Insurance operations
Total profit before tax from Insurance operations increased 32.9%. Underlying profit before tax (excluding the impact of divestments and special items) from insurance rose 27.1% to EUR 6,110 million due primarily to EUR 2,087 million gains on the sale of ING’s stakes in ABN AMRO and Numico. Underlying profit before tax from life insurance increased by 48.3%. The life-insurance activities in the US, Central and Rest of Europe and Latin America showed strong profit growth, supported by increased sales, growth in assets under management and investment gains. The underlying profit before tax from non-life insurance declined 22.5%. In the Netherlands, the deterioration was mainly caused by pressure on premium levels as well as high one-off claims provision releases last year. Canada’s result declined due to lower underwriting results and a decrease in investment gains.
Underlying gross premium income from life insurance policies increased 1.1%, or 8.1% excluding currency effects, mainly driven by the US, Asia and Central and Rest of Europe. Underlying gross premium income from non-life insurance policies decreased 2.1%, or 1.2% excluding currency effects, as lower premiums in Europe were only partly offset by higher premiums in Canada and Latin America.
Underlying operating expenses from the Insurance operations increased 5.7% to EUR 5,467 million, mainly caused by costs to support the ongoing growth of the business in US Wealth Management, Asia/Pacific and Central Europe.
Embedded value and value of new business
The embedded value of ING’s life insurance businesses increased 17.1% before dividends and capital injections to EUR 32,460 million in 2007. After the dividend payment of EUR 5,468 million to ING Group, the year-end embedded value was EUR 26,993 million. Embedded value profit, an important measure of value creation, increased 41.4% to EUR 2,802 million. The value of new business increased 37.9% to EUR 1,113 million in 2007, with the largest contributions coming from the developing markets in Asia/Pacific and Central and Rest of Europe. The largest increases were in Central and Rest of Europe, where the Romanian second-pillar pension fund added EUR 150 million, and in the Americas, mainly in the US and in Mexico’s pension business. New sales, measured in annual premium equivalent, rose 13.3% to EUR 7,320 million, while the internal rate of return improved to 14.3% from 13.3% in 2006.