A major Dutch insurer will be taking a charge of as much of $1.1 billion against fourth quarter financial results.
ING Group, N.V., Amsterdam, Netherlands, announced today an estimated $1.1 billion (EUR $0.9 billion) earnings charge against the fourth quarter results of its U.S. closed variable annuity block of business. The adjustment includes a charge to “restore the reserve adequacy to the 50% confidence level for the US Closed Block VA in line with ING’s IFRS-based accounting policy,” the company noted in a press statement.
ING adds that it terminated the sale these VA policies in 2009. Thereafter the company undertook “decisive action to reduce risk, leverage and expenses.”Among the measures: reducing deferred acquisition costs, strengthening reserves, expanding hedging program and increasing transparency by reporting the closed U.S. VA block as a separate business along the ongoing ING insurance U.S. businesses.
“Our new management team in the U.S. Insurance business is taking decisive steps to address legacy issues, improve results and prepare the business for its standalone future,” said ING Group CEO Jan Hommen says in the press statement. “The actions announced today reflect necessary steps taken in the context of ongoing market turbulence and the impact that has on US policyholder behavior.”
ING adds that, as a result of today’s announcement, the Insurance Group Directive (IGD) ratio for ING Insurance is expected to decrease by an estimated 12 percentage points, but will remain strong at approximately 230%. Likewise, the estimated consolidated risk-based capital (RBC) ratio for the insurance US operating subsidiaries is expected to decline from 492% as of Sept. 30, 2011, but to remain comfortably above its 425% target following these assumptions changes.