01

February 2007

Ron van Oijen: Unique sales force in South Korea 2006 results show strong earnings capacity Surfi ng the internet’s second wave

ING Shareholder 01 – February 2007 1 Dear reader,

This is the fi rst issue of ING Shareholder in 2007 planning to use the new wave of internet technol- This magazine is a quarterly publication and growth is the recurring theme throughout ogy. Building brand awareness is very important by ING Group for shareholders and others the magazine. It is clear that growth is much more in growing a business. The ING Renault Formula interested in ING. than short-term profi t. The 2006 annual results One sponsorship is a key part of ING’s strategy Subscribe to ING Shareholder show that ING achieved strong growth in underly- to develop its global brand. We take a look at Fax (+31) 411 65 21 25 ing profi t and that building on the momentum of the recent unveiling of the ING-branded Renault Mail P.O. Box 258, 5280 AG Boxtel profi table growth is the theme for 2007. racing car in Amsterdam, which marked the The Netherlands beginning of the three year sponsorship deal. This Internet: www.ing.com In an interview Michel Tilmant emphasises the created much media attention and was a taste of importance of striking the right balance between the publicity to come, when the fi rst Grand Prix Editorial offi ce growth and return. This issue is further investi- race begins in Melbourne, Australia in March. ING Group, Corporate Communications gated in the article on managing for value, which Investor Relations Department looks into one of the key tools ING is using to On a different note, as a shareholder you may be P.O. Box 810, 1000 AV Amsterdam ensure that growth also remains sustainable. interested to know that from 20 March this year, The Netherlands shareholders and holders of bearer depository Tel. (+31) 20 541 54 60 In a profi le on ING Life Korea, we look at how receipts will be able to submit questions about Fax (+31) 20 541 54 54 a business manages to achieve growth in a items on the agenda of the Shareholders’ meet- [email protected] highly concentrated insurance market. Among ing. ING wishes to give its shareholders the ISSN 1874–0472 other things, it is necessary to differentiate your opportunity for dialogue on the content of the Design business from the competition. In the case of ING agenda. To submit your questions, please go to VisualSpace Life Korea, this has largely been done through the www.ing.com/group. Questions pertaining the superior quality of its people and services. Shareholders’ meeting will be answered either on Photography the site or during the meeting itself. Cover photo by Eun Joong Joo (Ron van Oijen at Growth is also evident in the story about the Deoksugung Palace in Seoul). Other photos by Internet, which is back in the news again, bigger Aldwin Izarin/Hans van der Linde, Bernd Böhm, and better than before. We look at how business, Sung Kyun, Marco Sweering, Hadewych Veys particularly fi nancial businesses such as ING, are The editorial team Print Thieme Amsterdam

© 2007 ING Groep N.V.

All rights reserved. While every care was taken in the preparation of this magazine, no responsibility can be accepted for any inaccuracies.

2 ING Shareholder 01 – February 2007 ING Shareholder 01 – February 2007 Contents

Business & Markets

4 ING Life Korea: the story behind its success

8 Business News 6 Launch of the ING Renault F1 6 ING Capital Life Insurance in China 4 6 To Russia with life 6 ING goes carbon neutral

10 Beating the competition with local expertise

11 Striving for more value, the ING Managing-for-Value initiative

8 Strategy & Results

12 Strategy pays off in 2006, Michel Tilmant explains how

15 Financial results Q4 2006

Views & Analysis 15 19 Forecasting the future, and why it is so important to ING

20 Surfi ng, surfi ng! The internet is making news again

22 ING Trust Offi ce

23 Painting now! ING and fi gurative art

20

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ING Shareholder 01 – February 2007 3 4 ING Shareholder 01 – February 2007 Business & Markets

In addition to corporate advertising campaigns, ING Life Korea invited ING Life Korea over 50,000 customers to a pop concert as a token of appreciation of their support. The concert took place in Jamshil Olympic Main Stadium on Dynamic growth May 20, 2006. engine in Asia

The connection between Korea and the Netherlands goes back a long way. In 1653, Hendrik Hamel, a Dutch seaman, survived a shipwreck and became the fi rst Westerner to write extensively about South Korea, introducing the country to the outside world through detailed accounts of his stay. The relationship between the two countries has gone from strength to strength since then.

n a business level, ING Life Korea is one of ING’s fastest The model has not only driven our fast growth, but even brought growing business units and ranks top in terms of Value about fundamental changes in the insurance market landscape.” O of New Business (VNB). Its successful business model is also admired by the South Korean community at large, as the Tied-agent model company was recently ranked the number one foreign company Originally the business, like all its competitors, sold its life in South Korea by Korea’s leading business magazine, HanKyung insurance through independent agents, who might typically be Business Weekly. shop-owners or part-timers. The agents did not have suffi cient experience or knowledge, the role was not seen by people as a Since its establishment in 1989, ING Life Korea has overcome true ‘profession’ and turnover was high. a major domestic economic crisis and climbed from relatively humble beginnings to become the fourth biggest player on the New professionalism transforms industry South Korean life insurance market and the largest foreign insurer So in 1995, a major restructuring was carried out: the 1000 tied in terms of gross premium income. So what is the secret behind agent force was reduced to 200 and the company launched this success story? ING Life Korea themselves attribute it to their a new strategy. ING Life Korea’s agents must have a university new approach to selling life insurance, with the uncompromising degree and have received intensive on- and off-line training to quality of its tied agents. make them the most professional on the market. They were offered a unique commission scheme and they were re-branded “Our tied-agent network consists of professional, self-employed as ‘fi nancial consultants’ (FCs), with their role broadened from just fi nancial consultants” explains Ron van Oijen, CEO of ING Life selling single insurance products to providing a full fi nancial life Korea. “Their quality truly differentiates ING Life Korea from planning consultancy. traditional rivals, who rely heavily on non-professional part-timers.

ING Shareholder 01 – February 2007 5 Business & Markets

“Hiring people with the right qualifi cations is the key to meeting A well-diversifi ed product range the needs of Korean customers,” according to Jongwon Kim, “ING Life Korea has a well-built product portfolio,” says Ron sales director of ING Life Korea. “FCs are selected after a rigorous van Oijen. “Rather than selling one type of product, we provide recruitment process from candidates with a university education customers with a wide selection of products that can be adjusted and at least three years work experience. They then undergo to the different circumstances people fi nd themselves in during a comprehensive two-month training programme covering their lives, from getting married and sending their children to everything from basic insurance and product knowledge to university to retiring.” Life insurance and annuities are the basic products in fi nancial consulting, which cover the big two risks in life: premature death and outliving your savings. Of course, “ ING Life Korea is fi rmly customers can choose among a wide range of product options. established as a leading player Currently, ING Life Korea offers Critical Illness Whole Life, Variable Universal products, Term Life Insurance, variable products and in the bancassurance market” mutual funds to help customers meet their fi nancial needs. FCs advise customers how and what to choose.

practical sales skills and sophisticated fi nancial planning based on ING Life Korea is now fi rmly established as a leading player in the a customer’s lifecycle. Afterwards, they are also required to take bancassurance market. “As the market in South Korea is expected a series of training programmes to keep up with new fi nancial to continue to grow through deregulation, we plan to increase planning skills and products, which are keeping them far more sales volume in each partner bank by offering channel distin- competitive than their peers.” guished products as well as expanding our distribution network to more commercial banks,” explains Van Oijen. The commission scheme pays FCs a signifi cant lump sum against sales, which is then withdrawn on a pro rata basis should the Fast growth of direct channel customer later surrender their policy. The result is that our sales In 2005, the ING Life Direct Channel was launched and has force are motivated not only to make initial sales but to maintain grown quickly with new business premium income reaching a high retention rate through good customer after-care. This is EUR 2 million by December 2006. The ING Life Direct Channel vital, as success in the highly competitive insurance industry in sells ‘value for money’ and ‘easy to understand’ products through South Korea depends not only on products, but even more on the TV home-shopping channels and newspapers. service provided. “The channel provides Straight-Through-Service from product explanation to signing the contract with no face-to-face visits, As the fi nancial industry in South Korea converges and integrates, medical tests or lengthy paperwork. On the back of strong customers increasingly demand fi nancial planning that goes far revenue increases from the three major Korean TV home-shop- beyond the provision of an insurance plan. So the challenge for ping channels in particular, the direct channel is now looking to the FC network is to provide one-stop fi nancial consulting that still expand into savings products and products for children,” explains meets the diversifi ed demands of customers. Van Oijen.

