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					ING Group and Pension Funds:
  International Differences
     Drs. Peter de Bruijne AAG MBA
          Armenia - 29 May 2005
    This Presentation is about ...
    ... the influence of culture on ...




             … pension, as basis of a healthy long life.



2
    Agenda
    •   ING Group as source of my experience

    •   Pension Funds

    •   Value chain

    •   ING examples from the Value Chain
        1.   Technology
        2.   Administration
        3.   Marketing
        4.   Distribution
        5.   Client-Service

    •   Relevance for Armenia?


3
    Peter de Bruijne
• ..1988    actuary
• ..1997    manager life insurance
                 in Netherlands
                 in Curaçao (Caribbean)
• 1997-2000 chairman of 3rd pillar open pension fund
                 in Czech Republic (€ 10 - € 100 m)
• 2001-2004 advisor employee benefits for ING
                 in HU, ESP, GRE, RUS, LUX, UKR, GER
• 2001..    board member 2nd pillar occupational fund
                 in Netherlands (€ 8 bn)
• 2004..    advisor Financial Institutions
                 Insurance : Sri Lanka, UAE, Mongolia
                 Pension : Antilles, el Salvador, Nigeria
4
    ING Global Network
       ING operates in 50 countries and employs 115,000 employees world-wide

                                    Europe                                                  Asia/Australasia
                                             Austria                    Ukraine                     Australia
                                             Belgium                    United Kingdom              New Zealand
                                             Bulgaria                                               China
                                             Czech Republic                                         Hong Kong
                                             France       Africa/Middle East                        India
                                             Germany                  Iran
     North America                                                                                  Indonesia
                                             Greece                   United Arab Emirates
            Mexico                                                                                  Japan
                                             Hungary
            United States                                                                           Kazakhstan
                                             Ireland
            Canada                           Italy                                                  Malaysia
                                             Luxembourg                                             Philippines
     South America                           Netherlands                                            Singapore
            Argentina                        Poland                                                 South Korea
            Brazil                           Portugal                                               Taiwan
            Chile                            Romania                                                Thailand
            Cuba                             Russia
            Curaçao                          Serbia & Montenegro
                                                                                       Operations
            Peru                             Slovak Republic                                  Wholesale Banking
                                             Spain                                            Insurance
                                             Switzerland                                      Asset Management
                                             Turkey

    Last update: March 2005


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    A good balance of businesses

Operating profit before tax                           2004 Profit contribution of business lines*
in EUR million                2004    2003 %change
    Insurance                 4,005   3,486    14.9                 ING Direct
                                                                        6%                Insurance
     Europe                   1,733   1,791    -3.2                                        Europe
                                                        Retail                               22%
     Americas                 1,669   1,310    27.4   Banking
                                                        15%
     Asia / Pacific            751     411     82.7
     Other                    -148      -26
    Banking                   3,414   2,371    44.0
                                                                                            Insurance
     Wholesale Banking        1,932   1,272    51.9                                          Americas
                                                      Wholesale
                                                      Banking                                  22%
     Retail Banking           1,170   1,058    10.6
                                                        25%               Insurance
     ING Direct                432     151    186.1                      Asia / Pacific
                                                                               10%
     Other                    -120     -110
    Total ING Group           7,419   5,857    26.7   *Excludes component ‘other‘ in banking and insurance




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    ING Advisory concept


        Asset                 Wholesale    Retail
                  Insurance                         ING Direct
     Management                Banking    Banking




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    Build on our skills and experiences:

    We will tell      from our own experience



    We can show you our best practices



    We like to help        with implementation



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     Pension Funds
• Private financial institutions with purpose to
  provide retirement income from invested funds
              Canada
                                                                  Ireland                                                                             Estimated real asset growth
                                                                                    UK (USD 6 trillion)                                                      2002 - 2015


                                                                                            UK                              Sweden
                                                                                                                Norway
                                                                                                                                     Finland

