TIDMAGN
NOVEMBER 10, 2011
Q3 2011 RESULTS
AEGON withstands market turmoil with continued capital strength and resilient
franchise
Underlying earnings before tax of EUR 361 million
- Compared with Q3 2010, earnings included the positive effect of updated
assumptions (EUR 35 million) offset by effects of lower equity markets and
interest rates (EUR 49 million), unfavorable currency movements (EUR 32
million) and higher provisioning for longevity (EUR 24 million)
- Fair value items recorded a loss of EUR 288 million
o Decision to lower interest rates assumptions resulted in charge of EUR 168
million
o Other fair value items recorded EUR 120 million in losses due to lower
interest rates and equity markets, spread widening and increased volatility
o Hedging programs performed well; higher reserve requirements fully offset by
hedging results
- Net income amounts to EUR 60 million
- Return on equity of 6.9%, or 8.1% excluding run-off businesses
Strong gross deposits of EUR 10.5 billion; record net deposits* of EUR 4.4 billion
- Total sales increase 2% to EUR 1.6 billion as a result of strong deposits
- New life sales decline 18% to EUR 405 million due to product repricing
following continued focus on margins
- Accident & health sales increase 5% to EUR 153 million mainly driven by the
Americas
- Record deposits driven by pensions and variable annuities in the United States
Capital position remains strong; cash flows impacted by lower interest rates
- Strong capital position demonstrated by IGD solvency ratio of 190%
- Excess capital of EUR 3.4 billion, of which EUR 1.2 billion maintained at
the holding - well above target
- Capital base ratio increases to 73.6% - on track to achieve ratio of at
least 75% by the end of 2012
- Operational free cash flows of EUR (678) million; higher reserve
requirements due to lower interest rates
Statement of Alex Wynaendts, CEO
"The challenging financial market conditions clearly impacted AEGON's earnings
during the third quarter. Lower equity markets and the significant drop in
interest rates, as well as a further weakening of the US dollar were the main
drivers to the decline in underlying earnings. At the same time, AEGON's
capital position remained strong and our franchise continues to be resilient.
Despite the difficult environment, we achieved record net deposits in our key
growth businesses.
"In light of the continued low interest rate environment, we have revised our
long-term interest rate assumptions which had a one-time significant negative
impact on net income. It is clear that the actions we have taken to strengthen
our balance sheet have enabled us to withstand the extreme market volatility
we have seen in recent months, while also continuing to grow our business.
AEGON today is in a strong position, with a solid capital position and the
right strategy that will allow us to pursue our long-term ambitions."
KEY PERFORMANCE INDICATORS
amounts in EUR millions b) Notes Q3 2011 Q2 2011 % Q3 2010 % YTD 2011 YTD 2010 %
Underlying earnings before tax 1 361 401 (10) 452 (20) 1,176 1,381 (15)
Net income 2 60 404 (85) 657 (91) 791 1,442 (45)
Sales 3 1,620 1,261 28 1,595 2 4,292 4,512 (5)
Value of new business (VNB) 4 58 103 (44) 109 (47) 279 385 (28)
Return on equity 5 6.9% 8.1% (15) 9.3% (26) 7.4% 8.9% (17)
For notes see page 22.
* Excluding run-off businesses.
STRATEGIC HIGHLIGHTS
- Sale of closed UK life insurance business Guardian for a total consideration
of GBP 275 million
- Restructuring of AEGON The Netherlands accelerated to reduce cost base by
EUR 100 million
- Appointment of Simon Skinner as CEO of AEGON Ireland, AEGON's European
variable annuity platform
Sustainable earnings growth with an improved risk-return profile
AEGON continues to implement its transformational program aimed at delivering
sustainable earnings growth with an improved risk-return profile. The company
set the following targets*:
- Grow underlying earnings before tax on average by 7%-10% per annum between
2010 and 2015;
- Achieve a return on equity of 10%-12% by 2015;
- Increase fee businesses to 30%-35% of underlying earnings before tax by
2015; and
- Increase normalized operational free cash flow by 30% by 2015.
* Main economic assumptions embedded in targets: annual gross equity market
return of 9%, 10 year US interest rate of 5.25% in 2015 and EUR/USD rate of
1.35.
AEGON's ambition
AEGON's ambition to be a leader in all of its chosen markets by 2015 is
supported by four strategic objectives: Optimize portfolio, Enhance customer
loyalty, Deliver operational excellence and Empower employees. These key
objectives have been embedded in all AEGON businesses and provide the
strategic framework for the company's ambition to become the most-recommended
life insurance and pension provider by customers and distributors, as well as
the most-preferred employer in the sector.
AEGON's AMBITION
To be a leader in all our chosen markets by 2015
AEGON'S STRATEGIC PRIORITIES
- Optimize portfolio
- Enhance customer loyalty
- Deliver operational excellence
- Empower employees
Optimize portfolio
In line with its strategic objective to optimize its portfolio of businesses,
AEGON has decided to sell its UK-based Guardian life and pension business to
Cinven, a European private equity group. Guardian, which manages over 300,000
life insurance policies, has been closed to new business since 2001 and was
sold for a total cash consideration of GBP 275 million, equivalent to
approximately one time book value. AEGON Asset Management has entered into a
long-term agreement with Cinven and will continue to manage the assets of
Guardian which total GBP 7.4 billion. The transaction is expected to close in
the fourth quarter of 2011.
In China, AEGON's joint-venture with CNOOC opened its 10th regional branch in
Fujian province, increasing its potential customer base to over 500 million
people. AEGON-CNOOC is ranked among the top ten foreign insurance companies in
China.
In Spain, AEGON is positioning itself to grow with some of its current
partners and terminate its relationship with others. Recently, AEGON has
closed an agreement with one of the Banca Cívica partnering savings banks,
Caja Burgos, and has launched an exit process from its alliance with Caja de
Ahorros del Mediterráneo (CAM), which has led to an arbitration process. AEGON
will closely monitor the course of events regarding other bancassurance
partners in Spain.
Enhance customer loyalty
AEGON's net promoter score (NPS) program is being rolled out across the group
and brings the company closer to its goal of integrating NPS in many of its
businesses and enhancing customer loyalty. Approximately half of AEGON's
businesses have begun using the program to gain direct customer feedback,
respond to insights and adapt processes. Plans are in place to further
increase the number of business units using NPS by the end of 2012 to support
the company in its ambition of becoming the most recommended provider in the
sector.
Deliver operational excellence
AEGON announced plans to make its business in the Netherlands more agile and
better positioned to respond to changing conditions and opportunities in the
Dutch market. The restructuring of AEGON's Dutch business is an acceleration
of previously announced strategic plans. Restructuring charges of EUR 60
million are included in the third quarter 2011 earnings. The reorganization
program and other initiatives will result in reducing the cost base for AEGON
The Netherlands by EUR 100 million, compared to the cost base for 2010. The
majority of the cost savings are expected to be achieved in 2012.
In the United Kingdom, AEGON is on track to implement a new operating model
aimed at reducing costs by 25% by the end of this year. The program to
restructure the business aims to deliver GBP 80 million in expense savings of
which to date GBP 71 million has been implemented.
In India, AEGON Religare instituted automated underwriting and risk analysis.
