ING Direct 2013 Annual Report Download - page 342

Capital management continued
Capital base and financial leverage of NN Group
2013 2012 (4)
Shareholder’s equity (parent) 14,227 26,423
Revaluation reserve debt securities –2,804 –9,282
Revaluation reserve crediting to life policyholders 2,579 5,673
Revaluation reserve cash flow hedge –2,726 –3,548
Goodwill –264 –351
Minority interests 68 217
Capital base for financial leverage (a) 11,080 19,132
Hybrids issued by ING (1) 2,401 2,451
Hybrids issued by NN Group (2) 491 496
Total hybrids (b) 2,892 2,947
External debt issued by NN Group N.V. 694
External debt issued by US Holding companies 2,307
Group debt 1,000 1,311
Other net financial debt (3) 1,457
Total financial debt (c) 1,000 5,769
Total financial leverage (d) = (b) + (c) 3,892 8,716
Financial leverage ratio (e)v= (d) / {(a) + (d)} 26% 31%
(1) Hybrids issued by ING Group at amortised cost value consistent with IFRS carrying value.
(2) Hybrids issued by NN Group at amortised cost value consistent with IFRS carrying value.
(3) Includes net internal borrowings from the operating subsidiaries, offset by net current assets of the holding companies in excess of a cash capital
requirement.
(4) The Capital base for financial leverage as reported in the 2012 Annual Report of EUR 20,007 million is restated due to the change in accounting policy for
employee benefits as disclosed in the section ‘Changes in accounting policies in 2013’ on page 98.
For NN Group in total, the capital base for financial leverage purposes is fully based on IFRS accounting, whereas the IGD capital is
corrected for some regulatory adjustments. The table below provides a reconciliation.
Reconcilation between IGD capital and Capital base for financial leverage
2013 2012
IGD capital 11,253 22,446
Hybrids issued by ING Group –2,394 –2,438
Hybrids issued by NN Group –476
Revaluation reserve debt securities –2,804 –9,282
Revaluation reserve crediting to life policyholders 2,579 5,673
Revaluation reserve adjustments 2,446 3,209
Capital base for financial leverage 11,080 19,132
The table below provides the capital ratios for the larger Insurance subsidiaries according to local regulatory capital frameworks:
Local Capital ratios for the larger Insurance operations
2013 (2) 2012 (1)
NN Life 222% 191%
ING Re Netherlands 1,314% 320%
ING Life Japan 1,366% 989%
(1) Comparable capital ratio for ING Life Japan is at March 31st, 2013, as the financial year for ING Life Japan runs from April 1st until March 31st.
(2) The 2013 capital ratios are not final until filed with the regulators.
NN Life’s capitalisation improved due to a EUR 0.6 billion capital injection, higher performance of the equity portfolio, lower credit spreads,
but offset by the change in valuation curve from ECB AAA curve to DNB Swap curve. Following the subordinated loan to NN Life and the
impact of the pension agreement in the first quarter of 2014, the estimated pro-forma solvency I ratio for NN Life is 234%.
The capital ratio of ING Re increased mainly due to a capital injection of EUR 0.6 billion to strengthen its capitalisation from an economic
basis, favourable market developments and a decrease in required capital. Required capital decreased mainly due to lower value of the
guarantees for the reinsured Japan VA business and the termination of the Stop-Loss contract with Poland.
340 ING Group Annual Report 2013