ING Canada Reports 2008 Fourth Quarter and Year-End Results



    
    Strong financial position with $428 million in excess capital and no
    debt

    Continuing equity market weakness led to $186 million in impairments on
    common shares
    

    TORONTO, January 26 /CNW/ - ING Canada Inc. (TSX: IIC) reported a net
loss of $64.1 million or $0.53 a share for the quarter ended December 31, 2008
compared to a gain of $95.8 million or $0.77 per share last year. The decline
reflects the impairment of $185.8 million or $1.06 per share of common
equities as a result of the deep and prolonged drop in value of Canadian
common equities.
    Net operating income for the quarter was $75.1 million or $0.63 per share
down from $116.4 million or $0.93 per share recorded in the same quarter of
last year. The overall combined ratio for the quarter was 98.9%, up 5.7
percentage points from the same quarter of the previous year.
    Net income for the year 2008 was $128.2 million down 74.8% from the
previous year while net operating income declined by 21.1% to $360.7 million.
The overall combined ratio for the year was 97.1%. The financial position of
the company is strong with $427.5 million in excess capital, a minimum capital
test ratio of 205%, up 5.1 percentage points from the end of the previous
quarter, no debt and an untapped $150 million unsecured committed credit
facility. Impairments do not have an impact on either the regulatory minimum
capital or the excess capital position of the company since these measures
already take into consideration the market value of all assets.

    
    CEO's comments

    Charles Brindamour, President and CEO, commented:
    

    "In light of the announcement made earlier today by our majority
shareholder, ING Groep, we have decided to advance the publication of our
financial results and balance sheet that confirm our strong financial
position.
    "Our operating performance in 2008 was healthy with a net operating
income of $361 million. Our business insurance continued to perform extremely
well in the current pricing environment. However, the severe storms that
prevailed during the year impacted the results of our home insurance
portfolio. Current accident year results in auto insurance were relatively
stable.
    "Given the deep and prolonged decline of the Canadian stock market and
the level of uncertainty about its recovery, we took a significant impairment
on our common equity portfolio. We also continued to reduce the impact of the
volatility of the capital markets on our balance sheet. Our financial position
is strong with significant excess capital and no debt, which allows us to
pursue our growth strategy and to capitalize on the acquisition opportunities
that may arise as a result of the current market conditions.
    "The increased cost of claims in automobile insurance and the changing
weather patterns are likely to drive up the price of home and auto insurance
products in 2009. In commercial insurance, there are indications that the
pricing may be firming up."

    Current Outlook

    Personal and business insurance premiums are likely to rise over the next
12 months across the industry. The increase in claims costs in auto insurance
in Ontario and Alberta as well as the water-related damages in home insurance
could lead to premium increases in personal insurance. In business insurance,
current market indications suggest that the pricing environment will become
less aggressive.
    Unprecedented volatility and instability of the capital markets could
result in additional investment losses for the industry. With industry returns
and capital levels under pressure, conditions are more conducive to industry
consolidation and point to higher premiums overall.
    The Canadian economy is weakening under the pressures of the global
financial crisis and reduced commodity prices. However, the property and
casualty insurance industry has historically been less sensitive to economic
slowdown than many other sectors.
    ING Canada is well-positioned to continue to outperform the property and
casualty industry in the current environment due to its significant scale,
pricing and underwriting discipline, prudent investment management and its
strong financial position.

    
    Consolidated Highlights

    -------------------------------------------------------------------------
    In millions of        2008   2007     Change     2008     2007    Change
     dollars, except      ----   ----     ------     ----     ----    ------
     as otherwise           Q4     Q4
     noted                  --     --

    Direct Premiums
     Written,
     excluding pools     968.2  961.3       0.7%  4,145.5  4,108.6      0.9%
    Underwriting
     Income(1)            11.0   68.2    (83.9)%    117.0    189.1   (38.1)%
    Net Operating
     Income(2)            75.1  116.4    (35.5)%    360.7    457.0   (21.1)%
    Net Operating
     Income Per Share     0.63   0.93    (32.3)%     2.96     3.61   (18.0)%
    Net Income (loss)    (64.1)  95.8   (166.9)%    128.2    508.3   (74.8)%
    Net Income
     Per Share ($)
      Basic and Diluted  (0.53)  0.77   (168.8)%     1.05     4.01   (73.8)%
    Return on Equity
     - last 12 months     4.4%  15.4% (11.0) pts
    Combined Ratio
     (excluding MYA)     98.9%  93.2%    5.7 pts    97.1%    95.2%   1.9 pts
    -------------------------------------------------------------------------
    (1) Underwriting income is defined as underwriting income excluding
        market yield adjustment (MYA)
    (2) Net operating income is defined as the sum of underwriting income,
        interest and dividend income and corporate income after tax

    Operating Highlights

    -   Net operating income, which is defined as the sum of underwriting
        income, interest and dividend income and corporate income after tax,
        declined 35.5% to $75.1 million during the quarter as a result of
        lower underwriting results and investment income. For the year, net
        operating income was $360.7 million, down from the previous year,
        mainly as a result of the impact of the severe storms that prevailed
        during the year.

    -   Direct premiums written increased marginally to $968.2 million in the
        quarter and $4,145.5 million for the year. The slow pace of growth
        reflects our continued pricing discipline in both personal and
        commercial lines.

    -   Underwriting income, excluding the market yield adjustment, declined
        during the quarter to $11.0 million as a result of a 5.7 percentage
        point increase in the combined ratio to 98.9%. Our business insurance
        portfolio continued to improve during the quarter with a 78.7%
        combined ratio and underwriting income of $57.8 million, up 36.6%.
        Personal auto insurance results, which improved in the last quarter,
        deteriorated in the current quarter with an overall combined ratio of
        102.9%. Lower favourable prior year claims development than the
        corresponding period of last year and a higher average cost of
        claims led to an underwriting loss of $14.8 million in personal
        auto. Home insurance results were severely impacted by the weather
        conditions that prevailed in the last two weeks of the year.
        Overall, the combined ratio of our home insurance business was
        114.1%, resulting in a loss of $32.0 million.

        For the year, underwriting income declined by $72.1 million to
        $117.0 million as a result of $73.7 million increase in the costs
        of claims associated with severe storms that took place throughout
        the year. The combined ratio for the year was 97.1% up 1.9
        percentage points.

    -   Interest and dividend income, net of expenses decreased 9.5% during
        the quarter to $78.3 million and 4.6% for the year to $328.8 million.
        The decline reflects lower returns on fixed income investments as
        well as the reduction of the size of our equity portfolio.

    Investments
    -   Net losses on invested assets, excluding held-for-trading debt
        securities, totalled $194.2 million, compared to $19.0 million last
        year. The losses reflect impairments to the common equity portfolio
        as a result of the prolonged decline of the Canadian stock market
        and the level of uncertainty about its recovery. Impairments do not
        have an impact on either the regulatory minimum capital or the
        excess capital position of the company since these measures already
        take into consideration the market value of all assets. For the
        year, the net losses amounted to $316.4 million compared to a gain
        of $94.6 million the previous year.
        The common share portfolio was reduced by $249 million and the
        proceeds were reinvested in Canadian government T-Bills as well as
        dividend and interest income received during the quarter. These
        actions reduced the risk level associated with the company's
        investment portfolio and benefited the MCT ratio as capital markets
        continued to deteriorate late during the year.
    

    Analyst Estimates

    The average estimate of earnings per share and operating earnings per
share for the fourth quarter among the analysts that follow the company were
$0.48 and $0.73 respectively.

    Conference Call

    ING Canada will host a conference call to review its earnings results at
11:00 a.m. ET. To listen to the call via live audio webcast and to view the
presentation slides, the statistical supplement and other information not
included in this press release, visit our website at www.ingcanada.com and
click on "Investor Relations".
    The conference call is also available by dialling 416-644-3416 or
1-800-732-9307 (toll-free in North America). Please call ten minutes before
the start of the call.
    A replay of the call will be available at 2:30 p.m. ET today through
11:59 p.m. ET on Tuesday, February 3rd. To listen to the replay, call
416-640-1917 or 1-877-289-8525 (toll-free in North America). The passcode is
21296087 followed by the number sign. A transcript of the call will also be
available on ING Canada's website.

    About ING Canada

    ING Canada offers automobile, property and liability insurance to
individuals and businesses through its insurance subsidiaries. It is the
largest provider of property and casualty insurance in the country with more
than $4 billion in direct premiums written.


    
                     ING Canada Inc.

                     Review of performance
                     for the fourth quarter ended December 31, 2008


    Table of contents

    Section 1 - ING Canada ................................................6
    Section 2 - Canadian property and
                casualty insurance industry outlook .......................6
    Section 3 - Overview of consolidated performance ......................7
    Section 4 - Personal lines ...........................................16
    Section 5 - Commercial lines .........................................18
    Section 6 - Corporate and distribution ...............................19
    Section 7 - Financial condition ......................................21
    Section 8 - Risk management ..........................................24
    Section 9 - Cautionary note regarding forward-looking statements .....24
    

    January 26, 2009

    The following Review of Performance, which was approved by the Board of
Directors for the quarter ended December 31, 2008, is intended to enable the
reader to assess the company's results of operations and financial conditions
for the three- and 12-month periods ended December 31, 2008, compared to the
corresponding periods in 2007. It should be read in conjunction with the
company's Unaudited Interim Consolidated Financial Statements and accompanying
notes, as well as the MD&A and the Consolidated Financial Statements in the
company's 2007 Annual Report.
    The company uses both generally accepted accounting principles ("GAAP")
and certain non-GAAP measures to assess performance. Non-GAAP measures do not
have any standardized meaning prescribed by GAAP and are unlikely to be
comparable to any similar measures presented by other companies. ING Canada
analyzes performance based on underwriting ratios such as combined, general
expenses and claims ratios as well as other performance measures including and
excluding the market yield adjustment ("MYA") to claims liabilities. These
measures are defined in the company's glossary which is posted on the ING
Canada web site at www.ingcanada.com. Click on "Investor Relations" and
"Glossary" on the left navigation bar.

    Forward-looking statements

    This document contains forward-looking statements that involve risks and
uncertainties. The company's actual results could differ materially from these
forward-looking statements as a result of various factors, including those
discussed hereinafter or in the company's 2007 Annual Information Form. Please
read the cautionary note at the end of this document.

    Certain totals, subtotals and percentages may not agree due to rounding.
Additional information about ING Canada, including the Annual Information
Form, may be found online on SEDAR at www.sedar.com. A change column has been
provided for convenience showing the variation between the current period and
the prior period. Not applicable (n/a) is used to indicate that the current
and prior year figures are not comparable or if the percentage change exceeds
1,000%.

    
    Notes:

    -   All references to direct premiums written in this Review of
        Performance exclude pools, unless otherwise noted.
    -   All references to "excess capital" in this Review of Performance
        include excess capital in the P&C insurance subsidiaries (at 170%
        mimimum capital test ("MCT") plus liquid assets in the holding
        company, unless otherwise indicated.
    -   "ING", "ING Canada", "the company" and "we" are terms used
        throughout the document to refer to ING Canada Inc. and its
        subsidiaries.
    

    Section 1 - ING Canada

    1.1  Overview of the business

    ING Canada is the largest provider of automobile, home and business
    insurance in Canada insuring approximately four million individuals and
    businesses across Canada. Overall, the company has an approximate 11%
    market share and is the leading private sector P&C insurer in Ontario,
    Quebec, Alberta and Nova Scotia. ING Canada distributes insurance through
    brokers under ING Insurance and Grey Power, and direct-to-consumers
    through belairdirect. ING Canada's investment management subsidiary
    manages the invested assets of the company and its insurance
    subsidiaries.

