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 August 11, 2005
ING GROEP N.V.
Amstelveenseweg 500
1081-KL Amsterdam
The Netherlands
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form 20-F X Form 40-F
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Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
Page 1 of 41
This Report contains a copy of the following:
(1) The Press Release issued on August 11, 2005
Page 2 of 41
[ING GROUP LOGO]
PRESS RELEASE
Amsterdam o 11 August 2005
ING GROUP FIRST-HALF NET PROFIT RISES 25.0% TO EUR 3,492 MILLION
SOLID PERFORMANCE IN FIRST HALF 2005 WITH RETURNS IMPROVING IN BOTH BANKING AND
INSURANCE
o NET PROFIT PER SHARE INCREASES 20.4% TO EUR 1.61 FROM EUR 1.33 IN FIRST HALF
2004
o PROFIT BEFORE TAX EXCLUDING IMPACT OF DIVESTMENTS RISES 9.3% TO EUR 4,011
MILLION
o INSURANCE PROFIT EXCLUDING DIVESTMENTS RISES 2.3% LED BY AMERICAS AND EUROPE
o BANKING PROFIT EXCLUDING DIVESTMENTS CLIMBS 16.0% DRIVEN BY ALL BUSINESS LINES
o RETURNS INCREASE: RAROC AFTER TAX AND DIVESTMENTS RISES TO 18.0%, IRR TO 12.6%
o ING TO PAY INTERIM DIVIDEND OF EUR 0.54 PER SHARE IN CASH, UP FROM EUR 0.49
CHAIRMAN'S STATEMENT
"ING showed a solid performance in the first six months of 2005, despite
challenges posed by low interest rates in most markets," said Michel Tilmant,
Chairman of the Executive Board. "Income rose across the Group. The banking
businesses benefited from lower risk costs as the credit environment remained
benign, and ING Direct continued its fast growth, adding 1.8 million new
customers. Life insurance sales increased, especially in emerging markets, while
the non-life insurance units posted strong underwriting results. Both banking
and insurance also benefited from lower taxes."
"We are seeing results from our emphasis on value creation, with returns
improving in both banking and insurance, despite market pressures on margins.
The risk-adjusted return on capital for the banking operations improved with all
three business lines performing above ING's target. At the insurance operations,
the value of new life business increased 33.2% as units improved margins and
focused on the most attractive markets, such as retirement services and
pensions."
"Net profit in the second quarter declined mainly due to gains on divestments
last year and other non-recurring items. Excluding that impact, second-quarter
profit rose 6.7%. In addition, we have taken measures to strengthen insurance
reserves for an old book of business in Taiwan as a result of low interest
rates, despite the fact that insurance reserves for the Group as a whole remain
more than adequate, even using our conservative internal standards."
"We also continue to focus on improving execution to increase efficiency,
address operational and compliance issues, and improve service. We announced
some initiatives earlier this year to reduce expenses at some units. Cost
control remains a priority for management, and we will continue to take steps to
improve efficiency and preserve our competitive position in mature markets to
deliver more value for our customers and shareholders."
"The company has declared an interim dividend of EUR 0.54 to be paid in cash,
equal to a rounded half of the full-year dividend for 2004. We remain confident
about the remainder of the year, although interest-rate developments pose
challenges for some businesses as we saw in the second quarter."
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ALL FIGURES COMPARE FIRST-HALF 2005 WITH FIRST-HALF 2004
UNLESS OTHERWISE STATED.
COMPARABLE FIGURES FOR 2004 EXCLUDE IAS 32, 39 AND IFRS 4.
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PRESS CONFERENCE: 11 August, 9 a.m. CET at ING House, Amsterdam.
Presentation & webcast www.ing.com
ANALYST PRESENTATION: 11 August, 11:15 a.m. CET at ING House, Amsterdam.
Presentation & webcast www.ing.com
ANALYST CALL: 11 August, 4 p.m. CET.
Listen in: NL +31 20-794-8504 UK +44 207-190-1595 US +1 303-262-0078
ANALYST PRESENTATION LONDON, 12 August, 11 a.m. UK time, webcast at www.ing.com
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MEDIA RELATIONS +31 20 541 6522 INVESTOR RELATIONS +31 20 541 5571
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Page 3 of 41
1.1 ING GROUP
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TABLE 1. ING GROUP KEY FIGURES
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
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Profit before tax excluding divestments:
- Insurance Europe 995 861 15.6% 490 509 -3.7%
- Insurance Americas 986 789 25.0% 549 461 19.1%
- Insurance Asia/Pacific 225 264 -14.8% 54 152 -64.5%
- Other(1) -353 -103 -226 9
------- ------- ----- -----
INSURANCE PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 1,853 1,811 2.3% 867 1,131 -23.3%
- Wholesale Banking 1,206 1,084 11.3% 481 423 13.7%
- Retail Banking 808 644 25.5% 414 319 29.8%
- ING Direct 254 203 25.1% 127 125 1.6%
- Other(2) -110 -71 -56 -15
------- ------- ----- -----
BANKING PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 2,158 1,860 16.0% 966 852 13.4%
TOTAL PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 4,011 3,671 9.3% 1,833 1,983 -7.6%
Gains/losses on divestments 345 135 -31 219
Profit before tax from divested units 26 180 5 48
------- ------- ----- -----
TOTAL PROFIT BEFORE TAX 4,382 3,986 9.9% 1,807 2,250 -19.7%
Taxation 766 1,050 -27.0% 194 521 -62.8%
Third-party interests 124 143 -13.3% 62 66 -6.1%
------- ------- ----- -----
NET PROFIT 3,492 2,793 25.0% 1,551 1,663 -6.7%
- of which Insurance 1,430 1,543 -7.3% 700 1,076 -34.9%
- of which Banking 2,062 1,250 65.0% 851 587 45.0%
NET PROFIT PER SHARE (in EUR) 1.61 1.33 20.4% 0.72 0.79 -8.9%
KEY FIGURES
Net return on capital and reserves(3) 25.7% 25.4%
Debt/equity ratio(4) 9.8% 10.9%
Total staff (average FTEs) 114,600 113,300 1.1%
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1. Other insurance results includes the positive currency hedge result in 2004, interest on core debt
and results on old reinsurance activities in 2004
2. Other banking results consist mainly of interest expenses that are not allocated to the different
business lines
3. 2004 figures are full-year on ING GAAP basis; 2005 figures exclude revaluation reserves for
available-for-sale securities
4. Comparable figure is based on IFRS at 1 January 2005
FIRST-HALF PROFIT
Net profit rose 25.0% to EUR 3,492 million in the first half of 2005, up from
EUR 2,793 million in the same period last year, driven by solid growth at all
three banking business lines as well as the insurance activities in the Americas
and Europe. Net profit from banking increased 65.0% to EUR 2,062 million, mainly
as a result of low risk costs, lower taxes, and realised gains on divestments.
Net profit from insurance decreased 7.3% to EUR 1,430 million, despite lower
taxes, due to divestments and other non-recurring items as well as a decision to
strengthen reserves in Taiwan. However, the rest of Asia as well as the Americas
and Europe showed strong growth. Net profit per share rose 20.4% to EUR 1.61
from EUR 1.33.
Total profit before tax increased 9.9% to EUR 4,382 million. On balance,
divestments had a positive impact of EUR 56 million in the first half. Results
in the first half of 2005 included EUR 345 million in realised gains on
divestments and EUR 26 million in profit from divested units. That compares with
EUR 135 million in gains from divestments and EUR 180 million in profit from
divested units in the first half of 2004. Excluding the impact of divestments,
profit before tax increased 9.3% to EUR 4,011 million, lifted by higher results
from both banking and insurance.
Insurance profit before tax excluding divestments rose 2.3% to EUR 1,853 million
as higher results from the Americas and Europe were largely offset by lower
results from Asia/Pacific and Other, which includes one-off gains in the first
half last year. Insurance Europe posted an increase of 15.6% to EUR 995 million,
lifted by higher investment gains in the Netherlands as well as strong growth in
Central Europe. Insurance Americas posted a 25.0% increase to EUR 986 million,
driven by higher investment and fee income and improved margins in the U.S. life
businesses, as well as continued strong underwriting results at the Canadian
non-life insurance business. Insurance Asia/Pacific posted a 14.8% decrease,
mainly caused by
Page 4 of 41
reserve strengthening in Taiwan which offset strong growth elsewhere in the
region, notably Australia and South Korea. The Other insurance results showed a
decrease due to EUR 254 million of gains in the first half of last year on old
reinsurance business and the U.S. dollar hedge.
Banking profit before tax excluding divestments rose 16.0% to EUR 2,158 million,
lifted by higher profits from all three business lines. Results of Wholesale
Banking increased 11.3% to EUR 1,206 million, driven by lower risk costs. Retail
Banking profit rose 25.5% to EUR 808 million, lifted by higher income and lower
risk costs, particularly in the Netherlands and Belgium. ING Direct posted a
25.1% increase to EUR 254 million, supported by ongoing strong growth in
volumes, which was partially offset by a narrowing of the interest margin in the
second quarter of 2005.
EFFECTIVE TAX RATE
The effective tax rate decreased to 17.5% in the first half of 2005 from 26.3%
in the first six months last year, due to a lower statutory tax rate in the
Netherlands, high tax-exempt gains on divestments and private equity, as well as
EUR 135 million in releases from the tax-contingencies reserve due to the
favourable resolution of some pending corporate income tax matters. The
effective tax rate for the full year 2005 is expected to be around 20%.
CURRENCY IMPACT
The weakening of the U.S. dollar and related currencies was entirely offset by
the strengthening of other currencies, such as the Polish zloty, the Canadian
dollar, and the Korean won. However, results in the first half of 2004 included
a net gain of EUR 87 million (EUR 133 million before tax) on a U.S. dollar
hedge, which was not repeated as ING stopped hedging its U.S. dollar exposure
from 2005.
IMPACT OF IFRS
The 2004 figures have been restated to comply with IFRS. However, as permitted
under IFRS 1, the 2004 comparatives exclude the impact of IAS 32, 39 and IFRS 4,
which were implemented starting from 1 January 2005. In the first half of 2005,
IAS 32, 39 and IFRS 4 had a total positive impact of approximately EUR 80
million on the reported net profit. For the insurance operations, the standards
had a positive net impact of approximately EUR 10 million, mainly due to the
revaluation of non-trading derivatives, as well as prepayment penalties on
mortgages and realised gains on bonds, which are no longer amortised. In the
banking operations, the impact of IAS 32 and 39 was approximately EUR 70 million
after tax, mainly due to unrealised results on voluntary trade assets, realised
gains on the sale of bonds and higher prepayment penalties on mortgages. That
was partially offset by the negative revaluation of non-trading derivatives and
the asymmetrical accounting for market-making in ING bonds. In the second
quarter of 2005, IFRS had a total negative impact of EUR 10 million on the
Group's results, compared with a positive impact of EUR 90 million in the first
quarter of 2005. The swing was mainly caused by a lower value of non-trading
derivatives, partially offset by higher gains on bonds and higher results from
prepayment of mortgages.
SECOND-QUARTER PROFIT
Second-quarter net profit declined 6.7% to EUR 1,551 million, mainly due to
gains from divestments in the second quarter last year and other non-recurring
items. Net profit in the year-earlier period included EUR 219 million after tax
from gains on divestments and profit from divested units, plus EUR 92 million in
releases from old reinsurance business, and a gain on the U.S. dollar hedge of
EUR 35 million. In the second quarter of 2005, profit was lifted by EUR 135
million in releases from the tax-contingencies reserve, while divestments
contributed EUR 11 million to results, including a net gain and profit from
divested units. Excluding those items, net profit in the second quarter
increased 6.7%. Insurance profit before tax excluding divestments declined 23.3%
to EUR 867 million, due in part to gains from old reinsurance activities and the
U.S. dollar hedge in the second quarter of 2004, and a negative revaluation of
derivatives under IFRS in the second quarter of 2005, which are reported under
Other. Results from Insurance Asia/Pacific declined 64.5% as a result of
measures taken to strengthen reserves in Taiwan. That more than offset strong
growth elsewhere in the region. Profit from Insurance Europe declined 3.7% due
to lower life results in the
Page 5 of 41
Netherlands, mainly as a result of higher operating expenses. Insurance Americas
posted a 19.1% increase in profit, driven by growth in the U.S. life businesses
and continued strong underwriting results at the Canadian non-life business.
Banking profit before tax excluding divestments increased 13.4% to EUR 966
million, driven by higher results from Retail and Wholesale Banking due to lower
risk costs as well as higher income, particularly from mortgage lending in the
Retail business line. Profit before tax from ING Direct increased 1.6% as strong
growth in customers and funds entrusted was offset by narrower interest margins,
particularly in the U.S.
Compared with the first quarter of 2005, net profit declined 20.1% to EUR 1,551
million. Excluding divestments, which contributed a total of EUR 405 million in
the first quarter and EUR 11 million in the second quarter, net profit increased
0.3%. Net profit from insurance decreased 4.1% to EUR 700 million due to reserve
strengthening in Taiwan as well as lower private-equity gains and the negative
revaluation of derivatives under IFRS, which offset higher non-life results and
lower taxes. Net profit from banking declined 29.7% to EUR 851 million from EUR
1,211 million in the first quarter. Profit in the first quarter included gains
on the divestments of Baring Asset Management and shares in ING Bank Slaski, and
profit in the second quarter included a gain on NMB-Heller. Excluding
divestments, profit before tax declined 19.0% due to an increase in risk costs,
lower Financial Markets results and provisions at the Belgian Wholesale Banking
business. Profit from Retail Banking increased 5.1% and ING Direct maintained
its good performance from the first quarter.
1.2 BALANCE SHEET & CAPITAL AND RESERVES
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TABLE 2. KEY BALANCE SHEET FIGURES
30 June 1 January 1H 31 March 2Q
In EUR billion 2005 2005 Change 2005 Change
-----------------------------------------------------------------------------------------------------------------------
CAPITAL AND RESERVES 35.3 28.3 24.8% 31.3 12.9%
- insurance operations 18.6 15.3 21.6% 16.8 10.7%
- banking operations 21.2 17.2 23.3% 18.4 15.2%
- eliminations(1) -4.5 -4.2 -3.9
TOTAL ASSETS 1,107.1 964.5 14.8% 1,036.5 6.8%
NET RETURN ON CAPITAL AND RESERVES(2) 25.7% 25.4% 26.4%
- insurance operations 19.7% 27.0% 21.0%
- banking operations 24.0% 15.8% 23.9%
-----------------------------------------------------------------------------------------------------------------------
1. Own shares, subordinated loans, third-party interests, debenture loans and other eliminations
2. The comparable figures shown under 1 January 2005 are FY 2004 figures based on net profit and
average capital and reserves under ING GAAP 2005 figures are annualised
CAPITAL AND RESERVES
On 30 June 2005, ING's capital and reserves amounted to EUR 35.3 billion, an
increase of EUR 7.0 billion, or 24.8%, compared with 1 January 2005. The
increase was driven by the addition of net profit from the first six months of
2005 (EUR 3.5 billion), unrealised revaluations of debt securities (EUR 1.8
billion net after transfer of deferred profit sharing to insurance liabilities),
exchange rate differences (EUR 1.6 billion), unrealised revaluations on equities
(EUR 0.8 billion) and a change in cash-flow hedge reserve (EUR 0.8 billion).
That was offset mainly by the cash dividend payment (EUR -1.3 billion).
CAPITAL RATIOS
The debt/equity ratio of ING Groep N.V. improved to 9.8% from 10.9% at 1 January
2005. The improvement was caused by a EUR 5.4 billion increase in the Group
capital and reserves (excluding third-party interests) due to retained earnings
and revaluations. That was partially offset by an increase of EUR 0.1 billion in
core debt. The capital coverage ratio for ING's insurance operations increased
to 228% of regulatory requirements at the end of June, compared with 201% at 1
January 2005. The Tier-1 ratio of ING Bank N.V. stood at 7.20% on 30 June 2005,
up from 7.00% on 1 January 2005. The solvency ratio (BIS ratio) for the bank
decreased slightly to 10.55% at the end of June from 10.59% on 1 January 2005.
Total risk-weighted assets rose by EUR 31.4 billion, or 11.5%, to EUR 305.5
billion, driven by growth in all three banking business lines.
