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Executing our strategy
for profitable growth
2005
ING Group
Annual Report
www.ing.com

Table of contents

  • Page 1
    www.ing.com 2005 ING Group Annual Report Executing our strategy for profitable growth

  • Page 2

  • Page 3
    ... 42 44 Report of the Executive Board Financial highlights Risk management Insurance Europe Insurance Americas Insurance Asia/Pacific Wholesale Banking Retail Banking ING Direct Asset Management Human Resources Corporate Responsibility Consolidated balance sheet Consolidated profit and loss account...

  • Page 4
    ...-57, including the nominated members. OPERATING/UNDERLYING NET PROFIT in EUR billion 10 9 8 7 6 5 4 3 2 1 0 96 97 98 99 00 01 02 03 04 04 05 IFRS Dutch GAAP EMPLOYEES average FTEs, in thousands 120 110 100 90 80 70 60 50 40 30 20 10 0 96 97 98 99 00 01 02 03 04 05 2 ING Group Annual Report 2005

  • Page 5
    ... (IFRS)/non-operating net profit (Dutch GAAP) Net profit Distributable net profit Figures per ordinary share of EUR 0.24 nominal value Net profit Distributable net profit Dividend Capital and reserves* Ratios (in %) ING Group (Operating) return on equity (ROE) (Operating) net profit growth Insurance...

  • Page 6
    ... insurance, banking and asset-management services in over 50 countries. Our 115,000 employees work daily to satisfy a broad customer base: individuals, families, small businesses, large corporations, institutions and governments. Based on market capitalisation, ING is one of the 15 largest financial...

  • Page 7
    ...168 ING DIRECT Operates direct retail-banking activities for individual clients in Australia, Canada, France, Germany, Austria, Italy, Spain, the United Kingdom and the United States. The main products offered are savings, mortgages and mutual funds. A separate activity is ING Card, which manages...

  • Page 8
    ... growth engines - retirement services, direct banking and life insurance in emerging markets. In 2005, our growth engines showed very encouraging results. We significantly increased our pension activities, both in the United States and in the growth markets of Central Europe, Asia and Latin America...

  • Page 9
    ... I look back on the past year. ING is successfully executing its strategy for profitable growth. In this report, you are being updated on the financial and strategic developments of ING Group and its business lines. The Executive Board would like to thank the ING staff for their contribution to our...

  • Page 10
    ... direct banking, retirement services and life insurance in emerging markets. ING has strong positions in these businesses and intends to raise further their profit potential by using the experience and capital gained in ING's mature businesses. In 2005, we continued to execute our strategy with good...

  • Page 11
    ... compliance structure. INVESTING IN GROWTH Retirement services, life insurance in developing markets and direct banking are ING's growth engines. Good progress was made in 2005. In the United States, profits from US Retirement Services went up by 22%. In Central Europe, pension-fund profits before...

  • Page 12
    ...AND AMBITIONS In 2005, ING managed for value and created value. We took initiatives to enhance customer satisfaction, contain costs and improve risk management and did so with good results. We continued to invest in our growth engines, which improved their performance. Action was taken to strengthen...

  • Page 13
    ... REPORT OF THE EXECUTIVE BOARD FINANCIAL HIGHLIGHTS ING produced strong results in 2005, driven by double-digit underlying top-line growth, higher returns, and an improvement in the efficiency ratios for both banking and insurance. ING's three key growth engines - ING Direct, retirement services...

  • Page 14
    ...The internal rate of return in developing markets increased to 17.4% as business units benefited from increased scale. New sales in developing markets rose 50.8%. BANKING OPERATIONS ING's banking businesses showed a strong increase in profit in 2005 driven by solid growth in income at ING Direct and...

  • Page 15
    ...but also benefited from some favourable market conditions, including strong equity and real-estate markets, historically low credit losses for both bank lending and fixed-income investments, low claims at most non-life insurance units, and low taxes. Looking ahead, the interest-rate environment will...

  • Page 16
    ...Market Value at Risk (MVaR) limits and the introduction of market-consistent pricing. The limit structure contains an ING Group Insurance MVaR limit allocated through sub-limits to the business lines and business units. The ING Group Asset and Liability Committee (ALCO) Insurance monitors the limits...

  • Page 17
    ... is to determine the adequate level of group risk appetite supported by scenario analyses and to fully utilise our diversification opportunities. For further information, please see the Risk Management chapter as part of the Annual Accounts on pages 152 to 166. ING Group Annual Report 2005 15

  • Page 18
    ... sales elsewhere. In 2005, the improvement in customer satisfaction levels at Nationale-Nederlanden brought the company close to the industry average, confirming that sustained large-scale investments have begun to bear fruit. FINANCIAL DEVELOPMENTS KEY FIGURES 2005 2004 Value of new life business...

  • Page 19
    ... online. As for the second part of the strategy - selling more profitable products - NN rationalised and optimised its product portfolio in 2005. The focus is on products that offer more attractive returns and growth opportunities, such as group life and mortgages. Products that were not adding...

  • Page 20
    ... agreements at global level. For institutional clients, ING IM maintained its focus on profitable business and for insurance companies it introduced ALM (asset and liability management)-driven solutions. The equity department was strengthened in 2005 by restructuring and enhancing existing processes...

  • Page 21
    ...greenfield expertise in Central Europe. ING IM Europe aims to increase its assets under management by generating higher net inflows and improving investment performance. Its 'all-weather' fund range will be further developed and its operational quality strengthened. ING Group Annual Report 2005 19

  • Page 22
    ...) related to strengthening of the United States dollar against the euro. The value of new life-insurance business rose 19.7% to EUR 207 million, driven by a combination of higher margins across all business lines and higher sales, primarily in retirement services. The internal rate of return (IRR...

  • Page 23
    ... life and auto lines was not reflected in results, consistent with equity accounting for ING's 49%stake in SulAmérica. HIGHLIGHTS The United States business consists of US Financial Services and ING Investment Management. The majority of earnings in the United States comes from retirement services...

  • Page 24
    ... assets for the new ING Global Equity Dividend and Premium Opportunity Fund (IGD), making IGD then the eighth largest closed-end fund listed on the New York Stock Exchange. In 2005, the United States operations also completed the first phase of a significant Fund Optimisation Project. This project...

  • Page 25
    ... its leading market positions for sales and top-line growth and driving unit costs down. Insurance Americas will focus on execution, increase margins on new business (where market conditions permit) and aggressively manage risks to ensure value creation. In the United States, ING will explore...

  • Page 26
    .... The value of new life business again increased significantly. Assets under management grew by over 40%. The financial results of Insurance Asia/Pacific were affected by a strengthening of reserves in Taiwan, necessary in light of the low interest rates. ING remains committed to invest in growth...

  • Page 27
    ... demographic changes, deregulation and the increasing sophistication of the customer. ING is the second-largest foreign life-insurance company in Asia/Pacific in terms of annual premium income. Almost all business units have again increased their market share in 2005. There are a number of general...

