Good morning and welcoming you to ING's Second Quarter 2007 Conference Call. Before handing this conference call over to Michel Tilmant, Chief Executive Officer of ING Group, John Hele, Chief Financial Officer; and Koos Timmermans, Chief Risk Officer. Let me first say that any forward-looking statements in today's comments are subject to a number of variables including interest rates, foreign exchange rates, inflation rates, movements in securities markets, including equity markets, and underlying economic changes and conditions. The realization of forward-looking statements could be materially altered by unexpected movements in any or all of these and other variables. Good morning, Michel. Good morning, John. Michel, over to you.

Thank you very much. Welcome to all of you to this record quarterly earnings meeting. We are here with John Hele and Koos Timmermans. And there will be four parts of our presentation. I will first give you the results highlights then John Hele will go through the second quarter results in detail. After that Koos Timmermans will address the risk management and I will close the meeting by making a few inroads in… our strategy overview. But first of all, let’s go back to the key points of this quarter, and I encourage you to go to slide three, which I think you can see on your screen. And indeed this quarter, we have registered record quarter results. Our underlying net profits are up 36.7% to EUR2.747 billion. The realized gain of ABN AMRO were EUR573 million, but excluding this gain, underlying net profits were up 8.2%. We are pleased to say as we will [inaudible] to that expense remain under control, and that we further invest in growth. Earnings per share is EUR1.18, up 27% and we are pleased to inform that the value of new business improved significantly from the first quarter ’07. But if we take the accounting noise out, then we can see that there is a strong performance of the business. Indeed, Insurance Europe, pretax results excluding the volatility due to separate accounts in the Netherlands is up 25%. Insurance Americas, pretax results are up 30% and for USFS alone in U.S. dollar term plus 85%. Insurance Asia/Pacific, pretax results excluding the impact of the SPVA volatility in Japan is plus 19%. On the Wholesale side, gross results excluding risk costs and adjusted for asymmetrical tax treatment is plus 15%. Retail banking gross result excluding risk costs plus 14% and ING Direct gross result…

Good morning. I will first do a brief overview of Insurance and Banking and then go line-by-line to give you some more details. As Michel mentioned, we have had a strong business performance, although, at times IFRS earnings does… seem to match some of this. In Europe it EUR694 million, down 1.4%, but there is a swing of a EUR154 million quarter-on-quarter due to the revaluation of the separate account shortfalls in the Netherlands. We have a strong growth in Central Europe and continue to drive sales in business, which offset a decline in the non-life business in Europe. In the Americas, we had a very strong growth of 30% to EUR593 million where we had increased assets under management buoyed by favorable equity markets and good net flows. The USFS alone in U.S. dollar terms of 85% in underlying profit before tax. Asia/Pacific saw higher results in Australia and strong new sales at the SPVA business. Profit was down slightly 2.5%, but we also had the swing in the valuation of the single premium variable annuities in Japan due to implied hedging and taking that out, Asia/Pacific would have been 19%. The corporate line benefited from the gain on the ABN AMRO shares. So, in total, we are up almost 50% in Insurance. Turning to the Banking side and Wholesale continue to benefit from benign credit environment and the growth in ING real estate. In fact, overall, for the bank, we on a 3 basis points of net risk cost or EUR25 million. So, still very favorable credit experience in our overall bank. Wholesale banking has… the earnings were down 6.8%, but this was also driven by an asymmetrical tax treatment of some trading activities in our financial markets area. So, if you gross up these results, before tax,…

Okay. Thanks John. On the risk management chart, I will take you through our sub-prime exposure, but doing so I will first talk a bit about our total balance sheet composition. And from our total balance sheet competition… composition we will zoom in on sub-prime and next on that we will look at all the potential knock-on effects. So, on page 27 or 26 what you see is our total asset group composition. The biggest component of the EUR1.3 trillion balance sheet for both the Bank and the Insurance companies is the business loans, it’s the fixed income portfolio and the mortgages. An important thing to note with mortgages is that those are originative mortgages and we don't originate sub-prime mortgages. So, the important part then to see is where do we find sub-prime that is in the category which we have classified as ABS. So, I will come back on that. But before doing so, it’s important to note that this is our total group asset composition which looks pretty diversified over the different kind of categories and all of this is both, part of the result of business decisions looking at risks as well as independent risk management function doing so. So, let's zoom in on page 27, on the ABS portfolio. This is what we call ABS and what we have in there that is in EUR94 billion. What we have in there is a very small portion of CDOs and CLOs. And I will come back on that a bit later. We have our ABSs and then we are talking about student loans, credit cards, all the loans. The biggest bulk of it is what we call the RMBS portfolio. So, at a Group level that is the biggest part of our broader asset class ABSs.…