Page 6 of 41
RETURN ON CAPITAL AND RESERVES
The net return on capital and reserves increased to 25.7% in the first six
months of 2005 from 25.4% for full-year 2004. The insurance operations posted a
19.7% net return on capital and reserves in the first six months of 2005,
compared with 27.0% for full-year 2004, while the banking operations posted an
increase to 24.0% from 15.8%. The comparable figures for net return on capital
and reserves are based on net profit and average capital and reserves under ING
GAAP, while the 2005 figures are based on IFRS.
ASSETS UNDER MANAGEMENT
Assets under management increased 13.2% to EUR 505.2 billion at the end of June
from EUR 446.1 billion at the end of 2004, excluding the impact of divestments
and restatements. The increase was driven by a net inflow of EUR 13.6 billion,
the impact of higher currencies (EUR 31.7 billion) and higher stock markets (EUR
13.8 billion). Including the impact of divested units and a restatement due in
part to IFRS, which had a combined effect of EUR 45.8 billion, total assets
under management increased 2.7%.
1.3 DIVIDEND
ING Group will pay an interim dividend of EUR 0.54 per ordinary share, up from
EUR 0.49 last year, which is equal to a rounded half of the total dividend paid
over the book-year 2004 (EUR 1.07). The interim dividend will be fully paid in
cash. The ING share will be quoted ex-interim dividend as of 12 August 2005 and
the dividend will be made payable on 18 August 2005.
1.4 COMPLIANCE
Following incidents at several business units in the Netherlands (including
alleged insider trading in ING Perpetuals, an error in commercial software at
Nationale-Nederlanden, as well as mortgage-selling issues at Postbank and ING
Bank and investment fund issues at ING Investment Management), ING Netherlands
has decided to accelerate a process started in 2004 to further strengthen the
compliance culture in the Netherlands following consultation with the Dutch
regulator, the AFM. A change program has been designed and is now being
implemented to improve compliance within ING Netherlands, aimed at strengthening
the control and management of compliance-related incidents. The program, which
will take about two years to complete, is consistent with the fact that
compliance has been defined as one of ING Group's management priorities.
Page 7 of 41
1.5 INSURANCE OPERATIONS
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TABLE 3. ING GROUP: INSURANCE PROFIT & LOSS ACCOUNT
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
-----------------------------------------------------------------------------------------------------------------------
Life premium income 19,047 18,139 5.0% 9,782 8,905 9.8%
Non-life premium income 3,577 3,755 -4.7% 1,679 1,623 3.5%
------ ------ ------ ------
TOTAL PREMIUM INCOME 22,624 21,894 3.3% 11,461 10,528 8.9%
Investment income 4,726 4,718 0.2% 2,511 2,601 -3.5%
Commission income 622 587 6.0% 278 284 -2.1%
Other income 176 364 -51.6% -102 218
------ ------ ------ ------
TOTAL INCOME 28,148 27,563 2.1% 14,148 13,631 3.8%
Underwriting expenditure 23,329 22,614 3.2% 11,821 10,829 9.2%
Other interest expenses 535 541 -1.1% 265 255 3.9%
Operating expenses 2,466 2,272 8.5% 1,269 1,139 11.4%
Impairments/investment losses 2 24 -91.7% -1 12
------ ------ ------ ------
TOTAL EXPENDITURE 26,332 25,451 3.5% 13,354 12,235 9.1%
TOTAL PROFIT BEFORE TAX 1,816 2,112 -14.0% 794 1,396 -43.1%
Taxation 277 517 -46.4% 31 293 -89.4%
Third-party interests 109 52 109.6% 63 27 133.3%
------ ------ ------ ------
NET PROFIT 1,430 1,543 -7.3% 700 1,076 -34.9%
IMPACT FROM DIVESTMENTS
Total profit before tax 1,816 2,112 -14.0% 794 1,396 -43.1%
Gains/losses on divestments -49 219 -78 219
Profit before tax from divested units 12 82 5 46
------ ------ ------ ------
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 1,853 1,811 2.3% 867 1,131 -23.3%
- of which life insurance 1,160 1,237 -6.2% 485 779 -37.7%
- of which non-life insurance 693 574 20.7% 382 352 8.5%
KEY FIGURES
Value of new life business 381 286 33.2%
Internal rate of return 12.6% 11.4%
Combined ratio non-life business 90% 89%
Net return on capital and reserves(1) 19.7% 27.0%
Staff (average FTEs) 51,300 49,700 3.2%
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1. 2004 figures are full-year on ING GAAP basis
FIRST-HALF PROFIT
Net profit from insurance declined 7.3% to EUR 1,430 million in the first half
of 2005 as a result of divestments, which contributed a gain in the first half
of 2004 and a loss in the first half this year. That was partially offset by a
lower effective tax rate of 15.3%, compared with 24.5% in the first half last
year, due to non-taxable gains on private equity, a decrease in the statutory
tax rate in the Netherlands, and a release of EUR 100 million in reserves. Total
profit before tax declined 14.0% to EUR 1,816 million, reflecting the impact of
divestments, which contributed a one-time gain of EUR 219 million in the first
half of 2004 and a loss of EUR 49 million in the first half this year. Excluding
gains and losses on divestments and the profit from divested units in both
periods, profit before tax from insurance rose 2.3% to EUR 1,853 million.
Profit before tax excluding divestments from life insurance decreased 6.2% to
EUR 1,160 million from EUR 1,237 million in the first half last year, when
profit included a gain of EUR 158 million on the U.S. dollar hedge. Excluding
that gain, profit from life insurance increased 7.5%, driven by higher results
in the U.S., the Netherlands and Central Europe.
Profit before tax excluding divestments from non-life insurance increased 20.7%
to EUR 693 million, driven by continued strong underwriting results in Canada
and the acquisition of the Allianz Canada portfolio, as well as higher results
in the Netherlands and Belgium, supported by a lower claims ratio. The combined
ratio increased slightly to 90% from 89%.
Total premium income rose 3.3% to EUR 22,624 million as growth in life premiums
was tempered by the impact of divestments and currency effects. Divested units
contributed EUR 215 million to premium income
Page 8 of 41
in the first half of 2004. Also some life products were reclassified as
investment contracts under IFRS 4, notably in Australia, the U.S. and Belgium.
Excluding reclassifications, divestments and currency effects, total premium
increased 11.5% on a comparable basis. Life premium income rose 5.0%, or 14.8%
on a comparable basis, driven by a strong increase in Asia/Pacific. Non-life
premium income declined 4.7% to EUR 3,577 million, due in part to divestments in
Australia and the Netherlands. Excluding divestments and currency effects,
non-life premiums fell 3.9%, led by a decline in Mexico.
Investment income increased 0.2% as higher gains on equities, bonds and real
estate were offset by a negative impact from currencies, lower interest rates
and divestments. Commission income increased 6.0% to EUR 622 million, led by an
increase in Australia due to a reclassification of products from life insurance
to investment products under IFRS 4. Other income decreased sharply, due to the
loss of EUR 78 million on the sale of Life of Georgia and the gain on the U.S.
dollar hedge included in the first half of 2004.
Operating expenses from the insurance operations increased 8.5% to EUR 2,466
million, due to higher costs in all business lines. In the Netherlands,
operating expenses rose largely as a result of a new collective labour agreement
and investment in Ops & IT projects. Operating expenses in Canada rose due to
the integration of Allianz Canada, while operating expenses in Asia/Pacific
increased to support the continued growth of the business. Expenses as a
percentage of assets under management for investment products improved slightly
to 86 basis points from 87 basis points in the first half last year. Expenses as
a percentage of premiums for life products deteriorated from 12.69% to 13.18%.
The expense ratio for non-life insurance was 29%, up from 27% in the first half
last year.
Impairments/investment losses declined to EUR 2 million in the first half of
2005, compared with EUR 24 million in the first half of 2004.
------------------------------------------------------------------------------------------------------------------------
TABLE 4. NEW LIFE INSURANCE PRODUCTION AND VALUE BY REGION
In EUR million NEW PRODUCTION 1H 2005 NEW PRODUCTION 1H 2004
Value of Value of
Annual Single New Annual Single New
premium Premium Business IRR Premium Premium Business IRR
-----------------------------------------------------------------------------------------------------------------------
Insurance Europe 236 1,432 93 13.3% 203 1,495 70 12.8%
Insurance Americas 747 7,455 90 10.6% 917 8,067 82 9.7%
Insurance Asia/Pacific 859 3,255 198 14.2% 545 1,247 134 14.1%
----- ----- ----- ----- ----- -----
TOTAL 1,842 12,142 381 12.6% 1,665 10,809 286 11.4%
-----------------------------------------------------------------------------------------------------------------------
VALUE OF NEW BUSINESS
The value of new life insurance business written by the insurance operations
increased 33.2% to EUR 381 million in the first half of 2005, up from EUR 286
million in the first half of 2004, driven by strong sales in Asia/Pacific and
Central Europe, and higher margins at the U.S. business. The life insurance
businesses in emerging markets world-wide contributed a total of EUR 147 million
to the value of new business, up from EUR 107 million in the first half of 2004.
In Asia/Pacific, the value of new business rose 47.8% to EUR 198 million,
accounting for more than half of the total new business value of the Group.
Insurance Europe posted a 32.9% increase in the value of new business to EUR 93
million, lifted by higher sales in Central Europe and improved margins in the
Netherlands. The value of new business written by Insurance Americas increased
to EUR 90 million from EUR 82 million, driven by higher margins at the U.S.
business, which more than offset adverse currency effects, the exclusion of Life
of Georgia and the individual reinsurance business, and lower sales in Latin
America. The total internal rate of return increased to 12.6% from 11.4%, lifted
by the greater weight of Asia/Pacific as well as improved margins in the U.S.,
the Netherlands and Central Europe. The internal rates of return are adjusted to
reflect expected currency movements relative to the euro.
RESERVE-ADEQUACY TESTING
For many years ING has applied an annual test to assess whether insurance
reserves are adequate to meet the estimated future payments on in-force policies
using a prudent 90% confidence level. This 90%
Page 9 of 41
standard is more conservative than the U.S. GAAP loss-recognition test, which is
based on best-estimate assumptions with no prudency margins. In addition to the
insurance reserves, ING also holds capital for unexpected risks so that the
reserves plus capital meet a confidence level of 99.95% consistent with a target
AA rating by Standard & Poor's.
Despite the low interest-rate environment in many markets, the reserves for the
insurance activities of ING Group as a whole are more than adequate on the basis
of the prudent 90% internal standard and all regulatory testing. On a
stand-alone basis, the insurance reserves are adequate on the prudent 90% basis
for all business units, except Taiwan. Using a 50% confidence level as a
best-estimate test, Taiwan's reserves are still adequate.
Taiwan's inadequacy at 90% is related entirely to an old block of life insurance
contracts with long-term interest-rate guarantees of up to 8% which date back to
before 2001. Newer products have much lower embedded guarantees of approximately
2%. Further declines in interest rates in Taiwan in the second quarter, as well
as the effect of currency exchange rates, modelling refinements and product
experience have caused the earlier-reported inadequacy in Taiwan to widen to the
extent that Insurance Asia/Pacific as a region now also has a reserve inadequacy
based on the 90% standard.
The magnitude of the inadequacy is highly sensitive to interest rates and other
assumptions, such as product persistency and mortality. As a result, the
inadequacy can only be reliably estimated within a broad range and is bound to
vary significantly from quarter to quarter as interest rates change. At 30 June
2005, the reserve inadequacy range for Taiwan is EUR 2.8 to 3.3 billion based on
the 90% standard, representing an estimate of the additional liability that
could result over the remaining average life of the old block of business, which
is approximately 40 years. For Insurance Asia/Pacific the range of the shortfall
is EUR 1.5 to 2.0 billion.
The shortfall in Taiwan is equal to about 1% of the Group's total insurance
reserves, and is more than fully compensated by reserves above the prudent 90%
level at other insurance units. Nevertheless, in accordance with ING's policy
under these circumstances to restore reserve adequacy over time, ING has decided
to strengthen reserves in Taiwan and consider other structural improvements. A
charge of EUR 80 million was taken to strengthen reserves in the first half.
Page 10 of 41
1.6 BANKING OPERATIONS
-----------------------------------------------------------------------------------------------------------------------
TABLE 5. ING GROUP: BANKING PROFIT & LOSS ACCOUNT
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
-----------------------------------------------------------------------------------------------------------------------
Interest result 4,297 4,332 -0.8% 2,134 2,198 -2.9%
Investment income 840 149 463.8% 341 65 424.6%
Commission income 1,136 1,352 -16.0% 540 642 -15.9%
Other income 747 570 31.1% 327 216 51.4%
------ ------ ----- -----
TOTAL INCOME 7,020 6,403 9.6% 3,342 3,121 7.1%
OPERATING EXPENSES 4,408 4,264 3.4% 2,279 2,139 6.5%
------ ------ ----- -----
Gross result 2,612 2,139 22.1% 1,063 982 8.2%
Addition to provisions for loan losses 46 265 -82.6% 50 128 -60.9%
------ ------ ----- -----
TOTAL PROFIT BEFORE TAX 2,566 1,874 36.9% 1,013 854 18.6%
Taxation 489 533 -8.3% 163 228 -28.5%
Third-party interests 15 91 -83.5% -1 39
------ ------ ----- -----
NET PROFIT 2,062 1,250 65.0% 851 587 45.0%
IMPACT FROM DIVESTMENTS
Total profit before tax 2,566 1,874 36.9% 1,013 854 18.6%
Gains/losses on divestments 394 -84 47
Profit before tax from divested units 14 98 2
------ ------ ----- -----
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 2,158 1,860 16.0% 966 852 13.4%
KEY FIGURES
Cost/income ratio 62.8% 66.6% 68.2% 68.5%
RAROC (pre-tax) 27.0% 22.9%
RAROC (after tax) 20.8% 16.9%
Net return on capital and reserves(1) 24.0% 15.8%
Total risk-weighted assets(2) (in EUR billion) 305.5 274.1 11.5%
Addition to provisions for loan losses in
basis points of average credit-risk-weighted 3 21
assets
Staff (average FTEs) 63,300 63,600 -0.5%
-----------------------------------------------------------------------------------------------------------------------
1. 2004 figures are full-year on ING GAAP basis
2. 30 June 2005 compared with year-end 2004
FIRST-HALF PROFIT
Net profit from banking rose 65.0% to EUR 2,062 million, driven by higher
income, a sharp decline in risk costs, gains on divestments and lower taxes. The
effective tax rate declined from 28.4% in the first half of 2004 to 19.1%,
mainly due to non-taxable gains on divestments, a decrease of the statutory tax
rate in the Netherlands, a low effective tax rate in Belgium and a EUR 35
million release of tax reserves. Total profit before tax rose 36.9% to EUR 2,566
million. Divestments had a positive impact on profit in the first half,
including EUR 394 million in gains from the sale of Baring Asset Management and
a 12.77% stake in ING Bank Slaski as well as the NMB-Heller transaction. The
first half of 2004 included a EUR 84 million loss on the sale of the Asian cash
equities business. Excluding those items and the profit from divested units in
both periods, profit before tax increased 16.0% to EUR 2,158 million.
Total income from banking rose 9.6% to EUR 7,020 million. Excluding the impact
of divestments, banking income rose 9.3% to EUR 6,565 million. The interest
result declined 0.8% as a result of divestments. Excluding divestments, the
interest result increased 2.9% to EUR 4,292 million, driven by higher interest
results in Retail Banking and ING Direct, partially offset by lower interest
results in Wholesale Banking. The implementation of IAS 32 and 39 from 2005 had
a negative impact of approximately EUR 60 million on the interest result in the
first half. The total interest margin in the first half of 2005 was 1.15%, a
decrease of 9 basis points compared with the estimated comparable interest
margin (also including IAS 32 and 39) in the first half of 2004, due in part to
a flattening of the yield curve and a reclassification of interest-related
expenses from trading results to interest. Loans and advances to customers of
the banking operations increased by EUR 44.6 billion, or 12.4%, from 1 January
2005 to EUR 403.4 billion at the end of June 2005. Corporate lending rose by EUR
27.4 billion, of which EUR 20.5 billion was from outside the Netherlands.
Personal lending rose by EUR 16.9 billion, including a EUR 15.4 billion increase
in residential mortgages, of which EUR 9.6 billion was from ING Direct. Customer
deposits and other funds on deposit of the banking
Page 11 of 41
operations increased by EUR 48.0 billion, or 12.0%, to EUR 446.6 billion, driven
by the continued strong growth of ING Direct.
