SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For May 12, 2005
ING GROEP N.V.
Amstelveenseweg 500
1081-KL Amsterdam
The Netherlands
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form 20-F X Form 40-F
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Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
Page 1 of 46
This Report contains a copy of the following:
(1) The Press Release issued on May 12, 2005
Page 2 of 46
[ING LOGO]
Amsterdam o 12 May 2005
ING GROUP FIRST-QUARTER NET PROFIT RISES 72% TO EUR 1,941 MILLION
ALL BUSINESS LINES CONTRIBUTE TO PROFIT GROWTH AND VALUE CREATION
AS RETURNS INCREASE
o NET PROFIT PER SHARE INCREASES TO EUR 0.89 FROM EUR 0.54 IN FIRST QUARTER 2004
o PROFIT BEFORE TAX EXCLUDING IMPACT OF DIVESTMENTS RISES 28.9% TO EUR 2,185
MILLION
o INSURANCE PROFIT BEFORE TAX EXCLUDING DIVESTMENTS RISES 44.5%, DRIVEN
BY ALL REGIONS
o BANKING PROFIT BEFORE TAX EXCLUDING DIVESTMENTS RISES 18.3%, LED BY ING
DIRECT
o RAROC BANKING RISES TO 19.8% EXCLUDING DIVESTMENTS, IRR INSURANCE RISES TO
12.6%
o TOTAL OPERATING EXPENSES DECLINE EUR 398 MILLION COMPARED WITH FOURTH
QUARTER
o IMPACT FROM INTERNATIONAL FINANCIAL REPORTING STANDARDS IS LIMITED
CHAIRMAN'S STATEMENT
"ING Group made a strong start to the year. All six business lines contributed
to the sharp increase in first-quarter net profit, which was supported by a
lower tax rate due to tax-exempt gains on divestments and private equity," said
Michel Tilmant, Chairman of the Executive Board. "We saw healthy progress at the
Group's three growth engines. ING Direct added one million new customers and
attracted more than EUR 15 billion in funds entrusted in the first quarter
alone. The life insurance businesses in developing markets posted a 36% increase
in the value of new business, and Asia/Pacific accounted for more than half of
the Group's total. Assets in the pensions and retirement savings business also
continued to grow."
"All three banking business lines performed above ING's target for risk-adjusted
return on capital, and the life insurance businesses posted a 20% increase in
the value of new business by focusing on the most profitable products and market
segments."
"Our operating expenses declined from the level in the fourth quarter. However
expenses remain a key point of attention for management, and we will continue to
look for ways to reduce costs and improve efficiency to preserve our competitive
position, particularly in mature markets. At Nationale-Nederlanden we plan to
reduce the annual cost base by EUR 235 million by 2007 to bring efficiency into
line with the industry benchmark. That will lead to a reduction of the workforce
by 1,000 positions by the end of 2007 as well as a reduction in third-party
staff as backlogs diminish."
"In the first quarter we continued to benefit from favourable market conditions.
Risk costs in banking were historically low, partly due to releases of
provisions in Wholesale Banking, supported by improvements in risk management as
well as favourable market conditions. Our life insurance businesses were helped
by investment gains, while the non-life insurance business continued to benefit
from exceptionally low claims, particularly in Canada. Looking forward to the
full year, we are confident about the year ahead, although market circumstances
have started to deteriorate and have become more challenging recently."
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ALL FIGURES COMPARE FIRST-QUARTER 2005 WITH FIRST-QUARTER 2004
UNLESS OTHERWISE STATED. COMPARABLE FIGURES FOR 2004 EXCLUDE IAS 32,
39 & IFRS 4. SEE APPENDIX 7 FOR ACCOUNTING CHANGES.
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Page 3 of 46
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PRESS CONFERENCE CALL: 12 May, 9:30 a.m. CET.
Listen only: NL +31 20 796 5001 UK +44 20 7154 2666
ANALYST PRESENTATION: 12 May, 11:15 a.m. CET at ING House, Amsterdam.
Presentation & webcast www.ing.com
ANALYST CONFERENCE CALL: 12 May, 4 p.m. CET.
Listen only: NL +31 45 631 6910 UK +44 20 8400 6356 US +1 303 262 2130
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MEDIA RELATIONS +31 20 541 6522 INVESTOR RELATIONS +31 20 541 5571
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Page 4 of 46
1.1 ING GROUP
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TABLE 1. ING GROUP KEY FIGURES
FIRST QUARTER
In EUR million 2005 2004 Change
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Profit before tax excluding divestments:
- Insurance Europe 505 352 43.5%
- Insurance Americas 444 335 32.5%
- Insurance Asia/Pacific 171 112 52.7%
- Other(1) -127 -112
----- -----
INSURANCE PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 993 687 44.5%
- Wholesale Banking 725 661 9.7%
- Retail Banking 394 325 21.2%
- ING Direct 127 78 62.8%
- Other(2) -54 -56
----- -----
BANKING PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 1,192 1,008 18.3%
TOTAL PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 2,185 1,695 28.9%
Gains/losses on divestments 376 -84
Profit before tax from divested units 14 125
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TOTAL PROFIT BEFORE TAX 2,575 1,736 48.3%
Taxation 572 529 8.1%
Third-party interests 62 77 -19.5%
----- -----
NET PROFIT 1,941 1,130 71.8%
- of which Insurance 730 467 56.3%
- of which Banking 1,211 663 82.7%
NET PROFIT PER SHARE (in EUR) 0.89 0.54 64.8%
KEY FIGURES
Net return on capital and reserves(3) 26.4% 25.4%
Debt/equity ratio(4) 9.0% 10.9%
Total staff (average FTEs) 114,700 113,100 1.4%
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1. Other insurance results includes the currency hedge result in 2004, interest on core debt and
results on reinsurance activities
2. Other banking results consist mainly of interest expenses that are not allocated to the
different business lines
3. 2004 figures are full-year on ING GAAP basis; 2005 figures exclude revaluation reserves for
available-for-sale securities
4. Comparable figure is based on IFRS at 1 January 2005
FIRST-QUARTER PROFIT
Net profit increased 71.8% to EUR 1,941 million in the first quarter of 2005, up
from EUR 1,130 million in the same period last year, driven by strong growth
across all business lines. Net profit from insurance rose 56.3% to EUR 730
million, driven by strong profit growth from the life insurance businesses in
Asia, the U.S. and the Netherlands, as well as continued strong underwriting
results from non-life insurance in Canada. Net profit from banking rose 82.7% to
EUR 1,211 million, driven by the continued growth of ING Direct and lower risk
costs particularly in Wholesale Banking, as well as realised gains on
divestments in the first quarter of 2005. Net profit per share rose 64.8% to EUR
0.89 from EUR 0.54 in the first quarter of 2004.
Total profit before tax increased 48.3% to EUR 2,575 million. Realised gains on
divestments added EUR 376 million to profit before tax in the first quarter of
2005 compared with a loss of EUR 84 million from divestments in the first
quarter of 2004. The divested units contributed a total of EUR 125 million to
profit before tax in the first quarter of 2004 and EUR 14 million in the first
quarter this year. Excluding those impacts, profit before tax increased 28.9% to
EUR 2,185 million. (See Appendix 2 for details of the impact from divestments.)
Insurance profit before tax excluding divestments rose 44.5% to EUR 993 million,
with all three regions reporting strong increases. Insurance Europe posted an
increase of 43.5% to EUR 505 million, lifted by higher investment gains in the
Netherlands as well as continued growth in Central Europe. Insurance Americas
posted a 32.5% increase to EUR 444 million, driven by continued strong
underwriting results
Page 5 of 46
at the Canadian non-life insurance business as well as higher investment and fee
income at the U.S. life business. Insurance Asia/Pacific posted a 52.7%
increase, driven by strong growth from life insurance in Australia and South
Korea.
Banking profit before tax excluding divestments increased 18.3% to EUR 1,192
million, bolstered by higher results from all three business lines. Wholesale
Banking posted a 9.7% increase to EUR 725 million, due to the release of some
debtor provisions. Retail Banking rose 21.2% to EUR 394 million, driven by
higher results from the Netherlands and Belgium. ING Direct posted a 62.8%
increase in profit before tax to EUR 127 million, lifted by strong growth in
funds entrusted and mortgage lending.
TAX RATE
The effective tax rate decreased to 22.2% in the first three months of 2005 from
30.5% in the first quarter of 2004, due to a lower nominal tax rate in the
Netherlands as well as high tax-exempt realised gains on divestments and private
equity. The effective tax rates for insurance and banking are both within the
expected range for 2005 of 20% to 25%.
CURRENCY IMPACT
The decline of most currencies against the euro had a negative impact of EUR 11
million. Starting from 2005, ING no longer has hedges in place for the U.S.
dollar. In the first quarter of 2004, the U.S. dollar hedge resulted in a net
gain of EUR 52 million. Including the gain on the dollar hedge last year, the
total negative currency impact on the comparison for first-quarter net profit
was EUR 63 million.
IMPACT OF IFRS
ING Group adopted International Financial Reporting Standards (IFRS) as endorsed
by the European Union as of 2005. The 2004 comparatives have been restated to
comply with IFRS. However, as permitted by IFRS 1, ING Group has not restated
the 2004 comparatives for the impact of IAS 32, 39 and IFRS 4. Accordingly,
comparative information with respect to financial instruments and insurance
contracts is prepared under ING Group's previous accounting policies (ING GAAP).
In the first quarter of 2005, IAS 32, 39, IFRS 4 and adjustments to the fair
value of real estate had a positive impact on net profit of approximately EUR 90
million. For the insurance operations, the standards had a positive net impact
of approximately EUR 60 million, mainly due to the revaluation of non-trading
derivatives, adjustments to the fair value of real estate, prepayment penalties
on mortgages, and realised gains on bonds. In the banking operations, the impact
of IAS 32 and 39 was approximately EUR 30 million after tax, mainly due to the
revaluation of non-trading derivatives, which was partly offset by amortised
results on fixed-interest securities in 2004.
FIRST QUARTER VS. FOURTH QUARTER
Compared with the fourth quarter of 2004, net profit increased 37.9% from EUR
1,408 million to EUR 1,941 million. Total operating expenses declined by a total
of EUR 398 million in the first quarter from a peak in the fourth, with both
banking and insurance showing improvements. Net profit from insurance declined
16.6% to EUR 730 million, due to gains on divestments in the fourth quarter of
2004. Insurance profit before tax excluding divestments rose 4.9% to EUR 993
million from EUR 947 million in the previous quarter, driven by higher life
profits in the Netherlands, Central Europe and Asia. Net profit from banking
more than doubled to EUR 1,211 million from EUR 533 million in the fourth
quarter of 2004, partly due to gains on divestments in the first quarter and
losses on divestments in the fourth quarter. Banking profit before tax excluding
divestments rose 47.7% to EUR 1,192 million from EUR 807 million, due to higher
income, particularly from ING Direct and financial markets, lower risk costs and
a return to lower expenses after a peak in the fourth quarter of 2004.
Page 6 of 46
1.2 BALANCE SHEET & CAPITAL AND RESERVES
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TABLE 2. KEY BALANCE SHEET FIGURES
31 March 1 January Q1
In EUR billion 2005 2005 Change
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CAPITAL AND RESERVES 31.3 28.3 10.6%
- insurance operations 16.8 15.3 9.8%
- banking operations 18.4 17.2 7.0%
- eliminations(1) -3.9 -4.2
TOTAL ASSETS 1,036.5 964.5 7.5%
NET RETURN ON CAPITAL AND RESERVES(2) 26.4% 25.4%
- insurance operations 21.0% 27.0%
- banking operations 23.9% 15.8%
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1. own shares, subordinated loans, third-party interests, debenture loans and other
eliminations
2. as per 31 December 2004 under ING GAAP standards, March 2005 figures are annualised
CAPITAL AND RESERVES
On 31 March 2005, ING's capital and reserves amounted to EUR 31.3 billion, an
increase of EUR 3.0 billion, or 10.6%, compared with 1 January 2005. Net profit
from the first three months of 2005 added EUR 1.9 billion to capital and
reserves, a transfer from insurance liabilities added EUR 0.3 billion as a
result of deferred profit sharing, exchange rate differences added EUR 0.6
billion and other changes added EUR 0.4 billion. Unrealised revaluations on
equities and debt securities had a negative impact of EUR 0.2 billion.
CAPITAL RATIOS
The debt/equity ratio of ING Groep N.V. improved to 9.0% from 10.9% at 1 January
2005. The improvement was caused by a EUR 3.7 billion increase in the Group
capital base, excluding third-party interests, due to retained earnings and
revaluations as well as a EUR 0.3 billion decrease in core debt. The capital
coverage ratio for ING's insurance operations increased to 208% of regulatory
requirements at the end of March compared with 201% at 1 January 2005. The
Tier-1 ratio of ING Bank N.V. stood at 7.21% on 31 March 2005, up from 7.00% on
1 January 2005. The solvency ratio (BIS ratio) for the bank improved to 10.76%
from 10.59% on 1 January 2005. Compared with 1 January 2005, total risk-weighted
assets rose by EUR 13.3 billion, or 4.9%, to EUR 287.4 billion, driven by growth
in all three banking business lines.
RETURN ON CAPITAL AND RESERVES
The net return on capital and reserves increased to 26.4% in the first three
months of 2005 from 25.4% for full-year 2004. The net return on capital and
reserves of the insurance operations was 21.0% in the first three months 2005
compared with 27.0% for full-year 2004, while the net return on capital and
reserves from banking rose to 23.9% from 15.8%. The net return on capital and
reserves for 2004 is based on net profit and average capital and reserves under
Dutch GAAP, while the 2005 figures are based on IFRS.
ASSETS UNDER MANAGEMENT
Assets under management increased 6.0% to EUR 470.1 billion in the first quarter
from EUR 443.4 billion at the end of 2004, excluding the impact of divestments.
The increase was driven by a net inflow of EUR 13.3 billion, the impact of a
decline in the euro in the first quarter of EUR 12.1 billion, and higher stock
markets, which added EUR 0.5 billion. Including the impact of divested units,
which had a combined EUR 47.7 billion in funds under management, and a
restatement due in part to IFRS, total assets under management decreased by
4.4%.
