UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 6-K

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

ING Groep N.V.

Amstelveenseweg 500
1081 KL Amsterdam
The Netherlands

     Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F þ      Form 40-F o

     Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T rule 101(b) (1): o

     Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T rule 101(b) (7): o

     Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o       No þ

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b).

THIS REPORT ON FORM 6-K TOGETHER WITH OUR REPORT ON FORM 6-K SUBMITTED ON SEPTEMBER 8, 2009 (EXCEPT IN EACH CASE FOR REFERENCES THEREIN TO “UNDERLYING RESULT BEFORE TAX” AND ANY OTHER NON-GAAP FINANCIAL MEASURE AS SUCH TERM IS DEFINED IN REGULATION G UNDER THE SECURTIES EXCHANGE ACT OF 1934, AS AMENDED) SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-155937) OF ING GROEP N.V. AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED. FOR THE AVOIDANCE OF DOUBT, THE DISCLOSURE CONTAINING REFERENCES TO “UNDERLYING RESULT BEFORE TAX” AND ANY OTHER NON-GAAP FINANCIAL MEASURE CONTAINED IN THE ATTACHED REPORT IS NOT INCORPORATED BY REFERENCE INTO THE ABOVE-MENTIONED REGISTRATION STATEMENT OF ING GROEP N.V.

 

 

     This Form 6-K provides Consolidated Financial Statements and related Form 20-F disclosures revised to include amounts in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, consistent with the presentation set forth in the Company’s Form 6-K submitted on September 8, 2009 in respect of the period ending June 30, 2009.

 

PRESENTATION OF INFORMATION

In this Annual Report, and unless otherwise stated or the context otherwise dictates, references to “ING Groep N.V.”, “ING Groep” and “ING Group” refer to ING Groep N.V. and references to “ING”, the “Company”, the “Group”, “we” and “us” refer to ING Groep N.V. and its consolidated subsidiaries. ING Groep N.V.’s primary insurance and banking subsidiaries are ING Verzekeringen N.V. (together with its consolidated subsidiaries, “ING Insurance”)  and ING Bank N.V. (together with its consolidated subsidiaries, “ING Bank”), respectively. References to “Executive Board” or “Supervisory Board” refer to the Executive Board or Supervisory Board of ING Groep N.V.

ING presents its consolidated financial statements in euros, the currency of the European Economic and Monetary Union. Unless otherwise specified or the context otherwise requires, references to “US$” and “Dollars” are to the United States dollars and references to “EUR” are to euros.

Solely for the convenience of the reader, this Annual Report contains translations of certain euro amounts into U.S. dollars at specified rates. These translations should not be construed as representations that the translated amounts actually represent such dollar or euro amounts, as the case may be, or could be converted into U.S. dollars or euros, as the case may be, at the rates indicated or at any other rate. Therefore, unless otherwise stated, the translations of euros into U.S. dollars have been made at the rate of euro 1.00 = $ 1.2674, the noon buying rate in New York City for cable transfers in euros as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) on March 6, 2009.

The financial information contained herein is prepared under International Financial Reporting Standards as issued by the International Accounting Standards Board (“IASB”). International Financial Reporting Standards as issued by the IASB provide several options in accounting policies. ING Group’s accounting policies under International Financial Reporting Standards, as issued by the IASB and its decision on the options available, are set out in the section ‘Principles of valuation and determination of results’ below. In this document the term “IFRS-IASB” is used to refer to International Financial Reporting Standards as issued by the IASB, including the decisions ING Group made with regard to the options available under International Financial Reporting Standards as adopted by the IASB.

IFRS-EU refers to International Financial Reporting Standards as adopted by the European Union (“EU”), including the decisions ING Group made with regard to the options available under IFRS as adopted by the EU. The published 2008 Consolidated Annual Accounts of ING Group are presented in accordance with IFRS-EU. The Annual Accounts of ING Group will remain to be prepared under IFRS-EU. IFRS-EU differs from IFRS-IASB in respect of certain paragraphs in IAS 39 ‘Financial Instruments: Recognition and Measurement’ regarding hedge accounting for portfolio hedges of interest rate risk.

Under IFRS-EU, ING Group applies fair value hedge accounting for portfolio hedges of interest rate risk (fair value macro hedges) in accordance with the EU ‘carve out’ version of IAS 39. Under the EU ‘IAS 39 carve-out’, hedge accounting may be applied, in respect of fair value macro hedges, to core deposits and hedge ineffectiveness is only recognized when the revised estimate of the amount of cash flows in scheduled time buckets falls below the original designated amount of that bucket and is not recognized when the revised amount of cash flows in scheduled time buckets is more than the original designated amount. Under IFRS-IASB, hedge accounting for fair value macro hedges can not be applied to core deposits and ineffectiveness arises whenever the revised estimate of the amount of cash flows in scheduled time buckets is either more or less than the original designated amount of that bucket.

The financial information contained herein is prepared under IFRS-IASB. This information is prepared by reversing the hedge accounting impacts that are applied under the EU ‘carve out’ version of IAS 39. Financial information under IFRS-IASB accordingly does not take account of the fact that had ING Group applied IFRS-IASB as its primary accounting framework it may have applied alternative hedge strategies where those alternative hedge strategies could have qualified for IFRS-IASB compliant hedge accounting, which could have resulted in different shareholders’ equity and net result amounts compared to those disclosed herein.

A reconciliation between IFRS-EU and IFRS-IASB is included in Note 2.1 Basis of preparation.

Effective March 4, 2008, amendments to Form 20-F permit Foreign Private Issuers to include financial statements prepared in accordance with IFRS-IASB without reconciliation to US GAAP.

Unless otherwise indicated, gross premiums, gross premiums written and gross written premiums as referred to in this Annual Report include premiums (whether or not earned) for insurance policies written during a specified period, without deduction for premiums ceded, and net premiums, net premiums written and net written premiums include premiums (whether or not earned) for insurance policies written during a specified period, after deduction for premiums ceded. Certain amounts set forth herein may not sum due to rounding.

Although certain references are made to information available on ING’s website, no materials from ING’s website or any other source are incorporated by reference into this Annual Report, except as specifically stated herein.

References herein to “Items” are, to the extent such items are not included herein, to the relevant item in our Annual Report on Form 20-F for the year ended December 31, 2008.

Item 3. Key Information

The selected consolidated financial information data set forth below is derived from the consolidated financial statements of ING Group. ING Group adopted IFRS as of 2005.

The following information should be read in conjunction with, and is qualified by reference to the Group’s consolidated financial statements and other financial information included elsewhere herein.

