ING Direct 2008 Annual Report Download - page 31

ING Group Annual Report 2008
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The value of new business (VNB) increased by 12.6%, driven by
higher pension fund sales and better quality of business in Latin
America. VNB in the US fell 7.9% due to reduced spread-related
products sales and pressure on variable annuity margins and sales.
BUSINESS DEVELOPMENTS
In 2008, Insurance Americas continued its focus on the long-term
growth opportunities presented by the ageing of the US
population and increasing wealth in Latin America despite the
challenging markets. During 2008, Insurance Americas maintained
or improved its market position in retirement services and
individual life insurance through innovative product development
and distribution expansion.
Insurance Americas’ focus on faster-growing markets in the US and
Latin America continued to be rewarded in the first half as sales,
returns and the value of new business increased across the region.
In the second half of the year, the deepening financial crisis
resulted in substantial credit and investment-related losses, and
dampened sales of equity-linked products including investments,
variable universal life and variable annuities.
Because of the uncertain financial outlook, Insurance Americas’
most critical priorities in 2009 are customer retention, cost
containment and reducing risk to preserve capital and to
improve profitability.
The acquisition of CitiStreet for EUR 570 million boosted ING’s
leading position in retirement services in the US, making ING the
third-largest defined contribution business in the US based on
assets under management and administration, and the second-
largest based on number of plan participants.
Late in the year, ING US announced a realignment of its US Wealth
Management business, segmenting Retirement Services and
Annuities into two distinct business units. Under the new structure,
the US business is organised into four divisions: Retirement
Services, Annuities, Insurance, and Investments. The new structure
provides better focus on ING’s diverse customer base and
distribution partners. The structure is also intended to put ING in
the best possible position to capture the maximum upside sales
potential when the US economy recovers.
Retirement Services boosted by CitiStreet
ING is a major player in retirement services, providing defined
contribution plans to small and medium-sized corporations,
educational institutions, hospitals and governments. ING is
ranked number one in sales of retirement services for kindergarten
through to 12th grade education markets and number two in
small corporate plan sales.
The integration of the CitiStreet business into Retirement Services
has proceeded according to plan, and key business and operational
policies and strategies are being pursued which leverage the
strengths and talents of both organisations.
ING plans to fully leverage CitiStreet’s scalable technology platform
to allow easier business expansion and more technological
innovation. Emphasis is now on strict execution of integration
initiatives to become more efficient and effective. Significant cost
savings, primarily in IT expenditure, are expected.
The addition of CitiStreet, one of the premier retirement plan
service and administration organisations in the US defined
contribution marketplace, provides ING with an expanded
geographic footprint, further entry into specific market segments
including the large 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 plan offered by
non-profit organisations such as educational institutions that come
with several advantages such as tax concessions on contributions
and earnings. ING is already one of the State’s four 457 (also a
particular type of retirement savings plan) government pension
plan providers for state and county employees. From 360 school
districts in Iowa, more than 300 have already signed up to the
Iowa state plan. This high enrolment rate could be repeated in
other states which have yet to offer state-wide 403 (b) plans for
school districts. Under recent changes to 403 (b) regulations,
individual school districts in Iowa now have the option of arranging
their own plans or joining the state plan. Only a few states have
taken advantage of the changes in the legislation, but many more
could follow, opening up opportunities for ING in the important
education pension plan market.
Annuities hold ground in market turbulence
Variable annuity sales were well supported by ING LifePay Plus,
a withdrawal benefit, which was launched in August 2007. An
enhanced version of the product was introduced in April 2008.
ING continued to target pre- and post-retirees in sales strategies
as part of the easier brand campaign. Sales began to slow in the
third quarter as equity markets became more volatile and dipped
further in the fourth quarter. In 2008, as part of Insurance
Americas’ de-risking initiatives, several product changes were
made which lowered overall business risk. In January 2009, more
de-risking product changes were instituted which included further
restricting client exposure to equity funds, reducing benefit
entitlements and repricing.
Sales of fixed annuities improved 35% as customers sought
fixed-rate products in the volatile market environment. These
products provide stability of principal sum and guaranteed returns.
In addition, higher crediting rates made fixed annuities more
attractive to customers.
ING continued to expand its distribution capacity, particularly in
variable annuities, seeking out partnerships with major distributors.
As part of the easier campaign, ING launched a major campaign
to help simplify retirement planning. The ‘Your Number’
campaign was aimed at encouraging Americans to think about
and calculate the savings they would require to retire comfortably.
Print, web and TV ads directed people to www.INGyournumber.
com where they could calculate their ‘number’ via an interactive,
user-friendly tool.
Meeting the needs of customers, sponsors and distribution
partners during a difficult economic period remains a major priority
in Annuities, as well as Retirement Services.