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 November 4, 2004
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 43
This Report contains a copy of the following:
(1) The Press Release issued on November 4, 2004
Page 2 of 43
[ING GROUP LOGO]
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PRESS RELEASE
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Amsterdam o 4 November 2004
ING GROUP OPERATING NET PROFIT RISES 33.1% IN FIRST NINE MONTHS
SIGNIFICANT STEPS TAKEN TO MANAGE BUSINESS PORTFOLIO AND INCREASE RETURNS
o OPERATING NET PROFIT RISES 33.1% TO EUR 4,008 MILLION
o NET PROFIT RISES 47.6% TO EUR 4,437 MILLION (EUR 2.10 PER SHARE)
o OPERATING NET PROFIT FROM BANKING RISES 60.4% TO EUR 1,928 MILLION
o OPERATING NET PROFIT FROM INSURANCE RISES 14.9% TO EUR 2,080 MILLION
o DEBT/EQUITY RATIO OF ING GROUP IMPROVES TO 11.4% FROM 14.4% AT END 2003
o RAROC BANKING INCREASES TO 22.1%; IRR ON NEW LIFE INSURANCE BUSINESS 11.9%
o VALUE OF NEW LIFE INSURANCE BUSINESS INCREASES 41.2% TO EUR 466 MILLION
o THIRD-QUARTER NET PROFIT RISES 63.2% TO EUR 1,594 MILLION (EUR 0.74 PER SHARE)
CHAIRMAN'S STATEMENT
"Results in the third quarter were satisfying. Excluding one-off items, we saw a
22.1% increase in operating net profit compared with the third quarter last
year," said Michel Tilmant, Chairman of the Executive Board. "Premium income
showed solid growth at higher margins, resulting in an increase in the value of
new business at our life insurance operations. Risk costs at the bank continued
to fall and ING Direct posted a strong increase in operating profit."
"In the first nine months of this year, we have also taken important steps to
actively manage our portfolio of businesses. We have sold the Asian cash
equities business, our Australian non-life insurance joint venture, the Dutch
health insurance business, and CenE Bankiers in the Netherlands. We reached
agreements to sell our life insurance operations in Argentina and to exit the
individual life reinsurance business in the U.S. We also have reached an
agreement in principle about the sale of ING BHF-Bank in Germany. Last week we
also announced an initial public offering of our Canadian non-life business. We
expect to be able to complete this phase of our portfolio management strategy
next year."
"Cash proceeds from the divestments will be used to reduce debt and further
improve ING Group's debt/equity ratio, while reduced capital requirements as a
result of disposals will further strengthen ING's solvency ratios. Economic
capital released from under-performing or non-core units can then be reinvested
to support the growth of more profitable businesses."
"Underlying profit developments of our core businesses have continued to be
strong in the first nine months. We saw top-line growth in both banking and
insurance, and we continue to focus on containing our operating expenses. As a
result, ING remains confident about its full-year results for 2004."
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ALL FIGURES COMPARE FIRST NINE MONTHS 2004 WITH FIRST NINE MONTHS 2003 UNLESS
OTHERWISE STATED
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Page 3 of 43
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PRESS CONFERENCE CALL: 4 November, 9:30 a.m. CET. Listen in: NL +31 45 631 6908
UK +44 208 901 6990
ANALYST PRESENTATION: 4 November, 11:30 a.m. CET at ING House, Amsterdam.
Presentation & webcast www.ing.com
ANALYST CONFERENCE CALL: 4 November, 4 p.m. CET.
Listen in: NL +31 45 631 6910 U.K. +44 20 8901 6959 U.S. +1 303 262 2175
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MEDIA RELATIONS +31 20 541 5446 INVESTOR RELATIONS +31 20 541 5571
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Page 4 of 43
1.1 ING GROUP
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TABLE 1. ING GROUP KEY FIGURES
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
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Operating profit before tax:
- Insurance Europe 1,211 1,235 -1.9 437 437 0.0
- Insurance Americas 970 948 2.3 170 314 -45.9
- Insurance Asia/Pacific 631 304 107.6 104 128 -18.8
- Other -75 -11 -32 -99
------- ------- ----- -----
INSURANCE OPERATING PROFIT BEFORE TAX 2,737 2,476 10.5 679 780 -12.9
- Wholesale Banking 1,689 1,126 50.0 519 374 38.8
- Retail Banking 1,008 718 40.4 330 225 46.7
- ING Direct 320 93 244.1 117 62 88.7
- Other -158 -88 -87 -22
------- ------- ----- -----
BANKING OPERATING PROFIT BEFORE TAX 2,859 1,849 54.6 879 639 37.6
TOTAL OPERATING PROFIT BEFORE TAX 5,596 4,325 29.4 1,558 1,419 9.8
Taxation 1,378 1,081 27.5 278 403 -31.0
Third-party interests 210 232 -9.5 68 72 -5.6
------- ------- ----- -----
OPERATING NET PROFIT* 4,008 3,012 33.1 1,212 944 28.4
- of which Insurance 2,080 1,810 14.9 611 545 12.1
- of which Banking 1,928 1,202 60.4 601 399 50.6
Capital gains/neg. value adjustment shares 429 -5 382 33
------- ------- ----- -----
NET PROFIT 4,437 3,007 47.6 1,594 977 63.2
NET PROFIT PER SHARE (in EUR) 2.10 1.50 40.0 0.74 0.47 57.4
KEY FIGURES
Operating net return on equity** 23.2% 21.5%
Debt/equity ratio*** 11.4% 14.4%
Total staff (average FTEs) 113,200 115,400 -1.9
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* Operating net profit = net profit excluding realised capital gains/losses on shares and negative
revaluation reserve shares
** 2003 figures are full-year
*** 2003 figures are year-end
PROFIT FIRST NINE MONTHS
Operating net profit rose 33.1% to EUR 4,008 million in the first nine months of
2004, led by strong increases at ING's three banking business lines, as a result
of a sharp decline in risk costs and higher income. The insurance operations
also posted a solid increase, driven by Insurance Asia/Pacific, while profit
growth from Insurance Americas was largely offset by a charge at the individual
life reinsurance business in the U.S., which ING is exiting. Total operating net
profit excluding one-off items increased 34.1% to EUR 3,795 million from EUR
2,830 million.
Net profit rose 47.6% to EUR 4,437 million, lifted by EUR 429 million in
realised capital gains on equities in the first nine months of 2004 compared
with realised capital losses of EUR 5 million in the same period of 2003. The
high level of capital gains on shares, which were realised mainly in the third
quarter of 2004, is the result of a decision to sell part of the Dutch equity
portfolio to reduce volatility of the solvency ratios.
Net profit per share rose 40.0% to EUR 2.10 from EUR 1.50 in the first nine
months last year. The increase lagged growth in total net profit due to an
increase in the average number of shares outstanding as a result of ING's
dividend policy. Starting with the interim dividend of 2004, ING no longer
issues shares to fund the cash portion of the dividend, which will reduce future
dilution of earnings per share.
Page 5 of 43
Operating net profit from insurance rose 14.9% to EUR 2,080 million, driven by
higher profit from Insurance Asia/Pacific and a lower tax rate due to one-off
items. Operating profit before tax from Insurance Asia/Pacific increased to EUR
631 million from EUR 304 million, including a one-off gain of EUR 219 million
from the sale of ING's stake in its Australian non-life insurance joint venture
in the second quarter of 2004. Excluding that gain and the operating results of
the Australian venture from both periods, operating profit before tax from
Insurance Asia/Pacific rose 28.7%. Insurance Americas posted a 2.3% increase in
operating profit before tax to EUR 970 million, as strong growth in the core
life operations in the U.S. and the non-life operations in Canada was largely
offset by a one-off charge of EUR 252 million at the U.S. individual reinsurance
business. Excluding this one-off charge, Insurance Americas posted a 28.9%
increase in operating profit before tax. At Insurance Europe, operating profit
before tax decreased 1.9% to EUR 1,211 million, mainly due to lower realised
gains from real estate and private equity investments. Other results include
part of the gain on old reinsurance activities, the hedge result and interest on
core debt, which have not been allocated to the different insurance business
lines. Excluding one-off items, total operating net profit from insurance
increased 19.3% to EUR 1,864 million.
Operating net profit from banking rose 60.4% to EUR 1,928 million, lifted by
higher profit from all three business lines. Wholesale Banking posted a 50.0%
increase in operating profit before tax, driven by a substantial reduction in
risk costs and higher income, which was partly offset by an increase in
operating expenses due to a EUR 60 million restructuring charge at ING BHF-Bank.
Operating profit before tax from Retail Banking increased 40.4% to EUR 1,008
million, bolstered by higher income and lower risk costs. All main activities in
the Netherlands, Belgium, and Poland contributed to this improvement. Operating
profit before tax from ING Direct jumped to EUR 320 million from EUR 93 million
in the first nine months of 2003, mainly due to higher interest income, driven
by strong growth in funds entrusted. Other results consists mainly of interest
expenses that are not allocated to the different banking business lines.
Excluding one-off items, total operating net profit from banking increased 52.4%
to EUR 1,931 million.
ONE-OFF ITEMS
One-off items resulted in a net gain of EUR 213 million in the first nine months
of 2004 which was largely balanced by a net gain of EUR 182 million in the
comparable period last year. In the first nine months of 2004, one-off items
included a charge of EUR 164 million at the U.S. individual life reinsurance
business which ING is exiting, the release of redundant tax provisions for an
amount of EUR 142 million, a gain of EUR 87 million on the sale of CenE
Bankiers, a restructuring charge for ING BHF-Bank of EUR 36 million, a gain on
the sale of the Australian non-life operations of EUR 146 million, a gain on old
reinsurance business of EUR 92 million and a loss of EUR 54 million from the
sale of the Asian equities business. The corresponding period last year included
a gain of EUR 247 million from old reinsurance business and a restructuring
charge of EUR 65 million for ING BHF-Bank, ING Bank France and the international
wholesale banking activities. (See Appendix 2)
CURRENCY IMPACT
The weakening of most currencies against the euro had a negative impact of EUR
46 million on net profit in the first nine months. That was offset by a gain of
EUR 130 million after tax on the U.S. dollar hedge, compared with a gain of EUR
83 million on the hedge in the first nine months of 2003. ING has hedged the
expected profits in U.S. dollar and dollar-linked currencies for the remainder
of 2004.
THIRD-QUARTER PROFIT
Third-quarter operating net profit rose 28.4% to EUR 1,212 million from EUR 944
million in the third quarter of 2003. Operating net profit from banking
increased 50.6% to EUR 601 million, boosted by higher income and substantially
lower risk costs at both Wholesale Banking and Retail Banking, as well as
continued strong growth of ING Direct. Operating net profit from insurance rose
12.1% to EUR 611
Page 6 of 43
million as a result of a substantially lower tax burden due to the one-time
release of tax provisions. Operating profit before tax from insurance declined
12.9% to EUR 679 million, mainly as a result of the one-off charge at the U.S.
individual reinsurance business. Excluding that charge, profit before tax from
insurance rose 19.4%. Operating profit before tax from Insurance Europe was
unchanged as lower realised gains on real estate and private equity in the
Netherlands offset higher results from Belgium and the rest of Europe. Operating
profit before tax from Insurance Americas declined as a result of the charge at
the U.S. individual life reinsurance business, which more than offset growth at
the core life insurance business in the U.S. and continued strong underwriting
experience at the Canadian non-life business. Excluding that charge, profit
before tax from Insurance Americas rose 34.4% in the third quarter. At Insurance
Asia/Pacific, operating profit before tax declined compared with the third
quarter of 2003, when earnings included a one-time gain. Excluding that gain and
the profit contribution in the year-earlier figure from the Australian non-life
joint venture, which was sold, profit before tax from Insurance Asia/Pacific
increased 9.5%. Excluding one-off items, total operating net profit increased
22.1% to EUR 1,183 million. Third-quarter net profit increased 63.2% to EUR
1,594 million, boosted by capital gains on shares of EUR 382 million in the
third quarter of 2004.
Compared with the second quarter of 2004, operating net profit declined 24.5% to
EUR 1,212 million from EUR 1,605 million, driven by a 34.7% decrease in
operating net profit from insurance, on balance due to the one-off charge at the
U.S. reinsurance business, lower results from the Asian life business and the
gain on the sale of the Australian non-life insurance joint venture in the
second quarter. That was partly offset by better performance at the Dutch
insurance operations. Despite the EUR 87 million gain on the sale of CenE
Bankiers, operating net profit from banking declined 10.3% to EUR 601 million
from EUR 670 million, mainly due to higher operating expenses as a result of
restructuring at ING BHF-Bank, which was partly offset by lower risk costs.
Excluding one-off items, total operating net profit decreased 13.5% to EUR 1,183
million in the third quarter from EUR 1,367 million in the second quarter.
1.2 BALANCE SHEET & CAPITAL
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TABLE 2. KEY BALANCE SHEET FIGURES
30 September 31 December % 30 June
In EUR billion 2004 2003 Change 2004
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SHAREHOLDERS' EQUITY 24.6 21.3 15.5 24.1
- insurance operations 13.5 12.0 12.5 13.3
- banking operations 17.6 16.7 5.4 17.4
- eliminations* -6.5 -7.4 -6.6
TOTAL ASSETS 865.4 778.8 11.1 871.6
OPERATING NET RETURN ON EQUITY 23.2% 21.5% 24.8%
- insurance operations 21.4% 22.7% 23.0%
- banking operations 17.1% 11.1% 17.9%
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* own shares, subordinated loans, third-party interests, debenture loans and other eliminations
SHAREHOLDERS' EQUITY
On 30 September 2004, ING's shareholders' equity amounted to EUR 24.6 billion,
an increase of EUR 3.3 billion, or 15.5%, compared with year-end 2003. Net
profit from the first nine months added EUR 4.4 billion to shareholders' equity
and revaluations added EUR 0.2 billion, offset by realised capital gains
released to the profit and loss account of EUR -0.6 billion, the interim cash
dividend of EUR -0.4 billion, and exchange rate differences of EUR -0.2 billion.