Thank you very much Koos. I hope that those exceptional results that those exceptional results that you have seen and also the presentation on risk management show how much we have exercised discipline in execution, discipline in risk management. And also what I would like to show you in the last part of this presentation is how much we discipline in our strategic vision and we execute our strategy. On page 35, I would like to remind you that we are well positioned to capitalize on global trends in financial services. If you will look world-wide, we see people living longer, we see increase in global wealth and we see technology changing the distribution and from the customer standpoint, we see that they feel of risk of outliving their savings and they want some value for money and they want convenience. This is exactly inline with our mission, which is setting the standard in helping our customers manage their financial future and what… in the three core aspects of it, first that we want to give up high performance productivities, we want to develop strong distribution reach and we want to do as a leading branch. And we believe that high product performance capabilities, good distribution and branding will show sustainable, profitable growth opportunities for the foreseeable future. Now, we are also, page 36, very… in starting of strategy, we are disciplined in managing our capital. And we want to develop and we have our own efficient capital management to allocate resources to drive growth in return for shareholders. And we originate capital because of our business profit, because of systematic divestments of less strategic business and by external capital funding to hybrid securitizations and bonds. This creates capital and we basically a very productive dynamic capital management and that…

Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions]. The first question comes from Zenon Voyiatzis. Please state your name and company name followed by your question.

Hi, good morning. It’s Zenon from Merrill Lynch. I have three quick questions if I may. First one is on loan growth. In the second quarter, you had very strong acceleration to 6.5% versus 4.8% in the first one. Most of this seems to be in Holland, where risk weighted assets went up by 8%. I was a little bit surprised by that, given the interest rate environment and comments earlier from ABN AMRO. I just wonder if you can just give us a bit more color what is driving this strong growth and how sustainable it is we were to look India in the second half of the year. The second question is surprisingly on the sub-prime exposure. Not a big expert on this, but it seems that IKB's travails seems to have been driven by exposure to asset-backed commercial paper conduits where IKB was providing liquidity. I notice you sponsor $32 billion of such conduits, I just wonder whether firstly, I am right on this and, secondly, whether you reflect this in your numbers you just given us in the 4.4 billion or indeed whether you should reflect it or not. And the third question is fairly quick. Credit spreads have widened in July by between 10 basis points and 20 basis points. I just wondered and you have fairly big corporate bond portfolio. So, I just wonder whether you have expect any material impact either on equity or I guess to a lesser extent earnings? Thanks.

Okay. Let me first answer the first question. The loan growth in the Netherlands has been affected by the transfer of a mortgage book from the Insurance to the Bank to amount of EUR9.4 billion. And this transfer was made because it was more efficient capital vise and ALM wise, asset and liability management wise, to have this portfolio in the Bank rather than the Insurance. So that's essentially the explanation of the good part of this increase. Koos Timmermans respond to this… the two more… to the other questions.

May be go to the second question if we look at our total sub-prime mortgages exposure we gave you outstanding there and that includes indeed we have two conduits in which we warehouse exposures as well. Those ones are included at the moment. What we get in there is fresh sub-prime exposure, which is rated to the new underwriting standards. So, Peter, if you want to add anything on this.

Yes. The conduits are being tracked on delinquencies. It's basically indirect exposure. It's highly rated paper and there is an element of sub-prime in those conduits. It's not entirely sub-prime exposure and also our exposure in that conduit, but there is an element of sub-primer in the conduits, but the overall amounts are not significant.

Thanks.

