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Rating Action:

Moody's places ING's ratings on review for possible downgrade

21 Sep 2009

London, 21 September 2009 -- Moody's Investors Service today placed on review for possible downgrade the C+ bank financial strength rating (BFSR) of ING Bank N.V. ("ING Bank") and its Aa3 long-term senior debt ratings. Moody's also placed on review for possible downgrade the A2 senior debt of ING Verzekeringen N.V. ("ING Insurance") and the A1 senior debt rating of ING Groep N.V. ("ING Group"), the main holding company. The A1 insurance financial strength ratings (IFSRs) of ING's U.S. life insurance operating companies (collectively "ING US") were also placed on review. The short term P-1 rating for ING Bank was affirmed; the short term P-1 debt rating for ING Insurance was placed on review. A complete list of affected ratings is given below.

The rating action follows the announcement by the European Commission ("EC") last week of further investigation as concerns the Alt-A Back-up facility provided by the Dutch government to ING Group at the beginning of the year. Moody's notes that any revision of the original terms could potentially affect either the bank's current capital level and/or the bank's P&L. The review will also consider the additional capital pressures from continuous elevated levels of loan losses.

The illiquid assets back-up facility agreed with the Dutch government covered 80% of ING's EUR27.7 billion Alt-A mortgage securities, held at the time by both ING Bank -- approximately 87% of Group total -- and in ING's US insurance operations. This arrangement, which transferred 80% of economic risk of the securities to the Dutch State in exchange for a guarantee fee, considerably reduced the risk originated by this portfolio. The risk transfer took place at a discount of 10% of par value.

HEIGHTENED PRESSURE ON CAPITAL/PROFITABILITY LEVELS DRIVES REVIEW OF ING BANK'S RATINGS

Moody's decision to place ING Bank's ratings on review for possible downgrade reflects the heightened risk from a potential change in the terms of the Alt-A Back-up facility agreed with the Dutch Government in January 2009, as well as Moody's expectations of continued earnings and capital pressure at the bank through continuous elevated levels of loan losses. ING Bank's current BFSR incorporated the full relief of the January agreement between the Government and ING Group. Moody's previous negative outlook on the bank's C+ BFSR reflected the rating agency's expectation that the bank's profitability would remain constrained and would be affected by continuous high levels of loan loss provisions as well as by potential additional write-downs on the bank's structured finance assets.

On September 15 the European Commission announced the extension of both its investigation of the illiquid asset back-up facility provided by the Dutch State to ING and its temporary clearance of the measure until its final assessment of the facility. The EC highlighted that at this stage the valuation of the structure was not conservative enough and could require an increasing remuneration of the Dutch State should the Dutch authorities not be in a position to address EC's concerns.

At this stage, there is uncertainty about the content and extent of a final agreement between the EC and ING. The BFSR was placed on review for possible downgrade as, in Moody's view, additional payouts would hamper the bank's ability to rebuild reserves, as rising credit losses across its business lines against the background of the depressed economic environment are expected to weaken its profitability over the medium-term. As a consequence, ING Bank has rather weak prospects of regaining its earlier financial strength and flexibility, which has been materially weakened by the global crisis.

The long-term debt and deposit ratings were placed on review for possible downgrade as a direct consequence of the review on the BFSR. Moody's view that the bank benefits from "very high" systemic support has been confirmed and, as a consequence, the long-term debt and deposit ratings continue to benefit from a two-notch uplift from the Baseline Credit Assessment (BCA) of A2. Nonetheless, the review reflects the uncertainty on the extent of the restructuring of the bank in the coming months.

REVIEW ON ING INSURANCE AND ING GROUP RATINGS REFLECTS PRESSURE ON ING BANK

Moody's added that the ratings of ING's Insurance, ING US and of ING Group continue to benefit from support provided by ING Bank as well as, indirectly, via the provision of external capital and asset protection facilities. The possible downgrade for ING Bank potentially pressurizes the level of support available for ING's other operations, and the review for possible downgrade at ING Group, ING Insurance and ING US will consider the extent to which rating uplift can be provided above these entities' stand-alone rating levels going forward.

