ING Direct 2008 Annual Report Download - page 30

in EUR million
US 86% 18,736
Canada 12% 2,671
Latin America* 2% 480
Total 100% 21,887
* Excludes ING’s joint venture in Brazil because it
is a minority interest.
ING Group Annual Report 2008
1.2 Report of the Executive Board
28
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 growth in Latin America solid
but returns lower
> Canada weathers turmoil reasonably well
Insurance Americas results were significantly affected by the
global financial turmoil, which resulted in substantial credit
and investment-related losses together with lower sales of
equity-linked products. The CitiStreet acquisition has given
Retirement Services in the US a robust platform for further
growth. Sales in Latin America remained constant, while
returns were lower and Canada produced firm results given
the challenging market circumstances.
FINANCIAL DEVELOPMENTS
Underlying result before tax declined to a loss of EUR 534 million
in 2008 from EUR 2,062 million profit in 2007. The US recorded a
loss of EUR 1,117 million compared to a profit of EUR 1,356 million
in 2007, following the severe impact of the turbulent financial
environment. This result included investment losses of EUR 965
million, of which EUR 811 million related to credit losses. In
addition, deferred acquisition costs (DAC) unlocking had a negative
impact of EUR 1,180 million in 2008, compared with a positive
impact of EUR 14 million in 2007. The underlying result was also
impacted by negative alternative asset returns and lower fee
income, as positive net flows could not overcome asset under
management erosion and higher hedging costs. Underlying profit
before tax in Canada decreased 22.6%, or 17.7% excluding
currency effects, to EUR 364 million, driven by a lower
underwriting result due to unfavourable claims experience,
which was partially offset by higher investment results and lower
impairments on fixed interest securities. Underlying profit before
tax in Latin America decreased by 6.8%, or 2.3% excluding
currencies, to EUR 220 million. The life business posted EUR 44
million lower profit, triggered by lower investment gains in Mexico.
The profit from the non-life business improved by EUR 28 million,
due to higher results in Brazil, including a tax reserve release of
EUR 24 million.
Premium income decreased by 1.1% to EUR 21,887 million,
but rose 6.9%, excluding currency effects. In the US, premiums
increased by 8.4%, excluding currency impact, as sales of retirement
services, variable and fixed annuities and insurance were higher
than 2007 levels. Premium income in Canada decreased 4.2%
to EUR 2,671 million, but increased by 1.7% excluding currency
impact, reflecting rate increases in personal lines but a lower
number of new insured risks. Premiums in Latin America decreased
20.6%, excluding currency effects, reflecting the sale of the
Chile health insurance business in the first quarter of 2008,
which was partly offset by higher annuity sales.
Operating expenses increased by 3.0% to EUR 2,340 million, or
10.5% excluding currency effects. Operating expenses in the US
increased 10.1% excluding currency impact due to the acquisition
of CitiStreet, and were partly offset by lower personnel-related
expenses. Excluding CitiStreet and the currency impact, operating
expenses in the US rose modestly by 0.7%. The increase in Latin
America of 29.9% excluding currency impacts was mainly driven
by the acquired pension businesses and higher sales, and was
partly offset by the divestment of the Chile health business.
Excluding the impact of acquisitions and the sale of the Chile
health business and currency effects, operating expenses in Latin
America increased by 1.5%. In Canada, operating expenses rose by
4.3% excluding currency impact, related to the direct distribution
network and claims processing.
Profit and loss account (underlying)
in EUR million 2008 2007 change
Premium income 21,887 22,126 –1.1%
Operating expenses 2,340 2,272 3.0%
Underlying result before tax –534 2,062 –125.9%
Total result before tax* –589 2,152 –127.4%
* Total result before tax is defined as underlying result before tax including
divestments and special items.
Key figures
2008 2007
Value of new life business (EUR million) 304 270
Internal rate of return 12.6% 11.8%
New sales (EUR million) 3,503 3,671
Economic Capital (EUR billion) 6.0 6.5
Geographical breakdown of premium income