ING Direct 2013 Annual Report Download - page 338

Capital management continued
In May 2013, the US Insurance business was successfully separated and listed (VOYA) on the NYSE. ING Group has partly divested this
business in several tranches. In May ING Group sold approximately 28% shares in Voya and succesfully completed the secondary offering
of Voya with proceeds of EUR 644 million. On September 30th NN Group transferred its remaining shares of the US Insurance business to
ING Group. In October 2013, ING Group sold another tranche of approximately 15% shares in Voya with proceeds of EUR 788 million. At
the end of 2013, ING Group still owns 56.7% of the US Insurance business.
The proceeds from the Initial Public Offering of the US Insurance business and from the partial divestment of Sul América S.A. in Brazil to
GrupoSura and to the Larragoiti family were fully paid up to ING Group and used to reduce core debt at the Group.
NN Group reduced its financial leverage substantially, from 31% by the end of 2012 to 26% ultimo 2013. This was mainly driven by the
proceeds from the sale of its Asian Insurance business o.w. Hong Kong, Korea, Thailand and India, a capital injection from ING Group, the
transfer of the US business from NN Group to ING Group and dividends from operating companies, offset by capital injections into
operating companies, including a cash capital requirement for IPO purposes and holding company interest costs and expenses. In
September NN Group N.V. redeemed senior debt of EUR 1.3 billon and an intercompany loan from ING Group of EUR 0.7 billion. The
redemptions were funded by a new short-term intercompany loan of EUR 2 billion from ING Group, which was reduced to EUR 1 billion in
December following a capital injection from ING Group.
Nationale Nederlanden Bank N.V. (part of NN Group) acquired parts of Westland-Utrecht Bank (owned by ING Bank) per July 1st, 2013.
This acquisition was funded by a capital injection from ING Group and therefore not increasing financial leverage of NN Group. ING Bank
paid a dividend to ING Group to finance the capital injection into National Nederlanden Bank.
In order to comply with the obligations toward the European Commission, ING Group largely finalised the divestment of its Asian business,
US business and Brazilian business; the total proceeds from divestments in 2013 were EUR 4.1 billon.
Additionally, ING Group is in process of preparing NN Group for a separate listing in 2014. As part of those preparations to become a
stand-alone company, ING Group injected EUR 1 billion of capital to further strengthen capitalisation.
In 2013 ING Bank issued EUR 25.7 billion of debt. This amount is split in EUR 1.9 billion with an original tenor up to two years and EUR
23.8 billion with an original tenor of more than two years. This includes a USD 2 billion Lower Tier 2 that was executed by ING Bank
(including subsidiaries).
Furthermore, ING reduced the amount outstanding by executing Government Guaranteed Bond buy-backs, leading to a total net issuance
in 2013 of EUR 19.7 billion.
In 2012 ING Bank issued EUR 33 billion of debt with an original tenor of more than one year, compared with EUR 18 billion of long-term
debt maturing in the whole of 2012, successfully covering its 2012 funding needs and prefunding its 2013 requirements. ING Bank
(including subsidiaries) has EUR 21 billion of debt with an original tenor of more than one year maturing in 2013.
POLICIES
The activities of Capital Management are executed on the basis of established policies, guidelines and procedures. For the Capital Treasury
there are additional policies and limits that guide the management of the balance sheets and the execution of capital market transactions.
PROCESSES FOR MANAGING CAPITAL
In addition to measuring capital adequacy, Capital Management also ensures that sufficient capital is available through setting targets and
limits relevant to the above mentioned metrics for ING Group, ING Bank, and NN Group and ensuring adherence to the set limits and
targets through planning and executing capital management transactions. The ongoing assessment and monitoring of capital adequacy is
embedded in Capital Management’s capital planning process. Following the annual budgeting process, each year a capital plan is
prepared for the Group as a whole and each of its material businesses. This plan is updated on a quarterly basis and it is assessed to what
extent additional management actions are required. At all times maintaining sufficient financial flexibility should be preserved to meet
important financial objectives. At the foundation of the capital plan are ING’s risk appetite statements that determine target setting. These
constraints are being cascaded to the different businesses in line with our risk management strategy.
Important inputs to the capital planning and management process are provided by stress testing that is performed on a regular basis.
These stress tests focus on topical issues and the sensitivity of the Group’s capital position to certain risks. These analyses provide input
that help to steer strategic direction. Setting policies for recovery planning and resolution are a natural extension of ING’s capital
management policies and follow ING’s risk management framework seamlessly.
A key priority of Capital Management is to ensure that strong stand-alone companies are created for banking and insurance in preparation
of the separation. All operating entities need to stay adequately capitalised based on local regulatory and rating agency requirements and
interdependencies should be reduced to a minimum. The entities should also be able to access capital markets independently.
336 ING Group Annual Report 2013