Moody’s Affirms ING’s Debt Ratings

January 12, 2004

Moody’s Investors Service announced that it has affirmed the debt ratings of ING Groep N.V. (ING Group) and ING Verzekeringen N.V. (ING Insurance) at Aa3 for senior debt, A1 for subordinated debt, and Prime-1 for short-term debt. All ratings have a stable outlook.

The affirmation reflects “the early benefits of the group’s efforts deployed over the last eighteen months to restore its financial flexibility by the implementation of a series of measures to enhance capital growth and retention, and to refocus some of its less performing business units,” said Moody’s.

The report added, “ING Bank N.V.’s ratings (long- and short-term bank deposit at Aa2/Prime-1; bank financial strength at B+) also continue to have a stable rating outlook.” Moody’s observed that ING had reacted vigorously since late 2002 to stem the deterioration in its solvency and the related increase in its debt leverage, notably by changes to its dividend policy and measures to lower its balance sheet risk in the face of “a more challenging environment associated with a weaker global economy and the downturn experienced in equity markets.”

The rating agency noted that the group “has been addressing poor profitability issues at some of its key units and has selectively pruned its business portfolio in non strategic areas. Financial performance in 2003 is also benefiting from lower credit and investment losses and efficiency gains. As a result, strong core earnings generation across the group have allowed both ING Group and ING Insurance to maintain sound debt service coverage, aided by the group’s efforts to start managing down its debt leverage.”

Moody’s nevertheless pointed to the group’s challenges as follows: “(i) achieving further efficiency gains across its organisation, as additional market turmoil, decline in interest rates and competitive pressure may continue to weigh on its operating margins, and of (ii) achieving further improvements in the profitability and operational capabilities of some of its key business units, which continue to underperform the group’s targets.”

It added that its stable rating outlook “was predicated on its expectation that the group would successfully continue in future to restore its financial flexibility and solvency, which management still wants to further improve, and also noted that the strong operating cash flows and dividend capacity coming from ING Bank N.V. were somewhat mitigating ING Group’s relatively high double leverage, and that the bank’s financial strength and current ratings remained a key factor in sustaining the ultimate holding company’s ratings.”

Moody’s concluded that, “at their current level, ING’s ratings continue to reflect the strength and diversity of the group’s various business lines, and the superior diversification of its earnings sources, and added that ING’s conservative management style, low risk profile, and its position as one of Europe’s leading financial services groups, remained key factors underpinning its ratings.”

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