ING Groep's CEO Discusses Q4 2011 Results - Earnings Call Transcript

ING Groep N.V. (

ING

)

Q4 2011 Earnings Conference Call

February 9, 2012 3:00 AM ET

Executives

Jan Hommen – Chairman and CEO

Mike Smith – CEO, U.S. Annuity Business

Patrick Flynn – CFO

Matt Rider – CFO, Insurance EurAsia Business

Analysts

Andrew Coombs – Citigroup

Farquhar Murray – Autonomous Research

Farooq Hanif – Morgan Stanley

Richard Burden – Credit Suisse

Lemer Salah – SNS Securities

William Hawkins – KBW

Francois Boissin – Exane BNP Paribas

Marcus Rivaldi – Morgan Stanley

Hans Pluijgers – CA Cheuvreux

Tony Silverman – Standard and Poor's Equity Research

Francesca Tondi [ph] – Morgan Stanley

Kiri Vijayarajah – Barclays Capital

Presentation

Operator

Compare to:
Previous Statements by ING
» ING Groep's CEO Hosts Insurance U.S. Closed Block VA Assumption - Conference Call Transcript
» ING Groep's CEO Discusses Q3 2011 Results - Earnings Call Transcript
» ING's CEO Discusses Q2 2011 Results - Earnings Call Transcript
» ING Group CEO Discusses Q1 2011 Results - Earnings Call Transcript

Thank you for holding, ladies and gentlemen. Good morning. This is Carol welcoming you to the ING’s Q4 2011 conference call. Before handing this conference call over to Jan Hommen, Chief Executive Officer of ING Group, let me first say that today’s comments may include forward-looking statements such as statements regarding future developments in our business, expectations for our future financial performance and any statement not involving a historical fact.

Actual results may differ materially from those projected in any forward-looking statements. A discussion of factors that may cause actual results to differ from those and any forward-looking statements is contained in our public filings, including our most recent annual report on Form 20-F filed with the United States Securities and Exchange Commission and our earnings press release as posted on our website today. Furthermore, nothing in today’s comments constitutes an offer to sell or a solicitation of an offer to buy any securities.

Good morning, Jan. Over to you, sir.

Jan Hommen

Good morning. Thank you. Welcome, everyone, to the ING 2011 results conference. The first quarter was a challenging period. We have very volatile markets and we saw a deepening of the crisis in Europe. And in this uncertain environment, our first priorities were to protect our capital and to make sure that we further de-risk the organization.

The impact of hedging and de-risking and further impairments on our Greek government bonds took a toll of the results of Q4. Nonetheless, we were able to end the year with underlying profits of €3.675 billion, which was up 15% compared to 2010. I planned to talk you through the presentation.

At the end we have Mike Smith, our CEO of the US Annuity business here. He will give you some more detail on the assumption of that, that we pre-announced in December. And the last, Patrick Flynn, our CFO; Wilfred Nagel, our CRO; and Matt Rider, the CFO of the Insurance EurAsia business, are here. They’re here to visit us, and we are available to answer your questions.

So let’s begin this slide number two. The underlying profits, up 15% from a year earlier, but Q4, they had a loss of €516 million which reflected the lower results of the bank and the loss of insurance. As I said earlier, the uncertain environment that we felt our first priority had to be to put our capital and to further de-risk the – reduce the risk of the organization. And I think that’s where we have paid our – given our highest priority to. The results of the bank in Q4 underlying pre-tax came in at €793 million and that included impairment charges of €300 million and €109 million losses related to de-risking our positions.

Insurance had a loss of €1.348 billion in Q4 and mainly driven by the charge of €1.1 billion that we took in the US Closed Block VA business. Also, we had losses on hedges; hedges that were there to protect our capital position, in particular, regulatory capital. Plus we have impairments as well as some gains as a result of de-risking exercises.

When I take it altogether, then I see that operating results in insurance increased by 20.4% from a year earlier to €478 million and it was also supported by a higher investment spread and very strong cost control.

On slide number three, you see that the 2011 pre-tax result on the bank was down from last year, but it was entirely due to impairments on Greek government bonds and losses related to de-risking. By the way, 2010 included some gains on the sale of two Asian equity stakes. Excluding these items, the full-year pre-tax result was slightly higher even than last year.

The pre-tax result of insurance improved this year compared to last year and that was despite the impairments we took on Greek government bonds and the charge of the US Closed Block VA assumption changes. Operating results improved by 41.5% showing the results of the plans that we initiated in 2009 to further improve our performance.

As a group, we had an underlying profit, net profit of €3.675 billion and on a net basis, we even had a net basis of €5.766 million, which was double than it was last year. Slide number four, we have specifically put in to help you issue analysis of the numbers, because a lot of noise in the numbers.

This makes it easier for you to compare and you can see quickly here the actions that we have taken to de-risk the balance sheet, the priority we have given to protecting our capital, risk-hedging, and the impairments we have taken on the Greek government bonds. And there were a number of other one-offs; of course, notably, the VA Block that we were announcing. So, if you compare all this, then you see that the Group underlying results before tax declined by 8% compared with the previous quarter; obviously, the quota [ph] in 2010.

Slide number five, we took the charges of €199 million on impairments of Greek government bonds. So we have written them now down by almost 80%. You can see that we further reduced our exposure to countries like Greece, Italy, Ireland, Portugal and Spain by €1.8 billion in Q4.

Slide number six, capital ratio, the core tier 1 remained stable at 9.6%, even though we had an increase of escalated assets of about €10 billion as a result of the introduction of Basel II in the half. Solvency I ratio for insurance and RBC ratio for the US remained stable as well in Q4 despite the decline that we saw in interest rates and the market volatility that we witnessed in Q4. So that shows that the capital protection hedges that we put on in order to protect the regulatory capital really were effective.

On page seven, you see the summary of the progress we have made on the restructuring with the EC. We had hoped that we could have known today the result of the decision by the Fed on ING Direct that we understand that they’ll be coming now on Monday, February 13. And we completed the Latin. We have done a lot of work in legal separation and capital planning.

Read the rest of this transcript for free on seekingalpha.com