Page 7 of 46
1.3 INSURANCE OPERATIONS
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TABLE 3. ING GROUP: INSURANCE PROFIT & LOSS ACCOUNT
FIRST QUARTER
In EUR million 2005 2004 Change
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Life premium income 9,265 9,234 0.3%
Non-life premium income 1,898 2,132 -11.0%
------ ------
TOTAL PREMIUM INCOME 11,163 11,366 -1.8%
Income from investments 2,215 2,117 4.6%
Commission income 344 303 13.5%
Other income 278 146 90.4%
------ ------
TOTAL INCOME 14,000 13,932 0.5%
Underwriting expenditure 11,508 11,786 -2.4%
Other interest expenses 270 285 -5.3%
Operating expenses 1,197 1,133 5.6%
Impairments/investment losses 3 12 -75.0%
------ ------
TOTAL EXPENDITURE 12,978 13,216 -1.8%
TOTAL PROFIT BEFORE TAX 1,022 716 42.7%
- of which life insurance 692 474 46.0%
- of which non-life insurance 330 242 36.4%
Taxation 246 224 9.8%
Third-party interests 46 25 84.0%
------ ------
NET PROFIT 730 467 56.3%
IMPACT FROM DIVESTMENTS
Total profit before tax 1,022 716 42.7%
Gains/losses on divestments 29
Profit before tax from divested units 29
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PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 993 687 44.5%
- of which life insurance 682 465 46.7%
- of which non-life insurance 311 222 40.1%
KEY FIGURES
Value of new life business 188 157 19.7%
Internal rate of return 12.6% 11.7%
Combined ratio non-life business 88% 89%
Net return on capital and reserves(1) 21.0% 27.0%
Staff (average FTEs) 51,100 49,600 3.0%
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1. 2004 figures are full-year on ING GAAP basis
FIRST-QUARTER PROFIT
Net profit from insurance increased 56.3% to EUR 730 million, supported by
higher results from both life and non-life insurance. The life insurance
activities in the U.S., Asia and Australia benefited from strong sales and asset
growth, while the Dutch life business was bolstered by higher investment and
other income, including realised gains on private equity. The non-life insurance
activities continued to benefit from strong underwriting experience,
particularly lower claims in Canada. The effective tax rate was reduced to 24.1%
from 31.3% in the first quarter last year as a result of a decrease in the
nominal tax rate and non-taxable gains on private equity in the Netherlands.
Total profit before tax rose 42.7% to EUR 1,022 million. Pre-tax profit in the
first quarter of 2005 includes EUR 29 million in realised gains from the sale of
shares in ING Canada and the sale of Freeler in the Netherlands. Divested
insurance businesses contributed EUR 29 million to profit before tax in the
first quarter last year. Excluding the impact of divestments, profit before tax
from insurance increased 44.5% to EUR 993 million.
Page 8 of 46
Profit before tax excluding divestments from life insurance rose 46.7% to EUR
682 million, driven by strong results in the U.S., Asia/Pacific and the
Netherlands. Life results in the U.S. were driven by higher assets under
management, due to strong sales and positive equity market developments in 2004,
while profit from the life businesses in Asia/Pacific continued to grow,
particularly in Australia and South Korea, due to strong sales. In the
Netherlands, life results increased mainly due to higher private equity results
and adjustments to fair value of real estate and derivatives, despite higher
costs.
Profit before tax excluding divestments from non-life insurance rose 40.1% to
EUR 311 million, boosted by strong results in Canada and the Netherlands. ING
Canada continued to benefit from a favourable claims environment as well as the
consolidation of the portfolio acquired from Allianz Canada in 2004. The
combined ratio of the non-life businesses improved to 88% in the first quarter
of 2005 from 89% in the same period last year, due to a further improvement in
the claims ratio while the expense ratio deteriorated.
Total premium income declined 1.8% to EUR 11,163 million, due to the impact of
divestments. Divested units contributed EUR 213 million to premium income in the
first quarter of 2004. Under IFRS 4 some products were reclassified from life
insurance to investment contracts, notably in Australia, Belgium and the U.S.
Excluding divestments, currency effects and reclassifications under IFRS, total
premiums increased 8.6%, led by an 11.3% increase in life premiums. Non-life
premiums declined 11.0% to EUR 1,898 million, mainly due to divestments in
Australia and the Netherlands. Excluding divestments and currency effects,
non-life premiums decreased 3.9%, due in part to a decline in Mexico.
Investment income increased 4.6%, due in part to an adjustment to the fair value
of real estate as well as an increase in interest income in the U.S. Other
income rose sharply primarily because of higher profits from associates and
gains on private equity. Impairments/investment losses amounted to just EUR 3
million in the first quarter of 2005, compared with EUR 12 million in the first
quarter of 2004.
Operating expenses from the insurance operations increased 5.6% to EUR 1,197
million. Excluding the impact of divestments, operating expenses increased 7.7%,
due to higher costs in all business lines, but particularly in the Netherlands.
Operating expenses in the Americas increased due to the integration of Allianz
Canada, while operating expenses in Asia/Pacific increased due to higher sales
volumes and customer service improvements. Expenses as a percentage of assets
under management for investment products deteriorated to 91 basis points from 88
basis points in the first quarter last year. Expenses as a percentage of
premiums for life products increased from 12.01% to 12.51% in the first quarter
2005. The expense ratio for non-life insurance was 25%, up from 22% in the first
quarter last year.
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TABLE 4. NEW LIFE INSURANCE PRODUCTION AND VALUE BY REGION
In EUR million NEW PRODUCTION 1Q 2005 NEW PRODUCTION 1Q 2004
Value of Value of
Annual Single New Annual Single New
premium Premium Business IRR Premium Premium Business IRR
-----------------------------------------------------------------------------------------------------------------------
Insurance Europe 134 743 46 12.9% 91 719 43 14.7%
Insurance Americas 403 3,237 43 10.5% 485 4,560 42 9.7%
Insurance Asia/Pacific 308 1,637 99 15.2% 299 606 72 14.0%
----- ----- ----- ----- ----- ----- ----- -----
TOTAL 845 5,617 188 12.6% 875 5,885 157 11.7%
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VALUE OF NEW BUSINESS
The value of new life insurance business written by the insurance operations
increased 19.7% to EUR 188 million in the first quarter of 2005, up from EUR 157
million in the same period last year, driven by strong sales, particularly in
Asia and Central Europe. Developing markets world-wide contributed a total of
EUR 76 million to the value of new business, up 35.7% from the first quarter
last year. The value of new business written by Insurance Asia/Pacific rose
37.5% to EUR 99 million, accounting for more than
Page 9 of 46
half of the total new business value. Insurance Europe posted a 7.0% increase to
EUR 46 million, lifted by higher sales in the Netherlands and Central Europe.
The value of new business written by Insurance Americas increased to EUR 43
million from EUR 42 million, as the impact of margin increases was partially
offset by a lower U.S. dollar, the decision to exit the individual life
reinsurance business, and lower sales in Latin America. The internal rate of
return on new business production increased to 12.6% from 11.7%, lifted by
improvements in the Americas and Asia/Pacific due to pricing discipline. IRRs
are adjusted to reflect expected currency movements relative to the euro.
1.4 BANKING OPERATIONS
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TABLE 5. ING GROUP: BANKING PROFIT & LOSS ACCOUNT
FIRST QUARTER
In EUR million 2005 2004 Change
----------------------------------------------------------------------------------------------
Interest result 2,163 2,134 1.4%
Investment income 499 84 494.0%
Commission income 596 710 -16.1%
Other income 420 354 18.6%
----- -----
TOTAL INCOME 3,678 3,282 12.1%
OPERATING EXPENSES 2,129 2,125 0.2%
----- -----
Gross result 1,549 1,157 33.9%
Addition to provisions for loan losses - 4 137 -102.9%
----- -----
TOTAL PROFIT BEFORE TAX 1,553 1,020 52.3%
Taxation 326 305 6.9%
Third-party interests 16 52 -69.2%
----- -----
NET PROFIT 1,211 663 82.7%
IMPACT FROM DIVESTMENTS
Total profit before tax 1,553 1,020 52.3%
Gains/losses on divestments 347 -84
Profit before tax from divested units 14 96
----- -----
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 1,192 1,008 18.3%
KEY FIGURES
Cost/income ratio 57.9% 64.7%
RAROC (pre-tax) 30.2% 25.9%
RAROC (after tax) 23.9% 18.2%
Total risk-weighted assets(1) (in EUR billion) 287.4 274.1 4.9%
Addition to provisions for loan losses in basis points
of average credit-risk-weighted assets -1 22
Staff (average FTEs) 63,600 63,500 0.2%
----------------------------------------------------------------------------------------------
1. 31 March 2005 compared with year-end 2004
FIRST QUARTER PROFIT
Net profit from banking rose 82.7% to EUR 1,211 million, driven by higher
income, a sharp decline in risk costs, and gains on divestments. The effective
tax rate of the banking operations declined to 21.0% from 29.9% in the first
quarter of 2004, mainly due to non-taxable gains on divestments. Total profit
before tax rose 52.3% to EUR 1,553 million, including EUR 347 million in gains
on the sale of Baring Asset Management and the sale of a 12.77% stake in ING
Bank Slaski, as well as EUR 14 million in profit from divested units. The first
quarter of 2004 included a loss before tax of EUR 84 million on the sale of the
Asian cash equities business, as well as EUR 96 million in profit before tax
from divested units. Excluding divestments, profit before tax rose 18.3% to EUR
1,192 million from EUR 1,008 million. All three banking business lines
contributed to the increase.
Total income from banking rose 12.1% to EUR 3,678 million, while excluding
divestments income rose 6.2%. The interest result, excluding the impact of
divestments, increased 5.2% to EUR 2,158 million, driven by a higher average
balance sheet total, mainly due to the continued strong growth of ING Direct.
The implementation of IAS 32 and 39 from 2005 had a negative impact of approx.
EUR 60 million on the interest result in the first quarter. IFRS also resulted
in an increase of the balance sheet total by approximately EUR 85 billion due to
limited netting possibilities and derivatives being taken onto the
Page 10 of 46
balance sheet. The combined impact resulted in a total interest margin of 1.19%,
substantially lower than the 1.56% published in the first quarter of 2004. About
29 basis points of this reduction can be attributed to the impact of IFRS. Loans
and advances to customers of the banking operations increased by EUR 19.6
billion, or 5.5%, from 1 January 2005 to EUR 378.4 billion at the end of March
2005. Corporate lending rose by EUR 12.0 billion, of which EUR 8.9 billion was
from outside the Netherlands. Personal lending increased by EUR 7.5 billion. The
growth in personal lending was almost entirely due to a EUR 6.7 billion increase
in residential mortgages, of which EUR 4.3 billion was from ING Direct. (See
Appendix 5.5) Customer deposits and other funds on deposits of the banking
operations increased by EUR 26.1 billion, or 6.6%, to EUR 424.7 billion, to a
large extent caused by the continued strong growth of ING Direct.
Investment income increased from EUR 84 million to EUR 499 million, including
the gains on Baring Asset Management and ING Bank Slaski shares. Excluding
divestments, investment income rose 35.7%, or EUR 40 million, to EUR 152
million, mainly due to realised gains on equities in the Netherlands and
Belgium. (See Appendix 5.6)
Commission income declined 16.1% to EUR 596 million, or decreased 8.3% excluding
divestments, mainly caused by lower funds-transfer commission in the
Netherlands, lower commissions from the securities business and lower Other
commissions. This was compensated in part by higher management fees from ING
Real Estate and ING Belgium. (See Appendix 5.7)
Other income increased 18.6% to EUR 420 million. Excluding the impact of
divestments, Other income rose 28.7%, or EUR 93 million, to EUR 417 million. The
implementation of IAS 32 and 39 had a positive impact of approximately EUR 60
million due to a positive valuation result on non-trading derivatives. The
remaining increase was mainly due to the proportional (50%) consolidation of
Postkantoren BV (EUR 37 million), which was partially offset by lower results
from the trading portfolio, notably in Belgium and the Americas. The first
quarter of 2004 included a loss of EUR 48 million on Postbank's unit-linked
mortgage product 'MeerWaardehypotheek'. (See Appendix 5.8)
Total operating expenses increased 0.2% to EUR 2,129 million as higher costs
were offset by the impact of divestments. Excluding divestments, operating
expenses increased 7.7%, or by EUR 148 million, of which EUR 50 million was due
to the continued growth of ING Direct and EUR 37 million was due to the
consolidation of Postkantoren BV. The remaining increase was caused mainly by
higher IT expenses, provisions taken at ING Belgium and higher personnel
expenses. The cost/income ratio of the banking activities improved to 57.9% from
64.7% in the first quarter of 2004. However, excluding the gains/losses on
divestments, the cost/income ratio deteriorated to 63.9% from 62.7%. The average
number of staff increased to 63,600 from 63,500 in the first quarter of 2004.
Additions to provisions for loan losses reached an historic low, supported by
releases of some provisions. ING released EUR 4 million from the provision for
loan losses in the first quarter of 2005, compared with an addition to the
provision for loan losses of EUR 137 million in the same quarter last year. The
negative risk costs were possible due to an improvement of the credit portfolio,
the release of some provisions previously taken, notably in Wholesale Banking,
the absence of new large defaults, and improvements in risk management. The
addition equalled an annualised -1 basis point of average credit-risk-weighted
assets, compared with 22 basis points in the first quarter of 2004 and 18 basis
points for the full-year 2004.
RAROC
The after-tax Risk-Adjusted Return on Capital (RAROC) of ING's banking
operations improved to 23.9% in the first quarter of 2005 from 18.2% in the same
quarter last year. Excluding the gains on divestments, the after-tax RAROC was
19.8%. All three business lines produced returns above ING's
Page 11 of 46
target of 12.0% after tax. Retail Banking posted a return of 34.8% excluding the
gain on ING Bank Slaski shares. Wholesale Banking's RAROC after tax improved to
19.7% (excluding gains on divestments) from 17.9%. ING Direct's RAROC after tax
improved sharply from 9.5% to 13.2%, surpassing ING's target. In the RAROC
calculation, the actual credit risk provisioning is replaced by statistically
expected losses reflecting average credit losses over the entire economic cycle.
Page 12 of 46
2.1 INSURANCE EUROPE PROFIT RISES 43.5% TO EUR 505 MILLION
o PROFIT IN THE NETHERLANDS RISES 52.1% DUE TO PRIVATE EQUITY GAINS & IFRS
IMPACT
o INTERNAL RATE OF RETURN IN THE NETHERLANDS IMPROVES TO 12.9%
o VALUE OF NEW BUSINESS LIFTED BY LAUNCH OF NEW PENSION FUND IN SLOVAKIA
--------------------------------------------------------------------------------------------
TABLE 6. INSURANCE EUROPE PROFIT & LOSS ACCOUNT
FIRST QUARTER
In EUR million 2005 2004 Change
--------------------------------------------------------------------------------------------
Life premium income 2,212 2,534 -12.7%
Non-life premium income 940 1,008 -6.7%
TOTAL PREMIUM INCOME 3,152 3,542 -11.0%
Income from investments 1,041 954 9.1%
Commission and other income 298 152 96.1%
----- -----
TOTAL INCOME 4,491 4,648 -3.4%
Underwriting expenditure 3,401 3,788 -10.2%
Other interest expenses 118 97 21.6%
Operating expenses 454 400 13.5%
Impairments/investment losses 3 11 -72.7%
----- -----
TOTAL EXPENDITURE 3,976 4,296 -7.4%
TOTAL PROFIT BEFORE TAX 515 352 46.3%
- of which life insurance 406 268 51.5%
- of which non-life insurance 109 84 29.8%
Gains/losses on divestments 10
Profit before tax from divested units
----- -----
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 505 352 43.5%
- of which life insurance 396 268 47.8%
- of which non-life insurance 109 84 29.8%
KEY FIGURES
Value of new life business 46 43 7.0%
Internal rate of return 12.9% 14.7%
Assets under management(1) 149,300 144,900 3.0%
Staff (average FTEs) 16,400 15,900 3.1%
--------------------------------------------------------------------------------------------
1. 2004 figures are year-end
FIRST-QUARTER PROFIT
Profit before tax excluding divestments at Insurance Europe increased 43.5% to
EUR 505 million in the first quarter of 2005, up from EUR 352 million in the
first quarter last year. The increase was driven by a 47.8% increase in life
results due to higher investment income in the Netherlands and continued growth
in Central Europe. Profit before tax from the non-life insurance businesses rose
29.8%, led by growth in the Netherlands. Including the impact of the sales of
Freeler in the first quarter of 2005, total profit before tax from Insurance
Europe rose 46.3% to EUR 515 million.
