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ING Group
Annual Report
2008
Steering the business through turbulent times

Table of contents

  • Page 1
    ING Group Annual Report 2008 Steering the business through turbulent times

  • Page 2

  • Page 3
    ...of the Executive Board Strategy Financial highlights Capital management Risk management Insurance Europe Insurance Americas Insurance Asia/Pacific Wholesale Banking Retail Banking ING Direct Asset management Human resources Corporate responsibility 1.3 Our governance Report of the Supervisory Board...

  • Page 4
    ... the current composition of the Supervisory Board Committees. Total return index 200 150 100 50 0 01/05 04/05 07/05 10/05 01/06 04/06 07/06 10/06 01/07 04/07 07/07 10/07 01/08 04/08 07/08 10/08 01/09 ING MSCI World Banks MSCI World Insurance ING Group Annual Report 2008 2

  • Page 5
    ... EUR billion) Key performance indicators Net return on equity (ROE) Net result change Insurance Value of new life business (in EUR million) Internal rate of return (life) Combined ratio (non-life) Banking Cost/income ratio RAROC after tax Assets under management (in EUR billion) Employees (FTEs year...

  • Page 6
    ..., convenience and at competitive prices. This is reï¬,ected in our mission statement: to set the standard in helping our customers manage their financial future. OUR PROFILE ING is a global financial institution of Dutch origin offering banking, investments, life insurance and retirement services...

  • Page 7
    .... ING Direct 2008 2007 -1,125 530 Operates direct retail banking activities in Australia, Canada, France, Germany and Austria, Italy, Spain, the United Kingdom and the United States. The main products offered are savings accounts and mortgages, and, increasingly, also mutual funds and payment...

  • Page 8
    ...for ING 2008 has been marked by government support and disappointing financial results. For several years ample liquidity and low interest rates fuelled an economic upturn. The burst of the bubble in real estate markets, especially in the United States, triggered a rapid decline in asset prices. As...

  • Page 9
    ...year-end 2008 SHARE PRICE PERFORMANCE In 2008, ING's share price decreased 72.6% to EUR 7.33 at year-end. Over the full year, ING underperformed the Amsterdam Exchange Index (AEX) by 20.3%-points. â,¬ 0.74 Dividend per share DIVIDEND As previously announced in October 2008, ING Group will not pay...

  • Page 10
    .... Options on ordinary shares ING Group (or the depositary receipts therefor) are traded at the NYSE Euronext Amsterdam Derivative Markets and the Chicago Board Options Exchange. Authorised and issued capital in millions Year-end 2008 Year-end 2007 Ordinary shares - authorised - issued Preference...

  • Page 11
    ... distribution of ING shares* in percentages ING GROUP** ING INSURANCE - short term - long term ING BANK - short term - long term - financial strength AA- A-1+ AAA-1+ AA A1 P-1 A2 P-1 Aa3 C+ A+ A+ F1+ AA- United Kingdom United States and Canada Netherlands Luxembourg Belgium Switzerland...

  • Page 12
    ... in all countries, instead of offering single savings products. In Germany, ING Direct's mortgage activities have been strengthened by the acquisition of Interhyp. At Wholesale Banking, we reviewed and even selectively decreased our client coverage model in non-core markets. We reduced and exited...

  • Page 13
    ... hedges. Moreover, we have begun to cap balance sheet growth for the bank and reduced market risk for insurance operations. In Taiwan, ING sold its life insurance business to Fubon Financial Holding, which resulted in a reduction of interest rate risk exposure. ING Group Annual Report 2008 11

  • Page 14
    ... long term. We will assess our strategic focus and review our portfolio in the best interests of our customers, the markets we want to be in, our distribution models and our product offering. ING will pursue a universal customer ideal: saving and investing for the future should be easier. ING Group...

  • Page 15
    ... Group's capital position, including a capital support facility of EUR 10 billion by the Dutch State. ING also actively reduced risk exposures. The turmoil in financial markets caused a sharp decline in results for ING's insurance operations. At the same time, the banking business reported positive...

  • Page 16
    ... cost containment helped to offset most of the investments to support growth of the business in Asia/Pacific and Central Europe. Furthermore, the 2007 operating expenses contained a EUR 89 million one-off net release of employee benefits provisions in the Netherlands. ING Group Annual Report 2008...

  • Page 17
    ... million. Excluding ING Life Taiwan, VNB remained ï¬,at compared to 2007. BANKING OPERATIONS Despite the unprecedented impact of the financial crisis and challenging commercial environment, ING's banking businesses reported commercial growth across all three business lines. Client balances went up...

  • Page 18
    1.2 Report of the Executive Board Capital management Maintaining a strong capital position ING seeks to maintain a strong capital position and to allocate capital efficiently across the Group. The exceptional market conditions in 2008 had a significant negative effect on Shareholders' equity. ING...

  • Page 19
    ... Dutch State in January 2009. Through this facility ING Group transfers 80% of its Alt-A mortgage assets in ING Direct US and ING Insurance US at a price of 90% of par in return for a government note. The up-front impact of this transaction was more or less neutral for the profit and loss account...

  • Page 20
    ... AND ECONOMIC CAPITAL Increasingly ING looks at Available Financial Resources (AFR) and Economic Capital (EC) employed when managing capital. These concepts come from our internal risk management models. EC is a measure for the totality of risks run in the company over a one-year time horizon and...

  • Page 21
    ... and transfer pricing business model, ING Bank has used a system of capital investment rules and of capital charging and benefits to manage the balance sheet and make business results comparable. Capital is invested credit risk free (notionally) and the returns on the assets in the capital book...

  • Page 22
    ... same time, lending activities will be maintained with focus on the corporate and retail business. Credit risk In January 2009, ING entered into an Illiquid Assets Back-up Facility terms sheet with the Dutch State covering ING's Alt-A Residential Mortgage-Backed Securities (RMBS) portfolio. Through...

  • Page 23
    ... losses taken on the pressurised asset classes during 2008. Unrealised gains(/losses) relate to the available for sale (fixed income) securities and are taken into account in the revaluation reserve in Shareholders' equity. Impairments, fair value changes and trading losses are directly charged to...

  • Page 24
    ... additional downgrades in securities as well as internal ratings on corporate customers, leading to further increases in credit risk weighted assets. The deteriorating global economy is expected to keep loan loss provisions going forward at elevated levels. ING Group Annual Report 2008 22

  • Page 25
    ... daily business activities and strategic planning. The following principles support this objective: • products and portfolios are structured, underwritten, priced, approved and managed appropriately, and compliance with internal and external rules and guidelines is monitored; • ING's risk pro...

  • Page 26
    ... Money Laundering Reporting Officers that aims to support the implementation of the updated FEC Policy. ING also started a course for all 750 compliance officers worldwide to increase personal effectiveness. Finally, a new e-learning course has been developed for all employees in the Netherlands...

  • Page 27
    ... business growth and a EUR 16 million investment in a multi-year operational efficiency programme that started in 2008. This programme aims to integrate a substantial number of the insurance units' back-offices in the region. Profit and loss account (underlying) in EUR million 2008 2007 change...

  • Page 28
    ...value changes on real estate and private equity investments. Benelux insurance operations Within the Benelux, ING maintains its focus on the pension and life insurance business while continuing to enhance cost and capital efficiency. Cost containment and capital Cost containment in the Netherlands...

  • Page 29
    ... programme to increase value of new business by strict activity management, standardised monitoring, intensive coaching and joint field work. New operations ING entered the Turkish market by acquiring Oyak Bank in 2007, and in 2008 integrated it into the ING Group, rebranding it ING Bank Turkey. In...

  • Page 30
    ...Report of the Executive Board Insurance Americas Focus on long-term opportunities Key points > United States results significantly affected by unprecedented downturn in markets > CitiStreet acquisition boosts Retirement Services business > Shift towards traditional insurance lifts sales > Top-line...

  • Page 31
    ... corporate market, and broader service offerings to customers. Retirement Services produced solid commercial results in 2008. For example, the State of Iowa selected ING as its 403 (b) plan administrator and one of its plan providers for education employees. The 403 (b) plan is a retirement savings...

  • Page 32
    ...its entire 70% stake in ING Canada as part of the company's strategy to focus on its core savings and investment businesses. CONCLUSIONS AND AMBITIONS Insurance Americas achieved reasonable growth in sales and value of new business in 2008 given the market circumstances. ING will focus on aggressive...

  • Page 33
    ... its market positions across the region in 2008, a sign of its sound product portfolio and distribution capabilities. Active repositioning of its product portfolio was at the core of ING's response to changing customer needs due to the economic downturn. FINANCIAL DEVELOPMENTS Underlying result...

  • Page 34
    ... In Australia and New Zealand, underlying result before tax decreased 41.4%, or EUR 89 million to EUR 126 million in 2008 from EUR 215 million in 2007. This was driven by reduced fee income due to a decline in assets under management and lower investment earnings. New sales in life risk products and...

  • Page 35
    ... higher deposit rates offered by banks. In South Korea, a product was launched that allows customers a choice between asset-linked performance (with a capital guarantee) or a fixed interest rate every six months. Australia and New Zealand fund outï¬,ows ING further strengthened its life risk and...

  • Page 36
    ... Report of the Executive Board Wholesale Banking Commercial momentum in difficult times Key points > Solid commercial performance with income growth in General Lending and Structured Finance > Result before tax down due to market turmoil, negative revaluations in Real Estate and Financial Markets...