                                US (USD 24 trillion)
                                                                                                                                                                                 Japan

                                                                                                                         DK                         South
                                                                                                             Denmark              Poland
                                                                                                                                                    Korea
                                                                                                                 Germany               RUS

                                    US
                                                                             NL (USD                                              Ukraine Kazakhstan
                                                                            1.3 trillion)         NL

                                                                                                                                     Slovakia
                                                                                                       Lux                            Czech
                                                                                             BE                             AUS
                                                                                                                                    Romania
                                                                                                                                    Bulgaria
                                                                                                              Swiss         SI Hungary
                                                                                             France                                                                          Taiwan(1)
                                                                                                                            Croatia
                                                                                                                                         Iran
                                                                                                                                                      India     China
                                                                                                                                       Turkey
                                                                                                                 Italy
                                                                                                                            Greece                  Thailand                 Hong Kong
                                                                                                                                  Israel
                                   Cuba                         Portugal                                                                            Malaysia
        Mexico                                                                  Spain                                                      U.A.E.
                                        Venezuela                                                                                                   Singapore
                                                                                                                                                                             Philippines
                 Columbia      Brazil
                       Peru                                                                                                                            Indonesia                           2002
                       Chile             Uruguay                                                             Egypt
                                                                                     Morocco                                                                    Australia
                                        Argentina                                                                                                                                          2015
                                                                                                                                                                            New Zealand
                                                                                                             South Africa
    Commercially and non-commercially available assets (total pillar II and III)
9   Source: BCG-database, BCG growth projections, in co-operation with ING
     Value Chain
        Asset              Pension                                                             Support
        management         Scheme        Administration      Marketing       Distribution      and customer
        & Risk             development                                                         service
        Management


       technology    product design manufacturing         marketing      distribution       service

       Value Chain adjusted for Pension (McKinsey and Co)


     Influence of culture on the value chain often discussed
     • Service
     • Distribution        Barney, Jeannet & Hennessey,
     • Marketing           Hodgetts & Luthans, Kotler
     • Manufacturing
     • Product design - Hempel, Herkenhoff
     • Technology        - not well described
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     Value Chain differences from ING
          Asset              Pension                                                             Support
          management         Scheme        Administration      Marketing       Distribution      and customer
          & Risk             development                                                         service
          Management


         technology    product design manufacturing         marketing      distribution       service

         Value Chain adjusted for Pension (McKinsey and Co)


     •   Service                       : Communication in NL & Czech Rep.
     •   Distribution                  : ING in Slovak Republic & Russia
     •   Marketing                     : Examples from Poland & Czech Rep.
     •   Manufacturing                 : Administration issues from Poland
     •   Product design                : Pension Scheme from Czech Rep.
     •   Technology                    : Asset allocation in Chile

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     National Culture
     • “National culture is defined as the values, beliefs, and
       assumptions that are learned in early childhood and
       distinguish one group of people from another (Hofstede 1991)”

     • Hofstede Culture-Dimensions (1980)
          • Uncertainty Avoidance (UAI)
          • Power Distance (PDI)
          • Masculinity-Femininity (MAS)
          • Individualism-Collectivism (IDV)
          + Long Term Orientation (LTO, 1991)


     >70 Countries




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     National Culture Example UAI
                Uncertainty Avoidance Index
      Flexible                       Rules/regulations
      Pragmatic                           Conservative
      Gamble                                  Control




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     Culture’s influence on Asset Allocation
     Hypothesis:
     “In countries with a
     higher uncertainty
     avoidance index (UAI)
     pension funds will
     invest less in equity
     than in countries with
     lower uncertainty
     avoidance index”.