The new system improves turn-around time, minimizes human mistakes, cultivates
efficiency and contributes to reduced implementation and recurring costs. The
business won an award for companies that demonstrate strategic and operational
excellence in information technology.
FINANCIAL OVERVIEW c)
EUR millions Notes Q3 2011 Q2 2011 % Q3 2010 % YTD 2011 YTD 2010 %
Underlying earnings before tax
Americas 310 325 (5) 355 (13) 982 1,090 (10)
The Netherlands 68 74 (8) 97 (30) 223 298 (25)
United Kingdom 9 10 (10) 28 (68) 31 78 (60)
New markets 43 59 (27) 55 (22) 159 141 13
Holding and other (69) (67) (3) (83) 17 (219) (226) 3
Underlying earnings before tax 361 401 (10) 452 (20) 1,176 1,381 (15)
Fair value items (288) (23) - 204 - (396) 191 -
Realized gains / (losses) on 102 204 (50) 129 (21) 397 403 (1)
investments
Impairment charges (132) (100) (32) (92) (43) (294) (319) 8
Other income / (charges) (54) (16) - (14) - (73) (51) (43)
Run-off businesses (5) 10 - (7) 29 27 (35) -
Income before tax (16) 476 - 672 - 837 1,570 (47)
Income tax 76 (72) - (15) - (46) (128) 64
Net income 60 404 (85) 657 (91) 791 1,442 (45)
Net income / (loss) attributable
to:
Equity holders of AEGON N.V. 60 403 (85) 657 (91) 790 1,441 (45)
Non-controlling interests - 1 - - - 1 1 -
Net underlying earnings 308 339 (9) 374 (18) 980 1,069 (8)
Commissions and expenses 1,575 1,500 5 1,525 3 4,588 4,486 2
of which operating expenses 11 886 847 5 835 6 2,570 2,488 3
New life sales
Life single premiums 1,073 1,189 (10) 1,650 (35) 3,988 5,491 (27)
Life recurring premiums annualized 298 312 (4) 329 (9) 938 1,002 (6)
Total recurring plus 1/10 single 405 431 (6) 494 (18) 1,337 1,551 (14)
New life sales
Americas 12 110 104 6 138 (20) 327 379 (14)
The Netherlands 32 40 (20) 32 - 137 135 1
United Kingdom 199 217 (8) 264 (25) 663 837 (21)
New markets 12 64 70 (9) 60 7 210 200 5
Total recurring plus 1/10 single 405 431 (6) 494 (18) 1,337 1,551 (14)
New premium production accident and 153 145 6 146 5 457 442 3
health insurance
New premium production general 12 14 (14) 14 (14) 39 43 (9)
insurance
Gross deposits (on and off balance)
Americas 12 7,376 5,014 47 4,705 57 18,019 15,261 18
The Netherlands 584 442 32 525 11 1,488 1,892 (21)
United Kingdom 11 17 (35) 16 (31) 47 71 (34)
New markets 12 2,525 1,242 103 4,161 (39) 5,034 7,541 (33)
Total gross deposits 10,496 6,715 56 9,407 12 24,588 24,765 (1)
Net deposits (on and off balance)
Americas 12 2,840 426 - 545 - 3,033 1,838 65
The Netherlands 54 (113) - (83) - (174) 39 -
United Kingdom 1 14 (93) 2 (50) 17 41 (59)
New markets 12 1,502 (2,487) - 3,293 (54) (2,704) 3,601 -
Total net deposits excluding 4,397 (2,160) - 3,757 17 172 5,519 (97)
run-off businesses
Run-off businesses (1,121) (527) (113) (1,091) (3) (2,528) (5,150) 51
Total net deposits 3,276 (2,687) - 2,666 23 (2,356) 369 -
REVENUE-GENERATING INVESTMENTS
Sept. 30, June 30,
2011 2011 %
Revenue-generating investments 404,254 391,276 3
(total)
Investments general account 143,006 132,837 8
Investments for account of 139,599 142,672 (2)
policyholders
Off balance sheet investments third 121,649 115,767 5
parties
OPERATIONAL HIGHLIGHTS
Underlying earnings before tax
AEGON's underlying earnings before tax declined to EUR 361 million in the third quarter.
The 20% decline, compared with the same quarter last year, was mainly due to lower
interest rates and equity markets, unfavorable currency exchange rate movements and
higher provisioning for longevity.
Underlying earnings from the Americas decreased to EUR 310 million. Consistent
with AEGON's strategy, earnings from fee-based businesses grew compared with
the third quarter last year. However, they were more than offset by a weaker
US dollar against the euro and lower earnings from fixed annuities as this
line of business is de-emphasized. Earnings included the positive effect of
updated assumptions of EUR 35 million mainly related to mortality.
In the Netherlands, underlying earnings decreased to EUR 68 million as a
result of higher provisioning for longevity of EUR 24 million and investments
in developing new distribution capabilities of EUR 5 million.
In the United Kingdom, underlying earnings declined to EUR 9 million. The
third quarter included costs of EUR 14 million related to an ongoing program
to correct historical issues within customer policy records and investments in
developing new propositions (EUR 3 million). The company is on track to
finalize the program in the fourth quarter of 2011. In addition, earnings of
Guardian, the recently sold closed book of life insurance business, were
no longer reflected in underlying earnings (EUR 6 million).
Underlying earnings from New Markets decreased to EUR 43 million, mainly as a
result of lower earnings from Central & Eastern Europe due to lower investment
income and the negative impact from pension legislation changes. In addition,
the comparable quarter last year included a one-time benefit of EUR 5 million
from Variable Annuities Europe.
Total holding costs amounted to EUR 69 million as net interest results were
higher than in the comparable quarter a year ago.
Net income
Net income decreased to EUR 60 million due mainly to a significant decline in
results on fair value items.
Fair value items
To reflect current market circumstances, AEGON has lowered its long-term assumption
for 10-year US Treasury yields by 50 bps to 4.75% (graded uniformly from current yields
over the next five years) and lowered the 90-day rate to 0.2% for the next two
years followed by a three year grade to 3%. No change has been made to the
long-term credit spread or default assumptions. In addition, AEGON has lowered
its assumed return for separate account bond fund returns by 200 bps to 4%
over the next five years, followed by a return of 6% thereafter. The bond fund
return is a gross assumption from which asset management and policy fees are
deducted to determine the policyholder return. In total, these assumption
changes led to a charge of EUR 168 million. In addition, lower interest rates,
spread widening and lower equity markets affected other fair value items which
resulted in losses of EUR 120 million. In total, fair value items recorded a
loss of EUR 288 million during the third quarter.
Realized gains on investments
In the third quarter, realized gains on investments amounted to EUR 102
million and were the result of normal trading in the investment portfolio and
the divestment of the life reinsurance activities.
Impairment charges
Impairment charges amounted to EUR 132 million. In the United States,
impairments of EUR 76 million were linked to residential mortgage-backed
securities and in the United Kingdom to financial holdings of Portuguese and
Greek banks (EUR 22 million). Impairments in New Markets of EUR 29 million
were largely attributable to the effect of new legislation in Hungary, related
to Swiss franc denominated mortgages, affecting the mortgage portfolio.
Other charges
Other charges amounted to EUR 54 million and are mostly related to
restructuring provisions in the Netherlands (EUR 60 million) and in the United
Kingdom (EUR 15 million). These charges are partly offset by UK policyholder
tax with an equal and opposite charge in the tax income line of EUR 20
million.
