S&P Assigns ‘BBB+’ Rating to ING’s Hong Kong P/C Operation

December 5, 2005

Standard & Poor’s Ratings Services announced that it has assigned its “BBB+” insurer financial strength and long-term counterparty credit ratings to ING General Insurance Co. Ltd. (ING GIHK) with a stable outlook.

“The ratings reflect the company’s strong and consistent underwriting performance and its good capital position,” stated S&P credit analyst Paul Clarkson. S&P said the “also reflect the benefits of belonging to a financially strong global financial services group, ING GROEP N.V. (AA-/Stable/–), with the benefits and access to group resources that membership entails.”

However S&P indicated that the “ratings are moderated by its modest business position with the competitive operating environment of Hong Kong. The Netherlands based ING GROEP N.V. is a global financial services company, providing a wide array of banking, insurance and asset management services in more than 50 countries. In Hong Kong the group’s insurance operations encompass life insurance, pensions and general insurance. The Hong Kong operations are integrated and the general insurance operations are viewed as a business line rather than an independent operating entity.

“The company has strong financial flexibility, supported by its membership of the ING group. Evidence of group support is the extensive use of the group reinsurance company in placing its reinsurance program. Internal capital generation is good.

“ING GIHK has a modest business position in Hong Kong’s competitive general insurance market with a small market share of 0.9 percent. However, the Hong Kong market is very fragmented and the largest player commands a market share of only 5.8 percent.”

S&P noted: “To counter its modest business position, the company has a niche focus on the small and midsize enterprise sector, sourcing its business through strong relationships with brokers and agents. This strategy has brought ING GIHK success through steady and profitable premium growth. ING GIHK’s operating performance was very good in 2004, when it had a combined operating ratio of 93.8 percent and a five-year average of 94.4 percent.

“This compares favorably with its peers, which have displayed a degree of volatility over the same period. The company’s selective underwriting and focus on profitable underwriting has helped maintain a steady underwriting position. ING GIHK’s loss ratio has remained steady at about 50 percent.

“Although the company’s expense ratio would benefit from additional scale, at 43.7 percent in 2004 it compared favorably with its peer group average given its use of brokers and agents to acquire business. ING GIHK’s expense ratio also benefits from the company’s membership in a larger operation and its ability to spread expenses over a larger base. Its investment performance is reasonable and reflects a conservative investment portfolio producing consistent returns.

“ING GIHK’s capital relative to risk is considered good as evidenced by a solvency ratio of 82.4 percent in 2004. However, its capital base is small on an absolute basis in a global context, offering limited protection against adverse operating conditions or operational risk.”

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