CAPITAL RATIOS
The debt/equity ratio of ING Groep NV improved to 11.4% from 14.4% at the end of
2003 and 12.1% at the end of the second quarter of 2004. The improvement was
caused by a EUR 4.0 billion increase in the capital base due to retained
earnings and the issue of hybrid securities in June as well as a EUR 0.5
Page 7 of 43
billion decrease in core debt. The capital coverage ratio for ING's insurance
operations increased to 185% of regulatory requirements at the end of September,
compared with 180% at year-end 2003 and 184% at the end of June 2004. The Tier-1
ratio of ING Bank NV stood at 7.61% on 30 September 2004 up from 7.59% at the
end of 2003 and down from 7.65% at the end of the second quarter of 2004. The
solvency ratio (BIS ratio) for the bank fell to 11.19% from 11.34% at the end of
2003. Compared with year-end 2003, total risk-weighted assets rose by EUR 25.6
billion, or 10.2%, to EUR 276.9 billion. More than half of the increase was due
to the growth of ING Direct.
RETURN ON EQUITY
The operating net return on equity increased to 23.2% in the first nine months
of 2004 from 21.5% for the full year 2003. The operating net return on equity of
the insurance operations decreased to 21.4% in the first nine months from 22.7%
in 2003, while the operating net return on equity from banking rose to 17.1%
from 11.1%.
ASSETS UNDER MANAGEMENT
Assets under management increased 6.5% in the first nine months to EUR 493.0
billion at the end of September 2004. The EUR 30.3 billion increase resulted
from a net inflow of EUR 17.8 billion, EUR 10.2 billion from higher stock
markets, and EUR 4.6 billion from favourable currency rate differences.
Divestments had a negative impact of EUR 2.3 billion, mainly due to the
deconsolidation of Baring Private Equity Partners from the beginning of 2004.
1.3 INSURANCE OPERATIONS
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TABLE 3. ING GROUP: INSURANCE PROFIT & LOSS ACCOUNT
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
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PREMIUM INCOME 32,748 30,587 7.1 10,854 9,735 11.5
- of which life 27,567 24,935 10.6 9,428 8,131 16.0
- of which non-life 5,181 5,652 -8.3 1,426 1,604 -11.1
Income from investments 7,145 7,132 0.2 2,429 2,328 4.3
Commission income 892 978 -8.8 310 339 -8.6
Other income 506 710 -28.7 146 361 -59.6
------ ------ ------ ------
TOTAL OPERATING INCOME 41,291 39,407 4.8 13,739 12,763 7.6
Underwriting expenditure 34,167 32,267 5.9 11,555 10,367 11.5
Other interest expenses 852 951 -10.4 312 417 -25.2
Operating expenses 3,471 3,558 -2.4 1,153 1,181 -2.4
Investment losses 64 155 -58.7 40 18 122.2
------ ------ ------ ------
TOTAL OPERATING EXPENDITURE 38,554 36,931 4.4 13,060 11,983 9.0
OPERATING PROFIT BEFORE TAX 2,737 2,476 10.5 679 780 -12.9
- of which life insurance 1,648 1,716 -4.0 423 569 -25.7
- of which non-life insurance 1,089 760 43.3 256 211 21.3
Taxation 577 584 -1.2 39 201 -80.6
Third-party interests 80 82 -2.4 29 34 -14.7
------ ------ ------ ------
OPERATING NET PROFIT* 2,080 1,810 14.9 611 545 12.1
Capital gains/neg. value adjustment shares 429 -5 382 10
------ ------ ------ ------
NET PROFIT 2,509 1,805 39.0 993 555 78.9
KEY FIGURES
Value of new business** 466 330 41.2
Internal rate of return*** 11.9% 10.9%
Operating net return on equity*** 21.4% 22.7%
Staff (average FTEs) 49,600 51,500 -3.7
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* Operating net profit = net profit excluding realised capital gains/losses on shares and negative
revaluation reserve shares
** 2003 figures represent three-fourths of the full-year 2003 production
*** 2003 figures are full-year
Page 8 of 43
PROFIT FIRST NINE MONTHS
Operating net profit from insurance increased 14.9% to EUR 2,080 million in the
first nine months, led by very strong results from non-life insurance,
particularly in Canada, and the one-off gain from the sale of the Australian
non-life venture. Higher results from life insurance in Asia/Pacific, Europe
outside the Netherlands, and the core U.S. life business were more than offset
by the charge at the U.S. individual life reinsurance business.
Net profit from insurance increased 39.0% to EUR 2,509 million in the first nine
months, including EUR 429 million in capital gains on equities compared with EUR
-5 million in the first nine months last year. The gains, which were mainly
booked in the third quarter, result from a decision to sell part of the Dutch
equity portfolio in order to reduce volatility of the solvency ratios. The
effective tax rate on operating profit also decreased to 21.1% from 23.6% in the
first nine months of 2003, mainly due to some large releases of redundant tax
provisions in the third quarter. Total operating profit before tax from
insurance rose 10.5% to EUR 2,737 million.
Operating profit before tax from life insurance declined 4.0% to EUR 1,648
million, due entirely to the one-off charge at the individual life reinsurance
business in the U.S. Excluding that charge and one-off gains on old reinsurance
business in both periods, results from life insurance improved 15.0% to EUR
1,890 million. Good results at the core life business in the U.S., the life
operations in Europe outside the Netherlands, and the life businesses in
Asia/Pacific contributed to this development. Life results in the Netherlands
decreased by 12.1% to EUR 769 million due partly to lower realised gains on the
sale of real estate.
Operating profit before tax from non-life insurance increased 43.3% to EUR 1,089
million, driven by strong growth at the Dutch and Canadian units, as well as
some one-off items. Profit in the first nine months of 2004 included EUR 305
million of one-off items, including a gain on old reinsurance activities and the
sale of the Australian non-life operations. That compares with EUR 231 million
from one-off items in the same period last year relating to old reinsurance
activities. Excluding those items, profit before tax from non-life insurance
increased 48.2% to EUR 784 million.
Total operating income rose 4.8% to EUR 41,291 million, driven by a 7.1%
increase in premium income to EUR 32,748 million, led by life insurance sales,
particularly in the U.S. and Asia. Excluding the impact of currencies,
acquisitions and divestments, life premium income rose 17.4%. Non-life premium
income declined 8.3% to EUR 5,181 million due to currency effects and the sales
of the Australian non-life joint venture and the Dutch health insurance
operations. Excluding those items, non-life premiums increased 2.5%, driven by
increases in Canada, the Netherlands and Belgium. Investment income increased
0.2% to EUR 7,145 million, as higher income in Asia was offset by a decline in
Insurance Americas, largely due to currency effects.
Operating expenses from the insurance operations declined 2.4% to EUR 3,471
million, due to currency effects and divestments. On a comparable basis,
excluding currencies, acquisitions and divestments, operating expenses increased
5.5%, mainly due to a strong increase at the Dutch insurance operations as a
result of efforts to clear backlogs and improve service levels, as well as I.T.
costs. Almost all other operations world-wide showed either a modest increase or
a decrease in operating expenses. Expenses as a percentage of assets under
management for investment products increased by 4 basis points to 90 basis
points compared with 86 basis points for full-year 2003. Expenses as a
percentage of premiums for life products decreased to 12.38% from 13.17% in
2003. The expense ratio for non-life insurance was 29%, up from 27% a year
earlier.
Investment losses dropped to EUR 64 million, or 6 basis points of total
fixed-interest securities, which is far below the normalised level of about 20
basis points. In the first nine months last year, investment losses amounted to
EUR 155 million, or 15 basis points of total fixed-income securities.
Page 9 of 43
VALUE OF NEW LIFE INSURANCE BUSINESS
The value of new business at ING's life insurance operations increased to EUR
466 million, up 41.2% compared with three-fourths of full-year 2003 production.
Higher sales, higher margins and assumption changes all contributed to the
increase. Within Insurance Europe, the value of new business increased 40.0% to
EUR 98 million, driven by the Netherlands as it adjusted product pricing. In the
third quarter, that impact was partly offset by an increase in acquisition
expenses. The value of new life business from Insurance Americas increased 73.2%
to EUR 123 million, of which EUR 23 million is attributable to the inclusion of
the pension business in Latin America starting from 2004. The 2004 figures
reflect the removal of the individual life reinsurance business in the U.S.,
while the 2003 value of new business figures include EUR 14 million related to
this business. In Asia/Pacific, the value of new life business increased 29.6%
to EUR 245 million, accounting for more than half of the total value of new
business for ING's life insurance operations. The internal rate of return for
the business written in the first nine months was 11.9%, up from 10.9% overall
for 2003. (See Appendix 7)
1.4 BANKING OPERATIONS
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TABLE 4. ING GROUP: BANKING PROFIT & LOSS ACCOUNT
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
-------------------------------------------------------------------------------------------------------
Interest result 6,562 6,059 8.3 2,172 2,142 1.4
Commission 1,991 1,810 10.0 639 578 10.6
Other income 1,003 827 21.3 339 199 70.4
------ ------ ----- -----
TOTAL OPERATING INCOME 9,556 8,696 9.9 3,150 2,919 7.9
OPERATING EXPENSES 6,331 5,992 5.7 2,170 2,040 6.4
------ ------ ----- -----
Gross result 3,225 2,704 19.3 980 879 11.5
Addition to provisions for loan losses 366 855 -57.2 101 240 -57.9
------ ------ ----- -----
OPERATING PROFIT BEFORE TAX 2,859 1,849 54.6 879 639 37.6
Taxation 801 497 61.2 239 202 18.3
Third-party interests 130 150 -13.3 39 38 2.6
------ ------ ----- -----
OPERATING NET PROFIT 1,928 1,202 60.4 601 399 50.6
Capital gains/neg. value adjustment shares 23
------ ------ ----- -----
NET PROFIT 1,928 1,202 60.4 601 422 42.4
KEY FIGURES
Cost/income ratio 66.3% 68.9% 68.9% 69.9%
RAROC (pre-tax) 22.1% 17.9%
RAROC (after tax) 15.9% 13.1%
Total risk-weighted assets** (in EUR billion) 276.9 251.3 10.2
Addition to provisions for loan losses in
basis points of average credit-risk-weighted
assets 19 47
Staff (average FTEs) 63,600 63,900 -0.5
-------------------------------------------------------------------------------------------------------
* Operating net profit = net profit excluding realised capital gains/losses on shares and negative
revaluation reserve shares
** 30 September 2004 compared with year-end 2003
PROFIT FIRST NINE MONTHS
Operating net profit from banking rose 60.4% to EUR 1,928 million in the first
nine months of 2004, driven by a 9.9% increase in operating income and a sharp
reduction in risk costs. All three banking business lines reported strong
increases in profit before tax. The effective tax rate increased to 28.0%
Page 10 of 43
from 26.9% in the first nine months of 2003. Operating profit before tax rose
54.6% to EUR 2,859 million.
Total operating income from banking rose 9.9% to EUR 9,556 million, with almost
all income lines contributing to the increase. Interest income continued to be
the most important and stable contributor to income at the bank, supported by
the continued growth of ING Direct. The interest result rose 8.3% to EUR 6,562
million, driven by a higher average balance sheet total, mainly due to ING
Direct. The total interest margin narrowed 11 basis points to 1.49% compared
with the first nine months of 2003. That was mainly caused by lower interest
results on the asset and liability matching book in the Netherlands as well as
an increased share of the balance sheet total from outside the Netherlands,
mainly triggered by ING Direct which has an interest margin of about 1%. In the
third quarter, the interest margin narrowed to 1.42% from 1.49% in the second
quarter. Bank lending increased by EUR 24.0 billion, or 8.2%, from the end of
2003 to EUR 316.6 billion at the end of September. Corporate lending increased
by EUR 6.5 billion, while personal lending increased by EUR 17.4 billion. The
growth in personal lending was almost entirely due to a EUR 16.6 billion
increase in residential mortgages, of which EUR 9.8 billion was from ING Direct.
The sale of CenE Bankiers as per 30 September 2004 had a negative impact of EUR
2.8 billion on the growth of total bank lending. (See Appendix 6.4) Funds
entrusted to and debt securities of the banking operations increased by EUR 48.7
billion, or 12.9%, to EUR 426.5 billion, to a large extent caused by the
continued growth of ING Direct.
Commission income was up 10.0% to EUR 1,991 million, mainly driven by higher
securities-related commissions including a 33.2% increase in Management fees to
EUR 578 million, of which EUR 65 million is the net effect from the transfer of
ING Real Estate Investment Management companies from insurance to banking, and
the transfer of former Furman Selz businesses from banking to insurance.
Commissions from the securities business rose 9.0%, mainly in the Benelux.
Brokerage and advisory fees declined 20.6% to EUR 85 million. Commission from
insurance broking rose 24.4% to EUR 107 million, mainly in the Netherlands. (See
Appendix 6.5)
Other income increased 21.3% to EUR 1,003 million. Income from securities and
participating interests tripled to EUR 182 million supported by the EUR 87
million gain realised on the sale of CenE Bankiers in the third quarter, which
was partly offset by a one-off loss of EUR 42 million on the sale of the Asian
cash equities business in the first quarter. Results from financial transactions
declined 14.1% to EUR 470 million. The decrease was mainly caused by the loss of
EUR 48 million taken by Postbank in the first quarter of 2004 to compensate
customers for a disappointing return on investments related to the unit-linked
mortgage `MeerWaardehypotheek'. Due to the seasonally low financial markets
activities in the summer, results from financial transactions fell from EUR 146
million in the second quarter to EUR 92 million in the third. Other results
increased 60.3% to EUR 351 million, mainly caused by higher leasing income and
higher results from real estate, including rental income and profit from
property sales. (See Appendix 6.6)
Total operating expenses increased 5.7% to EUR 6,331 million, due to continued
investments to support the growth of ING Direct, as well as a restructuring
provision of EUR 60 million in the third quarter for ING BHF-Bank. Including the
EUR 42 million costs related to the sale of the Asian cash equities business in
the first quarter of 2004, total one-off expenses this year amounted to EUR 102
million. This was largely balanced by the EUR 82 million in provisions taken
last year to pay for restructuring at Wholesale Banking. Excluding those
factors, currency effects, and the impact of transfers of activities between
insurance and banking, operating expenses increased by 2.4%. The increase in
costs was outpaced by growth in income, resulting in an improvement of the
cost/income ratio of the banking activities to 66.3% in the first nine months of
2004, from 68.9% in the same period of 2003 and 70.1% for full-year 2003. The
average number of staff declined 0.5% to 63,600 in the first nine months of
2004.
Page 11 of 43
In the first nine months of 2004, ING added EUR 366 million to the provision for
loan losses, compared with EUR 855 million in the same period last year. The
addition equalled an annualised 19 basis points of average credit-risk-weighted
assets, compared with 47 basis points in the year-earlier period. In the
full-year 2003, the addition to the provision for loan losses was equal to 46
basis points. Risk costs continued to decline in the third quarter from the
second. ING added EUR 101 million to the provision for loan losses in the third
quarter, equal to 15 basis points of credit-risk-weighted assets, down from EUR
128 million, or 20 basis points, in the second quarter of 2004. Risk costs
remained well below the long-term average of about 35 basis points.