Key fi gures South KoreaING in South Korea ING’s business units in South Korea

8 Real GDP growth rate 4% in 1970’s Very tight government- 1996 South Korea becomes 8 ING Life Korea 2005; estimate 2006 to 5.2% planned economic system member of OECD 8 ING Bank (Wholesale) (Source: The Economist Intel- 1985 South Korean government 1997 South Korean economic 8 ING Investment Management ligence Unit Limited 2007) gradually slackens control to en- crisis: government applies for Inter- 8 ING Real Estate 8 Population 47.9 million courage foreign investment national Monetary Fund relief loan 8 Joint ventures with Kookmin 8 Size 99,500 sq.km 1989 Nationale-Nederlanden 1999 Nationale-Nederlanden Bank: KB Life (49%) and KB Asset 8 Eleventh largest economy acquires Life of Georgia’s insur- activities in South Korea under new Management (20%) worldwide (Source: International ance activities in South Korea (at name: ING Life Korea Monetary Fund) that time Korean law allowed only 2002 ING/Kookmin Bank strategic 8 Seventh-largest insurance market American companies into alliance established in the world USD 83 billion the South Korean market) 2005 ING Real Estate Korea (total premium volume) in 2005 1991 NMB Postbank Seoul established (a 9.2% increase compared to Branch established 2006 ING Investment 2004) (Source: World Insurance in Management established 2005, Swiss Re)

6 ING Shareholder 01 – February 2007 Business & Markets

Performance of ING Life Korea in EUR million 2006 2005 Growth rate in % Value New Business 157 159 -1.3 Internal Rate of Return 33.9% 48.0% Annual Premium Equivalent 853 632 35.0 Underlying Profi t before tax 263 182 44.6

Figures per distribution channel in EUR million 2006 2005 Growth rate in % Total premium income 3,224 2,279 31.8 Market share 5.8% 4.7% Tied Agents Total no. of new business policy 357,812 336,010 6.5 Financial consultants 6,390 5,336 19.6 Branches 127 102 Sales via banks Total no. of new business policy 9,507 5,972 59.2 No. of partner banks 6 4 Sales via direct channel Total no. of new business policy 30,469 14,829 105.5

ING Life Korea has become widely recognized in Korea as a pioneer in the fi eld of compliance, establishing the fi rst compli- ance department in the insurance industry in 1999. In 2006, the company received an award from Korea’s Independent Commis- sion against Corruption.

Invaluable staff ING Life Korea knows the importance of recruiting and developing high potential talent. The company operates a variety of employee development programs, such as the Overseas Assignment Respected brand Program, initiated in 2006 to provide employees with overseas Brand awareness is another part of the success story. Unaided working opportunities. The programme runs at ING business units recall brand awareness of ING Life Korea grew from 4% in 2002 in Hong Kong, Australia, India, China, Singapore, the Netherlands to 26% in 2006, and aided recall stood at 88% by 2005. and the US.

Under the theme ‘A different life plan’, ING Life Korea has Going for more successfully positioned itself in customers’ minds as their fi nancial In the South Korean insurance market, a number of the top expert and as a global fi nancial brand. This has been underpinned players are losing market share; ING is doing the opposite. At by a range of arts and sports sponsorship programs, such as the ING Life Korea, profi t before tax has grown by more than 400% AFC Asian Cup – see picture above – with over a billion viewers since 2001. And in November 2006, ING Life Korea’s market share predicted for this year’s tournament, the popconcert (reverted to reached 5.8%, a one%-point increase from 2005. Perhaps even on page 4) and the musical The Lion King, as well as support for more impressive than the growth in market share has been ING local charity programmes, in particular children’s projects such as Life Korea’s own growth in terms of total premium income: 31.8% the Guus Hiddink Foundation which supports talented football over the previous year. ING Life Korea is a real success story. players.

ING Shareholder 01 – February 2007 7 Business News Public debut ING Renault F1 race car

A veritable horde of photo- to achieve this objective. Each year graphers, camera crews and at least 850 million people watch journalists gathered on 24 January the Formula One races live. The to witness the offi cial unveiling races are held in 17 countries, in 15 of the ING Renault F1 race car by of which ING is active. This is the Michel Tilmant, ING Renault F1 only global sporting event capable Team president Alain Dassas, ING of putting ING brand recognition in Renault F1 Team managing direc- the fast lane.” tor Flavio Briatore and team drivers Giancarlo Fisichella and Heikki Briatore considers a ‘blue chip’ Kovalainen. like ING an excellent fi t for Renault. “ING is an innovative and Renault has for some years now effi cient company with motivated been a leading Formula One team, employees, just like Renault. Both which is precisely why ING wanted work with dedication towards their to take on the team’s title sponsor- goal: becoming and remaining ship for the coming three years. the best.” The fi rst race will take “With this sponsorship, we want place in Melbourne, Australia on to put the name of ING clearly March 18. on the world map,” said Tilmant. “Formula One is the best platform i www.ing-renaultf1.com

ING’s customer popularity spreading across China

ING Capital Life Insurance ate in Henan, which has the largest Company was ranked third in a population (approximately 100 customer satisfaction survey of million) and the fi fth-largest GDP life-insurance companies operating of China’s 31 provinces and mu- in China. In this, fi rst-ever survey, nicipalities. In the fi rst half of 2007, the China Insurance Regulatory ING Capital Life will open a branch Committee (CIRC) interviewed in Henan’s capital, Zhengzhou. more than 15,000 policy holders Hans van der Noordaa, chairman across 25 cities on the company’s of ING Insurance Asia/Pacifi c and products, services and agents. Executive Board member of ING PingAn Life and AVIVA-COFCO Group, was “delighted to receive came fi rst and second, respectively. the approval so soon after the branch opening in Shangdong ING Capital Life Insurance is a joint and the set-up of two sales and venture of ING and the Beijing marketing offi ces as part of our Capital Group and is headquar- Shenyang licence.” tered in Dalian. There was more good news when the company Pending approval, ING Capital Life received a licence from CIRC to can now extend the services that extend operations into China’s are already being so well received Henan province. in China to help manage the fi nan- ING Capital Life will be the fi rst cial future of almost 250 million Sino-foreign joint venture to oper- customers across the country.

8 ING Shareholder 01 – February 2007 Business & Markets Business News To Russia with life

ING has made an important step The Russian life insurance market is in the years ahead. Its middle class on the road to starting a life insur- still in its infancy. The total volume is emerging rapidly. ance company in Russia by hand- of the market was estimated to be ing in its application for a business approximately USD 300 million in ING aims to sell a range of licence to the Russian authorities. 2006 in terms of gross premiums, savings and protection products. Depending on the reaction of the according to ING’s own statistics Distribution will be mainly through insurance regulator, ING hopes to and data from sources such as a network of tied agents located start business in the spring of this Swiss Re. Life insurance premiums initially in Moscow, St. Petersburg year. ING is a leading provider of as a percentage of GDP — a and other large cities. The Euro- life insurance and pensions in Cen- good indicator of the potential pean Bank for Reconstruction and tral Europe and has been actively of a life insurance market — are Development and the International monitoring developments in the currently very low at 0.03%. ING Finance Corporation (the private Russian insurance market since the sees positive growth prospects for sector arm of the World Bank late 1990s. ING already operates life insurance in Russia. The Russian Group) intend to each take a 10% a pension funds business in Russia economy has grown by more than participation in ING’s Russian life and is also active in leasing and 6% per year over the past six years; insurance operation. wholesale banking. above-average growth is expected

ING to become carbon neutral

ING aims for carbon neutrality in risks and opportunities involved 2007. Carbon neutrality means in climate change. ING plans that ING will bring its net CO2 to achieve carbon neutrality by emissions to zero at the end of signifi cantly expanding its current each year. energy programme. This entails Taking responsibility for the im- reducing ING’s overall energy use pact we have on the environment and buying more ‘green’ electric- is important to ING. We are not ity. Any CO2 emissions leftover by just talking about environmental year-end 2007 will be compen- protection; we are backing up our sated through reforestation. commitment with real action. ING already compensates all of its We have had an environmental global business travel by support- programme in place for years. ing the planting and rehabilitation In 2006, we reduced our overall of 300 hectares of degraded global CO2 emissions by 30% tropical rainforest in Malaysia. This compared to the year before. Now planting programme will now be ING is taking another signifi cant extended further. step. And although the impact of ING’s measures will be modest, it is a signal that we are willing to play our part in developing strate- gies to manage the increasing i www.ing.com