		Year ended December 31,
		2008				2008				2007(2)				2006(2)				2005(2)				2004(2)
		USD(1)				EUR				EUR				EUR				EUR				EUR
		(in millions, except amounts per share and ratios)
IFRS-IASB Consolidated Income Statement Data
Income from insurance operations:
Gross premiums written:
Life			49,261				38,868				40,732				40,501				39,144				36,975
Non-life			6,266				4,944				6,086				6,333				6,614				6,642
Total			55,527				43,812				46,818				46,834				45,758				43,617
Commission income			2,624				2,070				1,901				1,636				1,346				1,198
Investment and Other income			11,369				8,970				13,488				11,172				10,299				10,787
Total income from insurance operations			69,519				54,851				62,208				59,642				57,403				55,602
Income from banking operations:
Interest income			124,460				98,201				76,859				59,262				48,342				25,471
Interest expense			110,410				87,115				67,823				49,927				39,180				16,772
Net interest result			14,050				11,085				9,036				9,335				9,162				8,699
Investment income			(3,117	)			(2,459	)			1,969				849				937				363
Commission income			3,669				2,895				2,926				2,681				2,401				2,581
Other income			(4,436	)			(3,500	)			1,182				1,513				1,348				1,035
Total income from banking operations			10,167				8,022				15,113				14,378				13,848				12,678
Total income (3)			79,316				62,582				77,097				73,804				71,120				68,159
Expenditure from insurance operations:
Life			65,426				51,622				49,526				49,106				47,156				44,988
Non-life			6,165				4,864				6,149				5,601				6,269				6,292
Total expenditure from insurance operations			71,590				56,486				55,675				54,707				53,425				51,280
Total expenditure from banking operations			14,680				11,583				10,092				9,190				8,932				9,260
Total expenditure(3)(4)			85,902				67,778				65,543				63,681				62,226				60,419
Result before tax from insurance operations:
Life			(2,720	)			(2,146	)			5,314				3,436				2,666				2,647
Non-life			648				511				1,219				1,499				1,312				1,675
Total			(2,072	)			(1,635	)			6,533				4,935				3,978				4,322
Result before tax from banking operations			(4,513	)			(3,561	)			5,021				5,188				4,916				3,418
Result before tax			(6,585	)			(5,196	)			11,554				10,123				8,894				7,440
Taxation			(2,113	)			(1,667	)			1,665				1,961				1,379				1,709
Minority interests			(47	)			(37	)			267				341				305				276
Net result			(4,426	)			(3,492	)			9,622				7,821				7,210				5,755
Dividend on Ordinary shares			1,901				1,500				3,180				2,865				2,588				2,359
Addition to shareholders’ equity			(5,788	)			(4,567	)			6,442				4,956				4,622				3,396
Payable on non-voting equity securities (7)																			(539	)			(425	)
Net result attributable to equity holders of the Company			(924	)			(729	)			9,241				7,692				7,210				5,755
Basic earnings per share(5)			(2.17	)			(1.71	)			4.49				3.62				3.32				2.71
Diluted earnings per share(5)			(2.17	)			(1.71	)			4.46				3.59				3.32				2.71
Dividend per Ordinary share (5)			0.94				0.74				1.48				1.32				1.18				1.07
Interim Dividend			0.94				0.74				0.66				0.59				0.54				0.49
Final Dividend			—				—				0.82				0.73				0.64				0.58
Number of Ordinary shares outstanding (in millions)			2,063.1				2,063.1				2,226.4				2,205.1				2,204.9				2,204.7
Dividend pay-out ratio (6)			n.a.				n.a.				34.3	%			37.0	%			35.5	%			39.5	%

		Year ended December 31,
		2008				2008				20072)				2006(2)				2005(2)				2004(2)
		USD(2)				EUR				EUR				EUR				EUR				EUR
						(in billions, except amounts per share and ratios)
IFRS-IASB Consolidated Balance Sheet Data
Total assets			1,683.9				1,328.6				1,313.2				1,226.5				1,158.6				876.4
Investments:
Insurance			138.8				109.5				132.3				140.5				144.5				112.1
Banking			188.6				148.8				160.4				171.1				180.1				164.2
Total			327.4				258.3				292.6				311.6				324.6				276.3
Loans and advances to customers			781.7				616.8				553.7				474.6				439.2				330.5
Insurance and investment contracts:
Life			270.0				213.0				232.4				237.9				232.1				205.5
Non-life			8.6				6.8				9.6				10.1				12.8				11.4
Investment contracts			26.7				21.1				23.7				20.7				18.6
Total			305.3				240.8				265.7				268.7				263.5				216.9
Customer deposits and other funds on deposit:
Savings accounts of the banking operations			347.6				274.3				275.1				283.1				269.4				219.4
Other deposits and bank funds			314.9				248.5				250.1				213.6				196.3				129.8
Total			662.6				522.8				525.2				496.7				465.7				349.2
Amounts due to banks			193.0				152.3				167.0				120.8				122.2				95.9
Share capital (in millions)							2,063.1				2,242.4				2,268.1				2,292.0				2,291.8
Shareholders’ equity			19.1				15.1				37.7				38.4				36.7				24.1
Non-voting equity securities			12.8				10.0
Shareholders’ equity per Ordinary share 5)			9.43				7.44				17.73				17.78				16.96				12.95

Fluctuations in the exchange rate between the euro and the U.S. dollar will affect the U.S. dollar amounts received by owners of shares or ADSs on conversion of dividends, if any, paid in euros on the shares and will affect the U.S. dollar price of the ADSs on the New York Stock Exchange.

The following table sets forth, for the periods and dates indicated, certain information concerning the exchange rate for U.S. dollars into euros based on the Noon Buying Rate.

		U.S. dollars per euro
		Period				Average
Calendar Period		End(1)				Rate(2)				High				Low
2004			1.3538				1.2478				1.3625				1.1801
2005			1.1842				1.2397				1.3476				1.1670
2006			1.3197				1.2661				1.3327				1.1860
2007			1.4603				1.3794				1.4862				1.2904
2008			1.3919				1.4695				1.6010				1.2446
2009 (through March 6, 2009) (2)			1.2674				1.2710				1.3718				1.2549

The table below shows the high and low exchange rate of the U.S. dollar per euro for the last six months.

		High				Low
September 2008			1.4737				1.3939
October 2008			1.4058				1.2446
November 2008			1.3039				1.2525
December 2008			1.4358				1.2634
January 2009			1.3718				1.2804
February 2009			1.3064				1.2547
March 2009 (through March 6, 2009)			1.2674				1.2549

The Noon Buying Rate for euros on December 31, 2008 was EUR 1.00 = $ 1.3919 and the Noon Buying Rate for euros on March 6, 2009 was EUR 1.00 = $ 1.2674.

Item 5. Operating and financial review and prospects

The following review and prospects should be read in conjunction with the consolidated financial statements and the related Notes thereto included elsewhere herein. The consolidated financial statements have been prepared in accordance with IFRS-IASB. Unless otherwise indicated, financial information for ING Group included herein is presented on a consolidated basis under IFRS-IASB.

FACTORS AFFECTING RESULTS OF OPERATIONS

ING Group’s results of operations are affected by demographics (particularly with respect to life insurance) and by a variety of market conditions, including economic cycles, insurance industry cycles (particularly with respect to non-life insurance), banking industry cycles and fluctuations in stock markets, interest and foreign exchange rates. See Item 3. “Risk Factors” for more factors that can impact ING Group’s results of operations.

General market conditions

Demographic studies suggest that over the next decade there will be growth in the number of individuals who enter the age group that management believes is most likely to purchase retirement-oriented life insurance products in ING’s principal life insurance markets in the Netherlands, the Rest of Europe, the United States, Asia and Australia. In addition, in a number of its European markets, including the Netherlands, retirement, medical and other social benefits previously provided by the government have been, or in the coming years are expected to be, curtailed. Management believes this will increase opportunities for private sector providers of life insurance, health, pension and other social benefits-related insurance products. Management believes that ING Insurance’s distribution networks, the quality and diversity of its products and its investment management expertise in each of these markets, positions ING Insurance to benefit from these developments. In addition, the emerging markets in Central and Eastern Europe, Asia and Latin America, in which ING Insurance has insurance operations, generally have lower gross domestic products per capita and gross insurance premiums per capita than the countries in Western Europe and North America in which ING Insurance has insurance operations. Management believes that insurance operations in these emerging markets provide ING Insurance with the market presence which will allow it to take advantage of anticipated growth in these regions. In addition, conditions in the non-life insurance markets in which ING Insurance operates are cyclical, and characterized by periods of price competition, fluctuations in underwriting results, and the occurrence of unpredictable weather-related and other losses.

