OREANDA-NEWS.  ING, EC agree on revised timelines for European and Japanese insurance divestments.
ING Life Japan to be divested in line with timelines for European Insurance/IM units
Timeline to divest more than 50% of European Insurance/IM units unchanged at end 2015
Timeline to divest 100% of European Insurance/IM businesses accelerated to end 2016
Preparations for the base case IPO of ING Insurance in 2014 are on track
Segment reporting for ING Life Japan units triggers EUR 0.6 bln pre-tax charge in 4Q13
ING announced today that it will expand the scope of the base case Initial Public Offering (IPO) of ING Insurance to include ING Life Japan. In that context, ING and the Dutch State have reached an agreement with the European Commission (EC) on a revised timeline for the divestment process. Preparations for an IPO of ING Insurance in 2014 are on track.

“After carefully exploring and evaluating the options available to us for the divestment of ING Life Japan, we have come to the conclusion that a standalone sale of this business is not feasible in a manner that meets the demands of our stakeholders. In that context, ING Life Japan will be included in the scope of the ING Insurance IPO,” said Ralph Hamers, CEO of ING Group.

As part of a previously announced restructuring agreement with the EC, ING planned to divest more than 50% of ING’s Asian insurance and investment management businesses by the end of 2013. ING successfully divested most of these businesses over the course of the past year. Under the revised timelines announced today, ING will divest ING Life Japan in line with the divestment timeline for ING’s European insurance and investment management activities. This means that the timeline to divest more than 50% of ING Life Japan has effectively been extended by two years to year-end 2015, which is also the unchanged timeline to divest more than 50% of ING’s European insurance and investment management businesses. As part of the revised agreement, ING will accelerate the timeline to complete the divestment of 100% of ING’s European insurance and investment management activities by two years to year-end 2016.

ING previously announced that ING Insurance will be the entity for the base case IPO of ING’s European insurance and investment management activities. ING Life Japan will now be included – together with the European insurance and investment management activities – in the scope of the IPO of ING Insurance, strengthening and diversifying the overall profile of the company.

“Today’s announcement provides further clarity on the planned IPO of ING Insurance which is preparing itself to be ready to go to the market in 2014,” added Ralph Hamers. “While we still have work ahead of us, I’m looking forward to completing the Group restructuring by end 2016 at the latest, and seeing our Bank and Insurance businesses pursue their own future success as standalone companies.”

ING’s European insurance and investment management businesses operate across Europe in both mature and growth markets. Together these businesses form a leading insurance and investment management company with a strong presence in more than 15 countries and a clear focus on delivering excellent customer service.

ING Life Japan is comprised of two parts: the operating business, predominantly Corporate Owned Life Insurance (COLI); and the Closed Block Variable Annuities (VA) business. The operating business is a segment-leading player with a strong distribution network of more than 5,000 registered agents. It has consistently produced strong sales and profitability, generating both capital and cash flow. The Closed Block VA business is also expected to contribute to the capital generation of ING Insurance. ING Life Japan stopped selling variable annuities in 2009, and a large part of the in-force portfolio consists of accumulation benefits products with a 10-year maturity. The guarantees on this portfolio are reinsured to ING Re in the Netherlands and approximately 90% of the policyholder obligations are expected to run off in 2019. Based on ING Group 3Q13 Results published today, the Japanese businesses account for approximately 20% of the combined pro-forma operating result of ING Insurance as the entity that is preparing for IPO in 2014.

In view of the expanded scope and in the context of the IPO preparations, ING Insurance is implementing a number of reporting changes to increase transparency of reporting and ensure consistency in the accounting of the different portfolios within the Japanese Closed Block VA.

As of the fourth quarter, ING Life Japan and the Japanese Closed Block VA guarantees reinsured to ING Re will no longer be classified as held for sale and discontinued operations, and ING Insurance will be adopting a new reporting segmentation to better align to the businesses it comprises and their governance. Within ING Insurance, the ING Life Japan business will be presented in two segments: Japan Life and Japan Closed Block VA. As of each segment the net insurance liability needs to be adequate at the 50% confidence level, an approximately EUR 0.6 billion P&L pre-tax charge is triggered in the fourth quarter of 2013 as a consequence of implementing the segmented reporting, to bring the reserve adequacy of the Japan Closed Block VA to the 50% mark.

In addition, ING is considering changing the accounting for death benefit guarantees within Japan Closed Block VA towards fair value accounting as from 1 January 2014, bringing the entire Japan business to fair value accounting. If implemented, this would result in a pre-tax charge to equity of approximately EUR 0.4 billion.

While these steps would reduce ING Insurance’s IFRS equity by approximately EUR 1.0 billion pre-tax (approximately EUR 0.7 billion after tax), they would not impact the regulatory capital of ING Life Japan or the economic capital of ING Re. Further details regarding the accounting implications of today 's announcement are available in the ING Group 3Q13 Quarterly Report published today.