ING Shareholder 01 – February 2007 9 Business & Markets

Leveraging success through local knowledge

London, ING uses a network of local teams to provide country- The global appetite for mergers & specifi c expertise. As competition increases, ING’s local presence and deep knowledge of European markets are helping the team acquisitions and private-equity deals hits avoid costly mistakes. Leveraged fi nance can be a risky business because companies often take on relatively high levels of debt. dizzying heights. ING Wholesale Banking Local knowledge and expertise are used to mitigate risk. is using local expertise to beat out Chabrelie cites an instance recently where foreign banks were competing for a piece of a Dutch deal but ING purposely sat it out. competitors and to mitigate risk. “We were aware of imminent legislation that was likely to severely undermine the bid target’s profi ts,” he says. Acquisitions or recapi- talisations of publicly quoted companies by private equity groups, termed ‘public-to-privates’, are one of the hottest types of deals in the market today. The Telepizza and Waterpik deals are examples of public-to-privates which showcase ING’s expertise in this growing The competitive market of leveraged fi nance makes use of a broad market. range of debt products to maximise potential return to investors. ING, which enjoys a strong balance sheet, has become a competi- The Telepizza deal, in which ING was joint bookrunner with Royal tive player by offering debt capital, including syndicated loans, Bank of Scotland, highlights how the team is using its local knowl- bridge loans and high-yield bond fi nancing, to companies and edge to maximise value for clients and build trusted relationships. private equity clients. Just as important as a wide product range is “There is no unifi ed European takeover code for public-to-private ING’s ability to provide clients with local knowledge and expertise. deals so to have a team on the ground that understood the intrica- cies of Spanish law was a great advantage.” Chabrelie is particularly “Knowing your clients and developing a deep understanding proud of the USD 290-million acquisition by private-equity fi rms of their vision and goals are paramount to delivering a winning Carlyle and Zodiac of the US-based Water Pik Technologies under formula,” says Pierre Chabrelie, London-based global head of lever- the noses of fi erce US competition. ING was the lead arranger and aged fi nance and sponsor coverage. “We are focused on listening sole bookrunner in the takeover. to our clients and delivering fi nancing solutions that ideally fi t their business needs.” ING’s leveraged fi nance team has doubled its revenues in the past two years to close to EUR 200 million. Given the recent track record It has been a banner period of growth for the European leveraged of success, Chabrelie believes the business will continue to be an fi nance markets. Of the USD 700 billion of buyout deals carried attractive one. “Being proactive and continually originating ideas out between 2000 and 2004, USD 340 billion were invested in the are the keys to our future success,” he said. European Union, overtaking the US, where USD 330 billion was invested, according to McKinsey. While other banks operate from i www.ingwholesale.com

10 ING Shareholder 01 – February 2007 Business & Markets

Increasing the value of the business

Managing for Value is a cornerstone of ING’s strategy. But what exactly is it, most value is created. We formulated value targets as an integral why is it important and how does ING part of our medium-term plans and then set targets on these for our managers. We will roll out Managing for Value across all put it into practice? business units, but have chosen to start with those 35 business units that together account for 75% of ING’s economic capital.” Together with the management of the business units, Duyster and his team focus on how to link strategy to value creation and how to defi ne the key performance indicators so that they steer key “ING’s focus on creating value means that we are committed to functions in that business unit towards value. “We want managers generating an above average level of return for our shareholders to acquire detailed insight into the crucial drivers of value for their compared to our peers, thus justifying their investment,” says specifi c businesses, and then to manage those. Management often Hoyte Duyster, director of Strategy and Business Change with has a long-list of their value drivers; but these are now quantifi ed responsibility for the global implementation of the Managing for and prioritised for TSR impact, allowing management to focus Value initiative within ING. “This means that we need to under- on those few levers that will have the biggest impact. In this way, stand the long-term effects of our daily decisions on value, beyond Managing for Value becomes one continuous business process.” the immediate effect on profi t. Of course, standard measures of business performance, such as profi t margins and market shares, Focused action are important indicators; but they do not necessarily measure how There are large differences between different business units’ main much value is being created. Although making a profi t is important, levers. “Some business units have to focus on improving margins it should be related to the capital needed to generate that profi t, through more cross-selling, cost reductions and/or terminating as well as the sustainability of that profi t.” The market perspective structurally unprofi table relationships. Other business units have of value creation is refl ected in the metric Total Shareholder Return to focus more on growth through aggressive client acquisition, (TSR). “Our 3-year TSR performance has signifi cantly improved creating more effi cient distribution channels to reach more clients since 2004, and ranks us amongst the best in the industry”, says or improving their product development processes.” Duyster. “In Asia, we have a leading market position in the professional tied- agents network and a very effective sales force of tied agents. But Long-term measure of value are there changes that could further optimise value in a market that Why is value creation important? Duyster again: “By creating sus- has both declining margins and new entrants? How is our current tainable value, we can continuously expand our business; because sales force performing compared with the new and fast-growing we provide a good return for our shareholders, who provide the sales forces of our competitors? We found that there are new ways additional capital investments we need. In order to achieve this, we that we can enhance value creation, for example by developing put our capital to work where it creates an above average return.” new customer retention programmes and new training initiatives So how do we do this? “First, we take the level of capital usage into for our agents. We will continue to grow in this promising market, account when assessing our performance, by including the desired but we have now specifi ed our actions more precisely so that we return that investors expect on this capital as a cost. Any return can take more focused action.” above this level is ‘out-performance’ from the investor’s point of view. And we continuously strive to grow this out-performance. Why is the Managing for Value approach appreciated by the Secondly, we take the longer-term view. It is not just how well we market, shareholders and analysts? “One reason may be that ING do this year, even more important is how we set ourselves up for has decided to gain a deep understanding within our business units longer-term performance”. of all the levers on costs and returns that generate long-term value creation, and that we initiate programmes to pull those levers and Value drivers unleash this potential. Analysts appreciate the pragmatic approach “We started top-down at Group level by reviewing our portfolio of realising growth potential, and our shareholders reap the and defi ning mechanisms to allocate capital to those areas where benefi ts of our Managing-for-Value initiative.

ING Shareholder 01 – February 2007 11 12 ING Shareholder 01 – February 2007 Strategy & Results ‘ ING has a strong earnings capacity’

ING created value for shareholders in 2006 by focusing on profi table growth and execution of business fundamentals. CEO Michel Tilmant refl ects on the 2006 fi nancial results and the strategic direction going forward.

