ING Direct 2008 Annual Report Download - page 33

ING Group Annual Report 2008
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Insurance Asia/Pacific
Well-positioned to strengthen the franchise
Key points
> Despite lower sales, Insurance Asia/Pacific
maintained or improved market positions
across the region
> Declining equity markets and weak
economic conditions eroded demand
for investment linked products
> Bank distribution reach extended:
number of tied agents reached 100,000
> Brand awareness rose through the global
and regional advertising campaigns
Growth in the Asia/Pacific region was adversely affected by
global economic developments in 2008. However, as one of
the leading international insurance and asset management
companies in the region with a strong and diversified
distribution network, ING remains well-positioned to
maintain its franchise. Based on annual premium equivalent,
ING maintained or improved its market positions across the
region in 2008, a sign of its sound product portfolio and
distribution capabilities. Active repositioning of its product
portfolio was at the core of ING’s response to changing
customer needs due to the economic downturn.
FINANCIAL DEVELOPMENTS
Underlying result before tax decreased by 79.9% to EUR 116
million in 2008 from EUR 576 million in 2007. Japan recorded a
loss of EUR 167 million in 2008 compared to a profit of EUR 24
million in 2007, driven by losses on the variable annuity business,
mainly due to extreme market volatility in October. Turmoil in the
global financial markets led to negative revaluations on credit-
and equity-linked securities and impairments on fixed income
investments, which further contributed to the decrease in the
underlying result. Excluding Japan and currency effects, underlying
result before tax declined 15.5%.
On 20 October 2008, ING reached an agreement with Fubon
Financial Holding Co. Ltd. to sell ING Life Taiwan for a consideration
of USD 600 million (EUR 447 million). The transaction was
completed on 11 February 2009 and the total net loss of the
transaction, comprising of the loss on divestment and results from
the divested unit, was EUR 292 million. The transaction significantly
reduced the Economic Capital attributed to Insurance. Taiwan was
separately reported from Insurance Asia/Pacific’s results in the
fourth quarter of 2008. ING recorded zero underlying result before
tax for Taiwan in the first nine months of 2008, as in 2007, due
to strengthening of reserves in a low interest rate environment.
Gross premium income decreased 12.6%, or 3.3% excluding
Taiwan and currency effects, to EUR 11,040 million. Double-digit
growth was recorded in local currency terms in Australia, South
Korea and Rest of Asia, but this was more than offset by a sharp
decline in single premium variable annuity premiums in Japan.
Assets under management decreased by 22.6% to EUR 82 billion
at year-end 2008.
Underlying operating expenses fell 6.7%, but were up 7.0%
excluding Taiwan and currency impact to EUR 1,040 million as cost
containment helped to offset most of the increased expenses from
a higher in-force base in some countries and continued investment
in greenfield operations, to support the growth in premium
income in these markets.
New sales decreased 23.3%, or 18.3% excluding Taiwan, to
EUR 2,055 million as investment markets deteriorated and
consumer preference for more cautious investment alternatives
eroded demand for investment-linked products. The decline in
sales was mainly attributable to Australia and Japan, whereas sales
were stable or up in local currency terms in South Korea and Rest
of Asia. The value of new business (VNB) decreased 27.4%, or
14.6% excluding Taiwan, to EUR 321 million, broadly consistent
with the decline in sales. The 2008 VNB figures reflect the full-year
impact of a change in methodology which excludes start-up
in EUR million
Japan 36% 4,026
Taiwan 20% 2,156
South Korea 30% 3,291
Australia/New Zealand 2% 292
Rest of Asia* 12% 1,275
Total 100% 11,040
* India, China, Hong Kong, Thailand and Malaysia.
Profit and loss account (underlying)
in EUR million 2008 2007 change
Premium income 11,040 12,632 –12.6%
Operating expenses 1,040 1,115 – 6.7%
Underlying result before tax 116 576 –79.9%
Total result before tax* –213 576 –137.0%
* 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) 321 442
Internal rate of return 14.0% 16.8%
New sales (EUR million) 2,055 2,680
Economic Capital (EUR billion) 2.8 7.0
Geographical breakdown of premium income