ING Direct 2011 Annual Report Download - page 206

Notes to the consolidated annual accounts of ING Group continued
Operating segments Banking
2009
Retail
Netherlands Retail Belgium ING Direct Retail CE Retail Asia
Commercial
Banking
ING Real
Estate
Corporate
Line Banking Total Banking
Underlying income
– Net interest result 3,303 1,619 3,136 675 110 3,513 428 –156 12,628
– Commission income 528 339 167 261 43 811 6–6 2,149
– Total investment and other
income 39 100 –1,541 –76 43 554 –654 –206 –1,741
Total underlying income 3,870 2,058 1,762 860 196 4,878 –220 –368 13,036
Underlying expenditure
– Operating expenses 2,477 1,287 1,652 660 132 1,817 162 259 8,446
– Additions to loan
lossprovision 527 200 765 116 39 968 239 2,854
– Other impairments * –2 –7 11 429 36 467
Total underlying expenses 3,002 1,480 2,428 776 171 2,785 830 295 11,767
Underlying result before
taxation 868 578 –666 84 25 2,093 –1,050 –663 1,269
Taxation 229 79 –252 29 5373 –216 –182 65
Minority interests 2 5 10 30 29 76
Underlying net result 639 497 –414 50 10 1,690 –863 –481 1,128
* Analysed as a part of operating expenses.
d. Insurance activities
With regard to insurance activities, ING Group analyses, as of 2011, the underlying result through a margin analysis, which includes
thefollowing components:
• Operating result; and
• Non-operating items.
Both are comprised of various sub-components. The total of operating result and non-operating items (gains/losses and impairments,
revaluations and market & other impacts) equals underlying result before tax.
To determine the operating result the following non-operating items are adjusted in the reported underlying result before tax:
• Realised capital gains/losses and impairments on debt and equity securities;
• Revaluations on assets marked to market through the P&L; and
• Other non-operating impacts, e.g. provision for guarantees on separate account pension contracts, equity related and other DAC
unlocking, VA/FIA Guaranteed Benefit Reserve Unlocking and DAC offset on gains/losses on debt securities.
The operating result for the life insurance business is also broken down into expenses and the following sources of income:
• Investment margin which includes the spread between investment income earned and interest credited to insurance liabilities
(excludingmarket impacts but including dividends and coupons);
• Fees and premium-based revenues which includes the portion of life insurance premiums available to cover expenses and profit,
feesondeposits and fee income on assets under management (net of guaranteed benefit costs in the United States);
• Technical margin which includes the margin between costs charged for benefits and incurred benefit costs and it includes mortality,
morbidity and surrender results; and
• Non-modelled which is not significant and includes parts of the business for which no margins are provided.
As of the fourth quarter of 2010, the Legacy Variable Annuity segment in the US is reported and analysed separately from the other US
business in the internal management reporting. Therefore as of 1 October 2010 ING reports the Insurance US Legacy VA business as a
separate segment to improve transparency and ongoing business. ING Group’s accounting policy for reserve adequacy as set out in the
Accounting policies for the consolidated annual accounts of ING Group requires each segment to be adequate at the 50% confidence level.
The separation of the Legacy VA business into a separate segment triggered a charge in the fourth quarter of 2010 to bring reserve adequacy
on the new Insurance US Closed Block VA segment to the 50% level. This charge is reflected as a DAC write-down of EUR 975 million before
tax. For 2011 the impact of the assumption adjustments includes a charge of EUR 177 million to restore the reserve adequacy of the
Insurance US Closed Block VA segment to the 50% level at 31 December 2011. Reference is made to Note 43 ‘Underwriting expenditure’.
204 ING Group Annual Report 2011