SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For November 14, 2003
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 30
This Report contains a copy of the following:
(1) The Press Release issued on November 14, 2003
Page 2 of 30
Amsterdam, 14 November 2003
PRESS RELEASE
ING GROUP REPORTS ON FIRST NINE MONTHS 2003
STRONG BANKING RESULTS AND TIGHT COST CONTROL BOOST PROFIT
o OPERATING NET PROFIT EUR 3,012 MILLION: 11.0% UP FROM FIRST 9 MONTHS 2002;
PER SHARE EUR 1.50 (+7.3%)
o BANKING OPERATING NET PROFIT EUR 1,202 MILLION: +41.4% INSURANCE OPERATING
NET PROFIT EUR 1,810 MILLION: -2.8%
o THIRD QUARTER OPERATING NET PROFIT: 22.8% UP FROM THIRD QUARTER 2002
o TOTAL OPERATING EXPENSES: - 7.3%, ORGANICALLY -1.3%
CHAIRMAN'S STATEMENT
"ING's financial performance in the first nine months of 2003 improved strongly
compared to the same period last year. We realised a healthy operating profit
growth of 11% despite the continued strength of the euro", said Ewald Kist,
Chairman of the Executive Board. "Our banking profits increased considerably by
41.4% on the back of higher interest income, reduced loan loss provisions and
lower expenses. On the insurance side the picture was mixed. In the United
States, investment losses in the third quarter were close to zero and the
rebounded stock markets also had a favourable effect, leading to a 20% profit
growth. Premium growth in our core markets was modest because of our efforts to
better balance profitability and market share. Our non-life operations continued
to develop favourably. Total expenses decreased as a result of tight cost
control and despite the ongoing growth at our specialities life insurance
business in the Asian developing markets and ING Direct. Growth engine ING
Direct contributed EUR 93 million to Group profit compared to a loss of EUR 63
million in the same period last year, showing the profit potential of this
attractive business model."
OUTLOOK 2003
Provided that financial markets do not deteriorate substantially by year-end,
the Executive Board expects operating net profit to increase by 10-15% compared
to the full year 2002 operating net profit (excluding realised capital gains on
shares).
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Please refer to www.ing.com/group ('press room' or 'investor relations') for
additional information on the first nine months 2003 results.
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PRESS CONFERENCE CALL ON 14 NOVEMBER 2003 AT 9.30 AM CET ANALYST CONFERENCE CALL ON 14 NOVEMBER 2003 AT 3.30 PM CET
Listen-in mode: Listen-in mode:
o The Netherlands: +31 45 631 6903 o The Netherlands: + 31 45 631 6910
o United Kingdom: +44 208 400 6370 o United Kingdom: + 44 208 400 6356
o United States: + 1 303 262 2130
Press presentation available via http://press.ing.com Analyst presentation available via
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on 14 November 2003 at around 8.15 am http://investors.ing.comhttp://www.ing.com/group
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CEThttp://press.ing.com/ on 14 November 2003 at around 9.00 am CET
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MEDIA RELATIONS: +31 20 541 5446 INVESTOR RELATIONS: +31 20 541 5462 INTERNET: www.ing.com/group
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Page 3 of 30
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TABLE 1. KEY PROFIT AND LOSS FIGURES ING GROUP
First FIRST % % Q3 Q3 %
nine NINE change organic* 2002 2003 change
in EUR x million months MONTHS change
2002 2003
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Operating net profit
- insurance operations 1,863 1,810 -2.8 1.2 620 545 -12.1
- banking operations 850 1,202 41.4 42.1 149 399 167.8
----- ----- ---- ----
Operating net profit 2,713 3,012 11.0 14.8 769 944 22.8
Capital gains/negative revaluation
reserve shares/gain JV with ANZ 865 -5 -28 33
----- ----- ---- ----
Net profit 3,578 3,007 -16.0 741 977 31.8
Total operating income 57,801 51,622 -10.7 1.4 17,385 16,271 -6.4
- insurance operations 49,165 42,988 -12.6 1.1 14,609 13,391 -8.3
- banking operations 8,647 8,696 0.6 3.1 2,779 2,919 5.0
Total operating expenses 10,297 9,550 -7.3 -1.3 3,419 3,221 -5.8
- insurance operations 3,932 3,558 -9.5 3.1 1,214 1,181 -2.7
- banking operations 6,365 5,992 -5.9 -3.7 2,205 2,040 -7.5
in EUR
Operating net profit per share 1.40 1.50 7.3 11.0 0.40 0.46 15.0
Net profit per share 1.85 1.50 -18.9 0.38 0.47 23.7
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*Excluding currency rate differences and acquisitions / divestments
GROUP OPERATING NET PROFIT SHOWS HEALTHY INCREASE
Operating net profit for the first nine months of 2003 was 11.0% higher at EUR
3,012 million compared to the same period last year. Especially continued strong
banking results and substantially lower total expenses led to this profit rise.
In the insurance operations ongoing very good results in the non-life business
and an improved performance of the US and Asian life business were the main
drivers. Excluding currency rate differences and one-off items ING Group's
profit increase was 20.4%. One-off items were EUR 182 million in the first nine
months 2003 against EUR 270 million in the same period last year. The impact of
the strengthening of the euro against most currencies resulted in a negative
effect of EUR 76 million. This includes the mitigating effect of the US dollar
hedge of EUR 83 million after tax (first nine months 2002: EUR 32 million).
Operating net profit for the third quarter of 2003 increased by 22.8% compared
to the third quarter of 2002 in spite of the fact that last year's third quarter
results included a EUR 225 million operating gain from the sale of 49% of the
life and mutual fund operations in Australia to the joint venture with ANZ.
Higher income, lower expenses and a lower addition to the provision for loan
losses in the banking operations as well as lower investment losses and
favourable DAC unlocking in the insurance operations have contributed to this
profit rise.
Net profit for the first nine months of 2003 was 16.0% lower at EUR 3,007
million. Net realised capital gains on shares were EUR 5 million negative
against EUR 615 million positive in the first nine months of 2002. Furthermore,
net profit for the first nine months of 2002 included a total capital gain of
EUR 475 million resulting from the joint venture with ANZ (EUR 225 million
operating and EUR 250 million non-operating profit). Compared to the third
quarter of 2002, net profit increased by 31.8%.
The further recovery of the most important stock market indices in the third
quarter 2003 has resulted in a positive revaluation reserve shares of EUR 301
million on 30 September 2003. As a consequence there is no impact in net profit
of negative value adjustments of the revaluation reserve shares anymore, as was
the case at the end of the first and second quarter 2003. On 11 November 2003,
the revaluation reserve shares amounted to approximately EUR 0.7 billion
positive.
Page 4 of 30
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All comparable figures in this press release relate to first nine months 2003
versus first nine months 2002, unless indicated otherwise.
To enable a clear insight in business performance, all further figures in this
press release are exclusive of realised capital gains on shares in the first
nine months of 2002 and 2003 and exclusive the non-operating part (EUR 250
million) of the profit from the ANZ transaction in the first nine months of
2002.
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INSURANCE RESULTS SLIGHTLY LOWER
Operating net profit from insurance operations decreased from EUR 1,863 million
to EUR 1,810 million (-2.8%). This development was to a large extent caused by
the negative impact of the stronger euro against other currencies (-EUR 74
million, including the dollar hedge effect) and lower one-off items (EUR 304
million in the first nine months 2002 and EUR 247 million in 2003). Excluding
these factors operating net profit improved by 5.6%.
Life insurance pre-tax results decreased from EUR 1,957 million to EUR 1,716
million (-12.3%). This decrease was mainly caused by substantially lower one-off
gains, pressure on interest income, lower dividend income and the strong euro.
Included in this result is a one-off gain from old reinsurance activities of EUR
72 million, compared to a one-off surrender gain of EUR 120 million on a group
life contract and the operating part of the profit on the ANZ transaction of EUR
225 million in the first nine months of 2002. Especially the operations in the
US and Asia showed a good improvement.
Non-life insurance pre-tax results showed an ongoing strong growth worldwide,
rising from EUR 441 million a year ago to EUR 760 million (+72.3%) in the first
nine months of 2003. On a comparable basis, excluding a one-off gain of EUR 231
million from old reinsurance activities in the second quarter of this year and
excluding the impact of currency fluctuations, non-life result increased by
38.1%.
Total premiums decreased by 14.0% to EUR 34,167 million. Organically, premium
growth was flat as a result of continued efforts to better balance profitability
and market share. In the Netherlands, life premiums grew by 9.5%. Despite strict
cost control in all regions total expenses increased organically by 3.1% as a
result of an increase in pension costs (e.g. +19.5% in the Netherlands), higher
expenses to reduce backlogs in the Netherlands and the growth of developing
markets activities.