Are you satisfi ed with ING’s performance over 2006? On top of that, our growth engines – retirement services, ING I certainly am. Our underlying net profi t rose with 24.3% to Direct, and life insurance in developing markets – continued to EUR 7,750 million in 2006, demonstrating that the performance perform well. For long-term growth, we do not only expand in all our business lines remains strong. One of ING’s distinguish- existing businesses, we also invest in future organic growth ing features is our ability to generate capital in our mature opportunities, such as new life insurance operations in Bulgaria businesses and to reallocate it to the most value-adding areas and Russia. We thus continuously aim at further enlarging our within the company, including our growth engines. And that’s business franchise. what we did in 2006. We performed solidly across businesses and continued to invest in new initiatives that expand growth What do you mean by enlarging the business franchise? organically in the key markets in which we operate. What are the most striking examples in your view? Over the past few years, ING has undergone a signifi cant trans- What’s in there for ING’s shareholders? formation. I very much realise that this process is never fi nished Thanks to the strong achievements in 2006, ING continues to and that we can always do better. That’s why it is crucial that offer a solid increase in total shareholder return (TSR). Amongst we use the current growth momentum to enlarge our business our peer group of 20 global fi nancial organisations, we rank franchise. What I mean is that we attract more and increasingly second with a TSR of 109% over a three-year period since 2004. satisfi ed clients, launch new products and expand our distribu- This surpasses our fi nancial objective to offer our shareholders tion capacity. And we did just that in 2006. ING Direct added a higher total return than the average of our peers over the many new customers. In Central Europe, the number of product longer term. We are in a position to give our shareholders a good launches doubled. We continue to broaden the service offering to dividend: after three consecutive years with a 10%-increase, we our customers with innovative adaptations on existing products, now propose a 12% increase to EUR 1.32 per share. Our average such as the withdrawal benefi t products in the US, the annuity annual dividend yield is around 4% over the last years. This all business in Japan, and the new ‘budget’ mortgage at Postbank demonstrates the fact that ING has a strong earnings capacity on in the Netherlands. Moreover, we are expanding our distribution the basis of our well-diversifi ed business portfolio. capacity, for instance at Nationale-Nederlanden, making optimal use of direct channels and the bancassurance possibilities that ING Where is that earnings capacity most evident? offers. Take our retail banking businesses in the Netherlands, with healthy growth in savings and mortgages. In the Netherlands, Some analysts had concerns about a slowdown of the ING is now the largest internet bank with 2.7 million clients. growth engines, also due to increased competition. Are Also Wholesale Banking achieved good results in areas such the growth engines living up to their expectation? as structured fi nance and leasing. And ING Real Estate, which Yes, they certainly are. Our retirement services business in the US tops the global ranking of real estate investment managers, saw had a good year which is also refl ected in our market rankings. another year of strong growth, both in profi ts and assets under We maintained our number one position in the K-12 market management. as measured by sales and participants. We also maintained our

ING Shareholder 01 – February 2007 13 Strategy & Results

number two position in the small corporate market. The second priority is to support the growth momentum by And take ING Direct. It was able to increase profi ts in a very further enhancing the execution of our business fundamentals. challenging interest rate environment. The mortgage business We will do so by improving customer satisfaction, including tight- achieved break-even in 2006. And although there is increased ening up on compliance at all levels. We will keep tight control competition in some markets, ING Direct continues to attract over costs, and ensure risks are properly measured, managed and priced. Execution is an ongoing process. By improving every day, we want to drive our performance to the next level.

How will ING deal with the current interest rate environ- “ Growth can be achieved in any ment - fl at yield curves and low nominal rates? market as long as we put our The current interest rate environment is indeed challenging for us, but that goes for all our peers in the fi nancial sector. The fl at customers fi rst” yield curve puts pressure on the interest margin. We see that across our banking businesses. On the insurance side the picture is more mixed. The low interest rates have a positive infl uence on equity and real estate prices and thus on our investments. But this is mitigated by pressure in some countries on the yield of the fi xed-income portfolio. All in all, I believe that ING benefi ts from a many new customers. The life insurance business in developing natural offset in interest rate risk between banking and insurance. markets showed good sales. In Central Europe, our life and pen- This is one of the benefi ts of having a balanced set of businesses. sion fund business is getting stronger and stronger. So overall, our growth engines continued to be on solid footing. The most important question is how we adapt ourselves to the interest rate environment. We do that through changes in product Shifting to risk management, is the perception design and by reducing costs, to maintain profi tability and long- of the outside world in line with the achievements in term value creation. In Retail Banking, competition in mortgages this fi eld at ING? increased in the second half of 2006, putting pressure on margins. I believe we’re beginning to get the credits for that. We’re However, we deliberately decided not to sacrifi ce margins for constantly monitoring our risk levels and have reduced our market share, and we maintained pricing discipline and produc- risk profi le by lowering our exposure to equity and real-estate tion slowed somewhat. Then Postbank introduced a new ‘budget’ markets, and reducing leverage at the Group level. Our decisions mortgage, which is very competitive in the current interest rate in the Executive Board are guided by the so-called ‘risk dashboard’ environment. that presents a snapshot of our overall risk profi le. It includes the risks in all bank and insurance lines of business. It provides insights ING is known for its entrepreneurial spirit. How important into earnings at risk and capital at risk. We’re quite happy that is innovation in this respect? very recently Standard & Poor’s awarded our risk management Very important. Innovation is key in delivering growth and capabilities on the insurance side as “excellent”, which positions improving yourself to better service your clients. At the same time, ING as a forerunner in the industry. I strongly believe that innovation – and that goes for entrepre- We believe that the fact that we are involved in banking and insur- neurship too – are not dictated top-down. It has to come from ance, as well as asset management, has diversifi cation benefi ts. people in the business who know their market best. They should For instance lower potential earnings volatility and greater cost constantly challenge the borders of product and service possibili- synergies. Rating agencies are recognising that our ability to ties in the industry. And I must say I’m happy with the results so diversify risks can lead to lower economic capital requirements far. Postbank has introduced new products in the Netherlands, than if we were only a bank or an insurance company. showing strong sales results. Australia launched the OneCare product, a ‘package’ product combining different types of insur- Is there going to be a change in ING’s strategic priorities for ance which received a strong response from customers. ING Direct 2007? has expanded its product range with retail investment products I don’t see the need to change. We are satisfi ed with the progress and payment accounts in select countries. And in South Korea we made and will continue our strategic course. First by building on are using innovative direct distribution channels for our insurance the momentum of profi table growth. We will continue to analyse products, for example via television home shopping and cable TV. where we are creating value and where we need to deploy resources for improved growth and return. In those businesses So it is my fi rm belief that growth can be achieved in any market where returns have stabilised at satisfying levels, we want to put as long as we put our customers fi rst, know exactly what their more emphasis on growing our activities. On top of that, we will preferences are and how we can best serve them. This is how we continue to invest in promising new business opportunities, thus can meet our ambition which is to set the standard in helping our planting the seeds for future growth. customers manage their fi nancial future.

14 ING Shareholder 01 – February 2007 Financial fi gures 2nd quarter 2006 Results Q4, 2006 ING posts record results

On Thursday 15 February, ING presented its fourth-quarter 2006 results. Underlying net profi t in the fourth-quarter rose 37.4% to EUR 2,124 million, while underlying net profi t in full year 2006 went up by 24.3% to EUR 7,750 million. The strong profi t growth demonstrates the solid earnings capacity of ING’s portfolio of businesses. ING proposes to “raise the annual dividend by 12%, providing an attractive yield to our inves- tors while retaining EUR 4.8 billion to invest in the continued growth of our businesses”, as Tilmant stated. Looking forward he added that “… risk costs and non-life claims will trend gradually to more normalised levels, however we do not anticipate a signifi cant shift in the market environment over the coming period. We are confi dent that ING is well positioned through our portfolio of businesses to capture growth op- portunities and continue to create value for our shareholders.” For the last time, CFO Cees Maas explained the financial results during the press conference at ING House. Earnings analysis: fourth quarter Results were supported by growth in assets under supported by a lower effective tax rate of 11.5% ING posted record earnings in the fourth quarter, management in the life business and favourable in the fourth quarter due to tax-exempt income driven by a strong underlying performance and underwriting experience in non-life. At the bank- from equity investments, releases of tax provisions a lower tax rate. Underlying net profi t was up ing business, strong volume growth helped offset and a reduction of corporate income tax rates. 37.4% to EUR 2,124 million, and underlying prof- the impact of fl at yield curves, and the interest The low effective tax rate in the fourth quarter it before tax rose 16.6% to EUR 2,496 million. margin stabilised. Risk costs increased from brought the rate for the full year down to 18.8%, Growth was led by strong results from insurance. historic lows. Underlying net profi t growth was below the expected range of 20-25%.

Changes Executive Board ING Group

ING Group announced that of ING Group.Given the mans as chief risk offi cer, Cees Maas, vice-chairman increasing complexity and both as members of the ING and chief fi nancial offi cer importance of the fi nance Group Executive Board. of the Group, will retire and risk roles within ING, John Hele (1958, Canadian) from the Executive Board the Supervisory Board has is currently deputy chief as of the General Meeting decided to create both a fi nancial offi cer report- of Shareholders on 24 April chief fi nancial offi cer and ing to Cees Maas. Prior to John Hele Koos Timmermans 2007. Cees Maas joined chief risk offi cer position on assuming this role in 2006, the Executive Board of ING Executive Board level. The he was general manager joined ING in 2003. Koos also responsible for Opera- Group in 1992. He will con- Supervisory Board intends and chief insurance risk Timmermans (1960, Dutch) tional Risk Management. tinue to serve ING as an ad- to propose to the Annual offi cer as well as the Group is currently deputy chief Before joining ING he held visor to the Executive Board. Shareholders’ Meeting of actuary. He worked at risk offi cer. Before this ap- positions at IBM’s European The Supervisory Board has 24 April 2007 to appoint Merrill Lynch in New York as pointment he was general treasury in Ireland and at awarded him with the title John Hele as chief fi nancial investment banker and as a manager Corporate Market ABN Amro. He has worked of honorary vice-chairman offi cer and Koos Timmer- marketing executive. Hele Risk Management and was at ING since 1996.