    
    Section 2 - Canadian property and casualty insurance industry outlook

    -------------------------------------------------------------------------
                     P&C insurance industry         ING Canada's response
    -------------------------------------------------------------------------
    Pricing        - Premiums in personal lines   - Pricing strategies
    and claims       will likely rise in 2009       demonstrate commitment
    environment      due to cost pressures in       to sustaining appropriate
    (12-month        Ontario and Alberta and        underwriting margins
    outlook)         increases in water-related   - Proactive in addressing
                     property losses                claims trends
                   - In Ontario, industry         - Focusing on innovation,
                     personal auto rates are        supply chain management
                     rising in response to          and efficiency in claims
                     higher accident benefit      - Taking robust actions in
                     and bodily injury              home insurance in
                     ("AB/BI") claims               pricing, segmentation and
                   - Cost pressures in Ontario      claims to build a
                     will likely be addressed       sustainable competitive
                     in the five-year review of     advantage
                     the Insurance Act which      - Differentiating 'AcceL',
                     is ongoing                     our small business
                   - The Alberta Insurance Rate     commercial offering from
                     Board approved a 5.0% rate     others on the market
                     increase on mandatory        - Ready to exploit growth
                     personal auto insurance        opportunities
                     effective in November 2008
                   - Signs have emerged that
                     suggest prices may firm up
                     for commercial insurance
                     in 2009
    -------------------------------------------------------------------------
    Economic       - Overall, P&C industry        - Focusing on strong
    conditions       results are not directly       execution in core
                     correlated with economic       underwriting business
                     cycles                       - Enhancing our risk
                   - Demand for P&C insurance       selection model that puts
                     is relatively inelastic;       emphasis on financial
                     personal auto insurance is     stability, a factor that
                     mandatory and property         will give us even greater
                     insurance is required on       advantage in a weak
                     mortgaged properties           economy
                   - The expense base for P&C     - Identifying opportunities
                     insurance companies is         to maximize quality
                     largely variable               growth
    -------------------------------------------------------------------------
    Capital        - Prolonged capital market     - Financial position is
    Markets          weakness in 2008 resulted      strong with $427.5
                     in investment losses,          million in excess
                     higher borrowing costs and     capital and no debt
                     diminished excess capital    - MCT of 205%, 5.1 points
                     levels across the industry     higher than at the end
                   - Pressure on the industry's     of the third quarter
                     capital will likely          - $6.6 billion cash and
                     continue through 2009          investment portfolio is
                                                    largely Canadian with
                                                    minimal US exposure and
                                                    includes no leveraged
                                                    investments
                                                  - Changes in the asset mix
                                                    and cautious approach
                                                    towards reinvestment
                                                    resulted in a
                                                    strengthening of the
                                                    balance sheet
                                                  - Lower excess capital
                                                    levels in the industry
                                                    could create
                                                    opportunities for ING to
                                                    consolidate in the
                                                    Canadian market and
                                                    points to higher premiums
                                                    in 2009
    -------------------------------------------------------------------------
    

    ING Canada is well-positioned to continue to outperform the P&C insurance
industry in the current environment due to our significant scale, pricing and
underwriting discipline, prudent investment and capital management practices,
and strong financial position.

    
    Section 3 - Overview of consolidated performance

    Fourth quarter highlights

    -   Strong financial position with MCT of 205%; a 5.1 point improvement
        over the third quarter
    -   Overall combined ratio of 98.9% versus 93.2% in Q4 2007 reflects
        higher claims associated with severe storms and a decrease in
        favourable prior year claims development in personal lines, which
        offset strong commercial underwriting results
    -   Net loss in the fourth quarter reflects common equity impairments
        caused by prolonged capital market weakness

    2008 Full year highlights

    -   Strong balance sheet with $427.5 million of excess capital at
        year-end and no debt
    -   Overall combined ratio of 97.1% with healthy combined ratios in all
        lines of business, except personal property which was impacted by
        severe storms
    -   Excluding catastrophe claims, underwriting income improved slightly
    -   Lower net earnings reflect realized investment losses and impairments
        related to global capital market decline

    Consolidated financial results

    Table 1 - Components of net income

    (in millions of
     dollars, except
     as otherwise         Q4-    Q4-                 YTD      YTD
     noted)              2008   2007     Change     2008     2007     Change
    -------------------------------------------------------------------------

    Direct premiums     968.2  961.3       0.7%  4,145.5  4,108.6       0.9%
     written
    Underwriting income
     (excluding MYA)     11.0   68.2    (83.9)%    117.0    189.1    (38.1)%
    Combined ratio
     (excluding MYA)    98.9%  93.2%    5.7 pts    97.1%    95.2%    1.9 pts
    Interest and
     dividend income,
     net of expenses
     (table 7)           78.3   86.5     (9.5)%    328.8    344.8     (4.6)%
    (Losses) gains on
     invested assets
     and other gains
     (table 8)         (152.2)  (3.3)       n/a   (288.0)    73.6   (491.3)%
    Income (loss)
     before income
     taxes             (108.2) 132.6   (181.6)%    123.6    671.6    (81.6)%
    Income tax
     (benefit) expense  (44.1)  36.8   (219.8)%     (4.6)   163.3   (102.8)%
    Effective income
     tax rate           40.7%  27.8%   12.9 pts   (3.8)%    27.8% (31.6) pts
    Net income (loss)   (64.1)  95.8   (166.9)%    128.2    508.3    (74.8)%
    Net operating
     income (table 17)   75.1  116.4    (35.5)%    360.7    457.0    (21.1)%
    -------------------------------------------------------------------------
    Earnings per share
    ("EPS") - basic
     and diluted
     (dollars)          (0.53)  0.77   (168.8)%     1.05     4.01    (73.8)%
    Net operating
     income per share
     (dollars)           0.63   0.93    (32.3)%     2.96     3.61    (18.0)%
    -------------------------------------------------------------------------
    Return on equity
     ("ROE") for the
     last 12 months      4.4%  15.4% (11.0) pts
    Book value per
     share (dollars)    21.96  25.48    (13.8)%
    -------------------------------------------------------------------------

    3.1 Explanation of consolidated financial results

    Table 2 - Changes in pre-tax operating income (year-over-year)

    (in millions of dollars,
     except as otherwise noted)                         Q4-2008     YTD 2008
    -------------------------------------------------------------------------

    Pre-tax operating income, as reported in 2007         156.6        578.2
      Change in favourable prior
       year claims development                            (10.2)        46.6
      Changes in current accident year from:
        Underwriting income                               (34.4)       (36.6)
        Losses from catastrophes                          (11.9)       (73.7)
        Results from Facility Association                  (0.7)        (8.4)
      Change in underwriting income excluding MYA         (57.2)       (72.1)
      Change in interest and dividend income,
       net of expenses                                     (8.2)       (16.0)
      Change in corporate and distribution                  0.1        (28.7)
    Pre-tax operating income, as reported in 2008          91.3        461.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Pre-tax operating income is a non-GAAP measure. Catastrophe claims are
    defined as a single event resulting in $5.0 million or more in aggregate
    claims.


    Table 3 - Changes in income before income taxes (year-over-year)

    (in millions of dollars,
     except as otherwise noted)                         Q4-2008     YTD 2008
    -------------------------------------------------------------------------

    Income before income taxes, as reported in 2007       132.6        671.6
      Change in net gains on invested assets and other
       gains excluding held for trading ("HFT") debt
       securities (table 8)                              (175.2)      (410.9)
      Change in pre-tax operating income (table 2)        (65.3)      (116.7)
      Change in market yield effect (table 9)              (0.3)       (20.4)
    Income (loss) before income taxes,
     as reported in 2008                                 (108.2)       123.6
    Income tax                                             44.1          4.6
    Net income as reported in 2008                        (64.1)       128.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Fourth quarter 2008

    The significant decline of the stock market in 2008 resulted in nearly
$185.8 million of common equity impairments in the fourth quarter, resulting
in a net loss. The magnitude of the impairments reflects management's
assessment of impact of the deep and prolonged decline of the Canadian stock
market on the value of the company's common equity portfolio. See table 8 for
a discussion of net gains and losses on invested assets.
    In light of current capital market conditions, management also took
further actions which resulted in a strengthening of the balance sheet
including a reduction of the common share portfolio of $249 million. The
proceeds of the asset dispositions as well as dividend and interest income
received in the fourth quarter were reinvested in Canada T-bills. Canada
T-bills now represent approximately 12% of the $6.6 billion cash and
investment portfolio. These actions benefited our MCT capital ratio as equity
and debt markets continued to deteriorate in late 2008. Despite turbulent
capital market conditions, our financial position is strong with no debt,
$427,5 million in excess capital and an MCT ratio of 205%, 5.1 points higher
than at the end of the third quarter.
    We continue to manage our $6.6 billion cash and investment portfolio
prudently and have no leveraged investments. The equity portfolio is 100%
Canadian, including common and preferred shares of high-quality,
dividend-paying Canadian companies. Approximately 89% of the preferred share
portfolio is top-rated at either P1 or P2 and more than 97% of the fixed
income portfolio is rated 'A' or better.
    Lower net operating income and an increase in the combined ratio to 98.9%
reflect the impact of severe storms and lower favourable prior year
development in personal lines. Severe wind, rain and snow storms in late 2008
had an adverse affect on personal property underwriting performance in the
quarter, resulting in a combined ratio of 114.1% in that line of business. The
combined ratio in personal auto was 102.9% in the fourth quarter reflecting a
decrease in favourable prior year development, which normally fluctuates from
quarter to quarter, and higher claims severity.
    Commercial underwriting income increased year-over-year for the third
quarter in a row with combined ratios of 91.6% in commercial auto and 73.2% in
commercial non-auto. Higher underwriting income was driven by a lower overall
current year loss ratio and more favourable prior year claims development.
Pricing discipline, strong operational execution and the high quality of the
book are reflected in consistent year-over-year increases in commercial
underwriting results in 2008.
    In total, direct premiums written were up slightly in the fourth quarter,
reflecting our disciplined pricing strategy and commitment to maintaining
adequate margins, though it has resulted in a slower pace of premium growth in
the short-term. The effectiveness of our strategy is demonstrated through our
combined ratio performance compared to the Canadian P&C industry. For the
first nine months of 2008, our combined ratio of 96.5% was trending 2.7 points
lower than the industry average of 99.2%. During the same time period, we
outperformed industry loss ratios in every line of business except personal
property.
    Personal and commercial insurance premiums are likely to rise over the
next 12 months across the industry. Cost pressures in personal property and
auto insurance as well as increases in water-related property losses will lead
to higher premiums this year. With lower excess capital levels and higher loss
ratios across the industry, some signs have emerged that suggest the
commercial pricing environment will become less aggressive in 2009 and
premiums will start to rise, reversing the trend over the last couple of
years. With industry returns and capital levels at a low point in the cycle,
conditions are more conducive to industry consolidation and point to higher
premiums overall.

    Year-to-date 2008

    Direct premiums written increased by 0.9% overall as we maintained
pricing discipline in both personal and commercial lines in a competitive
environment. Rates in personal lines are being adjusted to reflect higher
material and labour costs and higher water-related property claims. Commercial
underwriting results remained very healthy with combined ratios below 90% due
to our pricing discipline and portfolio shift toward smaller accounts that are
more profitable than larger accounts.
    The decrease in net operating income mainly reflects lower underwriting
income due to severe storms. Overall, underwriting income decreased to $117.0
million compared to $189.1 million in 2007, reflecting a $73.7 million
year-over-year increase in catastrophe claims in 2008 which affected both
personal property and personal auto results. Notwithstanding significantly
higher weather-related claims in 2008, the overall combined ratio was 97.1%, a
moderate increase of 1.9 points.
    In Central Canada, we experienced near-record snowfall and severe hail,
rain and wind storms in 2008.
    Despite the storms, personal auto underwriting income was $84.7 million
with a healthy combined ratio of 95.9%, a slight increase of 1.4 points
compared to 2007. Overall, personal auto current accident year results were
relatively stable in 2008. Personal property underwriting performance was most
impacted by seasonal storms, resulting in a loss of $120.7 million with a
combined ratio of 113.6%; largely reflecting catastrophe claims.
    Commercial underwriting income was strong in 2008, increasing 58.9%
year-over-year due to more favourable prior year claims development. The
combined ratio in commercial auto was 87.2% and commercial non-auto was 85.3%.
    Overall, net income decreased to $128.2 million, down from $508.3 million
in 2007. The decrease reflects lower operating income, as well as realized
common equity investment losses and impairments associated with the weak
capital market environment. Refer to table 8 for more information on
unrealized gains and losses on available-for-sale ("AFS") securities.