Run-off businesses
The results of run-off businesses amounted to a loss of EUR 5 million as a
lower amortization yield paid on internally transferred assets related to the
institutional spread-based business and favorable mortality results for
pay-out annuities were offset by lower results from BOLI/COLI and transaction
costs related to the divestment of the life reinsurance activities.
Income tax
Net income for the quarter contained a tax benefit of EUR 76 million. A
benefit of EUR 46 million in the United States related to the utilization of
losses for which previously no deferred tax asset was recognized. In the
United Kingdom, a benefit of EUR 24 million was recorded as a result of the
tax rate reduction as per April 2012, enacted in July 2011.
Return on equity
In the first nine months of 2011, the return on equity of AEGON's ongoing
business amounted to 8.7%. Including capital allocated to the run-off
businesses, return on equity amounted to 7.4%.
Operating expenses
In the third quarter, operating expenses increased 6% to EUR 886 million due
mainly to higher restructuring charges. Excluding restructuring charges,
employee benefit plans and at constant currencies, operating expenses
increased 1% during the first nine months of 2011.
Sales and deposits
AEGON's total sales increased 2% to EUR 1.6 billion mainly as a result of
strong pension deposits. New life sales declined, mainly as a result of lower
single premium production in the United Kingdom and the Americas following
repricing of products, partly offset by growth in Central & Eastern Europe.
Gross deposits of EUR 10.5 billion were supported by increased pension and
variable annuity deposits in the United States and continued strong
third-party asset management inflows.
Value of new business
Compared with the third quarter 2010, the value of new business declined
considerably to EUR 58 million, reflecting current market circumstances of
lower interest rates and higher volatility and lower new life sales partly
offset by higher deposits. AEGON prices its products on an economic framework
basis and will start to publish value of new business on that basis as of the
first quarter of 2012.
Revenue-generating investments
Revenue-generating investments rose 3% compared with the end of the second
quarter of 2011 to EUR 404 billion. The positive effect of strong inflows and
lower interest rates on asset balances was only partly offset by the effect of
lower equity markets.
Capital management
In August, Standard & Poor's positively revised their outlook on AEGON and its
subsidiaries to stable from negative and affirmed the `AA-' ratings on the
core operating entities. At the same time, Moody's affirmed the A3 senior debt
of AEGON and upgraded the subordinated rating of AEGON to Baa1 from Baa2.
Moody's also upgraded the outlook on all ratings to stable from negative. In
the opinion of the rating agencies, AEGON's balance sheet is more resilient to
stress as a result of an improved risk profile. In addition, AEGON delivered
on its strategy with the full repayment to the Dutch State in June 2011 and
the divestment of its life reinsurance activities in August 2011.
AEGON's core capital, excluding revaluation reserves, amounted to EUR 16.9
billion, equivalent to 73.6%6 of the company's total capital base at the end
of the third quarter. AEGON aims the proportion of core capital to be at least
75% of total capital by the end of 2012.
Shareholders' equity increased to EUR 19.4 billion as a result of the
appreciation of the US dollar against the euro and a significant increase in
the revaluation reserves during the third quarter. Shareholders' equity per
common share, excluding preference capital, amounted to EUR 9.21 at September
30, 2011.
The revaluation reserves at September 30, 2011 increased to EUR 2.6 billion,
mainly the result of a significant decrease in risk-free interest rates which
had a positive effect on the value of fixed income securities, partly offset
by spread widening. In addition, the foreign currency translation reserves
improved, primarily the result of a strengthening of the US dollar against the
euro.
AEGON aims to maintain at least 1.5 times holding expenses as a buffer at the
holding, currently equivalent to approximately EUR 900 million. During the
third quarter, excess capital in the holding increased to EUR 1.2 billion as a
result of dividends received from business units.
At September 30, 2011, AEGON's Insurance Group Directive (IGD) ratio amounted
to 190%, a decrease from the level of 200% at the end of the second quarter.
Cash flows
AEGON aims to deliver sustainable cash flows and has announced its intention
to improve operational free cash flow from its 2010 normalized level of EUR
1.0-1.2 billion per annum by 30% by 2015.
AEGON posted negative operational free cash flows of EUR 678 million during
the third quarter of 2011. Operational free cash flows were severely affected
in the United States as a result mainly of the sharp decline in interest
rates. Excluding the impact of financial markets in the third quarter,
operational free cash flows totaled EUR 397 million. Operational free cash
flows represent distributable earnings generation of the business units. The
impact of capital preservation initiatives or proceeds from disposals are not
included in the reported operational free cash flows.
APPENDIX I -- Americas --The Netherlands --United Kingdom --New Markets
FINANCIAL OVERVIEW, Q3 2011 GEOGRAPHICALLY c)
Holding,
other
The United New activities &
EUR millions Americas Netherlands Kingdom Markets eliminations Total
Underlying earnings before tax by line
of business
Life 166 47 20 17 - 250
Individual savings and retirement 88 - - (4) - 84
products
Pensions 56 24 (10) 2 - 72
Non-life - (1) - 4 - 3
Distribution - (2) (1) - - (3)
Asset Management - - - 15 - 15
Other - - - - (69) (69)
Share in underlying earnings before tax - - - 9 - 9
of associates
Underlying earnings before tax 310 68 9 43 (69) 361
Fair value items (275) 25 (8) (16) (14) (288)
Realized gains / (losses) on 40 59 3 - - 102
investments
Impairment charges (76) (5) (22) (29) - (132)
Other income / (charges) 4 (61) 5 (2) - (54)
Run-off businesses (5) - - - - (5)
Income before tax (2) 86 (13) (4) (83) (16)
Income tax 72 (23) 13 (9) 23 76
Net income 70 63 - (13) (60) 60
Net underlying earnings 242 55 30 26 (45) 308
EMPLOYEE NUMBERS
Sept.30, June 30,
2011 2011
Employees excluding agents 22,781 23,639
Agents 3,024 2,892
Total number of employees excluding 25,805 26,531
Associates
AEGON's share of employees (including 4,125 3,561
agents) in Associates
Total 29,930 30,092
AMERICAS
- Underlying earnings before tax amount to USD 437 million
- Net income decreases to USD 101 million, mainly driven by lower results from
fair value items
- New life sales decline to USD 155 million as a result of lower universal
life sales due to repricing
- Accident & health sales increase to USD 206 million, mainly the result of
affinity markets
- Gross deposits increase to USD 10.4 billion driven by strong pension and
variable annuity deposits
Underlying earnings before tax
Underlying earnings from the Americas decreased 5% to USD 437 million for the
third quarter 2011, the result mainly of lower fixed annuity earnings.
- Earnings from Life & Protection in the Americas amounted to USD 219 million
and were level compared to the same quarter last year. Earnings included USD
65 million as a result of favorable DAC unlocking related to mortality offset
partially by the effects of lower interest rates of USD 18 million. Higher
Long Term Care provisions in addition to a charge relating to Executive Life
of New York also contributed unfavorably to the results (USD 15 million).