  • Page 37
    ...reducing the number of full-time equivalents and streamlining support services. In 2008, Wholesale Banking reviewed and in some cases selectively decreased its client coverage model in non-core markets. ING reduced and exited certain volatile products and activities, especially in equity markets and...

  • Page 38
    ... 2008's overall performance. The client and product businesses held up well, in line with the aim to diversify away from proprietary risk businesses, including proprietary trading. Financial Markets continues to seek crossselling opportunities across product areas and client groups, including a new...

  • Page 39
    ...Economic slowdown affected assets under management in Private Banking The retail banking market became increasingly challenging in 2008. Against this backdrop, Retail Banking remained a steady performer with a high return on capital. Further progress was made in improving the customer experience and...

  • Page 40
    ...the Dutch savings market remained fierce and resulted in a shift from variable to relatively low-margin fixed products. ING responded by offering competitive fixed and variable savings products for both retail and business banking customers. ING managed to increase savings and deposits in 2008 by...

  • Page 41
    ... and to exceed customer expectations. Next to that, maintaining liquidity, increasing margins, controlling costs and managing risk are key. Across all regions, steps have been taken to respond to the challenging conditions while remaining open to new opportunities. ING Group Annual Report 2008 39

  • Page 42
    1.2 Report of the Executive Board ING Direct Putting the customer first Key points > Two million customers added in 2008, bringing the total to 22.2 million worldwide > Positive commercial results; total client retail balances production up EUR 24.4 billion to EUR 322.7 billion > Impairments of ...

  • Page 43
    ... in 2007. All other countries reported lower results due to the intensified competition for retail funds and an increase in risk costs. BUSINESS DEVELOPMENTS ING Direct is the world's leading direct bank. It sells a limited number of simple banking products at very low cost to retail customers in...

  • Page 44
    1.2 Report of the Executive Board ING Direct (continued) Payment accounts - showing growth potential Payment accounts help to develop a broader relationship with the customer and increase the share of a customer's total potential business. It has also become a client acquisition tool; by offering a...

  • Page 45
    ... Americas Investment Management Asia/Pacific ING Real Estate Private Banking Other Externally managed Total Assets under management by client category in EUR billion 23% 25% 12% 13% 10% 4% 13% 100% 129.5 139.4 63.6 69.5 53.1 23.6 72.6 551.3 Insurance policy holders Institutional clients Retail...

  • Page 46
    ... market conditions there were several positive developments during the quarter. Separately Managed Accounts sales increased by 13% during the year from EUR 414 million to EUR 466 million, assets were added to the VP Growth and Income Fund through a merger, and the ING Global Target Payment Fund...

  • Page 47
    ... an inï¬,ow of new client money, the decrease in assets under management occurred as a result of lower values in listed and unlisted funds as well as adverse currency movements. As the real estate markets went into reversal, ING Real Estate put in place a cost containment programme, beginning at...

  • Page 48
    ... to investment specialists. ING sold its Curaçao Private Banking Business in 2008 in line with its strategy to concentrate its activities on Europe and Asia. The focus for 2009 is on this region and offering more competitive products. In January 2009, Private Banking announced it would transfer the...

  • Page 49
    .... Set up in 2005, its objective is to establish a culture in which the company's shared values, beliefs and practices create and sustain superior business performance. Progress is measured by a regular WPC Survey and 2008 was the first time all ING employees were invited to participate. More than...

  • Page 50
    ...at a global level The human resources function within ING strives to increase value and service quality to the business. The governance model was changed in 2008 and is now based on two pillars: reaching out to the business lines and making global projects more transparent. A business line forum was...

  • Page 51
    ...strength, business models and products is essential, as is a clear customer focus and transparency about the way we operate. This includes our responsibilities to our employees and our duty to manage the broader social and environmental impact of our business activities. CLEAR STRATEGY Our corporate...

  • Page 52
    1.2 Report of the Executive Board Corporate responsibility (continued) In all our business activities, ING strives for the highest ethical standards. ING Investment Management, for example, signed up to the UN Principles for Responsible Investment (PRI) on 1 September 2008. Launched in 2006 by the ...

  • Page 53
    ... directly to the ING CR Strategy and are used by ING to measure CR performance within ING. Key Performance Indicators (1) Year-end 2008 Year-end 2007 Equator Principles Number of projects reviewed Sustainable assets under management (in EUR million) Customer satisfaction index (3) Economic value...

  • Page 54
    .... In February 2008, the 2007 annual figures were discussed, including the related reports from the internal and external auditors and the assessment of the Executive Board of the adequacy and effectiveness of the risk management and control systems of ING as well as the significant changes made...

  • Page 55
    ... risks and expenses of ING, and to increase the capital position and ratios as international market expectations of capital levels had changed dramatically. At the end of January 2009, the Supervisory Board extensively discussed and finally approved an agreement between ING and the Dutch government...

  • Page 56
    ...0.74 per (depositary receipt for an) ordinary share which was paid in August 2008. ING has announced that it will not pay a final dividend in May 2009 over the year 2008. APPRECIATION FOR THE EXECUTIVE BOARD AND THE ING EMPLOYEES The Supervisory Board would like to thank the Executive Board members...

  • Page 57
    ... the new term, though the term is used in this Annual Report. Transactions with the Dutch State On 12 November 2008, ING Group issued 1 billion core Tier-1 securities ('Securities') to the Dutch State against payment of EUR 10 per Security resulting in an increase of ING Group's core Tier-1 capital...

  • Page 58
    ...long-term value creation, thereby taking account of risk and restricting the potential for 'rewards for failure'. The new remuneration policy will among others include objectives relating to corporate and social responsibility; • members of the ING Executive Board will not receive any performance...

  • Page 59
    .... Under Dutch company law and the Tabaksblat 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. ING Group Annual Report 2008 57

  • Page 60
    ... by ING Group. The board of the Trust Office reports on its activities through an Annual Report, which has been included on pages 67-68. Issue of shares ING Group's authorised capital is the maximum amount of capital allowed to be issued under the terms of its Articles of Association. New shares in...

  • Page 61
    ... approval under Dutch law, and any other matters proposed by the Supervisory Board, the Executive Board or shareholders or holders of depositary receipts in accordance with ING Group's Articles of Association. Meetings are convened by public notice. As of the date of convening a General Meeting, all...

  • Page 62
    ...Report, starting on page 73. Members of the Executive Board are permitted to hold shares and depositary receipts for shares in the company for long-term investment purposes. Transactions in these shares are subject to the ING regulations for insiders. These regulations are available on the ING Group...

  • Page 63
    ... where he held various management positions, including chairman of ING Poland and of ING Latin America. He was appointed a member of the Executive Board of ING Group in April 2004. He is responsible for Retail Banking and Private Banking. He is also in charge of Operations/IT. Tom J. McInerney (Born...

  • Page 64
    ... the issuing of shares according to employment schemes); b. the cooperation by ING Group in the issue of depositary receipts for shares; c. the application for listing in or removal from the price list of any stock exchange of the securities referred to in a. or b.; ING Group Annual Report 2008 62

  • Page 65
    ... of the financial statements of ING Group, ING Verzekeringen N.V. and ING Bank N.V., in monitoring the compliance with legal and regulatory requirements, and in monitoring the independence and performance of ING's internal and external auditors. On 31 December 2008, the members of the Audit...

  • Page 66
    ... Report on pages 81-82. Members of the Supervisory Board are permitted to hold shares and depositary receipts for shares in the company for long-term investment purposes. Details are given on page 82. Transactions by Supervisory Board members in ING Group shares and depositary receipts for shares...

  • Page 67
    ... and chief executive officer of DBS Group Holdings. Former managing director in the Investment Banking Division of JPMorgan. Other business activities: non-executive director of MasterCard Incorporated and CapitaLand. Chairman of the Board of Directors of Brookstone, Inc. Member of the Bloomberg...

  • Page 68
    ... related fees, supported by sufficiently detailed information. This overview is periodically evaluated by the Audit Committee during the year. More details of ING Group's policy on external auditor's independence are available on the website of ING Group (www.ing.com). ING Group Annual Report 2008...

  • Page 69
    ...April 2008 the Board convened before the annual General Meeting of ING Group to discuss the proxy voting results and to decide on the initial position of the Board vis-Ã -vis the items on the agenda. During this meeting the Board also signed and adopted the 2007 balance sheet and statement of income...

  • Page 70
    ...Office (www.ingtrustoffice.com). All members of the Board stated that they meet the conditions regarding independence as referred to in the Dutch Corporate Governance Code and the Articles of Association of ING Trust Office. The annual remuneration for the chairman of the Board amounts to EUR 25...

  • Page 71
    ...sentence. On acquisition of cumulative preference shares, at least 25% of the nominal value must be paid up on said shares. In 2008 the Board of ING Continuity Foundation (the 'Board') met three times, namely on 28 January, 2 April and 3 December. The composition of the Board is currently as follows...

  • Page 72
    ...Annual Report gives a true and fair view of the position at the balance sheet date, the development and performance of the business during the financial year 2008 of ING Groep N.V. and the enterprises included in the consolidation taken as a whole, together with a description of the principal risks...

  • Page 73
    ... of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Executive Board assessed the effectiveness of our internal control over financial reporting as of 31 December 2008. In making this assessment, the Executive Board performed tests based...

  • Page 74
    ...the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of ING Groep N.V. as of 31 December 2008, the consolidated profit and loss account, consolidated statement of cash ï¬,ows and consolidated statement of changes in equity for the year then ended. Our report...