BANKING PROFITS IMPROVE STRONGLY
Compared to the first nine months of 2002, operating net profit from banking
operations increased strongly by 41.4% to EUR 1,202 million, mainly driven by a
higher interest result, lower expenses and lower loan loss provisions. One-off
items (-EUR 34 million in the first nine months of 2002 versus -EUR 65 million
in the same period this year, see table 3 on page 6) had a mitigating effect on
the improvement. The interest result rose by EUR 476 million, or 8.5%, mainly as
a result of higher volumes. The interest margin improved by 1 basis point to
1.60%. Total expenses decreased by 5.9% (organically by 3.7%) despite higher
pension expenses and the impact of the collective labour agreement in the
Netherlands as well as the ongoing expansion of ING Direct. Risk costs amounted
to EUR 855 million, which is equal to 47 basis points of average credit risk
weighted assets (annualised) compared to 51 basis points in the same period last
year. On a quarterly basis, risk costs decreased gradually to EUR 240 million in
the third quarter 2003 (39 basis points). On balance currency fluctuations had a
limited negative impact of EUR 2 million on operating net profit.
The efficiency ratio banking (excluding ING Direct and restructuring provisions)
improved from 71.0% for the full year 2002 to 66.8% in the first nine months of
2003. The overall (pre-tax)
Page 5 of 30
RAROC figure of ING's banking operations (excluding ING Direct) increased
significantly to 18.9% from 13.2% for the full year 2002.
ING Direct reported an operating profit before tax of EUR 93 million compared to
an operating profit before tax of EUR 31 million in the first half of 2003. In
the first nine months of 2002, ING Direct still reported a loss of EUR 63
million.
SOLID PROFIT CONTRIBUTION FROM ASSET MANAGEMENT
The functional operating profit before tax from asset management activities
improved strongly by 60% to EUR 219 million. This figure is derived by breaking
out the asset management profit contribution from the insurance and banking
results.
Despite the effect of the stronger euro (-EUR 23.9 billion), assets under
management increased by EUR 5.7 billion to EUR 454.7 billion compared to
year-end 2002. Both a net inflow of EUR 7.2 billion and the effect of rising
stock markets in the second and third quarter (EUR 16.4 billion) impacted assets
under management favourably. All regional units of ING Investment Management and
ING Real Estate contributed to the net inflow of EUR 7.2 billion. Furthermore
ING changed its definition of assets under management to conform more closely
with industry practice. This restatement led to a net increase of EUR 6.0
billion.
The investment performance of ING's asset management business was stable. On a
three-year horizon, 61% of global fund assets delivered an above-median
investment performance.
SHAREHOLDERS' EQUITY INCREASES
End of September 2003, shareholders' equity amounted to EUR 19.6 billion, an
increase of EUR 1.3 billion or 7.6% compared to year-end 2002 (see table 2
below). The first nine months operating net profit added EUR 3.0 billion to
shareholders' equity whereas the development of the revaluation reserve of
equity and real estate investments had an adverse impact of EUR 0.5 billion.
Exchange rate fluctuations impacted shareholders' equity by -EUR 0.6 billion.
Shareholders' equity per share increased from EUR 9.14 at year-end 2002 to EUR
9.37 at the end of September 2003.
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TABLE 2. KEY BALANCE SHEET FIGURES ING GROUP
Year-end 30 SEPTEMBER %
In EUR x billion 2002 2003 change
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Shareholders' equity 18.3 19.6 7.6
- insurance operations 10.8 11.7 8.3
- banking operations 15.8 17.6 11.4
- eliminations* -8.3 -9.7
Total assets 716.4 784.8 9.5
Operating net return on equity 17.4% 21.9%
- insurance operations 18.6% 22.4%
- banking operations 6.5% 11.5%
Total assets under management 449.0 454.7 1.3
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* Own shares, subordinated loans, third-party interests, debenture loans and
other eliminations.
KEY STRATEGIC DEVELOPMENTS
Strengthen the capital base
o In the first nine months of 2003, the capital base of ING Insurance
improved further and amounted to EUR 15.7 billion at the end of September,
which is 178% of the legally required
Page 6 of 30
level of EUR 8.8 billion (end of June 2003: 171%; year-end 2002: 169%). The
tier-1 ratio of ING Bank N.V. was 7.44% at the end of September 2003, a
small improvement compared to year-end 2002 (7.31%).
o At this point, around EUR 4 billion of the Dutch equity portfolio has been
protected with put options against a potential sharp decline in the stock
markets. To open up the upside potential in the equity portfolio, the total
amount of written call options has been reduced by EUR 2.1 billion to EUR
1.9 billion.
o In October, ING placed a perpetual subordinated loan with retail investors
in the United States. The proceeds amounted to USD 500 million and will be
used to increase ING's capital base.
Optimise the existing portfolio
o In Italy, ING reached an agreement with UniCredito Italiano and Aviva about
the sale of its agent network activities of ING Sviluppo as well as the
affiliated Italian life insurance, asset management and private banking
activities. The agreement was signed in July 2003 and the transaction is
expected to be completed by year-end.
o In October, ING reached an agreement in principle with Baring Private
Equity Partners for a management buy out. ING expects the completion of the
transaction by year-end 2003.
o In October, ING reached an agreement to sell ING Aetna Life to Manulife
Indonesia. This is part of ING's strategy in the Asia/Pacific region to
focus on markets and products where it can achieve a leading market
position.
Develop ING's special skills
o ING Direct continues to beat expectations with regard to the growth of
funds entrusted and the client base. Compared to year-end 2002 funds
entrusted grew at a pace of 72% from EUR 55.2 billion to EUR 94.8 billion
at the end of September 2003. The consolidation of the German Direct bank
Entrium added approximately EUR 6 billion and the start-up in the UK EUR
7.3 billion. ING Direct had 8.1 million clients at the end of September
2003, compared to 5.0 million clients at year-end 2002 which is an increase
of 61%.
o Insurance operations in developing markets showed an organic growth in
premium income of 8.5% and an increase in organic operating profit before
tax of 11.9%. Asia (excluding Japan) had an overall organic premium growth
of 23.1%. The organic result was 24.7% higher than in the same period last
year.
o In China a next step was taken in the third quarter, since ING's joint
venture with China Pacific Insurance Company, Pacific Antai Life Insurance,
has received approval to establish a branch office in Guangzhou. This
branch in the third city of China will offer a mix of traditional life and
endowment insurance policies to customers. The expansion plans come at a
time when Guangzhou is experiencing rapid growth, both in terms of gross
domestic product and life insurance premiums.
Further lower cost base
o Total expenses decreased by 7.3%. Organically, expenses were 1.3% lower
than in the first nine months of 2002. The main reason for this decline is
an ongoing strict cost control in almost all ING operations, while on the
other hand pensions costs were substantially higher and expenses increased
because of the expansion of ING Direct and the insurance operations in the
developing markets in Europe and Asia.
o Additional to the EUR 45 million restructuring provision (before tax) for
ING BHF-Bank and ING Bank France in the first half of 2003, a restructuring
provision of EUR 37 million (before tax) has been taken for international
wholesale banking. This provision relates to the further Equity Markets
back-office and data-centre consolidation on a pan-European scale.
Page 7 of 30
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DETAILED INFORMATION ON THE FIRST NINE MONTHS 2003 RESULTS
On the following pages, more detailed information on the first nine months 2003
results will be given. After a discussion of the Group figures, the results will
be viewed from two different reporting angles: the regulatory angle
insurance/banking and the managerial angle of Executive Centres. Additional
information can be found in the appendices.
As stated before: To enable a clear insight in business performance, all further
figures in this press release are exclusive of realised capital gains on shares
in the first nine months of 2002 and 2003 and the non-operating part (EUR 250
million) of the profit from the ANZ transaction in the first nine months of
2002.
All comparable figures in this press release relate to first nine months 2003
versus first nine months 2002, unless indicated otherwise.
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1. GROUP RESULT
INCOME
Total operating income decreased by 10.7% to EUR 51,622 million. Organically
total income increased by 1.4% in spite of difficult market conditions
(insurance +1.1%, banking +3.1%).
EFFICIENCY
Total expenses decreased by 7.3% from EUR 10,297 million to EUR 9,550 million.
Organically, the decrease was 1.3%. This development clearly shows that ongoing
cost control, as well as restructuring and integration efforts are paying off.
The total number of staff (full-time equivalents) decreased by 1,200 from
116,200 at year-end 2002 to 115,000 at the end of September 2003. Ongoing
restructuring, integration and cost containment programmes have led to a
reduction of the workforce in banking units within ING Europe and insurance
units within ING Americas (mainly US, Chile and Argentina). ING Direct attracted
some 1,600 new staff (including Entrium) to handle the strong growth of its
businesses.
PROFIT
Operating net profit increased by 11.0% to EUR 3,012 million. Operating net
profit per share was 7.3% higher at EUR 1.50. Operating profit before tax
increased by 15.2% to EUR 4,325 million.
ONE-OFF ITEMS
One-off items influenced results both in the first nine months 2003 and in the
first nine months 2002. On balance, the positive impact of one-off items on
operating net profit in the first nine months of 2003 was EUR 88 million lower
than in the same period last year. Please refer to table 3 for further details.