14
     Culture explains Asset Allocation ?
         non OECD                       OECD




 Hypothesis rejected    Hypothesis not rejected
                        P < 1 Promille incorrect
                        Culture explains 55% of Equity investments
15
     Example Chile: influence of asset size
     • Expansion of investment freedom




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     Value Chain differences from ING
          Asset              Pension                                                             Support
          management         Scheme        Administration      Marketing       Distribution      and customer
          & Risk             development                                                         service
          Management


         technology    product design manufacturing         marketing      distribution       service

         Value Chain adjusted for Pension (McKinsey and Co)


     •   Service                       : Communication in NL & Czech Rep.
     •   Distribution                  : ING in Slovak Republic & Russia
     •   Marketing                     : Examples from Poland & Czech Rep.
     •   Manufacturing                 : Administration issues from Poland
     •   Product design                : Pension Scheme from Czech Rep.
     •   Technology                    : Asset allocation in Chile

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      Pension Scheme Development
• Objective?
      • Capital Market Development? > Savings > OP or MuF : Chile
      • Ageing problem?             > Funding > OP + WP          : Western EU
      • Source Diversification     > Multi pillar > WB-5 pillars : West Africa

• Characteristics?
      • Build-up phase only?
         •   Will shorten investment duration (and lower yield)
         •   Will create 2nd “sales moment” with commission expenses
         •   Will concentrate the longevity risk
         •   Will create more focussed companies
         •   Will promote lump sum payments
      • Dependents?
      • Disability?
      • Choice?


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     Value Chain differences from ING
          Asset              Pension                                                             Support
          management         Scheme        Administration      Marketing       Distribution      and customer
          & Risk             development                                                         service
          Management


         technology    product design manufacturing         marketing      distribution       service

         Value Chain adjusted for Pension (McKinsey and Co)


     •   Service                       : Communication in NL & Czech Rep.
     •   Distribution                  : ING in Slovak Republic & Russia
     •   Marketing                     : Examples from Poland & Czech Rep.
     •   Manufacturing                 : Administration issues from Poland
     •   Product design                : Pension Scheme from Czech Rep.
     •   Technology                    : Asset allocation in Chile

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     Administration - Manufacturing
     • Operational
        • Mandatory or Voluntary Pension
        • Legal contract requirements (# signatures)
        • Underwriting requirements
                 • Technical
                 • Medical
                 • Money Laundry
        • Required interfacing
                 •   Employer
                 •   Supervisor
                 •   Tax authority
                 •   Post (addresses)
                 •   Clients (internet)
        • Standardisation
                 • Straight through processing
                 • Faultless basic data (id)

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     Administration - Legal Organisation
     • Trust/foundation (NL)
        • + no strings attached
        • - no transparency
     • Mutual (HU)
        • + power with involved people
        • - none financial decision making
     • Stock company (CR)
        • + clear transparent legal structure
        • - shareholder has different interests than Fund
     • On Balance rights (Germany)
        • + good for cash-flow position of employer
        • - stay dependent on employer
     • Outsourcing:         PF         in NL, CR, Pol, Hu, UK, etc.

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                   Admin          Investm
     Value Chain differences from ING
          Asset              Pension                                                             Support
          management         Scheme        Administration      Marketing       Distribution      and customer
          & Risk             development                                                         service
          Management


         technology    product design manufacturing         marketing      distribution       service

         Value Chain adjusted for Pension (McKinsey and Co)


     •   Service                       : Communication in NL & Czech Rep.
     •   Distribution                  : ING in Slovak Republic & Russia
     •   Marketing                     : Examples from Poland & Czech Rep.
     •   Manufacturing                 : Administration issues from Poland
     •   Product design                : Pension Scheme from Czech Rep.
     •   Technology                    : Asset allocation in Chile

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                                                Sources used in Slovakia (1st Q 2005):

     Marketing:                                 32% Advertising in media
                                                23% Mediators
• Promotion                                     16% Acquaintances
     • Important in retail market                9% Publications