  • Page 28
    ... and investment products to new and existing customers of the bank. In 2005, ING New Zealand was formed following an agreement to broaden the existing Australian joint venture between ANZ and ING. It was formed by incorporating New Zealand's National Bank's managed-funds and life-insurance business...

  • Page 29
    ... portfolio, there will be an increasing shift from traditional life insurance and unit-linked products to investment-linked products, as well as mutual funds, group insurance and pension products. ING is looking forward to participating in the opportunities created by pension reforms in a number...

  • Page 30
    ... non-recurring items and adjusted for exchange-rate differences, recurring operating expenses of Wholesale Banking increased 6.3%. * These numbers include the result from ING Real Estate which financially reports to Wholesale Banking. ING Real Estate is discussed in detail in the chapter on Asset...

  • Page 31
    ... of ING Real Estate, increased their portfolio by 39.5% to EUR 69.9 billion. This is discussed in the chapter on Asset Management. HIGHLIGHTS ING Wholesale Banking operates in a highly competitive market. To continue to improve our market position, Wholesale Banking has three key priorities: client...

  • Page 32
    ... business. The Value Chain Management concept was introduced for six products: General Lending, Structured Finance, Payments & Cash Management, Securities Services, Corporate Finance & Equity Markets and Financial Markets. This concept provides new insights in direct and indirect costs per project...

  • Page 33
    ... other products. By making use of our sector-specific knowledge we will continue to improve the quality of our product offering. We shall increase investments in key product areas such as Financial Markets, Payments & Cash Management, Leasing and Structured Finance. ING Group Annual Report 2005 31

  • Page 34
    ... costs, with the exception of the Netherlands, where provisions rose slightly in line with the growth of the business. The addition was equal to 11 basis points of average credit-risk-weighted assets compared with 25 basis points in 2004. UNDERLYING PROFIT BEFORE TAX in EUR million Retail Banking...

  • Page 35
    .... Adjusted for exchange-rate changes, income rose 2.0% as the growth in savings and deposits was offset by narrowed margins and lower lending volumes due to ING Bank Slaski's policy not to participate in foreign-currency mortgage lending because of our risk policy. Operating expenses increased by 13...

  • Page 36
    ... retail and corporate clients. ING aims to sell insurance and investment products through the Bank of Beijing. ING is represented on the board with two members, one for business management and one for corporate development. The Bank of Beijing offers ING good entry in the high-growth Chinese banking...

  • Page 37
    ... banking and Operations/IT. The outsourcing process will be further implemented in 2006. By increasing compliance awareness among all staff on prudent sales practices and fair treatment of customers, we want to maintain and strengthen our lead in customer satisfaction. ING Group Annual Report 2005...

  • Page 38
    ... 41.8% In 2005, ING Direct achieved strong growth in profit, number of customers, funds entrusted and retail-mortgage lending. It maintained a high level of customer satisfaction and brand awareness and expanded its customer base - all of which are key value drivers. These results were reached in...

  • Page 39
    ... ING Direct sells a limited number of banking products via the internet, telephone and direct mail to retail customers in major developed markets at very low costs. The two core products are savings and mortgages. All ING Direct business units are market leader in their local direct-banking markets...

  • Page 40
    ...10% of ING Direct's clients moved money out of mutual funds and shares into savings, after the stock markets deteriorated since 2001. The other 90% of savings balances continued to come out of savings accounts at other banks or surpluses on current accounts. A good interest-rate offer, combined with...

  • Page 41
    ... markets and in Australia, Canada and the United States. On 24 January 2006, ING Direct's (world-wide) 15-millionth customer was welcomed in Italy. For 2006, the focus remains on profitable growth in savings and mortgages in the nine countries of operation. We will promote our mutual-funds business...

  • Page 42
    ...36% 100% 247.8 104.9 194.7 547.4 ASSETS UNDER MANAGEMENT BY BUSINESS LINE in EUR billion Insurance Europe Insurance Americas Insurance Asia/Pacific Wholesale Banking Retail Banking ING Direct Total 31% 37% 13% 9% 9% 1% 100% 169.3 201.7 71.8 49.5 49.3 5.8 547.4 40 ING Group Annual Report 2005

  • Page 43
    ... client needs across the regions with good product offerings. The development and commercial successes of the closed-end high-dividend funds are prime examples of this. In 2005 ING IM launched two global closed-end funds in the United States, raising over EUR 1.8 billion of assets in the public...

  • Page 44
    ... the Executive Board. NUMBER OF EMPLOYEES BY BUSINESS LINE average FTEs 2005 Insurance Europe Insurance Americas Insurance Asia/Pacific Wholesale Banking Retail Banking ING Direct Total 14% 23% 7% 18% 32% 6% 100% 16,100 27,100 8,400 20,800 36,400 6,500 115,300 42 ING Group Annual Report 2005

  • Page 45
    ... performance culture • Customer-centric action plan per business line • Managing-for-Value workshops • Further steps to build human capital As managers play a key role in executing this change in culture, the ING Business School organises the Managingfor-Value workshop for management and key...

  • Page 46
    ...'s overall credit portfolio, it plays an important role in emerging markets. The Equator Principles categorise projects according to whether they have high, medium or low environmental and social risk and come into play with project costs of at least EUR 50 million. 44 ING Group Annual Report 2005

  • Page 47
    ... to take these issues into account when managing their day-to-day business. The Corporate Responsibility Report 2005 is available from 11 April 2006 on www.ing.com. The report can also be ordered through the website. Amsterdam, 6 March 2006 The Executive Board ING Group Annual Report 2005 45

  • Page 48
    ...the annual and semi-annual US GAAP results. An important subject in 2005 was the introduction of the International Financial Reporting Standards and the impact of these new accounting principles on the balance sheet and profit & loss account. Other topics were risk management, capital management and...

  • Page 49
    ... Direct and member of the Board of ING Direct. Tom McInerney will take over Fred Hubbell's responsibilities for Insurance Americas and ING Investment Management in the Americas. Mr. McInerney will combine his new role with his current position as Chief Executive Officer of ING US Financial Services...

  • Page 50
    ... also goes out to the 115,000 employees worldwide for their individual contributions to another successful year, successful both in profit development and growth of the business in all regions and business lines. Amsterdam, 6 March 2006 The Supervisory Board 48 ING Group Annual Report 2005

  • Page 51
    ... first time to the annual accounts and/or annual report for the financial year 2006. - Mr. J.H.M. Hommen, who was appointed in the 2005 General Meeting of Shareholders as a Supervisory Board member, has more than five positions as a supervisory board member with other Dutch-listed companies (which...

  • Page 52
    ... the financial rights attached to them. The market price of the depositary receipts for ordinary shares, on the other hand, has risen substantially over the years. Indeed, the ordinary shares have been split on two occasions because of the level of the share price. 50 ING Group Annual Report 2005

  • Page 53
    ... the Supervisory Board. Approval by the General Meeting of Shareholders would be required for any share issues exceeding these limits. Shareholders' structure Details of investors who have reported their interest in ING Group pursuant to the Disclosure of Major Holdings in Listed Companies Act 1996...

