ING Direct 2008 Annual Report Download - page 233

AFR/EC Reconciliation
2008 2007
Available Financial Resources ING Group (1) 42,135 49,715
Group EC (2) 30,675 35,000
EC Group (3) 1,000
Total ING Group EC 30,675 36,000
AFR/EC Ratio 137% 138%
Surplus/(deficit) 11,460 13,715
(1) AFR ING Bank, amounting to EUR 34,849 million (2007: EUR 31,733 million) plus AFR ING Insurance, amounting to EUR 14,456 million (2007: EUR 22,710
million) less core debt ING Group, amounting to EUR 7,170 million (2007: EUR 4,728 million).
(2) EC Insurance plus EC Bank less 15% diversification effect (15% in 2007).
(3) EC of the ING Group parent company in 2007 mainly included market risk on share-based payment plans and 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
Insurance Bank Group
2008 2007 2008 2007 2008 2007
Shareholders’ equity (parent) 11,893 17,911 22,889 25,511 17, 334 37, 208
Core Tier-1 securities 10,000
Group hybrid capital (1) 4,560 2,202 7,085 6,397 11,655 8,620
Group leverage/core debt (2) 7,170 4,728
Total capitalisation 16,453 20,113 29,974 31,908 46,159 50,556
Adjustments to equity:
Revaluation reserve debt securities 8,271 840 5,185 1,097 13,456 1,937
Revaluation reserve crediting to life policyholders –2,235 –42 –2,235 –42
Revaluation reserve cashflow hedge –1,360 –10 128 –428 –1,177 –438
Goodwill –1,889 –1,076 –1,636 –1,428 –3,275 –2,420
– Revaluation reserves fixed income & other 2,787 –289 3,677 –759 6,769 –963
– Revaluation reserves excluded from Tier-1 (3) –1,790 –2,952
– Insurance hybrid capital (4) 2,250 2,250
– Minorities 520 891 1,198 1,668
Deductions Tier-1 (as of 2007) –1,040 –93
Available capital 22,010 22,965 32,019 29,772
Other qualifying capital (5) 11,870 11,792
DAC/ViF adjustments (50%) (6) 1,893 4,070
Group leverage (core debt) –7,170 –4,728
Adjusted Equity (a) 23,903 27,035 43,889 41,564 45,758 44,865
Ratios
Core debt (b) 2,301 4,267 7,170 4,728
Debt/Equity ratio (b/(a+b)) 8.78% 13.63% 13.55% 9.53%
(1) Tier-1 instruments issued by ING Group (e.g. perpetual debt securities and preference shares) at nominal value. Group hybrid Tier-1 instruments other than
preference shares are provided as hybrid capital to ING Insurance or ING Bank.
(2) Investments in subsidiaries less equity of the Group holding company (including core Tier-1 securities). This net debt position is provided as equity to ING
Insurance and ING Bank.
(3) Includes mainly EUR –1,019 million (2007: EUR –2,358 million) in participations (e.g. Kookmin, Bank of Beijing) and other equity investments, EUR –615 million
(2007: EUR –595 million) for Real Estate for own use. The Dutch banking regulator requires this deduction to be made from Tier-1 capital. This deduction is
added back to Tier-2 capital.
(4) Dated subordinated debt issued by ING Insurance at nominal value.
(5) Includes EUR 12,910 million (2007: EUR 14,199 million) Tier-2 capital and nil (2007: nil) Tier-3, offset by EUR 1,040 million (2007: EUR 2,407 million) of
regulatory deductions. These deductions were based on Basel I regulation in 2007 and Basel II regulation in 2008.
(6) Mainly includes 50% of the excess of the present value of future profits generated by policies in force (Value in Force) over the after-tax deferred acquisition costs.
The capitalisation of ING Group was under pressure in the second half of 2008, but thanks to the government capital injection all
leverage ratios were within their targets at the end of the year. The debt/equity ratio of ING Group as at year-end 2008 was at 13.55%
(2007: 9.53%). The debt/equity ratio of ING Insurance as at year-end 2008 was at 8.78% (2007: 13.63%). The Basel II ING Bank Tier-1
ratio ended at 9.32%, this is a strong increase from the Basel I Tier-1 ratio of 7.39% at December 2007.
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ING Group Annual Report 2008