Highlights
ING continued to transform its business profile in the region. Insurance Americas aims to be a leading provider of investment, life insurance and retirement services products across the Americas.
Insurance Americas continued its sharp focus on top and bottom-line growth by taking advantage of the product and distribution opportunities presented by the ageing of the US population and the increasing wealth in Latin America.
In 2007, ING’s leading market position in retirement services and variable annuities resulted in both business lines contributing to 46% of US earnings. US Retirement Services is a market leader in earnings, number of retirement plans and participants. In US Variable Annuity, strong sales of new products and good retention rates together with enhanced distribution fuelled solid asset growth. Variable Annuity assets now stand at almost USD 50 billion. The Asset Management and Insurance businesses in the US both experienced a very strong 2007, with strong growth in mutual fund and institutional asset management sales, and a more than 49% increase in new life insurance sales from the launch of new universal life and term life products.
The results were achieved despite challenging credit and equity markets, the market turbulence caused by the fallout from subprime mortgages, and tough competitive conditions overall.
In the second half of the year, ING announced the acquisition of Banco Santander’s pension businesses in Argentina, Chile, Colombia, Mexico and Uruguay for EUR 1.15 billion. These businesses, together with ING’s existing Latin American pension operations, make ING the second-largest pension fund manager in Latin America. With this significant investment, ING has become a major player in the pension and wealth management markets of Latin America. ING will have EUR 40 billion in pension assets under management in the region, more than double the pre-acquisition assets.
US Wealth Management moves from strength to strength
In the US, ING has achieved solid growth from strong positions in retirement services and variable annuity businesses and its broad distribution capacity.
ING is a top player in retirement services, providing defined contribution pension plans to small and medium-sized corporations, educational institutions, hospitals, and governments. While all retirement services segments are important, ING specifically focuses on the markets with the best growth potential: the small and medium size corporate 401(k) market and the education market, specifically kindergarten to 12th grade (K-12) teachers and staff.
In corporate markets, ING focuses on providing defined contribution retirement savings plans to companies with 500 or fewer employees, as this is the sector where most of the employment growth is likely to occur in the future. Also, this sector is under-penetrated with only 30% of employers in the sector having 401(k) retirement savings plans in place for employees.
The education market also offers ING excellent growth opportunities. Recent changes to regulations governing the marketing of retirement savings plans to teachers and other education staff, the first for almost 40 years, are likely to benefit ING. The new legislation, which becomes effective in late 2008, will put fiduciary responsibilities on educational institutions to ensure the retirement savings plans being offered to staff are the most competitive. It will mean that educational institutions are likely to require assistance in fulfilling their obligations to find the best plans, and the financial institutions that can help them with this will be the ones most likely to win business. ING has a strong reputation for retirement plan administration, infrastructure and capability.
Also, about 2.4 million teachers aged 50-plus will retire in the next 10 to 15 years and they will require products and advice to help them make the best use of their retirement savings. These teachers will be replaced with roughly the same number of younger teachers entering the education system who will need to set up retirement savings plans. These younger teachers are more likely to want access to investment products online, and ING is building the capability to serve both the aged 50+ retirees, and the 20-something new teachers.
Finally, auto-enrolment which was authorised by the Pension Protection Act of 2006 and which means employees are automatically put into a company pension scheme unless they opt out, will assist ING as well as other financial services companies in attracting new business.
US variable annuity sales remain strong
Variable annuity sales received a major boost, hitting record levels in the second half of 2007, following the launch of ING LifePay Plus in August. ING LifePay Plus – a minimum guaranteed withdrawal benefit – has proven very popular among investors and financial advisers. Variable annuities continued to be a major driver of sales and net flows for US Wealth Management in 2007.
ING US Wealth Management has very broad, diversified distribution channels with access to more than 200,000 independent points of distribution, including wirehouses, independent broker/dealers, banks, employees, and direct to customers.
US Insurance improves significantly
US Insurance also recorded sharply higher sales and profits led by Individual Life which successfully launched several new universal and term life products. As a consequence, premium increased as did policies written. In 2007, the US Retail Life business wrote 83,344 policies, up from 30,930 policies in 2006. Higher policy count drives down average cost per policy, improving value for customers, and profitability for ING.
The strength of the ING brand name in the US continued to be a strong selling point with both distributors and end-customers. Additional investments in the ING brand in the second half of 2007 supported the sales growth experienced across the US businesses.
ING Investment Management Americas
ING IM Americas maintained strong asset management sales figures and launched new funds despite market challenges, particularly in the second half of the year. ING IM continued to increase its focus on improving portfolio performance in order to better serve both prospective and existing clients.
ING IM recorded strong investment performance from alternative investments, including private equities, limited partnerships and hedge funds, and its Institutional Markets division – renamed ING Financial Products in early 2008 – generated significant new business.
On the retail side, ING IM America’s successful ‘Going Global’ campaign continued to attract significant inflows, with EUR 945 million in 2007. Several new funds expanded the international line-up including ING Asia Pacific Real Estate and ING European Real Estate, and two new closed-end funds, the ING Asia Pacific High Dividend Equity Income Fund and the ING International High Dividend Equity Income Fund. This brings total closed-end fund assets to EUR 3.3 billion. All new funds use ING’s varied investment capabilities and regional expertise to create customised global solutions for investors. For more details see the Asset management chapter.
ING vaults into a leading position in Latin America
Through the acquisition in Latin America, ING has picked up leading pension businesses in five countries. In Mexico, it boosted ING to the number-3 position in the industry, and ING also became the number-3 player in Chile. In addition, ING acquired top-5 positions in Argentina, Colombia and Uruguay. ING was already the number-one pension provider in Peru with slightly more than 35% market share. Altogether, ING is now the second largest pension fund manager in Latin America – a strong position from which to continue building its businesses.
The acquisition gives ING a sustainable, scaled platform in the Latin American region where attractive macroeconomic and demographic trends are driving increasing demand for pension, life insurance and personal financial products.
ING’s pension expertise in the region, combined with the solid local management from the acquired pension companies, will enable a smooth integration while maximising growth opportunities.
Awards for excellence
In early 2008, ING in the US won a Process Excellence Award for the start up of its Six Sigma programme by the International Quality & Productivity Centre. ING’s Six Sigma programme, designed to achieve greater operational efficiency, delivered USD 44 million in financial benefits from 100 projects completed during the year. These projects focused on capacity improvement, revenue generation and expense reduction.
Also in early 2008, ING in the US won a Catalyst award for initiatives taken to support and advance women in business. ING’s Beyond Diversity: Building One ING Culture programme has led to a unifying culture within the workplace and has led to an increased number of women managers at the most senior levels of the business.