Okay. Shall we maybe go to the third question, the credit spread widening. First and foremost let me say that where we are holding bonds, where credit spreads are widening, the two portfolios where that's the biggest is in the insurance company and it's in ING Direct where we hold those portfolios for… by a whole. I mean so credit spread widening, is it for us an opportunity because we can buy at better spread or it is threat, I mean we are not a forced sellers of this type of bonds. What you do you see at the moment is yes indeed a credit spread widening and at the same time interest rates going down. So, typical example if I look at it over a July then what we have seen in the America, in the mortgage exposures as well ING Direct that there is a netting effect between interest rate going down and credit spread widening which dampens to a very large extent.

Okay. Perfect.

Thank you. The next question comes from Farooq Hanif. Please state your name and company name followed by your question.

Hi there. This is Farooq Hanif from Morgan Stanley. I have got two questions. First about using the realized gains on Numico and ABN in the second half of the year, partially for organic growth, are you set up some of the options for the using your surplus capital. I was just wondering, near term where you see your priorities? That's sort of question number one. The question number two is you have continuing impressive mortgage growth. I was wondering what the headwinds were like in the U.S. at the moment, given the mortgage market there and globally. Thank you. That's my second question.

Yes. I think that first of all on the capital gains. I think that as we get those significant capital gains in second quarter, I mean those capital gains will be put, generally speaking in our capital management, systematic approach. So we need to look at those inflows and these excess profits as part of our capital management for this year and next year. And to be disciplined way where we deployed this, the capital we are getting. So we are not going to change our discipline on that. On the other hand, I think that… I think those gains this year and probably a lowest to accelerate the process of investing in some areas and the way it is for instance our priorities are essentially to invest, to accelerate the growth in our some business. And to be honest I have asked some of my colleagues to come up with some ideas to increase the commercial impact in some areas. For instance in ING Direct we have already and we are able to announce that today a program of accelerating the growth by putting an additional EUR65 million of expense in developing payment accounts, in developing mortgages and in developing some U.S. regions by putting more marketing, more branding and more product development. I think that certainly given the circumstances we have to look at is there a possibility to make some additional investment in infrastructure upfront, so that we can basically improve our future earnings. So, we are looking to various to ways to use largely part of those capital gains, but you can rest assured that we will exercise the same discipline by using those capital gains either to put them in… redeploy them in the JR capital management that we do or to investment I mean additional clear projects to increase our commercial traction and that's what we intent to do.

On the mortgage share.

Yes, the mortgage. Dick Harryvan, our Board member in charge of ING Direct, will respond about the mortgage in ING Direct.

Good morning. The question was on mortgage growth in the U.S. We have seen… we are encouraged actually by a quite strong growth there, not because of relaxing our strict underwriting criteria. As Koos Timmermans mentioned before we have no sub-primer mortgages in the U.S. market, so the strict underwriting policies there. The average loan to value is 67%. We are seeing continued strong growth at this point is because our underwriting process is highly automated, making for a very quick turnaround and this something that the mortgage brokers appreciate on lots. So we expect to see continued good development of mortgages in the U.S. market, no immediate slowdown anticipated. We are only… the question is what kind of mortgages. We are only in prime mortgages as I mentioned, with a loan to value of 67%. And we are only in the ARM business, so five-year ARMs is the main lets say product that we are selling at this moment. We may consider introducing a third year mortgage for, which would be securitized into the market, but that something for next year. It's a portfolio well spread over states that we… over states of California being about 40% of the portfolio and the rest spread out over a large number of states.

Very comprehensive. Thank you.

Thank you. The next question comes from Mr. Paul Goodhind. Please state your name and the company name followed by your question.

Hi. Paul Goodhind with Bear Stearns. I have three questions on ING Direct please. You give a figure of EUR90 million, which is acquisition and investment in growth. Could you break that down between the two components of the acquisition cost and I presume you mean that's the losses on the other products. And link to that could you just give the profit for the quarter, break it down by product that you have in the past, so the mortgage profit, saving profit and the other products profit or loss. And lastly how does the level of savings marketing expenditure compared in Q2, this year with what you spent in Q2 last year? Thanks.