  • Page 54
    ... CORPORATE GOVERNANCE (continued) EXECUTIVE BOARD Function of Executive Board The Executive Board is responsible for the day-to-day management of the company and its business lines (Insurance Europe, Insurance Americas, Insurance Asia/Pacific, Wholesale Banking, Retail Banking and ING Direct...

  • Page 55
    ... Global Management Team of ING Direct since 2005. Tom McInerney (born 1956, American nationality) who has been CEO of ING's Insurance activities in the United States (US Financial Services) since 2002. Hans van der Noordaa (born 1961, Dutch nationality) who has been CEO of the Retail Division of ING...

  • Page 56
    ...-based compensation programmes for top senior management, including the Executive Board. The Corporate Governance Committee assists the Supervisory Board in monitoring and evaluating the corporate governance of ING as a whole and the reporting thereon in the Annual Report and to the Annual General...

  • Page 57
    ...and Hector Communications Corporation (listed companies). Member of the Advisory Board of Carlson School of Management, University of Minnesota. Member of the Supervisory Board of the Minnesota Orchestra. Member (emerita) of the Board of Trustees, Wellesley College. ING Group Annual Report 2005 55

  • Page 58
    ... N.V. Other business activities: Member of the Supervisory Board of each of Akzo Nobel N.V., AB Electrolux and Henkel KGaA (listed companies). Chairman of the Supervisory Board of Petroplus International N.V. Member of the Board of Directors of Heineken Holding N.V. 56 ING Group Annual Report 2005

  • Page 59
    ... as Executive Board chairman of a multinational and his knowledge of international business. EXTERNAL AUDITORS Ernst & Young Accountants (Ernst & Young) and KPMG Accountants N.V. (KPMG) are the appointed auditors of ING Group. Ernst & Young is responsible for auditing the financial statements of ING...

  • Page 60
    ...pre-approves the type(s) of audit, audit-related and non-audit services to be provided by ING's external audit firms on an annual basis. The Audit Committee also sets the maximum annual amount that may be spent for such preapproved services. Throughout the year the external audit firms and Corporate...

  • Page 61
    ... Corporate Governance code, best-practice provision IV.2.3 stating that a person may be appointed to the management of the Trust Office for a maximum of three four-year terms. Prior to its meeting on 5 December 2005 the Executive Board and Supervisory Board of ING discussed with the Trust Office...

  • Page 62
    ... issued. During the reporting year there have been no changes in the total number of outstanding depositary receipts of preference A shares. Tom Regtuijt was reappointed as Board member from 1 May 2005. In accordance with the provisions of article 7, section 3.8 of the Constitution, the Trust Office...

  • Page 63
    ... independence of the members of the Board of Stichting Continuïteit ING contained in Book II (04) of the Listing and Issuing Rules of Euronext Amsterdam N.V., Amsterdam, have been complied with. Board of Stichting Continuïteit ING Executive Board of ING Groep N.V. ING Group Annual Report 2005 61

  • Page 64
    ... and personal insider trading, business principles and local codes of conduct, whistleblower complaints; c. Financial services conduct-related integrity risk areas: e.g. marketing and sales conduct, transparency of product offerings, customer interest and protection, complaint-handling processes...

  • Page 65
    ..., the Executive Board uses every opportunity to stress the importance of Compliance to ING, not only to the outside world, but to employees at all organisational levels. Plans for the future The main objective for 2006 is to implement the new ING Group Compliance Policy by the end of the year and to...

  • Page 66
    ... in line with the relevant market for talent, the Supervisory Board reviews the basesalary levels of the Executive Board on an annual basis. Short-term incentive plan The short-term incentive plan (STIP) is a key component of ING's performance-driven culture. The short-term incentive is paid in cash...

  • Page 67
    ... peer group. The criteria used to determine the performance peer group are: a) considered comparable and relevant by the Supervisory Board, b) representing ING's current portfolio of businesses (e.g. banking, insurance and asset management) and ING's geographical spread, c) global players, d) listed...

  • Page 68
    ... direct compensation levels between ING's Executive Board and its peer group counterparts. Key recommendations from the report included that in order to close the gap, in particular the variable (performance-driven) pay component should be increased. In line with ING's overall remuneration policy...

  • Page 69
    ... and a 'fair value' calculation of options and performance shares (based on an option-pricing model). The grant is subject to shareholder approval of the maximum number of stock options and performance shares to be granted to the Executive Board pursuant to the 2005 LTIP. The LTI grant table on page...

  • Page 70
    ... members. Thus, the figures for 2004 reflect the partial year as Executive Board members. (3) Fred Hubbell gets his compensation in US dollars. For each year, the compensation in US dollars has been translated to euros at the average exchange rate for that year. (2) 68 ING Group Annual Report 2005

  • Page 71
    ... year 2005, the Company proposes to grant to the Executive Board members the combination of stock options and performance shares (based on the 50/50 split in value) as disclosed in the above table, in May 2006 (after the AGM). The fair-market-value calculations for the 2005 performance year result...

  • Page 72
    ...euros at the average exchange rate for that year. Loans and advances The table below presents the loans and advances provided to Executive Board members and outstanding on 31 December 2005, 2004 and 2003. These loans were concluded in the normal course of business and on terms applicable to company...

  • Page 73
    ...FINANCIAL YEAR OF OPTIONS HELD BY THE MEMBERS OF THE EXECUTIVE BOARD AS AT 31 DECEMBER 2005 Outstanding as at 31 December 2004 Granted in 2005 Exercised in 2005 Waived or expired in 2005(1) Outstanding as at 31 December 2005 Exercise price in in Euros Exercise price in US dollars Expiry date Number...

  • Page 74
    ...for 2006 that the Executive Board's short-term incentive award for the Group performance should again be measured using the same three financial criteria as were used in 2005: net profit, total operating expenses and return on economic capital. The targets set are challenging. The business continues...

  • Page 75
    ... 7,500 (was EUR 1,360), members of other Supervisory Board committees EUR 5,000 (was EUR 1,360). In addition to the remuneration, Supervisory Board members are entitled to expense allowances, which are partly fixed and partly directly related to the costs incurred. ING Group Annual Report 2005 73

  • Page 76
    ... members are permitted to hold ING (depositary receipts for) shares as a long-term investment. The table below shows the holdings by members of the Supervisory Board. Supervisory Board members did not hold ING options at year-end 2005. ING GROUP (DEPOSITARY RECEIPTS FOR) SHARES HELD BY MEMBERS OF...

  • Page 77
    ... Council jointly decided to end the activities of the ING Group Advisory Council in its current set-up as of 1 January 2006. The Executive Board would like to thank all Advisory Council members for their commitment and valuable contributions through the years. ING Group Annual Report 2005 75

  • Page 78
    ... CONSOLIDATED BALANCE SHEET OF ING GROUP AS AT 31 DECEMBER before profit appropriation amounts in millions of euros 2005 2004 ASSETS Cash and balances with central banks 1 Amounts due from banks 2 Financial assets at fair value through profit or loss 3 - trading assets - investments for risk of...

