ING Direct 2011 Annual Report Download - page 50

INSURANCE BENELUX
> Integration of Dutch insurance
businesses complete
> New bank pension savings and annuity
products launched
> Customer-driven strategy unveiled
whichfocuses on simpler products
andimprovedsystems
Insurance Benelux completed the first phase of the transformation
of Nationale-Nederlanden (NN) to become the most efficient and
most preferred insurer in the Netherlands. The integration of the
Dutch insurance operations under the Nationale-Nederlanden
banner was completed in 2011, one year ahead of schedule. The
two-year programme has led to major cost savings and efficiency
gains. The next phase of the transformation programme
commenced with the introduction of new low-cost bank pension
savings and annuities products, in response to the changing
regulatory and economic environment and shifting customer
demands. NN also received a licence to launch a low-cost defined
contribution company pension product (Premium Pension
Institution) in 2012, an important development in expanding the
company’s presence in the growing corporate pension market in
the Netherlands.
FINANCIAL DEVELOPMENTS
The underlying result before tax of Insurance Benelux decreased
by4.6%, despite a 43.8% higher operating result, reflecting the
change in provision for guarantees on separate account pension
contracts and capital losses and impairments on debt and public
equity, mainly as a result of deteriorating financial markets and
de-risking.
The operating result increased 43.8%, as a higher investment
margin, higher technical margin and a higher non-life result more
than offset higher administrative expenses.
The 45.9% higher investment margin was mainly driven by lower
interest rebates, lower profit sharing and higher non-recurring
separate account pension contract results. In addition, the
investment margin continued to benefit from the impact of
reinvestments in the first half of 2011, and higher dividends on
public equity and real estate funds.
The technical margin increased by 29.3% to EUR 315 million from
EUR 243 million in the previous year, mainly due to a EUR 70 million
positive impact from an early surrender of a contract with a large
pension fund.
Life administrative expenses increased 4.4% as a result of releases
of incidental expenses in the previous year, incidental expenses in
2011 and the impact of organisational changes which were only
partially offset by recurring cost savings.
Non-life operating results increased 14.7% due to lower claims
anda non-recurring positive effect in the expense provisions,
resulting from unifying provision methodologies in the Dutch
non-life entities.
New sales (APE) increased by 6.8% in 2011, mainly driven by higher
corporate pension sales and renewals.
BUSINESS DEVELOPMENTS
Business activity in 2011 was marked by an ongoing focus on cost
containment, efficiency and new initiatives to lift growth in
premiums. NN became the largest insurer in all segments of the
Dutch small and medium-sized enterprises market (SME) in 2011 as
defined by market research bureau GfK in its report on important
developments in the business market, TOF Zakelijk 2007 – 2011.
The first phase of the transformation of Nationale-Nederlanden,
the One programme, was a major business activity in 2011 and
also in the previous year. As part of the One programme, NN, RVS
and ING Verzekeren Retail (formerly Postbank Verzekeren) were
combined into one customer-focused organisation under the
Nationale-Nederlanden brand to simplify the business and to
reduce costs. As a result of the integration, NN now consists of
four key business units: NN Retail (retail clients), NN SME (small
and medium-sized enterprises), NN Corporate Clients (corporate
clients) and NN Services (the Closed Book business).
In the Netherlands, NN received a bank licence from the Dutch
Central Bank and introduced three new tax-favourable bank
products for pension savings (banksparen). Consumers are
increasingly looking for simple, flexible and low-cost savings
products and NN’s move into the banksparen field is in recognition
of this shift in consumer preferences. The move was made possible
by changes 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
NNon the advisor market.
Late in 2011, NN gained approval from the Dutch Central Bank
tointroduce a low-cost defined contribution company pension
product (Premium Pension Institution). It launched NN
EssentiePensioen in early 2012 for companies with more than
100 employees inthe Netherlands. The new product provides NN
with more opportunities to expand its presence in the corporate
pension market. NN EssentiePensioen is managed in conjunction
with ING Investment Management and NN-owned pension
administration and service company, AZL.
In the Closed Book business, NN Services introduced a standardised
processing and IT system (business process management layer) for
several legacy lines of retail life businesses. The business focus is
onprocess rationalisation, excellent customer service and lower
administration costs.
In 2008, ING’s Dutch insurance subsidiaries (ING Verzekeringen
Retail, NN and RVS) reached an outline agreement to offer
compensation to customers who purchased certain unit-linked
policies in the past. Other companies operating in the Dutch
insurance market have made similar agreements. In 2011, ING
announced additional measures that are aligned with the ‘Best-of-
class’ criteria formulated by the Dutch Ministry of Finance.
Implementation has started; our plan is to inform all unit-linked
policyholders about compensation by the end of 2012.
Distribution
As part of the operational separation of banking and insurance,
NNsecured a ten-year exclusive distribution contract with ING Bank
which came into effect on 1 January 2011. During the year, ING
Bank transferred Mandema & Partners, a company of independent
48 ING Group Annual Report 2011
Insurance