RAROC
The pre-tax Risk-Adjusted Return on Capital (RAROC) of ING's banking operations
improved strongly to 22.1% in the first nine months of 2004, compared with 17.9%
in the year-earlier period, due entirely to higher economic returns. Both
Wholesale Banking and ING Direct surpassed ING's hurdle, while the already high
return from Retail Banking improved further. The pre-tax RAROC for full-year
2003 was 17.0%. The after-tax RAROC in the first nine months of 2004 was 15.9%
compared with 13.1% in the same period last year, both of which were above ING's
target of 12.0%. 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 43
2.1 INSURANCE EUROPE OPERATING PROFIT BEFORE TAX 1.9% LOWER
o VALUE OF NEW LIFE INSURANCE BUSINESS IN EUROPE RISES 40.0% TO EUR 98 MILLION
o INTERNAL RATE OF RETURN FOR INSURANCE EUROPE INCREASES TO 11.9% FROM 10.9% IN
2003
o PROFIT FROM NETHERLANDS DECLINES 7.0% DUE TO LOWER CAPITAL GAINS, HIGHER
EXPENSES
---------------------------------------------------------------------------------------------
TABLE 5. INSURANCE EUROPE PROFIT & LOSS ACCOUNT
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
---------------------------------------------------------------------------------------------
PREMIUM INCOME 8,708 8,585 1.4 2,661 2,234 19.1
- of which life 6,990 6,753 3.5 2,260 1,842 22.7
- of which non-life 1,718 1,832 -6.2 401 392 2.3
Income from investments 3,074 3,123 -1.6 1,041 1,084 -4.0
Commission and other income 354 496 -28.6 121 184 -34.2
------ ------ ----- -----
TOTAL OPERATING INCOME 12,136 12,204 -0.6 3,823 3,502 9.2
Underwriting expenditure 9,411 9,378 0.4 2,920 2,502 16.7
Other interest expenses 230 283 -18.7 62 113 -45.1
Operating expenses 1,279 1,291 -0.9 413 445 -7.2
Investment losses 5 17 -70.6 -9 5 -280.0
------ ------ ----- -----
TOTAL OPERATING EXPENDITURE 10,925 10,969 -0.4 3,386 3,065 10.5
OPERATING PROFIT BEFORE TAX 1,211 1,235 -1.9 437 437 0.0
- of which life insurance 985 1,046 -5.8 351 367 -4.4
- of which non-life insurance 226 189 19.6 86 70 22.9
KEY FIGURES
Value of new business* 98 70 40.0
Internal rate of return** 11.9% 10.9%
Staff (average FTEs) 15,900 17,000 -6.5
---------------------------------------------------------------------------------------------
* 2003 figures represent three-fourths of full-year 2003 production
** 2003 figures are full-year
PROFIT FIRST NINE MONTHS
Operating profit before tax from Insurance Europe fell 1.9% to EUR 1,211
million, due to a 5.8% decline in profit from life insurance to EUR 985 million.
That was caused by lower results from life insurance in the Netherlands, despite
continued underlying growth at Nationale-Nederlanden, mainly as a result of
lower realised gains on real estate and one-off items. Almost all other units,
including Belgium, Poland and Hungary, posted higher results. Operating profit
before tax from non-life insurance rose 19.6% to EUR 226 million, driven by an
improvement in the claims ratio to 63% from 73% in the same period last year.
Total operating income declined 0.6% to EUR 12,136 million, as a slight increase
in premiums was offset by a decline in investment income. Total premium income
rose 1.4% to EUR 8,708 million, driven by a 3.5% increase in life premium
income, particularly in the Netherlands and Belgium. Non-life premium income
declined 6.2% due to the sale of ING's Dutch health insurance business in the
second quarter of 2004. Excluding the Dutch health insurance premiums from both
periods, non-life premium income increased 4.1%. Investment income fell 1.6%,
primarily due to lower realised capital gains on real estate in the Netherlands,
divestments and the transfer of a property portfolio from insurance to banking.
Operating expenses fell 0.9% to EUR 1,279 million, mainly as a result of the
sale of Sviluppo and the life operations in Italy in 2003 and the health
insurance business in the Netherlands in 2004. Excluding those impacts,
operating expenses rose 9.7%, due to a sharp increase in the Netherlands as a
result of expenses to reduce backlogs and improve efficiency at
Nationale-Nederlanden. Expenses in Belgium showed a moderate increase of 1.9%.
Page 13 of 43
VALUE OF NEW BUSINESS
The value of new life insurance business written by Insurance Europe was EUR 98
million, an increase of 40.0% compared with three-fourths of full-year 2003
production. The overall internal rate of return expected on these sales is
11.9%, up from 10.9% in 2003. The improvement in the internal rate of return was
seen largely in the Netherlands, where the company adjusted pricing on
single-premium products. The favourable impact of the pricing adjustments was
mitigated in the third quarter due to an increase in the allocation of
acquisition expenses to catch-up on expense overruns at the individual life
insurance business of Nationale-Nederlanden. As a result, the value of new
business in the Netherlands of EUR 33 million in the first nine months was only
slightly higher than the half-year figure of EUR 30 million. The internal rate
of return on new life business in the Netherlands increased to 9.8% in the first
nine months, from 8.0% in 2003, as a result of price adjustments on single
premium endowment policies. Belgium reported value of new business of EUR 39
million compared with EUR 41 million in 2003. The value of new business of EUR
26 million in the rest of Europe is nearly double the half-year result and up
EUR 5 million compared with three-fourths of the full-year 2003 production. The
increase from the half-year result reflects both higher production and higher
margins.
GEOGRAPHICAL BREAKDOWN INSURANCE EUROPE
--------------------------------------------------------------------------------
TABLE 6. INSURANCE EUROPE OPERATING PROFIT BEFORE TAX
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
--------------------------------------------------------------------------------
Netherlands 967 1,040 -7.0 346 371 -6.7
- of which life 769 875 -12.1 266 309 -13.9
- of which non-life 198 165 20.0 80 62 29.0
Belgium 99 72 37.5 35 23 52.2
- of which life 79 54 46.3 32 15 113.3
- of which non-life 20 18 11.1 3 8 -62.5
Rest of Europe* 145 123 17.9 56 43 30.2
----- ----- --- ---
Total 1,211 1,235 -1.9 437 437 0.0
--------------------------------------------------------------------------------
* Poland, Hungary, Czech Republic, Slovakia, Romania, Bulgaria, Greece, Spain
In the Netherlands, operating profit before tax from the insurance operations
declined 7.0% to EUR 967 million, caused by lower capital gains on real estate
(EUR -44 million), lower results on private equity investments (EUR -19
million), a lower gain from old reinsurance business (EUR -29 million) and
transfer of a real estate portfolio to ING Bank from 2004 (EUR -31 million).
Excluding those items, profit before tax increased 7.7%. The items above
primarily impacted the life results, which fell by 12.1% to EUR 769 million,
however excluding those factors, life results in the Netherlands increased 2.3%.
Profit before tax from the Dutch non-life insurance business rose 20.0% to EUR
198 million, driven by a favourable claims experience in Income, Fire and Motor
insurance, which more than offset a loss of EUR 14 million on the sale of the
health business. Total premium income in the Netherlands increased 1.1% to EUR
5,826 million as a 4.6% increase in life premium income more than offset an 8.3%
decline in non-life premium income caused by the sale of the Dutch health
insurance business. Excluding health insurance premiums from both periods,
non-life premium income rose 3.8% and total premiums increased 4.4%. Excluding
the Dutch health business, expenses rose 10.4% to EUR 978 million, due to higher
I.T. costs and continued efforts to reduce backlogs and improve service at
Nationale-Nederlanden. Operating profit before tax from Nationale-Nederlanden,
which is the main contributor to insurance profit in the Netherlands, was equal
to last year as continued growth was partly offset by higher costs. Excluding
one-time gains related to old reinsurance activities in both periods, profit
before tax from Nationale-Nederlanden increased 6.1%.
In Belgium, operating profit before tax from the insurance operations rose 37.5%
to EUR 99 million, bolstered by higher results from both life and non-life
insurance. Life results (including Luxembourg)
Page 14 of 43
rose 46.3% to EUR 79 million, driven by growth in the portfolio last year. Life
premium income rose 3.7% to EUR 1,642 million as higher sales of unit-linked
products more than offset a decline in universal life premiums. Non-life results
climbed 11.1% to EUR 20 million, due to higher results from fire and motor,
partly offset by losses in health insurance. Non-life premiums increased 5.4% to
EUR 252 million.
In the Rest of Europe, operating profit before tax increased 17.9% to EUR 145
million, driven by higher profit from Poland and Hungary. Premium income
declined 1.1% to EUR 988 million as a result of the sale in 2003 of ING's
Italian business. Excluding the impact of currencies and divestments, premium
income rose 7.5%. In addition, higher investment fee income and continued cost
control added to profit growth.
--------------------------------------------------------------------------------
TABLE 7. INSURANCE EUROPE PREMIUM INCOME
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
--------------------------------------------------------------------------------
Netherlands 5,826 5,764 1.1 1,644 1,470 11.8
- of which life 4,395 4,203 4.6 1,325 1,159 14.3
- of which non-life 1,431 1,561 -8.3 319 311 2.6
Belgium 1,894 1,822 4.0 701 449 56.1
- of which life 1,642 1,583 3.7 629 378 66.4
- of which non-life 252 239 5.4 72 71 1.4
Rest of Europe* 988 999 -1.1 316 315 0.3
----- ----- ----- -----
Total 8,708 8,585 1.4 2,661 2,234 19.1
--------------------------------------------------------------------------------
* Poland, Hungary, Czech Republic, Slovakia, Romania, Bulgaria, Greece, Spain
Page 15 of 43
2.2 INSURANCE AMERICAS OPERATING PROFIT BEFORE TAX INCREASES 2.3%
o EXCLUDING THE INDIVIDUAL REINSURANCE CHARGE, PROFIT BEFORE TAX INCREASES 28.9%
o PROFIT FROM CANADA MORE THAN DOUBLES, DRIVEN BY IMPROVED UNDERWRITING RESULTS
o VALUE OF NEW LIFE INSURANCE BUSINESS INCREASES 73.2% TO EUR 123 MILLION
-------------------------------------------------------------------------------------------
TABLE 8. INSURANCE AMERICAS PROFIT & LOSS ACCOUNT
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
-------------------------------------------------------------------------------------------
PREMIUM INCOME 17,349 16,667 4.1 5,819 5,608 3.8
- of which life 14,127 13,030 8.4 4,803 4,473 7.4
- of which non-life 3,222 3,637 -11.4 1,016 1,135 -10.5
Income from investments 3,135 3,410 -8.1 1,073 1,156 -7.2
Commission and other income 639 625 2.2 217 208 4.3
------- ------- ------ ------
TOTAL OPERATING INCOME 21,123 20,702 2.0 7,109 6,972 2.0
Underwriting expenditure 18,400 17,842 3.1 6,326 6,055 4.5
Other interest expenses 61 83 -26.5 21 37 -43.2
Operating expenses 1,636 1,694 -3.4 547 557 -1.8
Investment losses 56 135 -58.5 45 9
------- ------- ------ ------
TOTAL OPERATING EXPENDITURE 20,153 19,754 2.0 6,939 6,658 4.2
OPERATING PROFIT BEFORE TAX 970 948 2.3 170 314 -45.9
- of which life insurance 475 654 -27.4 -9 198 -104.5
- of which non-life insurance 495 294 68.4 179 116 54.3
KEY FIGURES
Value of new business* 123 71 73.2
Internal rate of return** 10.3% 9.0%
Staff (average FTEs) 25,400 26,300 -3.4
-------------------------------------------------------------------------------------------
* 2003 figures represent three-fourths of full-year 2003 production
** 2003 figures are full-year
PROFIT FIRST NINE MONTHS
Operating profit before tax from Insurance Americas increased 2.3% to EUR 970
million in the first nine months of 2004, reflecting a charge of EUR 252 million
in the third quarter due to poor mortality experience at the U.S. individual
life reinsurance business, which ING is exiting. Excluding that charge, profit
before tax rose 28.9% to EUR 1,222 million. The weakening of most currencies
against the euro also had a negative impact of EUR 81 million. Excluding both
the individual reinsurance charge and currency effects, operating profit before
tax increased 43.4%, driven by strong sales and higher asset levels in the U.S.
and continued premium growth and lower claims in Canada.
Operating income increased 2.0% to EUR 21,123 million lifted by a 4.1% increase
in premium income to EUR 17,349 million, which was driven by increased
production in the U.S. and Canada. Life premium income increased 8.4% to EUR
14,127 million, driven by the introduction of new products and increased
distribution in the U.S., while non-life premiums declined 11.4% as a result of
lower premium income from motor and property insurance in Mexico and currency
effects. Investment income fell 8.1% to EUR 3,135 million due largely to
currency impacts. Excluding currency impacts, total premium income increased
14.7% and investment income increased 0.7% due to the low interest rate
environment.
Operating expenses declined 3.4% as a result of currency effects. At constant
exchange rates and excluding the transfer of some investment management
activities from banking to insurance, expenses increased 2.9% due to increased
sales and benefit costs as a result of higher production.
VALUE OF NEW BUSINESS
The value of new life insurance business written by the continuing business of
Insurance Americas increased 73.2% to EUR 123 million compared with
three-fourths of the full-year new business value in
Page 16 of 43
2003, due in part to the inclusion of the Latin American pension business
starting in 2004. The 2004 figures reflect the removal of the individual life
reinsurance business in the U.S., while the 2003 value of new business figures
include EUR 14 million related to this business. The overall internal rate of
return through 30 September 2004 was 10.3%, up from 9.0% for the full year 2003,
due to continued focus on profitable revenue growth and expense controls in the
U.S. and the inclusion of the Latin American pension business. The U.S. internal
rate of return in U.S. dollars, rose to 10.8% for the nine months ended 30
September 2004 compared with 9.9% for the full-year 2003. In euro terms, the
internal rate of return for the U.S. rose to 10.1% from 9.2%.