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TABLE 3. ONE-OFF ITEMS FIRST NINE MONTHS 2003 VERSUS FIRST NINE MONTHS 2002
First nine months FIRST NINE MONTHS
in EUR x million 2002 2003
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Before tax After tax Before tax After tax
INSURANCE OPERATIONS
Operating gain on the ANZ transaction 225 225
Surrender gain group life contract 120 79
Gain from old reinsurance activities 303 247
BANKING OPERATIONS
Profit on the sale of Cedel shares 94 94
Restructuring provisioning -128 -128 -82 -65
---- ---- - --- - ---
TOTAL 311 270 221 182
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Page 8 of 30
CURRENCY RATE FLUCTUATIONS
During the reporting period, the value of the euro strengthened against most
currencies. The impact on operating net profit was a negative EUR 76 million.
This figure includes the mitigating effect of the US dollar hedge result of EUR
83 million after tax versus EUR 32 million in the same period last year. ING has
hedged the (expected) profits of its insurance operations in the US for the
years 2003 and 2004 at an EUR/USD exchange rate of 0.920 and 0.922 respectively.
RETURN ON EQUITY
The operating net return on equity increased from 17.4% in the full year 2002 to
21.9% in the first nine months 2003. The return on equity of the insurance
operations was 22.4% against 18.6% for the full year 2002. The return on equity
of the banking operations increased from 6.5% in the full year 2002 to 11.5% in
the first nine months 2003. The risk-adjusted return on capital (RAROC) of ING's
banking operations was 18.9% compared to 13.2% for the full year 2002 (pre-tax
and excluding ING Direct).
THIRD QUARTER 2003 VERSUS THIRD QUARTER 2002
Compared to the same quarter last year, operating net profit in the third
quarter of 2003 increased by 22.8%. However, the insurance business saw a
decrease in operating net profit of 12.1%. Although both life and non-life
results were higher in the third quarter 2003, operating net profit was lower as
a result of higher taxation and the operating part of the one-off gain on ANZ in
the third quarter 2002. Excluding the ANZ gain, operating net profit in the
third quarter increased by 38%. Currency exchange rate differences had a
negative impact. Banking results showed an increase of 167.8% as a result of a
lower addition to the provision for loan losses, higher interest result and
lower expenses, partly because of exceptionally high restructuring expenses in
the third quarter 2002.
THIRD QUARTER 2003 VERSUS SECOND QUARTER 2003
Third quarter operating net profit decreased by 19.0% to EUR 944 million
compared to the second quarter of 2003. Operating net profit of the insurance
operations was down 28.4% to EUR 545 million. This was caused by the one-off
gain (EUR 247 million) from old reinsurance activities as well as sharply
improved stock markets resulting in favourable DAC unlocking in the second
quarter 2003 and lower US reinsurance results in the third quarter 2003. Lower
investment losses and higher realised capital gains on the sale of real estate
positively influenced the insurance results in the third quarter 2003. Excluding
the one-off gain from old reinsurance activities, operating net profit of the
insurance operations increased by 6.0%. Operating net profit of the banking
operations decreased slightly by EUR 6 million to EUR 399 million on balance,
due to higher operating expenses (including a restructuring provision of EUR 37
million). Another factor was higher taxes in the third quarter 2003, which was
partly offset by a lower addition to the loan loss provision.
2.1 INSURANCE OPERATIONS
OPERATING NET PROFIT
Operating net profit from insurance decreased by EUR 53 million (-2.8%) to EUR
1,810 million. The development of the results was negatively affected by one-off
items (-EUR 57 million, see table 3 on page 6) and the impact of the strong euro
versus most other currencies (-EUR 74 million). Excluding these two items
operational net profit from insurance improved by 5.6%. The tax rate increased
from 19.4% in the first nine months 2002 to 23.6% in the first nine months 2003.
Page 9 of 30
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TABLE 4. PREMIUM INCOME AND OPERATING PROFIT BEFORE TAX OF THE INSURANCE
OPERATIONS
First nine FIRST NINE
months MONTHS %
2002 2003 % organic
in EUR x million change change
-------------------------------------------------
PREMIUM INCOME 39,711 34,167 -14.0 - 0.2
Life insurance 33,399 28,515 -14.6 - 0.7
Non-life insurance 6,312 5,652 -10.5 2.5
OPERATING PROFIT BEFORE TAX 2,398 2,476 3.3 7.9
Life insurance 1,957 1,716 -12.3 - 11.4
Non-life insurance 441 760 72.3 98.4
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PREMIUM INCOME
Due to the economic slowdown and fierce competition in the main insurance
markets, premium income organically decreased slightly by 0.2%. Life premiums in
the Netherlands grew satisfactory by 9.5%. Excluding the strong increase in
Guaranteed Investment Contracts premium income in the United States dropped
organically by 12.6%, mainly due to lower sales of fixed annuities. Overall, ING
will continue its policy to better balance profitability and market share. Total
premiums in the developing markets in local currencies increased by 8.5%.
EXPENSES
Total operating expenses decreased by 9.5%. Organically, total operating
expenses grew by 3.1%, mainly because of higher pension costs, additional
expenses with regard to the improvement of the quality level of the Dutch
operations and increased claim handling expenses in some business units.
Stringent cost control continues to be a top management priority. The expense
growth in the United States was flat thanks to the successful
restructuring/integration programme, started in 2001.
OPERATING PROFIT BEFORE TAX
The operating profit before tax increased by 3.3% to EUR 2,476 million. The
stronger euro impacted this result by EUR 94 million (including the positive
effect from the US dollar hedge). Realised capital gains on real estate
investments amounted to EUR 291 million against EUR 236 million in the first
nine months of 2002.
The life result dropped by EUR 241 million, on balance, mainly caused by lower
results in the Dutch operations and the one-off gain regarding the joint-venture
with ANZ in Australia in the first nine months 2002, partly compensated by
improved results in the US and Asia. Furthermore, lower investment income
(dividend and interest) put pressure on the results. The non-life result
improved strongly by 72.3%. Excluding the effect of the one-off gain regarding
the old reinsurance activities (EUR 231 million), the increase was still a very
healthy 20.0%. Especially the operations in the Netherlands, Belgium, Canada,
Mexico and Australia contributed to this growth.
CREDIT-RELATED LOSSES
Credit-related investment losses decreased strongly from EUR 492 million (50
basis points of total fixed interest securities) in the first nine months 2002
to EUR 155 million (15 basis points) in the first nine months 2003. The losses
in the US life operations in the third quarter 2003 amounted only EUR 7 million
compared to EUR 93 million in the third quarter of 2002.
COMBINED RATIO
The combined ratio of the non-life operations improved from 100% in the same
period last year to 98% in the first nine months of 2003.
CAPITAL BASE. End of September 2003, the capital base of ING Insurance amounted
to EUR 15.7 billion, 178% of the legally required level of EUR 8.8 billion
Page 10 of 30
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TABLE 5. GEOGRAPHICAL BREAKDOWN OF PREMIUM INCOME AND OPERATING PROFIT BEFORE TAX FROM
INSURANCE ACTIVITIES
PREMIUM INCOME OPERATING PROFIT BEFORE TAX
First FIRST % % First FIRST % %
nine NINE change organic nine NINE change organic
in EUR x million months MONTHS change months MONTHS change
2002 2003 2002 2003
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The Netherlands 5,410 5,764 6.5 6.7 1,114 1,021 -8.3 -8.3
Belgium 1,711 1,822 6.5 6.5 53 72 35.8 35.8
Rest of Europe 1,087 999 -8.1 -4.6 109 123 12.8 19.4
North America 23,383 18,481 -21.0 -5.3 500 579 15.8 27.4
Latin America* 2,650 1,772 -33.1 -0.1 256 194 -24.2 3.2
Asia 4,272 4,333 1.4 18.5 176 238 35.2 41.1
Australia 1,432 1,097 -23.4 18.0 296 98 -66.9 -66.7
Other -234 -101 -106 151
------ ------ ----- -----
TOTAL 39,711 34,167 -14.0 -0.2 2,398 2,476 3.3 7.9
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* Latin America = South America, including Mexico.
THE NETHERLANDS
Life premiums in The Netherlands increased by 9.3% to EUR 4,203 million, mainly
due to higher sales of individual single premiums. Non-life premiums, primarily
Loss of income/Accident, decreased by 0.2% to EUR 1,561 million.
The life result in the Netherlands decreased by EUR 155 million to EUR 855
million (-15.3%). The impact of one-offs amounted to EUR 72 million in the first
nine months 2003 versus EUR 120 million in the first nine months 2002. Other
reasons of this decrease are lower interest income and lower dividend income, as
a result of measures to strengthen ING's capital base and to reduce core debt,
partly compensated by higher realised capital gains on real estate. In addition,
operating expenses were slightly higher, among others due to higher pension
costs. The result on mortality and morbidity improved.
The non-life result increased from EUR 104 million in the first nine months 2002
to EUR 166 million (59.6%). Especially the results Loss of income/Accident rose
strongly, partly due to the release of an IBNR provision and a better claims
ratio.