  • Page 75
    ... market for talent, the Supervisory Board reviews the base-salary levels of the Executive Board on an annual basis. Short-term incentive plan The short-term incentive plan (STIP) is a key component of ING's performance-driven culture. The short-term incentive is paid in ING Group Annual Report 2008...

  • Page 76
    ... management. For this layer, directly reporting to the Executive Board, the emphasis is on individual performance in their primary business-related responsibility. Short-term incentive: relative weight of Group and individual performance Group performance Individual performance Performance shares...

  • Page 77
    ... with the Dutch State to strengthen ING's capital position, the exit arrangments have been limited to one-year base salary. The term of notice for Executive Board members is three months for the employee and six months for the employer. REMUNERATION EXECUTIVE BOARD 2008 Executive Board base salary...

  • Page 78
    ... 1,133 665 0 665 423 637 1,060 665 0 665 634 956 1,590 423 710 1,133 Compensation in cash of former members of the Executive Board who are not included in the above table amounted to nil in 2008, to EUR 729 thousand in 2007, and to EUR 5,353 thousand in 2006. ING Group Annual Report 2008 76

  • Page 79
    ... 0 43,312 10,264 499 0 0 0 64,967 15,396 748 43,347 9,069 569 The fair market value of long-term incentive awards of former members of the Executive Board who are not included in the above table amounted to nil in 2008 and 2007, and to EUR 938 thousand in 2006. ING Group Annual Report 2008 77

  • Page 80
    ... Our Governance Remuneration report (continued) Information on the options outstanding and the movements during the financial year of options held by the members of the Executive Board as at 31 December 2008 Outstanding as at 31 December 2007 Outstanding Waived or as at expired in 31 December 2008...

  • Page 81
    ... US dollars to euros at the average exchange rate for that year. (2) (1) 170 Pension costs of former members of the Executive Board who are not included in the above table amounted to nil in 2008, to EUR 1,386 thousand in 2007, and to EUR 4,954 thousand in 2006. ING Group Annual Report 2008 79

  • Page 82
    ... BOARD MEMBERS Executive Board members are permitted to hold ING depositary receipts for shares as a long-term investment. The table below shows the holdings by members of the Executive Board. ING depositary receipts for shares held by members of the Executive Board number of shares 2008 2007 2006...

  • Page 83
    ... Dutch State to strengthen its capital position. Under the terms of the agreement, the ING Supervisory Board will review the remuneration policy for the Executive Board and senior management to align it with new international standards. This will include linking incentive schemes to long-term value...

  • Page 84
    ... 2008, 2007 and 2006, there were no loans and advances outstanding to members of the Supervisory Board. ING depositary receipts for shares and options held by Supervisory Board members Supervisory Board members are permitted to hold ING depositary receipts for shares as a long-term investment...

  • Page 85
    ... Riphagen, Bernard Wempe, Jelte Wiersinga, Paul Zoet, the Netherlands Mieczyslaw Bielawski, Mariusz Cieslik, Jakub Dzianowicz, Poland Mihai Ailincai, Ane-Mona Giurgiteanu, Romania Ana Baron, Araceli Rodriguez, Spain Sam Chaudhuri, Rina Goldenberg, United Kingdom ING Group Annual Report 2008 83

  • Page 86
    2.1 Consolidated annual accounts Consolidated balance sheet of ING Group as at 31 December amounts in millions of euros 2008 2007 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...

  • Page 87
    Consolidated profit and loss account of ING Group for the years ended 31 December amounts in millions of euros 2008 2008 2007 2007 2006 2006 Interest income banking operations Interest expense banking operations Interest result banking operations 34 Gross premium income 35 Investment income 36 Net...

  • Page 88
    ... annual accounts Consolidated statement of cash ï¬,ows of ING Group for the years ended 31 December amounts in millions of euros 2008 2007 2006 Result before tax Adjusted for - depreciation - deferred acquisition costs and value of business acquired - increase in provisions for insurance...

  • Page 89
    ...equity Balance as at 1 January 2006 Unrealised revaluations after taxation Realised gains/losses transferred to profit and loss Changes in cash ï¬,ow hedge reserve Transfer to insurance liabilities/DAC Employee stock option and share plans Exchange rate differences Total amount recognised directly...

  • Page 90
    ... (2007: EUR -1,354 million; 2006: EUR -473 million) and Other reserves of EUR 18,077 million (2007: EUR 24,352 million; 2006: EUR 20,408 million). Changes in individual components are presented in Note 12 'Shareholders' equity (parent)/ non-voting equity securities'. ING Group Annual Report 2008...

  • Page 91
    ...' ING Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging) under the EU 'carve out' of IFRS-EU. The presentation of, and certain terms used in, the consolidated balance sheet, the consolidated profit and loss account, consolidated statement of cash...

  • Page 92
    2.1 Consolidated annual accounts Accounting policies for the consolidated balance sheet and profit and loss account of ING Group (continued) INSURANCE PROVISIONS, DEFERRED ACQUISITION COSTS (DAC) AND VALUE OF BUSINESS ACQUIRED (VOBA) The establishment of insurance provisions, DAC and VOBA is an ...

  • Page 93
    .... Price testing is performed to minimise the potential risks for economic losses due to materially incorrect or misused models. Certain asset backed securities in the Unites States are valued using external price sources that are obtained from third party pricing services and brokers. During 2008...

  • Page 94
    ... rates, rates of increase in future salary and benefit levels, mortality rates, trend rates in health care costs, consumer price index, and the expected return on plan assets. The assumptions are based on available market data and the historical performance of plan assets, and are updated annually...

  • Page 95
    ... and loss account. Exchange rate differences relating to the disposal of Available-for-sale debt and equity securities are considered to be an inherent part of the capital gains and losses recognised in Investment income. As mentioned in Group companies below any exchange rate differences deferred...

  • Page 96
    2.1 Consolidated annual accounts Accounting policies for the consolidated balance sheet and profit and loss account of ING Group (continued) On consolidation, exchange rate differences arising from the translation of a monetary item that forms part of the net investment in a foreign operation, and ...

  • Page 97
    .... Investment securities and actively traded loans intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices, are classified as available-for-sale. Available-for-sale financial assets...

  • Page 98
    ...risk management strategies, but which do not qualify for hedge accounting under the Group's accounting policies, are presented as non-trading derivatives. Non-trading derivatives are measured at fair value with changes in the fair value taken to the profit and loss account. ING Group Annual Report...

  • Page 99
    ... in the consolidated financial statements. The counterparty liability is included in Amounts due to banks, Other borrowed funds or Customer deposits and other funds on deposit, as appropriate. Securities purchased under agreements to resell ('reverse repos') are recognised as Loans and advances...

  • Page 100
    ... a case-by-case basis for specific equity securities; generally 25% and 6 months are used as triggers. If any objective evidence exists for available-for-sale debt and equity investments, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less...

  • Page 101
    ...associated with the item will ï¬,ow to the Group and the cost of the item can be measured reliably. Property under construction Land and buildings under construction (including real estate investments) are stated at the directly attributable purchase and construction costs incurred up to the balance...

  • Page 102
    ... on these acquisitions were charged directly to shareholders' equity. Goodwill is allocated to reporting units for the purpose of impairment testing. These reporting units represent the lowest level at which goodwill is monitored for internal management purposes. This test is performed annually or...

  • Page 103
    ... value remeasurement of available-for-sale investments and cash ï¬,ow hedges, which are charged or credited directly to equity, is also credited or charged directly to equity and is subsequently recognised in the profit and loss account together with the deferred gain or loss. FINANCIAL LIABILITIES...

  • Page 104
    ... Accounting policies for the consolidated balance sheet and profit and loss account of ING Group (continued) Provision for life insurance The Provision for life insurance is calculated on the basis of a prudent prospective actuarial method, taking into account the conditions for current insurance...

  • Page 105
    ... amortised cost, using the effective interest method (including certain initial acquisition expenses) or at fair value. OTHER LIABILITIES Employee benefits - pension obligations Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies...

  • Page 106
    ... The cost of acquiring the services is expensed as a staff expense. Prior to 2007, ING Group generally provided equity-settled share-based payment transactions. However, since 2007, ING Group has generally provided cash-settled share-based payment transactions. The fair value of equity-settled share...

  • Page 107
    ... that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and income arising thereon are excluded from these financial statements, as they are not assets of the Group. ING Group Annual Report 2008 105

  • Page 108
    ... statement of cash ï¬,ows and the change in Cash and cash equivalents in the balance sheet is due to exchange rate differences and is accounted for separately as part of the reconciliation of the net cash ï¬,ow and the balance sheet change in Cash and cash equivalents. ING Group Annual Report 2008...

  • Page 109
    ... to the consolidated balance sheet of ING Group amounts in millions of euros, unless stated otherwise ASSETS 1 CASH AND BALANCES WITH CENTRAL BANKS Cash and balances with central banks 2008 2007 Amounts held at central banks Cash and bank balances Short term deposits insurance operations 16,432...

  • Page 110
    ...The fair value of credit derivatives included in trading assets and held to mitigate exposure to credit risk was nil (2007: nil), and the change in their fair value in the period was nil (2007: nil). Investments for risk of policyholders by type 2008 2007 Equity securities Debt securities Loans and...

  • Page 111
    ... 31 December 2008 (2007: EUR 16,354 million). Changes in investments - available-for-sale and held-to-maturity Available-for-sale equity securities 2008 2007 Available-for-sale debt securities 2008 2007 2008 Held-to-maturity 2007 2008 Total 2007 Opening balance Additions Amortisation Transfers and...

