ING Direct 2011 Annual Report Download - page 192

Notes to the consolidated annual accounts of ING Group continued
Underwriting expenditure
2011 2010 2009
Expenditure from life underwriting
Reinsurance and retrocession premiums 1,888 2,008 1,842
Gross benefits 27,277 25,493 23,671
Reinsurance recoveries –1,866 –1,712 –1,694
Change in life insurance provisions for risk of company 1,606 1,875 2,078
Costs of acquiring insurance business 1,727 2,557 1,646
Other underwriting expenditure 576 560 462
Profit sharing and rebates 443 538 438
31,651 31,319 28,443
Expenditure from non-life underwriting
Reinsurance and retrocession premiums 43 65 70
Gross claims 1,097 1,034 1,012
Reinsurance recoveries –9 –9 –6
Change in provision for unearned premiums –26 –26 –2
Change in claims provision 544 –23
Costs of acquiring insurance business 269 281 290
Other underwriting expenditure –3 –2 –4
1,376 1,387 1,337
Expenditure from investment contracts
Costs of acquiring investment contracts 35 3
Other changes in investment contract liabilities 57 91 910
60 96 913
33,087 32,802 30,693
Profit sharing and rebates
2011 2010 2009
Distributions on account of interest
or underwriting results 21 991
Bonuses added to policies 287 328 289
Deferred profit sharing expense 135 201 58
443 538 438
The total Cost of acquiring insurance business (life and non-life) and investment contracts amounted to EUR 1,999 million (2010: EUR 2,843
million; 2009: EUR 1,939 million). This includes amortisation and unlocking of DAC of EUR 1,702 million (2010: EUR 2,697 million; 2009: EUR
1,811 million) and the net amount of commissions paid of EUR 1,884 million (2010: EUR 1,708 million; 2009: EUR 1,758 million) and
commissions capitalised in DAC of EUR 1,587 million (2010: EUR 1,562 million; 2009: EUR 1,630 million).
The total amount of commission paid and commission payable with regard to the insurance operations amounted to EUR 2,470 million (2010:
EUR 2,424 million; 2009: EUR 2,392 million). This includes the commissions recognised in Costs of acquiring insurance business of EUR 1,884
million (2010: EUR 1,707 million; 2009: EUR 1,758 million) referred to above and commissions recognised in Other underwriting expenditure
of EUR 586 million (2010: EUR 717 million; 2009: EUR 634 million). Other underwriting expenditure also includes reinsurance commissions
received of EUR 192 million (2010: EUR 192 million; 2009: EUR 255 million).
In 2011, ING has conducted a comprehensive review of its assumptions for the Insurance US Closed Block Variable Annuity (VA) business.
Thereview showed that current US policyholder behaviour for Closed Block VA policies sold predominantly between 2003 and 2009 diverges
from earlier assumptions made by ING, particularly given the ongoing volatility and challenging market circumstances. The assumptions for
the US Closed Block VA were updated for lapses, mortality, annuitisation, and utilisation rates, with the most significant revision coming from
the adjustments of lapse assumptions. The revisions bring the assumptions more in line with US policyholder experience and reflect to a much
greater degree the market volatility of recent years. In conjunction, hedging is adjusted to reflect the revised assumptions. The assumption
changes resulted in a charge of EUR 1,099 million, which is reflected in Underwriting expenditure and in the segment Insurance US Closed
Block VA. This charge affects the deferred acquisition costs (amortisation and unlocking) for EUR 488 million and the insurance provision
(effect of changes in other assumptions) for EUR 611 million. Reference is made to Note 10 ‘Deferred acquisition costs’ and Note 17 ‘Insurance
and Investment contracts, reinsurance contracts’. The impact of the assumption adjustments includes a charge to restore the reserve
adequacy to the 50% confidence level for the Insurance US Closed Block VA segment. Reference is made to Note 51 ‘Segment reporting’.
190 ING Group Annual Report 2011