GEOGRAPHICAL BREAKDOWN INSURANCE AMERICAS
--------------------------------------------------------------------------------
TABLE 9. INSURANCE AMERICAS OPERATING PROFIT BEFORE TAX
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
--------------------------------------------------------------------------------
United States 443 612 -27.6 -26 189 -113.8
Canada 341 134 154.5 123 52 136.5
Latin America 186 202 -7.9 73 73 0.0
- of which Mexico 134 159 -15.7 54 56 -3.6
- of which South America* 52 43 20.9 19 17 11.8
--- --- --- ---
Total 970 948 2.3 170 314 -45.9
--------------------------------------------------------------------------------
* Argentina, Brazil, Chile, Peru
In the United States, operating profit before tax from the insurance business
fell 27.6% to EUR 443 million, due to the charge of EUR 252 million in the third
quarter at the individual life reinsurance business. Excluding that charge,
operating profit before tax increased 13.6% to EUR 695 million. The decline of
the U.S. dollar against the euro also had a negative impact of EUR 56 million.
Excluding the reinsurance charge and currency impacts, operating profit before
tax increased 25.9%, lifted by higher asset levels, strong sales of annuities,
life insurance and retirement services, as well as lower credit losses and poor
individual reinsurance results in 2003. In the third quarter, excluding the
reinsurance charge and currency impacts, operating profit before tax increased
30.2% to EUR 226 million.
Premium income rose 6.7%, or 18.4% at constant currency rates, to EUR 14,159
million in the first nine months of 2004, driven by the introduction of new
products as well as increased distribution capacity for annuities, life and
retirement services, which helped increase market share. Premium growth was
strongest in the annuity business, where fixed annuity premium income rose 81.6%
and variable annuity premiums climbed 40.2% on the strength of equity index
annuities and variable annuity living benefits, as well as continued
productivity improvement among wholesalers.
Credit losses were 11 basis points in the first nine months, down from 27 basis
points in the same period of 2003. In the third quarter, credit losses increased
to 27 basis points from 6 basis points in the second quarter, principally due to
losses from a small portfolio of limited partnerships. As a result, the
composite margin narrowed to 127 basis points in the third quarter from 145
basis points in the second quarter. Excluding credit losses, the composite
margin increased to 154 basis points in the third quarter from 151 basis points
in the second. The core fixed-income portfolio performed in line with the prior
quarter, and remained well below historical averages.
Operating expenses declined 1.6% to EUR 1,087 million, but at constant exchange
rates operating expenses increased 8.3%. The increase is due in part to the
transfer of some investment management activities to Insurance Americas in 2004
that were previously reported under Wholesale Banking. Excluding this impact,
expenses increased 2.2% due to higher production levels and benefit costs.
In Canada, operating profit before tax from the non-life insurance activities
more than doubled to EUR 341 million from EUR 134 million during the first nine
months of 2004. Earnings reflected an improved
Page 17 of 43
underwriting experience and a reduction in the combined ratio to 84% compared
with 94% in the first nine months last year.
In Mexico, operating profit before tax declined 15.7% to EUR 134 million for the
nine months of 2004 as a result of currency exchange rates and the sale of the
Seguros Bital joint venture in the fourth quarter of 2003. Excluding these
impacts, operating profit before tax rose 3.7%, as an accounting change more
than offset weaker underwriting results. Claims experience was unfavourable
primarily due to several large claims in the non-life business, although claims
in the motor business continued to be favourable. Premium income declined 21.7%
to EUR 1,127 million, due in part to the decline of the peso against the euro.
At constant exchange rates, premiums fell 8.6% resulting from the non-renewal of
one large contract. Operating expenses declined 5.3% to EUR 238 million due to
the depreciation of the peso against the euro.
In South America, operating profit before tax from Chile, Brazil, Peru and
Argentina increased 20.9% to EUR 52 million, led by results in Chile. Premiums
rose 22.0% driven by higher annuity premiums in Chile. Operating expenses
decreased 16.4% supported by actions in Chile to consolidate branches and
offices. Results from Peru declined as a result of lower yields on invested
assets. ING agreed last month to sell its insurance business in Argentina and
the transaction is expected to close in the fourth quarter.
------------------------------------------------------------------------------------
TABLE 10. INSURANCE AMERICAS PREMIUM INCOME
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
------------------------------------------------------------------------------------
United States 14,159 13,272 6.7 4,795 4,566 5.0
Canada 1,658 1,623 2.2 578 585 -1.2
Latin America 1,532 1,772 -13.5 446 457 -2.4
- of which Mexico 1,127 1,440 -21.7 302 345 -12.5
- of which South America* 405 332 22.0 144 112 28.6
------ ------ ----- -----
Total 17,349 16,667 4.1 5,819 5,608 3.8
------------------------------------------------------------------------------------
* Argentina, Brazil, Chile, Peru
Page 18 of 43
2.3 INSURANCE ASIA/PACIFIC POSTS 28.7% INCREASE IN PROFIT
o INCLUDING GAIN ON SALE OF AUSTRALIAN BUSINESS, OPERATING PROFIT MORE THAN
DOUBLES
o PREMIUM INCOME INCREASES 22.9% TO EUR 6,674 MILLION
o VALUE OF NEW LIFE BUSINESS RISES TO EUR 245 MILLION, ACCOUNTING FOR 53% OF
ING'S TOTAL
-------------------------------------------------------------------------------------------------------
TABLE 11. INSURANCE ASIA/PACIFIC PROFIT & LOSS ACCOUNT
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
-------------------------------------------------------------------------------------------------------
PREMIUM INCOME 6,674 5,430 22.9 2,371 1,914 23.9
- of which life 6,444 5,145 25.2 2,364 1,814 30.3
- of which non-life 230 285 -19.3 7 100 -93.0
Income from investments 739 471 56.9 193 188 2.7
Commission and other income 96 119 -19.4 39 43 -9.3
----- ----- ----- -----
TOTAL OPERATING INCOME 7,509 6,020 24.7 2,603 2,145 21.4
Underwriting expenditure 6,353 5,154 23.3 2,307 1,835 25.7
Other interest expenses 6 8 -25.0 0 4 -100.0
Operating expenses 516 551 -6.4 189 175 8.0
Investment losses 3 3 0.0 3 3 0.0
----- ----- ----- -----
TOTAL OPERATING EXPENDITURE 6,878 5,716 20.3 2,499 2,017 23.9
OPERATING PROFIT BEFORE TAX 631 304 107.6 104 128 -18.8
- of which life 358 278 28.8 106 116 -8.6
- of which non-life 273 26 -2 12 -116.7
KEY FIGURES
Value of new business* 245 189 29.6
Internal rate of return ** 14.0% 14.7%
Staff (average FTEs) 8,300 8,200 1.2
-------------------------------------------------------------------------------------------------------
* 2003 figures represent three-fourths of full-year 2003 production
** 2003 figures are full-year
PROFIT FIRST NINE MONTHS
Operating profit before tax from Insurance Asia/Pacific increased to EUR 631
million from EUR 304 million, including a one-time gain of EUR 219 million from
the sale of ING's 50% stake in the Australian non-life insurance joint venture
in the second quarter of 2004. Excluding that gain and the operating results of
the Australian venture from both periods, operating profit rose 28.7% to EUR 360
million, led by higher life insurance profits in Taiwan, South Korea and Japan.
Across Asia/Pacific, profits were driven by higher premium income and lower
claims. In the third quarter, operating profit before tax declined compared with
the third quarter of 2003, when profit included a one-time gain of EUR 23
million. Excluding that gain and EUR 10 million in profits from the Australian
non-life joint venture, which was sold, profit before tax increased 9.5% to EUR
104 million from EUR 95 million, and climbed 13.0% at constant currency rates.
Total operating income increased 24.7%, boosted by higher premiums and the gain
on the sale of the Australian non-life joint venture. Premium income rose 22.9%
to EUR 6,674 million, driven by strong life insurance sales in Japan and South
Korea. Premium income from life insurance increased 25.2% to EUR 6,444 million,
while non-life premium income declined 19.3%, reflecting the sale of the
Australian non-life joint venture. Excluding the impact of currencies and
divestments, total premium income from Asia/Pacific increased 29.8%, with
premiums showing double-digit growth rates in local currency terms in Japan
(63.5%), South Korea (55.4%), Malaysia (18.4%), Hong Kong (20.3%), Thailand
(35.7%), India (283.3%) and China (13.6%). In the third quarter, premium income
rose 23.9%, though adjusted for the sale of the Australian non-life business,
premium income rose 29.8%. Investment income was boosted by the EUR 219 million
gain on the sale of the Australian non-life business. Excluding that gain,
investment income rose 10.4%.
Page 19 of 43
Operating expenses fell 6.4% to EUR 516 million, reflecting a number of one-off
items as well as the decline of many currencies against the euro. The favourable
settlement of a wage-tax assessment resulted in the release of a EUR 30 million
provision in the second quarter of 2004. In Taiwan, premium tax rates fell from
5% to 2% resulting in an EUR 11 million reduction in costs in the first nine
months. Excluding those items, operating expenses increased by 1.1%, reflecting
continued efforts to control costs. In the third quarter, operating expenses
increased 8.0% as a result of investments in product systems and process
improvements at the Australian life and wealth management joint venture, most of
which are non-recurring.
VALUE OF NEW BUSINESS
The value of new life insurance business written by Insurance Asia/Pacific was
EUR 245 million in the first three quarters of the year, up 29.6% compared with
three-fourths of the full-year production in 2003 and accounting for more than
half of ING Group's total. Most of the increase in new business value is due to
Japan, where strong sales, higher margins and higher assumed investment returns
due to interest rate increases in Japan all had a favourable impact on results.
ING invested EUR 334 million to write new life insurance business in the region
in the first three quarters of 2004, and the overall internal rate of return
expected on this investment is 14.0%. This compares with an overall rate of
return of 14.7% in 2003. The decline in IRR is primarily attributable to an
increase in the capital levels reflected in the Taiwan business.
GEOGRAPHICAL BREAKDOWN INSURANCE ASIA/PACIFIC
-------------------------------------------------------------------------------
TABLE 12. INSURANCE ASIA/PACIFIC OPERATING PROFIT BEFORE TAX
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
-------------------------------------------------------------------------------
Australia 366 98 273.5 29 35 -17.1
- of which life 95 73 30.1 31 25 24.0
- of which non-life 271 25 -2 10 -120.0
Korea 77 57 35.1 26 24 8.3
Taiwan 89 91 -2.2 29 45 -35.6
Japan 65 37 75.7 20 21 -4.8
Rest of Asia* 34 21 61.9 0 3 -100.0
---- ---- ---- ----
Total 631 304 107.6 104 128 -18.8
-------------------------------------------------------------------------------
* Including China, India, Thailand, Indonesia, Hong Kong and Malaysia
In Australia, operating profit before tax for the first nine months increased to
EUR 366 million from EUR 98 million, reflecting the EUR 219 million gain on the
sale of the non-life insurance joint venture. Excluding that gain and operating
profit from the business in both periods, as well as results from the Australian
unit of ING Real Estate which was transferred to Wholesale Banking in 2004,
profit from the ongoing Australian operations increased 39.7% to EUR 95 million.
Operating profit before tax from ING's Australian life and wealth-management
joint venture with ANZ grew 31.4% to EUR 68 million, mainly due to improved
capital investment earnings and operating profit from the life insurance
business.
In Korea, operating profit before tax rose 35.1% to EUR 77 million, driven by
higher sales of life insurance, higher renewal premiums and continued low claim
levels. Premium income increased 44.4% to EUR 1,148 million, and increased 55.4%
in local currency terms. During the second quarter of 2004, ING Life Korea
became the largest foreign insurance company in the country and now ranks fourth
in the life insurance market in terms of premiums. In the third quarter of 2004,
ING announced that it will acquire a 49% stake in a life insurance joint venture
with Kookmin Bank, called KB Life. The purchase is expected to be completed in
the fourth quarter of 2004.
Page 20 of 43
In Taiwan, operating profit before tax declined 2.2% to EUR 89 million from EUR
91 million in the same period last year, when profit was boosted by a one-time
gain of EUR 23 million. Excluding that gain, profit before tax increased 30.9%,
driven mainly by higher mortality profits, foreign currency gains and a 13.1%
drop in operating expenses due in part to the reduction of the premium tax rate
from 5% to 2%. Taiwan has doubled its programme to strengthen reserves due to
the continued low interest rate environment, resulting in a charge of EUR 75
million in the first nine months of 2004, up from EUR 37.5 million in the same
period last year. The company has also increased its focus on selling
investment-linked products, which accounted for 64.0% of new business premium
income in the first three quarters of 2004. Total premiums declined 1.8% but
increased 5.3% in local currency terms.
In Japan, operating profit before tax increased 75.7% to EUR 65 million from EUR
37 million in the year-earlier period, led by higher sales of corporate-owned
life insurance products and single-premium variable annuity products. Premium
income rose 61.5% to EUR 2,346 million.
In the Rest of Asia, operating profit before tax rose to EUR 34 million from EUR
21 million, including the EUR 30 million release of the wage tax provision in
2004 and a EUR 11 million release of a contingency reserve in 2003. The results
also reflect increased start-up losses to grow the businesses in India and
China. In Malaysia, operating profit before tax increased 23.8% to EUR 24
million, driven by growth in sales of employee benefits and individual life
insurance.