Yes. So Paul that's a… and obviously goes a bit further than what we typically disclose on our investments in products. We did want to get some insight into the investments going into, let's say, the new product lines and geographies as we have announced to become the most preferred consumer bank. We are expanding. So the EUR66 million that you in mortgages is the operational cost associated with getting it in the books. And this is compared to Q1 some EUR9 million higher. The payment accounts, there is a very big push on and Michel has referred to that we have more than EUR0.5 million. Payment accounts as we speak, almost a doubling since the end of last year. The EUR90 million there is again the cost associated with getting it in the books as compares to EUR10 million in the first quarter, so another EUR9 million increase there in terms of borrower cost. So, those first two items are EUR90 million additional investment vis-à-vis Q1 2007. Finally we have Japan. We are getting very close to launch and expect that second half of this year. And that quite an organization already up, almost ready to run, as you can imagine the cost of in the second quarter was EUR5 million, which second quarter last year was nil, so of course has an impact vis-à-vis second quarter of last year. Just in a general sense I can say Paul that our shift in emphasis on growth has been as we mentioned very strongly towards the mortgages. So if you look at the second quarter you see EUR8 billion growth in mortgages, only EUR2 billion growth in on balance savings and EUR1 billion in off balance. So there is a, let's say some compensation in moving marketing dollars from savings to the other product lines and Japan as a new country and U.S. the new territory as you may be call we have launched in Chicago Atlanta and Miami and just in the past month also in Seattle. So, we continue to expand to national scale in the U.S.

Great. I was trying to get a feel just really whether the mortgages were in profit and what that profit was looking like, I guess you have got strong improvement there offset by a more muted performance on the savings side. So is savings profit standalone stable now or t still going down? I mean obviously, the margin seems to be fairly stable sequentially, but in terms of the operating contribution, is that stable as well?

The savings indeed is quite stable, as you mentioned, some mortgages are profitable. We mentioned at the end of last year that it, the business line went into profit. I would be happy Paul to give you those numbers separately after this meeting.

Or we make them available through the system to everybody.

Paul, it's John. What we do have happening is less marketing going to the savings as Dick said. Our operating expenses including marketing year-on-year were up 4% to EUR15 million. And so there is a combination of the higher cost of course of our payments and these other areas and additional cost for mortgages, which do cost us more to process at issue than a savings account does, offset by slightly lower marketing costs overall and in particular from the savings accounts.

Thanks.

[Operator Instructions]. Your next question comes from Mr. William Elderkin. Please state your name and company name followed by your question.

Good morning everyone. It's William Elderkin from Citi Investment Research. Just coming back to the sub-prime issue two questions, really. One, can you give us an idea of how liquidity issues in the ABS sub-prime market and any downgrades on higher tranches where you are mostly affected would actually feed through into any impairment decision that you might take? And secondly, can you give us an idea of how much of the ABS portfolio is represented by, I think, Alt-A mortgages or self-certified mortgages where there have been some concerns as well? And finally and separately, can you give any guidance where you expect the full year Banking risk cost to end up for 2007?

Why don't I first start with the liquidity and the downgrade in the sub-prime portfolio? What you see right now is actually in our total portfolio of sub-prime mortgages, I think we had in total EUR4 million of downgrades. So if you look at the total categories of which Moody's and S&P downgrade, it's far… it's a lot more, but the tranches which we bought it's EUR4 million. So it's actually relatively low. If you look at the liquidity aspect, yes, that is what I mentioned already what you do see even in the higher tranches, you do see over the month of July, you will see interest rates moving down by 25 basis points and at the same time credit spread widening and those two affects or largely offsetting and that is what we have witness in our portfolio. If you look at it in terms of impairments that we don't at this moment see any impairment necessary in the portfolio of what we have. If I then move to the wider section of Alt-A that's a more difficult question to answer in a sense that in the U.S. portfolio on the insurance side we have EUR2.6 billion I believe of mortgage, which are could be rated as Alt-A and on the… if take the ING Direct portfolio there we have in total RMBSs in the order of EUR36 billion, out of which 25 could qualify as Alt-A, but there we have to be very careful in looking at the criteria, because if we… if I would take the criteria that the FICO score should be, of this portfolio in the order of 650 to 700. And if the loan to value is between 70 and 80 then I only end up with a portfolio of Alt-A of EUR2.3 billion. And so that is… I think the most important message which our Alt-A is that in ING Direct is the largest owner 99.9% that is AAA rated. And in this portfolio what we have seen again, that is what I reiterate. Over the last month you have seen the spread widening offset by the interest decline there in this portfolio. And that's a… yes maybe one of the other things to note on that, even spread widening to reiterate we are holding onto this portfolio and we are not forced to liquidate and we don't want to liquidate. And in the end, a spread widening will be good news for us there. Yes.

