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Rating:Three Things to Know from ING U.S.'s First Earnings Not Rated 0.0 Email Routing List Email & Route  Print Print
Friday, May 24, 2013

Three Things to Know from ING U.S.'s First Earnings

Reported by Tommy Fernandez

So, the newly public ING U.S. has reported its first quarterly earnings, ever.

It was an important presentation for a number of reasons, especially given its context.

The U.S. arm of the Dutch financial services giant went public earlier this month at an initial price of $19.50 which some experts thought was underwhelming. There was even some analyst speculation that the might not stay public for long.

If you listen to the company's earnings call of senior managements' discussion with analysts and their slide show presentation, as well as look at their earnings statement, you'll note several important themes as the company works to right itself.

Three themes that MFWire noted were:

POINT 1: Return on Capital is VERY Important
POINT 2: Asset Management is VERY Important for R.o.C.
POINT 3: ING is Devoting A Lot Towards Maximizing A.M.
Now to drill down on these points.

POINT 1: Return on Capital is VERY Important
As you would expect from a newly-public former arm of a complex global financial giant, ING's first earnings were complicated, according to Slide 16 of the webcast presentation. Depending on what metric you use, the company reported either $285 million gain, in terms of ongoing business operating earnings before income taxes, $181 operating earnings, adjusted and after-tax, or a $212 million loss. The reason for the various figures? ING is dealt with $310 million charge related to closed block variable annuities, a business the company is running off. It is also dealing with a variety of lingering capital issues inherited from its former Dutch parent, which remains a major stakeholder. In fact, the main reason the company went public was to help its parent pay off significant bailout debt to the Dutch government.

According to chairman and chief executive Rod Martin and chief operating officer Alain Karaoglan, the company is involved with 30 initiatives devoted to improving return on capital and return on earnings. The goal is to reach 400-500 basis points of ROE improvement by 2016.

POINT 2: Asset Management VERY Important for R.o.C.
Both asset management and retirement (one of ING U.S.'s three core remaining businesses along with insurance) is VERY important for generating earnings and improving return on capital.

Out of the $285 million of ongoing pre-tax business operating earnings, 76 percent came from ING's retirement and asset management operations: with 65 percent coming from retirement and the other 11 of the 76 percent points coming from asset management.

For the quarter, the retirement business generated $1.4 billion in net flows, while asset management generated $3.2 billion.

POINT 3: ING is Devoting A Lot Towards Maximizing A.M.
ING's sales force saw third-party AUM growth opt 6 percent compared to the same period a year ago, with DC I-O sales of $200 million. They had takeover mandates of $645 million. The company is looking to improve sales force productivity, reducing retail outflows and growth in high fee asset classes. The company is also looking to replace underperforming sub-advisors.

An important strategy to note, ING is looking to move some of its business away from recordkeeping focused accounts to more profitable full-service plans, depending on demand from plan sponsors.

For more information, go to the company's website containing senior managements' discussion with analysts and their slide show presentation, as well as look at their earnings statement.  

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