    Return on equity ("ROE")

    ROE for the 12-month period ending December 31, 2008 was 4.4%, compared
to 15.4% at December 31, 2007, reflecting losses and impairments on invested
assets as well as lower operating income.

    Book value

    Book value per share decreased to $21.96 in the fourth quarter from
$25.48 in the same quarter last year. The change reflects an increase in the
accumulated other comprehensive loss as capital market valuations declined
sharply in 2008, as well as the impact of share repurchases made under the
normal course issuer bid announced on February 20, 2008.

    Normal course issuer bid ("NCIB")

    ING Canada announced its NCIB in February 2008 to buy back up to 6.2
million shares over the following 12 months. At year end, the NCIB was 73.4%
complete with approximately 4.6 million shares repurchased at an average price
of $38.53. ING Groep N.V. participated in the NCIB to maintain its
proportionate share ownership at 70%. The NCIB was suspended in September 2008
and no further shares were repurchased in 2008.

    
    3.2 Underwriting income

    Table 4 - Net premiums earned, claims and general expenses

    (in millions of
    dollars, except as     Q4       Q4
    otherwise noted)     2008     2007   Change     2008     2007   Change
    -------------------------------------------------------------------------

    Net premiums
     earned           1,019.2   1,004.7     1.4%  4,039.4   3,932.0      2.7%
    Net claims:
      Current year
       claims           743.8     703.7     5.7%  2,790.4   2,665.2      4.7%
      Current year
       catastrophes      21.6       9.7   122.7%    114.8      41.1    179.3%
       (Favourable)
       prior year
       claims
       development      (52.2)    (62.4) (16.3)%   (148.9)   (102.3)    45.6%
    Total net claims    713.2     651.0     9.6%  2,756.3   2,604.0      5.8%
    Commissions, net    150.2     146.3     2.7%    577.3     583.1    (1.0)%
    Premium
     taxes, net          35.4      35.0     1.1%    140.4     136.9      2.6%
    General
     expenses, net      109.5     104.2     5.1%    448.4     418.9      7.0%
    Total
     underwriting
     expenses           295.1     285.5     3.4%  1,166.1   1,138.9      2.4%
    Total
     underwriting
     income
     (excluding MYA)     11.0      68.2  (83.9)%    117.0     189.1   (38.1)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Table 5 - Underwriting ratios (excluding MYA)
                                                       YTD      YTD
                       Q4-2008   Q4-2007   Change     2008     2007  Change
    -------------------------------------------------------------------------

    Claims ratio         70.0%     64.8%  5.2 pts    68.2%    66.2%   2.0 pts
    Expense ratio        28.9%     28.4%  0.5 pts    28.9%    29.0% (0.1) pts
    Combined ratio       98.9%     93.2%  5.7 pts    97.1%    95.2%   1.9 pts
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Table 6 - Annualized rate of favourable prior year claims development

                                                                 Full year
    (annualized rate, excluding MYA)    Q4-2008   Q4-2007      2008     2007
    -------------------------------------------------------------------------

    (Favourable) unfavourable prior
     year claims development as
     a % of opening reserves              (6.5)%    (7.0)%    (4.2)%   (2.9)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Favourable prior year claims development

    Excluding MYA, favourable prior year claims development was $52.2 million
in the fourth quarter, 6.5% of opening reserves on an annualized basis, and
$148.9 million year-to-date, or 4.2% of opening reserves. The rate of
development in the fourth quarter was higher than the long-term average of
3%-4%.
    Prior year claims development can fluctuate from quarter to quarter and
therefore, should be evaluated over longer periods of time. The historical
rate of favourable prior year claims development as a percentage of opening
claims has been approximately 3%-4% per year over the long term, but has
varied from year to year and between quarters.

    Industry pools

    In the fourth quarter, the net effect of transfers in and out of industry
pools, including the Facility Association, increased year-over-year in
personal auto by $18.4 million, excluding MYA.

    
    3.3 Interest and dividend income, net of expenses

    Table 7

    (in millions of
    dollars, except as    Q4-      Q4-              YTD      YTD
    otherwise noted)     2008     2007   Change    2008     2007   Change
    -------------------------------------------------------------------------

    Interest income      46.9     50.9    (7.9)%   187.9    197.7   (5.0)%
    Dividend income      35.3     40.4   (12.6)%   157.3    166.5   (5.5)%
    Interest and
     dividend income,
     before expenses     82.2     91.3   (10.0)%   345.2    364.2   (5.2)%
    Expenses             (3.9)    (4.8)     0.9    (16.4)   (19.4)    3.0
    Interest and
     dividend income,
     net of expenses     78.3     86.5    (9.5)%   328.8    344.8   (4.6)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Market-based yield   5.1%     5.1%   (0.0) pts  5.0%    5.1%   (0.1) pts
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The decline in interest income (before expenses) in the fourth quarter
and year-to-date reflects capital management initiatives, including the share
buyback program (NCIB) announced in February 2008, as well as an increase in
investments in Canada T-bills.
    The decline in dividend income in the fourth quarter and year-to-date
reflects principally the reduction of our common share portfolios in the last
half of 2008, lower trading activities in these portfolios and the impact of
capital management initiatives.
    The market-based yield is a non-GAAP measure defined as total pre-tax
dividend and interest income (before expenses) divided by the average fair
values of equity and debt securities held during the reporting period. The
market-based yield was 5.1% in the fourth quarter unchanged from 5.1% in the
same quarter of last year. This measure may not be comparable to other
companies since it is a non-GAAP measure.

    
    3.4 Gains and losses on invested assets and other gains

    Table 8

    (in millions of
    dollars, except as     Q4       Q4
    otherwise noted)     2008     2007   Change      2008      2007   Change
    -------------------------------------------------------------------------

    Debt securities
      Gains (losses)
       on AFS securities  1.8      2.9     (1.1)      0.2      (1.9)     2.1
       Losses on
       derivatives       (6.6)    (8.0)     1.4     (17.4)     (4.0)   (13.4)
      Impairments           -     (8.1)     8.1     (10.9)    (37.3)    26.4
      Losses on debt
       securities and
       related
       derivatives       (4.8)   (13.2)     8.4     (28.1)    (43.2)    15.1
    -------------------------------------------------------------------------
    Equity securities
      (Losses) gains,
       net of
       derivatives      (24.4)     9.2    (33.6)    (74.6)    147.4   (222.0)
      Impairments      (185.8)   (34.6)  (151.2)   (250.5)    (47.7)  (202.8)
      Gains on
       embedded
       derivatives       20.8     19.6      1.2      36.8      38.1     (1.3)
      (Losses) gains
       on equity
       securities
       and  related
       derivatives     (189.4)    (5.8)  (183.6)   (288.3)    137.8   (426.1)
    -------------------------------------------------------------------------
    Total (losses)
     gains excluding
     HFT debt
     securities        (194.2)   (19.0)  (175.2)   (316.4)     94.6   (411.0)
    Gains (losses)
     on HFT debt
     securities(1)       42.0     15.7     26.3      28.4     (21.0)    49.4
    Total (losses)
     gains, before
     income taxes      (152.2)    (3.3)  (148.9)   (288.0)     73.6   (361.6)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The gains (losses) on HFT debt securities are offset by a MYA to
        claims liabilities, with an objective of a minimal impact to net
        income. The difference between the MYA and the gains and losses on
        HFT debt securities is referred to as the "market yield effect" in
        this Review of Performance. See table 9.
    

    Fourth quarter

    The loss on invested assets in the fourth quarter was largely due to
$185.8 million of common share impairments reflecting the deep and prolonged
decline of the stock market, particularly in the fourth quarter of 2008. The
impairment process for common equities includes a review of all common shares,
particularly focusing on those trading below book value for six months or more
and more than 25% below book value at year end. Management applies judgment
based upon a review of each issuer's financial condition, considering various
factors including latest financial results and cash flows, changes in credit
ratings, capital structure or dividend payouts as well as security analysts'
recommendations. Management also takes into account the length of time the
security has been below book and the significance of the unrealized loss. The
stock market decline in late 2008, and the level of uncertainty around the
timing of a market recovery, led management to give significant weight to the
general market downturn in the judgment process. If such weighting had not
been given to the capital market environment, it is estimated that common
share impairments would have been approximately $60 million. Impairments do
not impact excess capital or the MCT ratio.
    Preferred shares and debt securities were not impaired. Preferred shares
are generally only impaired if the issuer is significantly downgraded, stops
paying dividends, or declares bankrupcy. After careful review, management
determined that there was no objective evidence at the time of assessment
which suggested the company would not receive the contractual cash flows from
these securities, which include either dividends or interest payments.
Management uses third party credit ratings as well as other public information
in its analysis of the quality of debt securities and preferred shares.
    Gains on embedded derivatives are similar to last year at $20.8 million.
These gains are driven by the decline in value of perpetual preferred shares.

    Year-to-date

    The decline of common share market values made up the majority of the
$316.4 million pre-tax loss on invested assets, excluding held-for-trading
bonds. In the last half of the year, management also took certain actions
which effectively strengthened the balance sheet, including a significant
reduction of the common share portfolio. The proceeds from these transactions
were reinvested in Canada T-bills, which now represent approximately 12% of
the $6.6 billion cash and investment portfolio.

    
    Held-for-trading debt securities and market yield adjustment

    Table 9 - Market yield effect

    (in millions of
    dollars, except as    Q4-       Q4-               YTD       YTD
    otherwise noted)     2008      2007  Change      2008      2007   Change
    -------------------------------------------------------------------------

    (Negative) positive
     impact of MYA      (47.3)    (20.7)  (26.6)    (50.0)     19.8    (69.8)
    Net gains (losses)
     on HFT debt
     securities          42.0      15.7    26.3      28.4     (21.0)    49.4
    Market yield effect  (5.3)     (5.0)   (0.3)    (21.6)     (1.2)   (20.4)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Claims liabilities are discounted at the estimated market yield of the
assets backing these liabilities. The MYA to claims liabilities is offset by
gains and losses on HFT debt securities with the objective that these items
offset each other with a minimal overall impact to income. The difference
between the MYA and the gains and losses on HFT debt securities is referred to
as the "market yield effect" in this Review of Performance.
    The interest rate fluctuations during the year, particularly the
increasing gap between short-term and long-term rates, as well as significant
capital market fluctuations have been challenging in terms of matching the
gains and losses on HFT debt securities and the MYA. During the fourth
quarter, the company improved the calculation of the market yield estimate, in
particular to better match the scattered duration of liabilities. The
calculation previously used a blended rate for all durations which proved
inappropriate under current economic conditions. Without this improvement, the
unfavourable market yield effect in Q4-2008 would have been greater by $24.4
million.

