ING Direct 2008 Annual Report Download - page 232

2.1 Consolidated annual accounts
Capital management (continued)
AVAILABLE FINANCIAL RESOURCES (AFR)
ING Group
AFR ING Group is computed as follows:
Available Financial Resources – ING Group
2008 2007
Total AFR Bank and Insurance 49,305 54,443
Less Core debt Group (1) 7,170 4,728
Total AFR ING Group 42,135 49,715
(1) Investments in subsidiaries less equity (including 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) 11,888 17,911
Plus hybrid capital (2) 2,934 2,202
Plus Mark-to-Market, tax adjustments and
illiquidity adjustment –366 2,597
Total AFR ING Insurance 14,456 22,710
(1) IFRS Equity 2008 adjusted for EUR 5 million shares of ING Group held by ING Insurance.
(2) Hybrid capital at market value.
ING continues to adjust AFR to reflect the illiquidity in its insurance portfolios as reporting AFR with MVLs discounted at the swap rates
results in an asymmetry between the assets and liabilities in terms of reflection of illiquidity premiums. In addition to valuing assets at
current market values, total portfolio illiquidity risk profile has been proxied by applying a AAA covered bond spread (128 bps over swaps)
to the valuation of insurance liabilities cash flows. This adjustment has been applied to all business (excluding mainly unit-linked/variable
business) except for the US and Japanese businesses where the AAA covered bond spread is further adjusted by the differential between
local AAA corporate bond spreads and AAA European corporate bond spreads (further +72 bps and -21 bps over swaps for the US and
Japan respectively). If a similar methodology had been applied at 31 December 2007, AFR at that time would have been EUR 26.7 billion.
At year-end 2007 the swap rate was used.
ING Bank
Available Financial Resources – ING Bank
2008 2007
IFRS Equity 22,889 25,511
Revaluation Reserve Debt Securities 5,185 1,097
Revaluation Reserve cash flow hedge 128 –428
Goodwill –1,636 –1,428
Minorities 1,198 1,668
Deduction (1) –1,084
Hybrid capital 7,085 6,397
Total AFR ING Bank 34,849 31,733
(1) Difference between loan loss provisions and expected loss is no longer deducted from AFR in 2008.
ING Bank paid dividends to ING Group of EUR 4.25 billion during the year. It received EUR 7.2 billion in capital injections from ING Group.
Hybrid capital increased mainly due to the issuance of additional hybrid capital.
AFR/EC RATIOS
AFR should exceed EC, and for ING Group as a whole there should be a prudent buffer. The target for the buffer at Group level is 20%.
For details regarding the computation of EC see the section entitled ‘Risk management’.
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