  • Page 79
    ... to equity holders of the Company 36 Diluted earnings per ordinary share 36 Dividend per ordinary share 37 3.32 3.32 1.18 2.71 2.71 1.07 References relate to the notes starting on page 135 which form an integral part of the consolidated annual accounts. ING Group Annual Report 2005 77

  • Page 80
    ...to banks, not payable on demand - customer deposits and other funds on deposit - trading liabilities - other financial liabilities at fair value through profit or loss - other liabilities Net cash flow from operating activities - associates and group companies - available-for-sale investments - held...

  • Page 81
    ... CHANGES IN EQUITY OF ING GROUP FOR THE YEARS ENDED 31 DECEMBER Share capital Share premium Revaluation reserve Currency translation reserve Other reserves amounts in millions of euros Total Balance as at 1 January 2004 Unrealised revaluations after taxation - revaluations - transferred to profit...

  • Page 82
    ... ING GAAP Goodwill Property Employee benefits Leases Available-for-sale debt securities Insurance provisions Derivatives/hedge accounting/fair value option Loans and advances to customers Loan loss provisions Venture capital investments Foreign currency translation Result on sale of group companies...

  • Page 83
    ... of the share-based payments are equity-settled. Under ING GAAP the intrinsic value was recognised in the profit and loss account. Leases Under ING GAAP, operating leases where ING is the lessor were presented as Loans and advances to customers. Under IFRS-EU, these are presented as property and...

  • Page 84
    ...loss account and (partly) offsets the fair value impact of the derivative that is also reported in the profit and loss account. Under ING GAAP, non-trading derivatives used for risk management purposes were valued similarly to the item being hedged (mainly at cost). 82 ING Group Annual Report 2005

  • Page 85
    ... changes in fair value recognised directly in the profit and loss account. Furthermore, the fair value option is applied to certain financial liabilities that are subject to marketmaking activities. Loans and advances to customers Under both ING GAAP and IFRS-EU loans are measured at amortised cost...

  • Page 86
    ... banking units of ING BHF-Bank. The transaction includes ING BHF-Bank's asset management, private banking, financial markets and core corporate banking business. The value of the transaction amounted to EUR 600 million. In 2004, ING Group acquired Allianz's property and casualty insurance operations...

  • Page 87
    ... Bank. The cash equities business comprises sales, trading, research and equity capital markets operations. In 2004, ING Group sold its non-life insurance business in Australia to QBE Insurance Group. The value of the transaction amounted to EUR 431 million. CRITICAL ACCOUNTING POLICIES ING Group...

  • Page 88
    ... exchange traded positions as well as OTC positions. EMPLOYEE BENEFITS Group companies operate various defined benefit retirement plans covering a significant number of its domestic and international employees. The liability recognised in the balance sheet in respect of the defined benefit pension...

  • Page 89
    ... recognised in the profit and loss account as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. ING Group Annual Report 2005 87

  • Page 90
    ...part of its risk management strategies do not qualify for hedge accounting under the Group's accounting policies. Changes in the fair value of non-trading derivatives that do not qualify for hedge accounting are recognised immediately in the profit and loss account. 88 ING Group Annual Report 2005

  • Page 91
    .... Investment securities and actively traded loans intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices are classified as available-for-sale. Available-for-sale financial assets For...

  • Page 92
    ... value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit and loss, the impairment loss is reversed through the profit and loss account. 90 ING Group Annual Report 2005

  • Page 93
    ... influence is determined taking into account both ING's financial interests for own risk and its role as investment manager. INVESTMENT PROPERTY Investment property is stated at fair value as at the balance sheet date. Changes in the carrying amount resulting from revaluations are recorded in...

  • Page 94
    ... THE CONSOLIDATED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF ING GROUP (CONTINUED) Equipment Equipment is stated at cost less accumulated depreciation and any impairment losses. The cost of the assets is depreciated on a straight-line basis over their estimated useful lives, which are generally as...

  • Page 95
    ... the estimate of future gross profits ING assumes the short-term and long-term separate account growth rate assumption to be the same. Higher/lower expected profits - e.g. reflecting stock market performance or a changed level of assets under management - may cause a lower/higher amortisation...

  • Page 96
    ... bear the investment risk are calculated on the same basis as the provision for life policy liabilities. For insurance contracts for which policyholders bear the investment risk the insurance provisions are generally shown at the balance sheet value of the associated investments. Reinsurance...

  • Page 97
    ... 90% confidence level, no reduction in the provision is recorded. OTHER LIABILITIES Employee benefits - pension obligations Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by periodic...

  • Page 98
    ... ING Group uses the cash thus received for stock options and warrants exercised to buy its own shares against the average market price in the financial year. The net increase in the number of shares resulting from the exercise of warrants and stock options is added to the average number of shares...

  • Page 99
    ... risk of changes in value. Cash flows arising from foreign currency transactions are translated into the functional currency using the exchange rates at the date of the cash flows. The net cash flow shown in respect of Loans and advances to customers only relates to transactions involving...

  • Page 100
    ...ANNUAL ACCOUNTS NOTES TO THE CONSOLIDATED BALANCE SHEET OF ING GROUP AMOUNTS IN MILLIONS OF EUROS, UNLESS STATED OTHERWISE ASSETS 1 CASH AND BALANCES WITH CENTRAL BANKS CASH AND BALANCES WITH CENTRAL BANKS 2005 2004 Amounts held at central banks Cash and bank balances Short term deposits insurance...

  • Page 101
    ... 2005 2004 Derivatives used in cash flow hedging Derivatives used in fair value hedging Derivatives used in hedges of net investments in foreign operations Other non-trading derivatives 2,274 1,179 31 4,282 7,766 4 INVESTMENTS INVESTMENTS BY TYPE 2005 2004 Available-for-sale Equity securities...

  • Page 102
    2.1 CONSOLIDATED ANNUAL ACCOUNTS NOTES TO THE CONSOLIDATED BALANCE SHEET OF ING GROUP (CONTINUED) AVAILABLE-FOR-SALE EQUITY SECURITIES BY INSURANCE AND BANKING OPERATIONS 2005 Listed 2004 2005 Unlisted 2004 2005 Total 2004 Insurance operations Banking operations 12,311 1,238 13,549 9,333 759 10,...

  • Page 103
    ... AND ADVANCES TO CUSTOMERS BY TYPE - BANKING OPERATIONS Netherlands International Total 2005 Netherlands International Total 2004 Loans to or guaranteed by public authorities Loans secured by mortgages Loans guaranteed by credit institutions Other personal lending Other corporate loans 13,907 111...

  • Page 104
    ...). PROVISION FOR LOAN LOSSES ANALYSED BY SECURITY - BANKING OPERATIONS Netherlands International Total 2005 Netherlands International Total 2004 Loans secured by public authorities Loans secured by mortgages Loans guaranteed by credit institutions Other personal lending Other corporate loans Other...

  • Page 105
    ... Balance sheet value Total assets Total liabilities Total income Total expense Vesteda Property Fund Iberica Lion Property Fund Lion Industrial Trust Q-Park N.V. Lionbrook Property Partnership ING UK Property Income Limited Partnership ING Logistic Property C.V. ING Retail Property Fund Australia...