    
    Unrealized gains and losses on available for sale securities

    Table 10

                                                As at
                       ------------------------------------------------------
    (in millions of     December September   June    March December September
    dollars, except as       31,     30,      30,      31,      31,      30,
    otherwise noted)        2008    2008     2008     2008     2007     2007
    -------------------------------------------------------------------------

    Debt securities         30.4   (16.3)     3.2     40.7      2.6    (13.8)
    Common shares         (133.8) (125.3)   (43.1)   (71.2)   (36.9)    47.8
    Preferred shares      (522.5) (272.1)  (215.5)  (175.8)  (141.0)   (64.5)
    Loans and equity
     investments            (6.9)   (3.8)    (3.6)    (2.5)    (0.9)      -
    Total net unrealized
     (loss) gain position
     at December 31       (632.8) (417.5)  (259.0)  (208.8)  (176.2)   (30.5)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    At the end of December 2008, the company had $632.8 million in unrealized
losses on invested assets compared to $417.5 million at the end of the third
quarter. The increase in the unrealized loss position reflects a sharp decline
in common and preferred share market values. To illustrate the market decline,
the S&P/TSX Composite Index was down 24% in the quarter and the preferred
share index was down 14%. On a year to date basis, the S&P/TSX Composite Index
was down 35% and the preferred share index was down 22% compared to the same
periods in 2007. The market value of preferred shares were impacted by the
widening of credit spreads as well as the recent number of new preferred
shares issues in late 2008 which increased market supply of preferred shares
at higher rates. Since preferred shares are typically held long term,
unrealized gains and losses are generally not realized, unless they need to be
impaired. Gains and losses in the common share portfolio are likely to be
realized on an ongoing basis reflecting the active trading strategy in the
high-dividend yield common share portfolio.

    Aging of unrealized losses on common shares

    The remaining unrealized losses on common shares amount to approximately
$134 million and can be further analysed as follows:

    
    Table 11

                                                                       As at
    (in millions of dollars)                               December 31, 2008
    -------------------------------------------------------------------------
    Greater than 25% below book value for
     less than 3 consecutive months                                       77
    Greater than 25% below book value for
     at least 3 months and
     less than 6 consecutive months                                       21
    Greater than 25% below book value for
     at least 6 consecutive months                                         2
    Other unrealized losses, net of unrealized gains                      34
    -------------------------------------------------------------------------
    Unrealized losses as at December 31, 2008                            134
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The above table provides information on the quality of the portfolio of
AFS common shares. It is not intended to provide any indication of future
impairments.
    In determining the fair values of invested assets, we rely mainly on
quoted market prices. There are no invested assets in the AFS or HFT
categories which are not quoted on an active market, except for a very limited
amount of fixed income private placements that we hold. Some of these assets,
particularly preferred shares and BBB bonds have less trading liquidity, but
their fair values are readily available from public market sources.
    The debt security portfolios are relatively unchanged and they include
approximately $293.8 million of T-bills with maturities greater than 90 days
from the sale of equities. The portfolios have net unrealized gains of $30.4
million at December 31, 2008 due to the overall reduction of risk-free
interest rates and the significant weight of government bonds in the
portfolio. During the quarter, the company reduced its position in BBB rated
bonds by 20% approximately, leaving only $102.0 million of bonds rated lower
than A (low). The quality of the debt securities in our portfolio remains
strong with 97% rated A or better. There have been no defaults on any of the
bonds in the portfolio.


    Other comprehensive income

    The change in unrealized losses on AFS securities and dispositions of AFS
securities resulted in other comprehensive loss ("OCI") of $162.0 million
(after-tax) in the fourth quarter. Most of the unrealized losses incurred
during the year are tax deductible and will allow the company to claim a
significant tax reimbursement in its tax return.

    
    3.5 Selected quarterly information

    Table 12

    (in millions of
    dollars, except as
    otherwise noted)           Q4-08     Q3-08     Q2-08     Q1-08     Q4-07
    -------------------------------------------------------------------------

    Written insured risks
     (thousands)             1,034.3   1,240.7   1,380.6     945.8   1,056.7
    Direct premiums written    968.2   1,100.3   1,216.7     860.3     961.3
    Total revenues             956.0   1,045.8   1,065.4   1,064.5   1,096.8
    Net premiums earned      1,019.2   1,032.3     996.1     991.8   1,004.7
    (Favourable)
      unfavourable prior
      year claims
      development              (52.2)    (56.4)    (41.2)      0.9     (62.4)
    Net underwriting income     11.0      61.9      43.4       0.7      68.2
    Combined ratio (%)          98.9%     94.0%     95.6%     99.9%     93.2%
    Net operating income        75.1     106.4     109.5      70.2     116.4
    Net (loss) income          (64.1)     57.3     112.0      23.0      95.8
    EPS-basic/diluted
     (dollars)                 (0.53)     0.47      0.91      0.19      0.77
    Net operating income per
     share (dollars)            0.63      0.88      0.89      0.56      0.93
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (in millions of
    dollars, except as
    otherwise noted)           Q3-07     Q2-07     Q1-07     Q4-06
    ---------------------------------------------------------------

    Written insured risks
     (thousands)             1,273.1   1,399.7     950.4   1,051.1
    Direct premiums written  1,091.2   1,209.8     846.3     955.6
    Total revenues           1,091.3   1,152.2   1,099.6   1,095.8
    Net premiums earned        994.0     976.7     956.7     979.6
    (Favourable)
      unfavourable prior
      year claims
      development              (24.0)     (5.2)    (10.7)    (24.3)
    Net underwriting income     29.0      53.1      38.7      62.3
    Combined ratio (%)          97.1%     94.6%     96.0%     93.6%
    Net operating income        95.5     132.5     112.8     101.8
    Net (loss) income           92.0     194.3     126.2     109.4
    EPS-basic/diluted
     (dollars)                  0.74      1.56      0.95      0.82
    Net operating income per
     share (dollars)            0.77      1.06      0.84      0.76
    ---------------------------------------------------------------
    ---------------------------------------------------------------

    

    Seasonality of property and casualty insurance

    Property and casualty insurance is seasonal in nature. Underwriting
revenues are generally stable from quarter to quarter; however, combined
ratios are typically lower in the second and third quarters of each year due
to seasonal weather conditions.
    ING Canada has two segments: 1) Underwriting and, 2) Corporate and
distribution. P&C insurance is divided into two lines of business, personal
and commercial lines. Corporate and distribution includes income from the
company's affiliated distribution network, as well as other corporate items.

    
    Section 4 - Personal lines

    4.1 Financial results

    Table 13

    (in millions of
    dollars, except as    Q4-       Q4-               YTD       YTD
    otherwise noted)     2008      2007  Change      2008      2007   Change
    -------------------------------------------------------------------------

    Written insured
     risks (thousands)
      Automobile        528.7     541.5   (2.4)%  2,449.3   2,514.4    (2.6)%
      Property          385.6     394.6   (2.3)%  1,654.4   1,676.1    (1.3)%
      Total             914.3     936.1   (2.3)%  4,103.7   4,190.5    (2.1)%
    Direct premiums
     written
     (excluding pools)
      Automobile        452.5     453.1   (0.1)%  2,057.0   2,057.7      0.0%
      Property          226.6     215.3     5.2%    952.9     904.4      5.4%
      Total             679.1     668.4     1.6%  3,009.9   2,962.1      1.6%
    Net premiums earned
      Automobile        520.6     515.2     1.0%  2,067.5   2,008.0      3.0%
      Property          227.9     217.6     4.7%    891.3     837.0      6.5%
      Total             748.5     732.8     2.1%  2,958.8   2,845.0      4.0%
    Net underwriting
     income (loss)
     (excluding MYA)
      Automobile        (14.8)     21.1 (170.1)%     84.7     111.4   (24.0)%
      Property          (32.0)      4.7 (780.9)%   (120.7)    (18.7)   545.5%
    Total
     (excluding MYA)    (46.8)     25.8 (281.4)%    (36.0)     92.7  (138.8)%
      Market yield
       adjustment       (30.7)    (13.1)  (17.6)    (32.4)     12.6    (45.0)
      Net underwriting
       income (loss)
       (including MYA)  (77.5)     12.7   (90.2)    (68.4)    105.3   (173.7)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Table 14 - Underwriting ratios

    (in millions of
    dollars, except as     Q4-      Q4-               YTD       YTD
    otherwise noted)      2008     2007    Change    2008      2007   Change
    -------------------------------------------------------------------------

    Personal auto
      Claims ratio
       (excluding MYA)   78.5%    72.1%   6.4 pts    71.2%    69.8%   1.4 pts
      Expense ratio      24.4%    23.8%   0.6 pts    24.7%    24.7%   0.0 pts
      Combined ratio
       (excluding MYA)  102.9%    95.9%   7.0 pts    95.9%    94.5%   1.4 pts
    Personal property
      Claims ratio
       (excluding MYA)   80.7%    64.7%  16.0 pts    80.2%    68.6%  11.6 pts
      Expense ratio      33.4%    33.2%   0.2 pts    33.4%    33.6% (0.2) pts
      Combined ratio
       (excluding MYA)  114.1%    97.9%  16.2 pts   113.6%   102.2%  11.4 pts
    Personal
     lines - total
      Claims ratio
       (excluding MYA)   79.2%    69.9%   9.3 pts    73.9%    69.4%   4.5 pts
      Expense ratio      27.1%    26.6%   0.5 pts    27.3%    27.3%   0.0 pts
      Combined ratio
       (excluding MYA)  106.3%    96.5%   9.8 pts   101.2%    96.7%   4.5 pts
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    4.2 Explanation of financial results

    Fourth quarter 2008

    In personal auto, direct written premiums were down slightly in the
fourth quarter as rate increases resulted in a decrease in written insured
risks. Underwriting results in personal auto decreased year-over-year due to
lower favourable prior year claims development, which normally fluctuates from
quarter to quarter, and higher claims severity. Rates in personal auto have
been increasing particularly in certain geographic regions to reflect an
increase in claims experience.
    In personal property, direct premiums written were up 5.2% due to
increases in insured amounts and higher rates. Overall, personal property
sustained an underwriting loss of $32.0 million reflecting higher current year
claims associated with severe storms in Ontario and Quebec in the fourth
quarter. We have been increasing direct written rates and enhancing our
pricing segmentation to reflect an increase in water-related property claims.
In addition, we are adjusting insured values to ensure that higher material
costs and labour rates are factored into our premiums and our customers retain
adequate coverage.

    Full year 2008

    In personal auto, direct written premiums were flat in 2008 reflecting
the competitive impact of raising rates on unit growth in the near-term, as
well as the run-off of a large group agreement in the first half of 2008. The
group agreement was large in terms of the number of policies but had a low
average premium and margin. In 2008, current accident year results in personal
auto were relatively stable, despite severe snow, hail and excessive rain in
Central Canada. Personal auto generated underwriting income of $84.7 million
in 2008 versus $111.4 million in 2007 with a healthy combined ratio of 95.9%.
    In personal property, higher average insured amounts and higher rates
resulted in a 5.4% increase in direct premiums written. Overall, personal
property sustained an underwriting loss of $120.7 million compared to a loss
of $18.7 million in 2007. 2008 results were negatively affected by higher
claims associated with severe snow, hail, rain and wind storms in Central
Canada compared to significantly lower levels of precipitation in the same
region over the comparable period of 2007. Actions are being taken to build
strength and sustainable advantage in home insurance through claims
innovation, segmentation and better management of water losses, which now make
up approximately 40% of personal property claims.