Total premium income decreased 11.0% to EUR 3,152 million, due in part to the
sale of the Dutch health insurance portfolio in 2004 and rate adjustments to
improve profitability. Excluding those impacts, total premium income declined
1.7%. Life premium income fell 12.7% to EUR 2,212 million due to the
reclassification of some products in Belgium from life insurance to investment
contracts under IFRS, as well as rate adjustments in the Netherlands. Excluding
the impact of the reclassification of products and currency impacts, life
premium income declined 4.4%. Non-life premiums declined 6.7% to EUR 940
million, due to the sale of the Dutch health portfolio. Excluding that sale and
currency effects, non-life premiums increased 5.9%.
Investment income increased 9.1% to EUR 1,041 million, lifted by adjustments to
the fair value of real estate, the revaluation of non-trading derivatives, and
higher realised gains on bonds and equities.
Page 13 of 46
Commission and Other income increased to EUR 298 million from EUR 152 million,
due to higher profits from associates and higher realised gains on private
equity.
Operating expenses increased 13.5% to EUR 454 million, and rose 14.6% adjusted
for the impact of divestments. The increase was driven by higher external staff
expenses and investments in new IT systems in the Netherlands as well as higher
expenses in Belgium. The average number of staff at Insurance Europe increased
3.1% to 16,400 employees as an increase in the Netherlands was partially offset
by a decrease in Belgium.
GEOGRAPHICAL BREAKDOWN INSURANCE EUROPE
-------------------------------------------------------------------------------------
TABLE 7. INSURANCE EUROPE PROFIT BEFORE TAX
FIRST QUARTER
In EUR million 2005 2004 Change
-------------------------------------------------------------------------------------
Netherlands 406 267 52.1%
- of which life 310 194 59.8%
- of which non-life 96 73 31.5%
Belgium 40 37 8.1%
- of which life 29 28 3.6%
- of which non-life 11 9 22.2%
Central Europe(1) & Spain 59 48 22.9%
--- ---
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 505 352 43.5%
-------------------------------------------------------------------------------------
1. Poland, Hungary, Czech Republic, Slovakia, Romania, Bulgaria, Greece, Russia
In the Netherlands, profit before tax excluding the sale of Freeler increased
52.1% to EUR 406 million, driven by strong increases from both life and non-life
insurance, due to higher gains on private equity as well as the impact of IFRS.
The implementation of IAS 32, 39 and IFRS 4, and adjustments to the fair value
of real estate had a total positive impact of approximately EUR 90 million in
the first quarter of 2005. Life insurance profit before tax rose 59.8% to EUR
310 million, driven by an increase in investment and other income as a result of
high gains on private equity and positive revaluations to the fair value of real
estate and (embedded) derivatives. Life premium income declined 8.2%, due in
part to rate adjustments to increase profitability. Profit before tax from the
Dutch non-life insurance business improved 31.5% to EUR 96 million due to better
results in Fire, Health and Loss of income/disability insurance as a result of
continued good claim experience. Premium income from non-life insurance
decreased 7.7% to EUR 823 million, due to the sale of the health portfolio in
2004. Excluding that sale, non-life premium income rose 6.7%. Operating expenses
increased 15.4% due to higher external staff expenses to improve the service
level and reduce backlogs as well as higher IT expenses at
Nationale-Nederlanden. However costs declined 19.2% from the fourth quarter.
In order to improve efficiency at Nationale-Nederlanden and bring costs into
line with the industry benchmark, the company plans to reduce the annual cost
base by EUR 235 million by 2007, or 20% compared with 2004. That will result in
a reduction of the workforce by 1,000 positions over three years out of 6,200
full-time positions at Nationale-Nederlanden. About EUR 75 million in severance
costs are expected over three years. The number of external advisors and
temporary staff will also be reduced over the same period as backlogs diminish.
However, Nationale-Nederlanden will continue to invest in IT systems and process
innovation to improve productivity and efficiency in order to further improve
customer service and the competitiveness of its products.
In Belgium, profit before tax from the insurance operations rose 8.1% to EUR 40
million. Life results (including Luxembourg) showed a moderate increase of 3.6%
to EUR 29 million, despite a 42.9% drop in life premium income caused by the
reclassification of some life products as investment contracts under IFRS, as
well as lower sales through the bank channel. Non-life results increased 22.2%
to EUR 11 million, due to higher results from Fire and Loss of income/Accident.
Non-life premiums increased 0.8% to EUR 104 million.
Page 14 of 46
In Central Europe & Spain, profit before tax increased 22.9% to EUR 59 million,
due to better life results in Poland and Hungary driven by a higher investment
income and a slight decrease of operating expenses. Premium income rose 17.4% to
EUR 378 million, driven by an 18.1% increase in life premiums to EUR 366
million.
--------------------------------------------------------------------------------------
TABLE 8. INSURANCE EUROPE PREMIUM INCOME
FIRST QUARTER
In EUR million 2005 2004 Change
--------------------------------------------------------------------------------------
Netherlands 2,349 2,555 -8.1%
- of which life 1,526 1,663 -8.2%
- of which non-life 823 892 -7.7%
Belgium 425 665 -36.1%
- of which life 321 562 -42.9%
- of which non-life 104 103 1.0%
Central Europe(1) & Spain 378 322 17.4%
--- ---
TOTAL 3,152 3,542 -11.0%
--------------------------------------------------------------------------------------
1. Poland, Hungary, Czech Republic, Slovakia, Romania, Bulgaria, Greece, Russia
VALUE OF NEW LIFE BUSINESS
The value of new business written by Insurance Europe increased to EUR 46
million from EUR 43 million in the first quarter last year, driven by an
increase in the Netherlands as well as the launch of a new pension fund in
Slovakia, which added EUR 7 million to the value of new business. That was
partially offset by a decline in Belgium due to lower sales. The overall
internal rate of return expected on the new production is 12.9%, down from 14.7%
in the first quarter 2004. The deterioration of the internal rate of return was
caused by a decrease in margins in Belgium, which countered an improvement of
the internal rate of return in the Netherlands and Central Europe.
--------------------------------------------------------------------------------------------------------------------
TABLE 9. INSURANCE EUROPE NEW LIFE INSURANCE PRODUCTION
NEW PRODUCTION 1Q 2005 NEW PRODUCTION 1Q 2004
Value of Value of
Annual Single New Annual Single New
In EUR million premium Premium Business IRR Premium Premium Business IRR
--------------------------------------------------------------------------------------------------------------------
Netherlands(1) 40 390 21 12.9% 36 280 17 12.4%
Belgium 13 289 7 16.8% 7 399 18 40.8%
Central Europe & Spain 81 64 18 12.1% 48 40 8 11.4%
TOTAL 134 743 46 12.9% 91 719 43 14.7%
--------------------------------------------------------------------------------------------------------------------
1. VNB statistics for 1Q 2004 were reported with a lag of one quarter, thus the
figures above for the Netherlands represent production for 4Q 2003. Starting at
year-end 2004, the lag of one quarter has been removed.
Page 15 of 46
2.2 INSURANCE AMERICAS PROFIT INCREASES 32.5% TO EUR 444 MILLION
o PROFIT FROM CANADA CLIMBS TO EUR 130 MILLION DRIVEN BY STRONG UNDERWRITING
RESULTS
o U.S. PROFIT RISES 25.5% DUE TO STRONG GROWTH IN ASSETS UNDER MANAGEMENT
o INTERNAL RATE OF RETURN FOR U.S. BUSINESS IMPROVES TO 10.7%
--------------------------------------------------------------------------------
TABLE 10. INSURANCE AMERICAS PROFIT & LOSS ACCOUNT
FIRST QUARTER
In EUR million 2005 2004 Change
--------------------------------------------------------------------------------
Life premium income 4,250 4,718 -9.9%
Non-life premium income 947 1,026 -7.7%
------- -------
TOTAL PREMIUM INCOME 5,197 5,744 -9.5%
Income from investments 1,031 1,006 2.5%
Commission and other income 272 194 40.2%
------- -------
TOTAL INCOME 6,500 6,944 -6.4%
Underwriting expenditure 5,412 6,041 -10.4%
Other interest expenses 73 26 180.8%
Operating expenses 552 531 4.0%
Impairments/investment losses 2
------- -------
TOTAL EXPENDITURE 6,037 6,600 -8.5%
TOTAL PROFIT BEFORE TAX 463 344 34.6%
- of which life insurance 262 221 18.6%
- of which non-life insurance 201 123 63.4%
Gains/losses on divestments 19
Profit before tax from divested units 9
------- -------
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 444 335 32.5%
- of which life insurance 262 212 23.6%
- of which non-life insurance 182 123 48.0%
KEY FIGURES
Value of new life business 43 42 2.4%
Internal rate of return 10.5% 9.7%
Assets under management(1) 169,300 160,900 5.2%
Staff (average FTEs) 26,200 25,400 3.1%
--------------------------------------------------------------------------------
1. 2004 figures are year-end
FIRST-QUARTER PROFIT
Profit before tax excluding divestments at Insurance Americas increased 32.5% to
EUR 444 million in the first quarter of 2005. The increase was driven by
continued strong underwriting results at the Canadian non-life insurance
business as well as higher investment and fee income at the U.S. life business
due to continued growth in assets under management. Profit growth was partially
offset by the weakening of the U.S. dollar and the Mexican peso against the
euro, which had a negative impact of EUR 16 million on first-quarter profit.
Including the income from the individual life reinsurance business in 2004 and a
gain in the first quarter of 2005 from the over-allotment of shares from the ING
Canada IPO, total profit before tax from Insurance Americas increased 34.6% to
EUR 463 million.
Premium income declined 9.5% to EUR 5,197 million. The weakening of the U.S.
dollar and Mexican peso against the euro had a negative impact of EUR 316
million, accounting for more than half of the decline. Premium income in the
U.S. was lower due to a change under IFRS in the accounting for investment
contracts, and a decline in the retirement services business because of a
continued focus on higher margins and not simply volume. The decline was
partially offset by higher sales of variable annuities. Premium income from
Mexico was also lower as a result of the non-renewal of a few large commercial
non-life policies as the company focuses on the more profitable market segments.
Page 16 of 46
Investment income increased 2.5% to EUR 1,031 million, due largely to higher
asset levels and higher income as a result of short-term interest rate
developments in the United States, as well as the gain on the over-allotment of
ING Canada shares. Commission and Other income increased to EUR 272 million from
EUR 194 million.
Operating expenses increased 4.0% driven by higher expenses in Canada related to
the acquisition of Allianz Canada, and increased expenses in the United States
due to business growth. The decline of the U.S. dollar and Mexican peso against
the euro reduced expenses in Insurance Americas by EUR 26 million.
GEOGRAPHICAL BREAKDOWN INSURANCE AMERICAS
--------------------------------------------------------------------------------
TABLE 11. INSURANCE AMERICAS PROFIT BEFORE TAX
FIRST QUARTER
In EUR million 2005 2004 Change
--------------------------------------------------------------------------------
United States 261 208 25.5%
Canada 130 64 103.1%
Latin America 53 63 -15.9%
- of which Mexico 40 46 -13.0%
- of which South America(1) 13 17 -23.5%
--- ---
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 444 335 32.5%
--------------------------------------------------------------------------------
1. Argentina, Brazil, Chile, Peru
In the United States, profit before tax excluding divestments increased 25.5% to
EUR 261 million led by higher investment income due to the strong growth in
asset levels over the past year as well as higher fee income related to sales of
variable annuities and higher equity markets. The composite margin after
credit-related gains and losses improved to 154 basis points from 134 basis
points in the first quarter of 2004. The decline of the U.S. dollar against the
euro had a negative impact of EUR 13 million on profit before tax. Premium
income declined 10.8% to EUR 4,234 million in the first quarter of 2005 due in
part to a change in accounting treatment for investment contracts and a decline
in sales. Premium income from variable annuities increased, driven by higher
sales of products with living benefit features. The decline of the U.S. dollar
against the euro had a negative impact of EUR 292 million, accounting for more
than half the reduction in premium income in the U.S. Operating expenses
declined 3.2% to EUR 344 million, including the impact of currencies which
accounted for EUR 21 million of the positive comparison, as well as EUR 9
million from the individual life reinsurance business in the first quarter of
2004.
In Canada, profit before tax from the non-life insurance activities increased
strongly to EUR 130 million from EUR 64 million in the first quarter of 2004,
driven by strong underwriting results and the purchase of Allianz Canada in the
fourth quarter of 2004. The business continued to benefit from lower claims
frequency and severity, particularly in personal motor insurance. The loss ratio
improved to 58.7%, compared with 66.3% in the first quarter of 2004. The expense
ratio increased as a result of higher operating expenses related to the
integration of the Allianz Canada business, which is progressing according to
plan. A lower level of net written premium due to the termination of an assumed
reinsurance treaty in the first quarter of 2004 also contributed to the increase
in the expense ratio. The combined ratio increased to 95.6% from 91.9% in the
first quarter of 2004. Premium income rose 14.4% to EUR 509 million as the
purchase of Allianz Canada more than offset the decrease in premium rates as a
result of regulatory changes.
In Mexico, profit before tax declined 13.0% to EUR 40 million in the first
quarter of 2005 because of higher claims in the automobile line, which was
partially offset by improved performance in other non-life insurance lines.
Premiums declined 28.3% to EUR 307 million, largely due to the non-renewal of a
few
Page 17 of 46
large contracts in the commercial non-life business. Operating expenses fell
7.4% to EUR 75 million. The decline of the peso against the euro had a negative
impact of EUR 5 million on operating expenses.
In South America, profit before tax from Chile, Brazil, Peru and Argentina
declined 23.5% to EUR 13 million, because of weaker results in Chile due to
lower investment yields. Results were also lower in Brazil as a result of higher
claims in property & casualty insurance. Premiums increased 20.5% driven by
higher annuity sales in Chile. Operating expenses rose EUR 8 million or 43.3%
due to expenses related to the pending sale of the non-life business in Chile as
well as higher marketing expenses in Peru, and accrual releases in the first
quarter of 2004.
