ING Direct 2011 Annual Report Download - page 324

PLAN ASSETS
Comprise assets held by a long-term employee benefit fund and
qualifying insurance policies. Assets held by a long-term employee
benefit fund are assets (other than non-transferable financial
instruments issued by the reporting enterprise) that:
• are held by an entity (a fund) that is legally separate from the
reporting enterprise and exists solely to pay or fund employee
benefits; and
• are available to be used only to pay or fund employee benefits,
are not available to the reporting enterprise’s own creditors
(even in bankruptcy), and cannot be returned to the reporting
enterprise, unless either the remaining assets of the fund are
sufficient to meet all the related employee benefit obligations of
the plan or the reporting enterprise or the assets are returned to
the reporting enterprise to reimburse it for employee benefits
already paid.
A qualifying insurance policy is an insurance policy issued by an
insurer that is not a related party of the reporting enterprise, if
the proceeds of the policy:
• can be used only to pay or fund employee benefits under a
defined benefit plan; and
• are not available to the reporting enterprise’s own creditors
(even in bankruptcy) and cannot be paid to the reporting
enterprise, unless either the proceeds represent surplus assets
that are not needed for the policy to meet all the related
employee benefit obligations or the proceeds are returned to
the reporting enterprise to reimburse it for employee benefits
already paid.
POST-EMPLOYMENT BENEFIT PLANS
Formal or informal arrangements under which a company provides
post-employment benefits for one or more employees. Post-
employment benefits are employee benefits other than termination
benefits and equity compensation benefits, which are payable after
the completion of employment.
PREFERENCE SHARE
Similar to an ordinary share but carries certain preferential rights.
These rights usually concern the guarantee of a fixed (cumulative)
return to the shareholder or a guaranteed return on the investment.
PREMIUMS EARNED
The portion of net premiums written in current and past periods
which applies to the expired portion of the policy period, calculated
by subtracting movements in unearned premium reserves from
net premiums.
PRE-SETTLEMENT RISK
Pre-settlement risk arises when a counterparty defaults on a
transaction before settlement and ING Group has to replace the
contract by a trade with another counterparty at the then prevailing
(possibly unfavourable) market price. The pre-settlement risk
(potential or expected risk) is the cost of ING Group replacing a
trade in the market. This credit risk category is associated with
dealing room products such as options, swaps, and securities
financing transactions. Where there is a mutual exchange of value,
the amount of outstanding is generally based on the replacement
value (mark-to-market) plus potential future volatility concept, using
an historical 7 year time horizon and a 99% confidence level.
PRIVATE LOAN
Loans to governments, other public bodies, public utilities,
corporations, other institutions or individuals with a loan
agreement as the only instrument of title.
PRIVATE PLACEMENT
A placement in which newly issued shares or debentures come
into possession of a limited group of subscribers who are prepared
to buy the new securities.
PROJECTED UNIT CREDIT METHOD
An actuarial valuation method that considers each period of service
as giving rise to an additional unit of benefit entitlement and
measures each unit separately to build up the final obligation.
QUALIFYING ASSET (WITHIN THE MEANING
OF BORROWING COSTS)
An asset that necessarily takes a substantial period of time to get
ready for its intended use or sale.
RECOGNITION
The process of incorporating in the balance sheet or profit and loss
account an item that meets the definition of an element and
satisfies the following criteria for recognition:
• it is probable that any future economic benefit associated with
the item will flow to or from the enterprise; and
• the item has a cost or value that can be measured reliably.
RECOVERABLE AMOUNT
The higher of an asset’s net selling price and its value in use.
REDEMPTION VALUE
With respect to investments in fixed-interest securities, the amount
payable on the maturity date.
REINSURANCE
The practice whereby one party, called the reinsurer, in
consideration for a premium paid to him, agrees to indemnify
another party, called the reinsured or ceding company, for part
or all of the liability assumed by the reinsured under a contract
or contracts of insurance which the reinsured has issued. The
reinsured may also be referred to as the original or primary
insurer, the direct writing company, or the ceding company.
RETURN ON EQUITY (ROE)
The return on equity is the net result as percentage of the
averageequity.
RISK ADJUSTED RETURN ON CAPITAL (RAROC)
A performance indicator that measures revenues in the perspective
of the risks that had to be taken to obtain that revenue. RAROC is
calculated by dividing the risk-adjusted-return by economic capital.
In the RAROC calculation, the actual credit-risk provisioning is
replaced by statistically expected losses reflecting the average
credit losses over the entire economic cycle.
Financial glossary continued
322 ING Group Annual Report 2011