    
    Section 5 - Commercial lines

    5.1 Financial results

    Table 15

    (in millions of
     dollars, except as     Q4-      Q4-               YTD      YTD
     otherwise noted)      2008     2007  Change      2008     2007   Change
    -------------------------------------------------------------------------
    Written insured
     risks (thousands)
      Automobile           63.0     62.8     0.3%    263.8    255.8     3.1%
      Non-auto             57.0     57.7   (1.2)%    234.0    233.5     0.2%
      Total               120.0    120.5   (0.4)%    497.8    489.3     1.7%
    Direct premiums
     written (excluding
     pools)
      Automobile           77.2     81.7   (5.5)%    317.8    321.2   (1.1)%
      Non-auto            211.9    211.3     0.3%    817.8    825.3   (0.9)%
      Total               289.1    293.0   (1.3)%  1,135.6  1,146.5   (1.0)%
    Net premiums earned
      Automobile           80.1     80.7   (0.7)%    318.9    320.2   (0.4)%
      Non-auto            190.7    191.1   (0.2)%    761.8    766.9   (0.7)%
      Total               270.8    271.8   (0.4)%  1,080.7  1,087.1   (0.6)%
    Net underwriting
     income (excluding
     MYA)
      Automobile            6.8      0.1     n/a      40.8     20.1   103.0%
      Non-auto             51.0     42.2    20.9%    112.2     76.2    47.2%
    Total (excluding
     MYA)                  57.8     42.3    36.6%    153.0     96.3    58.9%
      Market yield
       adjustment         (16.6)    (7.6)   (9.0)    (17.6)     7.2   (24.8)
      Net underwriting
       income (including
       MYA)                41.2     34.7     6.5     135.4    103.5    31.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Table 16 - Underwriting ratios

    (in millions of
     dollars, except as     Q4-      Q4-               YTD      YTD
     otherwise noted)      2008     2007    Change    2008     2007   Change
    -------------------------------------------------------------------------
    Commercial auto
      Claims ratio
      (excluding MYA)     63.9%    72.7% (8.8) pts   59.9%    66.0% (6.1) pts
      Expense ratio       27.7%    27.2%   0.5 pts   27.3%    27.7% (0.4) pts
      Combined ratio
      (excluding MYA)     91.6%    99.9% (8.3) pts   87.2%    93.7% (6.5) pts
    Commercial non-auto
      Claims ratio
      (excluding MYA)     36.4%    42.0% (5.6) pts   49.7%    54.5% (4.8) pts
      Expense ratio       36.8%    35.9%   0.9 pts   35.6%    35.6%   0.0 pts
      Combined ratio
      (excluding MYA)     73.2%    77.9% (4.7) pts   85.3%    90.1% (4.8) pts
    Commercial lines
     - total
      Claims ratio
      (excluding MYA)     44.5%    51.1% (6.6) pts   52.7%    57.9% (5.2) pts
      Expense ratio       34.2%    33.3%   0.9 pts   33.2%    33.2%   0.0 pts
      Combined ratio
      (excluding MYA)     78.7%    84.4% (5.7) pts   85.9%    91.1% (5.2) pts
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    5.2 Explanation of financial results

    Fourth quarter 2008

    Direct premiums written in commercial lines were down slightly
year-over-year reflecting lower average premiums and a small decrease in
units. The portfolio continues to shift toward small- and medium-sized
commercial accounts which are more profitable. Though the commercial market
remained competitive in 2008, our commercial units remained stable as we
maintained pricing discipline with only low single-digit rate decreases.
    Commercial underwriting income increased by 36.6% year-over-year, with a
combined ratio of 78.7% in the fourth quarter. The combined ratio for
commercial auto was 91.6% and commercial non-auto was 73.2%, demonstrating
strong execution of our targeted strategy in both commercial lines and
commitment to maintaining a high quality portfolio. Current year results
improved slightly year-over-year overall and favourable prior year claims
development increased compared to the same quarter last year.

    Full year 2008

    Direct premiums written in commercial lines were down 1.0% reflecting the
dynamics discussed above. In all lines of business, our priority is to price
policies appropriately to maintain adequate margins. Underwriting income in
commercial lines improved by $56.7 million in 2008 with an overall combined
ratio of 85.9%, notwithstanding $18.5 million in catastrophe claims associated
with seasonal storms in 2008. The increase in commercial underwriting income
mainly reflects more favourable prior year claims development.

    Section 6 - Corporate and distribution

    6.1 Financial results

    Our corporate and distribution segment primarily includes the results of
the company's affiliated distribution network (Canada Brokerlink, Grey Power
and Equisure), and other activities.

    
    Table 17 - Corporate and distribution income

    (in millions of
     dollars, except as     Q4-      Q4-               YTD      YTD
     otherwise noted)      2008     2007  Change      2008     2007   Change
    -------------------------------------------------------------------------

    Distribution
     income                20.5     26.9  (23.8)%     92.4    102.9  (10.2)%
    Distribution
     expenses              19.5     21.4   (8.9)%     79.1     85.3   (7.3)%
      Distribution
       earnings             1.0      5.5  (81.8)%     13.3     17.6  (24.4)%
    Corporate income
     (loss), net            1.0    (3.6) (127.8)%      2.3     26.7  (91.4)%
    Corporate and
     distribution income
     before income taxes    2.0     1.9      5.3%     15.6     44.3  (64.8)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    6.2 Explanation of financial results

    2008 full year corporate and distribution income decreased by $28.7
million due to the release of a $28 million provision in 2007 that was related
to a prior year divestiture which became redundant. Distribution results are
lower as the higher combined ratios negatively impacted the profitability of
the distribution network.

    
    Net operating income

    Table 18 - Components of net operating income

    (in millions of
     dollars, except as      Q4-      Q4-              YTD      YTD
     otherwise noted)       2008    2007  Change      2008     2007   Change
    -------------------------------------------------------------------------
    Net underwriting
     income (excluding
     MYA)                  11.0     68.2  (83.9)%    117.0    189.1  (38.1)%
    Interest and
     dividend income
     (table 7)             78.3     86.5   (9.5)%    328.8    344.8   (4.6)%
    Corporate and
     distribution
     (loss) income
     (table 16)             2.0      1.9     5.3%     15.6     44.3  (64.8)%
    Tax impact            (16.2)   (40.2) (59.7)%   (100.7)  (121.2) (16.9)%
    Net operating
     income (excluding
      MYA)                 75.1    116.4  (35.5)%    360.7    457.0  (21.1)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Net operating income for the fourth quarter and full year decreased due
to lower underwriting results and a decrease in dividend and interest income.
The decline in underwriting income was mainly due to higher catastrophe claims
and other claims associated with severe seasonal storms in 2008.

    
    Table 19 - Reconciliation to net income

    (in millions of
     dollars, except as     Q4-      Q4-               YTD      YTD
     otherwise noted)      2008     2007  Change      2008     2007   Change
    -------------------------------------------------------------------------
    Net income (loss)     (64.1)    95.8  (166.9)%   128.2    508.3   (74.8)%
    Add losses (deduct
     gains) before HFT
     debt securities
     (table 8)            194.2     19.0   175.2     316.4    (94.6)  411.0
    Add market yield
     effect (table 9)       5.3      5.0     0.3      21.6      1.2    20.4
    Tax impact            (60.3)    (3.4)  (56.9)   (105.5)    42.1  (147.6)
    Net operating
     income (excluding
     MYA)                  75.1    116.4   (35.5)%   360.7    457.0   (21.1)%
    Average outstanding
     shares (millions)    119.9    124.5    (4.6)    122.0    126.7    (4.7)
    Net operating
     income per share
     (dollars)             0.63     0.93   (0.31)     2.96     3.61   (0.65)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Operating income (net and pre-tax) and net operating income per share are
non-GAAP measures. Net operating income is defined as net income excluding the
MYA and net gains on invested assets and other gains, after tax. Pre-tax
operating income is defined as net operating income before income taxes. Net
operating income per share is equal to net operating income for the period
divided by the average outstanding number of shares for the same period. These
measures are used by management and financial analysts to assess the company's
performance; however, they may not be comparable to similar metrics published
by other companies.

    Changes in the definition of net operating income and underwriting
    measures

    Since the first quarter of 2008, the MYA to claims liabilities is
excluded from net operating income and underwriting measures discussed in this
Review of Performance. The MYA reflects the impact of changes in the discount
rate applied to the company's claims liabilities based on the market-based
yield of the underlying assets. The MYA can fluctuate substantially from
quarter to quarter as market yields vary, therefore, it has been excluded from
net operating income and underwriting measures which focus on core operating
performance. The MYA is matched with gains and losses on HFT debt securities,
which are also excluded from net operating income. The objective is that these
two items offset each other with a minimal overall impact to income (see table
9). The difference between the MYA and the gains and losses on HFT debt
securities is referred to as the "market yield effect" in this Review of
Performance.

    
    Section 7 - Financial condition

    7.1 Balance sheet highlights

    The table below shows the significant balance sheet items as reported on
December 31, 2007, September 30, 2008 and December 31, 2008.

    Table 20
                                                     As at
                                   ------------------------------------------
                                    December 31,  September 30,  December 31,
                                           2008           2008          2007
    -------------------------------------------------------------------------
    Cash and cash equivalents             510.4           68.7           8.1
    Invested assets
      Debt securities                   3,832.5        3,704.9       3,886.7
      Equity securities                 2,015.1        2,879.0       3,140.3
      Loans and equity investments        261.3          246.4         210.8
      Total invested assets             6,108.9        6,830.3       7,237.8
    Premiums receivable                 1,469.4        1,521.6       1,440.8
    Deferred acquisition costs and
     reinsurance assets                   606.6          639.5         653.1
    Other assets                        1,078.1        1,084.3       1,049.9
    Total assets                        9,773.4       10,144.4      10,389.7
    Claims liabilities                  4,064.9        4,044.3       3,989.0
    Unearned premiums                   2,366.8        2,441.1       2,333.5
    Other liabilities                     709.1          762.9         895.1
    Total liabilities                   7,140.8        7,248.3       7,217.6
    Shareholders' equity                2,632.6        2,896.1       3,172.1
    Book value per share (dollars)        21.96          24.15         25.48
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The two main drivers of the change in the balance sheet during 2008 were
the reduction of the equity securities which began in the third quarter and
the decline in fair value of equity securities in 2008.
    During the fourth quarter, the company reduced its exposure to the
volatility of capital markets by selling equity securities. This resulted in
net proceeds after purchases of approximately $253.5 million and helped
maintain strong capital ratios. The majority of these sales consisted of
common shares. The proceeds were reinvested in Canadian treasury bills most of
which mature in less than 90 days and are included in cash. Those with
maturities greater than 90 days are included in debt securities. The company
also sold the equities of its Drop Alpha and Market Neutral strategies and
unwound the derivative contracts associated with these strategies.
    In addition to these reductions, the fair values of the common and
preferred shares including realized losses fell by $568 million in the quarter
in line with worldwide stock market declines. Our common share portfolio has
generally followed the fluctuations of the TSX with some variances due to our
specific mix of securities. Preferred shares fair values have been negatively
impacted by the surge in corporate interest rate spreads as well as the
significant number of preferred share issues at the end of the year which
increased market supply of preferred shares at higher rates. Despite these
developments, the quality of the preferred share portfolio remains high with
approximately 89% of preferred shares rated P1 or P2.
    Loans and equity investments have increased as the company continues the
expansion of the distribution network. Most of these investments are carried
at amortized cost.
    Claims liabilities have not changed significantly year over year. A
reconciliation is provided in note 4 to the unaudited interim consolidated
financial statements.
    The following table shows the quarterly, year-to-date and cumulative
development of claims liabilities for the 10 most recent accident years, all
including MYA. The original reserve estimates are evaluated quarterly for
redundancy or deficiency. The evaluation is based on actual payments in full
or partial settlement of claims as well as on current estimates of claims
liabilities for claims still open or claims still unreported.