--------------------------------------------------------------------------------
TABLE 12. INSURANCE AMERICAS PREMIUM INCOME
FIRST QUARTER
In EUR million 2005 2004 Change
--------------------------------------------------------------------------------
United States 4,234 4,749 -10.8%
Canada 509 445 14.4%
Latin America 454 550 -17.5%
- of which Mexico 307 428 -28.3%
- of which South America(1) 147 122 20.5%
--- ---
TOTAL PREMIUM INCOME 5,197 5,744 -9.5%
--------------------------------------------------------------------------------
1. Argentina, Brazil, Chile, Peru
VALUE OF NEW LIFE BUSINESS
The value of new life insurance business written by Insurance Americas increased
2.4% to EUR 43 million, driven by stronger results in the United States from
higher sales of variable annuities and higher margins. That was partially offset
by a decline in new business value in Mexico due to competitive pressure in the
market for pension products as well as the exclusion of the U.S individual life
reinsurance business. The decline of the U.S. dollar against the euro had a
negative impact of EUR 3 million on the value of new business. The overall
internal rate of return for the first quarter of 2005 was 10.5%, up from 9.7% in
the first quarter of 2004, as improvements in the U.S. more than offset the
decline in Mexico. The internal rate of return for the U.S. business in U.S.
dollars increased to 11.1%.
-------------------------------------------------------------------------------------------------------------------
TABLE 13. INSURANCE AMERICAS NEW LIFE INSURANCE PRODUCTION
NEW PRODUCTION 1Q 2005 NEW PRODUCTION 1Q 2004
Value of Value of
Annual Single New Annual Single New
In EUR million premium Premium Business IRR Premium Premium Business IRR
-------------------------------------------------------------------------------------------------------------------
United States 366 3,178 41 10.7% 439 4,530 38 9.7%
Mexico 17 5 0 7.7% 30 1 3 15.3%
South America 20 54 2 9.1% 16 29 1 7.7%
TOTAL 403 3,237 43 10.5% 485 4,560 42 9.7%
-------------------------------------------------------------------------------------------------------------------
Page 18 of 46
2.3 INSURANCE ASIA/PACIFIC PROFIT RISES 52.7% TO EUR 171 MILLION
o LIFE PREMIUM INCOME INCREASES 41.4% TO EUR 2,800 MILLION LED BY JAPAN AND
KOREA
o VALUE OF NEW LIFE BUSINESS RISES TO EUR 99 MILLION, ACCOUNTING FOR 53% OF
ING'S TOTAL
o INTERNAL RATE OF RETURN INCREASES TO 15.2% FROM 14.0% A YEAR EARLIER
--------------------------------------------------------------------------------
TABLE 14. INSURANCE ASIA/PACIFIC PROFIT & LOSS ACCOUNT
FIRST QUARTER
In EUR million 2005 2004 Change
--------------------------------------------------------------------------------
Life premium income 2,800 1,980 41.4%
Non-life premium income 10 96 -89.6%
------ -----
TOTAL PREMIUM INCOME 2,810 2,076 35.4%
Income from investments 194 164 18.3%
Commission and other income 46 23 100.0%
------ -----
TOTAL INCOME 3,050 2,263 34.8%
Underwriting expenditure 2,697 1,955 38.0%
Other interest expenses 1 4 -75.0%
Operating expenses 181 173 4.6%
Impairments/investment losses -1
------ -----
TOTAL EXPENDITURE 2,879 2,131 35.1%
TOTAL PROFIT BEFORE TAX 171 132 29.5%
- of which life 170 111 53.2%
- of which non-life 1 21 -95.2%
Gains/losses on divestments
Profit before tax from divested units 20
------ -----
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 171 112 52.7%
- of which life insurance 170 111 53.2%
- of which non-life insurance 1 1
KEY FIGURES
Value of new life business 99 72 37.5%
Internal rate of return 15.2% 14.0%
Assets under management(1) 63,700 56,700 12.3%
Staff (average FTEs) 8,500 8,300 2.4%
--------------------------------------------------------------------------------
1. 2004 figures are year-end
FIRST QUARTER PROFIT
Profit before tax excluding divestments at Insurance Asia/Pacific increased
52.7% to EUR 171 million in the first quarter of 2005, led by strong results
from the Australian life and wealth businesses and the life insurance businesses
in South Korea. Including the results of the Australian non-life joint venture,
which was sold in the second quarter of 2004, total profit before tax from
Insurance Asia/Pacific rose 29.5% from EUR 132 million in the first quarter of
2004 to EUR 171 million in the same period this year.
Premium income rose 35.4% to EUR 2,810 million, driven by higher life insurance
sales. Life premium income increased 41.4% to EUR 2,800 million, led by a sharp
increase in sales of single-premium variable annuities in Japan and unit-linked
products in South Korea. That more than offset the impact of a reclassification
of the majority of products in Australia from life insurance to investment
products under IFRS. Excluding currency impacts, life premiums increased 43.2%.
Double-digit growth rates were recorded in Japan (138.3%), South Korea (33.6%),
Thailand (53.0%), India (57.6%), China (15.8%) and Malaysia (14.4%). Non-life
premium income fell 89.6%, reflecting the sale of the Australian non-life
business in the second quarter of 2004.
Investment income increased 18.3% to EUR 194 million due to the continuing
growth in business and assets under management throughout the region. Commission
and Other income rose to EUR 46 million from EUR 23 million, driven by higher
fee income on investment products primarily as a result of the reclassification
of most products in Australia under IFRS.
Page 19 of 46
Operating expenses rose 4.6% to EUR 181 million, reflecting the continuing
growth of businesses across the region. Excluding the effects of currencies and
the divestment of the Australian non-life operation in 2004, operating expenses
increased 13.8%, driven by investments to open new branches in China, India, and
South Korea, increases of staff numbers in the wealth management and life
insurance businesses to support a broader product range, customer service and IT
improvements, as well as higher premium taxes as a result of increased volumes
in Japan and Taiwan. The average number of full-time staff increased 2.4% in the
first quarter to 8,500 mainly due to increases in South Korea, India and China.
GEOGRAPHICAL BREAKDOWN INSURANCE ASIA/PACIFIC
--------------------------------------------------------------------------------
TABLE 15. INSURANCE ASIA/PACIFIC PROFIT BEFORE TAX
FIRST QUARTER
In EUR million 2005 2004 Change
-------------------------------------------------------------------------------
Australia 47 35 34.3%
South Korea 40 29 37.9%
Taiwan 59 26 126.9%
Japan 22 26 -15.4%
Rest of Asia(1) 3 -4
--- ---
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 171 112 52.7%
-------------------------------------------------------------------------------
1. Including China, India, Thailand, Indonesia, Hong Kong and Malaysia
In Australia, profit before tax from the life and wealth businesses increased
34.3% to EUR 47 million in the first quarter, driven by stronger underwriting
results at the life insurance business and an increase in investment income due
to higher asset levels and higher fee income from favourable market
developments. Life premium income declined to EUR 29 million from EUR 281
million, due to the reclassification of the majority of products from life
insurance to investment products under IFRS.
In South Korea, profit before tax rose 37.9% to EUR 40 million, driven by
continued strong growth in premium income due to high persistency, steady sales
through the tied agency network and the contribution of sales from the new
bancassurance joint venture with Kookmin Bank called KB Life. Premium income
rose 44.2% to EUR 489 million.
In Taiwan, profit before tax increased to EUR 59 million from EUR 26 million in
the first quarter of 2004. ING has discontinued the EUR 25 million quarterly
reserve-strengthening programme for Taiwan based on the current overall adequacy
level of reserves for the region and the Group.
In Japan, profit before tax declined to EUR 22 million from EUR 26 million in
the same period last year, when the claims experience for corporate-owned life
insurance was exceptionally favourable. Total premium income rose to EUR 1,589
million from EUR 696 million. Income from single-premium variable annuities
increased to EUR 1.2 billion from EUR 331 million, while premiums for
corporate-owned life insurance were stable.
In the Rest of Asia, profit before tax rose to EUR 3 million from a loss of EUR
4 million in 2004. In China, new insurance sales suffered from soft markets.
However, ING's 30% owned mutual fund joint venture, China Merchant Funds
Management Company Ltd., raised more than EUR 1.5 billion from the launch of its
Cash Plus Fund and made a positive contribution to profit before tax. The
increase also reflects improvements in results from Malaysia, which were
partially offset by lower results in Hong Kong.
Page 20 of 46
--------------------------------------------------------------------------------
TABLE 16. INSURANCE ASIA/PACIFIC PREMIUM INCOME
FIRST QUARTER
In EUR million 2005 2004 Change
--------------------------------------------------------------------------------
Australia 29 281 -89.7%
South Korea 489 339 44.2%
Taiwan 541 515 5.0%
Japan 1,589 696 128.3%
Rest of Asia(1) 162 159 1.9%
----- -----
PREMIUM INCOME EXCLUDING DIVESTMENTS 2,810 1,990 41.2%
Divested units 0 86
- --
----- -----
TOTAL 2,810 2,076 35.4%
--------------------------------------------------------------------------------
1. including India, China, Hong Kong, Thailand, Indonesia and Malaysia
VALUE OF NEW LIFE BUSINESS
The value of new life insurance business written by Insurance Asia/Pacific was
EUR 99 million, up 37.5% compared with the first quarter of 2004, and accounting
for more than half of ING Group's total. Most units contributed to this growth
in new business value, in particular Japan, South Korea and Australia, due to
strong sales and changes in the product mix. ING invested EUR 121 million to
write new life insurance business in the region in 2005, and the overall
internal rate of return expected on this investment is 15.2% compared with a
14.0% rate of return in the first quarter of 2004.
-------------------------------------------------------------------------------------------------------------------
TABLE 17. INSURANCE ASIA/PACIFIC NEW LIFE INSURANCE PRODUCTION
NEW PRODUCTION 1Q 2005 NEW PRODUCTION 1Q 2004
Value of Value of
Annual Single New Annual Single New
In EUR million premium Premium Business IRR Premium Premium Business IRR
-------------------------------------------------------------------------------------------------------------------
Australia 15 234 5 18.1% 19 188 2 9.6%
South Korea 123 54 30 33.0% 93 38 21 25.0%
Taiwan 51 55 27 16.1% 61 25 25 12.7%
Japan 91 1,281 36 12.6% 102 334 23 14.3%
Rest of Asia/Pacific 28 13 1 7.3% 24 21 1 8.3%
--- ----- -- ----- --- --- --
TOTAL 308 1,637 99 15.2% 299 606 72 14.0%
-------------------------------------------------------------------------------------------------------------------
Page 21 of 46
2.4 WHOLESALE BANKING PROFIT INCREASES 9.7% TO EUR 725 MILLION
o INCLUDING THE IMPACT OF DIVESTMENTS, PROFIT BEFORE TAX RISES 53.3%
o PROFIT LIFTED BY THE RELEASE OF LOAN LOSS PROVISIONS AS CREDIT ENVIRONMENT
IMPROVES
o ING REAL ESTATE PROFIT BEFORE TAX INCREASES 34.1% TO EUR 98 MILLION
--------------------------------------------------------------------------------
TABLE 18. WHOLESALE BANKING PROFIT & LOSS ACCOUNT
FIRST QUARTER
In EUR million 2005 2004 Change
--------------------------------------------------------------------------------
Interest result 701 846 -17.1%
Commission 302 402 -24.9%
Other income 787 428 83.9%
----- -----
TOTAL INCOME 1,790 1,676 6.8%
OPERATING EXPENSES 848 937 -9.5%
----- -----
Gross result 942 739 27.5%
Addition to provisions for loan losses -82 71
----- -----
PROFIT BEFORE TAX 1,024 668 53.3%
Gains/losses on divestments 285 -84
Profit before tax from divested units 14 91
----- -----
TOTAL PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 725 661 9.7%
KEY FIGURES
Cost/income ratio 47.4% 55.9%
RAROC pre-tax 28.8% 24.9%
RAROC after tax 25.0% 17.9%
Total risk-weighted assets (in EUR billion) 153.3 147.5 3.9%
Addition to provisions for loan losses in basis
points of average credit-risk-weighted assets -22 19
Staff (average FTEs) 21,900 24,100 -9.1%
--------------------------------------------------------------------------------
FIRST QUARTER PROFIT
Profit before tax excluding divestments at Wholesale Banking increased 9.7% to
EUR 725 million, lifted by the release of loan loss provisions as the credit
environment continued to improve. Including the impact of divestments, total
profit before tax from Wholesale Banking increased 53.3% to EUR 1,024 million.
ING realised a gain of EUR 255 million on the sale of Baring Asset Management in
the first quarter of 2005, and EUR 30 million of the gain on the sale of 12.77%
in ING Bank Slaski shares was reported under Wholesale Banking. The first
quarter of 2004 included a loss of EUR 84 million on the sale of the Asian cash
equities business.
Total income rose 6.8% to EUR 1,790 million, including the gains on the sales of
Baring Asset Management and part of ING's stake in ING Bank Slaski in Poland.
Excluding the impact of divestments, income declined 3.4% to EUR 1,444 million,
mainly due to lower Financial Markets trading results in Belgium, the U.K. and
the Americas compared with very strong results in the first quarter of 2004.
Operating expenses declined 9.5% to EUR 848 million, driven entirely by the
divestments of the Asian cash equities business, CenE Bankiers and parts of ING
BHF-Bank in 2004. Excluding divestments, operating expenses increased 5.1% to
EUR 801 million, mainly due to a provision taken in Belgium as well as higher
expenses at ING Lease and ING Real Estate to support the growth of the business.
The cost/income ratio improved to 47.4% from 55.9% in the first quarter of 2004
including the results from divestments. Excluding gains and losses on
divestments, the cost/income ratio deteriorated to 56.3% from 52.1%. The average
number of wholesale staff declined 9.1% compared with a year earlier, mainly due
to the sales of CenE Bankiers, the Asian cash equities business and parts of ING
BHF-Bank.
Page 22 of 46
The addition to the provision for loan losses improved sharply from EUR 71
million in the first quarter of 2004 to a release of EUR 82 million in the first
quarter this year, due to the continued improvement of the credit environment
and the absence of substantial new problem loans. The release was equal to -22
basis points of average credit-risk-weighted assets, compared with an addition
to provisions of 19 basis points in the first quarter of 2004.
GEOGRAPHICAL BREAKDOWN WHOLESALE BANKING
--------------------------------------------------------------------------------
TABLE 19. WHOLESALE BANKING PROFIT BEFORE TAX
FIRST QUARTER
In EUR million 2005 2004 Change
--------------------------------------------------------------------------------
Netherlands 260 223 16.6%
Belgium 225 276 -18.5%
Rest of world 175 96 82.3%
Other -31 -5
--- --
SUBTOTAL WHOLESALE BANKING 629 590 6.6%
Asset management(1) 96 71 35.2%
-- --
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 725 661 9.7%
--------------------------------------------------------------------------------
1. mainly ING Real Estate
In the Netherlands, profit before tax excluding divestments rose 16.6% to EUR
260 million driven by higher income and the release of some debtor provisions.