Fluctuations in equity markets

Our insurance and asset management operations are exposed to fluctuations in equity markets. Our overall investment return and fee income from equity-linked products are influenced by equity markets. The fees we charge for managing portfolios are often based on performance and value of the portfolio. In addition, fluctuations in equity markets may affect sales of life and pension products, unit-linked products, including variable business and may increase the amount of withdrawals which will reduce related management fees. In addition, our direct shareholdings that are classified as investments are exposed to fluctuations in equity markets. The securities we hold may become impaired in the case of a significant or prolonged decline in the fair value of the security below its cost. Our banking operations are also exposed to fluctuations in equity markets. ING Bank maintains an internationally diversified and mainly client-related trading portfolio. Accordingly, market downturns are likely to lead to declines in securities trading and brokerage activities which we execute for customers and therefore to a decline in related commissions and trading results. In addition to this, ING Bank also maintains equity investments in its own non-trading books. Fluctuations in equity markets may affect the value of these investments.

Fluctuations in interest rates

Our insurance operations are exposed to fluctuations in interest rates through impacts on sales and surrenders of life insurance and annuity products. Declining interest rates may increase sales, but may impact profitability as a result of a reduced spread between the guaranteed interest rates to policyholders and the investment returns on fixed interest investments. Declining interest rates may also affect the results of our reserve adequacy testing which may in turn result in reserve strengthening. Rising interest rates may increase the surrender of policies which may require liquidation of fixed interest investments at unfavorable market prices. This could result in realized investment losses. Our banking operations are exposed to fluctuations in interest

rates. Our management of interest rate sensitivity affects the results of our banking operations. Interest rate sensitivity refers to the relationship between changes in market interest rates on the one hand and on the other hand to changes in both net interest income and the results of our trading activities for our own account. Both the composition of our banking assets and liabilities and the fact that interest rate changes may affect client behavior in a different way than assumed in our internal models result in a mismatch which causes the banking operations’ net interest income and trading results to be affected by changes in interest rates

Market developments in 2008

Like other financial institutions, ING has not been immune to the financial crisis. The financial crisis started in the US subprime mortgage market in early 2007 and intensified over 2008 as prices fell across most major asset classes throughout the world. Equity markets lost significant ground and real estate prices were generally under pressure. Credit spreads widened significantly, both in the US and Europe. As liquidity became tight, central banks around the world were quick to provide funding to prevent the interbank market from drying up. There were also a number of significant financial institutions that failed during the year. As the financial crisis spread beyond the financial sector it also affected consumer confidence, other sectors and economic growth. All of these factors placed major strains on risk management departments in financial services companies, including ING, and emphasized the importance of having a robust risk management organisation in place that can take forceful measures to reduce risk. For details regarding the impact of the credit and liquidity crisis on ING’s assets and results, see Note 2.1 “Risk Management” to the consolidated financial statements.

Impact of financial crisis

Impact on pressurised asset classes

As a result of the deteriorating market conditions throughout 2008 ING Group incurred negative revaluations on its investment portfolio, which impacted shareholders’ equity. Furthermore, ING Group incurred impairments, fair value changes and trading losses, which impacted its profit and loss account (P&L).

The table below shows the exposures and negative revaluations and losses taken on US sub-prime and US Alt-A residential mortgage backed securities (RMBS), Collateralised Debt Obligations (CDOs) and Collateralised Loan Obligations (CLOs) during 2008.

US Subprime RMBS, US Alt-A RMBS and CDOs/CLOs exposures, revaluations and losses

		December 31, 2008																December 31, 2007
						Revaluations				Change in 2008												Revaluations
						through Equity				Write-downs through												through Equity
(EUR millions)		Market value				(pre-tax)				P&L (pre-tax)				Other changes				Market value				(pre-tax)
US Subprime RMBS			1,778				(839	)			(120	)			(52	)			2,789				(307	)
US Alt-A RMBS			18,847				(6,538	)			(2,064	)			(33	)			27,482				(936	)
CDOs/CLOs			3,469				(218	)			(394	)			2,186				1,895				(134	)
Total			24,094				(7,595	)			(2,578	)			2,101				32,166				(1,377	)

-		ING Group’s total EUR 1.8 billion exposure to US sub-prime assets relates to non originated loans acquired as investments in RMBS and represents 0.1% of total assets. At December 31, 2008 approximately 77% of ING’s US sub-prime portfolio was rated AA or higher. ING Group does not originate sub-prime mortgages. The vast majority of the total mortgage backed securitisations (MBS) are (residential) mortgages that are not classified as sub-prime.
-		ING Group’s total US Alt-A RMBS exposure at December 31, 2008 was EUR 18.8 billion. About 65% of this portfolio was AAA rated. The majority of the exposure (EUR 16.3 billion) was held by ING Direct. ING’s Available-for-Sale Alt-A investments are measured at fair value in the balance sheet. The substantial amount of negative pre-tax revaluation and impairments on this portfolio are mainly caused by the illiquid market.
-		Net investments in CDOs/CLOs at December 31, 2008 were 0.3% of total assets. The vast majority of the CDOs/CLOs has investment grade corporate credit as underlying assets, only EUR 1 million has US subprime mortgages underlying.

EUR 23.7 billion of the EUR 24.1 billion exposure on US Subprime RMBS, US Alt-A RMBS and CDOs/CLOs is booked at fair value. An analysis of the method applied in determining the fair values of financial assets and

liabilities is provided in Note 33 of Note 2.1 to the consolidated financial statements. At December 31, 2008 the fair value of US Subprime RMBS, US Alt-A RMBS and CDOs/CLOs was as follows:

Fair value of US Subprime RMBS, US Alt-A RMBS and CDOs/CLOs

		Reference to
		published price				Valuation technique				Valuation technique
		quotations in				supported by market				not supported by
(EUR millions)		active markets				inputs				market inputs				Total
2008
US Subprime RMBS			20				26				1,732				1,778
US Alt-A RMBS							244				18,244				18,488
CDOs/CLOs			3,273				162				34				3,469
Total			3,293				432				20,010				23,735
2007
US Subprime RMBS			2,636				153								2,789
US Alt-A RMBS			23,312				4,170								27,482
CDOs/CLOs			281				1,597				17				1,895
Total			26,229				5,920				17				32,168

Assets classified in Valuation technique not supported by market inputs consist mainly (approximately 87 %) of investments in asset backed securities in the United States. These assets are valued using external price sources that are obtained from third party pricing services and brokers. As at December 31, 2007, these assets were classified in Reference to published price quotations in active markets as valuation is based on independent quotes and trading in the relevant markets was active at that time. During 2008, the trading volumes in the relevant markets reduced significantly and these have now become inactive. The dispersion between prices for the same security from different price sources increased significantly. As a result, an amount of EUR 25 billion of mortgage backed securities in the United States was reclassified from Reference to published price quotations in active markets to Valuation technique not supported by market inputs in the third quarter of 2008.

Impact on Real Estate

By the end of 2008 ING Group’s total exposure to real estate was EUR 15.5 billion of which EUR 9.8 billion was subject to revaluation through the profit and loss account. In 2008, ING recorded EUR 1,184 million pre-tax negative revaluations and impairments. ING’s real estate portfolio has high occupancy rates and is diversified over sectors and regions, but is clearly affected by the negative real estate markets throughout the world.

Impact on Equity securities – available-for-sale

Direct equity exposure at December 31, 2008 in this caption was EUR 5.8 billion (public) and EUR 0,4 billion (private). During 2008 ING booked EUR 1,707 million of pre-tax impairments on this direct public equity exposure. ING generally decides to impair a listed equity security based on two broad guidelines: when the fair value of the security is below 75% of the cost price or when the market price of the security is below the cost price for longer than six months.

Impact on other asset classes

Negative impact on results 2008 (pre-tax) from private equity and alternative assets amounted to EUR 399 million. Negative impact on results 2008 (pre-tax) from debt securities other than mentioned above amounted to EUR 292 million.