- Individual Savings & Retirement earnings decreased to USD 123 million. Fixed
annuity earnings decreased to USD 61 million as a result of lower spreads and
declining asset balances as the product is de-emphasized. Earnings from
variable annuities improved to USD 57 million, compared to the third quarter
last year, and included charges related to policyholder behavior assumption
updates of USD 12 million. Earnings from retail mutual funds increased as a
result of higher account balances and amounted to USD 5 million.
- Earnings from Employer Solutions & Pensions remained level at USD 79 million
as a reserve release of USD 13 million in the comparable quarter last year
offset continued growth of the business.
- Earnings from Canada amounted to USD 17 million and the joint-ventures in
Latin America reported a loss of USD 1 million.
Net income
Net income from AEGON's businesses in the Americas decreased to USD 101
million in the third quarter. The main driver of the decline was negative
results from fair value items partly offset by tax benefits.
The loss of USD 387 million for fair value items included USD 237 million for
a change in long-term economic assumptions related to lower interest rates.
AEGON has lowered its long-term assumption for 10 year US Treasury yields by
50 bps to 4.75% (graded uniformly from current yields over the next five
years) and lowered the 90 day rate to 0.2% for the next two years followed by
a three year grade to 3%. No change has been made to the long term credit
spread or default assumptions. In addition, AEGON has lowered its assumed
return for separate account bond fund returns by 200 bps to 4% over the next
five years, followed by a return of 6% thereafter. The bond fund return is a
gross assumption from which asset management and policy fees are deducted to
determine the policyholder return.
Fair value of assets resulted in a loss of USD 92 million for the period,
primarily due to lower than expected alternative asset performance and credit
derivatives due to spread widening. Variable annuity hedge programs performed
well during the volatile quarter and contributed USD 1.4 billion in gains
which largely offset higher reserves and claims on the guarantee liabilities.
Gains on investments of USD 57 million were primarily realized as a result of
the divestment of the life reinsurance activities. Net impairments amounted to
USD 106 million and were largely linked to one residential mortgage-backed
security.
The results of run-off businesses amounted to a loss of USD 7 million as lower
amortization yield paid on internally transferred assets related to the
institutional spread-based business and favorable mortality on pay-out
annuities was offset by transaction costs related to the divestment of the
life reinsurance activities.
Net income for the quarter included a tax benefit of USD 101 million. A
benefit of USD 69 million related to the utilization of losses for which
previously no deferred tax asset was recognized.
Return on capital
During the first nine months of 2011, the return on average capital, excluding
revaluation reserves, invested in AEGON's business in the Americas amounted to
7.0%. Excluding the capital allocated to the run-off businesses, the return on
capital in the Americas would amount to 8.7%. Return on capital of AEGON's
businesses excludes the benefit of leverage at the holding.
Operating expenses
Operating expenses increased 7% to USD 506 million, mainly as a result of
expenses related to the completion of the divestment of the life reinsurance
activities. Excluding restructuring charges and employee benefit plan
expenses, operating expenses decreased 1% as a result of expense reduction
programs.
Sales
New life sales declined to USD 155 million, mainly the effect of the
discontinuance of single premium universal life sales in the bank channel
during the second half of 2010, as well as repricing of certain universal life
products this year to reflect the current interest rate environment.
New premium production for accident & health insurance increased to USD 206
million, primarily the result of growth in the employer benefits and affinity
marketing businesses.
Gross deposits increased to USD 10.4 billion as a result of higher fee-based
deposits. Pension deposits increased as result of higher takeover and annual
deposits in the retirement plan space, in addition to a strong increase in
stable value deposits. Stable value balances amount to USD 60 billion and are
expected to be maintained around this level.
Variable annuity sales continued to be strong, primarily as a result of the
Retirement Income Max rider. A new, recently launched GLWB rider is expected
to improve sales further in the direct channel. AEGON is currently in the
process of repricing its variable annuity offerings to reflect the current low
interest rate environment and subsequent higher hedging costs in its riders.
Net deposits for the ongoing businesses totaled
USD 4 billion as net inflows for the stable value and retirement plan
businesses and variable annuities were only partly offset by retail mutual
fund and fixed annuity outflows. AEGON is de-emphasizing sales of fixed
annuities as part of a strategic repositioning and incurs net outflows as a
result.
Value of new business
Value of new business decreased to USD 34 million as the effect of increased
retirement and stable value deposits was more than offset by a lower
contribution from variable annuities as a result of increased hedging costs in
the current interest rate environment.
Revenue-generating investments
Revenue-generating investments declined to
USD 315 billion as compared to the second quarter of 2011. The decline is
mainly the result of the effect of lower equity markets on unit-linked and off
balance sheet assets.
AMERICAS c)
USD millions Notes Q3 2011 Q2 2011 % Q3 2010 % YTD 2011 YTD 2010 %
Underlying earnings before tax by line
of business
Life and protection 219 194 13 220 - 608 655 (7)
Fixed annuities 61 77 (21) 112 (46) 228 358 (36)
Variable annuities 57 87 (34) 29 97 237 148 60
Retail mutual funds 5 6 (17) 3 67 17 3 -
Individual savings and retirement 123 170 (28) 144 (15) 482 509 (5)
products
Employer solutions & pensions 79 83 (5) 79 - 243 227 7
Canada 17 19 (11) 13 31 47 39 21
Latin America (1) 3 - 2 - - 4 -
Underlying earnings before tax 437 469 (7) 458 (5) 1,380 1,434 (4)
Fair value items (387) (72) - 117 - (476) (42) -
Realized gains / (losses) on 57 71 (20) 121 (53) 163 175 (7)
investments
Impairment charges (106) (76) (39) (111) 5 (262) (375) 30
Other income / (charges) 6 (5) - - - 1 (140) -
Run- off businesses (7) 15 - (9) 22 38 (46) -
Income before tax - 402 - 576 - 844 1,006 (16)
Income tax 101 (60) - 52 94 (42) 94 -
Net income 101 342 (70) 628 (84) 802 1,100 (27)
Net income / (loss) attributable
to:
Equity holders of AEGON N.V. 101 342 (70) 628 (84) 802 1,100 (27)
Net underlying earnings 343 368 (7) 339 1 1,057 1,058 -
Commissions and expenses 1,255 1,210 4 1,167 8 3,674 3,483 5
of which operating expenses 506 502 1 472 7 1,500 1,457 3
New life sales 12
Life single premiums 113 78 45 363 (69) 338 820 (59)
Life recurring premiums annualized 144 143 1 143 1 426 417 2
Total recurring plus 1/10 single 155 151 3 179 (13) 460 499 (8)
Life & protection 117 114 3 147 (20) 352 402 (12)
Employer solutions & pensions 6 7 (14) 5 20 19 17 12
Canada 15 18 (17) 15 - 50 46 9
Latin America 17 12 42 12 42 39 34 15
Total recurring plus 1/10 single 155 151 3 179 (13) 460 499 (8)
New premium production accident and 206 201 2 179 15 606 543 12
health insurance
Gross deposits (on and off balance) 12
by line of business
Life & protection 2 3 (33) 2 - 8 8 -
Fixed annuities 87 71 23 164 (47) 241 473 (49)
Variable annuities 1,338 1,401 (4) 956 40 3,918 2,793 40
Retail mutual funds 618 765 (19) 861 (28) 2,158 2,794 (23)
Individual savings & retirement 2,043 2,237 (9) 1,981 3 6,317 6,060 4
products
Employer solutions & pensions 8,282 4,913 69 3,975 108 18,749 13,503 39
Canada 73 83 (12) 100 (27) 253 504 (50)
Total gross deposits 10,400 7,236 44 6,058 72 25,327 20,075 26
Net deposits (on and off balance) 12
by line of business
Life & protection (10) (10) - (12) 17 (34) (39) 13
Fixed annuities (728) (810) 10 (584) (25) (2,339) (1,780) (31)
Variable annuities 489 471 4 225 117 1,180 419 182
Retail mutual funds (234) (5) - 233 - (289) 1,008 -
Individual savings & retirement (473) (344) (38) (126) - (1,448) (353) -
products
Employer solutions & pensions 4,514 1,048 - 1,030 - 6,047 3,680 64
Canada (39) (105) 63 (191) 80 (302) (870) 65
Total net deposits excluding 3,992 589 - 701 - 4,263 2,418 76
run-off businesses
Run-off businesses (1,580) (772) (105) (1,384) (14) (3,554) (6,774) 48
Total net deposits 2,412 (183) - (683) - 709 (4,356) -
REVENUE-GENERATING INVESTMENTS
Sept. 30, June 30,
2011 2011 %
Revenue-generating investments 315,362 324,919 (3)
(total)
Investments general account 122,645 121,723 1
Investments for account of 76,217 83,383 (9)
policyholders
Off balance sheet investments third 116,500 119,813 (3)
parties
THE NETHERLANDS
- Underlying earnings before tax decrease to EUR 68 million due to higher
provisioning for longevity
- Net income amounts to EUR 63 million as a result of restructuring charges
and lower fair value items
- New life sales remain level at EUR 32 million
Underlying earnings before tax
Underlying earnings from AEGON's operations in the Netherlands amounted to EUR
68 million, a decrease compared to the third quarter 2010. This was mainly due
to lower earnings in Life & Savings and higher provisioning for longevity in
Pensions.