I just come back on one point you made. How… in another way how confident are you in the resilience of sub-prime ABS instruments currently rated AAA or AA if within those same instruments, lower tranches have been downgraded?

What we do note is, at this moment we know that the system of rating this there is a sort of base default on these tranches and then normally the AAA and AA tranches, they have more collateral in the order of four to five times or three and half times as compared to the base case losses. Now, what really happened in the market is the losses there on the sub-prime, they are more in the order of 7%, which means that your BB tranches on which we own only a small part that is where we do… those tranches could be affected. But then again that is the very small part on the other one the AAA and the AA, I still think that the distance also collateral, which we own in abundance, as compared to the losses is sufficient at this.

John Hele. Just in terms of the overall credit losses in the quarter, we had a gross addition to credit losses of 22 basis points for the bank, but then we had a release of 19 basis points for another three. In the first quarter, we had a gross of 25 and a release of 25. So, for the last six quarters and so, almost seven quarters, we have been averaging between 20 basis points to 25 basis points gross, but had releases. So, for the first half year, we’re at 1 basis point. We have not seen a turn yet in the gross amount, but we do expect over time that the releases will be less, but exactly when that will occur is often hard to predict. The economy is still doing well in Europe and there is currently, of course, a sub-prime mortgage area in the U.S. and potential housing slowdown. But nevertheless the economy still appear to be hanging in there quite well. So, I think we have given the guidance that over time over the coming years we see between 25 basis points to 30 basis points as risk provisions, but we have not yet seen a turn in our portfolio on a gross basis.

Thank you.

Thank you. The next question comes from Mr. Ton Gietman. Please state your name and company name followed by your question.

Good Morning. Ton Gietman with Petercam. Two questions if I may. First, you are going to sell another amount of shares in ABN AMRO and Numico in the second half EUR2.3 billion receipt. How are you going to reinvest in equities again or… and if so, is it going to be in the Netherlands? My second question is perhaps it's a bit too early, could you comment on the integration of Postbank and ING Bank in the Netherlands. Is that progressing, and what are your thoughts on the most likely merger between Fortis bank in the Netherlands and ABN AMRO?

Okay. First of all, on the reinvestment in equities, let me put this way. I think that, generally speaking, you have seen that our equity portfolio has performed extremely well in the last three years. And that has been a recurrent income over the last few years. And we feel that it’s important for us to continue to capitalize on our capabilities in that area and therefore for us to have as equity portfolio of growing systematically with the size of ING balance sheet and probably the interest balance sheet is just the right thing to do. At the same time, I am not going to tell you when we are going to reinvest this money. First of all, we don't have the cash yet. And second, when the cash will be there, we will see where the market is and then you should… you have the overall direction I think the timing of it is something we want to use smartly. And therefore, there might be period that which we want to be more exposed and the period we want less exposed. It's just happened that by today's spent… by today’s situation. The equity portfolio is quite large, and Koos just told you that part of it is quite like cash and part of it is hedge, and we feel good that way. I think that in the next coming month, we will continue to manage the portfolio dynamically. Now second question about is where we are going to invest this equities. We… first of all, we are long-term investors. So, we are investing there in companies… in strong companies with long-term value. And I think that's… over the long-term what pays off, because you can see that over the long-term the value of strong companies always rebased to their values. So, that's what we have seen…

Sorry, are you suggesting that ABN AMRO was a very strong long-term investment for you.

I think that we felt very clearly that ABN AMRO was a very good investment over the long-term, because we would expect that something would happen one way or the other. So, we thought it was a good trade to keep on your book. So… and I think we were proven right. I think that what we… so, this is the geography of the field of the portfolio. We have in the past mostly invested in Dutch equities, because we have a very attractive tax incentive to do so, and as you know, the real return on Dutch equities has been extremely attractive over the last few years for us and for our shareholders. As you know, the tax regime is going to change and will open the same criteria for Europe in equities and as we do so there is a likelihood that we will redeploy part of those equities more global… more on the European scene. But the overall, physiology of buying strong equities stories over the long-term will stay and we will diversify from the Netherlands throughout the world. But we will do that slowly and systematically. What are the… your questions are, Ton?

