S&P Affirms ING Re’s ‘AA+’ Ratings

June 17, 2002

Standard & Poor’s has affirmed its double-‘A’-plus counterparty credit and insurer financial strength ratings on ING Re (Netherlands) N.V. with a negative outlook, following its annual review of the company.

S&P described ING Re as being “a core operating entity of the ING insurance group,” and specifically, “a key operating entity of ING Corporate Reinsurance, a business unit formed in December 2001 to focus on intragroup reinsurance and run-off reinsurance operations. ING Re Netherlands’ role is to implement the ING group’s risk management strategy using reinsurance, through the creation of intragroup synergies,” said the bulletin.

The announcement noted, however, that ING Re’s main activity consists of providing “support to other companies within the ING group for nontraditional reinsurance transactions.” S&P said it had not reviewed in detail all of these “structured reinsurance transactions,” but concluded that it “considers that the overall exposure of ING Re Netherlands to nontraditional reinsurance and financial guarantee transactions has been higher than expected.”

The report went on to state that “Following a strategic review of its activities in the latter part of 2001, ING Re Netherlands now intends to concentrate on providing traditional reinsurance solutions to other ING group members. Consequently, Standard & Poor’s does not expect ING Re Netherlands to acquire additional exposure to nontraditional reinsurance transactions or financial guarantee transactions. In addition, any third-party traditional reinsurance business is expected to be limited to 10% of net premiums written. Capital adequacy is expected to be maintained at a level consistent with the ratings on ING Re Netherlands.”

“The outlook on ING Re Netherlands reflects the company’s status as a core entity of the ING insurance group and is driven by the outlook on the parent, INGV,” stated Simon Marshall, an associate director at Standard & Poor’s Financial Services Group in London.

He indicated that the negative outlook “is driven by concerns that management might be challenged in translating INGV’s recently acquired impressive U.S. life business position into the expected improved earnings. Notwithstanding the recently announced plans to reduce headcount by 15%, the challenge of integration remains significant, culturally, operationally, and legally. In addition, the negative economic trends in the U.S. provide limited margin for error.”|”sp, affirms, ing, re’s, ‘aa+’, ratings

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