ING Plans 400 Layoffs in the US to Prepare for Spinoff

ING Groep began laying off 400 workers on Nov. 10 across the United States as it prepares to spin off its life insurance and annuity retirement business.

Some 200 positions were already open before the layoffs were announced, so there will be 600 positions in total that will be unfilled, said ING U.S. spokesman Dana Ripley. The headcount reduction is happening across the United States and represents about 5% of ING's U.S. work force. "The headcount reduction is part of a broader effort to sharpen our strategic focus and reduce administrative expenses as we prepare for a U.S.-focused IPO," he said. Employees that are losing their jobs will be notified by the end of the week, he said. U.S. employment will fall to about 7,600.

Ripley said the layoffs affect a variety of jobs, not one specific kind, and the reductions are spread evenly over the country.

In a statement released in conjunction with the Amsterdam-based corporation's third-quarter earnings report, Chief Executive Officer Jan Hommen said ING is preparing for a base case of two initial public offerings -- one in the United States and one in Europe -- and it is implementing changes to increase transparency and bring the U.S. insurance accounting and hedging "more into line with U.S. peers." The aim is to create "a strong and profitable U.S. insurance business that can be IPOed when earnings and market circumstances improve," he said.

The spinoffs, which may take place in 2012, are part of a plan to continue paying back a $13 billion bailout received from the Dutch government in 2008. A restructuring plan between ING and the European Commission requires ING to divest its global insurance, ING Direct (U.S. only) and asset management operations by 2013 through sale, IPO or some combination thereof (BestWire, June 11, 2010).

Consistent with ING Groep's "Back to Basics" strategic plan, ING USA's business profile is narrowing to concentrate on individual life, group retirement and a de-risked portfolio of individual annuity products while de-emphasizing financial products and legacy annuities, according to BestLink, which provides online access to A.M. Best Co.'sGlobal Insurance & Banking Database. This revised strategy should result in lower operating volatility and higher margined business over time.

On Nov. 10, ING reported a third-quarter net profit of 371 million euros ($510 million), which was impacted predominantly by a goodwill write-down of 513 million euros on the value of the U.S. insurance businesses. That is a 26% decline from 499 million euros in the third quarter of 2009.

ING U.S. companies include ING Life Insurance and Annuity Co., ING USA Annuity and Life Insurance Co., ReliaStar Life Insurance Co., ReliaStar Life Insurance Co. of New York, and Security Life of Denver Insurance Co. They currently have Best's Financial Strength Ratings of A (Excellent).

(By Ron Panko, senior associate editor, Best's Review: Ronald.Panko@ambest.com)