The financial picture for rescued Dutch financial services giant ING is looking much less terrible than a year ago, but losses on investments and bad bank debts continue to take a toll.

ING has reported a December quarter net loss of €712 million ($1.1 billion) – a small drop beside the €3.7 billion ($5.6 billion) deficit in the corresponding period of 2008.

For the full year it posted a net loss of €935 million ($1.4 billion), compared with a €729 million ($1.1 billion) loss in 2008.

A repayment of €930 million ($1.4 billion) to the Netherlands Government during the quarter put ING back into the red after two profitable quarters.

ING said insurance for the December quarter was squeezed by changes on its variable annuity books in the US and Japan as fewer customers surrendered their policies.

Maximum pay for ING’s most senior staff will be halved under a new policy for executives that raises the fixed salary for management board members but substantially cuts bonuses.

Under a deal struck with the European Union last year, ING must sell or spin off its insurance business by the end of 2013. The ANZ Bank bought the 51% it did not own of the Australasian wealth management and life insurance joint venture with ING in September.