Total income excluding divestments was up 6.9%, driven by a gain on the sale of
convertible bonds and higher income from Structured Finance and leasing. That
was partially offset by lower commissions on funds transfer and syndication
fees. Operating expenses increased 7.2%, mainly due to growth in leasing
activities and higher personnel expenses. Risk costs declined sharply due to the
release of some debtor provisions. In the first quarter of 2005, risk costs were
annualised -13 basis points of average credit-risk-weighted assets, compared
with 4 basis points in the same quarter last year.
In Belgium, profit before tax excluding divestments declined 18.5% to EUR 225
million. Total income fell 14.3% as the Financial Markets activities could not
match the record-high trading income level reported in the first quarter of
2004. Operating expenses rose 12.6%, due to EUR 31 million in provisions mainly
related to Williams de Broe. Risk costs declined sharply from 11 basis points in
the first quarter of 2004 to -35 basis points in the first quarter this year as
a result of releases.
In Rest of the world, including the remaining German Wholesale Banking
activities, profit before tax excluding divestments rose 82.3% to EUR 175
million, driven by releases of debtor provisions. Risk costs were EUR 82 million
lower, with releases equal to an annualised -29 basis points of average
credit-risk-weighted assets, compared with an addition of 45 basis points in the
first quarter of 2004. Total income excluding divestments decreased 3.8%, while
operating expenses were down 4.9%.
The asset management activities of Wholesale Banking posted a 35.2% increase in
profit before tax excluding divestments to EUR 96 million. ING Real Estate's
profit before tax rose 34.1% to EUR 98 million, driven by higher profits from
the finance and investment management activities, partly offset by lower results
from development. Baring Asset Management was sold to Mass Mutual Financial
Group and Northern Trust Corporation as of 31 March 2005, and has been excluded
from these figures.
RAROC
The after-tax Risk-Adjusted Return on Capital for the Wholesale Banking
operations improved to 25.0%, compared with 17.9% in the first quarter of 2004,
lifted by gains on the sale of Baring Asset Management and the ING Bank Slaski
shares. Excluding those gains the after-tax RAROC improved to 19.7%. The
Wholesale Banking activities in the Netherlands and Belgium are showing strong
pre-tax RAROCs. Within the Rest of World, the performance of Asia and Germany
are still below ING's target. The pre-tax RAROC of ING Real Estate improved
to 42.8% from 28.2% in the first quarter of 2004.
Page 23 of 46
------------------------------------------------------------------------------------------------------------------
TABLE 20. WHOLESALE BANKING RISK-ADJUSTED RETURN ON CAPITAL
RAROC % (pre-tax) ECONOMIC CAPITAL (in EUR billion)
Q1 2005 Q1 2004 FY 2004 Q1 2005 Q1 2004 FY 2004
------------------------------------------------------------------------------------------------------------------
Netherlands 30.1 28.2 25.5 2.6 3.0 3.0
Belgium 29.2 34.3 22.2 2.3 2.7 2.5
Rest of world 18.5 14.4 -1.6 2.6 3.4 3.1
Other -72.3 -29.8 -43.6 0.2 0.1 0.2
--- --- ---
SUBTOTAL WHOLESALE BANKING 23.5 23.9 13.6 7.7 9.2 8.8
Asset management(1) 73.1 36.4 39.5 0.9 0.8 0.8
--- --- ---
TOTAL PRE-TAX 28.8 24.9 16.0 8.6 10.0 9.6
TOTAL AFTER TAX 25.0 17.9 12.2
------------------------------------------------------------------------------------------------------------------
1. mainly ING Real Estate and Baring Asset Management
Page 24 of 46
2.5 RETAIL BANKING PROFIT RISES 21.2% TO EUR 394 MILLION
o INCOME EXCLUDING GAINS ON DIVESTMENTS INCREASES 14.1%
o COST/INCOME RATIO CONTINUES TO IMPROVE TO 65.1%
o RAROC AFTER TAX REMAINS HIGH AT 34.8% EXCLUDING DIVESTMENTS
-------------------------------------------------------------------------------------------
TABLE 21. RETAIL BANKING PROFIT & LOSS ACCOUNT
FIRST QUARTER
In EUR million 2005 2004 Change
-------------------------------------------------------------------------------------------
Interest result 1,045 953 9.7%
Commission 272 281 -3.2%
Other income 107 -19
----- -----
TOTAL INCOME 1,424 1,215 17.2%
OPERATING EXPENSES 927 840 10.4%
----- -----
Gross result 497 375 32.5%
Addition to provisions for loan losses 41 45 -8.9%
----- -----
PROFIT BEFORE TAX 456 330 38.2%
Gains/losses on divestments 62
Profit before tax from divested units 5
----- -----
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 394 325 21.2%
KEY FIGURES
Cost/income ratio 65.1% 69.1%
RAROC pre-tax 52.8% 52.1%
RAROC after tax 38.5% 35.2%
Total risk-weighted assets (in EUR billion) 79.2 76.5 3.5%
Addition to provisions for loan losses in basis points
of average credit-risk-weighted assets 21 25
Staff (average FTEs) 35,600 34,500 3.2%
-------------------------------------------------------------------------------------------
FIRST QUARTER PROFIT
Profit before tax excluding divestments at Retail Banking increased 21.2% to EUR
394 million, lifted by higher results from Belgium as well as the Netherlands,
where profit in the first quarter last year was impacted by a loss taken by
Postbank on a unit-linked mortgage product. Including a gain of EUR 62 million
on the sale of shares in ING Bank Slaski and the profit from the divested retail
banking activities of ING BHF-Bank, total profit before tax from Retail Banking
increased 38.2% to EUR 456 million.
Total income rose 17.2% to EUR 1,424 million, including the gain on the sale of
shares in ING Bank Slaski. Excluding that gain and the impact of divestments,
total income rose 14.1%, to EUR 1,362 million. Income was lifted by the
proportional (50%) consolidation of Postkantoren BV in the Netherlands (which
had no impact on total profit), and the acquisition of Mercator Bank in Belgium.
Operating expenses increased 10.4% to EUR 927 million, due in part to the
consolidation of Postkantoren BV and Mercator Bank. Excluding that impact,
operating expenses rose 6.8%, mainly due to wage increases and higher
IT-expenses. The cost/income ratio improved to 65.1% from 69.1% in the first
quarter of 2004. Excluding the gain on shares in ING Bank Slaski, the
cost/income ratio improved to 68.1%. The average number of retail staff
increased 3.2% to 35,600 due to the consolidation of Postkantoren BV and
Mercator Bank.
The addition to the provision for loan losses declined to EUR 41 million from
EUR 45 million. Lower risk costs in Belgium and Poland were partially offset by
higher risk costs in the Netherlands. The total addition was equal to an
annualised 21 basis points of average credit-risk-weighted assets compared with
25 basis points in the first quarter of 2004.
Page 25 of 46
GEOGRAPHICAL BREAKDOWN RETAIL BANKING
----------------------------------------------------------------------------------------
TABLE 22. RETAIL BANKING PROFIT BEFORE TAX
FIRST QUARTER
In EUR million 2005 2004 Change
----------------------------------------------------------------------------------------
Netherlands 290 252 15.1%
Belgium 87 55 58.2%
Poland 5 3 66.7%
Other retail(1) 12 15 -20.0%
--- ---
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 394 325 21.2%
----------------------------------------------------------------------------------------
1. mainly ING Vysya Bank, Private Banking rest of world, and the Kookmin Bank stake
In the Netherlands, profit before tax from retail banking rose 15.1% to EUR 290
million. Total income increased 13.6%, driven by the consolidation of
Postkantoren BV as well as the inclusion of a EUR 48 million loss in the first
quarter of 2004 on Postbank's unit-linked mortgage product. Excluding both
impacts, total income rose 2.7%, lifted by increased mortgage lending and
savings. The residential mortgage portfolio in the Netherlands increased by EUR
2.1 billion, or 2.6%, to EUR 84.3 billion at the end of March. Operating
expenses increased 11.9%, mainly due to the consolidation of Postkantoren BV.
Excluding that impact, operating expenses increased 4.7% due to higher wages and
costs to upgrade systems. Risk costs rose to 25 basis points of average
credit-risk-weighted assets from 22 basis points in the first quarter of 2004.
In Belgium, profit before tax from retail banking increased 58.2% to EUR 87
million, driven by growth in income and the release of some loan loss
provisions. Total income increased 15.1%, mainly due to the strong growth of
savings and current accounts and the successful sales of structured notes.
Operating expenses were 10.9% higher due to increased expenses for IT, marketing
and the branch network. The impact of the acquisition of Mercator Bank on income
and expense growth was 2.9%-points and 4.0%-points respectively. Risk costs were
negative EUR 2 million due to releases compared with an addition of EUR 10
million in the first quarter of 2004.
In Poland, profit before tax from the retail banking activities of ING Bank
Slaski (excluding the gain on the sale of shares) rose to EUR 5 million from EUR
3 million in the first quarter of 2004, fully due to lower risk costs. The level
of loan loss provisioning is now an annualised 50 basis points of average
credit-risk-weighted assets.
Other retail banking activities posted a profit before tax excluding divestments
of EUR 12 million, down from EUR 15 million in the first quarter last year,
fully caused by higher risk costs. The gross result (profit before risk costs)
increased by EUR 2 million, notably due to ING Vysya Bank.
RAROC
The after-tax Risk-Adjusted Return on Capital for the business line Retail
Banking improved to 38.5% from 35.2% in the first quarter of 2004. Excluding the
gain on the sale of ING Bank Slaski shares the after-tax RAROC is 34.8%, well
above ING's target of 12.0%. The low pre-tax RAROC in Other retail can be mainly
attributed to the inclusion of ING Vysya Bank in the RAROC calculations as of
the second half of 2004. On a like-for-like basis, excluding divestments, ING
Vysya Bank and changes to the model for market risk, the RAROC after tax
increased to 36.8% from 32.1%.
Page 26 of 46
-------------------------------------------------------------------------------------------------------------
TABLE 23. RETAIL BANKING RISK-ADJUSTED RETURN ON CAPITAL
RAROC % (pre-tax) ECONOMIC CAPITAL (in EUR billion)
Q1 2005 Q1 2004 FY 2004 Q1 2005 Q1 2004 FY 2004
-------------------------------------------------------------------------------------------------------------
Netherlands 64.5 63.1 68.0 1.8 1.6 1.6
Belgium 57.8 56.3 17.8 0.5 0.4 0.4
Poland 70.7 25.4 20.5 0.1 0.1 0.1
Other retail(1) 4.1 12.9 -3.1 0.6 0.5 0.6
--- --- ---
TOTAL PRE-TAX 52.8 52.1 43.1 3.0 2.6 2.7
TOTAL AFTER TAX 38.5 35.2 29.1
-------------------------------------------------------------------------------------------------------------
1. mainly ING Vysya Bank, Private Banking rest of world, and the Kookmin Bank stake
Page 27 of 46
2.6 ING DIRECT PROFIT RISES TO EUR 127 MILLION FROM EUR 78 MILLION
o EUR 15.4 BILLION ADDED TO FUNDS ENTRUSTED IN FIRST QUARTER, 1 MILLION
CUSTOMERS ADDED
o MORTGAGE PORTFOLIO GROWS BY EUR 4.4 BILLION TO EUR 37.5 BILLION
o RISK-ADJUSTED RETURN ON CAPITAL AFTER TAX INCREASES TO 13.2%, SURPASSING
TARGET
------------------------------------------------------------------------------------------------
TABLE 24. ING DIRECT(1) PROFIT & LOSS ACCOUNT
FIRST QUARTER
In EUR million 2005 2004 Change
------------------------------------------------------------------------------------------------
Interest result 452 351 28.8%
Commission 22 18 22.2%
Other income 13 3 333.3%
--- ---
TOTAL INCOME 487 372 30.9%
OPERATING EXPENSES 323 273 18.3%
--- ---
Gross result 164 99 65.7%
Addition to provisions for loan losses 37 21 76.2%
--- ---
PROFIT BEFORE TAX 127 78 62.8%
KEY FIGURES
Cost/income ratio 66.3% 73.4%
RAROC pre-tax 22.8% 17.7%
RAROC after tax 13.2% 9.5%
Total risk-weighted assets (in EUR billion) 54.9 50.1 9.6%
Addition to provisions for loan losses in basis points
of average credit-risk-weighted assets 27 26
Staff (average FTEs) 6,100 4,900 24.5%
------------------------------------------------------------------------------------------------
1. Including ING Card
FIRST QUARTER PROFIT
Profit before tax from ING Direct (including ING Card) rose to EUR 127 million
in the first quarter of 2005 compared with EUR 78 million in the first quarter
of 2004 as it continued to attract new customers and benefited from further
growth in business volumes from new and existing customers. Of the eight country
units, ING Direct is already profitable in seven.
Total income increased 30.9% to EUR 487 million, driven mainly by a 28.8%
increase in the interest result due to continued growth in both funds entrusted
and mortgages. Since year-end 2004, total funds entrusted grew by EUR 15.4
billion, or 10.6%, to EUR 160.8 billion. Compared with a year ago, funds
entrusted are up 38.6%. At the end of March 2005, ING Direct had a total
mortgage loan portfolio of EUR 37.5 billion, an increase of EUR 4.4 billion, or
13.6%, from year-end 2004. Compared with the end of March 2004, mortgage lending
rose 56.3%, driven by strong growth in the U.S., Germany and Australia. The
total interest margin of the ING Direct operations narrowed to 0.91% from 1.03%
during the first quarter of 2004, mainly due to a flattening of the yield curve
in the non-euro countries.
Operating expenses increased 18.3% to EUR 323 million as a result of higher
marketing costs and higher expenses to handle the continued growth of the
business, notably the strong increase in mortgage distribution. At the end of
March 2005, ING Direct had 12.5 million customers, an increase of 3.1 million,
or 32.4%, compared with a year ago. In the first quarter of 2005, ING Direct
added 1.0 million new customers. The cost/income ratio of ING Direct improved to
66.3% from 73.4% in the first quarter of 2004. The average number of full-time
employees at ING Direct increased by 1,200 to 6,100 in the first quarter of 2005
compared with a year ago, mainly due to expansion in Germany, the U.S. and the
U.K.
The addition to the provision for loan losses increased to EUR 37 million from
EUR 21 million. Risk costs equalled an annualised 27 basis points of average
credit-risk-weighted assets, compared with 26 basis points in the first quarter
of 2004.
Page 28 of 46
RAROC
The after-tax Risk-Adjusted Return on Capital for ING Direct improved from 9.5%
in the first quarter of 2004 to 13.2%, and is now above ING's target of 12.0%.