------------------------------------------------------------------------------
TABLE 13. INSURANCE ASIA/PACIFIC PREMIUM INCOME
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Australia 1,094 1,097 -0.3 345 407 -15.2
Korea 1,148 795 44.4 428 284 50.7
Taiwan 1,622 1,651 -1.8 543 562 -3.4
Japan 2,346 1,453 61.5 903 507 78.1
Rest of Asia* 464 434 6.9 152 154 -1.3
----- ----- ----- -----
Total 6,674 5,430 22.9 2,371 1,914 23.9
------------------------------------------------------------------------------
* including India, China, Hong Kong, Thailand, Indonesia and Malaysia
Page 21 of 43
2.4 WHOLESALE BANKING OPERATING PROFIT BEFORE TAX RISES 50.0%
o RISK COSTS DECLINE SHARPLY TO 15 BASIS POINTS FROM 55 BASIS POINTS
o INCOME INCREASES 2.7% AND COST/INCOME RATIO IMPROVES TO 59.1%
o RISK-ADJUSTED RETURN ON CAPITAL IMPROVES TO 19.0% FROM 16.1%
-----------------------------------------------------------------------------------------------------------------
TABLE 14. WHOLESALE BANKING PROFIT & LOSS ACCOUNT
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
-----------------------------------------------------------------------------------------------------------------
Interest result 2,551 2,721 -6.2 825 949 -13.1
Commission 1,053 939 12.1 329 256 28.5
Other income 949 773 22.8 295 250 18.0
------ ------ ----- -----
TOTAL OPERATING INCOME 4,553 4,433 2.7 1,449 1,455 -0.4
OPERATING EXPENSES 2,691 2,662 1.1 896 902 -0.7
------ ------ ----- -----
Gross result 1,862 1,771 5.1 553 553 0.0
Addition to provisions for loan losses 173 645 -73.2 34 179 -81.0
------ ------ ----- -----
OPERATING PROFIT BEFORE TAX 1,689 1,126 50.0 519 374 38.8
KEY FIGURES
Cost/income ratio 59.1% 60.0% 61.8% 62.0.%
RAROC (pre-tax) 19.0% 16.1%
Total risk-weighted assets* (in EUR billion) 158.5 152.9 3.7
Addition to provisions for loan losses in
basis points of average credit-risk-weighted
assets 15 55
Staff (average FTEs) 24,000 24,700 -2.8
-----------------------------------------------------------------------------------------------------------------
* 30 September 2004 compared with year-end 2003
PROFIT FIRST NINE MONTHS
Operating profit before tax from Wholesale Banking increased 50.0% to EUR 1,689
million, mainly driven by a sharp decline in risk costs. Excluding one-off items
such as the gain on the sale of CenE Bankiers, restructuring costs and the loss
on the sale of the Asian equities business, as well as currency effects and the
transfer of businesses between insurance and banking, comparable profit before
tax rose 39.6% to EUR 1,746 million.
Total operating income increased 2.7% to EUR 4,553 million, supported by a 22.8%
increase in Other income to EUR 949 million, including a EUR 87 million gain
from the sale of CenE Bankiers in the Netherlands in the third quarter of 2004.
Other income also includes a one-off loss of EUR 42 million on the sale of the
Asian cash equities business, which was booked in the first quarter of 2004.
Commission income increased 12.1% to EUR 1,053 million, driven by ING Real
Estate and Belgium, while the interest result declined 6.2% due to lower
interest margins, particularly in the Netherlands.
Operating expenses rose 1.1% to EUR 2,691 million, largely due to a
restructuring provision of EUR 60 million in the third quarter of 2004 for ING
BHF-Bank. Total one-off expenses this year amounted to EUR 102 million,
including EUR 42 million in costs related to the sale of the Asian cash equities
business in the first quarter. That compares with a one-off charge of EUR 82
million in the first nine months of 2003 to pay for restructuring at ING
BHF-Bank, ING Bank France and the international wholesale banking activities.
Excluding those one-off costs, currency effects, and the impact of transfers of
activities between insurance and banking, operating expenses rose 1.2%. The
cost/income ratio for Wholesale Banking improved to 59.1% from 60.0% in the
first nine months of 2003 and 63.3% for full-year 2003. The average number of
wholesale staff fell 2.8% compared with the first nine months of 2003, mainly
due to the sale of the Asian cash equities business and the restructuring in
2003, offset by higher staff numbers at ING Real Estate as a result of the
transfer of activities from insurance to banking.
Page 22 of 43
The addition to the provision for loan losses declined sharply to EUR 173
million from EUR 645 million in the first nine months of 2003, mainly in the
Netherlands, Germany and the Americas. The addition was equal to an annualised
15 basis points of average credit-risk-weighted assets, compared with 55 basis
points in the same period last year, and 56 basis points for full-year 2003.
GEOGRAPHICAL BREAKDOWN WHOLESALE BANKING
----------------------------------------------------------------------------------------------------------
TABLE 15. WHOLESALE BANKING OPERATING PROFIT BEFORE TAX
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
----------------------------------------------------------------------------------------------------------
Netherlands 756 717 5.4 268 273 -1.8
Belgium 581 480 21.0 138 131 5.3
Germany -37 -171 -45 -47
Rest of world 189 57 231.6 73 8 812.5
Other -43 -73 -18 -49
----- ----- --- ---
SUBTOTAL WHOLESALE BANKING 1,446 1,010 43.2 416 316 31.6
Asset management* 243 116 109.5 103 58 77.6
----- ----- --- ---
TOTAL 1,689 1,126 50.0 519 374 38.8
----------------------------------------------------------------------------------------------------------
* ING Real Estate and Baring Asset Management
In the Netherlands, operating profit before tax from Wholesale Banking increased
5.4% to EUR 756 million, due to a sharp decline in risk costs and the gain on
CenE Bankiers. In the first nine months of 2004, risk costs were only 10 basis
points of average credit-risk-weighted assets, supported by the release of some
debtor provisions, compared with 43 basis points in the same period last year.
Despite the EUR 87 million gain on the sale of CenE Bankiers, the gross result
decreased 10.3%, mainly due to lower results from financial markets activities,
including lower interest results on the asset and liability matching book. The
gross result from the wholesale banking activities of the Dutch branch network
was also lower, due to relatively high non-recurring revenues in 2003 and
refined allocations of expenses between Wholesale Banking and Retail Banking.
Total operating income in the Netherlands fell 2.5%, while operating expenses
rose 7.7%, partly due to the refined allocations of expenses.
In Belgium, operating profit before tax from Wholesale Banking increased 21.0%
to EUR 581 million, thanks to strong corporate banking results and lower risk
costs. Total income rose 5.2%, while operating expenses decreased 2.9%. As a
result of releases of some debtor provisions, risk costs were only 2 basis
points of average credit-risk-weighted assets compared with 12 basis points in
the year-earlier period.
In Germany, the wholesale banking activities of ING BHF-Bank posted an operating
profit before tax of EUR 23 million, excluding a restructuring provision of EUR
60 million, due to substantially lower risk costs and higher income. Including
the restructuring provision, the wholesale activities of ING BHF-Bank posted a
loss before tax of EUR 37 million, narrowing from a loss of EUR 171 million in
the first nine months of 2003. Risk costs fell from 152 basis points of average
credit-risk-weighted assets in the first nine months of 2003 to 69 basis points
in the same period this year. Total income increased 7.0%, driven by higher
interest results. Operating expenses were up 5.1%, due to the restructuring
provision. Excluding that charge and a EUR 30 million restructuring charge in
the second quarter of 2003, operating expenses fell 6.5%. ING BHF-Bank as a
whole, including retail banking and private banking activities, posted a loss of
EUR 31 million, including the restructuring charge, compared with a loss of EUR
176 million in the first nine months last year. ING reached an agreement in
principle on 30 September to sell parts of ING BHF-Bank to Sal. Oppenheim. The
transaction is expected to be completed by year-end.
In the rest of the world the wholesale banking activities posted an operating
profit before tax of EUR 189 million, more than triple the EUR 57 million profit
posted in the same period last year. Excluding one-off
Page 23 of 43
items (a loss and expenses of EUR 84 million from the sale of the Asian equities
business in the first quarter of 2004 and a restructuring provision of EUR 37
million in the third quarter of 2003) profit before tax climbed to EUR 263
million from EUR 94 million. This increase was fully caused by EUR 177 million
lower risk costs, which fell to 10 basis points from 89 basis points of average
credit-risk-weighted assets in the first nine months of 2003. Particularly the
operating profit before tax in the Americas and Central Europe improved
significantly.
The banking asset management units, including ING Real Estate and Baring Asset
Management, doubled their operating profit before tax to EUR 243 million from
EUR 116 million in the first nine months last year. ING Real Estate posted an
operating profit before tax of EUR 199 million, up from EUR 92 million in the
first nine months of 2003, including EUR 38 million from the transfer of the ING
Real Estate Investment Management companies from insurance to banking. Excluding
that impact, operating profit before tax from ING Real Estate rose 53.1%, driven
by strong revenue growth across all business lines and substantially higher
profits from the finance and development activities in the first nine months of
2004. Pre-tax profit of Baring Asset Management rose to EUR 28 million from EUR
13 million, mainly as a result of higher stock market levels.
RAROC
The pre-tax Risk-Adjusted Return on Capital for Wholesale Banking improved
strongly to 19.0% from 16.1% in the first nine months last year, driven by
higher economic returns while the use of economic capital gradually decreased.
With the exception of the Netherlands, all regions reported improved RAROCs.
Within the rest of world, both Americas and Central Europe are performing above
ING's hurdle of 18.5%, while the wholesale activities in Asia and the U.K. were
both well below ING's hurdle.
------------------------------------------------------------------------------------------------
TABLE 16. WHOLESALE BANKING RISK-ADJUSTED RETURN ON CAPITAL
RAROC % (pre-tax) ECONOMIC CAPITAL (in EUR billion)
9M 2004 9M 2003 FY 2003 9M 2004 9M 2003 FY 2003
------------------------------------------------------------------------------------------------
Netherlands 26.0 30.7 28.2 3.0 3.0 2.9
Belgium 24.0 20.0 16.1 2.6 2.6 2.7
Germany 0.8 -2.1 -3.8 1.1 1.4 1.3
Rest of world 9.5 6.3 5.0 2.1 2.5 2.5
Other -30.6 -68.1 -45.4 0.2 0.1 0.3
--- ---- ----
SUBTOTAL WHOLESALE BANKING 17.2 15.5 12.6 9.0 9.6 9.7
Asset management* 37.4 28.0 44.0 0.9 0.5 0.4
--- ---- ----
TOTAL 19.0 16.1 13.9 9.9 10.1 10.1
------------------------------------------------------------------------------------------------
* ING Real Estate and Baring Asset Management
Page 24 of 43
2.5 RETAIL BANKING OPERATING PROFIT BEFORE TAX RISES 40.4%
o INCOME INCREASES 6.4%, WHILE COST/INCOME RATIO IMPROVES TO 70.1%
o RISK COSTS DROP TO 22 BASIS POINTS FROM 33 BASIS POINTS
o RISK-ADJUSTED RETURN ON CAPITAL IMPROVES FURTHER TO 47.3%
-----------------------------------------------------------------------------------------------------------------
TABLE 17. RETAIL BANKING PROFIT & LOSS ACCOUNT
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
-----------------------------------------------------------------------------------------------------------------
Interest result 2,933 2,712 8.1 998 920 8.5
Commission 877 847 3.5 292 313 -6.7
Other income -40 -16 7 -76
----- ----- ----- -----
TOTAL OPERATING INCOME 3,770 3,543 6.4 1,297 1,157 12.1
OPERATING EXPENSES 2,642 2,657 -0.6 928 890 4.3
----- ----- ----- -----
Gross result 1,128 886 27.3 369 267 38.2
Addition to provisions for loan losses 120 168 -28.6 39 42 -7.1
----- ----- ----- -----
OPERATING PROFIT BEFORE TAX 1,008 718 40.4 330 225 46.7
KEY FIGURES
Cost/income ratio 70.1% 75.0% 71.5% 76.9%
RAROC (pre-tax) 47.3% 41.2%
Total risk-weighted assets* (in EUR billion) 74.1 69.9 6.0
Addition to provisions for loan losses in
basis points of average credit-risk-weighted
assets 22 33
Staff (average FTEs) 34,500 35,500 -2.8
-----------------------------------------------------------------------------------------------------------------
* 30 September 2004 compared with year-end 2003
PROFIT FIRST NINE MONTHS
Operating profit before tax from Retail Banking increased 40.4% to EUR 1,008
million, driven by continued income growth and strict cost control, particularly
in the Netherlands and Belgium. The gross result increased 27.3% compared with
the first nine months of 2003, while additions to provisions for loan losses
were 28.6% lower.
Total operating income rose 6.4% to EUR 3,770 million in the first nine months
of 2004. Interest income increased 8.1% due to higher mortgage lending and
increased savings. Commission income rose 3.5%, while other income declined,
mainly due to a EUR 48 million loss taken by Postbank in the first quarter of
2004 to compensate customers for a disappointing return on investments related
to the unit-linked mortgage product "MeerWaardehypotheek". Excluding that loss,
total income increased 7.8%.
Operating expenses from Retail Banking declined 0.6% to EUR 2,642 million as
continued cost control offset the impact of the collective labour agreement. As
a result, the cost/income ratio improved to 70.1% from 75.0% in the first nine
months of 2003 and 73.9% for full-year 2003. The average number of retail staff
was 2.8% lower than in the same period of 2003.
The addition to the provision for loan losses declined 28.6% to EUR 120 million
from EUR 168 million in the first nine months last year, mainly in the
Netherlands and Poland. The addition was equal to an annualised 22 basis points
of average credit-risk-weighted assets compared with 33 basis points in the
first nine months of 2003 and 27 basis points for the full-year 2003.
Page 25 of 43
GEOGRAPHICAL BREAKDOWN RETAIL BANKING
--------------------------------------------------------------------------------
TABLE 18. RETAIL BANKING OPERATING PROFIT BEFORE TAX
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
--------------------------------------------------------------------------------
Netherlands 844 698 20.9 283 252 12.3
Belgium 132 40 230.0 32 6 433.3
Poland 13 -4 2 7 -71.4
Other retail* 19 -16 13 -40
----- --- --- ---
TOTAL 1,008 718 40.4 330 225 46.7
--------------------------------------------------------------------------------
* mainly ING Vysya Bank, the retail activities of ING BHF-Bank, Private Banking
rest of world, Kookmin Bank stake
In the Netherlands, operating profit before tax from retail banking rose 20.9%
to EUR 844 million. Total income increased 3.2%, driven by higher interest
results as a result of increased mortgage loans and savings. That more than
offset the EUR 48 million loss taken by Postbank for the unit-linked mortgage
product in the first quarter of 2004. Excluding that loss, total income
increased 5.2%. The residential mortgage portfolio in the Netherlands rose by
EUR 5.8 billion in the first nine months to EUR 79.7 billion at the end of
September 2004. Operating expenses were 2.6% lower, while risk costs declined
from 29 basis points of average credit-risk-weighted assets to 20 basis points
in the first nine months of 2004.
In Belgium operating profit before tax from retail banking more than tripled to
EUR 132 million from EUR 40 million, driven by strong income growth. Total
income rose 15.3%, mainly due to higher interest results caused by increased
lending and savings volume. Operating expenses rose 4.4%. The addition to the
provision for loan losses remained unchanged at 20 basis points of average
credit-risk-weighted assets.
In Poland, the operating profit before tax of the retail banking activities of
ING Bank Slaski turned from a loss of EUR 4 million in the first nine months of
2003 to a profit of EUR 13 million this year. The swing was mainly due to a 53%
decline in risk costs, however the level of loan loss provisions remains high.