- Earnings from AEGON's Life & Savings operations in the Netherlands of EUR 47
million were down 8% compared to the third quarter of last year as lower
investment income in life insurance was only partly offset by better interest
results in Savings.
- Earnings from the Pension business declined to EUR 24 million as additional
provisioning for longevity of EUR 24 million more than offset other positive
technical results.
- Non-life recorded a loss of EUR 1 million, mainly as a result of costs
related to a project to increase efficiencies, which offset improved claim
experience.
- Losses from the distribution businesses amounted to EUR 2 million, mainly
the result of business development initiatives.
Net income
Net income from AEGON's businesses in the Netherlands declined to EUR 63
million. This was mainly a result of lower fair value items, which amounted to
EUR 25 million, driven by a decline in the fair value of guarantees net of
hedging. Gains on investments totaled EUR 59 million for the quarter and were
a result of normal trading activity in the portfolio. Other charges included
charges of EUR 60 million related to the restructuring of AEGON's businesses
in the Netherlands.
Interest rate and equity hedge programs performed well during the volatile
quarter as the EUR 2.6 billion increase in value of guarantees was fully
offset by hedging results.
Operating expenses
Operating expenses increased to EUR 242 million in the third quarter of 2011,
mainly as a result of restructuring charges of EUR 60 million and investments
in the further development of new distribution capabilities. On a comparable
basis, expenses remained level.
During the quarter, AEGON announced plans to make its business in the Netherlands
more agile and better positioned to respond to changing conditions and opportunities
in the Dutch market. The restructuring of AEGON's Dutch business is an
acceleration of previously announced strategic plans. The reorganization
program and other initiatives will result in a reduction of the cost base by
EUR 100 million as compared to the cost base for 2010. Most of the cost
savings are expected to be achieved in 2012.
Sales and deposits
New life sales remained level at EUR 32 million during the third quarter of
2011. Individual life sales amounted to EUR 17 million. Individual life single
premium production benefited from the focus on high service levels and the
exit of some competitors from the market. Individual life recurring premium
was lower as mortgage production slowed down. Pension sales increased 7% to
EUR 15 million.
Premium production for accident & health and non-life products amounted to EUR
6 million and remained level with the third quarter of 2010.
Gross savings deposits increased 40% to EUR 584 million after AEGON Bank
launched a marketing campaign and became more competitive in savings.
Value of new business
The value of new business declined to EUR 14 million, mainly as a result of
lower volumes and higher mortgage-related funding costs.
Revenue-generating investments
Revenue-generating investments increased 2% to EUR 61 billion compared with
the previous quarter as the impact from lower interest rates was only partly
offset by the negative impact of lower equity markets.
Update KoersPlan
As previously disclosed, in July 2011 the Amsterdam Court of Appeal ruled with
respect to a specific AEGON unit-linked product, the `KoersPlan'-product.
AEGON believes the ruling was wrongly decided, and in October 2011 AEGON
appealed the decision with the Supreme Court of the Netherlands. However, if
the Supreme Court were to confirm the decision taken by the Amsterdam Court of
Appeal and the principles underlying such decision were applied to AEGON's
entire KoersPlan-portfolio (instead of solely to the holders of
KoersPlan-products who are plaintiffs in the pending litigation), AEGON
currently estimates the financial effect to be approximately EUR 150 million
after tax. The actual amount may vary based on uncertainties related to the
application of any decision to individual customers, equity market
fluctuations as well as interest rates movements. AEGON expects the Supreme
Court to issue a decision during the second half of 2012.
THE NETHERLANDS
EUR millions Notes Q3 2011 Q2 2011 % Q3 2010 % YTD 2011 YTD 2010 %
Underlying earnings before tax by line
of business
Life and Savings 47 55 (15) 51 (8) 145 132 10
Pensions 24 16 50 42 (43) 62 118 (47)
Non life (1) - - 3 - 4 29 (86)
Distribution (2) (1) (100) 2 - 8 19 (58)
Share in underlying earnings before - 4 - (1) - 4 - -
tax of associates
Underlying earnings before tax 68 74 (8) 97 (30) 223 298 (25)
Fair value items 25 2 - 184 (86) (33) 343 -
Realized gains / (losses) on 59 142 (58) 35 69 236 154 53
investments
Impairment charges (5) (3) (67) (4) (25) (10) (11) 9
Other income / (charges) (61) (11) - - - (80) 33 -
Income before tax 86 204 (58) 312 (72) 336 817 (59)
Income tax (23) (35) 34 (75) 69 (65) (187) 65
Net income 63 169 (63) 237 (73) 271 630 (57)
Net income / (loss) attributable
to:
Equity holders of AEGON N.V. 63 169 (63) 237 (73) 271 630 (57)
Net underlying earnings 55 67 (18) 88 (38) 188 222 (15)
Commissions and expenses 311 278 12 248 25 861 775 11
of which operating expenses 242 201 20 179 35 632 543 16
New life sales
Life single premiums 210 217 (3) 176 19 884 814 9
Life recurring premiums annualized 12 18 (33) 14 (14) 49 54 (9)
Total recurring plus 1/10 single 32 40 (20) 32 - 137 135 1
Life and Savings 17 25 (32) 18 (6) 68 66 3
Pensions 15 15 - 14 7 69 69 -
Total recurring plus 1/10 single 32 40 (20) 32 - 137 135 1
New premium production accident and 6 4 50 5 20 20 20 -
health insurance
New premium production general 6 7 (14) 6 - 21 20 5
insurance
Gross deposits (on and off balance)
by line of business
Life and Savings 584 442 32 416 40 1,408 1,633 (14)
Pensions - - - 109 - 80 259 (69)
Total gross deposits 584 442 32 525 11 1,488 1,892 (21)
Net deposits (on and off balance)
by line of business
Life and Savings 54 (113) - (139) - (201) (7) -
Pensions - - - 56 - 27 46 (41)
Total net deposits 54 (113) - (83) - (174) 39 -
REVENUE-GENERATING INVESTMENTS
Sept. 30, June 30,
2011 2011 %
Revenue-generating investments 61,092 60,005 2
(total)
Investments general account 38,346 36,810 4
Investments for account of 22,746 23,195 (2)
policyholders
Off balance sheet investments third - - -
parties
UNITED KINGDOM
- Underlying earnings before tax of GBP 8 million as a result of higher
exceptional charges and expenses
- New life sales decrease to GBP 175 million as a result of planned lower
pension sales
Underlying earnings before tax
In the United Kingdom, underlying earnings before tax amounted to GBP 8
million, mainly driven by lower fee income. Exceptional charges during the
quarter related to the customer redress program (GBP 5 million), expenses
related to the execution of this program (GBP 7 million) and the development
of new product propositions (GBP 3 million). These exceptional expenses may
continue in the fourth quarter of 2011. Following the decision to sell the
closed UK life insurance business, Guardian, the associated earnings were no
longer reflected in underlying earnings (GBP 5 million).
