ING says to set aside millions for US insurance contracts
Dutch banker ING said on Wednesday it was setting aside a fourth-quarter provision of 900 million to 1.1 billion euros to cover commitments on US-based annuity products.
The Amsterdam-based group said the move was necessary after a review of its US-based Insurance US Closed Block Variable Annuity business showed "current US policyholder behaviour... diverges from earlier assumptions made by ING."
"At the moment, these products are loss-making products," company spokesman Frans Middendorf told AFP, saying ING stopped selling them in 2009.
But he added: "These insurance products provide for a minimum return, which we must honour."
There were about 500,000 contracts in the portfolio, with a total value of $45 billion (33 billion euros), Middendorf said.
The insurance product is known as a variable annuity which allowed investors from benefitting from a rising market, while being assured of a minimum return on investment.
It needed large reserves to ensure that an insurer was able to meet its obligations in the event of a market downturn.
The Dutch group has marketed these contracts mainly between 2003 and 2009.
After its review, ING made the adjustment which it said "bring the assumptions more in line with US policyholder experience and reflect to a much larger degree the market volatility of recent years."
The latest step was also part of a larger effort to turn ING's US-based insurance subsidiary into a standalone business in future, ING's chief executive Jan Hommen said in a press release.
The Dutch group said it continued to lay the groundwork for two initial public offerings (IPOs) of its insurance and investment business -- one in the United States, and another based in Europe and Asia.
At the release of its third quarter results in early November, ING announced it was slashing 2,000 jobs in the Netherlands to cut costs.
© 2011 AFP