ING Direct 2009 Annual Report Download - page 47

BUSINESS DEVELOPMENTS
Asia was hit hard by the global economic downturn. Export
volumes contracted by 20-40% across the region, which triggered
large cutbacks in production, employment and investment. Even
so, economic performance in Asia outpaced that in other regions
of the world, largely due to continued strong growth in China.
ING is well-positioned to benefit as the life insurance sector
regains momentum.
China’s shift to expansionary monetary and fiscal policy in response
to the collapse in export demand re-directed demand to the
domestic market. China’s GDP growth in 2009 is likely to have
exceeded the authorities’ 8% target, something deemed almost
impossible by most analysts at the beginning of the year. The
recovery in China stabilised economies in the rest of Asia with the
strongest recoveries experienced by the countries whose exports
were most exposed to Chinese demand. As a result, economic
performance in Asia outpaced growth in other regions around
the world. Equity indices in major markets across Asia recorded
double-digit growth in 2009 and ING is well-positioned to
benefit from the long-term growth in the region given the
recovery in the real economy and with the life insurance
sector regaining momentum.
ING’s life insurance sales in Asia recovered slightly in 2009 following
the sharp decline in the second half of 2008, but overall growth in
sales remained soft. Sales of investment-linked products remained
under pressure as consumer demand shifted towards protection
products. In response, ING repositioned its product portfolio by
developing more traditional savings and capital guaranteed products.
Sales across all products are expected to pick up in 2010 in what
promises to be a year of solid economic growth in Asia.
PRODUCTS AND DISTRIBUTION CHANNELS
In Asia/Pacific, ING sells insurance and wealth management
products mainly through its extensive tied agency force, but sales
through bank distribution partners is growing rapidly and ING
is exploring other channels. Faced with a challenging market
environment, Insurance Asia/Pacific’s two main strategic priorities
for 2009 were repositioning its product portfolio and strengthening
its distribution channels.
South Korea remains a key profitable ING stronghold in Asia but
difficult market circumstances led to a drop in sales in 2009.
Decisive action was taken to increase sales productivity through
the tied agents channel. For instance, ING Life Korea launched a
new, simplified commission system in July linking compensation
more closely to production and rewarding persistency. ING also
sees significant potential for growing its KB Life franchise, ING’s
joint venture with Kookmin Bank, South Korea’s largest bank.
ING’s Malaysian operations performed well, with its growing
employee benefits product line maintaining its market leadership
position, its individual life business continuing to grow steadily
and the business reaping the fruits of the first full year of its
bancassurance partnership with Public Bank. New products under
the ‘Easi’ label were launched, offering comprehensive packages
specifically aimed at those looking to ensure that their retirement
income can support their future financial needs.
On 30 November 2009, ING closed the sale of its stakes in its life
insurance and wealth management businesses in Australia and
New Zealand. The transaction generated a net profit of EUR 339
million. The results of the divested units are excluded from the
underlying results in 2008 and 2009. The total result before tax
was EUR 543 million up EUR 756 million in 2009 from a loss of
EUR 213 million in 2008.
The underlying result before tax was EUR 220 million in 2009
compared with EUR –1 million in 2008. Excluding the discontinued
SPVA business In Japan, the underlying result before tax was
EUR 374 million in 2009 compared with EUR 237 million in 2008
resulting from improved investment income as the pressure on
earnings due to volatile market conditions subsided, and cost
containment efforts were continued throughout the year.
COUNTRY DEVELOPMENTS
In South Korea, underlying result before tax increased by 40.5%
to EUR 229 million in 2009 from EUR 163 million in 2008. 2009
results were mainly affected by market related impacts, comprising
negative revaluations on an equity derivative fund and credit linked
securities and impairments on fixed income securities. Premium
income decreased by 17.0% to EUR 2,731 million in 2009 from
EUR 3,291 million in 2008 due to a decline in new sales that was
partly offset by favourable in-force persistency. Operating expenses
decreased by 25.3%, due to restructuring and other cost
containment measures implemented throughout the year.
In Japan, the underlying loss before tax was EUR 46 million in 2009
from a loss of EUR 167 million in 2008. The SPVA business posted
a loss of EUR 154 million in 2009 compared to a loss of EUR 238
million in 2008. The 2009 result was negatively impacted by a
EUR 191 million adjustment on technical reserves in the fourth
quarter due to changes in variable annuity lapse assumptions.
Excluding the SPVA business, the underlying profit before tax for
our COLI business rose 52.1% to EUR 108 million from EUR 71
million in 2008 on higher premium income, up 5.3% from a year
ago, as well as improved investment results. Operating expenses
fell 19.2% on a 27.9% decline in operating expenses for SPVA
business. Operating expenses for our COLI business declined by
9.6% compared with a year ago.
In Malaysia, the underlying result before tax rose 10.3% to EUR 64
million in 2009 compared with EUR 58 million in 2008. The
increase in profits was driven by an improvement of investment
results, as well as a higher premium income, which rose 6.5%
to EUR 586 million in 2009 compared with EUR 550 in 2008 on
continued new business growth, particularly through its bank
distribution partner Public Bank. Operating expenses declined
2.0% despite strong new sales growth, on strict cost control.
In the Rest of Asia, the underlying loss before tax was EUR 27
million in 2009 compared with a loss of EUR 54 million in 2008.
All major business units contributed to this growth. In 2009, our
operations in Thailand broke even with an underlying result before
tax of EUR 1 million, compared with a loss of EUR 12 million in
2008, on strong new business growth which led to 26% higher
premium income coupled with strict expense control. In China,
India and Hong Kong, the underlying results before tax rose
on improved investment results and lower expenses.
ING Group Annual Report 2009 45