  • Page 106
    ... Investments in associates 2005 2004 Receivables from associates 2005 2004 Opening balance Additions and advances Changes in the composition of the group Transfer to and from investments Revaluations Share of results Dividends received Disposals and redemptions Exchange differences Closing balance...

  • Page 107
    ... IN OWN USE BY INSURANCE AND BANKING OPERATIONS 2005 2004 Insurance operations Banking operations 788 1,483 2,271 842 1,567 2,409 MOVEMENTS IN PROPERTY IN OWN USE 2005 2004 Opening balance Additions Changes in the composition of the group Transfer to and from investment property Transfer to and...

  • Page 108
    ... lease payments to be received under non-cancellable operating leases are as follows: FUTURE MINIMUM LEASE PAYMENTS BY MATURITY 2005 2004 Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years 664 1,505 1 2,170 663 1,419 19 2,101 106 ING Group Annual Report 2005

  • Page 109
    ... growth rate assumption used for calculating the amortisation of the deferred acquisition costs is currently 7.9% gross (6.9% net of investment management fees). 11 OTHER ASSETS OTHER ASSETS BY TYPE 2005 2004 Reinsurance and insurance receivables Deferred tax assets Property held for sale Property...

  • Page 110
    ... ANNUAL ACCOUNTS NOTES TO THE CONSOLIDATED BALANCE SHEET OF ING GROUP (CONTINUED) REINSURANCE AND INSURANCE RECEIVABLES 2005 2004 Receivables on account of direct insurance from - policyholders - intermediaries Reinsurance receivables 2,212 213 719 3,144 2,298 327 388 3,013 DEFERRED TAX ASSETS...

  • Page 111
    ... to securities and property in own use and the reserve for cash flow hedging and hedges of net investments of foreign operations. The reserve for cash flow hedging amounts to EUR 2,046 million as at 31 December 2005. The other reserves include retained earnings. SHARE CAPITAL Preference shares (par...

  • Page 112
    ... to the approval of the Executive Board of ING Group. The par value of ordinary shares is currently EUR 0.24. The authorised ordinary share capital of ING Group consists of 3,000,000 shares, of which as at 31 December 2005 2,204,934 million have been issued and fully paid. Depository receipts for...

  • Page 113
    ...after tax Unrealised revaluations transferred to deferred profit sharing liabilities and DAC Exchange differences Net profit for the period Changes in the composition of the group Closing balance 3,481 -1,386 -32 17 14 305 -710 1,689 3,513 29 -103 275 -233 3,481 ING Group Annual Report 2005 111

  • Page 114
    ...arithmetic mean of the average effective yield on the five longest-dated Dutch government loans, as calculated by a Calculating Agent to be designated by the Executive Board for the last twenty stock exchange days preceding the day on which the first 'A' preference shares are issued, or, as the case...

  • Page 115
    ... conditions as the original bonds. 15 DEBT SECURITIES IN ISSUE The debt securities in issue relate to debentures and other issued debt securities with either fixed interest rates or interest rates based on interest-rate levels, such as certificates of deposit and accepted bills issued by ING Group...

  • Page 116
    ... ANNUAL ACCOUNTS NOTES TO THE CONSOLIDATED BALANCE SHEET OF ING GROUP (CONTINUED) 16 OTHER BORROWED FUNDS OTHER BORROWED FUNDS BY REMAINING TERM 2005 2006 2007 2008 2009 2010 There after Total Subordinated loans of group companies Preference shares of group companies Loans contracted Loans...

  • Page 117
    ...075 4,211 225,351 1,963 -8,798 4,407 200,158 Exchange differences Other movements Closing balance Where discounting is used in the calculation of life insurance provisions, the rate is within the range of 3% to 6% (based on weighted averages). To the extent that the assuming reinsurers are unable...

  • Page 118
    ... IFRS 4 0 16,860 16,860 5,553 Current year liabilities Prior year provisions - payments to contract holders - interest accrual - valuation changes investments -7,051 276 1,060 -5,715 1,659 276 18,633 Exchange differences Other movements Closing balance 116 ING Group Annual Report 2005

  • Page 119
    ... 2005, Customer deposits and other funds on deposit included liabilities with regard to securities sold in repurchase transactions amounting to EUR 2,104 million (2004: EUR 4,908 million). Savings accounts relate to the balances on savings accounts, savings books, savings deposits and time deposits...

  • Page 120
    ... value through profit or loss approximates the fair value. Financial liabilities designated as at fair value through profit or loss relate to debt securities in issue, funds entrusted and structured products. TRADING LIABILITIES BY TYPE 2005 2004 Equity securities Debt securities Funds on deposits...

  • Page 121
    ... Wholesale Banking network. The amounts included in other provisions are based on best estimates with regard to amounts and timing of cash flows required to settle the obligation. In general, the reorganisations and relocations provisions are of a short-term nature. ING Group Annual Report 2005 119

  • Page 122
    ... ANNUAL ACCOUNTS NOTES TO THE CONSOLIDATED BALANCE SHEET OF ING GROUP (CONTINUED) Pension liabilities and other staff-related liabilities The Group maintains defined benefit retirement plans in the major countries in which it operates. These plans generally cover all employees and provide benefits...

  • Page 123
    .... Generally, ING will rebalance the fund's asset mix to the target mix as individual portfolios approach their minimum or maximum levels. CATEGORIES OF PLAN ASSETS Weighted average expected Percentage of long term rate plan assets of return 2005 2004 2005 Target allocation 2006 Equity securities...

  • Page 124
    2.1 CONSOLIDATED ANNUAL ACCOUNTS NOTES TO THE CONSOLIDATED BALANCE SHEET OF ING GROUP (CONTINUED) The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid: PENSION BENEFITS Pension benefits 2006 2007 2008 2009 2010 Years 2011 - 2015 354 406 ...

  • Page 125
    ... during 2006. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid: POST-RETIREMENTS OTHER THAN PENSIONS Post-retirement benefits other than pensions 2006 2007 2008 2009 2010 Years 2011 - 2015 15 16 17 18 19 90 ING Group Annual Report 2005...

  • Page 126
    ... assets LIABILITIES Preference shares Subordinated loans Debt securities in issue Other borrowed funds Insurance and investment contracts Amounts due to banks Customer deposits and other funds on deposit Financial liabilities at fair value through profit or loss - trading liabilities - non-trading...

  • Page 127
    ...one month 1-3 months 3-12 months 1-5 years Over five years Maturity not applicable Total ASSETS Cash and balances with central banks Amounts due from banks Financial assets at fair value through profit or loss - trading assets - other Investments - available-for-sale Loans and advances to customers...

  • Page 128
    ... statements. In response to the needs of its customers, the Group offers financial products related to loans. These products include traditional off-balance sheet credit-related financial instruments. CONTINGENT LIABILITIES AND COMMITMENTS 2005 2004 Insurance operations Commitments Guarantees...