Impact on counterparty risk

In the third quarter a number of financial institutions were no longer expected to fulfil their obligations. ING incurred EUR 483 million pre-tax losses (excluding loan losses) on Lehman Brothers, Washington Mutual and the Icelandic banks. The loss included impairments of debt securities, trading losses and derivative positions, including the costs to replace derivatives on which the banks were counterparty.

Impact on Liquidity profile

Due to the financial crisis liquidity became scarce and central banks around the world provided funding to prevent the interbank market drying up. ING’s liquidity position remained sound. ING Bank has a favourable funding profile as the majority of the funding stems from client deposits.

Fluctuations in exchange rates

ING Group is exposed to fluctuations in exchange rates. Our management of exchange rate sensitivity affects the results of our operations both through the trading activities for our own account and because of the fact that we publish our consolidated financial statements in euros. Because a substantial portion of our income and expenses are denominated in currencies other than euros, fluctuations in the exchange rates used to translate foreign currencies, particularly the U.S. dollar, the Australian dollar, the Canadian dollar, the Turkish lira, the Japanese yen, the Korean won, the Pound sterling and the Polish zloty into euros will impact our reported results of operations and cash flows from year to year. This exposure is mitigated by the fact that realized results in non-Euro currencies are translated into euro by monthly hedging. See Note 23 of Note 2.1 to the consolidated financial statements for a description of our hedging activities with respect to foreign currencies. Fluctuations in exchange rates will also impact the value (denominated in euro) of our investments in our non-Euro reporting subsidiaries. The impact of these fluctuations in exchange rates is mitigated to some extent by the fact that income and related expenses, as well as assets and liabilities, of each of our non-euro reporting subsidiaries are generally denominated in the same currencies. For the main foreign currencies, in which ING’s income and expenses are denominated namely the U.S. dollar, Pound sterling, Canadian dollar, Australian dollar, Turkish lira and Polish zloty, the translation risk is managed taking into account the effect of translation results on the Tier-1 ratio. For all other currencies the translation risk is managed within a Value-at-Risk limit.

The weakening of most currencies against the euro during 2008 had a negative impact of EUR 163 million on (underlying) net result. In 2007 and 2006 exchange rates influenced net result, respectively, by EUR 159 million negatively and EUR 20 million positively.

For the years 2008, 2007 and 2006, the year-end exchange rates (which are the rates ING uses in the preparation of the consolidated financial statements for balance sheet items not denominated in euros) and the average quarterly exchange rates (which are the rates ING uses in the preparation of the consolidated financial statements for income statement items and cash flows not denominated in euros) were as follows for the currencies specified below:

										Average1)
		4Q 2008				3Q 2008				2Q 2008				1Q 2008				2007				2006
U.S. dollar			1.345				1.511				1.566				1.514				1.375				1.257
Australian dollar			1.922				1.694				1.664				1.674				1.639				1.664
Canadian dollar			1.590				1.559				1.579				1.509				1.470				1.422
Pound sterling			0.844				0.796				0.792				0.761				0.686				0.682
Japanese yen			130.787				161.518				162.530				159.662				161.685				146.188
South Korean won			1,748.405				1,640.581				1,589.017				1,438.373				1,275.559				1,199.328
Turkish lira			1.995				1.825				1.973				1.838				1.786				1.798
Polish zloty			3.741				3.327				3.425				3.566				3.781				3.897

		Year-end
		2008				2007				2006
U.S. dollar			1.396				1.472				1.318
Australian dollar			2.026				1.676				1.669
Canadian dollar			1.710				1.444				1.528
Pound sterling			0.956				0.734				0.671
Japanese yen			126.354				164.819				156.768
South Korean won			1758.273				1,378.094				1,225.971
Turkish lira			2.143				1.718				1.865
Polish zloty			4.175				3.586				3.832

Critical Accounting Policies

See Note 2.1. to the consolidated financial statements.

CONSOLIDATED RESULTS OF OPERATIONS

The following information should be read in conjunction with, and is qualified by reference to the Group’s consolidated financial statements and other financial information included elsewhere herein. ING Group evaluates the results of its insurance operations and banking operations, including Insurance Europe, Insurance Americas, Insurance Asia/Pacific, Wholesale Banking, Retail Banking and ING Direct, using the financial performance measure of underlying result before tax. Underlying result before tax is defined as result before tax and, excluding, as applicable for each respective segment, either all or some of the following items: gains/losses from divested units, realized gains/losses on divestitures and special items such as certain restructuring charges and other non-operating income/expense.

While these excluded items are significant components in understanding and assessing the Group’s consolidated financial performance, ING Group believes that the presentation of underlying result before tax enhances the understanding and comparability of its segment performance by highlighting result before tax attributable to ongoing operations and the underlying profitability of the segment businesses. For example, we believe that trends in the underlying profitability of our segments can be more clearly identified without the effects of the realized gains/losses on divestitures as the timing is largely subject to the Company’s discretion, influenced by market opportunities and ING Group does not believe that they are indicative of future results. Underlying result before tax is not a substitute for result before tax as determined in accordance with IFRS-IASB. ING Group’s definition of underlying result before tax may differ from those used by other companies and may change over time. For further information on underlying result before tax as well as the reconciliation of our segment underlying result before tax to our result before taxation see “ Item 5. Operating and Financial Review and Prospects — Segment Reporting” and Note 49 of Note 2.1 to the consolidated financial statements.

The following table sets forth the consolidated results of the operations of ING Group and its insurance and banking operations for the years ended December 31, 2008 and 2007:

		Insurance								Banking								Eliminations								Total
		2008				2007				2008				2007				2008				2007				2008				2007
		(EUR millions)
Premium income			43,812				46,818																				43,812				46,818
Interest result banking operations											11,085				9,036				43				60				11,042				8,976
Commission income			2,070				1,901				2,895				2,926												4,965				4,827
Investment and Other income			8,970				13,488				(5,959	)			3,151				248				163				2,763				16,476
Total income			54,851				62,208				8,022				15,113				291				223				62,582				77,097
Underwriting expenditure			49,485				48,833																				49,485				48,833
Other interest expenses			1,269				1,326												291				223				978				1,103
Operating expenses			5,422				5,515				10,303				9,967												15,725				15,481
Impairments/additions to the provision for loan losses			310				1				1,280				125												1,590				126
Total expenditure			56,486				55,675				11,583				10,092				291				223				67,778				65,543
Result before tax			(1,635	)			6,533				(3,561	)			5,021												(5,196	)			11,554
Taxation			(483	)			775				(1,184	)			889												(1,667	)			1,665
Result before minority interests			(1,152	)			5,758				(2,377	)			4,132												(3,529	)			9,889
Minority interests			31				155				(69	)			112												(38	)			267
Net result			(1,183	)			5,603				(2,309	)			4,019												(3,492	)			9,622
Result before tax			(1,635	)			6,533				(3,561	)			5,021												(5,196	)			11,554
Gains/losses on divestments(1)			(8	)			(382	)							(32	)											(8	)			(414	)
Result/loss divested units			88				(39	)																			88				(39	)
Special items (2)			321								301				489												622				489
Underlying result before tax			(1,235	)			6,113				(3,260	)			5,478												(4,495	)			11,591

The following table sets forth the consolidated results of the operations of ING Group and its insurance and banking operations for the years ended December 31, 2007 and 2006:

		Insurance								Banking								Eliminations								Total
		2007			2006						2007				2006			2007				2006				2007				2006
		(EUR millions)
Premium income			46,818				46,834																				46,818				46,834
Interest result banking operations											9,036				9,335				60				143				8,976				9,192
Commission income			1,901				1,636				2,926				2,681												4,827				4,317
Investment and Other income			13,488				11,172				3,151				2,362				163				73				16,476				13,461
Total income			62,208				59,642				15,113				14,378				223				216				77,097				73,804
Underwriting expenditure			48,833				48,188																				48,833				48,188
Other interest expenses			1,326				1,233												223				216				1,103				1,017
Operating expenses			5,515				5,275				9,967				9,087												15,481				14,362
Impairments/additions to the provision for loan losses			1				11				125				103												126				114
Total expenditure			55,675				54,707				10,092				9,190				223				216				65,544				63,681
Result before tax			6,533				4,935				5,021				5,188												11,554				10,123
Taxation			775				702				889				1,259												1,665				1,961
Result before minority interests			5,758				4,233				4,132				3,929												9,889				8,162
Minority interests			155				281				112				60												267				341
Net result			5,603				3,952				4,019				3,869												9,622				7,821
Result before tax			6,533				4,935				5,021				5,188												11,554				10,123
Gains/losses on divestments(1)			(382	)			(49	)			(32	)			112												(414	)			63
Result divested units			(39	)			(79	)							(65	)											(39	)			(144	)
Special items											489																489
Underlying result before tax			6,113				4,807				5,478				5,235												11,591				10,042

 

Total result before tax decreased by EUR 16,750 million, or 145.0%, from EUR 11,554 million in 2007 to EUR (5,196) million in 2008 and total underlying result before tax decreased by EUR 16,086 million or 138.8% from EUR 11,591 million in 2007 to EUR (4,495) million in 2008. The worldwide financial crisis led to extreme market volatility and sharp declines in asset prices, especially in the third and fourth quarters of 2008 which led to losses in the insurance operations and a decline in result of the banking operations in 2008. The decrease in total result before tax is also impacted by divestments which resulted in a gain of EUR 8 million and EUR 414 million for 2008 and 2007, respectively, and special items in 2008 and 2007 influenced result before tax negatively by EUR 622 million and EUR 489 million, respectively.

Net result decreased by EUR 13,114 million, or 136.3%, from EUR 9,622 million in 2007 to EUR (3,492) million in 2008. This lower loss compared with the decrease in result before tax was due to a conversion from a large profit into a loss, which resulted in a change in taxation from EUR 1,665 million in 2007 to EUR (1,667) million in 2008. Underlying net result decreased from EUR 9,589 million in 2007 to EUR (2,934) million in 2008.

Basic earnings per share decreased to EUR (1.71) in 2008 from EUR 4.49 in 2007.

Exchange rate differences had a negative impact of EUR 163 million on net result and EUR 229 million on result before tax, mainly due to the weakening of the US dollar, the Australian dollar and the South Korea won, partly offset by a strengthening of the Polish zloty and Pound sterling. In 2007 currency rate differences had a negative impact of EUR 159 million on net result and EUR 211 million on result before tax.

ING calculates certain capital ratios on the basis of adjusted capital (see the discussion under “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – ING Group Consolidated Cash Flows”), which differs from total equity attributable to equity holders of the Company in that it excludes unrealized gains and losses on debt securities, the cash flow hedge reserve and goodwill and includes hybrid capital. On this basis, the debt/equity ratio of ING Group increased to 13.5% in 2008 compared with 9.5% in 2007, partly due to the buyback of ING’s own shares, dividend payments and the recorded loss, partly offset by the issuance of Core Tier-1 Securities. The capital coverage ratio of ING Verzekeringen N.V. increased to 256% of E.U. regulatory requirements at the end of December 2008, compared with 244% at the end of December 2007, as the decrease in available capital was more than offset by the decline in required capital. The tier-1 ratio of ING Bank N.V. stood at 9.32% (based on Basel II risk weighted assets) at the end of 2008, up from 7.39% (based on Basel I risk weighted assets) at the end of 2007, well above the 7.20% target. Tier-1 capital increased from EUR 29.8 billion to EUR 32.0 billion, mainly thanks to net capital injections of EUR 3.0 billion by ING Group. Following the introduction of Basel II in 2008, risk weighted assets dropped from EUR 402.7 billion on December 31, 2007 to EUR 293.0 billion on January 1, 2008. During the year risk weighted assets increased to EUR 343.4 billion at year-end 2008.

Total premium income decreased 6.4%, or EUR 3,006 million from EUR 46,818 million in 2007 to EUR 43,812 million in 2008. Underlying life premiums decreased 3.7%, or EUR 1,506 million from EUR 40,254 million in 2007 to EUR 38,748 million in 2008. Excluding Taiwan and currency impacts, underlying life premiums increased 3.3%, mainly driven by the US, Australia, and most countries in Asia. Underlying non-life premiums decreased 8.1%, or EUR 388 million from EUR 4,790 million in 2007 to EUR 4,402 million in 2008.

Investment and Other income decreased 33.5%, or EUR 4,518 million from EUR 13,488 million in 2007 to EUR 8,970 million in 2008, reflecting the market turmoil in the second half of 2008. Moreover, in 2007 capital gains on ABN AMRO and Numico shares of EUR 2,087 million were recorded. Commission income increased 8.9%, or EUR 169 million from EUR 1,901 million in 2007 to EUR 2,070 million in 2008, driven by the US and Latin America.

Underwriting expenditure increased by EUR 652 million, or 1.3% from EUR 48,833 million in 2007 to EUR 49,485 million in 2008. The underwriting expenditure of the life insurance operations increased by EUR 1,657 million, or 3.8%. The underwriting expenditure of the non-life insurance operations decreased by EUR 1,005 million, or 21.2%.

Expenses

Operating expenses from the insurance operations decreased 1.7%, or EUR 93 million to EUR 5,422 million in 2008, from EUR 5,515 million in 2007, as ongoing cost reduction helped to offset most of the costs to support growth of the business in Asia/Pacific and Central and Rest of Europe. The expense ratios for the life insurance operations reflected the change in product mix as clients preferred traditional business over investment-linked business in the course of the year. Expenses as a percentage of assets under management for investment products deteriorated to 0.86% in 2008 compared with 0.76% in 2007. Expenses as a percentage of premiums for life products decreased to 14.0% in 2008 from 14.3% in 2007. The cost ratio for the non-life operations went up slightly to 32.2% in 2008 from 31.8% in 2007.

Result before tax and net result

Total result before tax from Insurance decreased 125.0%, or EUR 8,168 million, to a loss of EUR 1,635 million in 2008 from a profit of EUR 6,533 million in 2007, mainly due to the deterioration of the financial markets in the second half of 2008, as well as EUR 2,087 million gains on the sale of ING’s stakes in ABN AMRO and Numico in 2007. The impact of divestments amounted to EUR 8 million in 2008 and EUR 382 million in 2007. Divested units contributed a loss of EUR 88 million before tax in 2008 and a profit of EUR 40 million to result before tax in 2007. Special items had a negative impact of EUR 321 million in 2008 compared to no impact in 2007. The net result from insurance deteriorated by 121.1%, or EUR 6,786 million to a loss of EUR 1,183 million in 2008 from a profit of EUR 5,603 million in 2007.

Underlying result before tax

The underlying result before tax (excluding the impact of divestments and special items) decreased to a loss of EUR 1,235 million in 2008 from a profit of EUR 6,113 in 2007. The sharp decline in results was mainly due to the deterioration of the financial markets in the second half of 2008, as well as EUR 2,087 million gains on the sale of ING’s stakes in ABN AMRO and Numico in 2007. The underlying result from life insurance decreased by EUR 6,575 million to a loss of EUR 1,744 million from a profit of EUR 4,831 in 2007. Investment income was negatively impacted by capital losses and impairments on equity and debt securities, as well as negative fair value changes on real estate and private equity investments. Further, the result was negatively impacted by deferred acquisition cost (DAC) unlocking in the U.S. as well as losses on the SPVA business in Japan due to hedge losses. Underlying profit before tax from non-life insurance declined 60.3% to EUR 509 million from EUR 1,282 million in 2007, due primarily to capital losses and impairments on equities, as well as unfavourable underwriting results in Canada.