Investment income rose from EUR 149 million to EUR 840 million, including the
gains on Baring Asset Management, the ING Bank Slaski shares and the NMB-Heller
transaction. Excluding divestments, investment income rose to EUR 446 million
from EUR 176 million, mainly due to the sale of equity investments in Belgium
and the positive impact from the implementation of IAS 32 and 39, which
consisted of EUR 37 million in realised results on the sale of bonds and EUR 110
million in fair-value changes to voluntary trade assets.
Commission income declined 16.0% to EUR 1,136 million. Excluding the impact of
divestments, commission income was 4.8% lower, mainly due to lower
funds-transfer commission in the Netherlands, lower commission from the
securities business and lower Other commission. This was partially compensated
by higher management fees from ING Real Estate and ING Belgium and higher
brokerage and advisory fees.
Other income rose 31.1% to EUR 747 million. Excluding divestments, Other income
increased 43.4% to EUR 744 million, despite a EUR 47 million negative impact
from IAS 32 and 39 related to the asymmetrical accounting for market-making in
ING bonds and the valuation result on non-trading derivatives. The proportional
(50%) consolidation of Postkantoren BV starting in 2005, which had no impact on
total profit, added EUR 78 million to Other income. The remaining increase was
mainly due to a higher result of the trading portfolio and higher share of
profit of associates, such as minority shareholdings, notably at ING Real
Estate. The higher result of the trading portfolio was mainly caused by a
reclassification of interest-related expenses from trading results to interest
result, along with the EUR 48 million loss taken on Postbank's unit-linked
mortgage product 'MeerWaardehypotheek' in the first quarter of 2004.
Total operating expenses increased 3.4% to EUR 4,408 million. Excluding
divestments, operating expenses rose by EUR 477 million, or 12.3%, of which EUR
118 million was due to the continued strong growth of ING Direct and EUR 78
million to the consolidation of Postkantoren BV. The remaining increase was
mainly caused by higher IT expenses, provisions at ING Belgium related to
Williams de Broe, impairments on development projects of ING Real Estate and
higher personnel expenses, including the impact of the new collective labour
agreement in the Netherlands. The cost/income ratio of the banking operations
improved to 62.8% from 66.6%. Excluding the gains and losses on divestments but
including the one-off items above, the cost/income ratio deteriorated to 66.5%
from 65.5%. The average number of staff declined to 63,300 from 63,600 in the
first half of 2004.
Additions to provisions for loan losses remained very low. After a EUR 4 million
release in the first quarter of 2005, ING added EUR 50 million to the loan loss
provisions in the second quarter, compared with an addition of EUR 265 million
in the first half of 2004. The low risk costs were possible due to an
improvement of the credit portfolio, the release of provisions previously taken
(notably in Wholesale Banking), the absence of new large defaults and
improvements in risk management. The addition equalled an annualised 3 basis
points of average credit-risk-weighted assets, compared with 21 basis points in
the first half of 2004 and 18 basis points for the full-year 2004.
RAROC
The Risk-Adjusted Return on Capital (RAROC) after tax for ING's banking
operations improved to 20.8% in the first half of 2005 from 16.9% in the first
half last year. Excluding the gains and losses on divestments, the after-tax
RAROC improved to 18.0% from 17.5%. All three banking lines performed above
ING's target of 12.0% after tax. Excluding the gains and losses on
divestments, Wholesale Banking's RAROC improved to 17.1% from 16.2% in the
first half of 2004. Retail Banking posted a return of 32.9% excluding the gain
on ING Bank Slaski shares, compared with 29.2% in the first half last year. ING
Direct's after-tax RAROC increased to 14.3% from 12.1%. Total economic
capital decreased to EUR 14.8 billion from EUR 15.9 billion in the first half of
2004 as a result of divestments. In the RAROC calculation, the actual
credit-risk provisioning is replaced with statistically-expected losses
reflecting average credit losses over the entire economic cycle. Figures for
2004 have been adjusted for changes to the model for market risk.
Page 12 of 41
2.1 INSURANCE EUROPE PROFIT RISES 15.6% TO EUR 995 MILLION
o PROFIT IN THE NETHERLANDS RISES 12.3%, LIFTED BY HIGHER LIFE AND NON-LIFE
RESULTS
o VALUE OF NEW BUSINESS CLIMBS 32.9% DRIVEN BY CENTRAL EUROPE AND THE
NETHERLANDS
o PROFIT FROM CENTRAL EUROPE RISES 42.2% DRIVEN BY POLAND, HUNGARY AND CZECH
REPUBLIC
-----------------------------------------------------------------------------------------------------------------------
TABLE 6. INSURANCE EUROPE PROFIT & LOSS ACCOUNT
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
-----------------------------------------------------------------------------------------------------------------------
Life premium income 4,232 4,729 -10.5% 2,020 2,195 -8.0%
Non-life premium income 1,341 1,317 1.8% 401 309 29.8%
------ ------ ----- -----
TOTAL PREMIUM INCOME 5,573 6,046 -7.8% 2,421 2,504 -3.3%
Investment income 2,241 2,073 8.1% 1,200 1,119 7.2%
Commission and other income 431 246 75.2% 133 94 41.5%
------ ------ ----- -----
TOTAL INCOME 8,245 8,365 -1.4% 3,754 3,717 1.0%
Underwriting expenditure 6,079 6,491 -6.3% 2,678 2,703 -0.9%
Other interest expenses 236 168 40.5% 118 71 66.2%
Operating expenses 921 829 11.1% 467 429 8.9%
Impairments/investment losses 4 16 -75.0% 1 5 -80.0%
------ ------ ----- -----
TOTAL EXPENDITURE 7,240 7,504 -3.5% 3,264 3,208 1.7%
TOTAL PROFIT BEFORE TAX 1,005 861 16.7% 490 509 -3.7%
Gains/losses on divestments 10
Profit before tax from divested units
------ ------ ----- -----
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 995 861 15.6% 490 509 -3.7%
- of which life insurance 791 718 10.2% 395 450 -12.2%
- of which non-life insurance 204 143 42.7% 95 59 61.0%
KEY FIGURES
Value of new life business 93 70 32.9%
Internal rate of return 13.3% 12.8%
Assets under management(1) (In EUR billion) 160.5 148.3 8.2%
Staff (average FTEs) 16,200 15,800 2.5%
-----------------------------------------------------------------------------------------------------------------------
1. 2004 figures are year-end
FIRST-HALF PROFIT
Profit before tax excluding divestments at Insurance Europe rose 15.6% to EUR
995 million in the first half of 2005, up from EUR 861 million in the same
period last year, driven by strong increases in both life and non-life
insurance. Profit before tax from life insurance rose 10.2%, boosted by growth
in Central Europe as well as higher results in the Netherlands and Belgium,
driven in part by investment gains. Profit before tax from non-life insurance
rose 42.7%, lifted by strong underwriting results in the Netherlands. Including
the gain on the sale of Freeler in the first quarter of 2005, total profit
before tax from Insurance Europe rose 16.7% to EUR 1,005 million.
Total premium income declined 7.8% to EUR 5,573 million, driven by a 10.5%
decrease in life premium income, mainly as a result of the reclassification of
some products in Belgium from life insurance to investment contracts under IFRS.
Excluding the impact of the reclassification and currency effects, life premium
income declined 3.3%, partially due to rate increases to improve profitability
in the Netherlands. Non-life premium income rose 1.8% to EUR 1,341 million due
to an increase in disability insurance premiums in the Netherlands.
Investment income increased 8.1% to EUR 2,241 million, lifted by increases in
the fair value of real estate and realised gains on bonds in the Netherlands, as
well as higher investment income in Central Europe, especially Poland.
Commission and other income rose 75.2% to EUR 431 million due to higher share of
profit of associates, such as minority shareholdings, as well as realised gains
on private equity investments.
Operating expenses increased 11.1% to EUR 921 million, mainly due to higher
salaries related to the new Dutch collective labour agreement as well as Ops &
IT projects in the Netherlands. Operating expenses in
Page 13 of 41
Belgium rose 5.6%, mainly due to higher IT expenses, while in Central Europe
operating expenses declined 5.6%. The average number of staff at Insurance
Europe increased 2.5% to 16,200 employees as an increase in the Netherlands was
partially offset by a decrease in Belgium. At the end of June, the number of
staff in the Netherlands was 2.4% lower compared with year-end 2004.
GEOGRAPHICAL BREAKDOWN INSURANCE EUROPE
----------------------------------------------------------------------------------------------------------------------
TABLE 7. INSURANCE EUROPE PROFIT BEFORE TAX
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
----------------------------------------------------------------------------------------------------------------------
Netherlands 786 700 12.3% 380 433 -12.2%
- of which life 609 581 4.8% 299 387 -22.7%
- of which non-life 177 119 48.7% 81 46 76.1%
Belgium(1) 81 71 14.1% 41 34 20.6%
- of which life 58 52 11.5% 29 24 20.8%
- of which non-life 23 19 21.1% 12 10 20.0%
Central Europe(2) & Spain 128 90 42.2% 69 42 64.3%
--- --- --- ---
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 995 861 15.6% 490 509 -3.7%
----------------------------------------------------------------------------------------------------------------------
1. Including Luxembourg
2. Poland, Hungary, Czech Republic, Slovakia, Romania, Bulgaria, Greece, Russia
In the Netherlands, profit before tax increased 12.3% to EUR 786 million, lifted
by higher results from both life and non-life insurance, due in part to EUR 61
million higher gains on private equity investments as well as the impact of
IFRS. The implementation of IAS 32 and 39 from 1 January 2005 had a positive
impact of EUR 72 million on first-half results, while revaluations of the real
estate portfolio had a positive impact of EUR 63 million. Operating expenses
increased 16.1% due to higher salaries related to a new collective labour
agreement as well as investments in Ops & IT projects at ING Investment
Management and higher marketing costs at RVS. Operating expenses at
Nationale-Nederlanden increased 8.0%. Profit before tax from life insurance rose
4.8% to EUR 609 million, as higher investment income was partially offset by
increased operating expenses. Life premiums declined 9.4%, mainly due to lower
sales of single-premium products as a result of rate adjustments to improve
profitability. Profit before tax from non-life insurance increased 48.7% to EUR
177 million, driven by higher investment income as well as favourable claims
experience, particularly in fire, motor and personal liability insurance.
Non-life premium income increased 2.4% to EUR 1,139 million, led by rate
adjustments for fire insurance as well as the introduction of a new disability
product.
In Belgium, profit before tax from insurance rose 14.1% to EUR 81 million,
driven by both life and non-life insurance. Profit before tax from life
insurance (including Luxembourg) increased 11.5% to EUR 58 million. Life premium
income was 31.1% lower due to the reclassification of some products to
investment contracts under IFRS. Excluding that impact, life insurance premium
income increased 11.9%. Profit before tax from non-life insurance rose 21.1% to
EUR 23 million, led by higher results from fire and loss of income/accident
insurance. Non-life premiums declined 1.1% to EUR 178 million.
In Central Europe & Spain, profit before tax increased 42.2% to EUR 128 million,
driven by growth in premium income and higher investment income, particularly in
Poland, Hungary and the Czech Republic. Premium income rose 15.8% to EUR 777
million, driven by a 16.4% increase in life premiums to EUR 752 million.
Premiums in Hungary were boosted by sales of a euro-based unit-linked product,
and in Poland by increased sales of single-premium and annual premium products,
while pension fund inflows also increased. In the Czech Republic, production in
the pension fund business increased due to higher sales through brokers. ING
started a private pension fund in Slovakia at the beginning of 2005. Operating
expenses in the region declined 5.6% due to the positive impact of a cost
containment program in Poland as well as an extra provision in 2004 relating to
a discontinued business.
Page 14 of 41
------------------------------------------------------------------------------------------------------------------------
TABLE 8. INSURANCE EUROPE PREMIUM INCOME
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
------------------------------------------------------------------------------------------------------------------------
Netherlands 3,920 4,182 -6.3% 1,571 1,627 -3.4%
- of which life 2,781 3,070 -9.4% 1,255 1,407 -10.8%
- of which non-life 1,139 1,112 2.4% 316 220 43.6%
Belgium(1) 876 1,193 -26.6% 451 528 -14.6%
- of which life 698 1,013 -31.1% 377 451 -16.4%
- of which non-life 178 180 -1.1% 74 77 -3.9%
Central Europe(2) & Spain 777 671 15.8% 399 349 14.3%
----- ----- ----- -----
TOTAL 5,573 6,046 -7.8% 2,421 2,504 -3.3%
------------------------------------------------------------------------------------------------------------------------
1. Including Luxembourg
2. Poland, Hungary, Czech Republic, Slovakia, Romania, Bulgaria, Greece, Russia
VALUE OF NEW LIFE BUSINESS
The value of new business written by Insurance Europe increased 32.9% to EUR 93
million from EUR 70 million in the first half of 2004, driven by strong
increases in the Netherlands and Central Europe. The total internal rate of
return expected on new sales increased to 13.3% from 12.8%. The value of new
business in the Netherlands rose to EUR 47 million from EUR 30 million in the
first half of 2004 as a result of higher margins and a re-pricing of
single-premium products, which led to an increase in the internal rate of return
to 13.6% from 11.0%. In Central Europe & Spain, the value of new business rose
to EUR 31 million from EUR 14 million, driven by higher sales and the launch of
a new pension fund in Slovakia. In Belgium, including Luxembourg, the value of
new business declined to EUR 15 million from EUR 26 million due to lower
production and a market shift towards products with lower margins, which was
reflected in a decline of the internal rate of return to 17.2% from 26.8%.
---------------------------------------------------------------------------------------------------------------------
TABLE 9. INSURANCE EUROPE NEW LIFE INSURANCE PRODUCTION
NEW PRODUCTION 1H 2005 NEW PRODUCTION 1H 2004
Value of Value of
Annual Single New Annual Single New
In EUR million premium Premium Business IRR Premium Premium Business IRR
---------------------------------------------------------------------------------------------------------------------
Netherlands(1) 82 683 47 13.6% 76 697 30 11.0%
Belgium(2) 22 613 15 17.2% 29 730 26 26.8%
Central Europe & Spain 132 136 31 12.1% 98 68 14 11.0%
--- ----- -- --- ----- --
TOTAL 236 1,432 93 13.3% 203 1,495 70 12.8%
---------------------------------------------------------------------------------------------------------------------
1. VNB statistics for 1H 2004 for Nationale-Nederlanden were reported with a lag of one quarter, thus the figures
above for the Netherlands represent production for 4Q 2003 and 1Q 2004. As of 2005 VNB statistics reflect actual
reporting periods.
2. Including Luxembourg
Page 15 of 41
2.2 INSURANCE AMERICAS PROFIT RISES 25.0% TO EUR 986 MILLION
o U.S. PROFIT RISES 20.0% DRIVEN BY CONTINUED STRONG GROWTH IN ASSET LEVELS
o VALUE OF NEW LIFE BUSINESS IN THE U.S. INCREASES 15.5% TO EUR 82 MILLION
o PROFIT FROM CANADA CLIMBS 40.9% TO EUR 331 MILLION ON STRONG UNDERWRITING
RESULTS
-----------------------------------------------------------------------------------------------------------------------
TABLE 10. INSURANCE AMERICAS PROFIT & LOSS ACCOUNT
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
-----------------------------------------------------------------------------------------------------------------------
Life premium income 8,664 9,324 -7.1% 4,414 4,606 -4.2%
Non-life premium income 2,208 2,206 0.1% 1,261 1,180 6.9%
------ ------ ----- -----
TOTAL PREMIUM INCOME 10,872 11,530 -5.7% 5,675 5,786 -1.9%
Investment income 2,184 2,072 5.4% 1,153 1,066 8.2%
Commission and other income 264 420 -37.1% -8 226
------ ------ ----- -----
TOTAL INCOME 13,320 14,022 -5.0% 6,820 7,078 -3.6%
Underwriting expenditure 11,206 12,076 -7.2% 5,794 6,035 -4.0%
Other interest expenses 49 40 22.5% -24 14
Operating expenses 1,129 1,080 4.5% 577 549 5.1%
Impairments/investment losses -3 9 -3 7
------ ------ ----- -----
TOTAL EXPENDITURE 12,381 13,205 -6.2% 6,344 6,605 -4.0%
TOTAL PROFIT BEFORE TAX 939 817 14.9% 476 473 0.6%
Gains/losses on divestments -59 -78
Profit before tax from divested units 12 28 5 12
------ ------ ----- -----
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 986 789 25.0% 549 461 19.1%
- of which life insurance 537 457 17.5% 282 255 10.6%
- of which non-life insurance 449 332 35.2% 267 206 29.6%
KEY FIGURES
Value of new life business 90 82 9.8%
Internal rate of return 10.6% 9.7%
Assets under management(1) (In EUR billion) 183.9 161.2 14.1%
Staff (average FTEs) 26,400 25,400 3.9%
-----------------------------------------------------------------------------------------------------------------------
1. 2004 figures are year-end
FIRST-HALF PROFIT
Profit before tax excluding divestments at Insurance Americas increased 25.0% to
EUR 986 million in the first half of 2005, driven by higher investment and fee
income at the U.S. life businesses as well as continued strong underwriting
results at the Canadian non-life business. In the U.S., profit increased across
all business lines, particularly retirement services, and variable and fixed
annuities. Profit growth was offset in part by the weakening of the U.S. dollar
and the Mexican peso against the euro, while the Canadian dollar strengthened.