  • Page 129
    ... granted to corporate clients. Many of these facilities are for a fixed duration and bear interest at a floating rate. ING Group's credit risk in these transactions is limited. Most of the unused portion of irrevocable credit facilities is secured by customers' assets or counter-guarantees by the...

  • Page 130
    2.1 CONSOLIDATED ANNUAL ACCOUNTS ADDITIONAL INFORMATION TO THE CONSOLIDATED BALANCE SHEET OF ING GROUP (CONTINUED) LEGAL PROCEEDINGS ING Group companies are involved in litigation and arbitration proceedings in the Netherlands and in a number of foreign jurisdictions, including the United States, ...

  • Page 131
    ..., formed a funds management and life insurance joint venture in Australia. The joint venture, ING Australia Ltd, is owned for 51% by ING and 49% by ANZ. RELATED PARTIES In the normal course of business, the Group enters into various transactions with related companies. Related companies comprise non...

  • Page 132
    ... CONSOLIDATED BALANCE SHEET OF ING GROUP (CONTINUED) KEY MANAGEMENT PERSONNEL COMPENSATION amounts in thousands of euros Executive Board 2005 2004 Supervisory Board 2005 2004 2005 Total 2004 Base salary and short-term bonus Pension costs Retirement benefit Fair market value of long-tem incentives...

  • Page 133
    ... that the Group would receive or pay to terminate the contracts at the balance sheet date. Financial assets at fair value through profit or loss The fair values of securities in the trading portfolio and other assets at fair value through profit and loss are based on quoted market prices, where...

  • Page 134
    ... cash flow pricing models taking into account current cash flow assumptions and the counterparties' credit standings. Debt securities in issue and other borrowed funds The fair value of debt securities in issue and other borrowed funds is estimated using discounted cash flows based on current market...

  • Page 135
    ... are at least equal to the sum of: - the required capital for the banking activities; and - the required capital for the insurance activities. For regulatory purposes certain (external) subordinated loans of ING Bank N.V. and ING Verzekeringen N.V. are included. ING Group Annual Report 2005 133

  • Page 136
    ... shares issued by group companies Goodwill Subordinated loans Capital base ING Group Subordinated loans ING Bank N.V. (included in Tier-2) Subordinated loans ING Verzekeringen N.V. Capital base including subordinated loans Required capital banking operations Required capital insurance operations...

  • Page 137
    ...ACCOUNT OF ING GROUP AMOUNTS IN MILLIONS OF EUROS, UNLESS STATED OTHERWISE INCOME 22 INTEREST RESULT BANKING OPERATIONS NET INTEREST INCOME - BANKING OPERATIONS 2005 2004 Interest income on loans Interest income on impaired loans Total interest income on loans Interest income on available-for-sale...

  • Page 138
    ...LIFE INSURANCE POLICIES Gross Reinsurers' share Own account 2005 Gross Reinsurers' share Own account 2004 Policies for which the insurer bears the investment risk Policies for which the policyholder bears the investment risk Total direct business Indirect business... 136 ING Group Annual Report 2005

  • Page 139
    ... DIRECT LIFE BUSINESS Policies for which the insurer bears the investment risk Reinsurers' Own share account Policies for which the policyholder bears the investment risk Reinsurers' Own share account 2005 Gross Gross PERIODIC PREMIUMS Individual policies - without profit sharing - with profit...

  • Page 140
    ...Insurance operations 2005 2004 Banking operations 2005 2004 2005 Total 2004 Income from disposal of group companies Income from investment property Movement in fair value of investment property Income from investments in equity securities Income from investments in debt securities Income from loans...

  • Page 141
    ...-sale debt securities 511 245 -46 34 744 604 171 60 -45 186 45 45 604 682 305 -91 34 930 604 45 649 26 COMMISSION INCOME FEE AND COMMISSION INCOME Insurance operations 2005 2004 Banking operations 2005 2004 2005 Total 2004 Funds transfer Securities business Insurance broking Management fees...

  • Page 142
    ... CONSOLIDATED ANNUAL ACCOUNTS NOTES TO THE CONSOLIDATED PROFIT AND LOSS ACCOUNT OF ING GROUP (CONTINUED) 28 NET TRADING INCOME NET TRADING INCOME Insurance operations 2005 2004 Banking operations 2005 2004 2005 Total 2004 Results from securities trading Results from foreign exchange transactions...

  • Page 143
    ... for loan losses. Impairments on investments are presented under Gains and losses from investments. 32 STAFF COSTS STAFF COSTS Insurance operations 2005 2004 Banking operations 2005 2004 2005 Total 2004 Salaries Pension and other staff related liability costs Social security costs Share-based...

  • Page 144
    ... PROFIT AND LOSS ACCOUNT OF ING GROUP (CONTINUED) PENSION AND OTHER STAFF RELATED LIABILITY COSTS 2005 Pension 2004 Post-retirement benefits other than pensions 2005 2004 2005 Other 2004 2005 Total 2004 Current service cost Past service cost Interest cost Expected return on assets Effect...

  • Page 145
    ... determined by using an option-pricing model. This model takes the risk free interest rate into account (ranging from 3.12% to 3.46%), as well as the expected life of the options granted, the exercise price, the current share price, the expected volatility of the certificates of ING Group shares and...

  • Page 146
    ... by using a Monte Carlo Simulation based valuation model. The model takes into account the risk free interest rate and for performance shares the current stock prices, expected volatilities and current divided yields of the performance peer group used to determine ING's Total Shareholder Return (TSR...

  • Page 147
    ... dividend paid share (in millions (in euros) of euros) 2005(1) 2004 (1) 1.18 1.07 2,588 2,359 The Executive Board, with the approval of the Supervisory Board, has proposed, subject to the ratification by the General Meeting of Shareholders, a dividend of EUR 1.18 per share for the year 2005...

  • Page 148
    ... OF EUROS, UNLESS STATED OTHERWISE PRIMARY REPORTING FORMAT - BUSINESS SEGMENTS ING Group's business segments relate to the internal segmentation by business lines. These include the business lines: Retail Banking, Wholesale Banking, ING Direct, Insurance Americas, Insurance Europe and Insurance...

  • Page 149
    ...provisions for Wholesale Banking and a gain on old insurance business. INTEREST INCOME (EXTERNAL) AND INTEREST EXPENSE (EXTERNAL) BREAKDOWN PER BUSINESS LINE Insurance Europe Insurance Americas Insurance Asia/Pacific Wholesale Banking Retail Banking ING Direct Other Total Group 2005 Interest income...

  • Page 150
    ...reinsurance premiums ceded between group companies in different geographical areas. PROFIT BEFORE TAXATION BY GEOGRAPHICAL AREA Insurance operations 2005 2004 Banking operations 2005 2004 2005 Total 2004 Netherlands Belgium Rest of Europe North America Latin America Asia Australia Other 1,714 192...

  • Page 151
    ... Provision for life policy liabilities 2005 2004 Insurance provisions for policies for which the policyholders bear the investment risk 2005 2004 Claims provision 2004 2005 2005 Other 2004 2005 Total 2004 Netherlands Belgium Rest of Europe North America Latin America Asia Australia Other 39...