BANKING OPERATIONS

Income

Total income from banking decreased 46.9%, or EUR 7,091 million, to EUR 8,022 million in 2008 from EUR 15,113 million in 2007. This decrease was experienced despite an increase in the interest result, which was primarily attributable to a sharp increase in margins. The sharp increase in margins was more than offset, however, by decreases in investment income and other income.

The net interest result increased by EUR 2,049 million, or 22.7%, to EUR 11,085 million in 2008 from EUR 9,036 million in 2007, driven by higher interest results in all business lines, but especially in Wholesale Banking. The interest margin in 2008 was 1.07%, an increase from 0.94% in 2007, due to higher margins in Wholesale Banking (especially Financial Markets and General Lending) and in ING Direct (particularly influenced by the more favorable interest rate environment in the US).

Commission income decreased 1.1%, or EUR 31 million to EUR 2,895 million in 2008 from EUR 2,926 million in 2007. The decrease in commission income was primarily due to the strong decline of management fees by EUR 145 million (especially ING Belgium, ING Real Estate and Retail Netherlands). Fees from securities business decreased by EUR 56 million (especially ING Belgium and Retail Netherlands), but funds transfer fees increased by EUR 102 million (mainly Wholesale Banking and Retail Central Europe) and brokerage and advisory fees increased by EUR 23 million.

Investment income decreased by EUR 7,625 million to a loss of EUR 6,168 million in 2008 from a profit of EUR 1,457 million in 2007. The decrease was partly entirely due to results on securities (including impairments) and fair value changes on real estate investments, changing from a profit of EUR 487 million in 2007 to a loss of EUR 2,739 million in 2008. Of this loss, EUR 2,087 million relates to debt securities (mainly impairments on the Alt-A portfolio at ING Direct), EUR 302 million relates to equity securities and EUR 350 million is attributable to real estate investments. Furthermore, rental income decreased by EUR 46 million and other investment income decreased by EUR 78 million. In addition, the decrease was partly due to negative fair value changes on derivatives for which no hedge accounting is applied under IFRS-IASB.

Other income decreased by EUR 1,484 million, or 87.7%, to EUR 209 million in 2008 from EUR 1,693 million in 2007. Net trading income declined EUR 1,154 million from a profit of EUR 749 million in 2007 to a loss of EUR 405 million in 2008. The share of profit from associates decreased by EUR 448 million from EUR 238 million in 2007 to a loss of EUR 210 million in 2008, mainly due to the downward valuation of listed funds at ING Real Estate. Other revenues, including income from operating lease, were EUR 88 million lower. These developments were partly offset by an increase of EUR 206 million in valuation results from non-trading derivatives, for which hedge accounting is not applied.

Expenses

Total operating expenses increased by EUR 336 million, or 3.4%, to EUR 10,303 million in 2008 from EUR 9,967 million in 2007. In 2008, special items were EUR 271 million in provisions and costs related to the Retail Netherlands strategy (combining ING Bank and Postbank) and EUR 30 million impairment costs of not launching ING Direct Japan. In 2007, special items were EUR 295 million in provisions and costs related to the Retail Netherlands Strategy, EUR 94 million in restructuring provision for Wholesale Banking and EUR 56 million in restructuring provision for Retail Banking. Excluding these special items, total operating expenses increased by EUR 480 million, or 5.0%, mainly at Retail Banking, due to the inclusion of ING Bank Turkey and investments to support activities in developing markets, and at ING Direct to support the growth of the business.

The addition to the provision for loan losses

The total addition to the provision for loan losses in 2008 was EUR 1,280 million compared to EUR 125 million in 2007, an increase of EUR 1,155 million reflecting the worsening of economic conditions. Retail Banking showed an increase by EUR 203 million, from EUR 198 million in 2007 to EUR 401 million in 2008 and ING Direct showed an increase by EUR 215 million, from EUR 68 million in 2007 to EUR 283 million in 2008. The net release in Wholesale Banking of EUR 142 million in 2007 turned into an addition to the loan loss provision of EUR 596 million in 2008. As a percentage of average credit-risk weighted assets (based on Basel II), the addition to the provision for loan losses in 2008 was 48 basis points.

Result before tax and net result

Total result before tax decreased 170.9%, or EUR 8,582 million, to EUR (3,561) million in 2008 from EUR 5,021 million in 2007. Special items (mostly provision for the merger of Postbank and ING Bank Netherlands) had a negative impact of EUR 301 million on result before tax in 2008. In 2007, divestments and special items had a negative impact of EUR 458 million on result before tax, including EUR 489 million in special items, partly offset by EUR 32 million realized gains on divestments.

Net result from banking declined 157.5%, or EUR 6,328 million, from EUR 4,019 million in 2007 to EUR (2,309) million in 2008. The decrease in net result is smaller than the decrease in result before tax due to the tax rebate of EUR 1,184 million for 2008, which was supported by the revision of tax returns from previous years, compared with the taxation of EUR 889 million for 2007 (effective tax rate 17.7%).

Underlying result before tax

Excluding the effects of divestments and excluding special items, ING’s banking operations showed a decrease in underlying result before tax of EUR 8,738 million, or 159.5%, from EUR 5,478 million in 2007 to EUR (3,260) million in 2008. Underlying net result decreased by EUR 6,404 million, or 146.8%, from EUR 4,363 million in 2007 to EUR (2,041) million in 2008, due to the tax rebate.

GROUP OVERVIEW

Year ended December 31, 2007 compared to year ended December 31, 2006

Total result before tax increased by EUR 1,431 million, or 14.1% from EUR 11,554 million in 2006 to EUR 11,553 million in 2007 and total underlying result before tax increased by EUR 1,549 million or 15.4% from EUR 10,042 million in 2006 to EUR 11,591 million in 2007. The increase in result before tax was supported by EUR 2,087 million in gains on the sale of stakes in ABN AMRO and Numico. However, the result before tax of ING Direct decreased by 23.3% due to losses related to repositioning the UK business as well as an impairment on asset-backed commercial paper in Canada in the fourth quarter 2007. The increase in total result before tax is also impacted by divestments which resulted in a gain of EUR 414 million and a loss of EUR 63 million for 2007 and 2006, respectively. Special items in 2007 influenced result before tax negatively by EUR 489 million, in 2006 there were no special items.

Net result rose by EUR 1,801 million, or 23.0% from EUR 7,821 million in 2006 to EUR 9,622 million in 2007. This higher growth compared with the increase in result before tax was due to a lower effective tax rate in 2007. The effective tax rate decreased to 14.4% in 2007 from 19.4% in 2006 mainly due to high tax-exempt gains on equity investments (ABN AMRO and Numico) in 2007 compared to 2006. Underlying net result increased from EUR 7,810 million in 2006 to EUR 9,589 million in 2007.

Earnings per share attributable to equity holders of the Company increased to EUR 4.49 in 2007 from EUR 3.62 in 2006.

Currency impact

Currency rate differences had a negative impact of EUR 159 million on net result and EUR 211 million on result before tax, mainly due to the weakening of the US dollar, the Canadian dollar and the South Korea won. In 2006 currency rate differences had a positive impact of EUR 20 million on net result and EUR 48 million on result before tax.

Capital Ratios

ING calculates certain capital ratios on the basis of adjusted capital (see the discussion under “ Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – ING Group Consolidated Cash Flows”), which differs from total equity attributable to equity holders of the Company in that it excludes unrealized gains and losses on debt securities, the cash flow hedge reserve and goodwill and includes hybrid capital. On this basis, the debt/equity ratio of ING Group increased to 9.5% in 2007 compared with 9.0% in 2006, partly due to the buyback of own shares. The capital coverage ratio of ING Verzekeringen N.V. decreased to 244% of E.U. regulatory requirements at the end of December 2007, compared with 274% at the end of December 2006, due to the decrease in available capital. The tier-1 ratio of ING Bank N.V. stood at 7.39% at the end of 2007, down from 7.63% at the end of 2006, but remained above the 7.20% target. This decrease was caused by strong growth in risk-weighted assets and the deduction of EUR 1.2 billion in goodwill and other intangibles related to the purchase of Oyak Bank, partly compensated by a capital injection of EUR 2.2 billion from ING Group to ING Bank in the fourth quarter. Total risk-weighted assets of the banking operations increased by EUR 64.8 billion, or 19.2%, to EUR 402.7 billion as of December 31, 2007 from EUR 337.9 billion as of December 31, 2006, driven by growth in Wholesale Banking and Retail Banking.