The increase was due entirely to higher economic returns as the units continued
to grow business volumes much faster than expenses. In line with the strong
growth of the business, economic capital increased to EUR 2.6 billion from EUR
2.1 billion in first quarter of 2004.
GEOGRAPHICAL BREAKDOWN ING DIRECT
----------------------------------------------------------------------
TABLE 25. ING DIRECT PROFIT BEFORE TAX (including ING Card)
FIRST QUARTER
In EUR million 2005 2004 Change
----------------------------------------------------------------------
Canada 14 15 -6.7%
Spain 14 11 27.3%
Australia 15 17 -11.8%
France 3 0
United States 53 25 112.0%
Italy 2 -4
United Kingdom -8 -11
Germany(1) 40 27 48.1%
--- ---
SUBTOTAL ING DIRECT 133 80 66.3%
ING Card -6 -2
--- ---
TOTAL 127 78 62.8%
----------------------------------------------------------------------
1. including Austria
Seven of the eight ING Direct units posted a profit before tax in the first
quarter of 2005. Only the U.K., which started operations in May 2003, is still
loss making. Canada, Spain, Australia, the U.S. and Germany are already
performing above ING's target for risk-adjusted return on capital.
The U.S. and Germany posted the strongest profit increases, driven by the
continued growth of funds entrusted, mortgages and the number of clients.
Despite the flattening of the yield curve in the non-euro countries, the profit
development of ING Direct in Canada, Australia, the U.S. and the U.K. was still
very satisfactory. ING Card showed a loss of EUR 6 million in the first quarter
of 2005, partly caused by higher risk costs to bring provisions fully into line
with IFRS.
--------------------------------------------------------------------------------------------------------------------
TABLE 26. ING DIRECT CLIENTS AND FUNDS ENTRUSTED
NUMBER OF CLIENTS FUNDS ENTRUSTED
(x 1,000) (in EUR billion)
31 March 31 Dec. 31 March 31 March 31 Dec. 31 March
2005 2004 2004 2005 2004 2004
--------------------------------------------------------------------------------------------------------------------
Canada 1,170 1,121 959 9.7 9.0 7.6
Spain 1,047 975 799 11.3 10.2 8.4
Australia 1,063 996 777 9.2 8.5 7.2
France 448 413 354 9.9 9.2 7.9
United States 2,551 2,226 1,649 24.7 21.2 15.9
Italy 547 485 433 12.4 10.6 9.3
United Kingdom 836 762 471 30.0 27.9 17.9
Germany(1) 4,810 4,511 3,978 53.6 48.8 41.8
------ ------ ------ ----- ----- -----
TOTAL 12,472 11,489 9,420 160.8 145.4 116.0
--------------------------------------------------------------------------------------------------------------------
1. including Austria
Page 29 of 46
3. ASSETS UNDER MANAGEMENT INCREASE 6.0% TO EUR 470.1 BILLION
o INCLUDING THE IMPACT OF DIVESTMENTS, ASSETS UNDER MANAGEMENT DECLINE 4.4%
o FUND INFLOW OF EUR 13.3 BILLION DRIVEN BY INSURANCE ASIA/PACIFIC
o ING REAL ESTATE'S PORTFOLIO GROWS 6.8% TO EUR 53.5 BILLION
Assets under management increased 6.0% to EUR 470.1 billion in the first quarter
from EUR 443.4 billion at the end of 2004, excluding the impact of divestments.
The increase was driven by a net inflow of EUR 13.3 billion, the impact of a
decline in the euro in the first quarter of EUR 12.1 billion, and higher stock
markets, which added EUR 0.5 billion. Including the impact of divested units,
which had a combined EUR 47.7 billion in funds under management, and a
restatement of EUR 0.8 billion due in part to IFRS, total assets under
management decreased by 4.4%.
FUND INFLOW
The net inflow of EUR 13.3 billion was mainly realised by Insurance
Asia/Pacific, Insurance Europe and ING Real Estate. Insurance Asia/Pacific
reported a net inflow of EUR 4.7 billion, lifted by the successful launch of the
China Merchant Cash Fund with EUR 1.5 billion net new sales. ING Real Estate
realised an inflow of EUR 2.4 billion, due in part to EUR 1.1 billion in new
mandates won by ING Clarion in the U.S.
----------------------------------------------------------------------------------------------
TABLE 27. ASSETS MANAGED BY BUSINESS LINE
31 March 31 December
In EUR billion 2005 2004 Change
----------------------------------------------------------------------------------------------
Insurance Europe 149.3 144.9 3.0%
Insurance Americas 169.3 160.9 5.2%
Insurance Asia/Pacific 63.7 56.7 12.3%
Retail Banking 45.1 42.5 6.1%
Wholesale Banking 39.6 35.8 10.6%
ING Direct 3.1 2.6 19.2%
--- ---
ASSETS MANAGED EXCLUDING DIVESTED UNITS 470.1 443.4 6.0%
Divestments & restatements _____ 48.5
----
TOTAL 470.1 491.9 -4.4%
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
TABLE 28. ASSETS ORIGINATED BY BUSINESS LINE
31 March 31 December
In EUR billion 2005 2004 Change
----------------------------------------------------------------------------------------------
Insurance Europe 49.2 47.3 4.0%
Insurance Americas 101.5 98.0 3.6%
Insurance Asia/Pacific 32.3 28.2 14.5%
Retail Banking 86.2 82.9 4.0%
Wholesale Banking 29.5 26.0 13.5%
ING Direct 3.1 2.6 19.2%
----- ---
TOTAL THIRD PARTIES 301.8 285.0 5.9%
Proprietary assets 168.3 158.4 6.3%
----- -----
ASSETS MANAGED EXCLUDING DIVESTED UNITS 470.1 443.4 6.0%
Divestments & restatements ______ 48.5
----
TOTAL 470.1 491.9 -4.4%
----------------------------------------------------------------------------------------------
DISTRIBUTION CHANNELS
Excluding the impact of divestments, all distribution channels showed higher
assets under management. The business line Insurance Asia/Pacific posted a
record growth of EUR 14.5%, driven by a strong inflow of EUR 4.7 billion.
Divestments primarily impacted Retail Banking, due to the sale of the retail
activities of ING BHF-Bank with EUR 15.3 billion in managed assets, and
Wholesale Banking, due to the sale of Baring Asset Management with EUR 30.1
billion in assets.
Page 30 of 46
FUND INVESTMENT PERFORMANCE
The investment performance statistics of the ING Mutual Funds continue to
improve. Notably, ING has a good track record for fixed income and balanced
strategies, while equity is returning to higher scores. Measured as a percentage
of assets, more than half of ING funds performed above their benchmarks and
peers over 1-year, 3-year and 5-year periods, while 68% of assets were in the
first or second quartile on a five-year basis.
---------------------------------------------------------------------------------------------------
TABLE 29. ASSETS UNDER MANAGEMENT BY ASSET CLASS
In EUR billion 31 March 2005 31 December 2004
---------------------------------------------------------------------------------------------------
Equities 141.3 30% 160.2 32%
Fixed income 255.4 54% 258.3 53%
Real Estate(1) 37.3 8% 33.8 7%
Cash 36.1 8% 39.6 8%
----- ---- ----- ----
TOTAL 470.1 100% 491.9 100%
---------------------------------------------------------------------------------------------------
1. mainly ING Real Estate investment management and development activities, plus real estate assets
from other business lines
---------------------------------------------------------------------------------
TABLE 30. ASSETS UNDER MANAGEMENT BY CLIENT CATEGORY
31 March 31 December 2004 1Q
In EUR billion 2005 Change
---------------------------------------------------------------------------------
Private clients 202.8 215.2 -5.8%
Institutional clients 99.0 119.6 -17.2%
---- -----
Total third parties 301.8 334.8 -9.9%
Proprietary assets 168.3 157.1 7.1%
----- -----
TOTAL 470.1 491.9 -4.4%
Share of third parties 64.2% 68.1%
---------------------------------------------------------------------------------
ING INVESTMENT MANAGEMENT
ING Investment Management continues to leverage the global scale of its
operations and asset management skills to develop global strategies and
cross-sell successful strategies into other regions. Total cross-regional assets
under management amounted to EUR 9.5 billion. ING IM Americas accounted for EUR
6.7 billion of cross-regional products, while Europe accounted for EUR 1.9
billion and Asia/Pacific accounted for EUR 0.9 billion. In March, ING launched a
new closed-end fund ING Global Equity Dividend and Premium Opportunity Fund,
which leveraged the product development skills of ING IM Americas and the
investment expertise of ING IM Europe. The fund raised EUR 1.3 billion through
ING Funds' U.S. distribution channel, becoming the eighth largest fund to trade
on the New York Stock Exchange.
ING REAL ESTATE
ING Real Estate's total portfolio, including the real estate finance portfolio,
increased to EUR 53.5 billion at the end of March from EUR 50.1 billion at
year-end 2004, driven mainly by growth of the real estate investment management
activities. The real estate investment management portfolio increased by EUR 3.5
billion, or 11.3%, to EUR 34.4 billion, driven by a net inflow of EUR 2.4
billion. In the U.S., the Lion Industrial Trust also acquired a USD 440 million
portfolio in the Atlanta area. ING Real Estate also launched the Global REIT
Open Mother Fund in February, designed for Japanese investors. The real estate
development portfolio and the finance portfolio were unchanged at EUR 2.1
billion and EUR 17.0 billion respectively.
PROFIT CONTRIBUTION
The asset management profit share climbed from 7% to 8% of total Group profit
before tax excluding divestments. Including the gain on the sale of Baring Asset
Management, asset management accounted for 17% of the total profit before tax
Page 31 of 46
APPENDICES
1. Key figures
2. Consolidated profit and loss account (Insurance/Banking) first quarter,
gains & losses on divestments, and profit before tax from divested units
3. Consolidated balance sheet and changes in capital and reserves
4. Condensed consolidated statement of cash flows
5. Additional information: quarterly results, insurance profit & loss by
life/non-life, insurance and banking income information, loans and advances
to customers of the banking operations
6. Value of new business statistics
7. Accounting changes and impact of IFRS
8. Information for shareholders
----------------
The accounting principles applied in this document for the 2005 figures are in
accordance with International Financial Reporting Standards as endorsed by the
European Union ("EU"). A brief summary of these accounting principles is
included in Attachment 7 Accounting changes and impact of IFRS. A more detailed
explanation can be found on the ING Group web site. The applied accounting
principles differ from the published 2004 annual accounts as explained in
attachment 7. We have, however, adjusted the comparative 2004 figures to reflect
the impacts of IFRS except for those arising from IAS32/39 and IFRS 4 as also
explained in attachment 7.
All figures in this document are unaudited.
Certain of the statements contained in this release are statements of future
expectations and other forward-looking statements. These expectations are based
on management's current views and assumptions and involve known and unknown
risks and uncertainties. Actual results, performance or events may differ
materially from those in such statements due to, among other things, (i) general
economic conditions, in particular economic conditions in ING's core markets,
(ii) performance of financial markets, including emerging markets, (iii) the
frequency and severity of insured loss events, (iv) mortality and morbidity
levels and trends, (v) persistency levels, (vi) interest rate levels, (vii)
currency exchange rates, (viii) general competitive factors, (ix) changes in
laws and regulations, and (x) changes in the policies of governments and/or
regulatory authorities. ING assumes no obligation to update any forward-looking
information contained in this document.
Page 32 of 46
APPENDIX 1.
------------------------------------------------------------------------------------------------------------------------------
1. KEY FIGURES
IFRS DUTCH GAAP
1Q 1Q FY FY FY FY FY
2005 2004 2004 2003 2002 2001 2000
------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET (EUR x billion)
Total assets(1) 1,037 964 866 779 716 705 650
Capital and reserves(1) 31 28 26 21 18 22 25
ASSETS UNDER MANAGEMENT (EUR x billion) 470 488 492 463 449 513 503
MARKET CAPITALISATION (EUR x billion) 51 38 49 39 32 57 83
INCOME (EUR x million)
Insurance operations 14,000 13,932 55,398 53,233 59,449 55,274 34,521
Banking operations 3,678 3,282 12,537 11,680 11,201 11,111 11,302
OPERATING EXPENSES (EUR x million)
Insurance operations 1,197 1,133 4,837 4,897 5,203 5,583 5,023
Banking operations 2,129 2,125 8,658 8,184 8,298 8,186 8,273
IMPAIRMENTS/ADDITIONS TO THE PROVISION FOR LOAN
LOSSES (EUR x million) -1 149 497 1,288 2,099 907 400
PROFIT (EUR x million)
Insurance operations 1,022 716 4,005 3,486 3,170 2,792 2,307
Banking operations 1,553 1,020 3,414 2,371 1,468 2,170 2,605
----- ----- ----- ----- ----- ----- -----
Profit before tax 2,575 1,736 7,419 5,857 4,638 4,962 4,912
Operating net profit 5,389 4,053 3,433 3,539 3,388
Capital gains/neg. value adjustment shares 579 -10 820 713 620
Non-operating net profit 247 325 7,976
----- ----- ----- ----- -----
Net profit 1,941 1,130 5,968 4,043 4,500 4,577 11,984
Distributable net profit 1,941 1,130 5,968 4,043 4,253 4,252 4,901
FIGURES PER ORDINARY SHARE OF EUR 0.24 NOMINAL VALUE
Operating net profit 2.53 2.00 1.77 1.83 1.76
Net profit 0.89 0.54 2.80 2.00 2.32 2.37 6.27
Distributable net profit 0.89 0.54 2.80 2.00 2.20 2.20 2.56
Dividend 1.07 0.97 0.97 0.97 1.13
Capital and reserves(1) 14.39 13.00 11.76 10.08 9.14 11.03 13.04
RATIOS (in %)
ING Group
(Operating) return on equity (ROE) 26.4 25.4 22.9 21.5 17.4 15.3 10.3
(Operating) net profit growth 72 n/a 33 18 -3 4 27
Insurance operations
Combined ratio 88 89 94 98 102 103 104
Capital coverage ratio(1) 208 201 210 180 169 180 235
Banking operations
BIS ratio ING Bank(1) 10.76 10.59 11.47 11.34 10.98 10.57 10.75
Tier-1 ratio ING Bank(1) 7.21 7.00 7.71 7.59 7.31 7.03 7.22
Cost/income ratio 57.9 64.7 69.1 70.1 74.1 73.7 73.2
EMPLOYEES (average FTEs) 114,700 113,100 113,000 115,200 113,060 112,000 92,650
------------------------------------------------------------------------------------------------------------------------------
1. Balance sheet and capital & reserve figures for 1Q 2004 are based on IFRS figures from 1 January 2005
Page 33 of 46
APPENDIX 2. FIRST QUARTER PROFIT & LOSS ACCOUNT
-------------------------------------------------------------------------------------------------------------------------
2.1 ING GROUP FULL-YEAR CONSOLIDATED PROFIT & LOSS ACCOUNT
INSURANCE BANKING TOTAL(1)
In EUR million 1Q 2005 1Q 2004 1Q 2005 1Q 2004 1Q 2005 1Q 2004 %
-------------------------------------------------------------------------------------------------------------------------
Premium income 11,163 11,366 11,163 11,366 -1.8%
Income from investments 2,215 2,117 499 84 2,707 2,150 25.9%
Interest result banking operations 2,163 2,134 2,130 2,152 -1.0%
Commission income 344 303 596 710 940 1,013 -7.2%
Other income 278 146 420 354 698 500 39.6%
------ ------ ----- ----- ------ ------
TOTAL INCOME 14,000 13,932 3,678 3,282 17,638 17,181 2.7%
Underwriting expenditure 11,508 11,786 11,508 11,786 -2.4%
Other interest expenses 270 285 230 252 -8.7%
Operating expenses 1,197 1,133 2,129 2,125 3,326 3,258 2.1%
Impairments/additions to the
provision for loan losses 3 12 -4 137 -1 149
------ ------ ----- ----- ------ ------
TOTAL EXPENDITURE 12,978 13,216 2,125 2,262 15,063 15,445 -2.5%
PROFIT BEFORE TAX 1,022 716 1,553 1,020 2,575 1,736 48.3%
Taxation 246 224 326 305 572 529 8.1%
Third-party interests 46 25 16 52 62 77 -19.5%
------ ------ ----- ----- ------ ------
NET PROFIT 730 467 1,211 663 1,941 1,130 71.8%
-------------------------------------------------------------------------------------------------------------------------