• Price:                                         8% Independent experts

     • Commission important in broker-agent
       market (CR)
         • Timing even more than amount
     • Yield important in commodity market
• Product:
     • Quality important for Wholesale market
         • Solvability, employer interfacing,
           investment strategy
     • Quality important for transfer market
         • Client operational processes
         • Awards (Poland)


• Work Site marketing
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     Value Chain differences from ING
          Asset              Pension                                                             Support
          management         Scheme        Administration      Marketing       Distribution      and customer
          & Risk             development                                                         service
          Management


         technology    product design manufacturing         marketing      distribution       service

         Value Chain adjusted for Pension (McKinsey and Co)


     •   Service                       : Communication in NL & Czech Rep.
     •   Distribution                  : ING in Slovak Republic & Russia
     •   Marketing                     : Examples from Poland & Czech Rep.
     •   Manufacturing                 : Administration issues from Poland
     •   Product design                : Pension Scheme from Czech Rep.
     •   Technology                    : Asset allocation in Chile

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     Distribution:                                      + re-distribution!

     • Slovak Republic                       • Russia
        • 30.000 mediators                      • In house team of 5 fte
        • 780.000 savers (in week 16)           • 2 clients in Q1 2005
           • Initially estimated potential          • 1 client of 5000 empl
             1.1 – 1.3 million savers               • Maximal potential >10 mln
           • Maximal potential 1.9 - 2.2              people in Moscow
             million people
     • Broker market: B2A2C                  • Wholesale market: B2B
        • ING was retail Insurance Co           • ING is wholesale Bank in RU
        • ING has high name                     • ING is well known as FI in RU
          recognition (>85%)                    • Needs no promotion budget


     • > Chile, CR, Poland                   • > NL, Belgium


25
     Value Chain differences from ING
          Asset              Pension                                                             Support
          management         Scheme        Administration      Marketing       Distribution      and customer
          & Risk             development                                                         service
          Management


         technology    product design manufacturing         marketing      distribution       service

         Value Chain adjusted for Pension (McKinsey and Co)


     •   Service                       : Communication in NL & Czech Rep.
     •   Distribution                  : ING in Slovak Republic & Russia
     •   Marketing                     : Examples from Poland & Czech Rep.
     •   Manufacturing                 : Administration issues from Poland
     •   Product design                : Pension Scheme from Czech Rep.
     •   Technology                    : Asset allocation in Chile

26
      Service: decide by Market or Legislation
 • Dutch market self-regulation on indexation
 Category     indexation Policy   Payment    Proposed       Proposed
                                            Scheme Text   Communication




Source: OPF
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     Service: Communication
     KISS!
     •    Keep
     •    It
     •    Straight &
     •    Simple



Dear client,

we have also provided you with the option of notifying us
of changes or of carrying out amendments to your
contracts via the Internet.

     Application to change personal details
                                                            We used to let the actuaries and
     Application to change the method and frequency of
                                                            lawyers decide on texts: DON’T
     supplementary pension insurance payments

     Application to suspend payments                       Keep the ultimate reader in mind
     Application to change or add a beneficiary
     (beneficiaries)
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     Value Chain differences from ING
          Asset              Pension                                                             Support
          management         Scheme        Administration      Marketing       Distribution      and customer
          & Risk             development                                                         service
          Management


         technology    product design manufacturing         marketing      distribution       service

         Value Chain adjusted for Pension (McKinsey and Co)


     •   Service                       : Communication in NL & Czech Rep.
     •   Distribution                  : ING in Slovak Republic & Russia
     •   Marketing                     : Examples from Poland & Czech Rep.
     •   Manufacturing                 : Administration issues from Poland
     •   Product design                : Pension Scheme from Czech Rep.
     •   Technology                    : Asset allocation in Chile

29
     Relevance for Armenia?
     Needs influenced by culture!
       • Listen
       • Ask questions
       • Understand “why”

     •Do Not Copy !! Make your own meal
       • Use expertise of public and private sector
       • Use ING’s international experience




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