ING Shareholder 01 – February 2007 15 Results Q4, 2006 Financial fi gures 2nd quarter 2006

tax (RAROC) at the banking businesses improved Underlying profi t contribution of business lines Q4* to 20.4% in 2006 from 19.1%. The internal rate of return (IRR) on new life insurance sales Insurance Asia/Pacific 6% Wholesale Banking 22% improved slightly to 13.3%. The value of new life business declined in the fourth quarter, due in Insurance Americas 22% part to a retroactive increase in the discount rates to refl ect higher interest rates.

Execution Improving the execution of the business fun- damentals remains a priority for ING, including Retail Banking 18% increasing effi ciency, cost control, customer satis- faction, risk and compliance. Operating expenses Insurance Europe 25% ING Direct 7% remained under control in the fourth quarter. The cost/income ratio of the banking operations improved by 10 basis points in the fourth quarter * excluding corporate line and by 1.5%-points on a full-year basis, despite EUR 164 million in additional compliance costs in 2006 and investments to grow at ING Real Growth in January 2007. The life insurance businesses Estate, ING Direct and the retail-banking activities ING’s three key growth engines continued to in developing markets showed strong sales with in developing markets. The project to outsource show strong business momentum in the fourth annualised premium equivalent (APE) up 23.5% parts of Operations & IT in the Benelux is on track quarter. ING Direct remained focused on expand- to EUR 530 million. Sales of US retirement services with all three major outsourcing agreements fi nal- ing its mortgage business in the current interest accumulation products rose 21.7% and variable ised in the fourth quarter. On the insurance side, rate environment. In the fourth quarter ING annuity sales were up 15.2% as the US business expenses to life premiums improved slightly to Direct added EUR 5.4 billion in new mortgages, continues to focus on meeting the needs of baby 13.26% from 13.28%, while expenses to assets bringing the total portfolio to EUR 69.0 billion. boomers as they reach retirement. under management improved to 0.75% from Funds entrusted showed a net outfl ow of EUR 0.4 0.82%. billion as ING Direct balanced growth with profi t- Returns ability, notably in the UK. In the US, ING Direct Margins remained strong as ING focuses on Insurance continued to expand its geographical footprint balancing growth and returns to maximise value Strong equity markets helped drive growth in with launches in Atlanta in November and Miami creation. The risk-adjusted return on capital after sales and assets at ING’s life insurance busi-

Dividend Premium income*

0 3 6 9 12 15 At the Annual General Meeting of Sharehold- ers on 24 April 2007, ING will propose a total 4Q 2006 dividend for 2006 of EUR 1.32 per (depositary 11.3 billion receipt for an) ordinary share, up 12% from EUR 22% 52% 26% 1.18 in 2005. Taking into account the interim 4Q 2005 dividend of EUR 0.59 made payable in August 11.7 billion 2006, the fi nal dividend will amount to EUR 23% 50% 27% 0.73 to be paid fully in cash. ING’s shares will be quoted ex-dividend as of 26 April 2007 and the Insurance Europe dividend will be made payable on May 3, 2007 Insurance Americas Insurance Asia/Pacific (Amsterdam).

*including inter-company eliminations

16 ING Shareholder 01 – February 2007 Financial fi gures 2ndResults quarter Q4, 2006 2006

Key fi gures ING Group million on a normalised basis as a decline in the In EUR million Quarterly results Netherlands more than offset strong production 4Q2006 4Q2005 %-change in Central & Rest of Europe. Underlying profi t before tax1 – Insurance Europe 641 561 14.3 Insurance Americas – Insurance Americas 539 424 27.1 Higher equity markets drove growth in assets – Insurance Asia/Pacifi c 140 112 25.0 under management and fee income at the US in- – Corporate Line Insurance 20 -75 surance businesses, while the non-life business in Underlying profi t before tax from Insurance 1,340 1,022 - 31.1 Latin America improved compared with the 2005, – Wholesale Banking 546 492 11.0 when results were impacted by hurricane claims – Retail Banking 441 506 -12.8 in Mexico. That lifted underlying profi t before tax – ING Direct 183 184 -0.5 from Insurance Americas by 27.1% to EUR 539 – Corporate Line Banking -14 -64 million. Premium income increased 7.8% exclud- Underlying profi t before tax from Banking 1,156 1,118 3.4 ing currency effects as all countries reported higher premiums, while operating expenses were Underlying profi t before tax 2,496 2,140 16.6 fl at. The value of new life business declined to Taxation 287 486 -40.9 EUR 19 million on a normalised basis due to regu- Profi t before minority interests 2,209 1,654 33.6 latory delays which extended the requirement to Minority interests 85 108 -21.3 hold non-economic regulatory reserves in the US Underlying net profi t 2,124 1,546 37.4 individual life business. Net gains/losses on divestments -23 18 Net profi t from divested units -2 Insurance Asia/Pacifi c Special items after tax 278 Higher sales in South Korea and strong growth of Net profi t (attributable to shareholders) 2,101 1,840 14.2 assets under management in Japan drove under- Earnings per share (in EUR) 0.98 0.85 15.3 lying profi t before tax from Insurance Asia/Pacifi c up 25.0% to EUR 140 million. Sales declined in Assets under management (end of period) 600,000 547,400 9.6 Japan, where the market has become increasingly Total staff (FTEs end of period) 119,801 116,614 2.7 competitive, leading to a 9.6% decline in life premium income for the region. Premium growth 1. Underlying profit before tax and underlying was 34.4% in South Korea, 28.8% in Australia & net profit are non-GAAP measures for profit New Zealand and 35.9% in Hong Kong. Operat- excluding divestments and special items. ing expenses were up 10.7%, refl ecting invest- ments to support the growth of the business. In Taiwan, ING strengthened reserves by EUR 52 million due to the continued low interest rate nesses, while the non-life business continued to Insurance Europe environment. The value of new business declined benefi t from favourable claims experience in most Favourable underwriting experience at the Dutch 11.1% to EUR 80 million on a normalised basis markets. Underlying profi t before tax from ING’s non-life business and strong growth in Central refl ecting lower sales in Japan and required regu- insurance businesses rose 31.1% to EUR 1,340 Europe drove underlying profi t before tax at latory pricing changes in South Korea in 2006. million. Results from life insurance grew 24.5%, Insurance Europe up 14.3% to EUR 641 million. while that from non-life insurance rose 50.0%. Premium income declined 4.9% refl ecting lower Banking Total premium income was down 3.7% to EUR group life premiums in the Netherlands, while life ING’s banking activities continued to show strong 11,265 million due to currency effects, while the premiums in Central & Rest of Europe and non- growth in savings and mortgages, which helped US, Central Europe and Asia excluding Japan life premiums in the Netherlands showed strong offset the impact of fl at yield curves. Operating showed strong growth. Operating expenses re- growth. Expenses were under control, despite in- expenses were under control, while risk costs mained under control, increasing 1.6%, refl ecting vestments to grow the business in Central Europe. increased from historical lows as releases dimin- a release of employee benefi t provisions in 2005 Total underlying operating expenses increased ish. Underlying profi t before tax rose 3.4% to as well as continued investments to grow the 10.9% including a software write-down in the EUR 1,156 million, driven by an 8.8% increase in businesses in Asia and Central Europe. Netherlands in the fourth quarter of 2006. The income, notably from ING Real Estate. Operat- value of new business was down 5.3% to EUR 71 ing expenses were up 4.0% on a recurring basis,

ING Shareholder 01 – February 2007 17 Results Q4, 2006

excluding additional compliance costs in 2006. The cost/income ratio improved by 10 basis points to 65.8% in the fourth quarter and declined to 63.6% on a full-year basis. At an annualised 11 basis points of average credit-risk-weighted assets, risk costs remain well below normalised levels and there is no indication of a deterioration in the quality of the credit portfolio. Contin- ued attention for capital allocation and pricing discipline helped push the after-tax RAROC up to 20.4% from 19.1%.