  • Page 112
    ... to EUR 166 million as at 31 December 2008 (2007: EUR 170 million). Investments in connection with the insurance operations with a combined carrying value of EUR 47 million (2007: EUR 69 million) were non-income-producing for the year ended 31 December 2008. ING Group Annual Report 2008 110

  • Page 113
    ... loss provisions Loans and advances to customers by type - banking operations 2008 Netherlands 2007 2008 International 2007 2008 Total 2007 Loans to, or guaranteed by, public authorities Loans secured by mortgages Loans guaranteed by credit institutions Personal lending Corporate loans 16,288 158...

  • Page 114
    ...ows of the Group. Loan loss provisions analysed by type - banking operations 2008 Netherlands 2007 2008 International 2007 2008 Total 2007 Loans secured by public authorities Loans secured by mortgages Loans guaranteed by credit institutions Other personal lending Other corporate loans 167 120 474...

  • Page 115
    ... in associates Fair value of listed Interest held (%) investment Balance sheet value Total assets Total liabilities Total income Total expenses 2008 TMB Public Company Limited ING Dutch Office Master Fund C.V. ING Winkels Basisfonds Sul America S.A. ING Industrial Fund Australia Property Fund...

  • Page 116
    ...annual accounts Notes to the consolidated balance sheet of ING Group (continued) Investments in associates Interest held (%) Fair value of listed investment Balance sheet value Total assets Total liabilities Total income Total expenses 2007 TMB Public Company Limited ING Dutch Office Master Fund...

  • Page 117
    7 REAL ESTATE INVESTMENTS Changes in real estate investments 2008 2007 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 rate differences Closing balance 4,829 ...

  • Page 118
    ... and banking operations 2008 2007 Insurance operations Banking operations 394 1,447 1,841 599 1,470 2,069 Changes in property in own use 2008 2007 Opening balance Additions Changes in the composition of the group Transfers to and from Real estate investments Transfers to and from Other assets...

  • Page 119
    ... and loss account in Other income as a deduction from operating lease income. No individual operating lease has terms and conditions that materially affect the amount, timing or certainty of the consolidated cash ï¬,ows of the Group. The Group leases assets to third parties under operating leases as...

  • Page 120
    2.1 Consolidated annual accounts Notes to the consolidated balance sheet of ING Group (continued) 9 INTANGIBLE ASSETS Changes in intangible assets Value of business acquired 2008 2007 Goodwill 2007 Software 2007 Other 2007 Total 2007 2008 2008 2008 2008 Opening balance Additions (bought) ...

  • Page 121
    ... Banking - Central Europe and Insurance Americas - United States, compared with what was assumed in the year-end 2008 goodwill impairment test, the book value (including goodwill) of these reporting units may exceed the fair values resulting in impairments. 10 DEFERRED ACQUISITION COSTS Changes...

  • Page 122
    ... Net book value Taiwan - assets held for sale 2008 Cash and bank balances Financial assets at fair value through profit and loss Available-for-sale Investments Loans and advances to customers Property and equipment Intangible assets Deferred acquisition costs Other assets Taiwan - assets held for...

  • Page 123
    ...depositary receipts for) ordinary shares with a total value of EUR 5 billion over a period of 12 months, beginning in June 2007. On 23 May 2008 this programme was terminated as ING had almost reached the legal limit then in force for the acquisition of its own shares (10% of the issued share capital...

  • Page 124
    ... equity securities On 12 November 2008, ING Groep N.V. issued EUR 10 billion non-voting equity securities to the Dutch government. This was effected by issuing one billion securities with an issue price of EUR 10 each. The nominal value of each security is EUR 0.24. ING Group Annual Report 2008...

  • Page 125
    ... -690 468 1,356 11,206 -1,079 -804 -690 820 9,453 Transfer to insurance liabilities/DAC includes the change in the deferred profit sharing liability (net of deferred tax). Reference is made to Note 17 'Insurance and investment contracts, reinsurance contracts'. ING Group Annual Report 2008 123

  • Page 126
    2.1 Consolidated annual accounts Notes to the consolidated balance sheet of ING Group (continued) Changes in currency translation reserve 2008 2007 2006 Opening balance Unrealised revaluations after taxation Realised gains/losses transferred to profit and loss Exchange rate differences Closing ...

  • Page 127
    ... can pay to the holders of its cumulative preference shares, when issued. 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. ING Group Annual Report 2008 125

  • Page 128
    ... 2008 2007 ING Bank N.V. ING Verzekeringen N.V. 5,800 4,471 10,271 5,166 2,159 7,325 The number of subordinated loans held by group companies as at 31 December 2008 was 32,759 with a balance sheet value of EUR 1 million (2007: 35,040 with a balance sheet value of nil). ING Group Annual Report...

  • Page 129
    ... the Credit Guarantee Scheme of the State of the Netherlands and are part of ING's regular medium-term funding operations. 16 OTHER BORROWED FUNDS Other borrowed funds by remaining term 2008 2009 2010 2011 2012 2013 There after Total Subordinated loans of group companies Preference shares of group...

  • Page 130
    ... annual accounts Notes to the consolidated balance sheet of ING Group (continued) 17 INSURANCE AND INVESTMENT CONTRACTS, REINSURANCE CONTRACTS The gross amounts for provisions for insurance and investment contracts, net of reinsurance (i.e. the provision for ING's own account) is presented...

  • Page 131
    ... during the year Exchange rate differences Other changes Closing balance Changes in claims provisions Provision net of reinsurance 2008 2007 Reinsurance contracts 2008 2007 Insurance and investment contracts 2008 2007 Opening balance Changes in the composition of the group 6,172 -401 5,771...

  • Page 132
    2.1 Consolidated annual accounts Notes to the consolidated balance sheet of ING Group (continued) ING Group had an outstanding balance of EUR 52 million as at 31 December 2008 (2007: EUR 66 million) relating to environmental and asbestos claims of the insurance operations. In establishing the ...

  • Page 133
    ... other funds on deposit 2008 2007 Savings accounts Credit balances on customer accounts Corporate time deposits Other 263,637 174,141 80,230 4,775 522,783 275,127 161,204 86,151 2,734 525,216 Customer deposits and other funds on deposit by type 2008 Netherlands 2007 2008 International 2007 2008...

  • Page 134
    2.1 Consolidated annual accounts Notes to the consolidated balance sheet of ING Group (continued) Non-trading derivatives by type 2008 2007 Derivatives used in: - fair value hedges - cash ï¬,ow hedges - hedges of net investments in foreign operations Other non-trading derivatives 8,912 6,089 370 ...

  • Page 135
    ... in deferred tax Change through equity Changes Change in the through composition net result of the group Exchange rate differences Net liability 2007 Other Net liability 2008 Investments Financial assets and liabilities at fair value through profit and loss Deferred acquisition costs and VOBA...

  • Page 136
    ...tax losses and tax credits is taken into account in establishing the deferred tax assets. Changes in reorganisation provision 2008 2007 Opening balance Changes in the composition of the group Additions Interest Releases Charges Exchange rate differences Other changes Closing balance 619 -22 162 15...

  • Page 137
    ... are generally determined as a percentage of pay. These plans do not give rise to balance sheet provisions, other than relating to short-term timing differences included in current liabilities. The amount incurred in 2008 was EUR 68 million (2007: EUR 68 million). ING Group Annual Report 2008 135

  • Page 138
    ...style, and reliance on particular active investment strategies. The asset mixes of the Funds are reviewed on a regular basis. Generally, the Funds' asset mixes will be rebalanced to the target mixes as individual portfolios approach their minimum or maximum levels. ING Group Annual Report 2008 136

  • Page 139
    ... annual percentage in the long term. This estimate takes into account a reduction for administrative expenses and non-ING investment manager fees paid from the Funds. For estimation purposes, it is assumed that the long term asset mixes will be consistent with the current mixes. Changes in the asset...

  • Page 140
    2.1 Consolidated annual accounts Notes to the consolidated balance sheet of ING Group (continued) Taiwan - liabilities held for sale 2008 Insurance and investments contracts Financial liabilities at fair value through profit and loss Other liabilities Taiwan - liabilities held for sale 14,294 ...

  • Page 141
    ... assets LIABILITIES Preference shares Subordinated loans Debt securities in issue Other borrowed funds Insurance and investment contracts Amounts due to banks Customer deposits and other funds on deposit Financial liabilities at fair value through profit and loss - trading liabilities - non-trading...

  • Page 142
    ... assets LIABILITIES Preference shares Subordinated loans Debt securities in issue Other borrowed funds Insurance and investment contracts Amounts due to banks Customer deposits and other funds on deposit Financial liabilities at fair value through profit and loss - trading liabilities - non-trading...

  • Page 143
    ... to manage its exposure to credit risk, including total return swaps and credit default swaps, to sell or buy protection for credit risk exposures in the loan, investment and trading portfolios. Hedge accounting is not applied in relation to credit derivatives. Fair value hedge accounting ING Group...

  • Page 144
    ... consolidated balance sheet of ING Group (continued) As at 31 December 2008, the fair values of outstanding derivatives designated under cash ï¬,ow hedge accounting was EUR -318 million (2007: EUR 229 million), presented in the balance sheet as EUR 5,771 million (2007: EUR 3,417 million) positive...