    
    Table 21

                                             Accident year
                       ------------------------------------------------------
    (in millions of       Total     2007     2006     2005     2004     2003
     dollars, except
     as otherwise
     noted)
    -------------------------------------------------------------------------
    Original reserve             1,282.2  1,178.0  1,118.8  1,117.7    973.2
      Excluding MYA              1,288.4  1,173.3  1,118.8  1,117.7    973.2
    (Favourable)
     unfavourable
     development during
     Q4 2008 including
     MYA                  (19.3)    (8.1)     5.7     (0.8)    (1.6)   (15.5)
      Excluding MYA       (52.2)   (17.9)    (1.5)    (5.6)    (4.9)   (18.3)
    (Favourable)
     unfavourable
     development during
     YTD 2008 including
     MYA                 (113.9)    10.7    (28.4)   (27.5)   (20.6)   (21.4)
      Excluding MYA      (148.9)     0.3    (36.1)   (32.6)   (24.2)   (24.3)
    Cumulative
     development
     (including MYA)                10.7    (37.7)  (120.6)  (247.8)  (200.7)
    As a % of original
     reserve                        0.8%    (3.2)%  (10.8)%  (22.2)%  (20.6)%
    -------------------------------------------------------------------------

                                      Accident year
                       ---------------------------------------------
    (in millions of        2002     2001     2000     1999   1998 &
     dollars, except                                        earlier
     as otherwise
     noted)
    ----------------------------------------------------------------
    Original reserve      838.6    729.0    655.5    587.0  1,400.3
      Excluding MYA       838.6    729.0    655.5    587.0  1,400.3
    (Favourable)
     unfavourable
     development during
     Q4 2008 including
     MYA                    1.2      0.1      0.2     (0.1)    (0.5)
      Excluding MYA        (0.4)    (0.9)    (0.5)    (0.5)    (1.7)
    (Favourable)
     unfavourable
     development during
     YTD 2008 including
     MYA                   (9.6)    (7.8)    (3.3)    (4.3)    (1.7)
      Excluding MYA       (11.4)    (8.9)    (4.0)    (4.7)    (3.0)
    Cumulative
     development
     (including MYA)      (28.0)    32.5     31.4     32.7   (101.3)
    As a % of original
     reserve              (3.3)%     4.5%     4.8%     5.6%   (7.2)%
    ----------------------------------------------------------------
    ----------------------------------------------------------------
    

    7.2 Shareholders' equity

    Shareholders' equity was reduced in 2008 partly due to a return of
capital to shareholders through the normal course issuer bid as well as the
quarterly dividend payments but also because of the significant loss in fair
values of the investment portfolio which impacted both net income and other
comprehensive income.

    
    7.3 Liquidity and capital resources

    Table 22 - Cash flow and liquidity

    (in millions of
     dollars, except as     Q4-      Q4-               YTD      YTD
     otherwise noted)      2008     2007  Change      2008     2007   Change
    -------------------------------------------------------------------------
    Selected inflows and
     (outflows)
    Operating activities:
      Cash provided by
       operating
       activities         230.5    216.5     6.5%    619.7    620.3    (0.1)%
    Investing activities:
      Proceeds from the
       sale of invested
       assets, net of
       (purchases)        261.5   (146.2) (278.9)%   263.7    (42.7) (717.6)%
    Financing activities:
      Dividends paid      (37.2)   (33.6)    10.7%  (151.0)  (136.9)    10.3%
      Common shares
       repurchased for
       cancellation           -        -            (176.0)  (501.2)  (64.9)%
    Net cash and cash
    equivalents at the
    end of the period     510.4      8.1     n/a     510.4      8.1     n/a
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The company's cash flows from operations remain solid at $230.5 million
in the quarter and $619.7 million for the year. The impairments taken in the
fourth quarter had no impact on cash flows or liquidity. In Q4-2008, cash
provided from operating activities and from the sale of invested assets were
held in short term government debt securities, after allowing for the
quarterly dividend. For the full year, cash was used to pay dividends and fund
the NCIB with the balance kept in short term securities.
    Although the company's cash position increased substantially during the
fourth quarter following the sale of equity securities, the company's ability
to use its cash reserves is limited by the minimum regulatory capital (MCT)
required by the Office of the Superintendent of Financial Institutions
("OSFI") (150%). The company's year-end MCT level was strong at 205% despite
reflecting the significant decline in fair values in the quarter, impairments
of common shares and lower profitability. The sale of equities during the
quarter substantially reduced the amount of capital required, reflected in the
5.1 point increase in the MCT ratio compared to the end of the third quarter
of 2008. In addition, net capital injections into the P&C companies of $62.0
million contributed to the strong MCT level at year end.
    The company had approximately $357.5 million in excess capital in its
insurance subsidiaries on December 31, 2008 based on an MCT of 170% and liquid
assets of $70.0 million available at the holding company for a total  excess
capital of $427.5 million at the end of December 2008. The Company had no debt
on its books at year-end. On December 31, 2008, the Company obtained a
committed and unsecured revolving line of credit of $150 million in
replacement of the previous uncommitted credit facility of $100 million.

    The following table presents the breakdown of the Company's MCT.

    
    Table 23 - Minimum Capital Test
                                                        As at December 31,
    (in millions of dollars,                       --------------------------
     except as otherwise noted)                         2008            2007
    -------------------------------------------------------------------------
    Total capital available                          2,096.5         2,250.4
    Total capital required                           1,023.0         1,197.7
    MCT %                                             205.0%          187.9%
    Excess at 150%                                     562.0           453.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    For accounting purposes, at the end of 2008, the Company's pension plans
were in a surplus position of $10.9 million compared to a surplus of $33.2
million last year. The change is due essentially to the negative returns of
the plan assets which were not entirely offset by gains on the liabilities due
to increased discount rates. Actuarial valuations of the plans based on plan
assets and membership information as at December 31, 2008 will be performed
during 2009 and may or may not result in mandatory funding requirements
depending on which legislative changes are finally adopted. Our best estimate
of annual mandatory funding, if any, is in the range of 1% and 3% of total
assets, payable over 5 to 10 years.

    Rating agencies

    ING Canada Inc.'s long-term issuer rating with Moody's Investors Services
is A3 and the company's five principal operating insurance subsidiaries are
rated Aa3 for insurance financial strength (IFS). ING Canada Inc.'s unsecured
debt would be rated A (low) by DBRS. ING Canada Group has an A+ (Superior)
rating from A.M. Best.

    Section 8 - Risk management

    The company has not significantly changed its risk management strategy as
compared to the information presented in the annual MD&A.

    8.1 Estimated impact of changes in interest rates and equity prices

    Impact of changes in interest rates

    For our available-for-sale debt or preferred securities a 100 basis point
increase in interest rates would increase income before income taxes by
approximately $3.6 million. A 100 basis point increase would also decrease OCI
by approximately $163.4 million. Conversely, a 100 basis point decrease in
interest rates would lower income before income taxes and increase OCI by the
same amounts, respectively.

    Impact of changes in equity prices

    As at December 31, 2008, management estimates that a 10.0% increase in
equity markets would have no impact on income before income taxes and increase
OCI by $52.2 million. Excluding the impact of any impairments, a 10.0%
decrease in equity prices would have the corresponding opposite effect.

    Key assumptions

    The analysis in this section is based on the following assumptions: 1)
the securities in the company's portfolio are not impaired; 2) interest rates
and equity prices move independently; 3) shifts in the yield curve are
parallel; 4) credit and liquidity risks have not been considered, and, 5) all
of our debt securities and preferred shares are available-for-sale. For our
HFT debt securities, which are marked-to-market through the P&L, the estimated
impact on income before income taxes of a 100 basis point increase or decrease
in interest rates is assumed to be offset by the MYA. In addition, it is
important to note that AFS securities in an unrealized loss position, as
reflected in OCI, may at some point in the future be realized either through a
sale or impairment. See section 3.4, "Gains and losses on invested assets and
other gains".

    Section 9 - Cautionary note regarding forward-looking statements

    Certain statements in this report about the company's current and future
plans, expectations and intentions, results, levels of activity, performance,
goals or achievements or any other future events or developments are
forward-looking statements. The words "may", "will", "would", "should",
"could", "expects", "plans", "intends", "anticipates", "believes",
"estimates", "predicts", "likely" or "potential" or the negative or other
variations of these words or other similar words or phrases identify such
forward-looking statements.
    Forward-looking statements are based on estimates and assumptions made by
management based on management's experience and view of historical trends,
current conditions and expected future developments, as well as other factors
that management believes are appropriate in the circumstances. Many factors
could cause the company's actual results, performance or achievements or
future events or developments to differ materially from the forward-looking
statements. These factors include, without limitation, the following: the
company's ability to implement its strategy or operate its business as
management expects; its ability to accurately assess the risks associated with
the insurance policies that the company writes; unfavourable capital market
developments or other factors which could affect the company's invested
assets; the cyclical nature of the P&C insurance industry; its ability to
accurately predict future claims frequency; government regulations; litigation
and regulatory actions; periodic negative publicity regarding the insurance
industry; intense competition; the company's reliance on brokers and third
parties to sell its products; the company's ability to successfully pursue its
acquisition strategy; the significant influence of ING Groep; the company's
participation in the Facility Association (a mandatory pooling arrangement
among all industry participants); terrorist attacks and ensuing events; the
occurrence of catastrophic events; the company's ability to maintain its
financial strength ratings; the company's ability to alleviate risk through
reinsurance; the company's ability to successfully manage credit risk; the
company's reliance on information technology and telecommunications systems;
the company's dependence on key employees; general economic, financial and
political conditions; the company's dependence on the results of operations of
its subsidiaries; the accuracy of analyst earnings estimates or the consensus
figure based upon such estimates; the volatility of the stock market and other
factors affecting the company's share price; and future sales of a substantial
number of its common shares. These factors should be considered carefully, and
readers should not place undue reliance on the company's forward-looking
statements. Management has no intention and accepts no responsibility to
update or revise any forward-looking statements as a result of new
information, future events or otherwise, except as required by law.


    
    ING Canada Inc.
    Unaudited interim consolidated balance sheets
    (in millions of Canadian dollars)
    -------------------------------------------------------------------------
                                                    As at              As at
                                        December 31, 2008  December 31, 2007
    -------------------------------------------------------------------------
    Assets
    Cash and cash equivalents                $      510.4       $        8.1
    Invested assets (note 3)
      Debt securities                             3,832.5            3,886.7
      Equity securities                           2,015.1            3,140.3
      Loans and equity investments                  261.3              210.8
                                       --------------------------------------
                                                  6,108.9            7,237.8

    Premium receivables                           1,469.4            1,440.8
    Accrued interest and dividend income             34.7               46.2
    Other receivables                               247.0              264.8
    Deferred acquisition costs                      382.4              379.6
    Reinsurance assets                              224.2              273.5
    Other assets                                    303.4              280.1
    Income taxes receivable                         221.0              168.4
    Future income tax asset                          54.2               68.7
    Intangible assets                                57.0               61.8
    Goodwill                                        160.8              159.9
    -------------------------------------------------------------------------

                                             $    9,773.4       $   10,389.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Claims liabilities (note 4)              $    4,064.9       $    3,989.0
    Unearned premiums                             2,366.8            2,333.5
    Other liabilities                               701.7              862.6
    Income taxes payable                              7.4               32.5
                                       --------------------------------------
                                                  7,140.8            7,217.6

    Shareholders' equity
    Share capital (note 5)                        1,061.5            1,101.9
    Contributed surplus                              88.3               97.2
    Retained earnings                             1,928.9            2,091.3
    Accumulated other comprehensive loss           (446.1)            (118.3)
                                       --------------------------------------
                                                  2,632.6            3,172.1
                                       --------------------------------------

                                             $    9,773.4       $   10,389.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Unaudited interim consolidated statements of income
    For the periods ended December 31
    (in millions of Canadian dollars, except as otherwise noted)
    -------------------------------------------------------------------------

