ING Groep NV (INGA), the Dutch company planning an initial public offering for its European insurance arm next year, said it hasn’t set a final capital target for the unit and repeated that a spinoff is also possible.
Given that ING hasn’t settled on the ultimate leverage for the insurer, a capital target has “yet to be finalized under regulatory, rating and economic constraints,” ING Chief Executive Officer Jan Hommen said in a presentation today in London. The IPO is planned for the second half of 2014.
The division’s solvency ratio has fallen in the past three months after France’s credit rating was downgraded, the company said. ING, the biggest Dutch financial-services company, wants to ensure the insurance business is well-capitalized to satisfy regulators and ratings companies before an IPO or spinoff.
“I know that some of you had been hoping to get all types of targets,” Hommen told analysts and journalists. “We’re going hold you off for that for the time being. That will be at a later day, when we get closer to the IPO.”
The shares erased an early advance, falling 0.8 percent to 8.91 euros at 11:50 a.m. in Amsterdam trading. ING is still up 26 percent this year.
ING said it’s in the “end phase” of a European Union-imposed restructuring program that followed a rescue by the Dutch state in 2008 and 2009. ING has until the end of 2018 to complete the disposal of its insurance unit.
The company has sold 23 billion euros ($31 billion) of assets in the restructuring and expects 1.5 billion euros in proceeds from further transactions, which will be used to cut the insurer’s debt burden.
The European insurance operations’ pro-forma solvency ratio, a measure its ability to absorb losses, fell to 248 percent from 257 percent at the end of June following France’s downgrade by Fitch Ratings in July, according to a presentation on the company’s website. The downgrade hurt solvency in ING’s Dutch Nationale-Nederlanden unit by 41 percentage points, decreasing it to 189 percent, at the lower end of a target range, ING said.
Insurers in the Netherlands have to calculate liabilities using an interest-rate curve deriving from a selection of sovereign bonds of AAA-rated nations. The exclusion of French government debt has left the curve dominated by low-yielding German debt, inflating liabilities.
Following the sale of insurance assets in Asia, including the South Korean unit it agreed to sell to MBK Partners Ltd., and excluding the U.S. unit, ING Insurance will have 3.1 billion euros in debt.
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