1. Including inter-company eliminations.
-------------------------------------------------------------------------------------------------------------------------
2.2 REALISED GAINS/LOSSES ON DIVESTMENTS BEFORE TAX
INSURANCE BANKING TOTAL
In EUR million 1Q 2005 1Q 2004 1Q 2005 1Q 2004 1Q 2005 1Q 2004
-------------------------------------------------------------------------------------------------------------------------
- sale of Freeler 10 10
--- ----- ----- ----- --- -----
INSURANCE EUROPE 10 10
- over-allotment ING Canada IPO 19 19
--- ----- ----- ----- --- -----
INSURANCE AMERICAS 19 19
- sale of Baring Asset Management 255 255
- sale of ING Bank Slaski shares 30 30
(part)
- sale Asian cash equity business -84 -84
--- ----- ----- ----- --- -----
WHOLESALE BANKING 285 -84 285 -84
- sale of ING Bank Slaski shares 62 62
--- ----- ----- ----- --- -----
(part)
RETAIL BANKING 62 62
TOTAL REALISED GAIN/LOSSES 29 347 -84 376 -84
-------------------------------------------------------------------------------------------------------------------------
Page 34 of 46
-------------------------------------------------------------------------------------------------------------------------
2.3 PROFIT BEFORE TAX FROM DIVESTED UNITS
INSURANCE BANKING TOTAL
In EUR million 1Q 2005 1Q 2004 1Q 2005 1Q 2004 1Q 2005 1Q 2004
-------------------------------------------------------------------------------------------------------------------------
Insurance Europe
Insurance Americas 9 9
Insurance Asia/Pacific 20 20
Wholesale Banking 14 91 14 91
Retail Banking 5 5
ING Direct
----- ----- ----- ----- ----- ------
TOTAL PROFIT BEFORE TAX FROM DIVESTED
UNITS 29 14 96 14 125
-------------------------------------------------------------------------------------------------------------------------
Page 35 of 46
APPENDIX 3.
------------------------------------------------------------------------------------------------------
3.1 ING GROEP N.V. CONSOLIDATED BALANCE SHEET
31 March 1 January
In EUR million 2005 2005 Change
------------------------------------------------------------------------------------------------------
ASSETS
Cash and balances with central banks 10,475 9,805 6.8%
Amounts due from banks 62,134 51,721 20.1%
Non-trading derivatives 8,512 9,127 -6.7%
Financial assets marked-to-market 200,218 182,819 9.5%
Investments 288,545 265,597 8.6%
Loans and advances to customers 410,362 390,846 5.0%
Reinsurance contracts 7,064 6,818 3.6%
Property and equipment 5,620 5,805 -3.2%
Other assets 43,605 41,945 4.0%
--------- -------
TOTAL ASSETS 1,036,535 964,483 7.5%
EQUITY AND LIABILITIES
Capital and reserves 31,275 28,286 10.6%
Third-party interests 1,458 2,096 -30.4%
--------- -------
TOTAL EQUITY 32,733 30,382 7.7%
LIABILITIES
Preference shares 296 296
Subordinated loans 4,178 4,157 0.5%
Insurance and investment contracts 228,398 218,551 4.5%
Amounts due to banks 111,178 95,621 16.3%
Customer deposits and other funds on
deposit 421,793 395,699 6.6%
Debt securities in issue/other borrowed
funds 107,813 107,155 0.6%
Non-trading derivatives 7,781 8,647 -10.0%
Other liabilities 122,365 103,975 17.7%
--------- -------
TOTAL LIABILITIES 1,003,802 934,101 7.5%
TOTAL EQUITY AND LIABILITIES 1,036,535 964,483 7.5%
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
3.2 CHANGES IN CAPITAL AND RESERVES
In EUR million
-----------------------------------------------------------------------------------------------------------------
CAPITAL AND RESERVES AS OF 31 DECEMBER 2004 (ING GAAP) 25,866
Adjustments to IFRS 2,420
------
CAPITAL AND RESERVES AS OF 1 JANUARY 2005 (IFRS) 28,286
Net profit 1,941
Unrealised revaluations equities (after tax) 425
Unrealised revaluations debt securities (after tax) -641
Transfer to insurance liabilities (shadow accounting) 283
Realised capital gains equities released to profit & loss account -37
Realised capital gains debt securities released to profit & loss account -45
Exchange rate differences 620
Other 443
-----
Total changes first three months 2005 2,989
------
CAPITAL AND RESERVES AS OF 31 MARCH 2005 31,275
-----------------------------------------------------------------------------------------------------------------
Page 36 of 46
APPENDIX 4.
---------------------------------------------------------------------------------------------------
4. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
In EUR million 1Q 2005 1Q 2004
---------------------------------------------------------------------------------------------------
NET CASH FLOW FROM OPERATING ACTIVITIES 10,349 23,237
Investments and advances:
- associated undertakings -114
- available-for-sale investment securities -59,268
- held-to-maturity investment securities 1,029
- investment properties -59
- property and equipment -175
- assets subject to operating leases -205
- investments for the risk of policyholders -10,399
- other investments -2
Disposals and redemptions:
- associated undertakings 761
- available-for-sale investment securities 44,957
- held-to-maturity investment securities 105
- investment property 48
- property and equipment 285
- assets subject to operating leases 0
- investments for the risk of policyholders 8,494
- other investments 3
NET CASH FLOW FROM INVESTING ACTIVITIES -16,598 -27,393
Proceeds from insurance of subordinated loans 0
Repayments of subordinated loans 0
Proceeds from borrowed funds and debt securities 2,947
Repayment from borrowed funds and debt securities -3,341
Deposits by reinsurers 78
Issuance of ordinary shares 102
Purchase of treasury shares 0
Sale of treasury shares 0
Dividends paid 0
NET CASH FLOW FROM FINANCING ACTIVITIES -214 663
------
NET CASH FLOW -6,463 -3,493
Cash and equivalents at beginning of year 12,266 7,338
Effect of exchange-rate changes on cash and cash equivalents 297 278
------ -----
CASH AND EQUIVALENTS AT END OF PERIOD 6,100 4,123
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
In this summary, cash comprises the following items:
Treasury bills and other eligible bills 12,266 8,531
Loans and advances to banks -16,641 -13,116
Cash and bank balances and call money of the insurance operations 10,475 8,708
------ -----
CASH AND EQUIVALENTS AT END OF PERIOD 6,100 4,123
---------------------------------------------------------------------------------------------------
Page 37 of 46
APPENDIX 5. ADDITIONAL INFORMATION
-----------------------------------------------------------------------------------------------------
5.1 QUARTERLY RESULTS
1Q 4Q 3Q 2Q 1Q
In EUR million 2005 2004 2004 2004 2004
-----------------------------------------------------------------------------------------------------
Profit before tax
- Insurance Europe 515 365 397 509 352
- Insurance Americas 463 711 164 473 344
- Insurance Asia/Pacific 171 125 94 405 132
- Other -127 34 320 9 -112
----- ----- ----- ----- -----
INSURANCE PROFIT BEFORE TAX 1,022 1,235 975 1,396 716
- Wholesale Banking 1,024 323 528 426 668
- Retail Banking 456 175 352 318 330
- ING Direct 127 118 114 125 78
- Other -54 19 -85 -15 -56
----- ----- ----- ----- -----
BANKING PROFIT BEFORE TAX 1,553 635 909 854 1,020
PROFIT BEFORE TAX 2,575 1,870 1,884 2,250 1,736
NET PROFIT 1,941 1,408 1,554 1,663 1,130
- of which Insurance operations 730 875 931 1,076 467
- of which Banking operations 1,211 533 623 587 663
In EUR
NET PROFIT PER ORDINARY SHARE 0.89 0.65 0.73 0.78 0.54
-----------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
5.2 INSURANCE PROFIT FROM LIFE AND NON-LIFE
FIRST QUARTER 2005 FIRST QUARTER 2004
In EUR million Life Non-life Total Life Non-life Total
--------------------------------------------------------------------------------------------------------------------
Premium income 9,265 1,898 11,163 9,234 2,132 11,366
Income from investments 1,988 227 2,215 1,942 175 2,117
Commission and other income 631 -9 622 447 2 449
------ ----- ------ ------ ----- ------
TOTAL INCOME 11,884 2,116 14,000 11,623 2,309 13,932
Underwriting expenditure 10,020 1,488 11,508 9,997 1,789 11,786
Other interest expenses 270 270 285 285
Operating expenses 899 298 1,197 855 278 1,133
Impairments/investment losses 3 3 12 12
------ ----- ------ ------ ----- ------
TOTAL EXPENDITURE 11,192 1,786 12,978 11,149 2,067 13,216
PROFIT BEFORE TAX 692 330 1,022 474 242 716
--------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
5.3 INSURANCE INVESTMENT INCOME
FIRST QUARTER
In EUR million 2005 2004 Change
---------------------------------------------------------------------------------------
Income from debt securities 1,317 1,498 -12.1%
Realised gains/losses on bonds(1) 74 --
Other fixed-interest securities 814 899 -9.5%
Income investment property 52 72 -27.8%
Change in fair value real estate 36 10 260.0%
Dividend income 49 46 6.5%
Realised gains/losses on equities 45 20 125.0%
Other 199 -20
Eliminations -371 -408
----- -----
TOTAL 2,215 2,117 4.6%
---------------------------------------------------------------------------------------
1. Approximately 50% of this amount has been transferred to the provision for deferred
profit sharing (shadow accounting)
Page 38 of 46
--------------------------------------------------------------------------------
5.4 INSURANCE OTHER INCOME
FIRST QUARTER
In EUR million 2005 2004 Change
--------------------------------------------------------------------------------
Valuation results non-trading derivatives 81 --
Share of profit associates 169 48 252.2%
Other 28 98 -71.4%
--- ---
TOTAL 278 146 90.4%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5.5 LOANS AND ADVANCES TO CUSTOMERS OF THE BANKING OPERATIONS
31 March 1 January
In EUR billion 2005 2005 Change
--------------------------------------------------------------------------------
- Public authorities 20.7 16.9 22.5%
- Other corporate 208.5 200.3 4.1%
----- -----
TOTAL CORPORATE 229.2 217.2 5.5%
- Mortgages 133.0 126.3 5.3%
- Other personal 20.0 19.2 4.2%
----- ----
TOTAL PERSONAL 153.0 145.5 5.2%
Provisions for bank lending -3.8 -3.9
TOTAL BANK LENDING 378.4 358.8 5.5%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5.6 BANKING INVESTMENT INCOME
FIRST QUARTER
In EUR million 2005 2004 Change
--------------------------------------------------------------------------------
Change in fair value real estate 2 2 0.0%
Realised gains/losses on equities 41 27 51.9%
Realised gains/losses on bonds 0 0
Gains/losses on divestments 347 -42
Other investment income 109 97 12.4%
--- ---
TOTAL 499 84 494.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5.7 BANKING COMMISSION INCOME
FIRST QUARTER
In EUR million 2005 2004 Change
--------------------------------------------------------------------------------
Funds transfer 124 149 -16.8%
Securities business 150 219 -31.5%
Insurance broking 38 42 -9.5%
Management fees 189 185 2.2%
Brokerage and advisory fees 28 27 3.7%
Other 67 88 -23.9%
--- ---
TOTAL 596 710 -16.1%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5.8 BANKING OTHER INCOME
FIRST QUARTER
In EUR million 2005 2004 Change
-------------------------------------------------------------------------------
Valuation results non-trading derivatives 86 --
Share of profit associates 9 5 80.0%
Result of trading portfolio 203 247 -17.8%
Other 122 102 19.6%
--- ---
TOTAL 420 354 18.6%
--------------------------------------------------------------------------------
Page 39 of 46
APPENDIX 6. VALUE OF NEW BUSINESS STATISTICS
The internal rates of return have been adjusted to be consistent with a 7.5%
discount rate in the Netherlands to reflect expected currency movements relative
to the euro. The value of new business fully reflects acquisition expense
overruns, which represent excess cost for acquiring new business over and above
the expense allowances provided for in the product pricing. Starting in 2005,
new business statistics are converted at the average exchange rate instead of
the closing exchange rate of the reporting period. In compliance with the
European Embedded Value Principles, statistics are included for Value of New
Business divided by the present value of premiums in Table 6.1. ING continues to
focus primarily on the value of new business and the internal rate of return as
key value drivers.
--------------------------------------------------------------------------------------------------------------------
6.1 VALUE OF NEW LIFE BUSINESS STATISTICS
In EUR million NEW PRODUCTION 1Q 2005 NEW PRODUCTION FY 2004(1)
Value of New PV of VNB/PV Value of New PV of VNB/PV
Business premiums premiums Business premiums premiums
--------------------------------------------------------------------------------------------------------------------
Netherlands 21 704 3.0% 58 3,058 1.9%
Belgium 7 389 1.8% 42 1,946 2.2%
Central Europe & Spain 18 459 3.9% 38 1,623 2.3%
--- ----- --- ------
INSURANCE EUROPE 46 1,552 3.0% 138 6,627 2.1%
U.S.(2) 41 4,743 0.9% 138 16,229 0.9%
Latin America 2 120 1.7% 35 462 7.6%
--- ----- --- ------
INSURANCE AMERICAS(2) 43 4,863 0.9% 173 16,691 1.0%
INSURANCE ASIA/PACIFIC 99 2,179 4.5% 321 6,714 4.8%
--- ----- --- ------
TOTAL 188 8,594 2.2% 632 30,032 2.1%
--------------------------------------------------------------------------------------------------------------------
1. 2004 PV of premiums for Central Europe & Spain and Latin America are amended since the 2004 embedded value
results publication.