The Other retail banking activities posted an operating profit before tax of EUR
19 million, improving from a loss of EUR 16 million in the first nine months of
2003. The improvement can be largely attributed to ING Vysya Bank in India,
which incurred a substantial loss in the third quarter of 2003 due to the
reclassification of a trading portfolio into an investment portfolio, bringing
ING Vysya Bank, which was consolidated in 2002, into line with ING's accounting
principles.
RAROC
The pre-tax Risk-Adjusted Return on Capital for the business line Retail Banking
climbed to 47.3% from 41.2% in the first nine months last year. All regions
reported improved RAROCs.
--------------------------------------------------------------------------------
TABLE 19. RETAIL BANKING RISK-ADJUSTED RETURN ON CAPITAL
RAROC % (pre-tax) ECONOMIC CAPITAL (in EUR billion)
9M 2004 9M 2003 FY 2003 9M 2004 9M 2003 FY 2003
--------------------------------------------------------------------------------
Netherlands 71.0 64.3 62.2 1.6 1.5 1.5
Belgium 38.0 9.0 18.3 0.4 0.5 0.5
Poland 21.2 13.4 19.5 0.1 0.1 0.1
Other retail* 0.5 -2.5 5.4 0.7 0.4 0.4
--- --- ---
TOTAL 47.3 41.2 43.4 2.8 2.5 2.5
--------------------------------------------------------------------------------
* mainly ING Vysya Bank, the retail activities of ING BHF-Bank, Private Banking
rest of world, Kookmin Bank stake
Page 26 of 43
2.6 ING DIRECT PROFIT JUMPS TO EUR 320 MILLION FROM EUR 93 MILLION
o FUNDS ENTRUSTED RISES 41% IN FIRST NINE MONTHS TO EUR 139.7 BILLION
o 2.2 MILLION NEW CUSTOMERS ADDED IN FIRST NINE MONTHS, BRINGING TOTAL TO
10.7 MILLION
o MORTGAGE LENDING PORTFOLIO GROWS 47% TO EUR 30.8 BILLION
-----------------------------------------------------------------------------------------------------------------
TABLE 20. ING DIRECT* PROFIT & LOSS ACCOUNT
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
-----------------------------------------------------------------------------------------------------------------
Interest result 1,177 668 76.2 430 278 54.7
Commission 60 24 150.0 16 9 77.8
Other income 9 11 -18.2 3 2 50.0
----- ----- ----- -----
TOTAL OPERATING INCOME 1,246 703 77.2 449 289 55.4
OPERATING EXPENSES 853 571 49.4 304 211 44.1
----- ----- ----- -----
Gross result 393 132 197.7 145 78 85.9
Addition to provisions for loan losses 73 39 87.2 28 16 75.0
----- ----- ----- -----
OPERATING PROFIT BEFORE TAX 320 93 244.1 117 62 88.7
KEY FIGURES
Cost/income ratio 68.5% 81.2% 67.7% 73.0%
RAROC (pre-tax) 20.0% 10.7%
Total risk-weighted assets** (in EUR billion) 44.3 28.5 55.4
Addition to provisions for loan losses in basis
points of average credit-risk-weighted assets 26 22
Staff (average in FTE) 5,100 3,700 37.8
-----------------------------------------------------------------------------------------------------------------
* Including ING Card from 2004
** 30 September 2004 compared with year-end 2003
PROFIT FIRST NINE MONTHS
Operating profit before tax from ING Direct rose to EUR 320 million in the first
nine months of 2004 compared with EUR 93 million in the same period last year as
it continued to attract new customers and increase funds entrusted. Of the eight
countries in which ING Direct is active, it is profitable in all except the
United Kingdom, where it started operations in May 2003.
Operating income increased 77.2% to EUR 1,246 million, driven mainly by a 76.2%
jump in the interest result triggered by the continued growth in funds
entrusted. Since year-end 2003, total funds entrusted grew by EUR 40.3 billion,
or 40.5%, to EUR 139.7 billion. In the 12 months ended September 30, funds
entrusted increased 47.4%. Growth in mortgage lending also boosted income. At
the end of September, ING Direct had a total mortgage loan portfolio of EUR 30.8
billion, an increase of EUR 9.8 billion from the end of 2003, particularly due
to growth in the U.S. and Germany.
Operating expenses at ING Direct increased 49.4% to EUR 853 million as a result
of higher marketing costs and expenses to handle the continued growth of the
business, in particular the strong increase in mortgage distribution. Since
year-end 2003, the number of customers increased by nearly 2.2 million, or
25.7%, to 10.7 million. The cost/income ratio of ING Direct improved to 68.5%
from 81.2% in the first nine months last year. The average number of full-time
employees at ING Direct increased 37.8% to 5,100 in the first nine months of
2004, mainly due to expansion in Germany, the U.S. and the U.K.
The addition to the provision for loan losses almost doubled, in line with the
strong growth of the business, reaching EUR 73 million in the first nine months
of 2004 compared with EUR 39 million in the same period last year. Risk costs
equalled an annualised 26 basis points of average credit-risk-weighted assets,
up from 22 basis points in the first nine months of 2003, and unchanged from
full-year 2003.
Page 27 of 43
RAROC
The pre-tax Risk-Adjusted Return on Capital for ING Direct improved to 20.0%
from 10.7% in the first nine months of 2003, surpassing ING's hurdle of 18.5%.
The increase was due entirely to higher economic returns as the business units
reach critical mass. The economic capital increased to EUR 2.3 billion from EUR
1.6 billion in the first nine months of 2003.
GEOGRAPHICAL BREAKDOWN ING DIRECT
--------------------------------------------------------------------------------
TABLE 21. ING DIRECT OPERATING PROFIT BEFORE TAX (including ING Card)
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
--------------------------------------------------------------------------------
Canada 49 39 25.6 20 15 33.3
Spain 28 11 154.5 6 3 50.0
Australia 44 37 18.9 14 14 0.0
France 4 -21 2 -6
United States 123 44 179.5 47 25 88.0
Italy 6 -21 7 -4
United Kingdom -30 -31 -14 -12
Germany* 96 35 174.3 32 27 18.5
--- --- --- ---
SUBTOTAL ING DIRECT 320 93 244.1 114 62 83.9
ING Card 0 0 3 0
--- --- --- ---
TOTAL 320 93 244.1 117 62 88.7
--------------------------------------------------------------------------------
* Including Austria
Of the ING Direct operations, seven out of the eight countries posted profits in
the first nine months of 2004. Only the United Kingdom, which started operations
in May 2003, is still loss making. All ING Direct countries except France, Italy
and the U.K. are performing above ING's 18.5% hurdle for risk-adjusted return on
capital.
Compared with the first nine months of 2003, France and Italy turned to profit.
The U.S. and Germany posted the strongest profit increases, driven by the
continued growth of funds entrusted and number of clients. Developments in the
U.K. have been much better than planned, with higher-than-expected funds
entrusted and client numbers, which has resulted in lower start-up losses. Funds
entrusted in Australia continued to grow again in the third quarter of 2004,
after a slight decline in the second quarter.
--------------------------------------------------------------------------------------
TABLE 22. ING DIRECT CLIENTS AND FUNDS ENTRUSTED
NUMBER OF CLIENTS FUNDS ENTRUSTED
(x 1,000) (in EUR billion)
30 Sept. 30 June 31 Dec. 30 Sept. 30 June 31 Dec.
2004 2004 2003 2004 2004 2003
--------------------------------------------------------------------------------------
Canada 1,070 1,009 905 9.1 8.2 7.0
Spain 896 836 753 9.8 8.6 7.9
Australia 915 831 719 7.9 6.9 6.9
France 382 367 339 9.0 8.6 7.6
United States 2,048 1,823 1,399 21.3 18.4 12.8
Italy 461 449 379 10.0 9.5 7.6
United Kingdom 689 606 305 26.1 23.4 11.5
Germany* 4,262 4,097 3,735 46.5 44.6 38.1
------ ------ ----- ----- ----- ----
TOTAL 10,723 10,018 8,534 139.7 128.2 99.4
--------------------------------------------------------------------------------------
* Including Austria
Page 28 of 43
3. ASSETS UNDER MANAGEMENT RISE 6.5% TO EUR 493.0 BILLION
Total assets under management increased by EUR 30.3 billion, or 6.5%, in the
first nine months to EUR 493.0 billion at the end of September. The increase
resulted from a net inflow of EUR 17.8 billion, plus EUR 10.2 billion from
higher stock markets, and EUR 4.6 billion from positive currency rate
differences. Divestments had a negative impact of EUR 2.3 billion, mainly due to
the deconsolidation of Baring Private Equity Partners. In the third quarter,
total assets under management increased by only 0.4%, despite a solid net inflow
in the third quarter of EUR 4.1 billion, which was largely offset by the impact
of a stronger euro.
FUND INFLOW
The net fund inflow of EUR 17.8 billion was driven mainly by Insurance
Asia/Pacific, Private Banking and ING Real Estate. Insurance Asia/Pacific
reported a net inflow of EUR 7.3 billion, as a result of strong sales of Money
Market Funds and structured products at KB Asset Management in Korea as well as
strong life premium growth in Taiwan. Private Banking had a net inflow of EUR
4.0 billion led by Belgium, which is reported under Retail Banking. ING Real
Estate reported a net inflow of EUR 3.8 billion, included under Wholesale
Banking.
-------------------------------------------------------------------------------------
TABLE 23. ASSETS MANAGED BY BUSINESS LINE
30 September 31 December 9M % 30 June 3Q %
In EUR billion 2004 2003 Change 2004 Change
-------------------------------------------------------------------------------------
Insurance Europe 147.4 139.6 5.5 145.7 1.2
Insurance Americas 174.3 167.0 4.4 174.4 -0.1
Insurance Asia/Pacific 53.8 43.1 24.9 51.5 4.5
Retail Banking 55.6 52.2 6.6 56.0 -0.7
Wholesale Banking 61.9 60.8 1.8 63.2 -2.1
----- ----- -----
TOTAL 493.0 462.7 6.5 490.8 0.4
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
TABLE 24. ASSETS ORIGINATED BY BUSINESS LINE
30 September 31 December 9M % 30 June 3Q %
In EUR billion 2004 2003 Change 2004 Change
-------------------------------------------------------------------------------------
Insurance Europe 45.4 41.0 10.7 44.4 2.3
Insurance Americas 103.1 99.9 3.2 103.9 -0.8
Insurance Asia/Pacific 26.8 22.4 19.6 25.4 5.5
Retail Banking 102.8 94.5 8.8 101.7 1.1
Wholesale Banking 56.3 55.7 1.1 58.1 -3.1
----- ----- -----
Total third parties 334.4 313.5 6.7 333.5 0.3
Proprietary assets 158.6 149.2 6.3 157.3 0.8
----- ----- -----
TOTAL 493.0 462.7 6.5 490.8 0.4
-------------------------------------------------------------------------------------
DISTRIBUTION CHANNELS
All Business Lines contributed to a 6.7% increase in third-party assets to EUR
334.4 billion. Insurance Asia/Pacific and Insurance Europe led the increase in
the first nine months, with assets increasing 19.6% and 10.7% respectively. Of
total third-party assets, Insurance Europe accounts for 13.6%, Insurance
Americas for 30.8%, Insurance Asia/Pacific for 8.0%. Retail Banking accounts for
30.8% and Wholesale Banking accounts for 16.8% of the total.
-------------------------------------------------------------------------------------
TABLE 25. ASSETS UNDER MANAGEMENT BY CLIENT CATEGORY
30 September 31 December 9M % 30 June 3Q %
In EUR billion 2004 2003 Change 2004 Change
-------------------------------------------------------------------------------------
Private clients 201.0 187.9 7.0 202.5 -0.7
Institutional clients 133.4 125.6 6.1 131,0 1.8
----- ----- -----
Total third parties 334.4 313.5 6.7 333.5 0.3
Proprietary assets 158.6 149.2 6.3 157.3 0.8
----- ----- -----
TOTAL 493.0 462.7 6.5 490.8 0.4
Share of third parties 67.8% 67.8% 68.0%
-------------------------------------------------------------------------------------
Page 29 of 43
-------------------------------------------------------------------------------------------------
TABLE 26. ASSETS UNDER MANAGEMENT BY ASSET CLASS
In EUR billion 30 September 2004 30 June 2004 31 December 2003
-------------------------------------------------------------------------------------------------
Equities 159.1 32% 166.4 34% 161.0 35%
Fixed income 259.2 53% 257.0 52% 236.6 51%
Real Estate 33.4 7% 32.8 7% 28.9 6%
Cash 41.3 8% 34.6 7% 36.2 8%
----- ---- ----- ---- ----- ----
TOTAL 493.0 100% 490.8 100% 462.7 100%
-------------------------------------------------------------------------------------------------
ING INVESTMENT MANAGEMENT
ING Investment Management (IIM) continued to focus on cross-selling initiatives,
which create new sales opportunities with both ING affiliates and third-party
clients. Successful products are being offered on a wider scale, leading to new
mandates and assets under management. IIM-Europe continues to increase the
distribution of its products through third-party distribution channels as a
result of market developments in the field of open architecture. The European
unit realised strong growth in the third quarter with its Euro and Global Equity
strategies, and the High Dividend fund attracted an inflow of EUR 852 million in
the first nine months. IIM-Americas is successfully capitalising on its fixed
income strategies and funds, receiving inflows from U.S. and European pension
plans of EUR 1.4 billion in the first nine months, including EUR 1.1 billion in
the third quarter. Inflows for fixed-income funds reached EUR 1.5 billion for
the nine months ended September 30. The assets under management of
IIM-Asia/Pacific are fast growing as a result of our strong distribution in this
region and advanced product offerings.
ING REAL ESTATE
ING Real Estate's portfolio, including real estate finance, increased to EUR 49
billion at the end of September from EUR 42 billion at the end of 2003, and ING
Real Estate was recently ranked as the largest property investment manager in
the world in terms of assets under management. Growth in the portfolio was
driven mainly by ING Real Estate Investment Management, where assets under
management increased by EUR 3.9 billion, mainly as a result of the launch of two
new U.S. funds and the acquisition of the publicly listed Rodamco Asia real
estate fund. Pre-marketing has been started, enabling private investors to
invest in unlisted funds. ING Real Estate Finance's financial performance
continued to be very satisfactory and its portfolio now amounts to EUR 16.9
billion. ING Real Estate Development expanded its order book in the last few
months, winning orders from municipalities in France and the Netherlands.
Several new projects were also sold in the Netherlands, Italy and Hungary.