BELGIUM
Life premiums in Belgium grew by 5.9% to EUR 1,583 million. Sharply lower
unit-linked premiums were compensated by higher sales in universal life. The
life result increased by EUR 4 million to EUR 54 million (+ 8.0%) due to
improved profitability of retail products sold through the bank branches.
The non-life result increased substantially by EUR 15 million to EUR 18 million,
mainly as a result of a strongly improved claims ratio both in retail as well as
in wholesale business lines.
REST OF EUROPE
Premium income in local currencies went down by 4.6% to EUR 999 million. The
main cause for this decrease was the drop in new business of unit-linked
policies in Italy. Premium growth in the other European markets was
satisfactory, except for Poland. Life result improved by 11.4% to EUR 117
million. The operations in Greece, Poland and Spain showed improved results.
UNITED STATES
Reflecting improvements in the equity and credit markets, the United States
reported an operating profit before tax that was 20% or EUR 59 million higher
than the first nine months of 2002 (exclusive of the currency exchange impact
and gain on the US dollar hedge).
Page 11 of 30
US Financial Services (USFS), which includes individual life and annuities,
mutual funds and retirement services products reported an operating profit
before tax of EUR 533 million for the first nine months of 2003 up 46% compared
to the same period last year (at current exchange rates). USFS results reflect
the equity and credit market improvements as well as higher sales in retirement
services and variable annuities and lower operating expenses reduced by spread
compression on fixed products.
The S&P 500 Index, which most closely correlates with the US equity related
businesses, closed at 996 on September 30, up a modest 2.2% since 30 June 2003.
This contrasts sharply with the third quarter of 2002, when the S&P dropped
17.6% and more conservative assumptions for market returns were implemented both
resulting in significant DAC unlocking charges. These factors resulted in a
favourable improvement in operating profit before tax by EUR 254 million
compared to 2002. Fees on assets under management declined EUR 54 million as a
result of the S&P 500 that averaged 8.3% lower than the first nine months of
2002.
Credit markets continued to improve along with actions to enhance the portfolio,
resulting in EUR 7 million of gross credit related losses (exclusive of DAC
adjustments) in the third quarter of 2003. These losses totalled EUR 133 million
for the first nine months of 2003, or 27 basis points annualised, compared to
EUR 342 million in 2002 at constant exchange rates. Relative to the first nine
months of 2002, increased prepayments on mortgage backed securities and lower
investment yields resulted in compressed margins despite crediting actions. In
the third quarter, continuing credit rate actions and slightly improving yields
held this development constant from the second quarter. Margin compression
resulted in an unfavourable variance of EUR 232 million compared to the first
nine months of 2002. Operating profit before tax was EUR 55 million lower in the
reinsurance business unit, driven by a high number of mortality claims.
At constant exchange rates US gross premiums, excluding Guaranteed Investment
Contracts, were 12.8% lower than the prior year due to reduced fixed annuity
sales reflecting continued pricing discipline in a low interest rate
environment.
CANADA
The Canadian operations reported a strong operating profit before tax of EUR 129
million, which was 50% higher than the nine-month period in 2002, at current
exchange rates. These results were due to favourable loss experience and 10.4%
organic premium growth. The combined ratio improved from 95.7% in the first nine
months 2002 to 93.9% in the same period this year.
LATIN AMERICA
Results for Argentina, Brazil, Chile, Mexico and Peru of EUR 194 million, were
comparable to the prior year period at current exchange rates. The lower results
in Argentina and the lost income from the sale of the insurance business in the
Netherlands Antilles in the fourth quarter of 2002 partly dampened the benefit
of Mexico's higher operating profit.
ASIA
In Asia, the operating profit before tax increased significantly by 41.1% in
local currencies (35% in euro). ING Life Korea (+80%) was the main contributor
to this rapid profit growth. Underpinning this is the 54% growth in premium
income and favourable claims experience. The life operations in Taiwan, Japan,
Malaysia and Hong Kong also recorded premium growth of 12% in local currencies.
Results were higher due to favourable claims experience and active expense
management, despite lower investment income due to low interest rates. In 2003,
Taiwan has started to accrue EUR 50 million a year for additional reserve
against a prolonged low interest environment. This is also being partly
compensated by favourable claims experience and active expense management.
Page 12 of 30
AUSTRALIA
In Australia, the operating profit before tax in local currency, and excluding
the operational gain from the ANZ transaction in 2002, increased by 42% to EUR
98 million. Ongoing efforts to control expenses at ING Australia offset lower
fees from assets under management due to industry-wide weak fund flows. The
results of QBE Mercantile Mutual, the non-life joint venture with QBE in
Australia improved by 56% in local currencies due to a firmer market for pricing
and favourable claims experience.
OTHER
Result improved mainly due to the unallocated one-off gain from old reinsurance
activities.
2.2. BANKING OPERATIONS
OPERATING NET PROFIT
Operating net profit of the banking operations grew strongly by 41.4% from EUR
850 million in the first nine months 2002 to EUR 1,202 million. The operating
net profit in the third quarter 2003 was EUR 399 million, slightly below the EUR
405 million in the second quarter 2003, but 168% higher than the EUR 149 million
in the corresponding quarter in 2002.
------------------------------------------------------------------------------------
TABLE 6. OPERATING PROFIT BEFORE TAX OF THE BANKING OPERATIONS
First nine FIRST NINE
months MONTHS %
in EUR x million 2002 2003 change
------------------------------------------------------------------------------------
Interest result 5,583 6,059 8.5
Income from securities and participating interests 289 61 -78.9
Commission 1,993 1,810 -9.2
Results from financial transactions 482 547 13.5
Other results 300 219 -27.0
----- -----
TOTAL INCOME 8,647 8,696 0.6
Personnel expenses 3,695 3,460 -6.4
Other expenses 2,670 2,532 -5.2
----- -----
TOTAL EXPENSES 6,365 5,992 -5.9
GROSS RESULT 2,282 2,704 18.5
Additions to the provision for loan losses 925 855 -7.6
----- -----
OPERATING PROFIT BEFORE TAX 1,357 1,849 36.3
EFFICIENCY RATIO* 70.1% 66.8%
------------------------------------------------------------------------------------
* Excluding ING Direct and restructuring provisions
OPERATING PROFIT BEFORE TAX
The operating profit before tax of the banking operations improved by EUR 492
million (+36.3%) to EUR 1,849 million. Next to a EUR 70 million lower addition
to the provision for loan losses, gross result rose by EUR 422 million or 18.5%.
The strong increase of the gross result was largely caused by EUR 373 million or
5.9% lower expenses, including the impact of restructuring provisions created in
2002 (EUR 128 million for the international wholesale banking activities) and
2003 (EUR 82 million, whereof EUR 30 million for ING BHF-Bank, EUR 15 million
for ING Bank France and EUR 37 million for the international wholesale banking
activities). Total income increased by EUR 49 million or 0.6%. Higher interest
results, mainly due to higher volumes, were to a large extent offset by lower
securities related commissions and substantially lower income from securities
and participating interests (which included in 2002 an exceptional one-off gain
of EUR 94 million on the sale of Cedel shares). Both income and expenses were
affected by the appreciation of the euro against most currencies. Excluding
currency fluctuations and the acquisition of Toplease and ING Vysya Bank,
operating
Page 13 of 30
profit before tax rose organically by 37.6% (income +3.1%, expenses -3.7%). Also
excluding one-offs, the operating profit before tax improved by 40.1%.
Most banking units reported improved results. The operating profit before tax of
ING Direct improved from a loss of EUR 63 million in the first nine months 2002
to a profit of EUR 93 million this year, whereof EUR 62 million in the third
quarter of 2003. The results of ING BHF-Bank and ING Bank Slaski, however,
decreased.
THIRD QUARTER 2003 VERSUS SECOND QUARTER 2003
Compared to the second quarter 2003 (EUR 614 million), operating profit before
tax in the third quarter rose by EUR 25 million to EUR 639 million (+4.1%).
Total income was EUR 33 million higher, while the addition to loan loss
provisions decreased by EUR 50 million to EUR 240 million (annualised 39 basis
points of average credit risk weighted assets). Total expenses increased by EUR
58 million. Included in this quarter's expenses is the creation of a EUR 37
million restructuring provision for international wholesale banking. This
provision relates to the further Equity Markets back-office and data-centre
consolidation on a pan-European scale.
INTEREST RESULT
Compared to the first nine months 2002 the interest result increased
substantially by EUR 476 million or 8.5% to EUR 6,059 million, mainly due to a
EUR 38 billion higher average balance sheet total. The interest margin improved
to 1.60% compared to 1.59% in the same period last year. The continued strong
growth of ING Direct (with an interest margin of approximately 1%) had a
mitigating effect on the total interest margin development. On a
quarter-by-quarter basis, the interest margin improved from 1.55% in the second
quarter to 1.62% in the third quarter 2003, supported by a steepening of the
average gap between the short and long term interest rates.
BANK LENDING
At the end of September 2003, bank lending was EUR 19.7 billion or 6.9% higher
compared to year-end 2002. Corporate bank lending and personal lending rose by
EUR 10.6 billion and EUR 9.1 billion respectively. In the third quarter of 2003,
bank lending increased by EUR 16.0 billion. Almost half of this increase can be
attributed to ING Direct partly as a result of the consolidation of Entrium as
from August 2003.