On balance, currency fluctuations had a negative impact of EUR 17 million on
first-half profit before tax. Including a gain of EUR 19 million on the
over-allotment of shares from the ING Canada IPO in the first quarter of 2005,
and a loss of EUR 78 million on the sale of Life of Georgia in the second
quarter, as well as earnings from divested units in both periods, the total
profit before tax from Insurance Americas rose 14.9% to EUR 939 million.
Premium income declined 5.7% to EUR 10,872 million, mainly due to currency
effects, which had a negative impact of EUR 435 million, accounting for
two-thirds of the decline. Life premium income in the U.S. was also impacted by
the reclassification of some products to investment contracts under IFRS 4, as
well as lower single-premiums in the life business. The decline was partially
offset by higher sales of variable annuities. Non-life premium income was little
changed as an increase in Canada was largely offset by lower non-life sales in
Mexico.
Investment income rose 5.4% to EUR 2,184 million, largely due to higher asset
levels in the U.S., increased investment yields as a result of higher income
from penalties on the prepayment of fixed-income securities and commercial
mortgages, and the gain on the over-allotment of ING Canada shares. Commission
and
Page 16 of 41
other income declined 37.1% to EUR 264 million including the loss of EUR 78
million on the sale of Life of Georgia.
Operating expenses increased 4.5%, driven primarily by higher expenses in Canada
related to the acquisition of Allianz Canada. That was partially offset by the
divestment of some businesses as well as EUR 33 million of currency effects,
primarily related to the decline of the U.S. dollar against the euro.
GEOGRAPHICAL BREAKDOWN INSURANCE AMERICAS
-----------------------------------------------------------------------------------------------------------------------
TABLE 11. INSURANCE AMERICAS PROFIT BEFORE TAX
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
-----------------------------------------------------------------------------------------------------------------------
United States 534 445 20.0% 280 244 14.8%
Canada 331 235 40.9% 201 171 17.5%
Latin America 121 109 11.0% 68 46 47.8%
- of which Mexico 84 76 10.5% 44 30 46.7%
- of which South America(1) 37 33 12.1% 24 16 50.0%
--- --- --- ---
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 986 789 25.0% 549 461 19.1%
-----------------------------------------------------------------------------------------------------------------------
1. Argentina, Brazil, Chile, Peru
In the United States, profit before tax excluding divestments increased 20.0% to
EUR 534 million, driven by strong growth in asset levels over the past year, due
to improved investment performance, continued sales growth and good persistency,
particularly in annuities. The composite margin after credit-related gains and
losses increased sharply to 160 basis points from 138 basis points in the second
quarter of 2004, propelled by lower credited rates, higher prepayment penalty
income on fixed-income securities and low credit losses. The decline of the U.S.
dollar against the euro had a negative impact of EUR 22 million on profit before
tax. Premium income declined 7.5% to EUR 8,595 million, mainly due to the lower
U.S. dollar, which had a negative impact of EUR 444 million, accounting for
two-thirds of the decline. Premiums were also impacted by a change in the
accounting for investment contracts under IFRS 4 as well as lower single
premiums in the life business. Premium income from variable annuities increased,
driven by higher sales of products with living-benefit features. Operating
expenses excluding Life of Georgia and the individual reinsurance business were
unchanged at EUR 681 million, including a favourable impact from currencies of
EUR 32 million.
In Canada, profit before tax from non-life insurance increased 40.9% to EUR 331
million, driven by strong underwriting results and the purchase of Allianz
Canada in the fourth quarter of 2004. The business continued to benefit from
lower claims frequency and severity, particularly in personal motor insurance.
The loss ratio improved to 55.2%, compared with 57.9% in the first half of 2004.
The expense ratio increased as a result of higher operating expenses related to
the integration of the Allianz Canada business, and a lower level of net written
premiums in the first quarter of 2004 due to the termination of an assumed
reinsurance treaty. The combined ratio increased to 85.3% from 82.6% in the
first half of 2004. Premium income rose 16.2% to EUR 1,255 million as the
purchase of Allianz Canada more than offset the decrease in premium rates as a
result of regulatory changes.
In Mexico, profit before tax rose 10.5% to EUR 84 million in the first half of
2005 driven by higher investment yields, which were partially offset by lower
product experience in auto and group life. Premium income declined 18.1% to EUR
676 million due to lower sales and the non-renewal of a few large contracts in
the commercial non-life business as the company focuses on more profitable
market segments. Operating expenses were flat at EUR 156 million.
In South America, profit before tax from Chile, Brazil, Peru and Argentina
increased 12.1% to EUR 37 million, driven by stronger results in Chile due to
higher realised gains on fixed income securities and gains on the sales of
Chile's non-life business and the life portfolio in Argentina. Results were flat
in Brazil. Premium income in the region rose 13.4% driven by higher annuity
sales in Chile. Operating expenses
Page 17 of 41
increased by EUR 8 million, or 19.5%, due to expenses related to the sale of the
non-life business in Chile and higher marketing expenses in Peru.
------------------------------------------------------------------------------------------------------------------------
TABLE 12. INSURANCE AMERICAS PREMIUM INCOME
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
------------------------------------------------------------------------------------------------------------------------
United States 8,595 9,294 -7.5% 4,392 4,580 -4.1%
Canada 1,255 1,080 16.2% 746 635 17.5%
Latin America 972 1,086 -10.5% 518 536 -3.4%
- of which Mexico 676 825 -18.1% 369 397 -7.1%
- of which South America(1) 296 261 13.4% 149 139 7.2%
------ ------ ----- -----
PREMIUM INCOME EXCLUDING DIVESTMENTS 10,822 11,460 -5.6% 5,656 5,751 -1.7%
Premium income from divested units 50 70 19 35
------ ------ ----- -----
TOTAL PREMIUM INCOME 10,872 11,530 -5.7% 5,675 5,786 -1.9%
------------------------------------------------------------------------------------------------------------------------
1. Argentina, Brazil, Chile, Peru
VALUE OF NEW LIFE BUSINESS
The value of new life insurance business written by Insurance Americas rose 9.8%
to EUR 90 million, led by a 15.5% increase in the United States to EUR 82
million, driven by higher margins at the retirement services business due to
continued focus on profitable business, as well as higher sales. The internal
rate of return in the U.S. improved to 10.7%, or 11.1% in U.S. dollars. The
improvement in margins more than offset the exclusion of Life of Georgia and the
individual life reinsurance business, as well as the decline of the U.S. dollar
against the euro. In Mexico, the value of new life business was lower as a
result of strategic investments in a new individual life operation and lower
sales. The total internal rate of return for Insurance Americas in the first
half of 2005 was 10.6%, up from 9.7% in the first half of 2004.
-------------------------------------------------------------------------------------------------------------------
TABLE 13. INSURANCE AMERICAS NEW LIFE INSURANCE PRODUCTION
NEW PRODUCTION 1H 2005 NEW PRODUCTION 1H 2004
Value of Value of
Annual Single New Annual Single New
In EUR million premium Premium Business IRR Premium Premium Business IRR
-------------------------------------------------------------------------------------------------------------------
United States 668 7,338 82 10.7% 811 7,990 71 9.5%
Mexico 44 6 3 11.4% 72 6 9 19.2%
South America 35 111 5 9.4% 34 71 2 8.7%
--- ----- -- --- ----- --
TOTAL 747 7,455 90 10.6% 917 8,067 82 9.7%
-------------------------------------------------------------------------------------------------------------------
Page 18 of 41
2.3 INSURANCE ASIA/PACIFIC PROFIT DECLINES 14.8% TO EUR 225 MILLION
o LIFE PREMIUM INCOME INCREASES 50.7%, LED BY STRONG SALES IN JAPAN AND SOUTH
KOREA
o MEASURES TAKEN IN TAIWAN TO STRENGTHEN RESERVES DUE TO LOW INTEREST RATES
o VALUE OF NEW BUSINESS INCREASES 47.8% TO EUR 198 MILLION
-----------------------------------------------------------------------------------------------------------------------
TABLE 14. INSURANCE ASIA/PACIFIC PROFIT & LOSS ACCOUNT
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
-----------------------------------------------------------------------------------------------------------------------
Life premium income 6,147 4,080 50.7% 3,347 2,100 59.4%
Non-life premium income 20 223 -91.0% 10 127 -92.1%
----- ----- ----- -----
TOTAL PREMIUM INCOME 6,167 4,303 43.3% 3,357 2,227 50.7%
Investment income 401 555 -27.7% 207 391 -47.1%
Commission and other income 95 57 66.7% 49 34 44.1%
----- ----- ----- -----
TOTAL INCOME 6,663 4,915 35.6% 3,613 2,652 36.3%
Underwriting expenditure 6,044 4,046 49.4% 3,347 2,091 60.1%
Other interest expenses 3 6 -50.0% 2 2
Operating expenses 391 328 19.2% 210 155 35.5%
Impairments/investment losses -2 -1
----- ----- ----- -----
TOTAL EXPENDITURE 6,438 4,378 47.1% 3,559 2,247 58.4%
TOTAL PROFIT BEFORE TAX 225 537 -58.1% 54 405 -86.7%
Gains/losses on divestments 219 219
Profit before tax from divested units 54 34
----- ----- ----- -----
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 225 264 -14.8% 54 152 -64.5%
- of which life insurance 223 262 -14.9% 53 151 -64.9%
- of which non-life insurance 2 2 1 1
KEY FIGURES
Value of new life business 198 134 47.8%
Internal rate of return 14.2% 14.1%
Assets under management(1) (In EUR billion) 69.4 56.2 23.5%
Staff (average FTEs) 8,700 8,500 2.4%
-----------------------------------------------------------------------------------------------------------------------
1. 2004 figures are year-end
FIRST-HALF PROFIT
Profit before tax excluding divestments at Insurance Asia/Pacific decreased
14.8% to 225 million, due to a decision to strengthen reserves in Taiwan as a
result of the low interest-rate environment, which offset strong growth
elsewhere in the region. Excluding divestments and Taiwan, profit before tax in
the rest of the region increased 16.6%, driven by strong growth in Australia and
South Korea. Results in the first half of 2004 were also favoured by the release
of a EUR 30 million reserve for a wage-tax assessment. Excluding that one-off
item, profit before tax increased 38.0%. Total profit before tax from Insurance
Asia/Pacific declined 58.1%, reflecting a gain last year of EUR 219 million on
the sale of the Australian non-life joint venture in the second quarter of 2004,
and the results from that business.
Premium income rose 43.3% to EUR 6,167 million, led by a 50.7% increase in life
premium income driven by sharply higher sales of single-premium variable
annuities in Japan, tied-agency and bancassurance products in South Korea, and
short-term savings products in Taiwan. Strong sales more than offset the impact
of a reclassification of the majority of products in Australia from life
insurance to investment products under IFRS. Excluding currency impacts and the
effect of the IFRS change in Australia, life premiums increased 69.9%. Strong
growth rates were recorded in Japan (140.7%), South Korea (31.4%), Taiwan
(23.2%), India (280.2%), Thailand (43.9%), and Malaysia (13.1%) in local
currency terms. Non-life premium income fell 91.0%, reflecting the sale of the
Australian non-life business in the second quarter of 2004.
Investment income declined to EUR 401 million from EUR 555 million in the first
half of 2004, which included the gain of EUR 219 million from the sale of the
Australian non-life joint venture. Excluding that gain, investment income
increased 19.3% due to continued growth of the business throughout the region.
Commission and other income rose to EUR 95 million from EUR 57 million, driven
by higher fee income on
Page 19 of 41
wealth management products, primarily as a result of the reclassification of
most products in Australia under IFRS.
Operating expenses increased 19.2% to EUR 391 million, reflecting the continuing
growth of businesses across the region. Expenses in the year-earlier period also
benefited from the release of a EUR 30 million provision for a wage-tax
assessment. Excluding that release as well as currency effects and the
divestment of the Australian non-life joint venture, operating expenses
increased 15.9% as a result of staff increases and other expenses to support the
growth of the business, as well as investments to improve IT systems. The
average number of full-time staff rose 2.4% in the first half year to 8,700
mainly due to increases in India, Australia, South Korea, and Japan.
GEOGRAPHICAL BREAKDOWN INSURANCE ASIA/PACIFIC
------------------------------------------------------------------------------------------------------------------------
TABLE 15. INSURANCE ASIA/PACIFIC PROFIT BEFORE TAX
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
------------------------------------------------------------------------------------------------------------------------
Australia 95 68 39.7% 48 33 45.5%
South Korea 75 52 44.2% 35 23 52.2%
Taiwan 0 71 -59 45
Japan 44 46 -4.3% 22 20 10.0%
Rest of Asia(1) 11 27 -59.3% 8 31 -74.2%
--- --- --- ---
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 225 264 -14.8% 54 152 -64.5%
------------------------------------------------------------------------------------------------------------------------
1. Including China, India, Thailand, Indonesia, Hong Kong and Malaysia
In Australia, profit before tax increased 39.7% to EUR 95 million from EUR 68
million in the first half of 2004, excluding the results of the non-life
insurance joint venture, which was sold in the second quarter of 2004. Profit
before tax from the life insurance and wealth management joint venture, ING
Australia, rose 15.4% to EUR 60 million, driven by favourable claims experience
in the life insurance business, strong customer retention in the individual and
group risk insurance businesses, higher fee income as a result of increased
funds under administration in the employer superannuation business, and higher
investment income due to favourable equity market performance. New business
sales across all lines of business were higher than the prior year, driven by
strong sales through the distribution channels of the joint venture partner, ANZ
Bank. Life premium income declined to EUR 64 million from EUR 545 million, due
to the reclassification of the majority of products from life insurance to
investment products under IFRS. The Australian investment management business
posted a profit of EUR 5 million, up 12.9% from the first half last year. Profit
before tax also includes EUR 28 million from ING's holding company in Australia,
including additional interest income from the sales proceeds related to the
non-life joint venture.
In South Korea, profit before tax rose 44.2% to EUR 75 million, due to continued
strong growth in premium income and an increase in the scale of the in-force
business, which was offset in part by higher claims. Premium income rose 43.8%,
driven by higher sales through the tied agency network and continued high
persistency on existing contracts. Premiums were also boosted by new products
introduced by ING Life Korea, new bancassurance distribution agreements, as well
as the launch of the bancassurance joint venture with Kookmin Bank, KB Life, in
the first quarter of 2005. Profit in the second quarter was negatively impacted
by a EUR 16 million unrealised loss on cash-flow hedges, which were determined
not to qualify for hedge accounting under IFRS.
In Taiwan, due to a further decrease in the already low interest rate, a
strengthening of the Taiwan dollar, modelling refinements and product
experience, reserves in Taiwan have become inadequate according to ING's 90%
requirement. ING Group uses a prudent 90% confidence level for assessing the
reserve adequacy of its business units, which is more conservative than the
loss-recognition test used under U.S. GAAP. Using a 50% confidence level,
reserves in Taiwan remain adequate. Nonetheless, ING has decided to strengthen
reserves to prevent the 90% reserve inadequacy, under current assumptions, from
increasing further. As a consequence, a charge of EUR 80 million before tax was
taken in the second quarter, and the results from Taiwan are nil for the first
half of 2005. The inadequacy relates to an old block of business with
Page 20 of 41
embedded high interest-rate guarantees dating to before 2001, and such high
guarantees were discontinued in 2002. New business production in Taiwan
contributed EUR 48 million to the value of new life business in the first half
of 2005.
In Japan, profit before tax declined 4.3% to EUR 44 million, due entirely to
currency effects. Profit growth related to the strong sales of single-premium
variable annuities was offset by less favourable claims experience at the
corporate-owned life insurance business. Premium income from single-premium
variable annuities increased sharply to EUR 2,698 million from EUR 790 million
as a result of strong sales through a diversified distribution network of
regional and national banks, securities brokers and independent agents. Premiums
from corporate-owned life insurance rose 9.9% to EUR 669 million.