Wholesale Banking Strong growth in income, particularly at ING Real Estate drove underlying profi t before tax from Wholesale Banking up 11.0% to EUR 546 million. Income rose 15.3% driven by a 50.2% increase at ING Real Estate. Total underlying operating expenses were up 13.2%, including one-off com- pliance-related costs in 2006. Wholesale Banking ing expenses increased 9.5% including EUR 35 set the impact of fl at yield curves and investments recorded a net addition to the provision of loan million in additional compliance expenses in the to expand the geographical footprint and product losses of EUR 20 million after 7 quarters of net fourth quarter of 2006. Underlying income rose range. Underlying profi t before tax at ING Direct releases as releases from old provisions continue 3.2% driven by volume growth in savings and remained strong at EUR 183 million. ING Direct to diminish. The risk-adjusted return on capital mortgages and a capital gain in Belgium. The continued to focus on growing its mortgage after tax improved to 20.6% from 17.3%. residential mortgage portfolio in the Netherlands portfolio in the current interest rate environ- grew by EUR 1.6 billion, driven by the success of ment and production remained strong. Another Retail Banking Postbank’s ‘budget’ mortgage. Pricing discipline 587,000 new customers were added, supported Strong volume growth in savings and mortgages helped sustain high returns, with an after tax by the expansion of the US footprint (Chicago helped offset the impact of fl at yield curves at the RAROC of 32.5%. and Atlanta). Funds entrusted declined by Retail Banking activities. Underlying profi t before EUR 0.4 billion, driven mainly by transfers to off- tax declined 12.8% to EUR 441 million, refl ecting ING Direct balance sheet products and an outfl ow in the UK. higher one-off expenses. Total underlying operat- Continued commercial growth at ING Direct off- The after tax RAROC declined to 11.6%, partially due to higher taxes.

Assets under management Income banking operations Assets under Management increased by EUR 30.7 billion, or 5.4%, in the fourth quarter 012345 to EUR 600.0 billion at the end of 2006. All six 4Q 2006 business lines contributed to the growth. The 3.6 billion increase was driven by a sound net infl ow of 42% 41% 17% EUR 12.7 billion as well as EUR 20.6 billion from 4Q 2005 favourable stock market developments and 3.3 billion EUR 4.3 billion from acquisitions. Exchange rates 40% 43% 17% had a negative impact of EUR 6.9 billion. The growth was achieved mainly in the third-party Wholesale Banking assets which increased by EUR 25.8 billion to Retail Banking EUR 404.5 billion, accounting for 67% of total ING Direct assets under management.

18 ING Shareholder 01 – February 2007 Views & Analysis

Challenges in forecasting

Mark Cliffe is chief economist of ING Group. He shares with us his views on the ‘future’ and why the challenges in forecasting are so important to ING.

The economic environment has been kind to the fi nancial a greater burden on the forecaster’s judgement. Uncertainty is a markets in recent years: do you expect this to continue? fact of life; it’s how you deal with it that counts. The global economy has been benefi ting from some very positive structural changes in recent years: globalisation, market reform What does this mean for ING? and rapid technical progress. The combination of these factors Forecasting the future is essential to everything we do at ING. Our looks set to continue to improve effi ciency and propel growth mission statement says it all: “setting the standard in helping our for years to come. But there will inevitably be cyclical swings customers manage their fi nancial future”. To do that, we have to around this trend. For the past three years, we’ve been in a cyclical assess the prospective risks and returns in the fi nancial markets. upswing, initially led by the US and Asia, but more recently joined Our customers have to make decisions involving a view of the by Europe. This upswing is now looking a little tired as central future every day. Whether it’s saving, investing, borrowing, or banks around the world have raised interest rates in response to even insurance, choosing the right product ultimately depends rising infl ation, contributing to the sharp fl attening of the yield on making a judgement about the future. For example, to decide curve. Tighter monetary policy may lead to some downturn in between a fi xed or a variable mortgage, our customers need growth in the current year, but with infl ation falling back again, to assess the likelihood of rising long-term interest rates. For a this is unlikely to be severe. If anything, we face bigger risks from corporate treasurer to decide whether or not to hedge his dollar geo-political or fi nancial market shocks. After the sharp rises in exposure, he needs to be able to judge whether it is likely the dol- asset prices in recent years, the danger is that investors have left lar will continue to fall. In an uncertain world, customers cannot themselves little room for error. afford to “bet the farm” on a single view of the future; they have to weigh up the risks. So you think it’s getting harder to make reliable forecasts? There’s an old saying that “it is diffi cult to make predictions, That’s why ING’s economists and strategists have such an especially about the future”. I’m always wary of forecasters who important role in helping its staff and customers make those calls. try to take it a stage further by suggesting that “the outlook is This involves not just trying to predict ‘what’ will happen, but unusually uncertain”. But it is true that the accelerating pace of understanding ‘why’. If we can help our customers understand change poses new challenges for forecasters. It renders the data why things are happening, they will make more informed judge- and the historic relationships that we use less reliable, and puts ments about the risks that they face.

ING Shareholder 01 – February 2007 19 Views & Analysis

Business surfs the internet’s second wave

Asia Pacifi c chief executive offi cer The internet is back in the news again, Jacques Kemp. ING and many of its businesses have several internal bigger and better than before. And blogs. The interactive nature of blogs invites debate and is a way business is gearing up for a slice of the companies, particularly in mature A scene from ING’s markets operating in fi ercely proposed Second Life site action. competitive conditions can reach out to their customers, and indeed the general public. Corporate 2006 was the year the internet hit Web 2.0 technology such as blogs are largely seen as a means step further. All you have now the headlines again big time. Not corporate blogs, wikis, RSS feeds, of building a relationship with is people talking to each other, that it was ever completely out of and a relatively new phenomenon staff, customers stakeholders and none of who’s primary job is to the media spotlight, however it called virtual worlds. the community. They basically do this, but this accumulation of did seem the days of big head- enable these groups to read and little contributions then amounts line deals and the even more Blogs to respond in a direct way that to something that is interesting over-the-top feature stories about Blogs have been around for a few was not possible before. Many and new.” While blogs enable the internet’s unlimited potential years. They started out as people believe blogs show a company is companies to interact with their had well past. That was until last sharing thoughts and observations focused on customer/community customers and community in the year when Google announced it in online diaries, and have now communication and demonstrate written sense, a more intriguing had paid USD 1.65 billion for a morphed into the sharing of the company is web-savvy. feature of Web 2.0 technology photo/video sharing site YouTube videos, photos and almost any- goes one step further. and Time magazine awarded its thing else that can be uploaded Philip Evans, senior vice president coveted Person of the Year Award onto a website. Wikis are basi- of the Boston Consulting Group Second Life to all those who use the internet. cally online encyclopaedias where believes that blogs live and die on Second Life is one of many online The new internet wave or Web people post content on a subject the strengths and weaknesses of virtual worlds, where people can 2.0 as it has become commonly they know about. In the general the communicator. “My suspicion create their own fi ctional charac- known is diffi cult to defi ne. But blogsophere, it is estimated there is the colourful personality of the ters (avatars) and wonder around basically it revolves around are more than 52 million blog individual (writing the blog) virtual shops, rooms even cities or interactivity and user-gener- sites worldwide. In the business probably is 80% (of the blog’s countries. They can interact with ated content: people putting world, there are only a few by appeal) and the communications other avatars, purchase virtual information, photos, videos and comparison. However, this could technology is about 20%. The products and participate in events. music on websites and sharing soon change. important thing is what the blog- To its promoters, Second Life it with the world. This trend has ger is writing, it is not the fact that offers boundless possibilities for gained momentum in the past An online internet magazine, he or she is writing a blog. business. year through websites MySpace, Online Banking estimates that I think with all these technologies, YouTube and Wikipaedia. Time by 2008 most companies will it’s important not to get exces- Companies receive brand magazine described this phenom- not be without a corporate blog. sively carried away.”Evans believes exposure and can trial products enon as a ‘revolution’. “The new Currently, many blogs in business the real value in corporate blogs and services in the virtual world, Web is a very different thing. It’s are internal with employees and lies in what people are saying in gaining valuable feedback from a tool for bringing together the senior staff fi ling comments and response to the blog. avatars that can be applied in small contributions of millions of observations on matters that the real world. At present, the people and making them matter.” affect the company. There are also “If your job is communicating Second Life community is a very The magazine also said: “It’s about other types of blogs for external anyway, all that blogs and wikis small one indeed. Linden Lab, a the many wresting power from the use including those written by do is to provide you with some San Francisco-based company few and helping one another for executives such as CEOs, blogs improvement in terms of produc- that developed the concept and nothing and how that will not only about products and services and tivity, but is actually pretty minor technology for Second Life change the world, but also change those based on community issues. and not a revolution in business. estimates there are approximately the way the world changes.” ING currently has several external The really interesting thing is we three million registered users, and Although somewhat slower to blogs. One of these is My Cup of can see each other reacting. It’s this is growing by about 36% a catch on, businesses have begun Chá, (www.ingblogs.com/mycu- that audience effect that is new month. However, the number of to surf this ‘second wave’ through pofcha/) written by ING Insurance in the blog. “The Wiki goes one actual users at any point in time is