  • Page 145
    ... fair value through profit and loss Available-for-sale debt securities Held-to-maturity debt securities Loans and advances to customers - policy loans - public authorities - secured by mortgages - guaranteed by credit institutions - personal loans - other personal lending - other corporate lending...

  • Page 146
    ...the consolidated financial statements. In response to the needs of its customers, the Group offers financial products related to loans. These products include traditional off-balance sheet credit-related financial instruments. Contingent liabilities and commitments 2008 2007 Insurance operations...

  • Page 147
    ... ING Group continues to recognise them on its balance sheet under Loans and advances to customers. These transactions are therefore not off-balance sheet arrangements. Assets under synthetic securitisation programmes 2008 2007 Loans to small and medium-sized enterprises Corporate loans Mortgages...

  • Page 148
    ... ING Canada Inc. Belair Insurance Company Inc. ING Insurance Company of Canada ING Novex Insurance Company of Canada ING America Insurance Holdings, Inc. ING International Insurance Holdings, Inc. ING Life Insurance and Annuity Company ING Group Annual Report 2008 The Netherlands The Netherlands...

  • Page 149
    ...) Limited ING Life Insurance Company of America ING Australia Holdings Limited ING Australia Pty Limited ING Re (Netherlands) N.V. Companies treated as part of the banking operations ING Bank N.V. ING Bank Nederland N.V. Bank Mendes Gans N.V. ING Lease Holding B.V. ING Corporate Investments B.V. ING...

  • Page 150
    ... shares acquired Purchase price Purchase price Costs directly attributable to the acquisition Cash purchase price Cash in company acquired Cash outï¬,ow on acquisition (2) Assets Cash assets Investments Loans and advances to customers Amounts due from banks Financial assets at fair value through...

  • Page 151
    ... General Primary line of business Sales proceeds Sales proceeds Cash proceeds Cash in company disposed Cash inï¬,ow on disposal (1) Assets Cash assets Investments Loans and advances to customers Financial assets at fair value through profit and loss Miscellaneous other assets Liabilities Insurance...

  • Page 152
    ..., all client balances held by the private pension system would be transferred to the Argentina Government and AFJP's pension business would be terminated. The law became effective in December 2008 when the Argentine Social Security Administration (ANSES) took ownership over the affiliate accounts...

  • Page 153
    ... shares acquired Purchase price Purchase price Costs directly attributable to the acquisition Cash purchase price Cash in company acquired Cash outï¬,ow on acquisition (2) Assets Cash assets Investments Loans and advances to customers Amounts due from banks Financial assets at fair value through...

  • Page 154
    2.1 Consolidated annual accounts Additional information to the consolidated balance sheet of ING Group (continued) Acquisitions effective in 2007 In September 2007, ING paid EUR 20 million to increase its shareholding in ING Piraeus Life (the joint venture between ING and Piraeus Bank) from 50 to ...

  • Page 155
    ...in 2007 Belgian Broker & employee benefits ING Trust ING Regio B.V. Total General Primary line of business Sales proceeds Sales proceeds Cash proceeds Cash in company disposed Cash inï¬,ow on disposal (1) Assets Cash assets Investments Loans and advances to customers Financial assets at fair value...

  • Page 156
    ... the cash ï¬,ow statement includes cash outï¬,ows/inï¬,ows on individually immaterial acquisitions and real estate portfolios in addition to the cash ï¬,ows presented herein. In July 2006, ING acquired 100% of Appleyard Vehicles Contracts, a UK based car leasing company. The purchase price paid for...

  • Page 157
    ..., a publicly listed mortgage bank in Germany, as part of ING's strategy to focus on its core business. The sale resulted in a loss of EUR 83 million. In December 2006, ING sold its stake in Degussa Bank, a unit of ING-DiBa specialising in worksite banking for private customers. The sale resulted in...

  • Page 158
    2.1 Consolidated annual accounts Additional information to the consolidated balance sheet of ING Group (continued) In November 2006, the issue of amongst others, the costs charged by the insurance industry to customers in respect of unit-linked products (commonly referred to as '...

  • Page 159
    ...and short-term bonus Pension costs Retirement benefit Fair market value of long-term incentives Total compensation Loans and advances to key management personnel amounts in thousands of euros Executive Board members Total Amount outstanding 31 December 2008 2007 Average interest rate 2008 2007 2008...

  • Page 160
    ... shares Subordinated loans Debt securities in issue Other borrowed funds Investment contracts for risk of company Investment contracts for risk of policyholders Amounts due to banks Customer deposits and other funds on deposit Financial liabilities at fair value through profit and loss - trading...

  • Page 161
    ...include values obtained from one or more pricing services or by discounting expected future cash ï¬,ows using a current market rate applicable to the yield, credit quality and maturity of the investment. Reference is made to the comments on investments in asset backed securities in the United States...

  • Page 162
    ... price quotations in active markets Valuation technique supported by market inputs Valuation technique not supported by market inputs 2008 Assets Trading assets Investments for risk of policyholders Non-trading derivatives Financial assets designated at fair value through profit and loss Available...

  • Page 163
    ... price sources increased significantly. As a result, an amount of EUR 25 billion of asset backed securities in the United States was reclassified from Reference to published price quotations in active markets to Valuation technique not supported by market inputs in the third quarter of 2008...

  • Page 164
    2.1 Consolidated annual accounts Notes to the consolidated profit and loss account of ING Group amounts in millions of euros, unless stated otherwise 34 INTEREST RESULT BANKING OPERATIONS Interest result banking operations 2008 2007 2006 Interest income on loans Interest income on impaired loans ...

  • Page 165
    ... information on impairments. 37 COMMISSION INCOME Gross fee and commission income 2008 Insurance operations 2007 2006 2008 Banking operations 2007 2006 2008 2007 Total 2006 Funds transfer Securities business Insurance broking Asset management fees Brokerage and advisory fees Other 87 2,129 763 531...

  • Page 166
    2.1 Consolidated annual accounts Notes to the consolidated profit and loss account of ING Group (continued) Fee and commission expenses 2008 Insurance operations 2007 2006 2008 Banking operations 2007 2006 2008 2007 Total 2006 Funds transfer Securities business Insurance broking Management fees ...

  • Page 167
    40 OTHER INCOME Other income 2008 Insurance operations 2007 2006 2008 Banking operations 2007 2006 2008 2007 Total 2006 Net operating lease income Income from real estate development projects Income post office Other 153 153 305 305 -5 -5 195 124 144 28 491 79 95 148 258 580 65 220 156 35 ...

  • Page 168
    2.1 Consolidated annual accounts Notes to the consolidated profit and loss account of ING Group (continued) Profit sharing and rebates 2008 2007 2006 Distributions on account of interest or underwriting results Bonuses added to policies Deferred profit sharing expense -576 131 29 -416 -133 ...

  • Page 169
    ... STAFF EXPENSES Staff expenses 2008 Insurance operations 2007 2006 2008 Banking operations 2007 2006 2008 2007 Total 2006 Salaries Pension and other staff-related benefit costs Social security costs Share-based compensation arrangements External employees Education Other staff costs 2,069 140 205...

  • Page 170
    ...year, the ING Group Executive Board will decide whether the option and share schemes are to be continued and, if so, to what extent. Changes in option rights outstanding 2008 Options outstanding (in numbers) 2007 2006 Weighted average exercise price (in euros) 2008 2007 2006 Opening balance Granted...

  • Page 171
    ... simulation based valuation model. The model takes into account the risk free interest rate, the current stock prices, expected volatilities and current divided yields of the performance peer group used to determine ING's Total Shareholder Return (TSR) ranking. ING Group Annual Report 2008 169

  • Page 172
    ... 2008 Insurance operations 2007 2006 2008 Banking operations 2007 2006 2008 2007 Total 2006 Depreciation of property and equipment Amortisation of software Computer costs Office expenses Travel and accommodation expenses Advertising and public relations External advisory fees Postal charges...

  • Page 173
    ... market price in the financial year. The net increase in the number of shares resulting from exercising warrants and stock options or converting non-voting equity securities is added to the average number of shares used for the calculation of net earnings per share. ING Group Annual Report 2008...

  • Page 174
    ...potential conversion is not taken into account in determining the weighted average number of shares for the calculation of diluted earnings per share. 48 DIVIDEND PER ORDINARY SHARE Dividend per ordinary share 2008 (1) 2007 2006 Per ordinary share (in euros) Per non-voting equity security (in euros...

  • Page 175
    ...capital charging that makes the results of the banking business units globally comparable, irrespective of the book equity they have and the currency they operate in. ING's policy for the banking business units is that equity may only be invested locally at the local risk free rate. Banking business...

  • Page 176
    2.1 Consolidated annual accounts Segment reporting (continued) Business segments Insurance Europe Insurance Americas Insurance Asia/ Pacific Wholesale Banking Retail Banking Total segments Eliminations 2008 Income - external - inter-segment Total income Segment result before taxation Divestments ...

  • Page 177
    ... Americas Insurance Asia/ Pacific Wholesale Banking Retail Banking Total segments 2007 Income - external - inter-segment Total income Segment result before taxation Divestments Special items Underlying result before taxation Segment assets Segment liabilities Share in profit or loss of associates...

  • Page 178
    ...Consolidated annual accounts Segment reporting (continued) Business segments Insurance Europe Insurance Americas Insurance Asia/ Pacific Wholesale Banking Retail Banking Total segments 2006 Income - external - inter-segment Total income Segment result before taxation Divestments Underlying result...

