Netherlands-based ING Group (ING) reported income from investments deteriorated in the fourth quarter, primarily due to poor performance on Greek sovereign bonds and mortgage investments.

The insurer reported a $65 million loss on investments in U.S. residential mortgage backed securities. The company also took a $59 million hit on the reduced valuation of derivatives related to its German mortgage portfolio.

“The economic environment became more challenging in the fourth quarter of 2011. The financial crisis spread further into the real economy, and uncertainty around the European sovereign debt crisis continued to erode confidence and amplify market volatility," said Jan Hommen, CEO of ING Group. "Despite this challenging backdrop and its inevitable impact on results, ING posted 15.1% higher full-year underlying earnings in 2011 compared with 2010,"

ING is winding down its United States real estate holdings by 2013, a mandate that is part of its $13.5 billion bailout deal from the Dutch government, under which strict repay clauses are in force.

Hommen added that ING will spend 2012 preparing its insurance operations in the U.S., Europe and Asia to operate as stand-alone entities.

Capital One Financial [(COF) is scheduled to meet with regulators Monday about its bid to buy ING's U.S. assets.

jgaffney@housingwire.com

@jacobgaffney