20 ING Shareholder 01 – February 2007 Views & Analysis

to showcase or fi netune, for through internet (tracking). It example, a particular marketing reduces phone calls and assists us campaign before it commences, to in converting as many prospects build image and brand awareness. to customers as possible. The While the focus is now very much internet very much helps us stay on the internet’s cutting edge, it true to our principles, to remain is relatively easy to overlook how transparent, simple and low cost.” existing internet technology can be used to grow businesses, and Security has always been an to make doing business easier.” important issue for people using the internet for fi nancial services ING is very much committed transactions. “We have always to using technology to provide put an enormous amount of products and services that meet effort into security. Customer the key demands of consumers identifi cation either initially or at today: simplicity and transparency. each return visit is a great point of Whether it be through online car attention for us,” Harryvan said. insurance at Nationale Neder- “ING Direct is fi nding that increas- still fairly low, and is estimated to To some extent Second Life is a landen, or through ING Australia’s ingly, more customers are coming be about 20,000. In the past 60 laboratory, where you can experi- eBusiness Program where to the bank via the internet.” days, more than one million users ment with stuff that you might at customers can access all their have logged in. Although small in some point port back to the real investment information and “When we look at how we are number, the promoters of Second world. If you are Nike and Reebok portfolios online, developing new spending our marketing budgets, Life say they are, nonetheless a there is a lot of stuff like that you internet initiatives in banking and more and more is going to the very infl uential group of people. can do. Even the car companies insurance is a priority. internet. We are generating more The median age is 32 and 75% of are putting designs into Second customers not through the classic the users are content buyers and Life to see how avatars manipulate ING Direct newspaper advertising, (telling 25% are content sellers. About designs in order to see whether One major example of this is ING people to go to ING Direct’s USD 625,000 is spent every day in they can gain insight into con- Direct. Its phenomenal success internet site), but through website Second Life. sumer preferences that they can has been built on savvy use of the ads and pop ups. Many people are According to Philip Evans, Second apply in the real world.” internet. Executive Board member coming through there. It’s quite Life is most effective for compa- for ING Direct, Dick Harryvan says targeted marketing. The internet nies in terms of public relations ING is considering a Second Life internet technology has enabled provides us with increasing and as a forum to showcase exist- presence following a successful the company to make complex numbers of customers and is ing products and trial new ones. pilot project conducted last year. banking matters simple and con- very economical.” Going forward, “Quite a number of companies Director Retail Venturing Wichert venient. “For complex products, ING Direct plans to gradually have done things (in Second Life) van Engelen said he believed like mortgages, the internet is introduce more product basically to be able to talk about Second Life holds a lot of potential very helpful to us. We are able categories. The internet will be a them to the outside world, and for a global fi nancial services to simplify and automate highly big part of this. primarily that makes good sense. company like ING, keen to build complex processes. For example, Essentially think of it as PR, rather its brand and to develop new mar- people can monitor the status of than an extension of the business. kets. “It gives businesses a chance the mortgage application process i www.ingblogs.com/mycupofcha/

What does it all mean by people uploading information to the Wikipedia website Blog: a website on which regular written entries (thoughts/observa- RSS feeds: a special programme tions/comments) are made, usually for reading and storing news/infor- in reverse chronological order mation gathered from various websites Wiki: a website on any set subject, where people can upload informa- Virtual Worlds: a computer-based tion and make comments on exist- world where people can interact ing information with one another

Wikipedia: the best known Second Life: just one type of virtual ING Direct café, example of a Wiki. It is an online world. Established by a Californian- Barcelona encyclopaedia put together entirely based company Linden Labs

ING Shareholder 01 – February 2007 21 Column

‘Silent’ majority speak out!

At the end of last year, Ton Risseeuw retired on votes for the ‘silent’ holders of depositary receipt instructions we have received, consistency of reaching the age limit of 70 as stipulated in the – those not present at the meeting and who have ING’s policy regarding the agenda items to be Constitution of the ING Trust Offi ce and I have also not used the opportunity to vote by proxy. voted on, voting in previous AGMs, reports of taken up the chairman’s gavel. Risseeuw was a Depositary receipts are used to prevent a small, organisations who advise on remote voting and member of Board of the ING Trust Offi ce for fi ve chance, minority of shareholders forming a major- the discussions during the AGM itself. years, the last two as chairman. I have been a ity at a meeting as a result of others’ absence, member of the Board since August 2001 and was and taking a decision purely to serve their own We are also guided by recent developments, previously chairman of the Executive Board of the such as new legislation and the Frijns Committee. Hollandsche Beton Groep NV (HBG). The Board has been informed in detail on ‘proxy “ We will continue to moti- solicitation’ at ING. People entitled to vote are The Board is very grateful to Mr Risseeuw for all vate shareholders and actively approached in such a process and asked if his work. In recent years, certainly, the Trust Offi ce they intend to vote and reminded of the opportu- has been operating in a climate of increasing depositary receipt holders nities available. The Trust Offi ce promotes this, as change and criticism regarding the issue of the to use their voting rights” proxy solicitation will contribute to reaching the depositary receipts – a subject that continues to 35% minimum turnout. be a focal point of interest. Risseeuw put much energy into leading the Trust Offi ce and went interests. As a Board, we represent the interests of The Board has consisted of four members since to great trouble to persuade shareholders and all shareholders and depositary-receipt holders as Risseeuw’s resignation. We propose to appoint holders of depositary receipt to vote in person or well as the interests of ING and its stakeholders. Mr C.J. van den Driest to the Board. As required by proxy. In this connection, the introduction in Our role will no longer be relevant if more holders by the Constitution of the Trust Offi ce, this will 2005 of electronic voting by the internet, allow- of depositary receipt vote. Abandoning the issue be announced in a national newspaper and in the ing investors to submit their voting paper elec- of depositary receipts will not be considered Amsterdam Stock Exchange Offi cial List. Van den tronically, has been referred to in the past. There unless the turnout in three successive years is at Driest is a member of several supervisory boards is further information on this on the site of the least 35% of the votes which could be cast on the and former chairman of the Executive Board of Shareholder’s Communication Channel (www. ordinary shares (excluding the preference shares). Koninklijke Vopak N.V. Please see our website for communicatiekanaal.nl). An important develop- However, I would point out once again that ING the profi le of the current Board members. ment is that legislation on electronic communica- cannot abandon depositary receipts tion (Wet elektronische communicatiemiddelen) unilaterally nor will the Trust Offi ce do it without I look forward to meeting you at the came into effect on 1 January 2007. This makes ING. Turnout was, once again, higher last year Shareholders’ Meeting on 24 April. Whether it possible to set the Record Date 30 days rather than the year before (2006: 28%; 2005: 26%, you vote in person at the meeting, by a voting than 7 days before the Annual General Meeting excluding preference shares), but we are not instruction to the Trust Offi ce or via the of Shareholders (AGM) and allows shareholders there yet. We cordially invite you to exercise your Shareholder’s Communication Channel, it is to participate in the AGM and to cast their votes voting rights at the next annual general meeting really important that you vote! by electronic communication. of ING (24 April 2007). The notice of meeting will be available on the ING Group website (www.ing. Jan Veraart In due course, this could be a major boost to com) from 20 March. Chairman of the ING Trust Offi ce increased participation by depositary-receipt holders in the decision-making process during We do our best to fi nd out what is important shareholders’ meetings. As a Board, we will to you, for example, from your questions and i The next column will be published in May 2007. continue to try and motivate shareholders and comments at the AGM and, of course, via our If you have any questions or comments in the depositary receipt holders to actually use their website. We consider many factors when meantime, please go to our website voting rights. At the AGM, the Trust Offi ce only deciding how to vote: the nature of the voting www.stichtingingaandelen.nl

22 ING Shareholder 01 – February 2007 ING Gallery

ING is main sponsor of exhibition in Kunsthal Rotterdam The human form: focus of Painting Now!