  • Page 152
    ... CASH FLOW FROM INVESTING ACTIVITIES COMPANIES ACQUIRED AND DISPOSED OF IN 2005 amounts in billions of euros Acquisition Acquisition of of Eural New Zealand Disposal of Total Baring Asset acquisitions Management Disposal of Life of Georgia Total disposals GENERAL Primary line of business PURCHASE...

  • Page 153
    ... Bank Bank/ Insurance -0.3 0.5 0.2 -1.9 -1.9 -2.2 0.5 -1.7 0.4 0.4 1.0 1.0 1.4 1.4 ASSETS Investments Loans and advances to customers Financial assets at fair value through profit or loss Miscellaneous other assets LIABILITIES Amounts due to banks Customer deposits and other funds on deposit...

  • Page 154
    ... of ING Group, aiming for a balance between risk, return and capital and sets risk policy and limits. The Chief Financial Officer (CFO) bears primary overall responsibility for the Group Risk Function. ING has a Dual Signatory Approval structure whereby Executive Board members and the Corporate Risk...

  • Page 155
    ... (1) based on lending (wholesale and retail), financial markets and investment activities. The shift from mid-grade (BB-BBB) assets to high quality (AA-AAA) assets is the result of the continuing growth of ING Direct. RISK CONCENTRATION: ING BANK PORTFOLIO, BY ECONOMIC SECTOR in percentages 2005...

  • Page 156
    ...Country-risk limits are assigned for transfer risk generally only in emerging markets. LARGEST ECONOMIC EXPOSURES: ING BANK LENDING PORTFOLIO, BY COUNTRY(1) amounts in billions of euros 2005 2004 Netherlands United States of America Germany Belgium Spain United Kingdom Italy Australia France Canada...

  • Page 157
    ...commercial banking activities. - ING Retail Banking: ING identifies non-trading residual market risk that results from banking products of which the future cash flows depend on client behaviour like current accounts, saving accounts and mortgages. - ING Direct: Within ING Direct no trading positions...

  • Page 158
    ... on the VaR of the ING Wholesale Banking trading portfolio for 2005 and 2004 are provided in the table below. CONSOLIDATED TRADING VAR: ING WHOLESALE BANKING, BY PORTFOLIO Low High Average Year end 2005 Low High Average Year end 2004 Foreign exchange Equities Interest Diversification(1) Total VaR...

  • Page 159
    ...-rate mismatch positions is performed within the Treasury function. The commercial business units bear responsibility for the remaining interest-rate risks that result from banking products of which future cash flows depend on client behaviour, like saving accounts and mortgages. Within ING Direct...

  • Page 160
    ...BY BUSINESS LINES (2% SHOCK TO MARKET RATE) 2005 ING Wholesale Banking ING Retail Banking ING Direct ING Bank Corporate Line ING Bank Total -1,023 -619 -69 -1,492 -3,203 Note: Several banking books are governed by the trading risk process and are therefore excluded from the non-trading risk table...

  • Page 161
    ... expected changes in core-business funding requirements. This includes replenishment of existing funds as they mature, expected withdrawals from retail current accounts, savings and additional borrowings. Furthermore, access to the capital markets is actively managed by regularly issuing public debt...

  • Page 162
    ... operational risk as the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events. ING distinguishes the following event types (based on the Basel Committee level 1 and 2 event types): - processing failure - control failure...

  • Page 163
    ...risks that matches industry practice. ING INSURANCE GENERAL ING is engaged in the business of selling life and non-life insurance products. Life products include a broad range of traditional life, unit-linked, annuities, universal life, group life, pension, and (guaranteed) investment contracts. Non...

  • Page 164
    ... line of business this assessment is based on risk assessment models that are widely accepted in the industry. For the smaller non-life units, the (pre-tax) risk tolerance level for 2005 was set at EUR 5.0 million per event per business unit. With respect to life business ING Group's (pre-tax) risk...

  • Page 165
    ... of the business lines including diversification effects on a quarterly basis. In 2005 there were no breaches of the overall ING Insurance MVaR limit. Measurement At an ING Group level, CIRM is responsible for implementing and monitoring asset and liability management (ALM) practices and for...

  • Page 166
    ... in insurance contracts. The main foreign exchange risks of ING Insurance relate to the translation risk from net income and equity from business units in USA and Canada. For net income the impact is mitigated through the usage of average yearly exchange rates. 164 ING Group Annual Report 2005

  • Page 167
    ... December 2005 and exclude equities and real estate but include preferred shares. In the table below a summary is shown of the outstandings in the general account fixed-income portfolios per credit rating expressed in Standard & Poor's ratings at 31 December 2005. ING Group Annual Report 2005 165

  • Page 168
    ... as assets that are not rated. In the table below a summary is shown of the outstandings in the general account fixed-income portfolios per industry sector. RISK CONCENTRATION: ING INSURANCE PORTFOLIO, BY ECONOMIC SECTOR AS % OF TOTAL OUTSTANDINGS in percentages 2005 Sovereigns Financials Mortgages...

  • Page 169
    ... loans 5 Financial liabilities at fair value through profit or loss Other liabilities 6 Total 296 7,355 92 5,140 49,619 5,392 5,941 35,402 References relate to the notes starting on page 170 which form an integral part of the parent company annual accounts. ING Group Annual Report 2005...

  • Page 170
    ... OF EUROS PARENT COMPANY PROFIT AND LOSS ACCOUNT OF ING GROUP FOR THE YEARS ENDED 31 DECEMBER 2005 2004 Result of group companies after taxation Other results after taxation Net profit for the period 7,194 16 7,210 5,765 -10 5,755 PARENT COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED...

  • Page 171
    ... ING GAAP Goodwill Property Employee benefits Leases Available-for-sale debt securities Insurance provisions Derivatives/hedge accounting/fair value option Loans and advances to customers Loan loss provisions Venture capital investments Foreign currency translation Result on sale of group companies...

  • Page 172
    2.2 PARENT COMPANY ANNUAL ACCOUNTS NOTES TO THE PARENT COMPANY BALANCE SHEET OF ING GROUP ASSETS 1 INVESTMENTS IN WHOLLY OWNED SUBSIDIARIES INVESTMENTS IN WHOLLY OWNED SUBSIDIARIES Ownership Balance (%) sheet value 2005 Ownership Balance sheet (%) value 2004 Name of investee ING Bank N.V. ING ...

  • Page 173
    ... in subordinated loans. 6 OTHER LIABILITIES OTHER LIABILITIES BY TYPE 2005 2004 Debenture loans Amounts owed to group companies Other amounts owed and accrued liabilities 3,740 991 409 5,140 5,178 606 157 5,941 DEBENTURE LOANS Interest rate Year of issue Due date Balance sheet value 2005 2004...

  • Page 174
    ... PARENT COMPANY ANNUAL ACCOUNTS NOTES TO THE PARENT COMPANY BALANCE SHEET OF ING GROUP (CONTINUED) AMOUNTS OWED TO GROUP COMPANIES BY REMAINING TERM 2005 2004 - up to one year - one year to five years - over five years 956 35 991 600 6 606 REMUNERATION OF SENIOR MANAGEMENT, EXECUTIVE BOARD AND...

