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Insurance helps ING to 6.7% rise in 2006 profit

Dutch financial services group ING Groep NV posted a stronger-than-expected 6.7% rise in 2006 net profit on Thursday, as a healthier insurance business offset a weaker performance in banking

Net profit rose to €7.69 billion ($10 billion) from €7.21 billion in 2005 and exceeded an average forecast of €7.25 billion in a Reuters poll of 20 analysts. Q4 net profit rose 14.2% to €2.1 billion. ING, one of the top five insurers in Europe, said life insurance in emerging markets helped drive growth in the last three months of 2006. It also cited strong real estate markets, lower taxes and favorable conditions in the non-life insurance business. Banking net profit was hurt by a flatter US yield curve, which makes it harder for ING to borrow money short term to provide longer-terms loans to borrowers. „The bottom line was impressive,” said Petercam analyst Ton Gietman in a client note, adding that ING was able to post growth despite some tough areas in the business. ING shares were down 0.75% at €34.37 at 10:12 a.m., slightly underperforming the DJ Stoxx European banking index, which was down 0.6%.

„While the current interest rate environment is challenging, particularly for our banking business, the interest margin stabilized in the fourth quarter,” ING Executive Board Chairman Michel Tilmant said. „Our diversity works well in difficult markets.” Underlying profit, which excludes taxes and other charges, rose at its insurance arm by 23% to €4.89 billion and at its banking arm by 11.4% to €5.07 billion. Insurance also benefited from strong equity and asset markets worldwide. ING said, however, that its life insurance businesses in the US and Japan needed more „management attention” to make them more competitive and profitable. „ING will emphasize growth in 2007 by seeking profitable growth across all six business lines,” Tilmant said, „Our three growth engines - life insurance in developing markets, retirement services and ING Direct - will continue to be key drivers of growth.” Asked about any potential acquisitions, Tilmant told a news conference he was not looking for any large deals. „We will look here and there to make small add-on acquisitions,” Tilmant said.

ING is also looking to extract more efficiency out of its retail operations, especially in its home market of the Netherlands and for ING Direct, its direct and Internet banking service. Asked whether ING was looking at changing the Postbank brand in the Dutch market, ING said that it was looking at the all scenarios for the retail network but had not discussed any changes at the board level. ING Direct, known for its aggressive orange-themed marketing outside of the Netherlands, added more than 3 million new customers in 2006. ING is studying a launch of ING Direct in Japan, one of the most potentially lucrative markets for direct banking. ING also said that CFO Cees Maas would retire in April and be replaced by John Hele, his deputy. ING said it would pay a dividend of €1.32 per share for 2006, up from €1.18 a year earlier. „ING posted strong, and better than expected, Q4 results and we remain positive on the stock,” said Van Lanschot Bankiers analyst Ronald van Wanrooij. Its shares fell more than 10% in the weeks after it announced Q3 earnings in November, when it said that the interest rate environment remained challenging. (