FUNDS ENTRUSTED
Fund entrusted to and debt securities of the banking operations rose by EUR 52.6
billion or 16.4% to EUR 372.4 billion to a large extent caused by the continued
strong growth of ING Direct.
INCOME FROM SECURITIES AND PARTICIPATING INTERESTS
Income from securities and participating interests dropped from EUR 289 million
in the first nine months 2002 to EUR 61 million. Last years' figure included an
exceptional profit of EUR 94 million on Cedel shares. The remainder of the
decrease is largely attributable to ING BHF-Bank.
COMMISSION
Total commission decreased by EUR 183 million or 9.2%. Commission from
securities business dropped by EUR 84 million (-15.0%) due to the lower activity
level on the stock markets. The continued reluctance of (private) clients to
invest in securities also led to a decline in management fees (-17.3%) and
brokerage and advisory fees (-15.7%). Funds transfer commission was 5.9% lower,
while insurance broking commission was more or less unchanged. The 18.5%
increase in 'other' commission contained, among others, higher commission from
leasing, factoring and bank guarantees.
Page 14 of 30
----------------------------------------------------------------------------
TABLE 7. COMMISSION
First nine FIRST NINE %
In EUR x million months MONTHS change
2002 2003
----------------------------------------------------------------------------
Funds transfer 472 444 -5.9
Securities business 560 476 -15.0
Insurance broking 87 86 -1.1
Management fees 525 434 -17.3
Brokerage and advisory fees 127 107 -15.7
Other 222 263 18.5
----- -----
TOTAL 1,993 1,810 -9.2
----------------------------------------------------------------------------
RESULTS FROM FINANCIAL TRANSACTIONS
On balance, results from financial transactions increased by EUR 65 million
(+13.5%) but there are strong fluctuations between the separate lines, which are
to a large extent interrelated. Especially ING Belgium reported higher results
from financial transactions due to very good Financial Markets results. Higher
results from financial transactions were also reported by ING BHF-Bank, Furman
Selz and ING Bank Nederland. The international wholesale banking units, however,
showed a decrease (lower results in the Netherlands and the UK were partly
offset by higher results in the Americas).
Compared to the first nine months 2002, the lower results from securities
trading and currency trading were more than compensated by higher other results
from financial transactions, especially related results from derivatives
trading.
----------------------------------------------------------------------------
TABLE 8. RESULTS FROM FINANCIAL TRANSACTIONS
First nine FIRST NINE %
in EUR x million months MONTHS change
2002 2003
----------------------------------------------------------------------------
Result from securities trading portfolio 325 248 -23.7
Result from currency trading portfolio 218 72 -67.0
Other -61 227 n.a.
--- ---
TOTAL 482 547 13.5
----------------------------------------------------------------------------
OTHER RESULTS
Compared to the first nine months 2002, Other results decreased by EUR 81
million or 27.0% to EUR 219 million, to a large extent caused by lower results
from real estate.
TOTAL EXPENSES
Total expenses decreased by EUR 373 million (-5.9%) to EUR 5,992 million.
Organically, i.e. excluding currency fluctuations and the consolidation of
Toplease and ING Vysya Bank, expenses decreased by EUR 225 million or 3.7%.
Without taking into account the restructuring provisions created in 2002 and
2003 (EUR 128 million and EUR 82 million respectively) and the continuously
expanding ING Direct (expenses rose by EUR 114 million at comparable exchange
rates) the decrease was even 5.3%, reflecting the progress made in reducing the
cost base. On the same basis, personnel expenses decreased by EUR 203 million or
5.9%. A reduction of the average headcount by 3,100 full-timers, lower bonus
accruals and lower expenses for third-party staff more than offset the impact of
the collective labour agreement and higher pension costs mainly in the
Netherlands. Other expenses were 4.2% lower compared to the first nine months
2002.
Page 15 of 30
EFFICIENCY RATIO
Excluding the expanding ING Direct operations and restructuring provisions, the
efficiency ratio (total expenses as a percentage of total income) improved from
70.1% in the first nine months 2002 to 66.8% in the first nine months 2003. The
comparable full year 2002 efficiency ratio was 71.0%.
ADDITIONS TO THE PROVISION FOR LOAN LOSSES
In the third quarter 2003 ING Bank added EUR 240 million to the provision for
loan losses, the lowest level since the third quarter 2001 (EUR 225 million) and
EUR 50 million below the addition in the second quarter 2003. The total addition
in the first nine months 2003 amounted to EUR 855 million, a decrease of EUR 70
million compared to a year ago. Loan loss provisioning equalled 47 basis points
(annualised) of average credit risk weighted assets against 59 basis points for
the full year 2002.
RISK ADJUSTED RETURN ON CAPITAL
The Risk adjusted Return on Capital (RAROC) measures performance on a
risk-adjusted basis. RAROC is calculated as the economic return divided by
economic capital. The economic returns of RAROC are based on the principles of
valuation and calculation of results applied in the annual accounts. The credit
risk provisioning is replaced by statistically expected losses reflecting
average credit losses over the entire economic cycle. ING Group continues to
develop and refine the models supporting the RAROC calculations. ING Direct is
excluded.
--------------------------------------------------------------------------------
TABLE 9. RAROC BANKING OPERATIONS, EXCLUDING ING DIRECT
RAROC (pre-tax) Economic capital
in % in EUR x billion
Full year FIRST NINE Full year FIRST NINE
2002* MONTHS 2002* MONTHS
2003 2003
--------------------------------------------------------------------------------
MC Netherlands 38.4 45.5 4.8 4.5
MC South West Europe 17.0 22.9 3.4 3.0
MC Germany -3.5 -2.2 1.4 1.4
MC Central Europe 9.5 13.2 1.0 0.8
MC UK/Americas/Asia -0.4 8.9 3.1 2.0
Other -64.9 -56.2 0.8 1.1
--- ---
TOTAL BANKING OPERATIONS 13.2 18.9 14.5 12.8
Wholesale 10.1 14.1 11.8 10.4
Retail 26.4 39.1 2.7 2.4
--------------------------------------------------------------------------------
* Restated following a redefinition of the corporate line.
The overall (pre-tax) RAROC figure of ING's banking operations was 18.9%, a
strong improvement compared to the first nine months 2002 (14.3%) and the full
year 2002 (13.2%) and above the hurdle of 18.5%. Next to a higher economic
return, the improvement was caused by lower economic capital, due to a
methodology refinement for business and operational risk, as well as lower
market risk capital. Compared to full year 2002, the RAROC of the wholesale
activities improved by 4.0%-point to 14.1%. The already good RAROC of the retail
activities improved further from 26.4% in 2002 to 39.1% in the first nine months
2003.
Page 16 of 30
CAPITAL ADEQUACY
The tier-1 ratio of ING Bank N.V. was 7.44% at the end of September 2003
(year-end 2002: 7.31%). The solvency ratio (BIS ratio) was 11.18% against 10.98%
at year-end 2002. Total risk weighted assets increased from EUR 247.3 billion at
the end of December 2002 to EUR 255.5 billion at the end of September 2003, to a
large extent caused by the expansion of ING Direct.
-----------------------------------------------------------------------------------------
TABLE 10. GEOGRAPHICAL BREAKDOWN OF OPERATING INCOME AND OPERATING PROFIT BEFORE TAX FROM
BANKING ACTIVITIES
OPERATING INCOME OPERATING PROFIT BEFORE TAX
First nine FIRST NINE First nine FIRST NINE
months MONTHS % months MONTHS %
in EUR x million 2002 2003 change 2002 2003 change
-----------------------------------------------------------------------------------------
The Netherlands 3,807 4,004 5.2 1,163 1,280 10.1
Belgium 1,613 1,580 -2.0 454 437 -3.7
Rest of Europe 2,203 2,133 -3.2 -99 -86 n.a.
North America 427 480 12.4 -148 35 n.a.
Latin America* 219 136 -37.9 -22 114 n.a.
Asia 293 269 -8.2 -23 33 n.a.
Australia 79 94 19.0 34 45 32.4
Other 6 0 -2 -9
----- ----- ----- -----
TOTAL 8,647 8,696 0.6 1,357 1,849 36.3
-----------------------------------------------------------------------------------------
* Latin America = South America, including Mexico.
GEOGRAPHICAL BREAKDOWN BANKING
The operating profit before tax in the Netherlands increased by 10.1%. Higher
income (+ 5.2%) and lower expenses (-0.7%, despite higher pension costs and the
impact of a new collective labour agreement) more than compensated for increased
risk costs. Operating profit before tax in Belgium was 3.7% lower. However,
abstracted from the exceptional profit on Cedel-shares realised in the first
nine months 2002 (EUR 64 million booked in Belgium) operating profit before tax
rose by 12.1%.