INSURANCE OPERATIONS

Income

Total premium income decreased EUR 16 million from EUR 46,834 million in 2006 to EUR 46,818 million in 2007. Life premiums increased 0.6%, or EUR 231 million to EUR 40,732 million in 2007 from EUR 40,501 million in 2006, primarily due to growth in the United States, Asia, all countries with the exception of Japan, and Central Europe and the Rest of Europe partly offset by a decline in premium income in the Netherlands. Non-life premiums decreased 3.9%, or EUR 247 million, from EUR 6,333 million in 2006 to EUR 6,086 million in 2007, as lower premiums in Europe and Latin America were only partly offset by higher premiums in Canada.

Investment and Other income increased 20.7%, or EUR 2,316 million to EUR 13,488 million in 2007 from EUR 11,172 million in 2006, reflecting higher dividend income and capital gains on equities (ABN AMRO and Numico). Commission income increased 16.2%, or EUR 265 million to EUR 1,901 million in 2007 from EUR 1,636 million in 2006 supported by robust net inflows and growth in assets under management across all lines of business.

Underwriting Expenditure

Underwriting expenditure increased by EUR 645 million, or 1.3% from EUR 48,188 million in 2006 to EUR 48,833 million in 2007. The underwriting expenditure of the life insurance operations increased by EUR 440 million, or 1.0%. The underwriting expenditure of the non-life insurance operations increased by EUR 205 million, or 4.5%, resulting in an overall higher non-life claims ratio of 65.2% in 2007 compared with 58.7% in 2006, primarily attributable to a higher claims ratio in the Netherlands and Canada.

Expenses

Operating expenses from the insurance operations increased 4.5%, or EUR 240 million to EUR 5,515 million in 2007, from EUR 5,275 million in 2006, mainly due to ongoing cost reduction initiatives offset by higher start-up costs in 2007 to support our growth in Central Europe and the Rest of Europe and Asia. The efficiency ratios for the life insurance operations deteriorated mainly reflecting the investments in growth areas. Expenses as a percentage of assets under management for investment products deteriorated slightly to 0.76% in 2007 compared with 0.75% in 2006. Expenses as a percentage of premiums for life products decreased to 14.3% in 2007 from 13.3% in 2006. The cost ratio for the non-life operations was flat at 31.8%.

Result before tax and net result

Total result before tax from insurance increased 32.4%, or EUR 1,598 million, to EUR 6,533 million in 2007 from EUR 4,935 million in 2006, mainly due to the gains on equities. This increase was also impacted by divestments which resulted in a profit of EUR 382 million in 2007 and a gain of EUR 49 million in 2006. Divested units contributed EUR 79 million result before tax in 2006 and EUR 42 million to result before tax in 2007. Net result from insurance increased by 41.8%, or EUR 1,651 million to EUR 5,603 million in 2007 from EUR 3,952 million in 2006 due to a decrease in minority interests to EUR 155 million in 2007 from EUR 281 million in 2006, but especially the high tax exempt gains on equity investments caused a reduction of the effective tax rate from 14.2% in 2006 to 11.9% in 2007.

Underlying result before tax

Underlying result before tax from the insurance operations increased by 27.2%, or EUR 1,306 million to EUR 6,113 million in 2007 from EUR 4,807 million in 2006, primarily due to the gains on the sale of ING’s stakes in ABN AMRO and Numico. Underlying result before tax from life insurance increased 43.4%, or EUR 1,461 million from EUR 3,370 million in 2006 to EUR 4,831 million in 2007. The life insurance activities in the US, Central Europe, the Rest of Europe and Latin America showed strong profit growth, supported by increased sales, growth in assets under management and investment gains. The non-life operations decreased by 10.8%, or EUR 155 million from EUR 1,437 million in 2006 to EUR 1,282 million in 2007. In the Netherlands, the deterioration was mainly caused by rate pressure as well as high one-off claims provisions related to last year. Canada results declined due to lower underwriting results and a decrease in investment gains.

BANKING OPERATIONS

Income

Total income from banking increased 5.1%, or EUR 735 million, to EUR 15,113 million in 2007 from EUR 14,378 million in 2006. This increase was experienced despite a decrease in the interest result, which was primarily attributable to a sharp decline in margins, but which was more than offset by increases in commission income and investment income.

The net interest result decreased by EUR 299 million, or 3.2%, to EUR 9,036 million in 2007 from EUR 9,335 million in 2006, driven by lower interest results in Wholesale Banking and ING Direct, which were only partially offset by higher interest results in Retail Banking. The interest margin in 2007 was 0.94%, a decrease from 1.06% in 2006, due to the flattening or even inverse yield curves, pressure on client margins and intensified competition for savings and deposits.

Commission income increased 9.1%, or EUR 245 million to EUR 2,926 million in 2007 from EUR 2,681 million in 2006. The increase in commission income was primarily due to the strong growth of management fees (mainly from ING Real Estate) by EUR 169 million. Fees from funds transfer and brokerage and advisory fees also increased, but fees from securities business decreased slightly by EUR 38 million.

Investment income increased by EUR 791 million, or 118.9%, to EUR 1,457 million in 2007 from EUR 666 million in 2006. The increase was partly due to EUR 56 million in gains recognized on divestments in 2007 and losses of EUR 78 million on divestments in 2006. Furthermore, rental income increased EUR 113 million and realized gains on equities grew EUR 181 million compared to 2006, mainly due to the substantial capital gains following the sale of shares in the stock exchange and the derivatives market in Sao Paulo and a sizeable gain from the sale of an equity stake at Wholesale Banking.

Other income decreased by EUR 3 million, or 0.2%, to EUR 1,693 million in 2007 from EUR 1,696 million in 2006. Net trading income declined EUR 151 million and valuation results from non-trading derivatives, for which hedge accounting is not applied, were EUR 11 million lower. This was largely offset by an increase of EUR 104 million in other revenues, including higher income from operating lease. The share of profit from associates increased by EUR 55 million from EUR 183 million in 2006 to EUR 238 million in 2007, mainly due to associates at ING Real Estate.

Expenses

Total operating expenses increased by EUR 880 million, or 9.7%, to EUR 9,967 million in 2007 from EUR 9,087 million in 2006. The increase is for EUR 445 million attributable to special items in 2007, comprising EUR 295 million in provisions and costs related to the Retail Netherlands Strategy (combining ING Bank and Postbank), EUR 94 million in restructuring provision for Wholesale Banking and EUR 56 million in restructuring provision

for Retail Banking. Divestments in 2006 had a mitigating impact of EUR 111 million on expense growth, but an additional increase of EUR 546 million or 6.1%, was experienced in 2007 due, in part, to investments to support the growth of the business, notably at ING Direct, ING Real Estate and the Retail Banking activities in developing markets.

The addition to the provision for loan losses

The total addition to the provision for loan losses in 2007 was EUR 125 million compared to EUR 103 million in 2006, an increase of 21.4% or EUR 22 million. Retail Banking showed an increase by EUR 22 million, from EUR 176 million in 2006 to EUR 198 million in 2007 and ING Direct showed an increase by EUR 8 million, from EUR 60 million in 2006 to EUR 68 million in 2007. The net release in Wholesale Banking increased by EUR 10 million to EUR 142 million in 2007. As a percentage of average credit-risk weighted assets, the addition to the provision for loan losses in 2007 was 4 basis points, up slightly from 3 basis points in 2006.