  • Page 179
    ... SEGMENTS ING Group's six business lines operate in seven main geographical areas: the Netherlands, Belgium, Rest of Europe, North America, Latin America, Asia and Australia. Geographical distribution of income is based on the origin of revenue. Geographical segments 2008 Income - external - inter...

  • Page 180
    2.1 Consolidated annual accounts Segment reporting (continued) Result before taxation by geographical area 2008 Insurance operations 2007 2006 2008 Banking operations 2007 2006 2008 2007 Total 2006 Netherlands Belgium Rest of Europe North America Latin America Asia Australia Other Total 242 80 ...

  • Page 181
    Notes to the consolidated statement of cash ï¬,ows of ING Group amounts in millions of euros, unless stated otherwise 51 NET CASH FLOW FROM INVESTING ACTIVITIES Information on the impact of companies acquired or disposed of is presented in Note 29 'Companies acquired and companies disposed'. 52 ...

  • Page 182
    ...and limits and provides a review, oversight and support function throughout the Group on risk-related issues. The main financial risks ING Group is exposed to are credit risk (including transfer risk), market risk (including interest rate, equity, real estate, and foreign exchange risks), insurance...

  • Page 183
    ... of interest rate risk ING sold ING Life Taiwan which resulted into a significant reduction of its interest rate risk exposure. This divestment was in line with the strategy to allocate capital to those businesses that generate the highest return. In addition, ING lengthened its asset duration in...

  • Page 184
    ... securities in the United States was reclassified from Reference to published price quotations in active markets to Valuation technique not supported by market inputs in the third quarter of 2008. Reference is made to Note 33 'Fair value of financial assets and liabilities'. Impact on Real Estate...

  • Page 185
    ... embedded in ING Group's business processes. The following principles support this objective: • Products and portfolios are structured, underwritten, priced, approved and managed appropriately and compliance with internal and external rules and guidelines is monitored; • ING Group's risk pro...

  • Page 186
    2.1 Consolidated annual accounts Risk management (continued) The heads of these departments (Corporate Risk General Managers) report to the CRO and bear direct responsibility for risk (mitigating) decisions at the Group level. The Corporate Risk General Managers and the CRO are responsible for the ...

  • Page 187
    ... to reï¬,ect changes in markets, products and emerging best practices. ING GROUP RISK PROFILE ING Group uses an integrated risk management approach. The risk dashboard captures the risks in all Banking and Insurance business lines in terms of Earnings at Risk and Capital at Risk, and shows the...

  • Page 188
    ... at Risk per risk type compared to actual full year underlying earnings. Earnings at Risk by risk type (Group diversified) Credit and Transfer Market Interest Rate Equity Real Estate FX Insurance Other risks Total Earnings EaR/Earnings 2008 2008 2008 ING Bank ING Insurance Total ING Group 2,034...

  • Page 189
    ... equity markets and de-risking activities and hedges put in place near the end of 2008. Capital at Risk and Earnings at Risk by line of business (Group diversified) 2008 Earnings at Risk 2007 2008 Capital at Risk 2007 Wholesale Banking Retail Banking ING Direct Corporate Line Bank ING Bank...

  • Page 190
    ... to consolidated Benefit Interest Rate risk Equity risk Foreign Exchange risk Real Estate risk Credit risk Other risks* Total * Other risks includes operational risk as well as business risk. 60% 7% 1% 4% 3% 25% 100% The table below shows the build up of ING Group Economic Capital. Please...

  • Page 191
    ...the risk types: Economic Capital (Bank diversified only) by Line of Business 2008 2007 Wholesale Banking Retail Banking ING Direct Corporate Line Bank (1) Total banking operations (1) 9,849 6,169 4,050 2,339 22,407 8,646 5,360 2,831 1,090 17,927 Corporate Line includes funding activities at ING...

  • Page 192
    ... Consolidated annual accounts Risk management (continued) The increase of the Economic Capital allocated to the Corporate Line can be explained by the inclusion of the core equity investments in Economic Capital Bank, previously taken as an add-on at Group level. ING BANK - CREDIT RISKS Credit risk...

  • Page 193
    ...residential mortgages, car loans and other assets) held by the issuer of the security. The last major area of credit risk involves pre-settlement credit exposures which arise from trading activities, including derivatives, repurchase transactions and securities lending/borrowing and foreign exchange...

  • Page 194
    ... still exists after 90 days, the obligation is transferred to one of the 'problem loan' units. In order to reduce the number of arrears, ING banking units encourage their obligors to set up automatic debits from their (current) accounts to ensure timely payments. ING Group Annual Report 2008 192

  • Page 195
    ...), or the assets could be sold piecemeal. Impaired Loans: ING Bank portfolio, outstandings by economic sector 2008 2007 Private individuals Construction, Infrastructure and Real Estate General Industries Food, Beverages and Personal Care Financial Institutions Automotive Services Retail Other Total...

  • Page 196
    2.1 Consolidated annual accounts Risk management (continued) Provisions: ING Bank portfolio Wholesale Banking 2008 2007 2008 Retail Banking 2007 2008 ING Direct 2007 2008 Total ING Bank 2007 Opening balance Changes in the composition of the group Write-offs Recoveries Increase/(decrease) in loan ...

  • Page 197
    ... Banking 2008 2007 2008 Retail Banking 2007 2008 ING Direct 2007 2008 Total ING Bank 2007 Private Individuals Non-Bank Financial Institutions Commercial Banks Central Governments Real Estate Natural Resources Central Banks Transportation & Logistics Services Food Beverage and Personal Care General...

  • Page 198
    ...capital. ING's VaR model has been approved by the Dutch Central Bank to be used for the regulatory capital calculation of its most important trading activities. Market risk management for the fixed income and equity markets is split into two components: general market risk and specific market risk...

  • Page 199
    .... In 2008, there was no occurrence (2007: none) where a daily trading loss exceeded the daily consolidated VaR of ING Wholesale Banking. ING reports the results of this backtesting to the Dutch Central Bank on a quarterly basis. Stress testing Stress tests are used for the monitoring of market risks...

  • Page 200
    ... United States Mexico Japan United Kingdom (1) -91 69 -68 55 46 -1.272 -0.289 0.241 -0.111 0.060 -0.247 -0.187 -0.097 -0.056 -0.032 Bpv (or basis point value) refers to profit and loss account sensitivity per 1bp increase in the interest rate or credit spread. ING Group Annual Report 2008...

  • Page 201
    ... rate of return required by ING Bank's investors and aims for both earnings maximisation and stabilisation. ALCO Bank considers a well balanced portfolio of long-dated fixed income investments as the risk neutral position in its internal risk transfer framework. ING Group Annual Report 2008 199

  • Page 202
    ... from the current positions. For the commercial banking books the EaR captures the interest rate risks resulting from savings, current accounts and the main mortgage portfolios. The impact of new business is included in the EaR calculations for the savings and demand deposits portfolios, as it...

  • Page 203
    ... Corporate Line again only reï¬,ects the interest risk profile of the investments of the bank's own funds. NPV-at-Risk (1% instantaneous upward shock to interest rates) 2008 2007 By Business Line ING Wholesale Banking ING Retail Banking ING Direct ING Bank Corporate Line ING Bank Total By Currency...

  • Page 204
    ...long-term and stable income. The remaining outright risk is mainly maintained in the Bank's ALM books in which the strategic position is maintained. Foreign exchange risk in non-trading books Foreign exchange (FX) exposures in non-trading books result from commercial banking business (business units...

  • Page 205
    ... capital to support the launch of new funds. A decrease in real estate prices will cause the value of this seed and bridge capital to decrease and will lower the level of third party assets under management, which in turn will reduce the fee income from this activity. ING Group Annual Report 2008...

  • Page 206
    ..., long term balance sheet can not be financed timely or at a reasonable cost. In this view of liquidity risk the total on and off balance sheet positions are considered from a structural asset and liability management perspective. For this purpose ALCO Bank established a working group consisting...

  • Page 207
    ... are calculated in line with the regulatory reporting requirements for liquidity risk of the Dutch Central Bank. For this purpose ING Bank's weekly and monthly liquidity positions are stress tested under a scenario that is a mix between a market event and an ING specific event. The resulting...

  • Page 208
    ... investment earnings are a combination of the run-off of portfolio yields on existing assets and new money and reinvestment rates. For new money and reinvestments long-term best estimate assumptions are taken into account, although current new money rates are used for the short-term reinvestments...

  • Page 209
    ... rate risk was reduced substantially. Economic Capital in Asia/Pacific and Europe has now an equal balance for financial and non-financial risks, while capital in Americas is still primarily driven by interest rate, credit spread and client fund related equity risk. ING Group Annual Report 2008...

  • Page 210
    ... income from unit linked, variable annuity, and pension fund business across all regions. Direct exposure represents approximately 20% of the equity risk, after taking the hedge positions into account. ING continued to manage the market and credit risks resulting from its global Insurance operations...

  • Page 211
    ... include ING Canada which was divested in January. Earnings sensitivities for insurance market risks 2008 2007 Interest rate (1% up) Interest rate (1% down) Equity (15% down) Real Estate (8% down) Foreign Exchange (10% worst case) -67 82 -795 -525 -224 -161 125 -613 -570 -338 The table presents...

  • Page 212
    ... insurance portfolios which are reviewed annually by the ING Group Executive Board. ING Group has established actuarial and underwriting risk tolerance levels in specific areas of its insurance operations as described below. For non-life insurance, risk tolerance levels are set by line of business...