Although slightly improved, the performance in the Rest of Europe, especially in
Germany and Poland, was still disappointing. The reduction of the expenses
(negatively impacted by the EUR 82 million restructuring provision created in
2003 against EUR 60 million restructuring provision in 2002) could only partly
compensate for lower income and higher risk costs. The operating profit before
tax in the third quarter, however, was positive again.
In North America operating profit before tax improved strongly by EUR 183
million. Next to lower risk costs, notably ING Direct and Furman Selz
contributed to the improvement. The turn-around of the operating profit before
tax in Latin America was entirely caused by lower risk costs (in first nine
months 2002 high due to Argentina provisioning). The strong decrease in income
was partly compensated by lower expenses (in 2002 including EUR 20 million
restructuring provision).
The improvement in Asia can be attributed to lower expenses (in 2002 high due to
EUR 41 million restructuring provision) and a release of loan loss provisions.
The operating profit before tax in Australia improved further mainly due to ING
Direct.
Page 17 of 30
3. RESULTS BY EXECUTIVE CENTRE
----------------------------------------------------------------------------
TABLE 11. OPERATING PROFIT BEFORE TAX BY EXECUTIVE CENTRE
First FIRST % % organic
in EUR x million nine months NINE MONTHS change change
2002 2003
----------------------------------------------------------------------------
ING Group 3,755 4,325 15.2 19.3
- ING Europe 2,775 3,183 14.7 15.7
- ING Americas 690 757 9.7 26.6
- ING Asia/Pacific 475 323 -32.0 -32.1
- Other -185 62 n.a. n.a.
----------------------------------------------------------------------------
ING EUROPE
ING Europe not only includes all of ING's European operations, but also the ING
Direct business in Australia, Canada and the United States and the wholesale
banking business outside Europe. As of 2003 the asset management business units
ING Real Estate, Baring Asset Management, ING Trust, Parcom and Baring Private
Equity Partners (previously part of ING Asset Management) are also included in
ING Europe. The 2002 results per executive centre have been restated
accordingly.
The strong improvement of the operating profit before tax is for the greater
part attributable to substantial higher banking results (+35.6%). Lower risk
costs, lower operating expenses and a higher interest result were the main
drivers for this development. The insurance result deteriorated mainly because
of the effect of one-off items and currency exchange rates. Excluding these
effects the insurance result increased by 11.7%.
Banking operations in the Netherlands and Belgium showed an excellent
performance. However the results in Germany (ING BHF-Bank) and Poland (ING Bank
Slaski), although somewhat improved in the third quarter, are still
disappointing. The efficiency ratio (excluding ING Direct and restructuring
expenses) improved from 68.2% to 65.1%. The insurance result, including the
effect of one-offs, decreased mainly because of lower life results in the
Netherlands. However life operations in Belgium and Poland performed well. The
non-life results on the main markets Netherlands and Belgium continued to
improve. The operating profit before tax from the newly included asset
management businesses showed a strong increase of 26.2% to EUR 207 million.
ING Direct continued its excellent performance. An operating loss before tax of
EUR 63 million in the first nine months 2002 swung to an operating profit before
tax of EUR 93 million in the same period this year. A favourable development of
the interest result as well as the increasing number of customers and funds
entrusted were the main drivers of this development. The operations in Canada,
Australia, USA, Spain and Germany reported profits.
-------------------------------------------------------------------------------------------------------
TABLE 12. ING DIRECT NUMBER OF CLIENTS FUNDS ENTRUSTED
x 1,000 in EUR x billion
Year- END OF Year- END OF
end SEPTEMBER % end SEPTEMBER %
2002 2003 change 2002 2003 change
*As from August 2003 including Entrium
-------------------------------------------------------------------------------------------------------
Canada 684 861 25.9 5.1 7.0 37.3
Spain 610 730 19.7 6.0 8.8 46.7
Australia 475 667 40.4 4.1 6.4 56.1
France 270 316 17.0 6.3 7.5 19.1
USA 864 1,194 38.2 8.9 12.2 37.1
Italy 244 364 49.2 4.5 7.3 62.2
UK 212 7.3
Germany* 1,894 3,788 100.0 20.3 38.3 88.7
----- ----- ---- ----
TOTAL 5,041 8,132 61.3 55.2 94.8 71.7
------------------------------------------------------------------------------------------------------
Page 18 of 30
ING AMERICAS
ING Americas' operating profit before tax was EUR 757 million for the first nine
months of 2003, of which EUR 245 million was realised during the third quarter.
Results were EUR 67 million (+9.7%) higher than the same period in 2002.
Excluding the impact of the strengthening euro, results were 26.6% higher. Good
results were driven by strong gains in the Canadian property and casualty
business, improvements in the US equity and credit markets, and the solid
performance of the Mexican operations which helped to counterbalance higher
reinsurance claim volumes and spread compression resulting from the low interest
rate levels in the US.
ING ASIA/PACIFIC
Excluding the EUR 225 million operating profit in 2002 due to the ANZ
transaction, ING Asia/Pacific's operating profit before tax increased
significantly by EUR 73 million to EUR 323 million (+29.2%). In local
currencies, operating profit before tax rose by 38.1%. Main contributors to this
higher result were the life and non-life operations in Australia and the life
operation in South Korea. The operations in Taiwan, Japan, Malaysia and Hong
Kong recorded a premium growth of 12% in local currencies. Investment income in
these countries was lower than expected due to the low interest environment. In
2003 Taiwan has started to accrue EUR 50 million a year for additional reserves
against a prolonged low interest environment. However, these negative factors
are being compensated by favourable claims experience and active expense
management in both the insurance and investment management companies. Start-up
related losses have been reduced compared to the first nine months of 2002
partly reflecting ING's decision to focus on strategically important operations.
Offsetting these positive developments was the lower attributable result from
shareholdings in the two banks that form part of ING Asia/Pacific.
OTHER
Result improved mainly due to the unallocated one-off gain from old reinsurance
activities.
----------------
The accounting principles applied in this document correspond with those applied
in ING Group's Annual Accounts 2002. 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.
APPENDICES
1. Key figures
2. Consolidated profit and loss account, nine months 2003 vs. 2002
3. Consolidated profit and loss account, third quarter 2003 vs. 2002
4. Consolidated balance sheet and changes in shareholders' equity
5. Condensed consolidated statement of cash flows
6. Additional information: quarterly results, geographical breakdown,
realised capital gains on real estate and bank lending
7. Assets under management
8. Consolidated balance sheet ING Verzekeringen N.V.
9. Consolidated balance sheet ING Bank N.V.
10. Information for shareholders
Page 19 of 30
APPENDIX 1. KEY FIGURES
FIRST NINE FIRST NINE
MONTHS MONTHS
1999* 2000* 2001* 2002* 2002** 2003**
-----------------------------------------------------------------------------------------------------------------
BALANCE SHEET (EUR x billion)
Total assets 492.8 650.2 705.1 716.4 721.6 784.8
Investments 195.8 277.2 307.4 297.6 306.7 332.2
Lending 201.8 246.8 254.2 284.4 272.5 304.1
Insurance provisions 107.5 200.2 214.0 195.8 199.0 200.1
Shareholders' equity 34.6 25.3 21.5 18.3 16.5 19.6
RESULTS (EUR x million)
Income insurance operations
Premium income 22,412 29,114 50,460 52,284 39,711 34,167
Income from investments,
commission and other income 7,308 9,193 12,617 13,053 9,454 8,821
------ ------ ------ ------ ------ ------
29,720 38,307 63,077 65,337 49,165 42,988
Income banking operations
Interest 5,652 5,786 6,072 7,646 5,583 6,059
Commission 2,856 3,630 2,765 2,615 1,993 1,810
Other income 1,368 1,886 2,274 940 1,071 827
------ ------ ------ ------ ------ ------
9,876 11,302 11,111 11,201 8,647 8,696
Total income 39,584 49,568 74,163 76,521 57,801 51,622
Total expenditure 35,203 43,801 68,422 70,880 54,046 47,297
Operating profit before tax
Insurance operations 2,400 3,162 3,571 4,173 2,398 2,476
Banking operations 1,981 2,605 2,170 1,468 1,357 1,849
------ ------ ------ ------ ------ ------
Total 4,381 5,767 5,741 5,641 3,755 4,325
Operating net profit 3,229 4,008 4,252 4,253 2,713 3,012
Operating net profit
excl. capital gains on shares 2,665 3,388 3,539 3,433 2,713 3,012
Net profit 4,922 11,984 4,577 4,500 3,578 3,007
Net profit available for ordinary
shares 4,901 11,963 4,556 4,479 3,562 2,991
FIGURES PER ORDINARY SHARE OF EUR 0.24 NOMINAL VALUE
Operating net profit 1.68 2.09 2.20 2.20 1.40 1.50
Net profit 2.56 6.27 2.37 2.32 1.85 1.50
Distributable net profit 1.84 2.56 2.20 2.20 1.72 1.50
Diluted net profit 2.52 6.18 2.35 2.32 1.85 1.50
Dividend 0.82 1.13 0.97 0.97
Dividend pay-out ratio 44.4% 43.9% 44.1% 44.1%
Shareholders' equity 17.90 13.04 11.03 9.14 8.40 9.37
Diluted shareholders' equity 17.65 12.86 10.92 9.14 8.40 9.37
EMPLOYEES
Average number of staff 86,040 92,650 111,998 113,056 112,180 115,386
Full time equivalents, end of period 88,931 108,965 113,143 116,215 111,732 114,995
* Including capital gains on shares
** Excluding capital gains on shares
Page 20 of 30
APPENDIX 2. CONSOLIDATED PROFIT AND LOSS ACCOUNT, NINE MONTHS 2003 VS. 2002
INSURANCE BANKING TOTAL* %
OPERATIONS OPERATIONS CHANGE
2002 2003 2002 2003 2002 2003
in EUR x million FIRST NINE MONTHS FIRST NINE MONTHS FIRST NINE MONTHS
------------------------------------------------------------------------------------------------------------
Premium income 39,711 34,167 39,711 34,167 -14.0
Income from investments of the insurance
operations 7,826 7,133 7,773 7,035 -9.5
Interest result banking operations 5,583 6,059 5,625 6,095 8.4
Commission 1,031 978 1,993 1,810 3,024 2,788 -7.8
Other income 597 710 1,071 827 1,668 1,537 -7.9
------ ------ ----- ----- ------ -----
TOTAL OPERATING INCOME 49,165 42,988 8,647 8,696 57,801 51,622 -10.7
Underwriting expenditure 41,411 35,848 41,411 35,848 -13.4
Other interest expenses 932 951 921 889 -3.5
Total expenses 3,932 3,558 6,365 5,992 10,297 9,550 -7.3
Additions to the provision for loan
losses/investment losses** 492 155 925 855 1,417 1,010 -28.7
------ ------ ----- ----- ------ -----
TOTAL OPERATING EXPENDITURE 46,767 40,512 7,290 6,847 54,046 47,297 -12.5
OPERATING PROFIT BEFORE TAX 2,398 2,476 1,357 1,849 3,755 4,325 15.2
Taxation 465 584 330 497 795 1,081 36.0
Third-party interests 70 82 177 150 247 232 -6.1
------ ------ ----- ----- ------ -----
OPERATING NET PROFIT 1,863 1,810 850 1,202 2,713 3,012 11.0
OPERATING NET PROFIT 1,863 1,810 850 1,202 2,713 3,012 11.0
Capital gains shares 615 -5 615 -5
Gain on joint-venture ANZ 250 250
------ ------ ------
NET PROFIT 2,728 1,805 850 1,202 3,578 3,007 -16.0
* Including inter-company eliminations.