- Earnings from Life decreased 22% to GBP 18 million, mainly as a result of
lower investment income following de-risking, and only partly offset by cost
reductions.
- Pensions recorded a loss of GBP 9 million, mainly as a result of lower fee
income, continued investments in new product propositions, expenses and other
charges related to the customer redress program, and the exclusion of earnings
from Guardian following the decision to sell the closed UK life insurance
business.
- Distribution recorded a loss of GBP 1 million.
AEGON is progressing well with the implementation of its program to identify
and correct historical issues within its customer policy records, which began
in May 2009. The immediate priority of the program has been to deal with
issues that resulted in financial detriment and to return affected customers
to the financial position they would have been in had the issue not occurred.
The program of determining the full scope of customer redress is expected to
continue throughout the remainder of the year and may lead to additional
charges. AEGON expects to have repaid the majority of the customer detriment
by the end of 2011.
Net income
Net income was nil as lower underlying earnings and lower results on fair
value items were only partly offset by higher gains on investments of GBP 3
million. Impairments in the third quarter amounted to GBP 19 million and
related to impairments on financial holdings of Portuguese and Greek banks.
Net income also included a charge of GBP 13 million relating to the
restructuring of AEGON's operations in the United Kingdom and a benefit of GBP
21 million was recorded as a result of the tax rate reduction as per April
2012, enacted in July 2011.
Operating expenses
Operating expenses remained level at GBP 104 million as cost savings were
offset by charges related to the restructuring program of GBP 13 million, as
well as investments in the new proposition development of GBP 3 million.
Expenses of GBP 7 million relating to the execution of the customer redress
program are also included in operating expenses. The UK restructuring aims to
reduce operating expenses by 25%, or GBP 80 million, by the end of 2011. It is
expected that further restructuring charges will arise in the fourth quarter
of 2011. To date, AEGON has implemented cost savings of GBP 71 million.
Sales and deposits
New life sales decreased 20% to GBP 175 million during the quarter as a result
of a planned decrease in sales of individual pensions and new group pension
schemes following reductions in the commission levels paid to advisors on
these products.
Value of new business
The value of new business in the United Kingdom declined to GBP 3 million
mainly driven by lower sales.
Revenue-generating investments
Revenue-generating investments declined to GBP 55 billion as compared with the
second quarter 2011, as a result of a lower equity markets.
UNITED KINGDOM
GBP millions Notes Q3 2011 Q2 2011 % Q3 2010 % YTD 2011 YTD 2010 %
Underlying earnings before tax by line
of business
Life 18 17 6 23 (22) 56 56 -
Pensions (9) (7) (29) - - (25) 14 -
Distribution (1) (1) - 1 - (4) (3) (33)
Underlying earnings before tax 8 9 (11) 24 (67) 27 67 (60)
Fair value items (7) - - 1 - (8) (8) -
Realized gains / (losses) on 3 10 (70) - - 38 5 -
investments
Impairment charges (19) (35) 46 (2) - (54) (10) -
Other income / (charges) 7 4 1 - 12 (67) - 52 -
Income before tax (11) (15) 27 35 - 3 106 (97)
Income tax attributable to (17) (15) (13) (23) 26 (33) (63) 48
policyholder return
Income before income tax on (28) (30) 7 12 - (30) 43 -
shareholders return
Income tax on shareholders return 28 15 87 32 (13) 61 45 36
Net income - (15) - 44 - 31 88 (65)
Net income / (loss) attributable
to:
Equity holders of AEGON N.V. - (15) - 44 - 31 88 (65)
Net underlying earnings 26 14 86 52 (50) 73 105 (30)
Commissions and expenses 183 193 (5) 179 2 548 530 3
of which operating expenses 104 109 (5) 102 2 311 292 7
New life sales 8
Life single premiums 615 711 (14) 859 (28) 2,167 3,048 (29)
Life recurring premiums annualized 113 120 (6) 133 (15) 360 412 (13)
Total recurring plus 1/10 single 175 191 (8) 219 (20) 577 717 (20)
Life 18 15 20 17 6 49 66 (26)
Pensions 157 176 (11) 202 (22) 528 651 (19)
Total recurring plus 1/10 single 175 191 (8) 219 (20) 577 717 (20)
Gross deposits (on and off balance)
by line of business
Variable annuities 10 14 (29) 13 (23) 41 61 (33)
Total gross deposits 10 14 (29) 13 (23) 41 61 (33)
Net deposits (on and off balance)
by line of business
Variable annuities 1 12 (92) 1 - 15 35 (57)
Total net deposits 1 12 (92) 1 - 15 35 (57)
REVENUE-GENERATING INVESTMENTS
Sept. 30, June 30,
2011 2011 %
Revenue-generating investments 54,611 58,319 (6)
(total)
Investments general account 8,168 7,952 3
Investments for account of 46,443 50,367 (8)
policyholders
NEW MARKETS
- Underlying earnings before tax declined to EUR 43 million, mainly driven by
lower earnings from CEE
- Net loss amounted to EUR 13 million, mainly the result of increased
impairments
- New life sales increased to EUR 64 million driven by higher sales in CEE and
Spain
Underlying earnings before tax
In New Markets, AEGON reported underlying earnings before tax of EUR 43
million. The decline is a result of lower underlying earnings from Central &
Eastern Europe and Variable Annuities Europe.
- Earnings from Central & Eastern Europe declined to EUR 15 million as higher
results from non-life in Hungary were more than offset by the negative impact
from pension legislation changes and lower investment income in Hungary.
Compared to the second quarter of 2011, earnings for the third quarter were
lower as result of seasonality in non-life claims. Other factors were lower
fee income following the pension asset transfer to the Hungarian State and
reduced contributions to mandatory pension funds in Poland.