In the Rest of Asia, profit before tax declined to EUR 11 million from EUR 27
million in the first half last year, when results were positively impacted by
the release of a EUR 30 million reserve for a wage tax assessment in the second
quarter. ING's 30% owned mutual fund joint venture, China Merchant Funds
Management Company Ltd., made a positive contribution to profit before tax by
raising more than EUR 1.7 billion in its Cash Enhancement Fund. It now has EUR
3.3 billion of assets under management, and is the largest non-domestic asset
manager in the country.
------------------------------------------------------------------------------------------------------------------------
TABLE 16. INSURANCE ASIA/PACIFIC PREMIUM INCOME
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
------------------------------------------------------------------------------------------------------------------------
Australia 64 545 -88.3% 35 264 -86.7%
South Korea 1,035 720 43.8% 546 381 43.3%
Taiwan 1,345 1,079 24.7% 804 564 42.6%
Japan 3,367 1,443 133.3% 1,778 747 138.0%
Rest of Asia(1) 356 312 14.1% 194 153 26.8%
----- ----- ----- -----
PREMIUM INCOME EXCLUDING DIVESTMENTS 6,167 4,099 50.5% 3,357 2,109 59.2%
Divested units 204 118
----- ----- ----- -----
TOTAL PREMIUM INCOME 6,167 4,303 43.3% 3,357 2,227 50.7%
------------------------------------------------------------------------------------------------------------------------
1. Including India, China, Hong Kong, Thailand, Indonesia and Malaysia
VALUE OF NEW LIFE BUSINESS
The value of new business written by Insurance Asia/Pacific was EUR 198 million,
up 47.8% compared with first half of 2004, and accounting for more than half of
ING Group's total. Most units contributed to this growth in new business value,
in particular Japan and South Korea, due to strong sales. ING invested EUR 325
million to write new business in the region, up 78.6% from first half of 2004,
and the total internal rate of return expected on this investment is 14.2%.
-------------------------------------------------------------------------------------------------------------------
TABLE 17. INSURANCE ASIA/PACIFIC NEW LIFE INSURANCE PRODUCTION
NEW PRODUCTION 1H 2005 NEW PRODUCTION 1H 2004
Value of Value of
Annual Single New Annual Single New
In EUR million premium Premium Business IRR Premium Premium Business IRR
-------------------------------------------------------------------------------------------------------------------
Australia 23 440 6 12.0% 30 351 3 9.9%
South Korea 260 111 66 37.0% 184 84 38 25.1%
Taiwan 325 56 48 13.3% 113 27 45 11.9%
Japan 193 2,612 78 12.3% 170 752 44 15.9%
Rest of Asia 58 36 0 8.3% 48 33 4 9.6%
--- ----- --- --- ----- ---
TOTAL 859 3,255 198 14.2% 545 1,247 134 14.1%
-------------------------------------------------------------------------------------------------------------------
Page 21 of 41
2.4 WHOLESALE BANKING PROFIT RISES 11.3% TO EUR 1,206 MILLION
o PROFIT LIFTED BY THE RELEASE OF LOAN LOSS PROVISIONS AS CREDIT ENVIRONMENT
IMPROVES
o ING REAL ESTATE PROFIT BEFORE TAX RISES 36.1% TO EUR 161 MILLION
o RAROC AFTER TAX INCREASES TO 21.2%, OR 17.1% EXCLUDING THE IMPACT OF
DIVESTMENTS
-----------------------------------------------------------------------------------------------------------------------
TABLE 18. WHOLESALE BANKING PROFIT & LOSS ACCOUNT
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
-----------------------------------------------------------------------------------------------------------------------
Interest result 1,337 1,668 -19.8% 636 822 -22.6%
Commission 545 724 -24.7% 243 322 -24.5%
Other income 1,362 710 91.8% 575 282 103.9%
------ ------ ----- -----
TOTAL INCOME 3,244 3,102 4.6% 1,454 1,426 2.0%
OPERATING EXPENSES 1,768 1,869 -5.4% 920 932 -1.3%
------ ------ ----- -----
Gross result 1,476 1,233 19.7% 534 494 8.1%
Addition to provisions for loan losses -76 139 6 68 -91.2%
------ ------ ----- -----
PROFIT BEFORE TAX 1,552 1,094 41.9% 528 426 23.9%
Gains/losses on divestments 332 -84 47
Profit before tax from divested units 14 94 - 3
------ ------ ----- -----
TOTAL PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 1,206 1,084 11.3% 481 423 13.7%
KEY FIGURES
Cost/income ratio 54.5% 60.3% 63.3% 65.4%
RAROC pre-tax 25.2% 20.3%
RAROC after tax 21.2% 15.3%
Total risk-weighted assets(1) (in EUR billion) 160.9 147.5 9.1%
Addition to provisions for loan losses in
basis points of average credit-risk-weighted -10 18
assets
Staff (average FTEs) 21,100 24,000 -12.1%
-----------------------------------------------------------------------------------------------------------------------
1. 30 June 2005 compared with year-end 2004
FIRST-HALF PROFIT
Profit before tax excluding divestments at Wholesale Banking increased 11.3% to
EUR 1,206 million, driven by the release of loan loss provisions due to a benign
credit environment and improved risk management. Including the impact of
divestments, total profit before tax increased 41.9% to EUR 1,552 million. ING
realised a gain of EUR 255 million on the sale of Baring Asset Management, and
EUR 30 million of the gain on the sale of ING Bank Slaski shares was reported
under Wholesale Banking in the first quarter of 2005. In the second quarter, a
gain of EUR 47 million was realised on the NMB-Heller transaction. The first
half of 2004 included a loss of EUR 84 million on the sale of the Asian cash
equities business.
Total income increased 4.6% to EUR 3,244 million, including the gains on the
sales of Baring Asset Management and the ING Bank Slaski shares, as well as the
NMB-Heller transaction. Excluding the impact of divestments, income rose 3.9% to
EUR 2,851 million, fuelled by higher income from ING Real Estate and the
Wholesale Banking network outside the Benelux, mainly the U.K. and Central &
Eastern Europe. This was partially offset by lower Financial Markets results in
Belgium, compared with the very strong results in the first half of 2004.
Operating expenses declined 5.4% to EUR 1,768 million, due entirely to the
divestments of the Asian cash equities business, CenE Bankiers and parts of ING
BHF-Bank in 2004 as well as Baring Asset Management in the first quarter of
2005. Excluding the impact of divestments, operating expenses increased 13.1% to
EUR 1,721 million, mainly due to provisions taken in Belgium as well as
impairment losses on development projects at ING Real Estate. Excluding the
gains and losses on divestments, the cost/income ratio deteriorated to 60.7%
from 58.1% as a result of these non-recurring costs. The average number of
wholesale staff declined 12.1% to 21,100 compared with the first half of 2004,
mainly due to divestments.
Page 22 of 41
The addition to the provision for loan losses declined sharply from EUR 139
million in the first half of 2004 to a release of EUR 76 million in the first
half this year, due to the improved credit environment and the absence of
substantial new problem loans. In the first half of 2005, risk costs were an
annualised -10 basis points of average credit-risk-weighted assets compared with
18 basis points in the first half of 2004.
GEOGRAPHICAL BREAKDOWN WHOLESALE BANKING
-----------------------------------------------------------------------------------------------------------------------
TABLE 19. WHOLESALE BANKING PROFIT BEFORE TAX
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
-----------------------------------------------------------------------------------------------------------------------
Netherlands 414 456 -9.2% 154 233 -33.9%
Belgium 330 422 -21.8% 105 146 -28.1%
Rest of World 340 131 159.5% 165 35 371.4%
Other -40 -25 -9 -20
----- ----- --- ---
SUBTOTAL WHOLESALE BANKING 1,044 984 6.1% 415 394 5.3%
Asset management(1) 162 100 62.0% 66 29 127.6%
----- ----- --- ---
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 1,206 1,084 11.3% 481 423 13.7%
-----------------------------------------------------------------------------------------------------------------------
1. Mainly ING Real Estate
In the Netherlands, profit before tax excluding divestments declined 9.2% to EUR
414 million. Total income excluding divestments was up 1.8%, driven by a gain on
the sale of convertible bonds in the first quarter of 2005. Higher income from
Structured Finance and Leasing was offset by lower volumes in General Lending
combined with lower interest margins in the Corporate Clients segment and the
Payments & Cash Management business. Operating expenses increased 12.4%, mainly
due to growth in Leasing, higher personnel expenses and higher IT expenses. Risk
costs were an annualised 3 basis points of average credit-risk-weighted assets,
compared with 4 basis points in the first half of 2004.
In Belgium, profit before tax excluding divestments declined 21.8% to EUR 330
million. Total income was 5.8% lower due to a decline in Financial Markets
results, particularly in the second quarter, compared with very strong results
in the first half of 2004. Operating expenses increased 21.7%, due to EUR 99
million in provisions, of which EUR 68 million was taken in the second quarter,
mainly related to Williams de Broe. That was partially offset by impairments on
real estate taken in 2004 under IFRS. Risk costs declined sharply from 8 basis
points of average credit-risk-weighted assets in the first half of 2004 to -15
basis points in the first half this year due to releases, particularly in the
first quarter.
In the Rest of the World, profit before tax excluding divestments increased
sharply to EUR 340 million from EUR 131 million, driven by releases of debtor
provisions and higher income. Total income excluding divestments rose 7.4%,
boosted by a strong performance of Structured Finance in the U.K. and higher
Financial Markets results in Central & Eastern Europe. Operating expenses
excluding divestments were down 0.2%. Risk costs decreased from EUR 103 million,
or 44 basis points of average credit-risk-weighted assets, in the first half of
2004 to a release of EUR 51 million, or -24 basis points, in the first half of
this year. All regions within the Rest of the World showed a net release from
the provision for loan losses in the first half of 2005.
The asset management activities of Wholesale Banking posted a profit before tax
excluding divestments of EUR 162 million, an increase of 62.0% compared to the
first half of 2004. ING Real Estate's profit before tax rose 36.1% to EUR
161 million, driven by higher results from the real estate finance activities
and the investment management activities. The results from property development
decreased due to impairments on projects in Poland and the Czech Republic.
RAROC
The Risk-Adjusted Return on Capital after tax for Wholesale Banking improved
from 15.3% in the first half of 2004 to 21.2% in the first half this year,
lifted by the gains on the sales of Baring Asset Management and the ING Bank
Slaski shares as well as the NMB-Heller transaction. Excluding these gains, the
after-tax
Page 23 of 41
RAROC improved to 17.1% from 16.2% The Wholesale Banking activities in the
Netherlands and Belgium continued to show strong pre-tax RAROCs. Within Rest of
the World, the performance in Germany and Asia is still below ING's target. The
pre-tax RAROC of ING Real Estate increased to 30.2% from 29.1% in the first half
of 2004. Total economic capital was reduced to EUR 8.7 billion from EUR 10.2
billion in the first half of 2004, mainly due to the divestments of parts of ING
BHF-Bank, the Asian cash equities business, CenE Bankiers and Baring Asset
Management.
----------------------------------------------------------------------------------------------------------------------
TABLE 20. WHOLESALE BANKING RISK-ADJUSTED RETURN ON CAPITAL
RAROC % (pre-tax) ECONOMIC CAPITAL (in EUR billion)
1H 2005 1H 2004(1) FY 2004(1) 1H 2005 1H 2004 FY 2004
----------------------------------------------------------------------------------------------------------------------
Netherlands 27.2 24.4 25.5 2.6 3.1 3.0
Belgium 23.5 27.2 22.2 2.2 2.7 2.5
Rest of World 17.1 9.8 -1.6 2.7 3.3 3.1
Other -44.6 -27.2 -43.6 0.2 0.2 0.2
--- ---- ---
SUBTOTAL WHOLESALE BANKING 20.9 19.0 13.6 7.7 9.3 8.8
Asset management(2) 56.7 34.2 39.5 1.0 0.9 0.8
--- ---- ---
TOTAL PRE-TAX 25.2 20.3 16.0 8.7 10.2 9.6
TOTAL AFTER TAX 21.2 15.3 12.2
----------------------------------------------------------------------------------------------------------------------
1. 2004 RAROC figures have been restated to reflect changes in the model for market risk
2. Mainly ING Real Estate and Baring Asset Management
Page 24 of 41
2.5 RETAIL BANKING PROFIT RISES 25.5% TO EUR 808 MILLION
o TOTAL INCOME INCREASES 7.8% ON AN UNDERLYING BASIS DRIVEN BY MORTGAGES AND
SAVINGS
o COST/INCOME RATIO IMPROVES TO 67.2% FROM 70.5% AS INCOME GROWS FASTER THAN
COSTS
o RISK-ADJUSTED RETURN ON CAPITAL AFTER TAX INCREASES TO 34.8%, WELL ABOVE ING'S
TARGET
-----------------------------------------------------------------------------------------------------------------------
TABLE 21. RETAIL BANKING PROFIT & LOSS ACCOUNT
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
-----------------------------------------------------------------------------------------------------------------------
Interest result 2,147 1,935 11.0% 1,102 982 12.2%
Commission 543 585 -7.2% 271 304 -10.9%
Other income 142 -48 35 -29
------ ------ ----- -----
TOTAL INCOME 2,832 2,472 14.6% 1,408 1,257 12.0%
OPERATING EXPENSES 1,903 1,743 9.2% 976 903 8.1%
------ ------ ----- -----
Gross result 929 729 27.4% 432 354 22.0%
Addition to provisions for loan losses 59 81 -27.2% 18 36 -50.0%
------ ------ ----- -----
PROFIT BEFORE TAX 870 648 34.3% 414 318 30.2%
Gains/losses on divestments 62
Profit before tax from divested units 4 -1
------ ------ ----- -----
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 808 644 25.5% 414 319 29.8%
KEY FIGURES
Cost/income ratio 67.2% 70.5% 69.3% 71.8%
RAROC pre-tax 50.0% 44.2%
RAROC after tax 34.8% 29.2%
Total risk-weighted assets(1) (in EUR billion) 82.2 76.5 7.5%
Addition to provisions for loan losses in
basis points of average credit-risk-weighted 15 22
assets
Staff (average FTEs) 36,000 34,600 4.0%
-----------------------------------------------------------------------------------------------------------------------
1. 30 June 2005 compared with year-end 2004
FIRST-HALF PROFIT
Profit before tax excluding divestments from Retail Banking rose 25.5% to EUR
808 million, mainly due to higher results from Belgium and the Netherlands.
Including a gain of EUR 62 million on the sale of ING Bank Slaski shares in the
first quarter of 2005 and the results from the divested retail banking
activities of ING BHF-Bank, total profit before tax increased 34.3%.
Total income increased 14.6% to EUR 2,832 million, including the gain on ING
Bank Slaski shares. Excluding that gain and the impact of divestments, total
income rose 13.9% to EUR 2,770 million. Income was lifted by the acquisition of
Mercator Bank in Belgium and the proportional (50%) consolidation of
Postkantoren BV in the Netherlands (which had no impact on total profit). Income
in the first quarter of 2004 included a EUR 48 million loss on a unit-linked
mortgage product in the Netherlands. Excluding that charge and the consolidation
of Mercator Bank and Postkantoren BV, the underlying increase was 7.8%, driven
by higher income from mortgages in the Netherlands and growth in savings and
current accounts in Belgium.
Operating expenses increased 9.2% to EUR 1,903 million, due in part to the
consolidation of Postkantoren BV in the Netherlands and Mercator Bank in
Belgium. Excluding that impact, operating expenses were up 5.6%, mainly due to
wage increases related to a new collective labour agreement in the Netherlands
and higher IT expenses. The cost/income ratio improved to 67.2% from 70.5% in
the first half of 2004. Excluding the gain on ING Bank Slaski shares, the
cost/income ratio improved to 68.7%. The average number of retail staff rose
4.0% to 36,000 due to the consolidations mentioned.
The addition to the provision for loan losses declined 27.2% to EUR 59 million
from EUR 81 million. Lower risk costs in Belgium and Poland were partially
offset by higher risk costs in the Netherlands in line with the growth of the
business. The total addition for Retail Banking was equal to an annualised 15
basis points of average credit-risk-weighted assets compared with 22 basis
points in the first half of 2004.
