ING Direct 2009 Annual Report Download - page 230

ING Insurance
The MVaR limits are managed by ALCO Insurance at the relevant organisational level. The Group Insurance ALCO determines the
aggregate limit and ensures that the Group stays within the limit and allocates the sub-limits to business lines, with similar roles for the
business line and business unit ALCOs. Limit breaches by business lines are reported to ALCO Insurance and resolved in accordance with
the policy within the next quarter.
CIRM consolidates and monitors the MVaR exposures of the business lines including diversification effects on a quarterly basis. Together
with ING Capital Management, MVaR is managed within the limits.
In 2009 there was a breach of the overall ING Insurance MVaR limit, due to breaches in USFS and Corporate Line. Both breaches were
waived temporarily to be able to resolve regulatory issues which had a higher priority than economic capital. Actions to reduce interest rate
risk would have had an adverse effect on regulatory capital and as such a waiver for the limit breaches was temporarily given.
Real Estate
Real Estate price risk arises from the possibility that the value of Real Estate assets fluctuate because of a change in earnings related to
Real Estate activities and/or a change in required investor yield.
ING Insurance has two different categories of Real Estate exposure on its insurance books. First, ING Insurance owns buildings it occupies.
Second, ING Insurance has invested capital in several Real Estate funds and direct Real Estate assets. A decrease in Real Estate prices will
cause the value of this capital to decrease and as such ING Insurance is exposed to Real Estate price shocks.
The second category can be divided on the one hand in minority stakes in Real Estate assets that are revalued through equity and on the
other hand stakes in funds managed by ING and direct Real Estate revalued through P&L. Only for the last category Real Estate price
shocks will have a direct impact on reported net profit.
The crisis in the financial markets has led to a further slowdown of the world economy in general. These global economic factors also
had negative consequences for the value of Real Estate assets.
As of Q4 2009 ING Insurance has EUR 3.7 billion of Real Estate related investments. ING Insurance’ Real Estate exposure (i.e. including
leverage) is EUR 6.1 billion of which EUR 4.4 billion is recognised as fair value through P&L and EUR 1.7 billion is not revalued through P&L,
but is either booked at cost or is revalued through equity (with impairments going through P&L). In total, Real Estate exposure decreased
by EUR 0.4 billion mainly as a result of negative fair value changes (EUR 396 million), impairments (EUR 77 million) and compensated by net
investments (EUR 22 million) and FX appreciation (EUR 42 million).
Real Estate Exposure recorded as fair value through P&L
2009 Residential Office Retail Industrial Other Total
Europe 379 1,366 1,958 450 83 4,236
Americas 94 94
Australia 25 25
Asia 68 68
Total 379 1,366 1,958 450 270 4,423
Real Estate Exposure recorded as fair value through P&L
2008 Residential Office Retail Industrial Other Total
Europe 438 1,609 2,207 522 28 4,804
Americas 93 93
Total 438 1,609 2,207 522 121 4,897
Real Estate Exposure not revalued through P&L
2009 Residential Office Retail Industrial Other Total
Europe 747 228 3 5 541 1,524
Americas 125 125
Asia 20 20
Total 747 373 3 5 541 1,669
Real Estate Exposure not revalued through P&L
2008 Residential Office Retail Industrial Other Total
Europe 781 250 920 469 1,529
Americas 149 149
Asia 21 21
Total 781 420 920 469 1,699
Risk management (continued)
2.1 Consolidated annual accounts
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