BRUSSELS, June 25 (Reuters) – Dutch bancassurer ING Groep (ING.AS) may retain its Belgian insurance activities rather than divest the business because of risks the unit may not be viable otherwise, Belgium’s De Tijd newspaper said on Friday.
ING agreed to split its banking and insurance operations as part of a restructuring deal with the EU’s executive arm, the European Commission (EC), after it got 10 billion euros ($13.4 billion) in state aid to help it through the credit crisis.
The group plans to dispose of the insurance business and has said its preferred route would be an IPO, which would not come until 2011 at the earliest, but financial daily De Tijd cited sources as saying ING might keep its Belgian insurance business.
“That option is being considered and ING prefers it,” the newspaper cited a source as saying.
Another source said the banking and insurance activities are so closely intertwined that a split would be very costly and could threaten the viability of the Belgian insurance arm.
The group therefore hopes to obtain EU approval to retain the Belgian insurance business, De Tijd said.
An ING spokesman said it was possible the Belgian insurance and banking operations could remain together. Belgian insurance was mainly sold through banking operations, he said.
“All scenarios are being looked at,” the spokesman said, when asked if ING could keep its Belgian insurance operations.
“We very much like the bank to remain an important distribution channel for insurance activities. We are looking now how that can be done in the best way,” the spokesman said.
He declined to say if the insurance unit’s viability was at stake if it were to be split from the banking operations.
There were other countries where it was also a “bit more difficult” to separate banking and insurance operations but ING kept its target to separate its banking and insurance operations by the end of 2013, the spokesman said.
Analysts said convincing the EU could be difficult, given that ING has a pending appeal against its EC restructuring order. ING struck a one-time deal with the Dutch state for lower penalties on the early repayment of some aid; the EU counted the penalty discounts as additional aid, however.
“The challenge will be to convince the EC to accept this option knowing that ING is already in a legal dispute with the EC regarding the reduction of the penalty upon redemption of the core capital securities, which the EC considers to be state aid as well,” KBC Securities said in a research note.
ING had previously identified Belgium as one of a small group of countries with a high degree of bank and insurer integration and with dependencies that, if not resolved by the time of separation, “may hinder the operational integrity of the separated business unit”.
ING shares eased 0.4 percent by 0827 GMT in Amsterdam, while the European insurance sector .SXIP was flat. (Writing by Antonia van de Velde; additional reporting by Gilbert Kreijger and Ben Berkowitz in Amsterdam; editing by Simon Jessop and Michael Shields) ($1 = 0.7453 euro)