  • Page 213
    ... or to changes in long term mortality rates. As noted, ING manages these risks via limits and external reinsurance. Morbidity risk relates to disability products in the Netherlands and some health riders sold in Asia. The decrease in morbidity risk capital relates to the sale of ING Life Taiwan...

  • Page 214
    ...and investment activities. The ratings reï¬,ect probabilities of default and does not take collateral into consideration. Overall risk concentrations remained stable in 2008 for ING Insurance with a small shift towards Commercial Banks as a result of increased equity derivatives trading business at...

  • Page 215
    ... Group, ING Bank and ING Insurance. The General Manager Corporate ORM also establishes and approves the Minimum Standards, and assists and supports the Executive Board in managing ING's operational risks. The ORM function is organised along functional reporting lines. The Business Line operational...

  • Page 216
    .... ORCs, chaired by the business management, steer the risk management activities of the first and second line of defence in their entities. On a group level the Operational & Residual Risk Committee approves the operational risk capital model. The operational risk appetite within ING is defined as...

  • Page 217
    ... level of control within the business units. These scorecards are integral part of ING's Dutch Central Bank approved regulatory capital model (AMA). The Operational Risk Capital model of ING is based on a Loss Distribution Approach (LDA). The Loss Distribution is based on both external and internal...

  • Page 218
    ... and supports the Executive Board in managing ING's Compliance Risks. The Compliance Risk Management function is organised hierarchically at the Corporate Level and along functional reporting lines in the Business Lines. It is part of the second line in ING's three lines of defence model. The Group...

  • Page 219
    ... business units and the result is integrated with the Operational Risk Management results into ING's Dutch Central Bank approved regulatory capital model (AMA). Developments in 2008 - ING Compliance Risk Management's revised Charter and Framework In August the Executive Board of ING issued the ING...

  • Page 220
    2.1 Consolidated annual accounts Risk management (continued) The Charter and Framework and the supporting documentation were produced in close collaboration with the Business Lines, Legal and Compliance Risk Management and business leaders. - Updated FEC Policy and Guidance The ING Group Financial ...

  • Page 221
    ... is compared to the forecasted earnings to determine risk appetite levels. The ING Bank credit risk component of EaR bank is adjusted for forecasted risk costs (addition to Loan Loss Provision). The specific accounting treatments for AFS Debt Securities that requires a write down to market value...

  • Page 222
    ... in line with the net market value (or surplus) definition. The process of Economic Capital modelling enables ING Bank to allocate Economic Capital to the business units and support risk-adjusted performance measurement (RAROC). By comparing Economic Capital figures with ING's available financial...

  • Page 223
    ... for each risk type. Reporting Framework For each business unit and product line, the gross Economic Capital for each risk type is delivered to MISRAROC - the financial data warehouse for RAROC and Economic Capital reporting of ING Bank. The net Economic Capital figures are calculated by taking...

  • Page 224
    ... returns. During 2008, the Economic Capital levels for credit and transfer risk were calculated on a weekly basis for most of the Wholesale Bank and ING Direct investment portfolios and for the SME portfolios within the Retail banking operations. For consumer loans, residential mortgages, credit...

  • Page 225
    ... to changes in model risks and market variables, such as interest rates, equity prices, foreign exchange rates and real estate prices. Economic Capital for market risk is calculated for exposures both in trading portfolios and non-trading portfolios. Measurement Economic capital for market risk is...

  • Page 226
    ... total ING capital. BUSINESS RISK BANK The current calculation method applied within ING Bank defines business risk as the 'residual risk category' that includes all risks that are not covered by the explicitly defined (and managed/measured) credit/transfer, market and operational risk categories...

  • Page 227
    ...associated with the possibility of reduced sales volume in the coming year. ING quantifies the impact of the following types of risk in its Economic Capital model: • Market risk for ING Insurance is the change in value based on changes in interest rates, equity prices, real estate prices, credit...

  • Page 228
    ... annual accounts Risk management (continued) Economic Capital Model The ING Economic Capital calculation is calculated based on a 'Surplus-at-Risk' concept. 'Surplus-at-Risk' is calculated based on the steps: • Calculate the complete balance sheet (all assets and liabilities) on a Market Value...

  • Page 229
    ... it can be used safely in Economic Capital calculations. Non-market risk Economic Capital is calculated by business units, Corporate Credit Risk Management and Corporate Operational, Information and Security Risk Management and inputted into ECAPS at the sub risk level. ECAPS than aggregates 21 sub...

  • Page 230
    ...Consolidated annual accounts Risk management (continued) The quality of the replicating portfolio is monitored by several statistical criteria including R-squared and benchmarked against market value sensitivities such as duration, convexity, and changes in value for larger interest rate and equity...

  • Page 231
    ... and monitoring of capital adequacy is embedded in Capital Management's capital planning process and results in a quarterly Capital Adequacy Assessment Report which is presented to both the ING Group Finance and Risk Committee and the ING Group Executive and Supervisory Boards. The main objective of...

  • Page 232
    ... core Tier-1 securities) of the Group holding company. This net debt position is provided as equity to ING Insurance and ING Bank. ING Insurance AFR insurance is computed as follows: Available Financial Resources - ING Insurance 2008 2007 IFRS Equity (1) Plus hybrid capital (2) Plus Mark-to-Market...

  • Page 233
    ...market risk on the assets backing ING Bank equity. In 2008 the market risk on the assets backing ING Bank equity is included in ING Bank EC, and additional EC for share-based payment plans is zero in 2008. Capital base 2008 Insurance 2007 2008 Bank 2007 2008 Group 2007 Shareholders' equity (parent...

  • Page 234
    ...-2 loans and revaluation reserves equity and real estate revaluations removed from Tier-1 capital. (4) Based on Basel II as of 2008. (5) 90% of Basel I Risk Weighted Assets in 2008 and 80% in 2009. ING Insurance European Union directives require insurance companies established in member states of...

  • Page 235
    ...of Bank and Insurance are included. Regulatory required capital ING Group 2008 2007 Shareholders' equity (parent) Core Tier-1 securities Excluding: Revaluation reserves (1) Group hybrid capital Goodwill and intangibles deductible from Tier-1 Minorities Capital base ING Group Subordinated loans ING...

  • Page 236
    ... Group ING Insurance - short term - long term ING Bank - short term - long term - financial strength (1) A-1+ AA- P-1 A1 AA- A-1+ AA P-1 Aa2 B F1+ AA The Standard & Poor's and Fitch ratings have a negative outlook and the Moody's ratings have a stable outlook. ING Group Annual Report 2008...

  • Page 237
    Main credit ratings of ING at 16/02/2009 (1) Standard & Poor's AAMoody's A1 Fitch A+ ING Group ING Insurance - short term - long term ING Bank - short term - long term - financial strength (1) A-1+ AA- P-1 A2 A+ A-1+ AA P-1 Aa3 C+ F1+ AA- The Standard & Poor's and Fitch ratings have a ...

  • Page 238
    ... Consolidated annual accounts Subsequent events SUBSEQUENT EVENTS On 26 January 2009 ING Group and the Dutch government ('State') announced that they have reached an agreement on an Illiquid Assets Back-Up Facility ('Facility') term sheet. The transaction is expected to close in the first quarter...

  • Page 239
    2.2 Parent company annual accounts Parent company balance sheet of ING Group as at 31 December before appropriation of result amounts in millions of euros Assets Investments in wholly owned subsidiaries 1 Other assets 2 Total assets Equity 3 Share capital Share premium Non-voting equity securities ...

  • Page 240
    ... Parent company annual accounts Parent company profit and loss account of ING Group for the years ended 31 December amounts in millions of euros Result of group companies after taxation Other results after taxation Net result 2008 2007 -569 -160 -729 9,299 -58 9,241 ING Group Annual Report 2008...

  • Page 241
    ...fit and loss Transfer to insurance liabilities/DAC Change in cash ï¬,ow hedge reserve Unrealised revaluations from net investment hedges Employee stock option and share plans Exchange rate differences Other Total amount recognised directly in equity Net result Share capital Share premium Other...

  • Page 242
    ...results stated in connection with the consolidated balance sheet and profit and loss account are also applicable to the parent company balance sheet and profit and loss account with the exception of Investments in group companies and investments in associates which are initially recognised at cost...

  • Page 243
    Notes to the parent company balance sheet 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 2008 2007 ING Bank N.V. ING Verzekeringen N.V. Other 22,890 11,884 -76 34,698 24,038...

  • Page 244
    2.2 Parent company annual accounts Notes to the parent company balance sheet of ING Group (continued) Changes in issued share capital Ordinary shares (par value EUR 0.24) Number x1,000 Amount Issued share capital as at 31 December 2006 Issue of shares Exercise of B warrants Issued share capital as...

  • Page 245
    ... (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 2008 Amount 2007 2008 Number 2007 Opening balance Purchased/sold Cancelled Share-based payments...

  • Page 246
    ... (2007: nil). ING Group has issued statements of liabilities in connection with Section 403, Book 2 of the Dutch Civil Code and other guarantees for a number of group companies. REMUNERATION OF SENIOR MANAGEMENT, EXECUTIVE BOARD AND SUPERVISORY BOARD The information on share-based payment plans and...

  • Page 247
    ... the parent company annual accounts. The consolidated annual accounts comprise the consolidated balance sheet as at 31 December 2008, the profit and loss account, statement of changes in equity and statement of cash ï¬,ows for the year then ended, and a summary of significant accounting policies...