                                      Three months            Twelve months
                                   ------------------      ------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Revenues
    Premiums written
      Direct                  $    970.5  $    959.7  $  4,170.5  $  4,100.0
      Ceded                         25.4        25.3        98.4        97.6
                             ------------------------------------------------
      Net                          945.1       934.4     4,072.1     4,002.4
    Changes in net unearned
     premiums                       74.1        70.3       (32.7)      (70.4)
                             ------------------------------------------------
    Net premiums earned          1,019.2     1,004.7     4,039.4     3,932.0
    Interest and dividend
     income                         82.2        91.3       345.1       364.3
    Net (losses) gains on
     invested assets and
     other gains                  (152.2)       (3.3)     (288.0)       73.6
    Distribution and other           6.8         4.0        35.2        70.0
    -------------------------------------------------------------------------
                                   956.0     1,096.7     4,131.7     4,439.9
    Expenses
    Underwriting
      Claims                       760.5       671.7     2,806.3     2,584.3
      Commissions, premium
       taxes and general
       expenses                    295.1       285.5     1,166.1     1,138.9
                             ------------------------------------------------
                                 1,055.6       957.2     3,972.4     3,723.2
    Distribution and other           8.6         6.9        35.7        45.1
                             ------------------------------------------------
                                 1,064.2       964.1     4,008.1     3,768.3
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                 (108.2)      132.6       123.6       671.6
    Income tax (benefit)
     expense                       (44.1)       36.8        (4.6)      163.3
    -------------------------------------------------------------------------
    Net income (loss)         $    (64.1) $     95.8  $    128.2  $    508.3
    -------------------------------------------------------------------------
    Earnings per share, basic
     and diluted (dollars)    $    (0.53) $     0.77  $     1.05  $     4.01
    Dividends per share
     (dollars)                $     0.31  $     0.27  $     1.24  $     1.08
    Basic and diluted average
     number of common shares
     (in millions)                 119.9       124.5       122.0       126.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Unaudited interim consolidated statements of comprehensive (loss) income
    For the periods ended December 31
    (in millions of Canadian dollars)
    -------------------------------------------------------------------------

                                      Three months            Twelve months
                                   ------------------      ------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Net income (loss)         $    (64.1) $     95.8  $    128.2  $    508.3

    Unrealized losses on
     available for sale
     securities
      Change during the period    (431.8)     (198.6)     (801.2)     (296.3)
      Income taxes                 118.7        62.3       236.0        95.9
                             ------------------------------------------------
                                  (313.1)     (136.3)     (565.2)     (200.4)
    Reclassified to income
      From available for
       sale securities             216.4        68.2       344.6       (54.5)
      Income taxes                 (65.3)      (19.2)     (107.2)       27.5
                             ------------------------------------------------
                                   151.1        49.0       237.4       (27.0)
                             ------------------------------------------------
    Other comprehensive loss      (162.0)      (87.3)     (327.8)     (227.4)

    Comprehensive (loss)
     income                   $   (226.1) $      8.5  $   (199.6) $    280.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Unaudited interim consolidated statements of changes in shareholders'
    equity
    For the twelve-month periods ended December 31
    (in millions of Canadian dollars)
    -------------------------------------------------------------------------
                                                        Accumulated
                                                            other
                          Share  Contributed  Retained comprehensive
                         capital    surplus   earnings       loss      Total
    -------------------------------------------------------------------------
    Balance as at
      December 31,
      2007             $ 1,101.9  $    97.2  $ 2,091.3  $  (118.3) $ 3,172.1
    Comprehensive
     (loss) income             -          -      128.2     (327.8)    (199.6)
    Common shares
     repurchased for
     cancellation
     (note 5)              (40.4)         -     (135.6)         -     (176.0)
    Dividends paid             -          -     (151.0)         -     (151.0)
    Stock-based
     compensation              -       (8.9)      (4.0)         -      (12.9)
    -------------------------------------------------------------------------
    Balance as at
     December 31,
     2008              $ 1,061.5  $    88.3  $ 1,928.9  $  (446.1) $ 2,632.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Balance as at
     December 31,
     2006              $ 1,183.9  $    93.5  $ 2,143.4  $       -  $ 3,420.8
    Transition
     adjustments               -          -       (4.3)     109.1      104.8
    Comprehensive
     (loss) income             -          -      508.3     (227.4)     280.9
    Common shares
     repurchased for
     cancellation
     (note 5)              (82.0)         -     (419.2)         -     (501.2)
    Dividends paid             -          -     (136.9)         -     (136.9)
    Stock-based
     compensation              -        3.7          -          -        3.7
    -------------------------------------------------------------------------
    Balance as at
     December 31,
     2007              $ 1,101.9  $    97.2  $ 2,091.3  $  (118.3) $ 3,172.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Unaudited interim consolidated statements of cash flows
    For the periods ended December 31
    (in millions of Canadian dollars)
    -------------------------------------------------------------------------

                                      Three months            Twelve months
                                   ------------------      ------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Cash flows from (used in)
     operating activities
    Net income (loss)         $    (64.1) $     95.8  $    128.2  $    508.3
    Adjustments for
     non-cash items                 37.4      (111.1)      378.2        14.6
    Changes in net claims
     liabilities                    43.8         4.6       125.9       163.0
    Changes in other operating
     assets and liabilities        213.4       227.2       (12.6)      (65.6)
                             ------------------------------------------------
    Cash provided by operating
     activities (note 8)           230.5       216.5       619.7       620.3

    Cash flows from (used in)
     investing activities
    Proceeds from sale of
     invested assets               991.8     1,337.7     5,278.6    10,802.9
    Purchase of invested
     assets                       (730.3)   (1,483.9)   (5,014.9)  (10,845.6)
    Purchase of brokerages
     and books of business          (1.3)       (0.3)       (6.7)      (12.4)
    Sale of brokerages and
     books of business                 -           -         2.1         2.4
    Purchase of property and
     equipment and other           (11.8)      (29.7)      (49.6)      (47.4)
                             ------------------------------------------------
    Cash provided by (used
     in) investing activities      248.4      (176.2)      209.6      (100.1)

    Cash flows from (used in)
     financing activities
    Common shares repurchased
     for cancellation                  -           -      (176.0)     (501.2)
    Dividends paid                 (37.2)      (33.6)     (151.0)     (136.9)
                             ------------------------------------------------
    Cash used in financing
     activities                    (37.2)      (33.6)     (327.0)     (638.1)
    -------------------------------------------------------------------------
    Net increase (decrease)
     in cash and cash
     equivalents                   441.7         6.7       502.3      (117.9)
    Cash and cash equivalents,
     beginning of period            68.7         1.4         8.1       126.0
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period            $    510.4  $      8.1  $    510.4  $      8.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    1)  Basis of presentation

    These unaudited interim consolidated financial statements of ING Canada
    Inc. ("ING" or the "Company") have been prepared in accordance with
    Canadian generally accepted accounting principles ("GAAP") for interim
    financial statements and do not include all the information required for
    annual financial statements. Except as described below, these interim
    unaudited consolidated financial statements use the same accounting
    policies as were used for the Company's audited consolidated financial
    statements for the fiscal year ended  December 31, 2007 and should be
    read in conjunction with the Company's annual consolidated financial
    statements for the year then ended. Certain comparative figures have been
    reclassified to conform to the presentation adopted in the current
    period.

    2)  Accounting policy changes

    a)  Applied during the period

    Financial instruments and capital

    Effective January 1, 2008, the Company applied the new Canadian Institute
    of Chartered Accountants' ("CICA") Handbook Sections 3862, Financial
    Instruments - Disclosure, 3863 Financial Instruments - Presentation and
    1535 Capital Disclosures revising and enhancing disclosure requirements.
    These new sections place increased emphasis on disclosures about the
    nature and extent of risks arising from financial instruments and how the
    Company manages those risks and require the disclosure of both
    qualitative and quantitative information that enables users of financial
    statements to evaluate the Company's objectives, policies and processes
    for managing capital. The risk management policies and procedures of the
    Company as well as certain disclosures required by Sections 3862 and 1535
    were provided in the 2007 annual Management Discussion & Analysis under
    Section 9 and in notes 3, 4, 5 and 13 of the 2007 annual consolidated
    financial statements. The impact of changes in risk variables such as
    market prices and interest rates is described in the Risk Management
    section of the Review of Performance for the fourth quarter ended
    December 31, 2008.

    b)  Future accounting changes

    Goodwill and intangible assets

    Effective January 1, 2009, the Company will apply the recommendations of
    the CICA of Section 3064, Goodwill and Intangible Assets. This Section
    will replace Section 3062, Goodwill and Other Intangible Assets, and
    Section 3450, Research and Development Costs, which establish standards
    for the recognition, measurement and disclosure of goodwill and
    intangible assets. The provisions relating to the definition and initial
    recognition of intangible assets, including internally generated
    intangible assets, are equivalent to the corresponding provisions of IAS
    38, Intangible Assets, of International Financial Reporting Standards
    ("IFRS"). The Company is currently analyzing the impact this change will
    have on its consolidated financial statements, however, the Company does
    not expect it to be significant.

    International financial reporting standards

    The Accounting Standards Board ("AcSB") has issued an exposure draft
    proposing to incorporate IFRS into the CICA Handbook over the period
    ending December 31, 2010. After this transitional period, the Company
    will cease to use Canadian GAAP and will adopt IFRS on January 1, 2011.
    The Company monitors this transition to IFRS and is analyzing the impact
    that the adoption of the IFRS will have on its consolidated financial
    statements.

    3)  Invested assets and other financial instruments

    a)  Invested assets

    The Company's invested assets are separated into three categories:
    available for sale ("AFS"), held-for-trading ("HFT") and loans.

                                  Classified  Designated
                             AFS    as HFT      as HFT      Loans      Total
    -------------------------------------------------------------------------
    As at December 31, 2008

    Debt securities
      Short-term notes     293.8         -           -          -      293.8
      Fixed income
       securities        1,781.2         -     1,757.5          -    3,538.7
    Equity securities
      Preferred shares   1,220.1         -           -          -    1,220.1
      Common shares        723.3         -        71.7          -      795.0
    Loans and equity
     investments            19.0         -           -      242.3      261.3
    -------------------------------------------------------------------------
                         4,037.4         -     1,829.2      242.3    6,108.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    As at December 31, 2007

    Debt securities
      Short-term notes      18.9         -           -          -       18.9
      Fixed income
       securities        2,162.8         -     1,705.0          -    3,867.8
    Equity securities
      Preferred shares   1,430.8         -           -          -    1,430.8
      Common shares      1,427.6      72.9       209.0          -    1,709.5
    Loans and equity
     investments            22.6         -           -      188.2      210.8
    -------------------------------------------------------------------------
                         5,062.7      72.9     1,914.0      188.2    7,237.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    b)  Unrecognized gains and losses

                    HFT invested     Other invested assets    Total invested
                          assets                                      assets
    -------------------------------------------------------------------------
                                 Unamortized Unrealized Unrealized   At fair
                   At fair value      cost       gains     losses      value
    -------------------------------------------------------------------------
    As at December
     31, 2008

    Debt securities
      Short-term notes         -     293.8           -          -      293.8
      Fixed income
       securities        1,757.5   1,750.8        57.1      (26.7)   3,538.7
    Equity securities
      Preferred shares         -   1,742.6         1.8     (524.3)   1,220.1
      Common shares         71.7     857.1        10.5     (144.3)     795.0
    Loans and equity
     investments               -     268.2        29.2       (6.9)     290.5
    -------------------------------------------------------------------------
                         1,829.2   4,912.5        98.6     (702.2)   6,138.1
    Net unrealized losses                            (603.6)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at December 31, 2007

    Debt securities
      Short-term notes         -      18.9           -          -       18.9
      Fixed income
       securities        1,705.0   2,160.2        21.2      (18.6)   3,867.8
    Equity securities
      Preferred shares         -   1,571.8         8.8     (149.8)   1,430.8
      Common shares        281.9   1,464.5        74.3     (111.2)   1,709.5
    Loans and equity
     investments               -     211.7           -       (0.9)     210.8
    -------------------------------------------------------------------------
                         1,986.9   5,427.1       104.3     (280.5)   7,237.8
    Net unrealized losses                            (176.2)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Included in loans and equity investments are broker loans carried at cost
    for which there are unrealized gains of $29.2 million as at December 31,
    2008 (2007 - nil).