PROFIT CONTRIBUTION
The functional operating profit before tax from asset management (derived from
figures included in the insurance and banking results) increased 40.3% to EUR
334 million in the first 9 months of 2004. Growth was mainly driven by the
institutional asset management business, (including ING Real Estate, Baring
Asset Management and ING Investment Management) and private banking. The asset
management profit share increased to 6.0% from 5.5% of total group operating
profit before tax.
Page 30 of 43
APPENDICES
1. Key figures
2. Consolidated profit and loss account (Insurance/Banking) first nine months,
one-off items
3. Consolidated profit and loss account (Insurance/Banking) third quarter,
one-off items
4. Consolidated balance sheet and changes in shareholders' equity
5. Condensed consolidated statement of cash flows
6. Additional information: quarterly results, specification of realised capital
gains on real estate and equities from insurance, insurance profit & loss by
life/non-life, bank lending, bank commission income, banking other income
7. Value of new business at the life insurance operations
8. Consolidated balance sheet ING Verzekeringen N.V.
9. Consolidated balance sheet ING Bank N.V.
10. Information for shareholders
----------------
The accounting principles applied in this document correspond with those applied
in ING Group's Annual Accounts 2003. However, starting 1 January 2004, ING
adopted the US GAAP accounting standard "Statement of Position 03-1: Accounting
and Reporting by Insurance Enterprises for Certain Non-Traditional Long-Duration
Contracts and for Separate Accounts" for both its Dutch and US accounting. 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.
This release shall not constitute an offer to sell or the solicitation of an
offer to buy, nor shall there be any sale of the common shares of ING Canada
Inc. in any jurisdiction in which such offer, solicitation or sale would be
unlawful. Such shares have not been and will not be registered under the U.S.
Securities Act of 1933, and may not be offered or sold in the United States
except pursuant to an exception from the registration requirements of such
Securities Act.
Page 31 of 43
APPENDIX 1.
---------------------------------------------------------------------------------------------------------------------------
1. KEY FIGURES
9 months 9 months FY FY FY FY
2004 2003 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET (EUR x billion)
Total assets 865 785 779 716 705 650
Shareholders' equity 25 20 21 18 22 25
ASSETS UNDER MANAGEMENT (EUR x billion) 493 455 463 449 513 503
MARKET CAPITALISATION (EUR x billion) 44 33 39 32 57 83
OPERATING INCOME (EUR x million)
Insurance operations 41,291 39,407 53,233 59,449 55,274 34,521
Banking operations 9,556 8,696 11,680 11,201 11,111 11,302
OPERATING EXPENSES (EUR x million)
Insurance operations 3,471 3,558 4,897 5,203 5,583 5,023
Banking operations 6,331 5,992 8,184 8,298 8,186 8,273
ADDITIONS TO THE PROVISION FOR LOAN/INVESTMENT
LOSSES (EUR x million) 430 1,010 1,288 2,099 907 400
PROFIT (EUR x million)
Insurance operations 2,737 2,476 3,486 3,170 2,792 2,307
Banking operations 2,859 1,849 2,371 1,468 2,170 2,605
------ ------ ------ ------ ------ ------
Operating profit before tax 5,596 4,325 5,857 4,638 4,962 4,912
Operating net profit 4,008 3,012 4,053 3,433 3,539 3,388
Capital gains/neg. value adjustment shares 429 -5 -10 820 713 620
Non-operating net profit 247 325 7,976
------ ------ ------ ------ ------ ------
Net profit 4,437 3,007 4,043 4,500 4,577 11,984
Distributable net profit 4,437 3,007 4,043 4,253 4,252 4,901
FIGURES PER ORDINARY SHARE OF EUR 0.24 NOMINAL VALUE
Operating net profit 1.90 1.50 2.00 1.77 1.83 1.76
Net profit 2.10 1.50 2.00 2.32 2.37 6.27
Distributable net profit 2.10 1.50 2.00 2.20 2.20 2.56
Dividend 0.97 0.97 0.97 1.13
Shareholders' equity 11.19 9.37 10.08 9.14 11.03 13.04
RATIOS (in %)
ING Group
Operating return on equity (ROE) 23.2 21.9 21.5 17.4 15.3 10.3
Operating net profit growth 33 11 18 -3 4 27
Dividend pay-out ratio 48.5 44.1 44.1 43.9
Insurance operations
Combined ratio 92 98 98 102 103 104
Capital coverage ratio 185 178 180 169 180 235
Banking operations
BIS ratio ING Bank 11.19 11.18 11.34 10.98 10.57 10.75
Tier-1 ratio ING Bank 7.61 7.44 7.59 7.31 7.03 7.22
Cost/income ratio 66.3 68.9 70.1 74.1 73.7 73.2
EMPLOYEES (average FTEs) 113,200 115,400 115,200 113,060 112,000 92,650
---------------------------------------------------------------------------------------------------------------------------
Page 32 of 43
APPENDIX 2.
-------------------------------------------------------------------------------------------------------------------------
2.1 ING GROUP FIRST NINE MONTHS CONSOLIDATED PROFIT & LOSS ACCOUNT
INSURANCE BANKING TOTAL*
In EUR million 9M 2004 9M 2003 9M 2004 9M 2003 9M 2004 9M 2003 %
-------------------------------------------------------------------------------------------------------------------------
Premium income 32,748 30,587 32,748 30,587 7.1
Income from investments of the
insurance operations 7,145 7,132 6,982 7,034 -0.7
Interest result banking operations 6,562 6,059 6,619 6,095 8.6
Commission 892 978 1,991 1,810 2,883 2,788 3.4
Other income 506 710 1,003 827 1,509 1,537 -1.8
------ ------ ----- ----- ------ ------
TOTAL OPERATING INCOME 41,291 39,407 9,556 8,696 50,741 48,041 5.6
Underwriting expenditure 34,167 32,267 34,167 32,267 5.9
Other interest expenses 852 951 746 889 -16.1
Operating expenses 3,471 3,558 6,331 5,992 9,802 9,550 2.6
Additions to the provision for loan
losses/investment losses 64 155 366 855 430 1,010 -57.4
------ ------ ----- ----- ------ ------
TOTAL OPERATING EXPENDITURE 38,554 36,931 6,697 6,847 45,145 43,716 3.3
OPERATING PROFIT BEFORE TAX 2,737 2,476 2,859 1,849 5,596 4,325 29.4
Taxation 577 584 801 497 1,378 1,081 27.5
Third-party interests 80 82 130 150 210 232 -9.5
------ ------ ----- ----- ------ ------
OPERATING NET PROFIT 2,080 1,810 1,928 1,202 4,008 3,012 33.1
Capital gains/negative value
adjustment shares 429 -5 429 -5
------ ------ ----- ----- ------ ------
NET PROFIT 2,509 1,805 1,928 1,202 4,437 3,007 47.6
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
2.2 ONE-OFF ITEMS BEFORE TAX
INSURANCE BANKING TOTAL*
In EUR million 9M 2004 9M 2003 9M 2004 9M 2003 9M 2004 9M 2003 %
-------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT BEFORE TAX 2,737 2,476 2,859 1,849 5,596 4,325 29.4
- old reinsurance business 96 303 96 303
- sale Australia non-life 219 219
- U.S. individual reinsurance charge -252 -252
- sale of Asian equities business -84 -84
- sale CenE Bankiers 87 87
- restructuring provisions -60 -82 -60 -82
OPERATING PROFIT BEFORE TAX
EXCLUDING ONE -OFF ITEMS 2,674 2,173 2,916 1,931 5,590 4,104 36.2
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
2.3 ONE-OFF ITEMS AFTER TAX
INSURANCE BANKING TOTAL*
In EUR million 9M 2004 9M 2003 9M 2004 9M 2003 9M 2004 9M 2003 %
-------------------------------------------------------------------------------------------------------------------------
OPERATING NET PROFIT 2,080 1,810 1,928 1,202 4,008 3,012 33.1
- old reinsurance business 92 247 92 247
- sale Australia non-life 146 146
- U.S. individual reinsurance charge -164 -164
- release of redundant tax provisions 142 142
- sale of Asian equities business -54 -54
- sale CenE Bankiers 87 87
- restructuring provisions -36 -65 -36 -65
OPERATING NET PROFIT
EXCLUDING ONE-OFF ITEMS 1,864 1,563 1,931 1,267 3,795 2,830 34.1
-------------------------------------------------------------------------------------------------------------------------
* Including inter-company eliminations.
Page 33 of 43
APPENDIX 3.
-------------------------------------------------------------------------------------------------------------------------
3.1 ING GROUP THIRD QUARTER CONSOLIDATED PROFIT & LOSS ACCOUNT
INSURANCE BANKING TOTAL*
In EUR million 3Q 2004 3Q 2003 3Q 2004 3Q 2003 3Q 2004 3Q 2003 %
-------------------------------------------------------------------------------------------------------------------------
Premium income 10,854 9,735 10,854 9,735 11.5
Income from investments of the
insurance operations 2,429 2,328 2,374 2,268 4.7
Interest result banking operations 2,172 2,142 2,189 2,163 1.2
Commission 310 339 639 578 949 917 3.5
Other income 146 361 339 199 485 560 -13.4
------ ------ ----- ----- ------ ------
TOTAL OPERATING INCOME 13,739 12,763 3,150 2,919 16,851 15,643 7.7
Underwriting expenditure 11,555 10,367 11,555 10,367 11.5
Other interest expenses 312 417 274 378 -27.5
Operating expenses 1,153 1,181 2,170 2,040 3,323 3,221 3.2
Additions to the provision for loan
losses/investment losses 40 18 101 240 141 258 -45.3
------ ------ ----- ----- ------ ------
TOTAL OPERATING EXPENDITURE 13,060 11,983 2,271 2,280 15,293 14,224 7.4
OPERATING PROFIT BEFORE TAX 679 780 879 639 1,558 1,419 9.8
Taxation 39 201 239 202 278 403 -31.0
Third-party interests 29 34 39 38 68 72 -5.6
------ ------ ----- ----- ------ ------
OPERATING NET PROFIT 611 545 601 399 1,212 944 28.4
Capital gains/negative. value
adjustment shares 382 10 23 382 33
------ ------ ----- ----- ------ ------
NET PROFIT 993 555 601 422 1,594 977 63.2
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
3.2 ONE-OFF ITEMS BEFORE TAX
INSURANCE BANKING TOTAL*
In EUR million 3Q 2004 3Q 2003 3Q 2004 3Q 2003 3Q 2004 3Q 2003 %
-------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT BEFORE TAX 679 780 879 639 1,558 1,419 9.8
- U.S. individual reinsurance charge -252 -252
- sale CenE Bankiers 87 87
- restructuring provisions -60 -37 -60 -37
OPERATING PROFIT BEFORE TAX
EXCLUDING ONE -OFF ITEMS 931 780 852 676 1,783 1,456 22.5
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
3.3 ONE-OFF ITEMS AFTER TAX
INSURANCE BANKING TOTAL*
In EUR million 3Q 2004 3Q 2003 3Q 2004 3Q 2003 3Q 2004 3Q 2003 %
-------------------------------------------------------------------------------------------------------------------------
OPERATING NET PROFIT 611 545 601 399 1,212 944 28.4
- U.S. individual reinsurance charge -164 -164
- release of redundant tax provisions 142 142
- sale CenE Bankiers 87 87
- restructuring provisions -36 -25 -36 -25
OPERATING NET PROFIT
EXCLUDING ONE-OFF ITEMS 633 545 550 424 1,183 969 22.1
-------------------------------------------------------------------------------------------------------------------------
* Including inter-company eliminations.
Page 34 of 43
APPENDIX 4.
----------------------------------------------------------------------------------------------------------------
4.1 ING GROEP N.V. CONSOLIDATED BALANCE SHEET
30 September 31 December 9M % 30 June 3Q %
In EUR million 2004 2003 Change 2004 Change
----------------------------------------------------------------------------------------------------------------
ASSETS
Tangible fixed assets 1,251 1,311 -4.6 1,252 -0.1
Participating interests 3,595 3,167 13.5 3,643 -1.3
Investments 392,797 335,003 17.3 382,942 2.6
Lending 316,578 292,556 8.2 314,379 0.7
Banks 59,805 61,060 -2.1 70,567 -15.3
Cash 4,996 11,738 -57.4 10,887 -54.1
Other assets 64,810 53,473 21.2 66,008 -1.8
Accrued assets 21,598 20,463 5.5 21,962 -1.7
------- ------- -------
TOTAL 865,430 778,771 11.1 871,640 -0.7
EQUITY AND LIABILITIES
Shareholders' equity 24,639 21,331 15.5 24,061 2.4
Preference shares of Group companies 1,417 1,783 -20.5 1,441 -1.7
Third-party interests 1,763 1,730 1.9 1,665 5.9
------- ------- -------
Group equity 27,819 24,844 12.0 27,167 2.4
Subordinated loan 4,294 3,252 32.0 4,326 -0.7
------- ------- -------
Group capital base 32,113 28,096 14.3 31,493 2.0
General provisions 2,656 2,740 -3.1 2,680 -0.9
Insurance provisions 212,821 198,035 7.5 210,816 1.0
Funds entrusted to and debt securities of
the banking operations 426,473 377,824 12.9 423,261 0.8
Banks 118,765 102,115 16.3 131,542 -9.7
Other liabilities 65,379 61,123 7.0 64,919 0.7
Accrued liabilities 7,223 8,838 -18.3 6,929 4.2
------- ------- -------
TOTAL 865,430 778,771 11.1 871,640 -0.7
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
4.2 CHANGES IN SHAREHOLDERS' EQUITY
In EUR million
----------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY AS PER 31 DECEMBER 2003 / 2002 21,331 18,254
Net profit 4,437 4,043
Revaluations (after tax) 237 335
Realised capital gains released to P&L account -602 10
Write-off of goodwill -18 -145
Exchange rate differences -152 -1,196
Issue of shares 1,694 925
Changes in ING Groep N.V. shares held by Group companies -50 50
Dividend paid -2,105 -943
Other -133 -2
------ ------
SHAREHOLDERS' EQUITY AS PER 30 SEPTEMBER 2004 / 31 DECEMBER 2003 24,639 21,331
----------------------------------------------------------------------------------------------------------------
Page 35 of 43
APPENDIX 5.