RATINGS AFFECTED

The following ratings were placed on review for possible downgrade:

- ING Groep N.V.: A1 senior debt, A2 subordinated debt ratings

- ING Bank N.V.: the C+ bank financial strength rating (BFSR), Aa3 long-term bank deposits and senior unsecured ratings, A1 subordinated and junior subordinated ratings;

- ING Verzekeringen N.V.: the A2 senior debt rating and Prime-1 short-term rating for commercial paper

- ING Belgium SA/NV: the Aa3 long-term bank deposit ratings;

- ING Belgium International Finance S.A.: the backed Aa3 long-term senior unsecured ratings;

- Internationale Nederlanden Bank N.V., Paris branch: the Aa3 long-term senior unsecured ratings;

- ING Bank N.V., Tokyo Branch: the Aa3 long-term senior unsecured ratings;

- ING Bank N.V., Sydney Branch: the Aa3 long-term senior unsecured ratings;

- ING Groenbank N.V.: the backed Aa3 long-term senior unsecured ratings;

- ING Bank (Australia) Ltd: the backed Aa3 long-term senior unsecured ratings and long-term deposit note/CD program ratings;

- ING Bank Slaski S.A.: the A2 long-term and Prime-1 short-term bank deposits ratings (local and foreign currency);

- ING Bank Eurasia: the Baa1 long-term and Prime-2 short-term bank deposits ratings (local and foreign currency);

- ING (US) Issuance LLC: Aa3 senior unsecured debt rating

- Lion Connecticut Holdings, Inc.: the A1 senior debt rating (guaranteed by ING Groep N.V.), A3 unguaranteed senior unsecured debt rating; A3 long-term issuer rating;

- ING America Insurance Holdings, Inc.: the A2 senior debt rating (guaranteed by ING Verzekeringen, N.V.), Prime-1 short-term rating for commercial paper rating (guaranteed by ING Verzekeringen, N.V.)

- Security Life of Denver Insurance Company: the A1 insurance financial strength rating;

- ING Life Insurance & Annuity Company: the A1 insurance financial strength rating;

- ING USA Annuity and Life Insurance Company: the A1 insurance financial strength rating;

- Reliastar Life Insurance Company: the A1 insurance financial strength rating;

- Reliastar Life Insurance Company of New York: the A1 insurance financial strength rating;

- ING USA Global Funding Trusts 1-5: the A1 senior secured debt rating;

- ING Security Life Institutional Funding: A1 senior secured debt rating;

- ING Americas Issuance B.V.: Aa3 long-term debt rating;

All other ratings are unaffected by this rating action.

A separate press release will be issued for ING Bank of Canada.

RATING HISTORY AND MOODY'S METHODOLOGIES

On August 20, 2009 Moody's Investors Service downgraded the preference stocks of ING Groep N.V. to Ba1 from A3. Moody's also downgraded the subordinated debt securities of ING Verzekeringen N.V. to Ba1 from A3, the trust preferred securities of ING Capital Funding Trust III to B1 from A3 and the preferred stocks of Equitable of Iowa Companies Capital Trust II to Ba1 from Baa1. The ratings for these securities remain under review for possible further downgrade. Moody's action reflected our assumption of a high probability of coupon suspension on these securities as a result of the ongoing discussion between ING Group and the European Commission ("EC") on its state aid package and followed Moody's press release entitled "Moody's sees broader impact on hybrid ratings triggered by EC's state aid reviews", published on 19 August 2009. In Moody's view, there is a high probability that the EC could ask ING Group to refrain from paying coupons on various subordinated securities of the group, in line with its objective of burden sharing.

The principal methodologies used in rating ING and its subsidiaries are "Moody's Global Rating Methodology for Property and Casualty Insurers" published in July 2008, "Moody's Global Rating Methodology for Life Insurers", published in September 2006, "Bank Financial Strength Ratings: Global Methodology", published in February 2007 and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", published in March 2007 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Based in Amsterdam, ING Groep N.V. had total assets amounting to EUR1,188 billion at end-June 2009 and reported a net loss of EUR722 million for the six months ending June 2009.

Based in Amsterdam, ING Banking activities had total assets amounting to EUR912 billion at end-June 2009 and its Tier 1 ratio stood at 9.4%, on a Basel II basis. In H1 2009, the banking activities of ING Groep reported a net profit of EUR232 million.

The insurance activities of ING Groep had total assets amounting to EUR287 billion at end-June 2009 and the insurance capital coverage ratios for insurance activities was 257%. In H1 2009, the insurance activities of ING Groep reported a net loss of EUR955 million.

London
Antonello Aquino
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Simon Harris
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's places ING's ratings on review for possible downgrade
No Related Data.
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