to be sold...

Page 322
... the investment in new business (i.e. the projected return on the investment in new business) is calculated. INTEREST-RATE REBATES Profit sharing for group life insurance business. A rebate granted to policyholders based on the discounted value of the difference between the interest rate used to...

Page 323
...AND LIABILITIES Assets and liabilities which are fixed in terms of units of currency by contract or otherwise. Examples are cash, short or long-term accounts, notes receivable in cash and notes payable in cash. MONEY MARKET RISK Money market risk arises when ING Group places short term deposits with...

Page 324
...is the cost of ING Group replacing a trade in the market. This credit risk category is associated with dealing room products such as options, swaps, and securities financing transactions. Where there is a mutual exchange of value, the amount of outstanding is generally based on the replacement value...

Page 325
...cost of capital is used as the discount rate for calculating the present value of future cash flows. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 323

Page 326
..., (4) the implementation of ING's restructuring plan to separate banking and insurance operations, (5) changes in the availability of, and costs associated with, sources of liquidity such as interbank funding, as well as conditions in the credit markets generally, including changes in borrower and...

Page 327
... 5639111 Fax: +31 20 5760950 Internet: www.ing.com 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts Commercial Register of Amsterdam, no. 33231073 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2011 325

Page 328
General information continued WRITTEN AND PRODUCED BY ING Groep N.V. Corporate Communications, Amsterdam DESIGNED BY Addison Corporate Marketing, London PRINTED BY Drukkerij Tesink, Zutphen 326 ING Group Annual Report 2011

Page 329

Page 330

Page 331

Page 332
... N.v. Amstelveenseweg 500 1081 KL Amsterdam P.O. Box 810, 1000 AV Amsterdam The Netherlands Telephone: +31 20 5639111 Fax: +31 20 5760950 Internet: www.ing.com Commercial Register of Amsterdam, no. 33231073 CO neutral We print Printed with Â© CO neutrally Â© Drukkerij Tesink Bio ink & varnish...

ING Direct 2011 Annual Report Download

Download and view the complete annual report

Table of contents