Thank you. Thank you very much.

You asked also another question of Postbank and IBN. I think on Postbank and IBN, I think that we have now 50 work stream working on them. We have now a structure of… in place. We are going to propose the structure to the work counsel in the next few weeks and the project is on track. So, there is no delay. And it’s on track in terms of time and it’s on track in terms of budget. In terms of Fortis and ABN AMRO, Ton, I have taken the clear view that I don’t comment on this, because I think there is enough noise in the market for me to abstain.

That's it. Okay. Thank you.

Thank you. The next question comes from Mr. Christopher Hitchings. Please state your name and company name followed by your question.

Hi. It’s Chris Hitchings here from KBW. Just a very simple question. How many shares in ABN did you sell in the first half and how do you still retain? But I can't seem to reconcile what that profit was with what you say is the value of your holding now and what you’re filing… your SEC filing said you are holding was at the start of the year.

Hi, Chris.

Hi.

We sold 25 million shares to the end of the second quarter, and as at that time, we still had 36 million shares remaining.

But your SEC filing said you earned 109 million at the start of the year.

We also hold…, I have to check on that filing. Don’t recognize the number. We also hold some for clients as well, which can distort some of the filed figures. I mean we can do it ones on our own account.

So, the 25 plus 36 is what you held on your own account?

Yes.

And that is what you say is worth EUR1.3 billion now. That's for EUR36 million in your… in the slide wherever it is.

Yes.

Slide 6. Okay. Thanks so much.

Thank you. The last question comes from Sir Nick Holmes. Please state your name and company name followed by your question.

Yes. Hi. Nick Holmes at Lehman. I am asking the last question. I am surprised at that. Couple of questions. First one is turning back to your equity gains, I wondered if your new risk model suggests that having such a large equity portfolio which is really in the Dutch Insurance business, isn't it, makes economic sense. And I wonder whether your considering reducing the equity exposure some of your insurance peers doing or planning to do. Second question is coming back to the Bank bad debt releases. I wondered can you can give us an age profile of the lending book that's generating these releases. I am just interested for a bit more color on which lending years it is that are mainly generating these releases. Thank you very much.

Yes, on the equity portfolio. First of all, if we look at… when we look at the overall risk profile of the group, we clearly at the equity risk profile that is in our business, both in terms of profit at risk and capital at risk. By the way, we will in the symposium in September we will show further of this declaration so look like. I think that in the years, we have also reduced… in the overall portfolio that we have there, there is a big part in the Dutch equities but in more recently in the last few years, we have shifted parts of the equity exposure to other businesses in the U.S. and Canada and Japan and Asia. So, why, because some of those countries needed some equities to match some long-term liabilities and they needed to have part of that in their overall local portfolio. So, we have allowed that to happen at the expense of the Dutch portfolio, but within some limits. I think that the equity portfolio has been extremely profitable as you have seen over the years, the return has been fantastic, I think 3% over benchmark systematically over the last few years. I think that that’s pretty good investment performance and therefore the overall cash flow for the Company in terms of capital gains has been pretty nice so I think that from that standpoint its hard to say that was not a good thing to add. And I think only those who don’t have these gains just claim that they should reduce them. So, I think that I heard that … sorry before but I just hear it from the people who don’t have a chance to make this kind of portfolio. So, I think that the only thing you can ask yourselves and I am really going to be very frank on this is that the only thing is it seems that… your question seems to evidence that some people don’t put a lot of PE on and value on this equity capital gains despite the fact that they are coming over the last 11 years on a recurrent basis. And therefore, that might be the only reason why you might want to shift this portfolio and do something else with the economic capital which is attached with this portfolio. But then you have to make the choice between what is right economically which is to keep that portfolio or what might be right just from a perception standpoint, which might be to shift that exposure somewhere else. And so far we have chosen for being economically consistent.

Just following-up on that. I mean, clearly, you have done very well out of this portfolio but I am intrigued as where you see this portfolio within your business because in origin it is within the Dutch insurance business, isn’t it? Now, do you still see it as integral to insurance or do you see it as really a separately managed equity portfolio?

