ING Takes $14 Billion Goodwill Writedown
AMSTERDAM (AP) _ ING Groep NV said Monday it took a 13.1 billion euro ($14.1 billion) writedown on acquisitions under U.S. accounting rules, showing that companies the Dutch bank and insurer bought in 2001 are performing worse than expected.
ING purchased U.S. insurers Aetna Inc. and Reliastar Financial Corp., as well as other assets in Europe and Asia. The current value of these companies is much lower than the price paid for them.
The writedown is a requirement under Generally Accepted Accounting Principles, or GAAP, because the company has a New York Stock Exchange listing. It won’t affect ING’s 2002 results, which were reported under Dutch accounting law.
U.S. GAAP treats goodwill on acquisitions as a ``trading″ item that must be reported on the profit and loss account, while Dutch GAAP allows it to be charged against shareholder equity on the balance sheet, which doesn’t affect annual earnings.
If ING reported earnings under U.S. GAAP, including the goodwill writedowns, it would have posted a net loss of 9.6 billion euros last year, compared with the 4.5 billion euro net profit for 2002 reported under Dutch GAAP.
Two-thirds of the goodwill writedown relates to ING’s 13.5 billion euro acquisitions of Aetna and Reliastar Financial in 2001.
Goodwill is the intangible asset companies enter on their books to reflect the amount by which the purchase price for an acquisition exceeds the fair value of the acquisition’s hard assets, such as cash, factories and equipment.
While the writedown required by U.S. rules was largely a technicality, analysts said it reinforces that ING overpaid for U.S. insurance operations that have failed to live up to expectations. Had the companies performed better, they’d be more valuable and the goodwill writedown smaller or nonexistent.
ING spokeswoman Joyce Hulst stressed that the company paid for its U.S. acquisitions by selling its stakes _ at the peak of the market _ in rival Dutch banks ABN Amro NV and Fortis.
ING’s American Depositary Receipts were at $13.39 Monday afternoon, up $1.18, or 9.7 percent, on the New York Stock Exchange.