Date: October 28, 2009
From: Butch Britton, CEO, ING US Insurance
ING Insurance / ING Investment Management
New Global Strategy for ING Groep N.V.
Since announcing the Back to Basics strategy earlier this year, ING Groep N.V. ("ING") has made significant progress on bringing greater discipline and focus to our regional insurance businesses by lowering costs, reducing risk and divesting non-core businesses.
Yesterday ING announced the next steps in this process. ING intends to definitively separate the global banking and insurance/investment management operations through one or more initial public offerings or sales of its insurance and investment management businesses, or a combination of both, within the next four years. No decisions have been made yet how this will be accomplished. A global or regional IPO scenario could be highly attractive to ING but many factors will influence the decision-making process.
Our Rationale
ING has a proud history as a global financial services leader and has been a strong advocate for combining banking and insurance in one company. The combination provided ING with advantages of scale, capital efficiency, and earnings stability through a diversified portfolio of businesses. However, the global financial crisis has diminished these benefits. Now, the widespread demand for greater simplicity and reliability has made a separation the optimal course.
Overall, ING is pleased to report that its financial position continues to improve. ING will use the proceeds from a rights issue to pay back half of the capital injection ING received last year. ING also announced preliminary figures for the 3rd quarter of 2009. The expected underlying net profit is around EUR 750 million (US $1.1 billion). The company's core Tier 1 ratio rises to 7.6% from 7.3% at the end of 2009, and the Tier 1 ratio rises to 9.7% from 9.4%.
Continued Strong Leadership
Tom McInerney, currently head of ING Insurance Americas, will remain on the Management Board for ING's global insurance businesses and will become chief operating officer, assuming responsibility for all ING insurance and investment management operations worldwide. Rob Leary, currently head of ING Investment Management Americas, will assume the new role of CEO, ING Insurance U.S. and report to Tom.
ING has established long-term structural leadership positions in life insurance and retirement services, both in growth markets and mature markets. Collectively, ING's global insurance operations are the world's sixth-largest insurance enterprise (by revenue)1 with leadership positions in the U.S., Benelux, Latin America, Central and Eastern Europe, and Asia. ING Insurance is well positioned to pursue its strategy under one global entity. It will focus on capturing synergies -- across and within regions -- arising out of managing the business in a unified way, under one leadership team dedicated exclusively to insurance and investment management. In the U.S., life Insurance, retirement services and rollover annuities remain core businesses and the long-term growth of those businesses continues to be important.
In the short-term, ING will focus on creating a stand-alone insurance company -- using our strong management team and working on the details of separating the two businesses. Simultaneously, ING will begin fleshing out all the options for the business going forward, taking into account the interests of all stakeholders -- customers, employees, shareholder, regulators and others. The ING Life Companies will continue with business as usual, providing clients with quality products and customer service. Your clients' policies and the service they receive will not be affected by today's announcement.
Ratings Updates
On October 26, 2009, Standard & Poor's (S&P) affirmed the A+ ratings of ING's U.S. Insurance operating entities; however, S&P also assigned a negative outlook, as did Fitch and Moody's. Also on October 27, Fitch downgraded ING U.S. Insurance operating entities from A to A-, and Moody's downgraded ING's U.S. Insurance operating entities from A1 to A2.
In their ratings action announcements, Fitch and Moody's appear primarily concerned about ING effectively executing the separation process. It is important to remember that ING U.S. Insurance's capital position remains strong. ING has maintained a regulatory capitalization ratio well above its targeted RBC ratio. In fact, ING's current RBC ratio is in-line with the historical equivalent of (AA) rated insurance companies.
Additional Resources and ING Press Releases
[ Download/View ING_Insurance_US_Client_Letter_102709.pdf ]
[ Download/View ING_Insurance_Ratings_Talking_Points_102709.pdf ]
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