  • Page 175
    ... parent company annual accounts give a true and fair view of the financial position of the company as at 31 December 2005 and of the result for the year then ended in accordance with the accounting principles generally accepted in the Netherlands and comply with the financial reporting requirements...

  • Page 176
    ... 38 (5) of the Articles of Association Non-distributable profit of Stichting Regio Bank At the disposal of the General Meeting of Shareholders pursuant to Article 38 (6) of the Articles of Association Dividend of EUR 1.18 per ordinary share 7,210 4,593 29 2,588 174 ING Group Annual Report 2005

  • Page 177
    ...the General Meeting of Shareholders): 1. i) for a total of 220,000,000 ordinary shares; plus ii) for a total of 220,000,000 ordinary shares, only if these shares are issued in connection with the take over of a business or company; 2. for 10,000,000 preference shares B. ING Group Annual Report 2005...

  • Page 178
    ... of Goodwill Real Estate Debt securities Valuation of equity securities Derivatives and hedge accounting Fair value option Deferred acquisition costs Provision for life insurance liabilities Deferred profit sharing Employee benefits Equity instruments Provision for restructuring Associates and other...

  • Page 179
    ... 2004, which under IFRS-EU were charged directly to equity as part of goodwill. REAL ESTATE (2005 AND 2004) Investment property Under IFRS-EU, investment property is measured at fair value, with changes in fair value recognised in the profit and loss account. No depreciation is recorded. Under US...

  • Page 180
    ..., (through equity) to reflect changes that would have been necessary if unrealised investment gains and losses related to available-for-sale securities had been realised. However, the amounts may be different due to differences in underlying accounting principles. 178 ING Group Annual Report 2005

  • Page 181
    ... and IFRS-EU for associates for which equity accounting is applied due to underlying differences between IFRS-EU and US GAAP in the associates' equity and profit and loss. These mainly relate to underlying differences in the accounting treatment for real estate. ING Group Annual Report 2005 179

  • Page 182
    ... Group provided in prior years to adequately capture various subjective and judgmental aspects of credit risk assessment which were not considered on an individual basis. Accordingly, the alignment of US GAAP reporting with the change in estimation process on adoption of IFRS-EU in 2005 has resulted...

  • Page 183
    ... Economic capital is based on detailed calculations for credit, transfer, market, operational and business risk and includes diversification benefit within the bank. ING uses a one-sided confidence interval of 99.95% - consistent with our target debt rating (AA/Aa2 long term) - and a one year time...

  • Page 184
    ... times of severe stress. Economic capital is calculated for credit, transfer, market, operational and business risk. Business risk is used to cover unexpected losses that may arise as a result of changes in volumes, margins and costs. ING continuously develops and refines its internal capital models...

  • Page 185
    ...value of new business written during 2005 was EUR 805 million, compared to the 2004 level of EUR 632 million. This 27.4% increase is primarily due to higher sales and improved pricing margins. During 2005 ING invested EUR 1,770 million to write new life insurance business. The overall rate of return...

  • Page 186
    ... 11,509 12,108 14,571 -4,227 10,344 22,451 EMBEDDED VALUE PER BUSINESS LINE - LIFE OPERATIONS 2005 2004 Netherlands Belgium/Luxembourg Central Europe & Spain Insurance Europe United States Latin America Insurance Americas Insurance Asia/Pacific ING Group 11,300 1,077 2,552 14,929 9,911 947 10,858...

  • Page 187
    ... 2005) Lower short-term rates with 10bp 1% lower equity and real estate returns (1) 10% downward shift in market values of equity and real estate investments Local regulatory minimum capital requirement Net impact of:(2) 1% decrease in new-money and 1% decrease in discount rates 1% increase in new...

  • Page 188
    ... level review of the results of the calculations but was not asked to perform any detailed checks on the models and processes used. Watson Wyatt has concluded that the methodology and assumptions used comply with the European Embedded Value Principles and Guidance. 186 ING Group Annual Report 2005

  • Page 189
    CREDIT RATING Credit ratings are indicators for the likelihood of timely and complete repayment of interest and instalment of fixed-income securities as assigned by rating agencies. MAIN CREDIT RATINGS OF ING(1) Standard & Poor's Moody's ING GROUP ING INSURANCE - short term - long term ING BANK - ...

  • Page 190
    ... 2005 Shareholders' Meeting was the adaptation of the so-called Tabaksblat Code (the Dutch corporate governance code) and how ING would deal with it. Listing The (depositary receipts for) ordinary shares ING Group are listed on the exchanges of Amsterdam, Brussels, Frankfurt, Paris, New York (NYSE...

  • Page 191
    ... price at the end of December and operating/underlying net profit per ordinary share for the financial year. Price/earnings ratio 2005 and 2004 are IFRS-based. SHARES AND WARRANTS IN ISSUE in millions Year-end 2005 Year-end 2004 (Depositary receipts for) ordinary shares of EUR 0.24 nominal value...

  • Page 192
    ...GENERAL INFORMATION INFORMATION FOR SHAREHOLDERS (CONTINUED) GEOGRAPHICAL DISTRIBUTION OF ING SHARES in percentages United Kingdom United States & Canada Netherlands Belgium Luxembourg France Switzerland Germany Other 28% 21% 17% 11% 8% 6% 5% 2% 2% PRICES DEPOSITARY RECEIPTS FOR ORDINARY SHARES...

  • Page 193
    ... 2006 Publication of annual results 2006 Thursday, 15 February 2007 Annual General Meeting of Shareholders Tuesday, 24 April 2007 ING share quotation ex final dividend 2006 Thursday, 26 April 2007 * All dates shown are provisional. Investor relations In addition to financial press releases, ING...

  • Page 194
    ... fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. 192 ING Group Annual Report...

  • Page 195
    ... a liability for which a time-proportionate compensation is paid or received, in relation to a notional amount. INTEREST-RATE REBATES Profit sharing for group life insurance business. A rebate granted to policyholders based on the discounted value of the difference between the interest rate used for...

  • Page 196
    ... shares or debentures come into possession of a limited group of subscribers who are prepared to buy the new securities. PROJECTED UNIT CREDIT METHOD An actuarial valuation method that considers each period of service as giving rise to an additional unit of benefit 194 ING Group Annual Report 2005

  • Page 197
    ... its total risk weighted assets. The minimum set by the Dutch central bank is 4%. TRADING PORTFOLIO The trading portfolio comprises those financial instruments which are held to obtain short-term transaction results, to facilitate transactions on behalf of clients or to hedge other positions in the...

  • Page 198
    ... 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 forwardlooking information contained in this document. 196 ING Group Annual Report 2005

  • Page 199
    30% Cert no. SGS-COC-2359 The trademark of the Forest Stewardship Council (FSC) indicates that the wood used to make this report comes from a forest that is well-managed according to strict environmental, social and economic standards.

  • Page 200
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