-------------------------------------------------------------------------------------------------
5. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
9 months 9 months
In EUR million 2004 2003*
-------------------------------------------------------------------------------------------------
NET CASH FLOW FROM OPERATING ACTIVITIES 55,862 39,099
Investments and advances:
- participating interests -2,553 -246
- investments in shares and property -4,657 -4,756
- investments in fixed-interest securities -256,351 -269,119
- other investments -371 -49
Disposals and redemptions:
- participating interests 1,467 208
- investments in shares and property 5,223 6,134
- investments in fixed-interest securities 206,055 227,418
- other investments 358 139
Net investment for risk of policyholders -5,446 -8,732
-------- --------
NET CASH FLOW FROM INVESTING ACTIVITIES -56,275 -49,003
Subordinated loans of ING Groep NV companies 1,000 750
Bonds, loans taken up and deposits by reinsurers -1,619 -1,056
Private placements of ordinary shares 45
Private placement of preference shares of group companies -410 0
Issue of shares 471
Changes in shares ING Groep N.V. 483 6
Cash dividends -894 -927
-------- --------
NET CASH FLOW FROM FINANCING ACTIVITIES -1,440 -711
Net cash flow -1,853 -10,615
Cash at beginning of year 7,338 7,829
Exchange rate differences 213 221
-------- --------
CASH AT END OF PERIOD 5,698 -2,565
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
In this summary, cash comprises the following items:
Short-dated government paper 15,097 7,147
Banks, available on demand -14,395 -17,668
Cash and bank balances and call money of the insurance operations 4,996 7,956
-------- --------
CASH AT END OF PERIOD 5,698 -2,565
-------------------------------------------------------------------------------------------------
* Restated
Page 36 of 43
APPENDIX 6. ADDITIONAL INFORMATION
---------------------------------------------------------------------------------------------------------------------
6.1 QUARTERLY RESULTS
3Q 2Q 1Q 4Q 3Q 2Q 1Q
In EUR million 2004 2004 2004 2003 2003 2003 2003
---------------------------------------------------------------------------------------------------------------------
Operating profit before tax
- Insurance Europe 437 365 409 556 437 400 398
- Insurance Americas 170 460 340 362 314 395 239
- Insurance Asia/Pacific 104 405 122 107 128 105 71
- Other -32 39 -82 -15 -99 184 -96
----- ----- ----- ----- ----- ----- -----
INSURANCE OPERATING PROFIT BEFORE TAX 679 1,269 789 1,010 780 1,084 612
- Wholesale Banking 519 511 659 146 374 358 394
- Retail Banking 330 351 327 340 225 257 236
- ING Direct 117 128 75 58 62 24 7
- Other -87 -21 -50 -22 -22 -25 -41
----- ----- ----- ----- ----- ----- -----
BANKING OPERATING PROFIT BEFORE TAX 879 969 1,011 522 639 614 596
OPERATING PROFIT BEFORE TAX 1,558 2,238 1,800 1,532 1,419 1,698 1,208
OPERATING NET PROFIT 1,212 1,605 1,191 1,041 944 1,166 902
- of which Insurance operations 611 935 534 698 545 761 504
- of which Banking operations 601 670 657 343 399 405 398
NET PROFIT 1,594 1,641 1,202 1,036 977 1,863 167
In EUR
Operating net profit per ordinary share 0.57 0.76 0.57 0.50 0.46 0.58 0.46
NET PROFIT PER ORDINARY SHARE 0.74 0.79 0.57 0.50 0.47 0.95 0.08
---------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
6.2 SPECIFICATION OF REALISED CAPITAL GAINS ON REAL ESTATE AND EQUITIES FROM INSURANCE
FIRST NINE MONTHS BEFORE TAX FIRST NINE MONTHS AFTER TAX
In EUR million 2004 2003 % 2004 2003 %
--------------------------------------------------------------------------------------------------------------------
REAL ESTATE
- life 252 278 -9.3
- non-life 13 16 -18.7
--- ---
Subtotal 265 294 -9.9 164 180 -8.9
EQUITIES 436 -10 429 -5
--- --- --- ---
TOTAL 701 284 146.8 593 175 238.9
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
6.3 INSURANCE PROFIT FROM LIFE AND NON-LIFE
FIRST NINE MONTHS 2004 FIRST NINE MONTHS 2003
In EUR million Life Non-life Total Life Non-life Total
--------------------------------------------------------------------------------------------------------------------
Premium income 27,567 5,181 32,748 24,935 5,652 30,587
Income from investments 6,392 753 7,145 6,365 767 7,132
Commission and other income 1,364 34 1,398 1,681 7 1,688
------ ----- ------ ------ ----- ------
TOTAL OPERATING INCOME 35,323 5,968 41,291 32,981 6,426 39,407
Underwriting expenditure 30,164 4,003 34,167 27,473 4,794 32,267
Other interest expenses 852 852 951 951
Operating expenses 2,595 876 3,471 2,686 872 3,558
Investment losses 64 64 155 155
------ ----- ------ ------ ----- ------
TOTAL OPERATING EXPENDITURE 33,675 4,879 38,554 31,265 5,666 36,931
OPERATING PROFIT BEFORE TAX 1,648 1,089 2,737 1,716 760 2,476
--------------------------------------------------------------------------------------------------------------------
Page 37 of 43
--------------------------------------------------------------------------------------------------------------------
6.4 BANK LENDING
30 September 31 December 9M % 30 June 3Q %
In EUR billion 2004 2003 Change 2004 Change
--------------------------------------------------------------------------------------------------------------------
- Public authorities 14.7 14.9 -1.3 14.9 -1.3
- Other corporate 167.4 160.7 4.2 171.5 -2.4
----- ----- -----
TOTAL CORPORATE 182.1 175.6 3.7 186.4 -2.3
- Mortgages 120.8 104.2 15.9 114.7 5.3
- Other personal 18.2 17.4 4.6 18.0 1.1
----- ----- -----
TOTAL PERSONAL 139.0 121.6 14.3 132.7 4.7
Provisions for bank lending -4.5 -4.6 -4.7
TOTAL BANK LENDING 316.6 292.6 8.2 314.4 0.7
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
6.5 BANKING COMMISSION INCOME
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
--------------------------------------------------------------------------------------------------------------------
Funds transfer 444 444 0.0 151 147 2.7
Securities business 519 476 9.0 129 150 -14.0
Insurance broking 107 86 24.4 31 19 63.2
Management fees 578 434 33.2 197 150 31.3
Brokerage and advisory fees 85 107 -20.6 36 24 50.0
Other 258 263 -1.9 95 88 8.0
----- ----- --- ---
TOTAL 1,991 1,810 10.0 639 578 10.6
--------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
6.6 BANKING OTHER INCOME
FIRST NINE MONTHS THIRD QUARTER
In EUR million 2004 2003 % 2004 2003 %
--------------------------------------------------------------------------------------------------------------------
Income from securities and 182 61 198.4 103 15
participating interests
Results from financial transactions 470 547 -14.1 92 104 -11.5
Other results 351 219 60.3 144 80 80.0
----- ----- --- ---
TOTAL 1,003 827 21.3 339 199 70.4
--------------------------------------------------------------------------------------------------------------------
Page 38 of 43
APPENDIX 7.
7.1 NEW BUSINESS PRODUCTION AND VALUE BY REGION
The value of new life business written in the first three quarters of 2004 was
EUR 466 million compared with EUR 330 million for three-fourths of full-year
production in 2003. ING invested EUR 1,283 million to write new life insurance
business. Investment in new business includes acquisition expenses (commissions,
underwriting, and policy issuance), benefits expected to be paid in the first
year, as well as funds to establish reserves and capital allocations to support
the business. Premiums and expected investment income in the first year are
deducted from the investment calculation. The overall internal rate of return
(IRR) expected on this investment is 11.9%. The value of new business and IRR
for 2004 reflect ING's internal capital requirements, including the impact of
financial options and guarantees for all business units where these benefits are
significant.
----------------------------------------------------------------------------------------------------------------------
7.2 BUSINESS PRODUCTION AND VALUE BY REGION
NEW PRODUCTION FIRST NINE MONTHS 2004 NEW PRODUCTION 3/4 OF 2003
Value of Value of FY
Annual Single New IRR Annual Single New IRR
In EUR million premium Premium Business in % Premium Premium Business in %
----------------------------------------------------------------------------------------------------------------------
INSURANCE EUROPE 330 2,620 98 11.9 255 2,336 70 10.9
- Netherlands 143 1,221 33 9.8 120 915 8 8.0
- Belgium 40 1,277 39 22.9 22 1,314 41 29.4
- Rest of Europe 147 122 26 11.7 113 107 21 11.9
INSURANCE AMERICAS 1,167 11,583 123 10.3 1,224 10,967 71 9.0
- United States 996 11,452 104 10.1 1,187 10,909 76 9.2
- Mexico 114 5 16 21.3 25 6 0 7.3
- South America 57 126 3 8.6 12 52 -5 4.0
INSURANCE ASIA/PACIFIC 839 2,257 245 14.0 739 1,191 189 14.7
- Australia 52 581 6 9.7 26 451 6 11.0
- Japan 244 1,365 93 15.6 202 634 31 11.3
- Korea 289 147 61 26.2 247 46 58 28.2
- Taiwan 172 129 78 11.8 186 35 93 15.8
- Rest of Asia/Pacific 82 35 7 10.1 78 25 2 8.3
----- ------ --- ----- ------ ---
TOTAL 2,336 16,460 466 11.9 2,218 14,494 330 10.9
----------------------------------------------------------------------------------------------------------------------
The expected internal rate of return in developing markets is 13.5% compared
with 15.3% for 2003.
----------------------------------------------------------------------------------------------------------------------
7.3 NEW BUSINESS PRODUCTION AND VALUE IN DEVELOPING MARKETS* BY REGION
NEW PRODUCTION FIRST NINE MONTHS 2004 NEW PRODUCTION 3/4 OF 2003
Value of Value of FY
Annual Single New IRR Annual Single New IRR
In EUR million premium Premium Business in % Premium Premium Business in %
----------------------------------------------------------------------------------------------------------------------
Europe 98 47 20 13.1 80 39 18 13.9
Americas 171 131 19 12.3 37 58 -5 4.8
Asia/Pacific 543 311 146 13.8 511 107 153 16.9
----- ------ --- ----- ------ ---
TOTAL 812 489 185 13.5 628 204 166 15.3
----------------------------------------------------------------------------------------------------------------------
* The countries included as developing markets are:
Europe: Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia
Americas: Argentina, Chile, Mexico, Peru
Asia/Pacific: China, Hong Kong, India, Korea, Malaysia, Thailand, Taiwan
Page 39 of 43
APPENDIX 8.
------------------------------------------------------------------------------------------------------
8. ING VERZEKERINGEN N.V. CONSOLIDATED BALANCE SHEET
In EUR million 30 September 2004 31 December 2003 % change
------------------------------------------------------------------------------------------------------
ASSETS
Tangible fixed assets 327 315 3.8
Participating interests 2,376 2,587 -8.2
Investments 231,502 215,231 7.6
Cash 1,391 1,848 -24.7
Other assets 7,651 7,935 -3.6
Accrued assets 13,826 12,668 9.1
------- -------
TOTAL 257,073 240,584 6.9
EQUITY AND LIABILITIES
Shareholders' equity 13,511 12,011 12.5
Third-party interests 1,302 1,187 9.7
Subordinated loans 2,655 2,647 0.3
------- -------
Group equity 17,468 15,845 10.2
General provisions 1,627 1,665 -2.3
Insurance provisions 212,820 198,035 7.5
Other liabilities 24,072 23,973 0.4
Accrued liabilities 1,086 1,066 1.9
------- -------
TOTAL 257,073 240,584 6.9
------------------------------------------------------------------------------------------------------
Page 40 of 43
APPENDIX 9.
------------------------------------------------------------------------------------------------------
9. ING BANK N.V.* CONSOLIDATED BALANCE SHEET
In EUR million 30 September 2004 31 December 2003 % change
------------------------------------------------------------------------------------------------------
ASSETS
Cash 4,171 10,135 -58.8
Short-dated government paper 15,097 6,521 131.5
Banks 59,805 61,060 -2.1
Loans and advances 318,059 293,987 8.2
Interest-bearing securities 182,864 140,032 30.6
Shares 8,711 8,882 -1.9
Other participating interests 1,818 1,613 12.7
Property and equipment 6,573 5,720 14.9
Other assets 5,052 4,581 10.3
Accrued assets 9,768 9,063 7.8
------- -------
TOTAL 611,918 541,594 13.0
EQUITY AND LIABILITIES
Banks 118,765 102,115 16.3
Funds entrusted 354,638 307,793 15.2
Debt securities 74,119 72,372 2.4
Other liabilities 20,864 17,400 19.9
Accrued liabilities 7,634 8,815 -13.4
General provisions 1,365 1,412 -3.3
------- -------
577,385 509,907 13.2
Fund for general banking risks 1,343 1,281 4.8
Subordinated liabilities 16,473 14,516 13.5
Shareholders' equity 15,742 14,868 5.9
Third-party interests 483 553 -12.7
Capital and reserves of Stichting Regio Bank 492 469 4.9
------- -------
Group equity 16,717 15,890 5.2
Group capital base 34,533 31,687 9.0
------- -------
TOTAL 611,918 541,594 13.0
------------------------------------------------------------------------------------------------------
* The accounting principles applied in this balance sheet correspond with those
applied in ING Bank N.V.'s Annual Accounts 2003.
Page 41 of 43
APPENDIX 10. INFORMATION FOR SHAREHOLDERS
SHARES AND WARRANTS
The average number of shares used for the calculation of net profit per share
for the first nine months 2004, was 2,108.5 million (1,993.8 million for the
first nine months 2003). The number of (depositary receipts for) ordinary shares
of EUR 0.24 nominal value outstanding at the end of September 2004 was 2,204.7
million (including 28.5 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 September 2004 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 September 2004 was 17.2 million.
In the first nine months of 2004, the turnover of (depositary receipts for)
ordinary shares on the Euronext Amsterdam Stock Market was 1,802.1 million
(purchases and sales). The highest closing price was EUR 21.20, the lowest EUR
16.73; the closing price at the end of September 2004 was EUR 20.32.
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 were confirmed in 2003
and have a stable outlook.
IMPORTANT DATES IN 2005 AND 2006*
17 February 2005 Publication of annual results 2004
26 April 2005 Annual general meeting of shareholders
28 April 2005 ING share quoted ex-final dividend
12 May 2005 Publication of first-quarter results
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
* 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
-------------------
H. VAN BARNEVELD
General Manager Corporate Control & Finance
By: /s/C.F. Drabbe
--------------
C.F. DRABBE
Assistant General Counsel
Dated: November 4, 2004
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