- Results from AEGON's operations in Asia remained level at EUR (11) million
as the impact from cost reductions have been offset by the inclusion of the
expenses related to the Asian regional office. The results for the Asia
regional office have been included since the first quarter of 2011, following
the implementation of the new operational structure for the Asian operations.
- Earnings from Spain & France amounted to
EUR 21 million as growth from the inclusion of earnings from Caixa Sabadell
Vida was more than offset by lower underlying earnings from CAM. Earnings
contributions from partner La Mondiale in France decreased slightly compared
with the same quarter last year.
- Earnings from Variable Annuities Europe declined to EUR 3 million. The
comparable quarter last year included a one-time benefit of EUR 5 million.
Excluding this one-time benefit, earnings for Variable Annuities Europe
remained level.
- AEGON Asset Management reported higher earnings of EUR 15 million for the
quarter as a result of higher performance fees and cost savings.
Net income
New Markets recorded a net loss of EUR 13 million during the quarter as a
result of lower underlying earnings and higher impairments. Impairments
amounted to EUR 29 million and were mainly driven by increased mortgage
impairments in Central & Eastern Europe. Following new legislation in Hungary,
customers are allowed to repay their mortgages at pre-set foreign exchange
rates between the Swiss franc and the Hungarian forint. AEGON estimated the
total negative impact from this change in legislation to amount to EUR (14)
million, which has been reflected in impairments. Results on fair value items
amounted to EUR (16) million, driven mainly by hedge ineffectiveness in
Variable Annuities Europe. In addition, lower realized gains were offset by
lower other charges.
Operating expenses
Operating expenses declined 3% to EUR 130 million in the third quarter, as a
result of lower operating expenses in AEGON Asset Management and cost saving
initiatives in Central & Eastern Europe. This was only partly offset by higher
costs in Variable Annuities Europe.
Sales and deposits
New life sales increased 7% to EUR 64 million.
- In Central & Eastern Europe, new life sales increased by 4% to EUR 27
million driven by the development of the tied network and the increased focus
on life insurance in Hungary, Poland and Turkey.
- In Asia, new life sales declined to EUR 7 million as growth in India was
offset by lower new life sales in China mainly as a result of new regulation.
- New life sales in Spain & France increased 20% to EUR 30 million, mainly as
a result of the first-time inclusion of Caixa Sabadell Vida.
New premium production from AEGON's general insurance and accident & health
businesses in Central & Eastern Europe decreased to EUR 6 million, as strong
household insurance sales in Hungary were offset by lower motor production due
to increased price competition.
Gross deposits in New Markets amounted to EUR 2.5 billion, primarily driven by
strong deposits in AEGON Asset Management as a result of new mandate wins and
good performance in the retail segment. During the quarter, AEGON Asset
Management rebranded its third-party asset management operations as Kames
Capital.
Value of new business
The value of new business in New Markets decreased to EUR 16 million as a
result of the combined negative effects of adverse pension legislation in
Hungary, lower production at one of the distribution partners in Spain and
margin pressure at Variable Annuities Europe.
Revenue-generating investments
Revenue-generating investments increased 5% compared with the second quarter
of 2011 to EUR 44 billion, driven by net deposits in AEGON Asset Management.
Lower interest rates more than offset the negative impact of lower equity
markets.
NEW MARKETS
EUR millions Notes Q3 2011 Q2 2011 % Q3 2010 % YTD 2011 YTD 2010 %
Underlying earnings before tax
Central Eastern Europe 15 29 (48) 20 (25) 70 66 6
Asia (11) (8) (38) (10) (10) (30) (27) (11)
Spain & France 21 20 5 24 (13) 64 63 2
Variable Annuities Europe 3 - - 8 (63) 8 7 14
AEGON Asset Management 15 18 (17) 13 15 47 32 47
Underlying earnings before tax 43 59 (27) 55 (22) 159 141 13
Fair value items (16) (3) - (9) (78) (19) (10) (90)
Realized gains / (losses) on - - - 2 - 2 13 (85)
investments
Impairment charges (29) (4) - - - (35) (11) -
Other income / (charges) (2) (3) 33 (5) 60 6 (16) -
Income before tax (4) 49 - 43 - 113 117 (3)
Income tax (9) (10) 10 (13) 31 (45) (35) (29)
Net income (13) 39 - 30 - 68 82 (17)
Net income / (loss) attributable
to:
Equity holders of AEGON N.V. (13) 38 - 30 - 67 81 (17)
Non-controlling interests - 1 - - - 1 1 -
Net underlying earnings 26 47 (45) 41 (37) 111 103 8
Commissions and expenses 180 175 3 175 3 535 519 3
of which operating expenses 130 132 (2) 134 (3) 403 394 2
New life sales 12
Life single premiums 82 117 (30) 156 (47) 373 498 (25)
Life recurring premiums annualized 56 58 (3) 44 27 173 150 15
Total recurring plus 1/10 single 64 70 (9) 60 7 210 200 5
Life 59 64 (8) 50 18 185 169 9
Associates 5 6 (17) 10 (50) 25 31 (19)
Total recurring plus 1/10 single 64 70 (9) 60 7 210 200 5
Central Eastern Europe 27 30 (10) 26 4 84 69 22
Asia 7 7 - 9 (22) 25 28 (11)
Spain & France 30 33 (9) 25 20 101 103 (2)
Total recurring plus 1/10 single 64 70 (9) 60 7 210 200 5
New premium production accident and 2 1 100 1 100 6 9 (33)
health insurance
New premium production general 6 7 (14) 8 (25) 18 23 (22)
insurance
Gross deposits (on and off balance) 12
Central Eastern Europe 160 167 (4) 242 (34) 509 717 (29)
Asia 9 7 29 8 13 27 43 (37)
Spain & France 8 11 (27) 10 (20) 27 66 (59)
Variable Annuities Europe 122 159 (23) 167 (27) 412 530 (22)
AEGON Asset Management 2,226 898 148 3,734 (40) 4,059 6,185 (34)
Total gross deposits 2,525 1,242 103 4,161 (39) 5,034 7,541 (33)
Net deposits (on and off balance) 12
Central Eastern Europe 112 (1,972) - 154 (27) (1,752) 372 -
Asia 6 4 50 8 (25) 21 42 (50)
Spain & France 1 (43) - (11) - (53) 18 -
Variable Annuities Europe 33 63 (48) 71 (54) 122 197 (38)
AEGON Asset Management 1,350 (539) - 3,071 (56) (1,042) 2,972 -
Total net deposits 1,502 (2,487) - 3,293 (54) (2,704) 3,601 -
REVENUE-GENERATING INVESTMENTS
Sept. 30, June 30,
2011 2011 %
Revenue-generating investments 44,302 42,154 5
(total)
Investments general account 3,354 2,819 19
Investments for account of 6,129 6,203 (1)
policyholders
Off balance sheet investments third 34,819 33,132 5
parties
FINANCIAL OVERVIEW, 2011 YEAR-TO-DATE GEOGRAPHICALLY c)
Holding,
other
The United New activities &
EUR millions Americas Netherlands Kingdom Markets eliminations Total
Underlying earnings before tax by line
of business
Life 463 145 64 55 - 727
Individual savings and retirement 346 - - (8) - 338
products
Pensions 173 62 (28) 9 - 216
Non-life - 4 - 26 - 30