** In order to increase transparency, investment losses of the insurance operations are specified
separately in the line Addition to the provision for loan losses / investment losses. All
figures have been restated accordingly.
Page 21 of 30
APPENDIX 3. CONSOLIDATED PROFIT AND LOSS ACCOUNT, THIRD QUARTER 2003 VS. 2002
INSURANCE BANKING TOTAL* %
OPERATIONS OPERATIONS CHANGE
in EUR x million 2002 2003 2002 2003 2002 2003
THIRD QUARTER THIRD QUARTER THIRD QUARTER
----------------------------------------------------------------------------------------------------------------------
Premium income 11,551 10,362 11,551 10,362 -10.3
Income from investments of the insurance
operations 2,633 2,329 2,611 2,269 -13.1
Interest result banking operations 1,950 2,142 1,969 2,163 9.9
Commission 293 339 606 578 899 917 2.0
Other income 132 361 223 199 355 560 57.7
------ ------ ----- ----- ------ ------
TOTAL OPERATING INCOME 14,609 13,391 2,779 2,919 17,385 16,271 -6.4
Underwriting expenditure 12,252 10,995 12,252 10,995 -10.3
Other interest expenses 262 417 259 378 45.9
Total expenses 1,214 1,181 2,205 2,040 3,419 3,221 -5.8
Additions to the provision for loan
losses/investment losses** 114 18 300 240 414 258 -37.7
------ ------ ----- ----- ------ ------
TOTAL OPERATING EXPENDITURE 13,842 12,611 2,505 2,280 16,344 14,852 -9.1
OPERATING PROFIT BEFORE TAX 767 780 274 639 1,041 1,419 36.3
Taxation 130 201 69 202 199 403 102.5
Third-party interests 17 34 56 38 73 72 -1.4
------ ------ ----- ----- ------ ------
OPERATING NET PROFIT 620 545 149 399 769 944 22.8
OPERATING NET PROFIT 620 545 149 399 769 944 22.8
Negative value adjustment shares 23 23
Capital gains 205 10 205 10
Gain on ANZ joint venture -233 -233
------ ------
NET PROFIT 592 555 149 422 741 977 31.9
* Including inter-company eliminations.
** In order to increase transparency, investment losses of the insurance operations will be specified separately
in the line Addition to the provision for loan losses / investment losses. All figures have been restated accordingly.
Page 22 of 30
APPENDIX 4. CONSOLIDATED BALANCE SHEET ING GROEP N.V.
in EUR x million 31 DECEMBER 2002 30 SEPTEMBER 2003 % CHANGE
-------------------------------------------------------------------------------------------
Assets
Tangible fixed assets 1,415 1,288 -9.0
Participating interests 2,883 3,492 21.1
Investments 297,581 332,214 11.6
Lending 284,448 304,080 6.9
Banks 45,682 59,537 30.3
Cash 11,421 7,956 -30.3
Other assets 51,186 54,375 6.2
Accrued assets 21,754 21,838 0.4
------- -------
TOTAL 716,370 784,780 9.5
Equity and liabilities
Shareholders' equity 18,254 19,633 7.6
Preference shares of Group companies 2,146 1,928 -10.2
Third-party interests 1,959 1,856 -5.3
------- -------
Group equity 22,359 23,417 4.7
Subordinated loan 2,412 2,978 23.5
------- -------
Group capital base 24,771 26,395 6.6
General provisions 3,489 3,402 -2.5
Insurance provisions 195,831 200,103 2.2
Funds entrusted to and debt securities
of the banking operations 319,824 372,390 16.4
Banks 96,267 111,528 15.9
Other liabilities 65,397 61,907 -5.3
Accrued liabilities 10,791 9,055 -16.1
------- -------
TOTAL 716,370 784,780 9.5
CHANGES IN SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY AS PER 31 DECEMBER 2001 / 2002 21,514 18,254
in EUR x million
Net profit / Operating net profit 4,500 3,012
Revaluations (after tax) -3,444 -507
Realised capital gains transferred to P&L account -1,040
Write-off of goodwill -1,176 -100
Exchange rate differences -1,041 -642
Exercise of warrants and stock options -2
Issue of shares 495
Changes in ING Groep N.V. shares held by group companies 822 46
Dividend paid -1,969 -943
Other 90 18
------ ------
SHAREHOLDERS' EQUITY AS PER 31 DECEMBER 2002 / 30 SEPTEMBER 2003 18,254 19,633
Page 23 of 30
APPENDIX 5. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
2002 2003
FIRST FIRST
in EUR x million NINE MONTHS NINE MONTHS
--------------------------------------------------------------------------------
Net cash flow from operating activities 27,013 23,727
Investments and advances:
- participating interests -1,318 -246
- investments in shares and property -6,171 -4,756
- investments in fixed-interest securities -216,153 -269,119
- other investments -40 -49
Disposals and redemptions:
- participating interests 595 208
- investments in shares and property 6,464 6,134
- investments in fixed-interest securities 180,389 227,418
- other investments 65 139
Net investment for risk of policyholders 9,485 -8,732
----- ------
Net cash flow from investing activities -26,684 -49,003
Subordinated loans of Group companies 2,068 750
Bonds, loans taken up and deposits by reinsurers 1,460 -1,056
Private placements of ordinary shares 25 45
Issue of shares 0 471
Movements in shares ING Groep N.V. 97 6
Cash dividends -1,977 -927
------ ----
Net cash flow from financing activities 1,673 -711
Net cash flow 2,002 -25,987
Cash at beginning of year 4,681 21,030
Exchange rate differences 1,504 2,392
----- -----
CASH AT END OF PERIOD 8,187 -2,565
In this summary, cash comprises the following items:
Short-dated government paper 6,565 7,147
Banks, available on demand -7,154 -17,668
Cash and bank balances and call money 8,776 7,956
CASH AT END OF PERIOD 8,187 -2,565
Page 24 of 30
APPENDIX 6. ADDITIONAL INFORMATION
QUARTERLY RESULTS*
2002 2002 2002 2002 2003 2003 2003
in EUR x million Q1 Q2 Q3 Q4 Q1 Q2 Q3
----------------------------------------------------------------------------------------------------------
Life 660 697 600 646 445 702 569
Non-life 120 154 167 126 167 382 211
----- ----- ----- ---- ------ ------ -----
Total insurance operations 780 851 767 772 612 1,084 780
Total banking operations 546 537 274 111 596 614 639
----- ----- ----- ---- ------ ------ -----
OPERATING PROFIT BEFORE TAX 1,326 1,388 1,041 883 1,208 1,698 1,419
OPERATING NET PROFIT 931 1,013 769 720 902 1,166 944
of which:
Insurance operations 582 661 620 675 504 761 545
Banking operations 349 352 149 45 398 405 399
OPERATING NET PROFIT PER ORDINARY SHARE 0.48 0.52 0.40 0.37 0.46 0.58 0.46
* Excluding capital gains/negative value adjustments shares and the gain on the
joint venture with ANZ.