Page 25 of 41
GEOGRAPHICAL BREAKDOWN RETAIL BANKING
------------------------------------------------------------------------------------------------------------------------
TABLE 22. RETAIL BANKING PROFIT BEFORE TAX
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
------------------------------------------------------------------------------------------------------------------------
Netherlands 629 565 11.3% 339 313 8.3%
Belgium 139 66 110.6% 52 11 372.7%
Poland 8 11 -27.3% 3 8 -62.5%
Other Retail Banking(1) 32 2 20 -13
--- --- --- ---
PROFIT BEFORE TAX EXCLUDING DIVESTMENTS 808 644 25.5% 414 319 29.8%
------------------------------------------------------------------------------------------------------------------------
1. Mainly ING Vysya Bank, Private Banking rest of world, and the Kookmin Bank stake
In the Netherlands, profit before tax from retail banking rose 11.3% to EUR 629
million. Total income increased 14.3%, lifted by the consolidation of
Postkantoren BV and reflecting the EUR 48 million loss taken on a unit-linked
mortgage product at Postbank in the first quarter of 2004. Excluding both
impacts, total income rose 6.4%, driven by growth in mortgage lending and
savings as well as higher income from prepayment penalties on mortgages. That
was partially offset by lower interest margins due to decreasing interest rates.
Compared with year-end 2004, the residential mortgage portfolio in the
Netherlands increased by EUR 5.0 billion, or 6.1%, to EUR 87.2 billion at the
end of June. Excluding the impact of Postkantoren BV, operating expenses
increased 8.5% due to higher wages related to a new collective labour agreement
and costs to upgrade IT systems. Risk costs were an annualised 20 basis points
of average credit-risk-weighted assets, equal to the first half of 2004.
In Belgium, profit before tax from retail banking increased sharply to EUR 139
million from EUR 66 million, driven by higher income and lower risk costs. Total
income increased 9.4%, mainly due to the strong growth of savings and current
accounts, high sales of structured notes, and the consolidation of Mercator
Bank. Operating expenses remained unchanged due to impairments on real estate in
2004 under IFRS. The impact of the acquisition of Mercator Bank added
2.8%-points to income growth and 3.6%-points to expense growth. The addition to
the provision for loan losses was EUR 2 million, or 2 basis points of average
credit-risk-weighted assets, compared with 27 basis points in the first half of
2004.
In Poland, profit before tax from the retail banking activities of ING Bank
Slaski (excluding the gain on the sale of shares) declined to EUR 8 million from
EUR 11 million in the first half of 2004, mainly due to lower lending volumes
and higher expenses caused by investments to improve the branch network. Risk
costs dropped from EUR 8 million in the first half of 2004 to a release of EUR 1
million this year, due to the improved quality of the portfolio.
Other Retail Banking activities posted a profit before tax excluding divestments
of EUR 32 million, up from EUR 2 million in the first half of 2004, mainly due
to higher results from ING Vysya Bank and Private Banking in Asia, as well as
the stake in Kookmin Bank in Korea.
RAROC
The Risk-Adjusted Return on Capital after-tax for Retail Banking improved to
34.8% from 29.2% in the first half of 2004. Excluding the gain on the sale of
ING Bank Slaski shares, the after-tax RAROC is 32.9%, well above ING's
target of 12.0%. The 2004 RAROC-figures for Retail Banking have been adjusted to
reflect changes to the model for market risk.
-------------------------------------------------------------------------------------------------------------
TABLE 23. RETAIL BANKING RISK-ADJUSTED RETURN ON CAPITAL
RAROC % (pre-tax) ECONOMIC CAPITAL (in EUR billion)
1H 2005 1H 2004(1) FY 2004(1) 1H 2005 1H 2004(1) FY 2004(1)
-------------------------------------------------------------------------------------------------------------
Netherlands 64.9 61.6 58.5 2.0 1.9 1.9
Belgium 44.8 43.0 16.4 0.5 0.5 0.5
Poland 49.3 23.8 20.5 0.1 0.1 0.1
Other Retail Banking(2) 4.4 -1.6 -3.1 0.6 0.6 0.6
--- --- ---
TOTAL PRE-TAX 50.0 44.2 38.8 3.2 3.1 3.1
TOTAL AFTER TAX 34.8 29.2 26.2
-------------------------------------------------------------------------------------------------------------
1. 2004 RAROC figures have been restated to reflect changes in the model for market risk
2. Mainly ING Vysya Bank, Private Banking rest of world, and the Kookmin Bank stake
Page 26 of 41
2.6 ING DIRECT PROFIT BEFORE TAX INCREASES 25.1% TO EUR 254 MILLION
o 1.8 MILLION NEW CUSTOMERS ADDED IN FIRST HALF TO MORE THAN 13.3 MILLION
CUSTOMERS
o MORTGAGE PORTFOLIO GROWS BY EUR 9.8 BILLION TO EUR 42.9 BILLION
o RISK-ADJUSTED RETURN ON CAPITAL AFTER TAX INCREASES TO 14.3% FROM 12.1%
-----------------------------------------------------------------------------------------------------------------------
TABLE 24. ING DIRECT(1) PROFIT & LOSS ACCOUNT
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
-----------------------------------------------------------------------------------------------------------------------
Interest result 884 747 18.3% 432 396 9.1%
Commission 46 44 4.5% 24 26 -7.7%
Other income 54 6 41 3
----- ----- ----- -----
TOTAL INCOME 984 797 23.5% 497 425 16.9%
OPERATING EXPENSES 667 549 21.5% 344 276 24.6%
----- ----- ----- -----
Gross result 317 248 27.8% 153 149 2.7%
Addition to provisions for loan losses 63 45 40.0% 26 24 8.3%
----- ----- ----- -----
PROFIT BEFORE TAX 254 203 25.1% 127 125 1.6%
KEY FIGURES
Cost/income ratio 67.8% 68.9% 69.2% 64.9%
RAROC pre-tax 19.8% 19.4%
RAROC after tax 14.3% 12.1%
Total risk-weighted assets(2) (in EUR billion) 62.4 50.1 24.6%
Addition to provisions for loan losses in
basis points of average credit-risk-weighted 22 26
assets
Staff (average FTEs) 6,200 5,000 24.0%
-----------------------------------------------------------------------------------------------------------------------
1. Including ING Card
2. 30 June 2005 compared with year-end 2004.
FIRST-HALF PROFIT
Profit before tax from ING Direct (including ING Card) increased 25.1% to EUR
254 million as the business continued to attract new customers and benefited
from economies of scale as business volumes grew. In the first half of 2005, ING
Direct added 1.8 million new customers and EUR 30.4 billion in funds entrusted.
Results in the second quarter were negatively affected by a flattening of the
yield curve in most countries, particularly the U.S. However, starting in July
client rates in Germany, the U.K., France and Italy were adjusted to mitigate
the impact on the interest margin going forward.
Total income rose 23.5% to EUR 984 million, driven mainly by an 18.3% increase
in the interest result as funds entrusted and the mortgage portfolio continued
to show strong growth. In the first six months of 2005, total funds entrusted
grew by EUR 30.4 billion, or 20.9%, to EUR 175.8 billion compared with year-end
2004. The total mortgage portfolio increased by EUR 9.8 billion, or 29.8%, to
EUR 42.9 billion at the end of June, driven by strong growth in Germany, the
U.S. and Australia. The total interest margin of the ING Direct operations
narrowed in the first half of 2005 to 0.83% from 1.00% in the first half of
2004, mainly due to a flattening of the yield curve. In all currency zones in
which ING Direct is active, the long-term interest rates decreased during the
second quarter, while short-term interest rates remained stable in all countries
except the U.S., where rates increased further. Because of strong sales
momentum, ING Direct decided to continue its marketing campaigns until the end
of June and adjust client rates in July. As a result of those client rate
adjustments, the interest margin has increased to about 0.90% to date.
Operating expenses rose 21.5% to EUR 667 million as a result of higher marketing
costs and higher expenses to facilitate the continued strong growth of the
business, notably in mortgage distribution. At the end of June 2005, ING Direct
had 13.3 million customers, an increase of 1.8 million in the first half and up
3.3 million from the end of June 2004. The cost/income ratio of ING Direct
improved to 67.8% from 68.9% in the first half of 2004, while the operational
cost base, excluding marketing, improved to 0.40% of total assets compared with
0.44% for the full year 2004. Total marketing costs increased 21% in the first
half to
Page 27 of 41
support the continued growth of the business. The average number of full-time
employees increased from 5,000 to 6,200 in the first half of 2005, mainly due to
expansion in Germany, the U.S. and the U.K.
The addition to the provision for loan losses increased to EUR 63 million from
EUR 45 million, in pace with the strong growth of the business. Risk costs
equalled an annualised 22 basis points of average credit-risk-weighted assets,
compared with 26 basis points in the first half of 2004.
RAROC
The Risk-Adjusted Return on Capital after tax for ING Direct increased from
12.1% in the first half of 2004 to 14.3%, which is above ING's target of 12.0%.
The increase was due entirely to higher economic returns. Economic capital
increased to EUR 2.9 billion from EUR 2.4 billion in first half of 2004,
reflecting the strong growth of the business.
GEOGRAPHICAL BREAKDOWN ING DIRECT
------------------------------------------------------------------------------------------------------------------------
TABLE 25. ING DIRECT PROFIT BEFORE TAX (including ING Card)
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
------------------------------------------------------------------------------------------------------------------------
Canada 31 29 6.9% 17 14 21.4%
Spain 28 22 27.3% 14 11 27.3%
Australia 34 30 13.3% 19 13 46.2%
France 8 2 300.0% 5 2 150.0%
United States 77 76 1.3% 24 51 -52.9%
Italy 8 -1 6 3 100.0%
United Kingdom -21 -16 -13 -5
Germany(1) 97 64 51.6% 57 37 54.1%
--- --- --- ---
SUBTOTAL ING DIRECT 262 206 27.2% 129 126 2.4%
ING Card -8 -3 -2 -1
--- --- --- ---
TOTAL 254 203 25.1% 127 125 1.6%
------------------------------------------------------------------------------------------------------------------------
1. Including Austria
Seven of the eight ING Direct units posted a profit before tax in the first half
of 2005, with Germany, Spain, Australia and France showing strong profit growth.
Only the U.K., which started operations in May 2003, is still loss-making. Due
to the inversion of the yield curve in the U.K. in the second quarter, the loss
in that market increased slightly, however total start-up losses remain lower
than expected. The yield curve and interest margin in the U.K. have since become
positive, and on August 1 the client rate in the U.K. was reduced by 0.25%,
preceding a similar rate cut by the Bank of England on August 4. Results in the
U.S. declined in the second quarter due to the rapid increase in short-term
interest rates, which have been partially passed on to customers through
increased client rates. The operations in Canada, Spain, Australia, the U.S. and
Germany are performing above ING's target for risk-adjusted return on capital.
ING Card showed a loss of EUR 8 million in the first half of 2005, due in part
to higher risk costs to bring provisions fully into line with IFRS.
------------------------------------------------------------------------------------------------------------------------
TABLE 26. ING DIRECT CLIENTS AND FUNDS ENTRUSTED
NUMBER OF CLIENTS FUNDS ENTRUSTED
(x 1,000) (in EUR billion)
30 June 31 March 31 December 30 June 31 March 31 December
2005 2005 2004 2005 2005 2004
------------------------------------------------------------------------------------------------------------------------
Canada 1,212 1,170 1,121 10.5 9.7 9.0
Spain 1,110 1,047 975 11.8 11.3 10.2
Australia 1,147 1,063 996 9.9 9.2 8.5
France 463 448 413 10.5 9.9 9.2
United States 2,866 2,551 2,226 29.0 24.7 21.2
Italy 589 547 485 13.2 12.4 10.6
United Kingdom 911 836 762 33.5 30.0 27.9
Germany(1) 5,028 4,810 4,511 57.4 53.6 48.8
------ ------ ------ ----- ----- -----
TOTAL 13,326 12,472 11,489 175.8 160.8 145.4
------------------------------------------------------------------------------------------------------------------------
1. Including Austria
Page 28 of 41
3. ASSETS UNDER MANAGEMENT INCREASE 13.2% TO EUR 505.2 BILLION
o INCLUDING THE IMPACT OF DIVESTMENTS, ASSETS UNDER MANAGEMENT GREW BY 2.7%
o FUND INFLOW OF EUR 13.6 BILLION DRIVEN MAINLY BY INSURANCE ASIA/PACIFIC
o ING REAL ESTATE'S PORTFOLIO GROWS 14.4% TO EUR 57.3 BILLION
-----------------------------------------------------------------------------------------------------------
TABLE 27. ASSETS UNDER MANAGEMENT BY BUSINESS LINE
30 June 31 December 1H 31 March 2Q
In EUR billion 2005 2004 Change 2005 Change
-----------------------------------------------------------------------------------------------------------
Insurance Europe 160.5 148.3 8.2% 149.3 7.5%
Insurance Americas 183.9 161.2 14.1% 169.3 8.6%
Insurance Asia/Pacific 69.4 56.2 23.5% 63.7 8.9%
Retail Banking 47.1 42.6 10.6% 45.1 4.4%
Wholesale Banking 40.9 35.2 16.2% 39.6 3.3%
ING Direct 3.4 2.6 30.8% 3.1 9.7%
----- ---- -----
ASSETS MANAGED EXCLUDING DIVESTED UNITS 505.2 446.1 13.2% 470.1 7.5%
Divestments & restatements 45.8
TOTAL 505.2 491.9 2.7% 470.1 7.5%
-----------------------------------------------------------------------------------------------------------
Assets under management increased 13.2% to EUR 505.2 billion in the first half
of 2005, excluding the impact of the divestments of Baring Asset Management and
parts of ING BHF-Bank. Including those divestments and EUR 2.5 billion of
restatements in 2004, total assets under management increased by 2.7%. The
growth in assets was driven by a net inflow of EUR 13.6 billion, plus EUR 31.7
billion attributable to higher currencies and EUR 13.8 billion from higher stock
markets.
FUND INFLOW
The net inflow of EUR 13.6 billion was driven mainly by Insurance Asia/Pacific,
Insurance Europe and ING Real Estate. Insurance Asia/Pacific reported a net
inflow of EUR 4.7 billion, due in part to the China Merchant Cash Fund which
brought in EUR 1.7 billion of new sales. ING Insurance Europe's net inflow of
EUR 3.1 billion stemmed mainly from the euro inflation-linked bond strategy, the
Europe high dividend strategy, and the emerging market debt investment strategy.
ING Real Estate realised an inflow of EUR 3.5 billion resulting from ongoing
growth of its investment management activities, driven by the U.S., the U.K. and
Australia, as well as the launch of a new residential property fund in the
Netherlands.
------------------------------------------------------------------------------------------------------------
TABLE 28. ASSETS ORIGINATED BY BUSINESS LINE
30 June 31 December 1H 31 March 2Q
In EUR billion 2005 2004 Change 2005 Change
------------------------------------------------------------------------------------------------------------
Insurance Europe 55.0 50.7 8.5% 49.2 11.8%
Insurance Americas 110.8 98.0 13.1% 101.5 9.2%
Insurance Asia/Pacific 35.5 28.2 25.9% 32.3 9.9%
Retail Banking 88.7 82.2 7.9% 86.2 2.9%
Wholesale Banking 31.5 26.0 21.2% 29.5 6.8%
ING Direct 3.4 2.6 30.8% 3.1 9.7%
----- ----- -----
TOTAL THIRD PARTIES 324.9 287.7 12.9% 301.8 7.7%
Proprietary assets 180.3 158.4 13.8% 168.3 7.1%
----- ----- -----
ASSETS MANAGED EXCLUDING DIVESTED UNITS 505.2 446.1 13.2% 470.1 7.5%
Divestments & restatements 45.8
TOTAL 505.2 491.9 2.7% 470.1 7.5%
------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
TABLE 29. ASSETS UNDER MANAGEMENT BY ASSET CLASS
In EUR billion 30 June 2005 31 December 2004 31 March 2005
---------------------------------------------------------------------------------------------------------------
Equities 158.4 31.4% 160.2 32.5% 141.3 30.1%
Fixed income 270.6 53.5% 258.3 52.5% 255.4 54.3%
Real Estate(1) 39.5 7.8% 33.8 6.9% 37.3 7.9%
Cash 36.7 7.3% 39.6 8.1% 36.1 7.7%
----- ----- ----- ----- ----- -----
TOTAL 505.2 100% 491.9 100% 470.1 100%
---------------------------------------------------------------------------------------------------------------
1. ING Real Estate investment management and development activities plus real estate assets from other
business lines
Page 29 of 41
--------------------------------------------------------------------------------------------------------------
TABLE 30. ASSETS UNDER MANAGEMENT BY CLIENT CATEGORY
30 June 31 December 1H 31 March 2Q
In EUR billion 2005 2004 Change 2005 Change
--------------------------------------------------------------------------------------------------------------
Private clients 221.4 196.4 12.7% 202.8 9.2%
Institutional clients 103.5 91.3 13.4% 99.0 4.5%
----- ----- -----
TOTAL THIRD PARTIES 324.9 287.7 12.9% 301.8 7.7%
Proprietary assets 180.3 158.4 13.8% 168.3 7.1%
----- ----- -----
ASSETS MANAGED EXCLUDING DIVESTED UNITS 505.2 446.1 13.2% 470.1 7.5%
Share of third parties 64.3% 64.5% 64.2%
--------------------------------------------------------------------------------------------------------------
ASSETS UNDER MANAGEMENT FOR THIRD-PARTY CLIENTS
Total assets under management for third-party clients increased in the first 6
months by 12.9%. The majority of those assets are being managed by ING
Investment Management (59%). Private Banking and U.S. Financial Services each
manage more than 14% of these assets and ING Real Estate had a 9% share. The
remaining 4% was managed by other business units, such as ING Direct. Assets
managed on behalf of institutional clients exceeded the EUR 100 billion mark.
