UPDATE 3-ING to overhaul Dutch insurance business

* Will unify insurance operations, separately manage bank

* Aims to boost annual income by 100 mln euros from 2013

* To cut 800 jobs, bringing total global reduction to 9,500

* Overhaul not a sign of splitting bank, insurer - CEO

(Adds unit CEO comment, updates shares)

AMSTERDAM, July 1 (Reuters) - Dutch ING (ING.AS) will combine its local insurance brands and separately manage its bank and insurance operations, aiming for an annual income boost of 100 million euros ($141 million) after cutting 800 jobs.

ING, the biggest financial group in the Netherlands, will unify Dutch insurance operations under its Nationale-Nederlanden brand, and separately manage bank and insurance operations, Nationale-Nederlanden chief executive Lard Friese told reporters.

ING, which was formed in 1991 when Nationale-Nederlanden and NMB Postbank Groep merged, will spend 165 million euros in the first four years for the overhaul of its Dutch insurance business, it said in a statement.

The group, which has been loss-making since last July and got 10 billion euros of state aid last October, is working on a programme to reduce risks, raise up to 8 billion euros from asset sales and exit 10 out of 48 countries where it operates.

The plan was part of ING's "back to basics" strategy, which aims to have separate management for insurance and bank operations, and the changes would better serve 5 million insurance clients in the Netherlands, ING Chief Executive Jan Hommen said.

The unification of the local insurance activities was not a sign of a complete split of ING's bank and insurance unit, Friese told reporters.

"Jan Hommen made a clear statement in April when the back to basics strategy was announced. The insurance operations in the Benelux are a core building block for ING. I think that clearly states how important these operations are for ING Group," Friese said.

SNS Securities called the move a "logical step".

"Even though ING might (lose) some of its customers by the integration, we believe it will win customers in the long run by creating a cost efficient and customer oriented Dutch insurance organisation," SNS analysts said in a research note.

ING shares rose 1.7 percent to 7.29 euros by 1118 GMT, outperforming a 0.8 percent rise for the DJ STOXX European insurance index. .SXIP. Since April 9, when its restructuring strategy was announced, ING shares are up 39 percent, compared with a gain of 17 percent for the index.

ING's total announced job cuts stands at 9,500 out of 115,000 employees at the end of March. It announced the reduction of 8,700 jobs in January and February, including the cancellation of vacancies and external hire contracts.

The 800 new cuts will go mainly through attrition over three years but Friese did not rule out forced job cuts.

ING, which competes with Aegon (AEGN.AS) and Aviva's (AV.L) Delta Lloyd, expects to save 100 million euros before tax from 2013 onwards thanks to the overhaul, adding to 1.1 billion euros in annual savings from 2010 already announced earlier.

When asked if some of ING's Dutch insurance operations were loss-making, Friese said investment results were hit by the financial crisis but excluding this impact commercial results were "good". ($1=0.7077 euro) (Reporting by Ben Berkowitz, Reed Stevenson, and Gilbert Kreijger; Editing by David Cowell)