GEOGRAPHICAL BREAKDOWN OF OPERATING INCOME AND OPERATING PROFIT BEFORE TAX
OPERATING INCOME* OPERATING PROFIT BEFORE TAX
First nine FIRST NINE First nine FIRST NINE
months 2002 MONTHS 2003 % months 2002 MONTHS %
in EUR x million change 2003 change
-----------------------------------------------------------------------------------------------------
The Netherlands 12,189 13,029 6.9 2,277 2,301 1.1
Belgium 3,546 3,677 3.7 507 509 0.4
Rest of Europe 3,601 3,424 -4.9 10 37 270.0
North America 28,656 22,705 -20.8 352 614 74.4
Latin America** 3,350 2,296 -31.5 234 308 31.6
Asia 4,978 5,058 1.6 153 271 77.1
Australia 1,819 1,356 -25.5 330 143 -56.7
Other 334 541 62.0 -108 142 n.a
------ ------ ----- -----
58,473 52,086 -10.9 3,755 4,325 15.2
Income between areas -672 -464 n.a.
------ ------ ----- -----
TOTAL 57,801 51,622 -10.7 3,755 4,325 15.2
* After eliminations.
** Latin America = South America, including Mexico.
SPECIFICATION OF REALISED CAPITAL GAINS ON REAL ESTATE
2002 2003 %
in EUR x million FIRST NINE MONTHS FIRST NINE MONTHS CHANGE
--------------------------------------------------------------------------------
Life insurance 219 275 25.6
Non-life insurance 17 16 -5.9
-- --
Total before taxation 236 291 23.3
Taxation/third parties 86 112 30.2
-- ---
NET 150 179 19.3
BANK LENDING
in EUR x billion 31 DECEMBER 2002 30 SEPTEMBER 2003 % CHANGE
--------------------------------------------------------------------------------
- Public authorities 14.2 16.6 16.9
- Other corporate 162.0 170.2 5.1
----- -----
Total corporate 176.2 186.8 6.0
- Mortgages 92.5 99.9 8.0
- Other personal 15.7 17.4 10.8
---- ----
Total personal 108.2 117.3 8.4
TOTAL BANK LENDING 284.4 304.1 6.9
Page 25 of 30
APPENDIX 7. ASSETS UNDER MANAGEMENT
ASSETS UNDER MANAGEMENT BY CLIENT CATEGORY
in EUR x billion 31 DECEMBER 2002 30 SEPTEMBER 2003 % change
--------------------------------------------------------------------------------
Private clients 161.1 179.1 11.2
Institutional clients 128.9 125.9 -2.3
----- -----
Third parties 290.0 305.0 5.2
Internal clients 159.0 149.7 -5.8
----- -----
Total 449.0 454.7 1.3
Share of third parties 64.6% 67.1%
ASSETS UNDER MANAGEMENT BY ASSET CLASS
31 DECEMBER 2002
Equity Fixed income Real Estate Cash
34% 57% 6% 3%
30 SEPTEMBER 2003
Equity Fixed income Real Estate Cash
33% 55% 6% 6%
ASSETS UNDER MANAGEMENT BY EXECUTIVE CENTRE
in EUR x billion 31 DECEMBER 2002 30 SEPTEMBER 2003 % change
--------------------------------------------------------------------------------
EC Europe 235.1 244.0 3.8
EC Americas 176.6 170.9 -3.2
EC Asia/Pacific 37.3 39.8 6.7
---- ----
Total 449.0 454.7 1.3
Page 26 of 30
APPENDIX 8. CONSOLIDATED BALANCE SHEET ING VERZEKERINGEN N.V.
in EUR x million 31 DECEMBER 2002 30 SEPTEMBER 2003 % CHANGE
--------------------------------------------------------------------------------
Assets
Tangible fixed assets 382 336 -12.0
Participating interests 1,143 1,577 38.0
Investments 214,807 217,687 1.3
Cash 3,221 1,767 -45.1
Other assets 8,652 8,635 -0.2
Accrued assets 13,605 13,030 -4.2
------ ------
TOTAL 241,810 243,032 0.5
Equity and liabilities
Shareholders' equity 10,827 11,734 8.4
Third-party interests 1,163 1,297 11.5
Subordinated loans 2,727 2,678 -1.8
----- -----
Group equity 14,717 15,709 6.7
General provisions 2,197 2,037 -7.3
Insurance provisions 195,831 200,103 2.2
Other liabilities 27,355 24,196 -11.5
Accrued liabilities 1,710 987 -42.3
----- ---
TOTAL 241,810 243,032 0.5
Page 27 of 30
APPENDIX 9. CONSOLIDATED BALANCE SHEET ING BANK N.V.*
%
in EUR x million 31 DECEMBER 2002 30 SEPTEMBER 2003 CHANGE
--------------------------------------------------------------------------------------------
Assets
Cash 8,782 6,543 -25.5
Short-dated government paper 8,398 7,148 -14.9
Banks 45,682 59,671 30.6
Loans and advances 284,638 304,360 6.9
Interest-bearing securities 99,994 135,413 35.4
Shares 8,020 9,332 16.4
Other participating interests 1,845 1,948 5.6
Property and equipment 6,184 5,677 -8.2
Other assets 5,919 4,772 -19.4
Accrued assets 7,649 8,386 9.6
----- -----
TOTAL 477,111 543,250 13.9
Equity and liabilities
Banks 96,267 111,528 15.9
Funds entrusted 247,115 299,908 21.4
Debt securities 75,493 73,261 -3.0
Other liabilities 17,636 17,619 -0.1
Accrued liabilities 8,759 7,826 -10.7
General provisions 1,597 1,684 5.4
----- -----
446,867 511,826 14.5
Fund for general banking risks 1,233 1,278 3.6
Subordinated liabilities 13,175 14,076 6.8
Shareholders'equity 14,664 15,047 2.6
Third-party interests 744 567 -23.8
Capital and reserves of Stichting Regio Bank 428 456 6.5
--- ---
Group equity 15,836 16,070 1.5
Group capital base 30,244 31,424 3.9
------ ------
TOTAL 477,111 543,250 13.9
* The accounting principles applied in this balance sheet correspond with those
applied in ING Bank N.V.'s Annual Accounts 2002.
Page 28 of 30
APPENDIX 10. INFORMATION FOR SHAREHOLDERS
SHARES AND WARRANTS
The average number of shares used for the calculation of net profit per share
for the first nine months 2003, was 1,993.8 million (1,925.8 million for the
first nine months 2002). The number of (depositary receipts for) ordinary shares
of EUR 0.24 nominal value outstanding at the end of September 2003 was 2,091.4
million (including 27.5 million own shares to cover outstanding options for ING
personnel). The number of (depositary receipts for) preference shares of EUR
1.20 nominal value outstanding at the end of September 2003 was 87.1 million.
Until 1 January 2004, the dividend on these preference shares will amount to EUR
0.2405.
On 5 January 1998, 17.2 million ING Group warrants B were issued. With an
additional payment of the exercise price of EUR 49.92 one warrant B entitles the
holder to two ING Group depositary receipts up to 5 January 2008. The number of
warrants B outstanding at the end of September 2003 was 17.2 million.
In the first nine months 2003, the turnover of (depositary receipts for)
ordinary shares on the Euronext Amsterdam Stock Market was 2,296.2 million
(purchases and sales). The highest closing price was EUR 19.00, the lowest EUR
8.70; the closing price at the end of September 2003 was EUR 15.70.
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
ING Groep N.V. and ING Verzekeringen N.V. were downgraded by Standard & Poor's
from AA- to A+ with a stable outlook on 21 November 2002. Moody's downgraded ING
Groep N.V. and ING Verzekeringen N.V. from Aa2 to Aa3 on 8 April 2003. Both
Moody's and Standard & Poor's reconfirmed the rating (respectively Aa2 and AA-
with a stable outlook) for ING Bank N.V. in the reporting year.
IMPORTANT DATES IN 2004*:
o 19 February 2004: publication annual results 2003
o 15 March 2004: publication Annual Report 2003 on the Internet
o 24 March 2004: publication Annual Report 2003
o 27 April 2004: Annual General Meeting of Shareholders, Circustheater, The
Hague
o 13 May 2004: publication results first three months 2004
o 5 August 2004: publication results first six months 2004
o 4 November 2004: publication results first nine months 2004
o All dates shown are provisional.
Page 29 of 30
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized
ING Groep N.V.
(Registrant)
By: /s/H. van Barneveld
-------------------
H. van Barneveld
General Manager Corporate Control & Finance
By: /s/C.F. Drabbe
--------------
C.F. Drabbe
Assistant General Counsel
Dated: November 14, 2003
Page 30 of 30