Mixed interim results from ING
Group saw banking surge ahead to produce its best results since the
onset of the global financial crisis, while insurance operations
disappointed. Central to ING’s insurance woes is its US legacy
variable annuity business, which remains subject to the whims of
the equity market.
ING Group has reported making progress with the daunting
task of dismantling its sprawling bancassurance empire, a process
that began almost a year ago as part of an agreement with its major
creditor, the Dutch government.
Under the agreement, ING will
dispose of all its insurance operations – the world’s sixth-largest
– using options including sales, initial public offers, or
combinations of these over a period of four years.
Commenting on second-quarter 2010
results, ING CEO Jan Hommen said: “We continue to work towards the
operational separation of our banking and insurance operations,
with the aim to have the businesses operating on an arm’s-length,
stand-alone basis by the end of this year.”
Indicative of the scale of the
task, Hommen said ING has 1,100 projects underway, with separation
costs in 2010 estimated at between €110m ($140m) and €150m.
Projects already finalised in 2010 include splitting the legal
entity for employees in the Netherlands, physical separation of
office space and commercial distribution agreements between ING’s
banking and insurance units.
Insurance divestments
completed in 2009 and in the first half of 2010 were:
In addition, Swiss and Asian
private banking operations were sold. Proceeds of insurance sales
totalled €2.76bn and banking sales €1.44bn. Capital of €3.1bn was
released.
Mixed results
ING’s banking operations delivered
a solid performance in the second quarter of 2010, lifting
underlying profit before tax to €1.61bn from €1.28bn in the first
quarter of the year and a loss of €186m in the second quarter of
2009.
operations were disappointing in
the second quarter of 2010, delivering a €115m underlying loss
before tax compared to profits of €269m in the previous quarter,
€242m in the second quarter of 2009 and a record €1.97bn in the
second quarter of 2007. The worst damage in the second quarter of
2010 was done by US operations, which recorded a €472m loss.
Hommen attributed poor
second-quarter 2010 results to a fall in equity markets. This had a
particularly adverse impact on US legacy variable annuity business,
which sustained an underlying €610m loss before tax. He was also
critical of performance of insurance operations overall, warning
that they would need to show “more progress” to meet 2013
targets.
Insurance operations produced an
underlying 2% return on equity in the first half of 2010 compared
with banking operations’ 16.8%. At the end of June 2010, equity
attributable to insurance operations was €20.72bn out of a total of
€41.62bn.
Driven by primarily by strong Asian
growth, new life business on an annual premium equivalent basis
totalled €1.25bn in the second quarter of 2010, up 23.2% compared
with the same period in 2009. Gross premium income in the second
quarter of 2010 fell 5.5% compared with same period in 2009 to
€6.80bn of which €317m came from general insurance business.
At the end of June 2010 ING had 35,158 full-time insurance
employees and 70,673 full-time bank employees.
