Fitch Affirms ING, U.S. Subs, Ratings; Removes from Watch Negative

Fitch Ratings announced that it has affirmed and removed from Rating Watch Negative the ‘AA’ insurer financial strength (IFS) rating of most of ING Verzekeringen N.V.’s (INV) U.S.-based insurance operating subsidiaries (ING-US). Fitch also affirmed its long-term ratings on INV and its U.S.-based subsidiaries with a stable outlook.

The bulletin noted: “INV, for which US Life operations are key components, is part of ING group, a leading global banking and insurance group located in the Netherlands, with a strong franchise in a number of countries, including the Netherlands, Belgium, the United States, Mexico, Canada, Korea, Taiwan, Japan and Australia.

“As a whole, INV’s global insurance operations produced improved results as it focused on streamlining business positions on a global basis, improving margins in both life and non-life business segments and reducing expenses. In addition, INV has strengthened its capital adequacy and has managed to reduce its debt level to a satisfactory level. The Stable Rating Outlook for INV’s long-term rating reflects Fitch’s expectation that its worldwide insurance activities will continue to improve their operating performance despite the unfavorable context of low interest rates while maintaining strong capital adequacy.”

Fitch said the ‘AA’ IFS rating on ING-US reflects its view that “U.S.-based insurance operations are core to INV, ING group’s lead insurance holding company, and as such receives implicit support for the rating. Absent this support, Fitch views ING-US’s IFS rating at ‘AA-‘ on a standalone basis due primarily to modest risk-adjusted capital levels for the rating and moderate, but improving profitability.

“Additional factors in the rating are ING-US’s strong business position in the United States 401(k) and 403 (b) retirement savings, life insurance and variable annuity markets, as well as solid positions in fixed annuities and mutual funds.

“Additional strengths include diversified revenue and distribution channels and a high quality investment portfolio. Fitch notes that ING-US operating performance has exhibited good top and bottom line growth in 2004 and early 2005. Additionally, credit-related investment losses have declined and fixed annuity margins improved.
Fitch’s debt ratings on INV’s U.S.-based subsidiary debt reflect INV’s guarantees on certain issues and INV’s financial strength and resources on issues with no direct guarantees.”

The stable outlook is based on Fitch’s “expectations of ING-US’s continued status as a core operation of INV and strong market positions in retirement savings, life and annuity markets.”

Fitch also indicated that it “expects ING-US’s profitability will improve moderately in 2005 but will continue to lag INV’s performance. Challenges include managing expenses in life insurance, improving spread margins in fixed annuities and increasing statutory capitalization levels in support of solid growth. ING-US’s risk-adjusted capital is expected to not fall below 300 percent of NAIC company action level.”