All business units reported higher third-party assets under management, driven
by growth at ING Real Estate (+27.5%), the U.S. Financial Services business
(+19.3%), ING Investment Management (+10.9%) and Private Banking (+10.6%).
ING INVESTMENT MANAGEMENT
ING Investment Management manages EUR 193.2 billion third-party assets as well
as proprietary assets of the Group. The third-party business posted a 10.9%
increase in funds under management in the first half of 2005. The increase was
driven by the strengthening of U.S. and Asia/Pacific currencies, higher markets
as well as net inflows. ING IM Asia/Pacific reported more than EUR 1.7 billion
in inflows into the China Merchants Cash Plus Fund, which was one of the first
money-market funds in the country. Europe's newly launched regional high
dividend funds raised more than EUR 500 million, bringing the total fund flow
into new high dividend products, including the IGD Closed End Fund launched in
the US, to EUR 1.8 billion in the first half. Also, the fixed-income product
range was expanded with the launch of the new Euro Inflation-Linked Bond Fund in
the first half, which has raised EUR 120 million so far. ING IM Americas
continues to receive solid inflows into the ING Funds Senior Income Fund,
reporting inflows of EUR 439 million for the first six months. The investment
performance statistics for the mutual funds managed by ING continue to be
strong, with a good track record for fixed income and balanced strategies. More
than 58% of the fund assets exceeded their benchmark or were in the first or
second quartile on a five-year basis.
ING REAL ESTATE
ING Real Estate's portfolio, including real estate finance, increased to EUR
57.3 billion at the end of June 2005 from EUR 50.1 billion at the end of 2004,
driven mainly by the investment management activities. The real estate
investment management portfolio increased by EUR 6.0 billion to EUR 36.9
billion, including a net inflow of EUR 3.5 billion. Fund inflow was driven by
strong demand for the Clarion Lion Property Fund and the Lion Industrial Trust
in the U.S., as well as the launch of a second residential real estate fund for
private investors in the Netherlands, and the appointment of ING Real Estate in
Australia to manage a listed property trust which has been renamed the ING Real
Estate Community Living Fund. The real estate finance portfolio increased to EUR
18.2 billion from EUR 17.0 billion at year-end 2004, lifted by a number of large
transactions in Spain, the U.K. and the U.S. The real estate development
portfolio increased by EUR 0.1 billion to EUR 2.2 billion due to the start of
two new projects in the Netherlands. ING Real Estate's U.S. unit, ING Clarion
Partners, formed a private equity joint venture in June to purchase Gables
Residential Trust, a U.S.-based real estate investment trust. That transaction
is expected to be completed in the third quarter of 2005.
Page 30 of 41
APPENDICES
1. Key figures
2. First-half consolidated profit and loss account (Insurance/Banking), gains
& losses on divestments, and profit before tax from divested units
3. Second-quarter consolidated profit and loss account (Insurance/Banking),
gains & losses on divestments, and profit before tax from divested units
4. Consolidated balance sheet and changes in capital and reserves
5. Condensed consolidated statement of cash flows
6. Additional information: quarterly results, insurance profit & loss by
life/non-life, insurance and banking income information, loans and advances
to customers of the banking operations
7. Value of new business statistics
8. Information for shareholders
----------------
The accounting principles applied in this document for the 2005 figures are in
accordance with International Financial Reporting Standards as endorsed by the
European Union ("EU"). For more information please refer to www.ing.com.
All figures in this document are unaudited.
Certain of the statements contained in this release are statements of future
expectations and other forward-looking statements. These expectations are based
on management's current views and assumptions and involve known and unknown
risks and uncertainties. Actual results, performance or events may differ
materially from those in such statements due to, among other things, (i) general
economic conditions, in particular economic conditions in ING's core markets,
(ii) performance of financial markets, including emerging markets, (iii) the
frequency and severity of insured loss events, (iv) mortality and morbidity
levels and trends, (v) persistency levels, (vi) interest rate levels, (vii)
currency exchange rates, (viii) general competitive factors, (ix) changes in
laws and regulations, and (x) changes in the policies of governments and/or
regulatory authorities. ING assumes no obligation to update any forward-looking
information contained in this document.
Page 31 of 41
APPENDIX 1.
------------------------------------------------------------------------------------------------------------------------------
1. KEY FIGURES
IFRS DUTCH GAAP
1H 1H FY FY FY FY FY
2005 2004 2004 2003 2002 2001 2000
------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET (EUR x billion)
Total assets(1) 1,107 964 866 779 716 705 650
Capital and reserves(1) 35 28 26 21 18 22 25
ASSETS UNDER MANAGEMENT (EUR x billion) 505 491 492 463 449 513 503
MARKET CAPITALISATION (EUR x billion) 52 42 49 39 32 57 83
INCOME (EUR x million)
Insurance operations 28,148 27,563 55,398 53,233 59,449 55,274 34,521
Banking operations 7,020 6,403 12,537 11,680 11,201 11,111 11,302
OPERATING EXPENSES (EUR x million)
Insurance operations 2,466 2,272 4,837 4,897 5,203 5,583 5,023
Banking operations 4,408 4,264 8,658 8,184 8,298 8,186 8,273
IMPAIRMENTS/ADDITIONS TO THE PROVISION FOR LOAN
LOSSES (EUR x million) 48 289 497 1,288 2,099 907 400
PROFIT (EUR x million)
Insurance operations 1,816 2,112 4,005 3,486 3,170 2,792 2,307
Banking operations 2,566 1,874 3,414 2,371 1,468 2,170 2,605
------ ------ ------ ------ ------ ------ ------
Profit before tax 4,382 3,986 7,419 5,857 4,638 4,962 4,912
Operating net profit 5,389 4,053 3,433 3,539 3,388
Capital gains/negative value adjustment shares 579 -10 820 713 620
Non-operating net profit 247 325 7,976
------ ------ ------ ------ ------
Net profit 3,492 2,793 5,968 4,043 4,500 4,577 11,984
Distributable net profit 3,492 2,793 5,968 4,043 4,253 4,252 4,901
FIGURES PER ORDINARY SHARE OF EUR 0.24 NOMINAL VALUE
Operating net profit 2.53 2.00 1.77 1.83 1.76
Net profit 1.61 1.33 2.80 2.00 2.32 2.37 6.27
Distributable net profit 1.61 1.33 2.80 2.00 2.20 2.20 2.56
Dividend 0.54 0.49 1.07 0.97 0.97 0.97 1.13
Capital and reserves(1) 16.27 13.00 11.76 10.08 9.14 11.03 13.04
RATIOS (in %)
ING Group
(Operating) return on equity (ROE) 25.7 25.2 22.9 21.5 17.4 15.3 10.3
(Operating) net profit growth 25 n/a 33 18 -3 4 27
Insurance operations
Combined ratio 90 89 94 98 102 103 104
Capital coverage ratio(1) 228 201 210 180 169 180 235
Banking operations
BIS ratio ING Bank(1) 10.55 10.59 11.47 11.34 10.98 10.57 10.75
Tier-1 ratio ING Bank(1) 7.20 7.00 7.71 7.59 7.31 7.03 7.22
Cost/income ratio 62.8 66.6 69.1 70.1 74.1 73.7 73.2
EMPLOYEES (average FTEs) 114,600 113,300 113,000 115,200 113,060 112,000 92,650
------------------------------------------------------------------------------------------------------------------------------
1. Comparable figures shown under1H 2004 are IFRS-based figures at 1 January 2005
Page 32 of 41
APPENDIX 2. FIRST-HALF PROFIT & LOSS ACCOUNT
-------------------------------------------------------------------------------------------------------------------------
2.1 ING GROUP FIRST-HALF CONSOLIDATED PROFIT & LOSS ACCOUNT
INSURANCE BANKING TOTAL(1)
In EUR million 1H 2005 1H 2004 1H 2005 1H 2004 1H 2005 1H 2004 %
-------------------------------------------------------------------------------------------------------------------------
Premium income 22,624 21,894 22,624 21,894 3.3%
Investment income 4,726 4,718 840 149 5,553 4,759 16.7%
Interest result banking operations 4,297 4,332 4,255 4,372 -2.7%
Commission income 622 587 1,136 1,352 1,758 1,939 -9.3%
Other income 176 364 747 570 923 934 -1.2%
------ ------ ------ ------ ------ ------
TOTAL INCOME 28,148 27,563 7,020 6,403 35,113 33,898 3.6%
Underwriting expenditure 23,329 22,614 23,329 22,614 3.2%
Other interest expenses 535 541 480 473 1.5%
Operating expenses 2,466 2,272 4,408 4,264 6,874 6,536 5.2%
Impairments/additions to the
provision for loan losses 2 24 46 265 48 289 -83.4%
------ ------ ------ ------ ------ ------
TOTAL EXPENDITURE 26,332 25,451 4,454 4,529 30,731 29,912 2.7%
PROFIT BEFORE TAX 1,816 2,112 2,566 1,874 4,382 3,986 9.9%
Taxation 277 517 489 533 766 1,050 -27.0%
Third-party interests 109 52 15 91 124 143 -13.3%
------ ------ ------ ------ ------ ------
NET PROFIT 1,430 1,543 2,062 1,250 3,492 2,793 25.0%
-------------------------------------------------------------------------------------------------------------------------
1. Including inter-company eliminations.
-------------------------------------------------------------------------------------------------------------------------
2.2 NET IMPACT OF DIVESTMENTS AND SPECIAL ITEMS IN FIRST HALF
INSURANCE BANKING TOTAL
In EUR million 1H 2005 1H 2004 1H 2005 1H 2004 1H 2005 1H 2004 %
-------------------------------------------------------------------------------------------------------------------------
NET PROFIT 1,430 1,543 2,062 1,250 3,492 2,793 25.0%
GAINS/LOSSES ON DIVESTMENTS:
- sale of Freeler 10 10
- over-allotment ING Canada IPO 19 19
- sale Life of Georgia -39 -39
- sale Australia non-life 146 146
- sale of Baring Asset Management 269 269
- sale of ING Bank Slaski shares 92 92
- restructuring NMB-Heller 47 47
- sale Asian cash equity business -54 -54
SUBTOTAL GAINS/LOSSES ON DIVESTMENTS -10 146 408 -54 398 92
Net profit from divested units 8 102 10 83 18 185
----- ----- ----- ----- ----- -----
NET PROFIT EXCLUDING DIVESTMENTS 1,432 1,295 1,644 1,221 3,076 2,516 22.3%
SPECIAL ITEMS:
- gain old reinsurance business 92 92
- hedge result 103 -16 87
- tax releases 100 35 135
----- ----- ----- ----- ----- -----
SUBTOTAL SPECIAL ITEMS 100 195 35 -16 135 179
NET PROFIT EXCLUDING DIVESTMENTS AND
SPECIAL ITEMS 1,332 1,100 1,609 1,237 2,941 2,337 25.8%
-------------------------------------------------------------------------------------------------------------------------
Page 33 of 41
APPENDIX 3. SECOND-QUARTER PROFIT & LOSS ACCOUNT
------------------------------------------------------------------------------------------------------------------------
3.1 ING GROUP SECOND-QUARTER CONSOLIDATED PROFIT & LOSS ACCOUNT
INSURANCE BANKING TOTAL(1)
In EUR million 2Q 2005 2Q 2004 2Q 2005 2Q 2004 2Q 2005 2Q 2004 %
------------------------------------------------------------------------------------------------------------------------
Premium income 11,461 10,528 11,461 10,528 8.9%
Investment income 2,511 2,601 341 65 2,846 2,609 9.1%
Interest result banking operations 2,134 2,198 2,125 2,220 -4.3%
Commission income 278 284 540 642 818 926 -11.7%
Other income -102 218 327 216 225 434 -48.2%
------ ------ ------ ------ ------ ------
TOTAL INCOME 14,148 13,631 3,342 3,121 17,475 16,717 4.5%
Underwriting expenditure 11,821 10,828 11,821 10,828 9.2%
Other interest expenses 265 256 250 221 13.1%
Operating expenses 1,269 1,139 2,279 2,139 3,548 3,278 8.2%
Impairments/additions to the
provision for loan losses -1 12 50 128 49 140 -65.0%
------ ------ ------ ------ ------ ------
TOTAL EXPENDITURE 13,354 12,235 2,329 2,267 15,668 14,467 8.3%
PROFIT BEFORE TAX 794 1,396 1,013 854 1,807 2,250 -19.7%
Taxation 31 293 163 228 194 521 -62.8%
Third-party interests 63 27 -1 39 62 66 -6.1%
------ ------ ------ ------ ------ ------
NET PROFIT 700 1,076 851 587 1,551 1,663 -6.7%
------------------------------------------------------------------------------------------------------------------------
1. Including inter-company eliminations.
------------------------------------------------------------------------------------------------------------------------
3.2 NET IMPACT OF DIVESTMENTS AND SPECIAL ITEMS IN SECOND QUARTER
INSURANCE BANKING TOTAL
In EUR million 2Q 2005 2Q 2004 2Q 2005 2Q 2004 2Q 2005 2Q 2004 %
------------------------------------------------------------------------------------------------------------------------
NET PROFIT 700 1,076 851 587 1,551 1,663 -6.7%
GAINS/LOSSES ON DIVESTMENTS:
- sale Life of Georgia -39 -39
- sale Australia non-life 146 146
- restructuring NMB-Heller 47 47
----- ----- ----- ----- ------ -----
SUBTOTAL GAINS/LOSSES ON DIVESTMENTS -39 146 47 8 146
Net profit from divested units 3 67 6 3 73
----- ----- ----- ----- ------ -----
NET PROFIT EXCLUDING DIVESTMENTS 736 863 804 581 1,540 1,444 6.6%
SPECIAL ITEMS:
- gain old reinsurance business 92 92
- hedge result 49 -14 35
- tax releases 100 35 135
----- ----- ----- ----- ------ -----
SUBTOTAL SPECIAL ITEMS 100 141 -14 135 127
NET PROFIT EXCLUDING DIVESTMENTS AND
SPECIAL ITEMS 636 722 769 595 1,405 1,317 6.7%
------------------------------------------------------------------------------------------------------------------------
Page 34 of 41
APPENDIX 4.
