ING Direct 2008 Annual Report Download - page 280

NET ASSET VALUE
Used in the equity method of accounting. The initial net asset value of the
investment is determined by the fair value of the assets and liabilities of the
investee. After the initial valuation of assets and liabilities of the investee at
fair value, the assets and liabilities of the investee are valued in accordance
with the accounting policies of the investor. The profit and loss account
reflects the investor’s share in the results of operations of the investee.
NET PREMIUMS WRITTEN
Gross premiums written for a given period less premiums ceded
to retrocessionaires during the given period.
NET PRESENT VALUE AT RISK (NPV-AT-RISK)
Establishes what the value of future cash flows is in terms of today’s
monetary value. NPV-at-Risk establishes the change in value of future
cash flows as a result of interest rate changes in terms of today’s
monetary value.
NON-VOTING EQUITY SECURITIES
Core Tier-1 securities issued to the Dutch State in October 2008 for
a total consideration of EUR 10 billion. This capital injection qualifies
as core Tier-1 capital for regulatory purposes.
NOTIONAL AMOUNTS
Represent units of account which, in respect of derivatives, reflect the
relationship with the underlying assets. They do not reflect, however,
the credit risks assumed by entering into derivative transactions.
OPERATING LEASE
A lease other than a finance lease.
OPERATIONAL RISK
The risk of a direct or indirect loss resulting from inadequate or failed internal
processes, people and systems or from external events.
OPTION CONTRACTS
Give the purchaser, for a premium, the right, but not the obligation, to buy
or sell within a limited period of time a financial instrument or currency at
a contracted price that may also be settled in cash. Written options are
subject to market risk, but not to credit risk since the counterparties have
already performed in accordance with the terms of the contract by paying
a cash premium up front.
ORDINARY SHARE
An equity instrument that is subordinate to all other classes of equity
instruments. Ordinary shares participate in the net profit for the financial
year after other types of shares such as preference shares.
OUT OF THE MONEY
A call option is said to be out of the money if the exercise price is higher
than the price of the underlying value; a put option is said to be out of the
money if the exercise price is lower than the price of the underlying value.
OVER-THE-COUNTER INSTRUMENT
A non-standardised financial instrument not traded on a stock exchange
but directly between market participants.
JOINT VENTURE
A contractual arrangement whereby two or more parties undertake an
economic activity which is subject to joint control.
LENDING RISK
Lending risk arises when ING grants a loan to a customer, or issues
guarantees on behalf of a customer. This is the most common risk
category, and includes term loans, mortgages, revolving credits, overdrafts,
guarantees, letters of credit, etc. The risk is measured at the notional
amount of the financial obligation that the customer has to repay to ING,
excluding any accrued and unpaid interest, or discount/premium
amortisations.
LIQUIDITY RISK
The risk that ING Group or one of its subsidiaries cannot meet its financial
liabilities when they fall due, at reasonable costs and in a timely manner.
MARKET RISK
Market risk is the risk that movements in market variables, such as interest
rates, equity prices, implied volatilities, foreign exchange rates, real estate
prices negatively impact the earnings or market value.
MARKET VALUE AT RISK (MVAR)
A calculation method which measures the decrease in the market value
surplus caused by movements in financial markets, at a 99.95% confidence
level over a one year horizon.
MINORITY INTERESTS
The part of the profit or loss and net assets of a subsidiary attributable
to an interest which is not owned, directly or indirectly, by the parent
company.
MONETARY 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 with a
counterparty in order to manage excess liquidity, as such, money market
deposits tend to be short term in nature (1-7 days is common). In the event
of a counterparty default, ING may lose the deposit placed. Money market
risk is therefore measured simply as the notional value of the deposit.
MONOLINER
A financial company that deals specifically with one particular branch of
the financial industry.
MONTE CARLO SIMULATION
A model to calculate Value at Risk, assuming that changes in risk factors
are (jointly) normally distributed taking into account nonlinear behaviour of
financial products.
MORTGAGE BACKED SECURITIES (MBS)
A security whose cash flows are backed by typically the principal and/or
interest payments of a pool of mortgages.
NEW SALES
New sales of life insurance, measured as Annual Premium Equivalent (APE),
have been defined as the total of annual premiums and 10% of single
premiums received on production in a given period.
2.4 Additional information
Financial glossary (continued)
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