ING Group Reports $3.54 Billion Nine Month Profit

2003 is looking more and more like a vintage year for European insurers, with the Netherlands ING Group reporting a nine month net profit of 3.012 billion euros ($3.54 billion).

The Amsterdam-based international integrated financial services company posted an 11 percent gain over the same period last year. It also reported operating net profit per share rose 7.3 percent to $1.75 (1.50 euros), while third quarter operating net profit was up 22.8 percent over third quarter 2002 to $1.102 billion euros ($944 million).

The results, however, failed to impress investors, as they were slightly below analysts’ forecasts, causing a 1.4- percent drop in the company’s shares on Friday.

ING’s announcement said “strong banking results and tight cost control contributed to the boost in profit. Total operating expenses were down 7.3 percent; organically, expenses were 1.3 percent lower than in the first nine months of 2002.” Insurance operating net profit was down 2.8 percent to $2.112 billion (1.810 billion euros), “due largely to the strong euro and lower one-off items.”

ING noted: “In the United States, the insurance business saw a 20 percent profit growth. Total assets under management grew 1.3 percent to U.S. $530.6 billion/EUR 454.7 billion. Provided that financial markets do not deteriorate substantially by year- end, the Executive Board expects operating net profit to increase by 10 to 15 percent compared to the full year 2002 operating net profit (excluding realized capital gains on shares).”

It also hihglighted the following “strategic developments during the quarter:
— ING Insurance’s capital base improved further to U.S. $18.3/ EUR 15.7 billion at the end of September, 178 percent of the legally required level.
— The tier-1 ratio of ING Bank was 7.44 percent on September 30 (year-end 2002: 7.31 percent).
— ING continued to optimize its portfolio to focus on core business and areas where it can achieve leading market positions, with an agreement to sell ING Aetna Life to Manulife Indonesia and an agreement with Baring Private Equity Partners for a management buyout.
— ING Direct continues to beat expectations, with 8.1 million clients as of September 30 (up from 5.0 million at year-end 2002) and funds entrusted up 72 percent to U.S. $110.6 billion/EUR 94.8 billion in the first nine months of 2003. ”

Ewald Kist, Chairman of the Executive Board, stated: “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. 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.”