4.1 ING GROEP N.V. CONSOLIDATED BALANCE SHEET
30 June 1 January % 31 March Q2 %
In EUR million 2005 2005 Change 2005 Change
----------------------------------------------------------------------------------------------------------------
ASSETS
Cash and balances with central banks 11,414 9,805 16.4% 10,475 9.0%
Amounts due from banks 56,828 51,721 9.9% 62,134 -8.5%
Non-trading derivatives 9,439 9,127 3.4% 8,512 10.9%
Financial assets at fair value through
profit or loss 217,749 182,819 19.1% 200,218 8.8%
Investments 312,763 265,597 17.8% 288,545 8.4%
Loans and advances to customers 435,769 390,846 11.5% 410,362 6.2%
Reinsurance contracts 7,764 6,818 13.9% 7,064 9.9%
Property and equipment 5,695 5,805 -1.9% 5,620 1.3%
Other assets 49,664 41,945 18.4% 43,605 13.9%
--------- ------- ---------
TOTAL ASSETS 1,107,085 964,483 14.8% 1,036,535 6.8%
EQUITY AND LIABILITIES
Capital and reserves 35,310 28,286 24.8% 31,275 12.9%
Third-party interests 1,665 2,096 -20.6% 1,458 14.1%
--------- ------- ---------
TOTAL EQUITY 36,975 30,382 21.7% 32,733 13.0%
LIABILITIES
Preference shares 296 296 296
Subordinated loans 4,895 4,157 17.8% 4,178 17.2%
Insurance and investments contracts 247,625 218,551 13.3% 228,398 8.4%
Amounts due to banks 129,269 95,621 35.2% 111,178 16.3%
Customer deposits and other funds on
deposit 445,664 395,699 12.6% 421,793 5.7%
Debt securities in issue/other borrowed
funds 106,997 107,155 -0.1% 107,813 -0.8%
Financial liabilities at fair value
through profit or loss 85,265 73,861 15.4% 86,104 -1.0%
Non-trading derivatives 8,392 8,647 -2.9% 7,781 7.9%
Other liabilities 41,707 30,114 38.5% 36,261 15.1%
--------- ------- ---------
TOTAL LIABILITIES 1,070,110 934,101 14.6% 1,003,802 6.6%
TOTAL EQUITY AND LIABILITIES 1,107,085 964,483 14.8% 1,036,535 6.8%
----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
4.2 CHANGES IN CAPITAL AND RESERVES
In EUR million
-----------------------------------------------------------------------------------------------------------------
CAPITAL AND RESERVES AS OF 31 DECEMBER 2004 (ING GAAP) 25,866
Adjustments to IFRS 2,420
------
CAPITAL AND RESERVES AS OF 1 JANUARY 2005 (IFRS) 28,286
Net profit first six months 2005 3,492
Unrealised revaluations equities 782
Unrealised revaluations debt securities 2,675
Transfer to insurance liabilities (shadow accounting) -833
Realised capital gains equities released to profit & loss account -137
Realised capital gains debt securities released to profit & loss account -139
Change in cashflow/net investment hedge reserve 767
Cash dividend -1,275
Exchange rate differences 1,613
Other 79
------
Total changes first six months 2005 7,024
------
CAPITAL AND RESERVES AS OF 30 JUNE 2005 35,310
-----------------------------------------------------------------------------------------------------------------
Page 35 of 41
APPENDIX 5.
----------------------------------------------------------------------------------------------------------
5. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
In EUR million 1H 2005 1H 2004
----------------------------------------------------------------------------------------------------------
NET CASH FLOW FROM OPERATING ACTIVITIES 17,911 43,562
Investments and advances:
- associated undertakings -216
- available-for-sale investment securities -125,605
- held-to-maturity investment securities -1,029
- investment properties -107
- property and equipment -335
- assets subject to operating leases -520
- investments for the risk of policyholders -19,677
- other investments -1
Disposals and redemptions:
- associated undertakings 1,191
- available-for-sale investment securities 98,699
- held-to-maturity investment securities 183
- investment property 181
- property and equipment 335
- assets subject to operating leases 180
- investments for the risk of policyholders 15,510
- other investments 3
-
NET CASH FLOW FROM INVESTING ACTIVITIES -31,208 -44,109
Proceeds from issuance of subordinated loans 500
Repayments of subordinated loans -207
Proceeds from borrowed funds and debt securities 9,364
Repayment from borrowed funds and debt securities -10,703
Deposits by reinsurers 200
Issuance of ordinary shares 111
Purchase of treasury shares
Sale of treasury shares
Dividends paid -1,275
-------
NET CASH FLOW FROM FINANCING ACTIVITIES -2,010 -966
NET CASH FLOW -15,307 -1,513
Cash and equivalents at beginning of year 12,257 7,338
Effect of exchange-rate changes on cash and cash equivalents 349 107
------- -------
CASH AND EQUIVALENTS AT END OF PERIOD -2,701 5,932
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
In this summary, cash comprises the following items:
Treasury bills and other eligible bills 14,133 10,613
Loans and advances to banks -28,249 -15,568
Cash and bank balances and call money of the insurance operations 11,415 10,887
------- -------
CASH AND EQUIVALENTS AT END OF PERIOD -2,701 5,932
-----------------------------------------------------------------------------------------------------------
Page 36 of 41
APPENDIX 6. ADDITIONAL INFORMATION
--------------------------------------------------------------------------------------------------------------------------
6.1 QUARTERLY RESULTS
2Q 1Q 4Q 3Q 2Q 1Q
In EUR million 2005 2005 2004 2004 2004 2004
--------------------------------------------------------------------------------------------------------------------------
Profit before tax
- Insurance Europe 490 515 365 397 509 352
- Insurance Americas 476 463 711 164 473 344
- Insurance Asia/Pacific 54 171 125 94 405 132
- Other -226 -127 34 320 9 -112
----- ----- ----- ----- ----- -----
INSURANCE PROFIT BEFORE TAX 794 1,022 1,235 975 1,396 716
- Wholesale Banking 528 1,024 323 528 426 668
- Retail Banking 414 456 175 352 318 330
- ING Direct 127 127 118 114 125 78
- Other -56 -54 19 -85 -15 -56
----- ----- ----- ----- ----- -----
BANKING PROFIT BEFORE TAX 1,013 1,553 635 909 854 1,020
PROFIT BEFORE TAX 1,807 2,575 1,870 1,884 2,250 1,736
NET PROFIT 1,551 1,941 1,408 1,554 1,663 1,130
- of which Insurance operations 700 730 875 931 1,076 467
- of which Banking operations 851 1,211 533 623 587 663
In EUR
NET PROFIT PER ORDINARY SHARE 0.72 0.89 0.65 0.73 0.79 0.54
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
6.2 INSURANCE PROFIT FROM LIFE AND NON-LIFE
FIRST HALF 2005 FIRST HALF 2004
In EUR million Life Non-life Total Life Non-life Total
--------------------------------------------------------------------------------------------------------------------------
Premium income 19,047 3,577 22,624 18,139 3,755 21,894
Investment income 4,250 476 4,726 4,042 676 4,718
Commission and other income 790 8 798 1,002 -51 951
------ ------ ------ ------ ------ ------
TOTAL INCOME 24,087 4,061 28,148 23,183 4,380 27,563
Underwriting expenditure 20,596 2,733 23,329 19,665 2,949 22,614
Other interest expenses 535 535 541 541
Operating expenses 1,850 616 2,466 1,688 584 2,272
Impairments/investment losses 2 2 24 24
------ ------ ------ ------ ------ ------
TOTAL EXPENDITURE 22,983 3,349 26,332 21,918 3,533 25,451
PROFIT BEFORE TAX 1,104 712 1,816 1,265 847 2,112
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
6.3 INSURANCE INVESTMENT INCOME
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
-------------------------------------------------------------------------------------------------------------------------
Income from debt securities 2,693 2,603 3.5% 1,376 1,105 24.5%
Realised gains/losses on bonds(1) 177 103
Other fixed-interest securities 1,446 1,851 -21.9% 632 952 -33.6%
Income investment property 110 159 -30.8% 58 87 -33.3%
Change in fair value real estate 50 54 -7.4% 14 44 -68.2%
Dividend income 281 244 15.2% 232 198 17.2%
Realised gains/losses on equities 88 40 120.0% 43 20 115.0%
Other 719 456 57.7% 520 476 9.2%
Eliminations -838 -689 -467 -281
----- ----- ----- -----
TOTAL 4,726 4,718 0.2% 2,511 2.601 -3.5%
-------------------------------------------------------------------------------------------------------------------------
1. Approximately 50% of this amount has been transferred to the provision for deferred profit sharing (shadow accounting)
Page 37 of 41
-------------------------------------------------------------------------------------------------------------------
6.4 LOANS AND ADVANCES TO CUSTOMERS OF THE BANKING OPERATIONS
30 June 1 January 1H 31 March 2Q
In EUR billion 2005 2005 Change 2005 Change
-------------------------------------------------------------------------------------------------------------------
- Public authorities 20.4 16.9 20.7% 20.7 -1.4%
- Other corporate 224.2 200.3 11.9% 208.5 7.5%
TOTAL CORPORATE 244.6 217.2 12.6% 229.2 6.7%
- Mortgages 141.7 126.3 12.2% 133.0 6.5%
- Other personal 20.7 19.2 7.8% 20.0 3.5%
TOTAL PERSONAL 162.4 145.5 11.6% 153.0 6.1%
Provisions for bank lending -3.6 -3.9 -3.8
TOTAL BANK LENDING 403.4 358.8 12.4% 378.4 6.6%
-------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
6.5 BANKING INVESTMENT INCOME
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
--------------------------------------------------------------------------------------------------------------------
Change in fair value real estate -1 3 -3 1
Realised gains/losses on equities 89 26 48 -1
Realised gains/losses on bonds 37 29
Gains/losses on divestments 394 -42 47
Other investment income 321 162 220 65
--- --- --- ---
TOTAL 840 149 463.8% 341 65 424.6%
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
6.6 BANKING COMMISSION INCOME
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
--------------------------------------------------------------------------------------------------------------------
Funds transfer 276 293 -5.8% 152 144 5.6%
Securities business 311 390 -20.3% 161 171 -5.8%
Insurance broking 70 76 -7.9% 32 34 -5.9%
Management fees 329 381 -13.6% 140 196 -28.6%
Brokerage and advisory fees 71 49 44.9% 43 22 95.5%
Other 79 163 -51.5% 12 75 -84.0%
----- ----- ----- -----
TOTAL 1,136 1,352 -16.0% 540 642 -15.9%
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
6.7 BANKING OTHER INCOME
FIRST HALF SECOND QUARTER
In EUR million 2005 2004 Change 2005 2004 Change
--------------------------------------------------------------------------------------------------------------------
Valuation results non-trading derivatives -21 -107
Share of profit associates 31 22 -5
Result of trading portfolio 496 393 26.2% 293 146 100.7%
Other 241 177 36.2% 119 75 58.7%
----- ----- ----- -----
TOTAL 747 570 31.1% 327 216 51.4%
--------------------------------------------------------------------------------------------------------------------
Page 38 of 41
APPENDIX 7. VALUE OF NEW BUSINESS STATISTICS
The internal rates of return have been adjusted to be consistent with a 7.5%
discount rate in the Netherlands to reflect expected currency movements relative
to the euro. The value of new business fully reflects acquisition expense
overruns, which represent excess costs for acquiring new business over and above
the expense allowances provided for in the product pricing. Starting in 2005,
new business statistics are converted at the average exchange rate instead of
the closing exchange rate of the reporting period. In compliance with the
European Embedded Value Principles, statistics are included for Value of New
Business divided by the present value of premiums in Table 7.1. ING continues to
focus primarily on the value of new business and the internal rate of return as
key value drivers.
--------------------------------------------------------------------------------------------------------------------
7.1 VALUE OF NEW LIFE BUSINESS STATISTICS
NEW PRODUCTION 1H 2005 NEW PRODUCTION FY 2004(1)
Value of PV of VNB/PV Value of New PV of VNB/PV
In EUR million New Business premiums premiums Business premiums premiums
--------------------------------------------------------------------------------------------------------------------
Netherlands 47 1,359 3.5% 58 3,058 1.9%
Belgium (& Luxembourg) 15 788 1.9% 42 1,946 2.2%
Central Europe & Spain 31 1,205 2.6% 38 1,623 2.3%
--- ------ --- ------
INSURANCE EUROPE 93 3,352 2.8% 138 6,627 2.1%
U.S.(2) 82 8,698 0.9% 138 16,229 0.9%
Latin America 8 251 3.2% 35 462 7.6%
--- ------ --- ------
INSURANCE AMERICAS(2) 90 8,949 1.0% 173 16,691 1.0%
INSURANCE ASIA/PACIFIC 198 7,342 2.7% 321 6,714 4.8%
--- ------ --- ------
TOTAL 381 19,643 1.9% 632 30,032 2.1%
--------------------------------------------------------------------------------------------------------------------
1. Comparison with FY 2004 is provided because first-half 2004 PV of premiums is not available
2. 2004 excludes U.S. individual reinsurance business
---------------------------------------------------------------------------------------------------------------------
7.2 INVESTMENT IN NEW LIFE BUSINESS & ACQUISITION EXPENSE OVERRUNS
NEW PRODUCTION 1H 2005 NEW PRODUCTION 1H 2004
Investment in new Acquisition expense Investment in new Acquisition expense
In EUR million business overruns business overruns
---------------------------------------------------------------------------------------------------------------------
Netherlands 68 2 66 1
Belgium (& Luxembourg) 20 0 17 0
Central Europe & Spain 67 14 50 8
--- --- --- ---
INSURANCE EUROPE 155 16 133 9
U.S. 416 13 549 4
Latin America 47 9 42 3
--- --- --- ---
INSURANCE AMERICAS 463 22 591 7
INSURANCE ASIA/PACIFIC 325 -2 182 0
--- --- --- ---
TOTAL 943 36 906 16
---------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
7.3 NEW BUSINESS PRODUCTION AND VALUE IN DEVELOPING MARKETS(1) BY REGION
NEW PRODUCTION 1H 2005 NEW PRODUCTION 1H 2004
Value of Value of
Annual Single New Annual Single New
In EUR million premium Premium Business IRR Premium Premium Business IRR
--------------------------------------------------------------------------------------------------------------------
Europe 96 67 25 13.0% 66 8 9 11.4%
Americas 79 117 8 9.9% 106 77 11 12.0%
Asia/Pacific 643 203 114 17.0% 344 144 87 14.4%
--- --- --- --- --- ---
TOTAL 818 387 147 15.0% 516 229 107 13.3%
--------------------------------------------------------------------------------------------------------------------
1. The countries included as developing markets are:
Europe: Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia
Americas: Chile, Mexico, Peru
Asia/Pacific: China, Hong Kong, India, Korea, Malaysia, Thailand, Taiwan
Page 39 of 41
APPENDIX 8. INFORMATION FOR SHAREHOLDERS
SHARES AND WARRANTS
The average number of shares used for the calculation of net profit per share
for the first six months of 2005, was 2,172.9 million (2,091.3 million for the
first six months of 2004). The number of (depositary receipts for) ordinary
shares of EUR 0.24 nominal value outstanding at the end of June 2005 was 2,204.8
million (including 34.1 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 June 2005 was 87.1 million. The
dividend percentage for the "A" shares for the period from 1 January, 2004 to 1
January 2014 has been set at 4.65%. This dividend will amount to EUR 0.1582 per
year until 1 January 2014. This dividend will be paid for the first time in
2005.
On 5 January 1998, 17.2 million ING Group warrants B were issued. With an
additional payment of the exercise price of EUR 49.92 one warrant B entitles the
holder to two ING Group depositary receipts up to 5 January 2008. The number of
warrants B outstanding at the end of June 2005 was 17.2 million.
In the first six months of 2005, the turnover of (depositary receipts for)
ordinary shares on the Euronext Amsterdam Stock Market was 1,009.6 million
(purchases and sales). The highest closing price was EUR 23.96, the lowest EUR
20.99; the closing price at the end of June 2005 was EUR 23.37.
LISTING
The (depositary receipts for) ordinary shares ING Group are quoted on the
exchanges of Amsterdam, Brussels, Frankfurt, Paris, New York (NYSE) and the
Swiss exchange. The (depositary receipts for) preference shares and warrants B
are quoted on the Euronext Amsterdam Stock Market. Warrants B are also quoted on
the exchange of Brussels. Options on (depositary receipts for) ordinary shares
ING Group are traded at the Euronext Amsterdam Derivative Markets and the
Chicago Board Options Exchange.
RATING
Both ING Groep N.V. and ING Verzekeringen N.V. have an A+ rating from Standard &
Poor's and an Aa3 rating from Moody's. ING Bank N.V. has an Aa2 rating from
Moody's and an AA- from Standard & Poor's. All ratings from S&P were confirmed
in 2004 and the ratings from Moody's were confirmed in May 2005. The ratings
from Moody's have a stable outlook, and the ratings from S&P all have a positive
outlook.
IMPORTANT DATES(1)
12 August 2005 ING share quoted ex-interim dividend
18 August 2005 Payment date 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
11 May 2006 Publication of results first three months
10 August 2006 Publication of results first six months
11 August 2006 ING share quoted ex-interim dividend
9 November 2006 Publication of results first nine months
14 February 2007 Publication of annual results 2006
25 April 2007 Annual General Meeting of shareholders
26 April 2007 ING share quoted ex-final dividend
1. All dates shown are provisional. For further information see the Financial
Calendar at www.ing.com
Page 40 of 41
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. Blokbergen
-------------------
C. Blokbergen
Corporate Legal, Compliance
& Security Department
Head Legal Department
Dated: August 11, 2005
Page 41 of 41