ING Q3 net profit falls on US insurance charge
Wednesday, November 10, 2010
AMSTERDAM (AP) — ING NV, the bailed-out Dutch bank and insurer, Wednesday reported a fall in third quarter earnings after writing down the value of its U.S. insurance operations, and said it plans to spin off both its U.S. and European insurance arms with separate initial public stock offerings.
Net profit was 371 million ($510 million), down from 499 million in the same period a year ago, and included a 513 million write-down on the value of its U.S. insurance arm.
ING said its banking division enjoyed good margins during the quarter, borrowing money cheap and lending it dear, especially to retail clients. It also took fewer charges for bad loans and enjoyed better profits on investments.
ING said its “underlying profit” at banking — a nonstandard measure that strips out the effects of taxes and one-time profits or charges — was 1.51 billion, up from 250 million in the same period a year ago.
Insurance division operating profit rose to 473 million from 393 million thanks to better investment returns and higher fees, Chief Executive Jan Hommen said in a statement.
SNS Securities analyst Lemer Salah, who rates shares a Buy, said insurance earnings were not quite as good as expected, but banking earnings were in line with expectations.
Shares fell 0.3 percent to 7.942 in early Amsterdam trading.
ING plans to hive off its insurance arm and keep its banking operations as part of a deal with European regulators after having received state aid during the 2008 financial crisis. It still owes the Dutch state 10 billion.
It said Wednesday it is now looking at further dividing its insurance activities into two parts and floating them separately.
“We are going to prepare ourselves for a base case of two IPOs for our insurance businesses: one Europe-led IPO with solid cash-flow combined with strong growth positions in developing markets, and one separate US-focused IPO with a leading franchise in retirement services,” Hommen said in a statement.
He didn’t set a date for the IPOs.
However, preparations for the U.S. IPO will likely lead to two charges of around 1 billion each, ING said, each involving its U.S. variable annuities business.
In the fourth quarter ING will write down the value on annuities by 1 billion. Then in the first quarter of 2011, it is considering changes “to bring its accounting practices for its U.S. insurance business more into line with U.S. peers.” That would lead it to an additional write-down of 1 billion to 1.3 billion, ING said.
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