    The Company has no exposure to leveraged capital notes in structured
    investment vehicles, directly or through the use of derivatives as at
    December 31, 2008 (2007 - $19.8 million).

    c)  Positive and negative fair values of derivative financial instruments

                                                             Fair values
                                                        --------------------
                                                         Positive  Negative
    -------------------------------------------------------------------------
    As at December 31, 2008

    Designated as fair value hedge                              -       1.9
    Not designated in a hedging relationship                  9.0       2.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    As at December 31, 2007

    Designated as fair value hedge                            2.4         -
    Not designated in a hedging relationship                  4.7      18.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    d)  Equities sold short

                        As at December 31, 2008     As at December 31, 2007
                       --------------------------  --------------------------
                                     Fixed income               Fixed income
                                       securities                 securities
                                          pledged                    pledged
                        Fair value  as collateral  Fair value  as collateral
    -------------------------------------------------------------------------
    Long positions               -              -        62.1              -
    Short positions              -              -        62.0           63.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    4)  Net claims liabilities

    a)  Movements

                                    Direct claims  Reinsurers'    Net claims
                                      liabilities       share    liabilities
    -------------------------------------------------------------------------
    For the twelve months ended
     December 31, 2008

    Balance as at December 31, 2007       3,989.0       256.9        3,732.1
    Transition adjustment                       -           -              -
    Claims incurred                       2,931.6        23.2        2,908.4
    Prior year (favourable)
     claims development                    (161.9)      (23.3)        (138.6)
    Increase (decrease) due to
     changes in discount rate                38.7         2.3           36.4
    Claims paid                          (2,732.5)      (52.1)      (2,680.4)
    -------------------------------------------------------------------------
    Balance as at December 31, 2008       4,064.9       207.0        3,857.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    For the twelve months ended
     December 31, 2007

    Balance as at December 31, 2006       3,823.5       270.4        3,553.1
    Transition adjustment                    18.0         2.0           16.0
    Claims incurred                       2,717.1        10.8        2,706.3
    Prior year (favourable) claims
     development                            (92.0)       10.3         (102.3)
    Increase (decrease) due to
     changes in discount rate               (22.0)       (2.3)         (19.7)
    Claims paid                          (2,455.6)      (34.3)      (2,421.3)
    -------------------------------------------------------------------------
    Balance as at December 31, 2007       3,989.0       256.9        3,732.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During 2008, the company refined the calculation of the market rate
    estimate used to discount claims liabilities.  These modifications
    resulted in a decrease of $38.4 million in the net claims liabilities
    for the year ended December 31, 2008 which is included in Increase
    (decrease) due to changes in discount rate above.  The corresponding
    reduction in claims expenses has been recognized in the statements of
    income in the current period.

    5)  Share capital

    a)  Normal course issuer bid

    On February 22, 2008, the Company commenced its normal course issuer bid
    to purchase for cancellation during the ensuing 12-month period ending
    February 21, 2009, up to 6,223,638 common shares. The actual number of
    common shares which may be purchased and the timing of any such purchases
    will be determined by the Company. Under the terms of the normal course
    issuer bid, ING Canada's majority shareholder, ING Groep, is permitted to
    participate to maintain its proportionate share ownership at 70%. As at
    December 31, 2008, 4,566,195 common shares have been repurchased under
    the issuer bid at an average price of $38.53 per share for a total
    consideration of $176.0 million and ING Groep participated
    proportionately. Total cost paid, including fees, was first charged to
    share capital to the extent of the average carrying value of the common
    shares purchased for cancellation and the excess of $135.6 million was
    charged to retained earnings.

    b)  Substantial issuer bid

    On March 30, 2007, the Company completed a substantial issuer bid under
    which it purchased for cancellation 9,259,239 of its common shares at
    $54.00 per share for a total consideration of $500.0 million plus fees of
    $1.2 million, net of income taxes. Total cost paid, including fees, was
    first charged to share capital to the extent of the average carrying
    value of the common shares purchased for cancellation and the excess of
    $419.2 million was charged to retained earnings.

    c)  Issued and outstanding

                   As at December 31, 2008       As at December 31, 2007
             -------------------------------- ------------------------------
                         Issued and                      Issued and
             Authorized  outstanding         Authorized  outstanding
              (shares)    (shares)   Amount   (shares)    (shares)   Amount
    -------------------------------------------------------------------------
    Common   Unlimited 119,906,566 $ 1,061.5 Unlimited 124,472,761 $ 1,101.9
    Class A  Unlimited           -         - Unlimited           -         -
    Special        One           1         -       One           1         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    d)  Stock-based compensation

    The following table reconciles the beginning and ending balances of the
    share units outstanding for both the Company's long-term incentive plan
    ("LTIP") and employee share purchase plan ("ESPP").

    -------------------------------------------------------------------------

                                      Three months            Twelve months
                                   ------------------      ------------------
    For the periods ended
     December 31                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    LTIP (share equivalents)
      Outstanding, beginning
       of period                 363,833     703,050     616,115     545,274
      Net change in estimate
       during the period         (56,969)    (86,935)   (309,251)     70,841
    -------------------------------------------------------------------------
      Outstanding, end of
       period                    306,864     616,115     306,864     616,115
    -------------------------------------------------------------------------
    LTIP (restricted common
     shares)
      Outstanding, end of
       period                    289,236           -     289,236           -
    -------------------------------------------------------------------------
    ESPP (restricted common
     shares)
      Outstanding, beginning
       of period                  82,467      64,528      66,228      22,892
      Awarded during the period   24,855      16,656      87,144      63,146
      Vested or forfeited
       during the period         (17,416)    (14,956)    (63,466)    (19,810)
    -------------------------------------------------------------------------
    Outstanding, end of period    89,906      66,228      89,906      66,228
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    6)  Related-party transactions

    a)   Revenues and expenses

    -------------------------------------------------------------------------

                                      Three months            Twelve months
                                   ------------------      ------------------
    For the periods ended
     December 31                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Reinsurance ceded to related
     entities
      Ceded premiums earned          3.7         5.4        14.8        21.0
      Ceded claims                   0.7         4.3         0.6         4.5
    Expenses
      Commissions                   10.0        10.5        39.2        37.3
      Other expenses (income)       (5.5)        4.7         8.2        18.2
    -------------------------------------------------------------------------

    b)  Balance sheet amounts

                                                         As at         As at
                                                  December 31,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------
    Reinsurance (payable) receivable                      (0.4)          2.4
    Loans                                                127.0          90.4
    -------------------------------------------------------------------------

    7)  Debt outstanding

    The Company has an unsecured committed credit facility of $150.0 million
    (2007 - uncommitted $100.0 million), which may be drawn as prime loans
    at the prime rate plus a margin or as bankers' acceptances at the
    bankers' acceptance rate plus a margin. As at December 31, 2008 the
    Company has not drawn down under the facility.

    8)  Additional information

    a)  Consolidated statements of income

                                      Three months            Twelve months
                                   ------------------      ------------------
    For the periods ended
     December 31                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Amounts included in net
     (losses) gains on invested
     assets:
    Related to HFT financial
     instruments
      (Losses) gains               (19.4)        4.7       (81.4)      (22.0)
      Derivative financial
       instruments gains            76.2        25.7       118.6        45.5
    Impairment of AFS invested
     assets                       (185.8)      (42.7)     (261.4)      (84.9)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    b)  Consolidated statements of cash flows

                                      Three months            Twelve months
                                   ------------------      ------------------
    For the periods ended
     December 31                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Amounts included in non-cash
     items:
      Amortization                   9.7        18.9        39.9        29.0
      Stock-based compensation      (0.3)       (1.1)       (0.5)        3.7
      Employee future benefits       2.7         1.5        12.4         6.9
    Income taxes recovered (paid)   14.7       (17.1)      (70.4)     (158.8)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    9)  Segmented information

    The Company has two reportable segments, the underwriting segment and the
    corporate and distribution segment.

    The Company's core business activity is property and casualty ("P&C")
    insurance underwriting. Underwriting segment includes two lines of
    business: personal lines and commercial lines. Classes in personal lines
    include automobile and property. Classes in commercial lines encompass
    primarily automobile and other, primarily property and liability.

    Corporate and distribution segment includes the results of the Company's
    broker operations and the results of other operations.

    a)  Results of the Company's reportable segments

                                      Corporate and  Inter-segment
                          Underwriting  distribution  eliminations     Total
    -------------------------------------------------------------------------
    For the three months
     ended December 31,
     2008

    Revenues                   1,019.3       19.7        (12.9)      1,026.1
    Expenses                   1,055.6       18.8        (14.1)      1,060.4
    -------------------------------------------------------------------------
    Subtotal                     (36.3)       0.9          1.2         (34.3)
    Interest and dividend
     income, net of expenses                                            78.3
    Net (losses) gains on
     invested assets and
     other gains                                                      (152.2)
    -------------------------------------------------------------------------
    Total income (loss)
     before income taxes                                              (108.2)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the three months
     ended December 31,
     2007

    Revenues                   1,004.7       19.2        (15.1)      1,008.8
    Expenses                     957.2       20.5        (18.3)        959.4
    -------------------------------------------------------------------------
    Subtotal                      47.5       (1.3)         3.2          49.4
    Interest and dividend
     income, net of expenses                                            86.5
    Net (losses) gains on
     invested assets and
     other gains                                                        (3.3)
    -------------------------------------------------------------------------
    Total income (loss)
     before income taxes                                               132.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                      Corporate and  Inter-segment
                          Underwriting  distribution  eliminations     Total
    -------------------------------------------------------------------------
    For the twelve months
     ended December 31,
     2008

    Revenues                   4,039.5       94.0        (58.8)      4,074.7
    Expenses                   3,972.4       78.2        (58.8)      3,991.8
    -------------------------------------------------------------------------
    Subtotal                      67.1       15.8            -          82.9
    Interest and dividend
     income, net of expenses                                           328.7
    Net (losses) gains on
     invested assets and
     other gains                                                      (288.0)

    Total income before income taxes                                   123.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the twelve months
     ended December 31,
     2007

    Revenues                   3,932.0      136.6        (66.6)      4,002.0
    Expenses                   3,723.2       86.0        (60.3)      3,748.9
    -------------------------------------------------------------------------
    Subtotal                     208.8       50.6         (6.3)        253.1
    Interest and dividend
     income, net of expenses                                           344.9
    Net (losses) gains on
     invested assets and
     other gains                                                        73.6
    -------------------------------------------------------------------------
    Total income before
     income taxes                                                      671.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    b)  Assets of the Company's reportable segments

                                      Corporate and  Inter-segment
                          Underwriting  distribution  eliminations     Total
    -------------------------------------------------------------------------
    As at December 31,
     2008

    Goodwill                      74.4       86.4            -         160.8
    Invested assets            6,059.0       49.9            -       6,108.9
    Other                      3,207.4      303.4         (7.1)      3,503.7
    -------------------------------------------------------------------------
    Total assets               9,340.8      439.7         (7.1)      9,773.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at December 31,
     2007

    Goodwill                      74.4       85.5            -         159.9
    Invested assets            6,737.1      501.9         (1.2)      7,237.8
    Other                      2,714.7      290.6        (13.3)      2,992.0
    -------------------------------------------------------------------------
    Total assets               9,526.2      878.0        (14.5)     10,389.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    c)  Results by line of business

                                      Three months            Twelve months
                                   ------------------      ------------------
    For the periods ended
     December 31                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Direct premiums written
      Personal                     681.3       666.7     3,034.5     2,952.7
      Commercial                   289.2       293.0     1,136.0     1,147.3
    Underwriting (loss) income
      Personal                     (77.5)       12.7       (68.4)      105.3
      Commercial                    41.2        34.7       135.4       103.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Media Enquiries: Gilles Gratton, Vice President
- Corporate Communications, (416) 217-7206, Email:
gilles.gratton@ingcanada.com; Investor Enquiries: Michelle Dodokin, Vice
President - Investor Relations, (416) 344-8044, Email:
michelle.dodokin@ingcanada.com


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890