I think that's a very good question I think that … first of all as I said before we have reallocated part of this portfolio to other business entities we need equities. So, if you would look to the portfolio five years ago, even four years ago it was 100% Dutch and now it is not 100% Dutch, its probably 70% Dutch. So, we have 30% of equities which are put into various business. Why do we do this? Because the equity business needs a portfolio to manage their liabilities. So, I think that a very good part of that portfolio is really intrinsic to the asset and liability management of our business unit including Nationale Nederlanden and since Nationale Nederlanden is such a big portfolio of business in the first place… okay and historical back book I mean these equities are part of the ALM of the back book. No, it is fair to say that a portion of that portfolio could be moved to the corporate level okay because some of our existing business units are over capitalized partly Nationale Nederlanden. And I think that there is a study going on in the Company to look right now about how much capital does Nationale Nederlanden exactly meets therefore what should be the exact ALM and portfolio of Nationale Nederlanden going forward, what is the capital that could be a strength to the group. And of that capital how much equity should be moved at the group level, but I think that's where we are at this point. And then you could argue that part of that portfolio is a good part of that portfolio, a great majority of that portfolio. The interesting part about business that there is also a portion that we are managing purely on proprietary basis and that amount can be moved to the corporate level.

And so, how much would say is managed on a purely proprietary basis? Would it be--?

I think that if you don’t… let me give you a rule of thumb, without that I have a precise number because we are just precisely working on this right now, I would say that the rule of thumb would be that about EUR4 billion are probably the part of the portfolio that would be exclusively on the proprietary basis.

And would you say that the remainder sort of represents the surplus capital, the investment of the surplus capital from the insurance unit within your risk models. I am just curious to see how this equity exposure fits in?

Hello Nick, it's John. In terms of the asset allocation, its surplus as well as for a piece of the liability to the asset liability strategies of various businesses. And so, the allocation that Michel spoke about is this is what we think are needed in the businesses to drive the earnings of the business. And this portfolio has done extremely well, so over the time, there's likely around this EUR4 billion although this number is still under discussion and analysis but we need to tighten down over the coming months.

Right, thank you very much. And just quickly on the bad debt releases?

Nick, Koos wants to add something on this.

Maybe Nick, on this next current year you also asked a question about the history of releases and if we express loan loss or releases in terms of basis point values or so, I think what we can do is give you a bit of a history there on what those releases had been over the past years. Peter, you can fill that in?

Yes, I can…

Yes, my question was actually, can you give us the age profile of the lending book that is generating these releases. I am just wondering whether there are some years which are particularly productive, particularly benign in terms of credit experience. Whether 2003, 2004 or something like that is generating the bulk of your releases.

The releases… obviously we moved to IFRS in 2005, so there will be a split into specific provisions that we notably find in the wholesale bank and portfolio provisions that you will find in ING Direct and ING Retail. Your inventory of specific provisions in the wholesale bank is basically coming down at a certain moment in time that pot has gone. That's why John has just indicated that we would return to normalized levels. What we are releasing currently are our older vintages. We are releasing provisions taken in the Asia crisis but we have been still managing those exposures down. When we sold BHF, we retained a portfolio of bad loans; those are currently being worked out. So, it's basically releases out of… lets say 1998 till to date, actually, I mean as a certain long-term as an example you could be worried about the U.S. airline industry and then… that basically emerged out of September 11. But you also have to realize that a lot of our releases are basically provided because of the enormous amount of refinancing that is taking place. So, you are having a loan exposure but it's being refinanced. And ING at that moment in time could have opted not to take place in that refinancing. So, it's basically a mixture of 1998 till to date. We are looking at the specific files on basically day-to-day basis

Okay. Thank you very much indeed.

Excuse me sir, there are no further questions at this time. Please continue with any other points you wish to raise.

Well, thank you. Thank you very much for joining us today. And I hope that you will remember for this quarter a very good record quarter in terms of earnings. A record quarter in terms of business performance and also a lot of discipline in risk management, lot of discipline in strategy and a lot of discipline in execution. Thank you very much. And we will see you later. Thank you.

Ladies and gentlemen this concludes the second quarter results and earnings conference call. Thank you for participating you may now disconnect.