Result before tax and net result

Total result before tax decreased 3.2%, or EUR 167 million, to EUR 5,021 million in 2007 from EUR 5,188 million in 2006. Divestments and special items had a negative impact of EUR 458 million on result before tax in 2007, including EUR 489 million in special items, partly offset by EUR 32 million realized gains on divestments. In 2006, divestments resulted in a realized loss of EUR 112 million. The divested units contributed EUR 65 million to result before tax in 2006.

Net result from banking increased 3.9%, or EUR 150 million from EUR 3,869 million in 2006 to EUR 4,019 million in 2007. This decrease is moderated due to the effective tax rate for ING’s banking operations which decreased from 24.3% (EUR 1,259 million) for 2006 to 17.7% (EUR 889 million) for 2007, caused by high tax-exempted gains, the release of some tax liabilities, a lower corporate tax rate in the Netherlands and the impact of a tax asset in Germany.

Underlying result before tax

Excluding the effects of divestments and excluding special items, ING’s banking operations showed an increase in underlying result before tax of EUR 243 million, or 4.6%, from EUR 5,235 million in 2006 to EUR 5,478 million in 2007. Underlying net result increased by EUR 418 million, or 10.6%, from EUR 3,945 million in 2006 to EUR 4,363 million in 2007, due to the low effective tax rate.

CONSOLIDATED ASSETS AND LIABILITIES

The following table sets forth ING Group’s consolidated assets and liabilities for the years ended December 31, 2008, 2007 and 2006:

		2008				2007				2006
		(EUR billions, except amounts per share)
Investments			258.3				292.7				311.6
Financial assets at fair value through the profit and loss account			280.5				327.1				317.5
Loans and advances to customers			616.8				553.7				474.6
Total assets			1,328.6				1,313.2				1,226.5
Insurance and investment contracts:
Life			213.0				232.4				237.9
Non-life			6.7				9.6				10.1
Investment contracts			21.1				23.7				20.7
Total insurance and investment contracts			240.8				265.7				268.7
Customer deposits and other funds on deposits (1)			522.8				525.2				496.7
Debt securities in issue/other borrowed funds			127.7				94.1				107.8
Total liabilities (including minority interests)			1,301.9				1,273.2				1,188.1
Non-voting equity securities			10.0
Shareholders’ equity			15.1				37.7				38.4
Shareholders’ equity per Ordinary share (in EUR)			7.44				17.73				17.78

Year ended December 31, 2008 compared to year ended December 31, 2007

Total assets increased by 1.2% in 2008 to EUR 1,328.6 billion, mainly due to increased loans and advances to customers, partly offset by decreased investments and financial assets at fair value through the profit and loss account. Investments decreased by EUR 34.4 billion, or 11.7%, to EUR 258.3 billion in 2008 from EUR 292.7 billion in 2007, representing a decrease of EUR 22.8 billion in insurance investments and a decrease of EUR 11.6 billion in banking investments.

Loans and advances to customers increased by EUR 63.1 billion, or 11.4%, rising to EUR 616.8 billion at the end of December 2008 from EUR 553.7 billion at the end of December 2007. Loans and advances to customers of the insurance operations decreased EUR 1.9 billion. Loans and advances of the banking operations increased by EUR 70.1 billion. The Netherlands operations increased by EUR 34.9 billion and the international operations by EUR 33.3 billion.

Shareholders’ equity decreased by 60.0% or EUR 22,638 million to EUR 15,080 million at December 31, 2008 compared to EUR 37,718 million at December 31, 2007. The decrease is mainly due to the negative net result from the year 2008 (EUR (3,492) million), unrealized revaluation equity and debt securities (EUR (18,971) million), changes in treasury shares (EUR (2,030) million) and the cash dividend to shareholders/coupon on the Core Tier-1 Securities (EUR (3,600) million), partially offset by realized gains equity securities released to profit and loss (EUR 2,596 million) and the change in cashflow hedge reserve (EUR 746 million).

Year ended December 31, 2007 compared to year ended December 31, 2006

Total assets increased by 7.1% in 2007 to EUR 1,313.2 billion, mainly due to increased loans and advances to customers and financial assets at fair value through the profit and loss account. Investments decreased by EUR 18.9 billion, or 6.1%, to EUR 292.7 billion in 2007 from EUR 311.6 billion in 2006, representing a decrease of EUR 8.2 billion in insurance investments and a decrease of EUR 10.7 billion in banking investments.

Loans and advances to customers increased by EUR 79.1 billion, or 16.7%, rising to EUR 553.7 billion at the end of December 2007 from EUR 474.6 billion at the end of December 2006. Loans and advances to customers of the insurance operations decreased EUR 10.0 billion. Loans and advances of the banking operations increased

by EUR 89.1 billion. The Netherlands operations increased by EUR 30.7 billion and the international operations by EUR 58.4 billion. The impact of the inclusion of Oyak Bank was EUR 4.8 billion. ING Direct contributed EUR 25.1 billion to the increase, of which EUR 28.0 billion was due to personal lending.

Shareholders’ equity decreased by 1.8% or EUR 677 million to EUR 37,718 million at December 31, 2007 compared to EUR 38,395 million at December 31, 2006. Net result from the year 2007 added EUR 9,622 million to equity and unrealized revaluation shares added EUR 2,997 million, partially offset by unrealized revaluations debt securities of EUR 4,725 billion, realized gains equity securities released to profit and loss of EUR 3,044 million, change due to treasury shares of EUR 2,304 million and a cash dividend of EUR 2,999 million.

ING does not have any significant non-consolidated SPEs or other off-balance sheet arrangements for which it is reasonably likely that these may have to be consolidated in future periods, and/or could have a significant impact on our income from operations, liquidity and capital resources. Reference is made to Note 27 of the Consolidated Financial Statements.

ING Group’s segments are based on the management structure of the Group, which is different from its legal structure. The following table sets forth the contribution of our six business lines to our underlying result before tax for each of the years 2008, 2007 and 2006 See Note 49 of Note 2.1 to the consolidated financial statements for further disclosure of our segment reporting.

2008		Insurance				Insurance				Insurance				Wholesale				Retail												Total
(EUR millions)		Europe				Americas				Asia/Pacific				Banking(3)				Banking (3)				ING Direct				Other(1)				Group
Total income			14,489				27,738				14,159				398				7,399				878				(2,479	)			62,852
Total expenditure			13,838				28,327				14,372				3,498				5,979				2,033				(269	)			67,778
Result before tax			651				(589	)			(213	)			(3,100	)			1,420				(1,155	)			(2,210	)			(5,196	)
Gains/losses on divestments							(237	)			214																15				(8	)
Result before tax from divested units							(28	)			115																				88
Special items							321												271				30								622
Underlying result before tax			651				(534	)			116				(3,100	)			1,691				(1,125	)			(2,194	)			(4,495	)

2007		Insurance				Insurance				Insurance				Wholesale				Retail												Total
(EUR millions)		Europe				Americas				Asia/Pacific				Banking				Banking				ING Direct				Other 1) 2)				Group
Total income			16,262				29,681				14,383				5,312				7,483				2,196				1,781				77,097
Total expenditure			13,962				27,529				13,807				2,836				5,405				1,667				338				65,544
Result before tax			2,300				2,152				576				2,476				2,079				530				1,443				11,554
Gains/losses on divestments			(418	)			(93	)											(32	)							129				(414	)
Result before tax from divested units			(42	)			3																								(39	)
Special items															94				355								40				489
Underlying result before tax			1,840				2,062				576				2,570				2,402				530				1,611				11,591