2. 2004 includes individual life reinsurance business
---------------------------------------------------------------------------------------------------------------------
6.2 INVESTMENT IN NEW LIFE BUSINESS & ACQUISITION EXPENSE OVERRUNS
In EUR million NEW PRODUCTION 1Q 2005 NEW PRODUCTION 1Q 2004
Investment in new Acquisition expense Investment in new Acquisition expense
business overruns business overruns
---------------------------------------------------------------------------------------------------------------------
Netherlands 35 1 31 1
Belgium 9 0 8 -1
Central Europe & Spain 40 8 23 8
--- -- --- --
INSURANCE EUROPE 84 9 62 8
U.S. 213 5 295 3
Latin America 19 4 15 2
--- -- --- --
INSURANCE AMERICAS 232 9 310 5
INSURANCE ASIA/PACIFIC 121 -1 90 3
--- -- --- --
TOTAL 437 17 462 16
---------------------------------------------------------------------------------------------------------------------
Page 40 of 46
------------------------------------------------------------------------------------------------------------------------
6.3 NEW BUSINESS PRODUCTION AND VALUE IN DEVELOPING MARKETS(1) BY REGION
In EUR million NEW PRODUCTION 1Q 2005 NEW PRODUCTION 1Q 2004
Value of Value of
Annual Single New Annual Single New
premium Premium Business IRR Premium Premium usiness IRR
------------------------------------------------------------------------------------------------------------------------
Europe 64 20 16 12.3% 35 3 5 11.0%
Americas 36 59 2 8.8% 46 29 4 11.3%
Asia/Pacific 202 123 58 18.4% 178 84 47 14.6%
--- --- -- --- --- --
TOTAL 302 202 76 14.9% 259 116 56 14.0%
------------------------------------------------------------------------------------------------------------------------
1. The countries included as developing markets are:
Europe: Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia
Americas: Chile, Mexico, Peru
Asia/Pacific: China, Hong Kong, India, Korea, Malaysia, Thailand, Taiwan
Page 41 of 46
APPENDIX 7. ACCOUNTING CHANGES AND IMPACT OF IFRS
7.1 BASIS OF PRESENTATION
ING Group applies International Financial Reporting Standards as endorsed by the
European Union ("EU"). IFRS as endorsed by the EU differs from full IFRS as
promulgated by the International Accounting Standards Board ("IASB") only in
respect of IAS 39 (Financial instruments) in the following areas:
- elimination of the option to measure non-trading financial liabilities at
fair value;
- elimination of certain restrictions concerning hedge accounting for
portfolio hedges of core deposits.
Application of IFRS as endorsed by the EU is optional for ING Group. ING Group
has adopted IFRS as endorsed by the EU as its accounting framework because it
believes (together with several other European banks) that it enables a better
reflection of the way in which European banks undertake asset/liability
management, particularly in a fixed interest rate environment.
ING Group has early adopted ED 7 (regarding presentation and disclosure of
financial instruments) as it is expected that this will be a final standard in
2005. During 2005, new IFRS requirements and/or interpretations may be issued.
As a result, the accounting principles set out below may differ from the final
accounting principles that will be applied in the 2005 annual accounts.
7.2 CHANGES IN ACCOUNTING PRINCIPLES
ING Group adopted IFRS as endorsed by the EU ("IFRS") as of 2005. The 2004
comparatives have been restated to comply with IFRS. However, as permitted by
IFRS 1, ING Group has not restated the 2004 comparatives for the impact of IAS
32, IAS 39 and IFRS 4. Accordingly, comparative information with respect to
financial instruments and insurance contracts is prepared under ING Group's
previous accounting policies (ING GAAP). ING Group has implemented IFRS
retrospectively, using the following transitional provisions:
- Goodwill is only capitalised on acquisitions after 1 January 2004.
Accounting for acquisitions before that date has not been restated;
goodwill on those acquisitions was charged directly to shareholders' equity.
- Hedge accounting is applied to all hedge relationships that were accounted
for as a hedge under ING GAAP and meet the IAS 39 criteria for hedge
accounting as of 1 January 2005.
- Unrecognised actuarial losses on employee benefit plans were recognised
directly in equity at 1 January 2004.
- The cumulative translation differences reserve in equity was reset to nil
at 1 January 2004.
- IFRS 2 (share based payments) is applied for unvested awards that were
issued after 7 November 2002.
ING Group's accounting principles under IFRS and its decision on the options
available are set out in the "Principles of valuation and determination of
results" which is available at www.ing.com/group.
7.3 EXPLANATION OF DIFFERENCES BETWEEN IFRS AND ING GAAP
The explanation of differences in accounting principles between IFRS (applied as
of 2005) and the accounting principles applied by ING Group in the 2004 annual
accounts (ING GAAP) is presented below in two sections:
- differences between ING GAAP and IFRS excluding IAS 32/39 and IFRS 4, which
are implemented in the restated 2004 comparatives as of 1 January 2004;
- differences due to the impact of IAS 32/39 and IFRS 4 which are implemented
as of 1 January 2005.
DIFFERENCES BETWEEN ING GAAP AND IFRS EXCLUDING IAS 32/39 AND IFRS 4
Goodwill: Under ING GAAP, goodwill was charged to equity. Under IFRS, all
goodwill arising after 1 January 2004 is capitalised and subject to an annual
impairment review. Goodwill charged to equity prior to 1 January 2004 is not
restated.
Page 42 of 46
Real Estate - Investment Property: Under IFRS, investment property is reported
at fair value, with changes in fair value reported in the profit and loss
account. Under ING GAAP, investment property was reported at fair value, with
changes in fair value reported in a revaluation reserve in equity; at disposal,
the accumulated revaluation was recognised in the profit and loss account under
ING GAAP.
Real Estate - Property in Own Use: Both under IFRS and ING GAAP, property in own
use is reported at fair value, with changes in fair value reported in a
revaluation reserve in equity. However, under IFRS a depreciation charge is
recognised in the profit and loss account. At disposal, the accumulated
revaluation was recognised in the profit and loss account under ING GAAP. Under
IFRS, no result is recognised on disposal. Furthermore, under IFRS individually
negative revaluation reserves on a property-by-property basis are charged to the
profit and loss account; under ING GAAP negative revaluation reserves were
offset against positive revaluation reserves.
Real Estate - Property under Development for Third Parties: Under IFRS, real
estate in the course of construction is reported under the percentage of
completion method (pro rata profit recognition). Under ING GAAP profit was
recognised on completion. In addition, IFRS is more restrictive on the overhead
expenses that may be capitalised.
Employee Benefits: Accounting for pension liabilities under ING GAAP was similar
to IFRS; however, at transition to IFRS all unrecognised actuarial gains and
losses were charged to shareholders' equity. Under IFRS additional provisions
for certain employee benefits are required.
Employee Benefits - Share-based Payments: Under IFRS, the fair value of shares
and options granted to employees is recognised in the profit and loss account
over the vesting period of the award. Under ING GAAP the intrinsic value was
recognised in the profit and loss account.
Leases: Under ING GAAP, leases where ING is the lessor were presented as
Lending. Under IFRS, these are presented as fixed assets, with depreciation
recognised in the profit and loss account on a straight-line basis. Certain
bonuses/discounts are amortised over the lease term under IFRS whilst under ING
GAAP they were reported in income immediately.
Foreign Currency Translation: Under ING GAAP, translation differences on
insurance liabilities and related investments were recorded in equity. Under
IFRS, both are recognised in the profit and loss account. Both under IFRS and
ING GAAP translation differences on foreign operations are reported in a
translation reserve in equity; however, at transition to IFRS the translation
differences reserve was reset to nil.
Result on the Sale of Consolidated Subsidiaries: The result on sale under IFRS
is different from ING GAAP as the book value at the time of disposal under IFRS
differs from ING GAAP. This specifically relates to a negative revaluation on
property in own use that under IFRS was charged to the profit and loss account
in 2004, whereas it was included in the result on disposal under ING GAAP (also
in 2004). There is no net effect on 2004 net income.
Dividend income on Equity Securities: Under ING GAAP, dividend income was
accrued over the year whereas under IFRS dividend income is recognised when
declared.
Taxation: Deferred taxation was adjusted for the (deferred) tax effect of the
above differences between ING GAAP and IFRS.
DIFFERENCES FROM IMPLEMENTING IAS 32/39 AND IFRS 4 AS OF 1 JANUARY 2005
Available-for-Sale Debt Securities: Under IFRS, quoted debt securities
(non-trading) other than those designated as being held-to-maturity are reported
at fair value, with changes in fair value recognised in a revaluation reserve in
equity; realised results are recognised directly in the profit and loss account.
Under ING GAAP, debt securities were reported at amortised cost; realised
results were deferred and amortised over the remaining term.
Insurance Provisions: Under IFRS certain contracts that do not contain
significant insurance risk are presented as investment contracts and measured
either at amortised cost or at fair value.
Page 43 of 46
For insurance contracts with discretionary participation features, a deferred
profit sharing liability is recorded under IFRS for the full amount of
unrealised results on allocated investments. In addition, a deferred profit
sharing liability is recorded for the policyholders' share in other differences
between ING GAAP and IFRS as at 1 January 2005. Insurance liabilities are
adjusted to compensate for the impact of the transition to IFRS on reserve
inadequacy.
Derivatives and Embedded Derivatives: Under IFRS, all derivatives (including
embedded derivatives that are not closely related to the host contract) are
reported at fair value. Under ING GAAP, non-trading derivatives were valued
similar to the item being hedged (mainly at cost).
Hedge Accounting: Under IFRS, for derivatives qualifying as cash flow hedges and
net investment hedges, the fair value movements are initially deferred in equity
and subsequently released to the income statement in the same period in which
the hedged item affects profit and loss. For fair value hedges, the valuation of
the hedged item is adjusted to reflect the hedged risk; this fair value
adjustment on the hedged item is reported in the profit and loss account and
(partly) offsets the fair value impact on the derivative that is also reported
in the profit and loss account. Under ING GAAP, non-trading derivatives used for
risk management purposes were valued similar to the item being hedged (mainly at
cost). As an alternative for hedge accounting under IFRS, financial assets may
be designated at fair value through profit or loss, which implies that these are
presented at fair value, with all changes in fair value recognised directly in
the profit and loss account.
Loans: Under both ING GAAP and IFRS loans are measured at amortised cost. Under
IFRS, certain fees/costs are capitalised and amortised whilst under ING GAAP
they were expensed immediately (e.g. mortgage broker fees). The amortisation of
premiums, discounts and fees under IFRS is based on effective yield whereas
under ING GAAP these were amortised on a straight-line basis. Under IFRS,
realised results are reported in net income. Under ING GAAP these were amortised
over the remaining term (e.g. prepayment penalties on mortgages).
Loan Loss Provisions: Under IFRS loan loss provisions for portfolios of
individually smaller loans are calculated based on a more prescriptive
methodology. Furthermore, under IFRS no unallocated provisions are allowed.
Equity Securities: Under ING GAAP, negative revaluations on equity securities
were only charged to the income statement as impairment when triggered by the
financial condition of the issuer. Under IFRS, impairment is also triggered by a
prolonged decline of the market value below cost.
Classification of Equity Instruments: Under ING GAAP, preference shares and
trust preferred securities were -- in accordance with the legal form --
classified as equity. Under IFRS, the conditions of ING Group's preference
shares and trust preferred securities require classification as liabilities.
Venture Capital Investments: Under ING GAAP, venture capital investments were
reported at the lower of cost or fair value. Under IFRS, investments in which
ING has no significant influence are reported at fair value with changes in fair
value reported in a revaluation reserve in equity. Investments in which ING has
significant influence are reported at fair value, with changes in fair value
reported in the profit and loss account.
Taxation: Deferred taxation was adjusted for the (deferred) tax effect of the
above differences between ING GAAP and IFRS.
Page 44 of 46
APPENDIX 8. INFORMATION FOR SHAREHOLDERS
SHARES AND WARRANTS
The average number of shares used for the calculation of net profit per share
for the first three months of 2005, was 2,174.3 million (2,087.7 million for the
first three months of 2004). The number of (depositary receipts for) ordinary
shares of EUR 0.24 nominal value outstanding at the end of March 2005 was
2,204.8 million (including 31.9 million own shares to cover outstanding options
for ING personnel). The number of (depositary receipts for) "A" preference
shares of EUR 1.20 nominal value outstanding at the end of March 2005 was 87.1
million. The dividend percentage for the "A" shares for the period from 1
January, 2004 to 1 January 2014 has been set at 4.65%. This dividend will amount
to EUR 0.1582 per year until 1 January 2014. This dividend will be paid for the
first time in 2005.
On 5 January 1998, 17.2 million ING Group warrants B were issued. With an
additional payment of the exercise price of EUR 49.92 one warrant B entitles the
holder to two ING Group depositary receipts up to 5 January 2008. The number of
warrants B outstanding at the end of March 2005 was 17.2 million.
In the first three months of 2005, the turnover of (depositary receipts for)
ordinary shares on the Euronext Amsterdam Stock Market was 500.2 million
(purchases and sales). The highest closing price was EUR 23.96, the lowest EUR
21.75; the closing price at the end of March 2005 was EUR 23.30.
LISTING
The (depositary receipts for) ordinary shares ING Group are quoted on the
exchanges of Amsterdam, Brussels, Frankfurt, Paris, New York (NYSE) and the
Swiss exchange. The (depositary receipts for) preference shares and warrants B
are quoted on the Euronext Amsterdam Stock Market. Warrants B are also quoted on
the exchange of Brussels. Options on (depositary receipts for) ordinary shares
ING Group are traded at the Euronext Amsterdam Derivative Markets and the
Chicago Board Options Exchange.
RATING
Both ING Groep N.V. and ING Verzekeringen N.V. have an A+ rating from Standard &
Poor's and an Aa3 rating from Moody's. ING Bank N.V. has an Aa2 rating from
Moody's and an AA- from Standard & Poor's. All ratings from S&P were confirmed
in 2004 and the ratings from Moody's were confirmed in May 2005. The ratings
from Moody's have a stable outlook, and the ratings from S&P all have a positive
outlook.
IMPORTANT DATES IN 2005 AND 2006(1)
11 August 2005 Publication of first-half results
12 August 2005 ING share quoted ex-interim dividend
10 November 2005 Publication of results first nine months
16 February 2006 Publication of annual results 2005
25 April 2006 Annual general meeting of shareholders
27 April 2006 ING share quoted ex-final dividend
1. All dates shown are provisional.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ING Groep N.V.
(Registrant)
By: /s/H. van Barneveld
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H. van Barneveld
General Manager Corporate Control & Finance
By: /s/C. Blokbergen
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C. Blokbergen
Corporate Legal, Compliance & Security Department
Head Legal Department
Dated: May 12, 2005
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