Wilhelm Sasnal (1972) Michael Raedecker (1963) Ksiežyc / Moon, 2000 Untitled (What is my charisma), 1996 oil on canvas Acrylics and thread on canvas 60 x 80 cm 65 x 55 cm

It’s contemporary art in the most popular themes in Western art: the 20,000 items, the vast majority It is consistent with the contempo- literal sense of the phrase: until 6 human forms’. of which are of museum calibre. rary fi gurative Dutch art theme but May, 2007, the Kunsthal in Rot- In 2001 ING sponsored ‘Dutch also dovetails perfectly with current terdam has an exhibition of 21st The works of recognised masters Realists since 1950’, also at the developments in the English art century paintings that focus on the and younger painters hang side Kunsthal in Rotterdam. market. Like all works in the human fi gure. The 80 featured art- by side in this unique exhibition, ING Collection, the painting is on ists originate from many different which was previously to be seen Over the Moon show in one of the offi ces of the countries and span several genera- in Munich’s Kunsthalle and later One of the works exhibited is company. In this case at the head- tions. Together they represent the moves on to Vienna. The Kunsthal Wilhelm Sasnal’s 2000 painting offi ce in Amsterdam. cream of international fi gurative exhibition has been enhanced ‘Moon’(see photo) from the ING art and include the likes of Lucian with Dutch works that give an Collection Poland. In 2006 this After fashion design at the Rietveld Freud, Alex Katz and Wilhelm insight into the current art scene 34-year-old Polish artist won, for Academy in Amsterdam, Raedecker Sasnal, as well as top Dutch artists in Holland. A full-colour catalogue his entire oeuvre, the biennial Vin- studied Fine Art, initially at the such as Marlene Dumas, Philip accompanies the exhibition. cent van Gogh prize for contempo- Rijksacademie voor Beeldende Kun- Akkerman, Co Westerik and rary art. This prestigious prize was sten (Royal Academy for Fine Art) Michael Raedecker. ING Group is Figurative art inaugurated in the year 2000 and is in Amsterdam and then Goldsmiths main sponsor of this exhibition to The theme of Painting Now! fi ts awarded to artists under 40. College, London. He recently won which it has loaned six works from perfectly with ING’s own collec- the John Moores prize, the very its own collection. tion and explains why ING was New addition to ING Collection prestigious prize for contemporary delighted to sponsor the exhibition. The latest addition to the ING Col- painting in the UK. In 2000 he The Kunsthal exhibition provides a The guiding principle of the lection is a work by the 43-year-old was nominated for Britain’s best- snapshot of current international ING Collection acquisitions policy Dutch artist, Michael Raedecker. known Fine Art award, the Turner paintings, with which the organis- is modern Dutch fi gurative art. The untitled painting (see photo) Prize. Raedecker lives and works in ers hope to create ‘a dialogue It’s now almost thirty years since from 1996 was made with paint London. between different generations of ING started building its collection, and thread, and is a valuable addi- artists through one of the most which currently comprises over tion to the ING Collection Belgium. i www.kunsthal.nl

ING Shareholder 01 – February 2007 23 Key facts and dates

Total return index Key dates in 2007 250 Monday, 23 April 2007 ING share quotation ex fi nal dividend 2006 (NYSE)

200 Tuesday, 24 April 2007, 10:30 a.m. Annual general meeting of shareholders

150 Wednesday, 25 April 2007 Record date (NYSE)

100 Thursday, 26 April 2007 ING share quotation ex fi nal dividend 2006 (Euronext) 50 Thursday, 3 May 2007 Payment date fi nal dividend 2006 (Euronext)

0 Thursday, 10 May 2007 Payment date fi nal dividend 2006 (NYSE) 01-01-2004 2005 2006 31-12-2006 Wednesday, 16 May 2007, 7:30 a.m. ING Depositary Receipts Publication results Q1 2007 MSCI World Insurance Wednesday, 8 August 2007 MSCI World Banks Source: Thomson Financial Datastream Record date (NYSE) Wednesday, 8 August 2007, 7:30 a.m. Global fi nancials top 20 (based on market value in EUR billion) Publication results Q2 2007 Thursday, 9 August 2007 1 Citigroup Inc 210.1 ING share quotation ex interim dividend 2007 2 Bank Of America Corp 184.6 (Euronext and NYSE) 3 HSBC Holdings 160.2 Thursday, 16 August 2007 4 Amer Intl Group 142.0 Payment date interim dividend 2007 (Euronext) 5 Jpm Chase 129.1 Thursday, 23 August 2007 6 Mitsubishi UFJ Financial 101.8 Payment date interim dividend 2007 (NYSE) 7 UBS 96.6 Wednesday, 7 November 2007, 7:30 a.m. 8 Royal Bank Scotland 94.8 Publication results Q3 2007 9 Wells Fargo 91.8 Wednesday, 20 February 2008, 7:30 a.m. 10 Banco Santander 88.3 Publication results Q4 2007 11 Wachovia Corp 83.6 Thursday, 24 April 2008, 10:30 a.m. 12 BNP Paribas 76.9 Annual general meeting of shareholders 13 ING 74.6 Friday, 25 April 2008 14 Barclays 71.6 Record date (NYSE) 15 Unicredito 69.6 Monday, 28 April 2008 16 Allianz 67.2 ING share quotation ex fi nal dividend 2007 (Euronext 17 Morgan Stanley Dean Witter 66.5 and NYSE) 18 Goldman Sachs 65.9 Monday, 5 May 2008 19 BBVA 64.9 Payment date fi nal dividend 2007 (Euronext) 20 Mizuho Financial Group 64.5 Source: MSCI, Bloomberg, 29 December 2006 Monday, 12 May 2008 Payment date fi nal dividend 2007 (NYSE) Annual General Meeting of Annual Report 2006 and Annual (All dates are provisional) Shareholders Review 2006

This year the Annual General Meeting of The Annual Report 2006 and Annual Review Disclaimer ING Group’s 2006 Annual Accounts will be prepared in accordance Shareholders (AGM) will again take place in 2006 will be available on the ING Group with International Financial Reporting Standards as adopted by the Amsterdam, on 24 April 2007. The venue will internet site www.ing.com as of 20 March European Union (‘IFRS-EU’). In preparing this financial information, the same accounting principles are applied as in the 2005 ING be ‘The Factory’, which is located in the eastern 2007, the Dutch versions as of 27 March 2007. Group Annual Accounts. All figures in this document are unaudited. Certain of the statements contained in this release are statements harbour area of Amsterdam. The address is Copies of the printed versions can be obtained of future expectations and other forward-looking statements. These expectations are based on management’s current views and Czaar Peterstraat 213. The AGM will start at free of charge at ING Group as of 28 March assumptions and involve known and unknown risks and uncertain- 10.30 a.m. 2007. The Dutch printed versions are available ties. Actual results, performance or events may differ materially from those in such statements due to, among other things, (i) as of 4 April 2007. general economic conditions, in particular economic conditions in ING’s core markets, (ii) performance of financial markets, including Furthermore, the 2006 ING Corporate Respon- developing markets, (iii) the frequency and severity of insured loss sibility Report will be available on the website of events, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) interest rate levels, (vii) currency exchange rates, (viii) ING, www.ing.com/group, as of 10 April 2007. general competitive factors, (ix) changes in laws and regulations, and (x) changes in the policies of governments and/or regulatory authorities. ING assumes no obligation to update any forward-look- ing information contained in this document.

24 ING Shareholder 01 – February 2007