  • Page 248
    ... 2009 ING Group and the Dutch government announced that they have reached an agreement on an Illiquid Assets Back-Up Facility. Reference is made to section 'Subsequent events' in the consolidated annual accounts. As disclosed in this Annual Report, shareholders' equity and net result of ING in 2008...

  • Page 249
    ...fee income on certain insurance products, and our capital base. We also offer a number of insurance and financial products that expose us to risks associated with ï¬,uctuations in interest rates, securities prices, corporate and private default rates, the value of real estate assets, exchange rates...

  • Page 250
    ...interruption of activities, our banking and insurance operations may be subject to losses resulting from such disruptions. Losses can relate to property, financial assets, trading positions, insurance and pension benefits to employees and also to key personnel. If our business continuity plans are...

  • Page 251
    ... of fixed income securities, including those rated investment grade, the international credit and interbank money markets generally, and a wide range of financial institutions and markets, asset classes, such as public and private equity, and real estate sectors. As a result, the market for fixed...

  • Page 252
    ... in order to model client behaviour for the risk calculations in our banking and insurance books. Assumptions are used to determine insurance liabilities, the price sensitivity of savings and current accounts and to estimate the embedded optional risk in the mortgage and investment portfolios. The...

  • Page 253
    ... markets may (i) result in impairment charges to equity securities that we hold in our investment portfolios and reduced levels of unrealised capital gains available to us which would reduce our net income and negatively impact our solvency position, (ii) negatively impact performance, future sales...

  • Page 254
    ... results, that may impact our share price include, but are not limited to: • market expectations of the performance and capital adequacy of financial institutions in general; • investor perception of the success and impact of our strategies; • a downgrade or review of our credit ratings...

  • Page 255
    ...2008. Future increases of capital or other ownership changes may bring ING over the 50% threshold; in which case limitations to the future use of tax loss carry forwards as well as certain so-called built-in-losses may adversely affect net result and equity. Section 382 of the United States Internal...

  • Page 256
    ... 2007 2008 RAROC (pre-tax) 2007 General Lending & PCM Structured Finance Leasing & Factoring Financial Markets Other Wholesale products Subtotal Wholesale Banking ING Real Estate Total Wholesale Banking The Netherlands Belgium Central Europe Asia Total Retail Banking Total ING Direct Corporate Line...

  • Page 257
    ... the Executive Board. The CRO has several direct reports who are all responsible for a specific risk management function within ING Bank. Chief Risk Officer Corporate Credit Risk Management Corporate Market Risk Management Corporate Operational Risk Management Group Compliance Risk Management...

  • Page 258
    ...related to ING Bank's core credit risk activities in the areas of: Securities Financing, Derivatives (collectively Pre-Settlement Risk); Money Market activities (including reserve deposits at Central Banks); Lending (both on and off balance sheet); and Investment risks. The amounts presented in this...

  • Page 259
    ...incorporated the Basel II concepts into its daily activities, both globally and locally: Credit Scoring/Acceptance Performance measurement Regulatory Capital/RWA Basel II Risk Components PD EAD LGD Maturity Economic Capital Loan Loss Provisioning Loan Pricing ING Group Annual Report 2008 257

  • Page 260
    ...(AIRB) approach for credit risk: • Reporting on (minimum) regulatory capital requirements; • Model monitoring reports; and • Stress testing reports. The acceptance, maintenance, measurement, management and reporting of credit risks at all levels of ING Bank is accomplished through promotion...

  • Page 261
    ...as consumer loans, car loans and credit cards. Under these exposure class definitions, it is possible for a private individual to be included under both Residential Mortgages and Retail Other. For other types of counterparties or issuers, there is no potential overlap. ING Group Annual Report 2008...

  • Page 262
    ..., equities and ONCOA. Gross credit risk exposures (EAD) by geographic area Central governments and central banks 2008 Netherlands Germany Belgium United States of America Spain France Australia United Kingdom Italy Canada Other Total Institutions Corporate Residential mortgages Other retail...

  • Page 263
    ... formula that is used to determine IBNR Provisions and is also calculated centrally using a common tool across ING Bank. 1 The threshold amount varies per business unit, but generally is EUR 0 in the international units, and EUR 1 million in the 'home markets'. ING Group Annual Report 2008 261

  • Page 264
    ... for ING Bank only (continued) Cumulative Provisions by geographic area Central governments and central banks 2008 Netherlands Germany Belgium United States of America Spain Poland France Iceland Turkey Italy Other Total Institutions Corporate Residential mortgages Other retail Total...

  • Page 265
    ... 2008 Automotive Builders & Contractors Commercial Banks Food, Beverages & Personal Care General Industries Media Natural Resources Non-Bank Financial Institutions Private Individuals Real Estate Retail Services Transportation & Logistics Other Total Institutions Corporate Residential mortgages...

  • Page 266
    ... to loans to private individuals, such as residential mortgage loans, car loans, and other consumer loans. For business loans (governments, institutions, corporates), ING has adopted a policy to classify the obligor as a problem loan as quickly as possible upon the occurrence of a payment default...

  • Page 267
    ... process is detailed further in the sections that describe ING's Data Management and IT processes). These models are typically used for small businesses, consumer loans, and residential mortgage exposures. • Risk Ratings from Appeals: Rating Model outcomes that are perceived to be inaccurate can...

  • Page 268
    ... effect can cause RWA assets to increase or decrease together with risk rating migration without a significant change in the size of the underlying financial assets, in terms of financial accounting. As such, rating migrations are closely monitored within ING. ING Group Annual Report 2008 266

  • Page 269
    ..., or another defined event within the associated credit risk agreement has occurred. In most cases, the obligor pays a commitment fee to ING on the unused portion of these facilities. Pre-Settlement, Money Market and Investment limits are generally not committed. If all of the unused commitments...

  • Page 270
    .... Counterparty credit risk (EAD) from derivatives (SA and AIRB) Central governments and central banks 2008 Credit Derivatives Derivatives Equity Derivatives Foreign Exchange Derivatives Interest Rate Derivatives Total Institutions Corporate Residential mortgages Other retail Total 22...

  • Page 271
    Counterparty credit risk (EAD) from securities financing (SA and AIRB) Central governments and central banks 2008 Bond Financing Given Equity Financing Given Bond Financing Taken Stock Financing Taken Total Institutions Corporate Residential mortgages Other retail Total 213 6,619 6,832 1,...

  • Page 272
    ... Investor ING Direct is the primary investor in securitisation transactions within ING Bank. ING Direct's core strategy is gathering customer deposits and reinvesting them in its investment portfolio and retail assets, mainly mortgages. The difference between retail liabilities (the savings product...

  • Page 273
    ...in the money market for secured borrowings. ING Bank has created a number of these securitisations with a 31 December 2008 position of approximately EUR 70 billion of AAA rated notes. The underlying exposures are residential mortgages in the Netherlands, Canada, Germany and Australia. As long as the...

  • Page 274
    ... SPV. The transactions are funded by the ING Administered Multi Seller Asset Backed Commercial Paper (ABCP) conduit Mont Blanc Capital Corp (rated A-1+/P-1). Despite the conditions in the international money markets Mont Blanc Capital Corp continues to fund itself externally in the ABCP markets. In...

  • Page 275
    ... trading book of ING Bank. Market risk capital of CAD2 trading books is calculated according to the internal VaR model, where correlations and volatilities are taken into account. On the other hand, market risk capital of CAD1 books is calculated using standardised fixed risk weights. In 2008, ING...

  • Page 276
    ...3 information for ING Bank only (continued) INTEREST RATE RISK IN THE BANKING BOOKS Earnings at Risk 2008 By line of business ING Wholesale Banking ING Retail Banking ING Direct ING Bank Corporate Line Total By Currency Euro US Dollar Pound Sterling Other Total Net Present Value at Risk -132 -101...

  • Page 277
    ... solvency calculation, which, for ING, apply from 2008 onwards. Basel II is an international standard for calculating the required capital based on internal models that take into account the financial and operational risks. BASIS POINT VALUE (BPV) The change in the Net Present Value of a cash ï¬,ow...

  • Page 278
    ... rates and changes in bond prices and their Net Present Value. It is a very important measure for portfolios containing (embedded) options. CORE DEBT Investments in ING Group subsidiaries minus the equity of the holding company including hybrids. COST OF CAPITAL The costs related to owning capital...

  • Page 279
    ... (IRR) Internal rate of return is the discount rate at which the present value of distributable earnings from new business equals 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...

  • Page 280
    ... ASSETS 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 places short term deposits...

  • Page 281
    ...) market price. The pre-settlement risk (potential or expected risk) is the cost of ING 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...

  • Page 282
    ... all risk factor changes. WARRANT A financial instrument that gives the holder the right to purchase ordinary shares. WEIGHTED AVERAGE COST OF CAPITAL (WACC) The weighted average cost of capital is used as the discount rate for calculating the present value of future cash ï¬,ows. ING Group Annual...

  • Page 283
    ... unknown risks and uncertainties. Actual results, performance or events may differ materially from those in such statements due to, among other things, (i) general economic conditions, in particular economic conditions in ING's core markets, (ii) changes in the availability of, and costs associated...

  • Page 284
    ... Amsterdam The Netherlands Telephone: +31 20 5415411 Fax: +31 20 5415444 Internet: www.ing.com Commercial Register of Amsterdam, no. 33231073 The trademark of the Forest Stewardship Council (FSC) indicates that the wood used to make this review comes from a forest that is well-managed according to...