Distribution - 8 (5) - - 3
Asset Management - - - 47 - 47
Other - - - - (219) (219)
Associates - 4 - 30 - 34
Underlying earnings before tax 982 223 31 159 (219) 1,176
Fair value items (339) (33) (9) (19) 4 (396)
Realized gains / (losses) on 116 236 43 2 - 397
investments
Impairment charges (187) (10) (62) (35) - (294)
Other income / (charges) 1 (80) - 6 - (73)
Run-off businesses 27 - - - - 27
Income before tax 600 336 3 113 (215) 837
Income tax (30) (65) 33 (45) 61 (46)
Net income 570 271 36 68 (154) 791
Net underlying earnings 751 188 84 111 (154) 980
APPENDIX II
VALUE OF NEW BUSINESS
AND IRR
VNB VNB VNB VNB VNB
EUR millions, after tax Q3 2011 Q2 2011 % Q3 2010 % YTD 2011 YTD 2010 %
Americas 24 51 (53) 40 (40) 138 135 2
The Netherlands 14 20 (30) 23 (39) 58 102 (43)
United Kingdom 3 11 (73) 19 (84) 24 56 (57)
New Markets 16 20 (20) 27 (41) 59 91 (35)
Total 58 103 (44) 109 (47) 279 385 (28)
IRR % IRR% IRR%
EUR millions, after tax Q3 2011 Q2 2011 Q3 2010
Americas 10.6 14.8 12.1
The Netherlands 18.1 17.3 16.2
United Kingdom 9.0 10.6 11.4
New Markets 30.8 36.5 34.1
Total 19.1 19.5 17.8
MODELED NEW BUSINESS,
APE AND DEPOSITS
Premium Premium business
business
APE APE
EUR millions Notes Q3 2011 Q2 2011 % Q3 2010 % YTD 2011 YTD 2010 %
9
Americas 242 231 5 247 (2) 722 701 3
The Netherlands 34 45 (24) 38 (11) 154 189 (19)
United Kingdom 200 227 (12) 254 (21) 665 823 (19)
New Markets 77 88 (13) 80 (4) 260 257 1
Total 554 592 (6) 619 (11) 1,800 1,969 (9)
Deposit Deposit business
business
Deposits Deposits
EUR millions Notes Q3 2011 Q2 2011 % Q3 2010 % YTD 2011 YTD 2010 %
9
Americas 6,566 4,223 55 4,131 59 15,425 12,381 25
United Kingdom 11 17 (35) 16 (31) 47 67 (30)
New Markets 188 258 (27) 231 (19) 662 841 (21)
Total 6,765 4,498 50 4,378 55 16,133 13,290 21
VNB/PVNBP
SUMMARY
Premium Premium business
business
VNB PVNBP VNB / VNB / VNB PVNBP VNB / VNB /
PVNBP APE PVNBP APE
EUR millions Notes Q3 2011 % % YTD 2011 % %
10
Americas 22 725 3.0 9.1 71 2,293 3.1 9.8
The Netherlands 14 266 5.4 42.0 58 1,273 4.6 37.7
United Kingdom 3 1,179 0.3 1.6 23 3,996 0.6 3.5
New Markets 17 545 3.1 22.1 60 1,881 3.2 22.9
Total 57 2,714 2.1 10.3 212 9,442 2.2 11.8
Deposit Deposit business
business
VNB PVNBP VNB / VNB / VNB PVNBP VNB / VNB /
PVNBP Deposits PVNBP Deposits
EUR millions Notes Q3 2011 % % YTD 2011 % %
10
Americas 2 8,180 0.0 0.0 67 19,897 0.3 0.4
United Kingdom 0 11 0.4 0.4 0 47 0.5 0.5
New Markets (1) 280 (0.3) (0.4) (0) 909 0.0 0.0
Total 1 8,472 0.0 0.0 67 20,853 0.3 0.4
Notes:
1)For segment reporting purposes underlying earnings before tax, net
underlying earnings, commissions and expenses, operating expenses, income tax
including associated companies, income before tax including associated
companies and value of new business (VNB) are calculated by consolidating on a
proportionate basis the revenues and expenses of certain of our associated
companies in Spain, India, Brazil and Mexico. We believe that our non-IFRS
measures provide meaningful information about the underlying operating results
of our business including insight into the financial measures that our senior
management uses in managing our business. Among other things our senior
management is compensated based in part on AEGON's results against targets
using the non-IFRS measures presented here. While other insurers in our peer
group present substantially similar non-IFRS measures, the non-IFRS measures
presented in this document may nevertheless differ from the non-IFRS measures
presented by other insurers. There is no s
2)Net income refers to net income attributable to equity holders of AEGON N.V.
and minority interest.
3)Sales is defined as new recurring premiums plus 1/10 of single premiums plus
1/10 of gross deposits plus new premium production accident and health plus
new premium production general insurance.
4)The present value of future distributable earnings on the block of business
sold in the reporting period. Value of new business is calculated using
beginning of year economic assumptions and assumptions outside of management
control, and beginning of quarter operating assumptions.
5)Return on equity is calculated by dividing the net underlying earnings after
cost of leverage by the average shareholders' equity excluding the preferred
shares and the revaluation reserve.
6)Capital securities that are denominated in foreign currencies are, for
purposes of calculating the capital base ratio, revalued to the period-end
exchange rate. All ratios exclude AEGON's revaluation reserve.
7)Included in other income/(charges) are charges made to policyholders with
respect to income tax in the United Kingdom.
8)Includes production on investment contracts without a discretionary
participation feature of which the proceeds are not recognized as revenues but
are directly added to our investment contract liabilities.
9)APE = recurring premium + 1/10 single premium.
10)PVNBP: Present Value New Business Premium.
11)Reconciliation of operating expenses, used for segment reporting, to our
IFRS based operating expenses.
Q3 2011 YTD 2011
Employee expenses 513 1,567
Administrative expenses 363 960
Operating expenses for IFRS reporting 876 2,527
Operating expenses related to 10 43
associates
Operating expenses in earnings release 886 2,570
12)New life sales, gross deposits and net deposits data include results of our
associated companies in Spain, India, Brazil and Mexico which are consolidated
on a proportionate basis.
13)Operational free cash flow reflect the sum of the return on free surplus,
earnings on in-force business, release of required surplus on in-force
business reduced by new business first year strain and required surplus on new
business. Refer to our Embedded Value 2010 report for further details.
a)The calculation of the IGD (Insurance Group Directive) capital surplus and
ratio are based on Solvency I capital requirements on IFRS for entities within
the EU (Pillar 1 for AEGON UK), and local regulatory solvency measurements for
non-EU entities.
Specifically, required capital for the life insurance companies in the US is
calculated as two times the upper end of the Company Action Level range (200%)
as applied by the National Association of Insurance Commissioners in the US.
The calculation of the IGD ratio excludes the available and required capital
of the UK With-Profit funds. In the UK solvency surplus calculation the local
regulator only allows the available capital number of the With-Profit funds
included in overall local available capital to be equal to the amount of
With-Profit funds' required capital.
b)The results in this release are unaudited.
c)The comparative 2010 earnings and sales information has been revised to
reflect the transfer of the Life Reinsurance and BOLI/COLI businesses to the
Run-off businesses line to make the information consistent with the current
period figures.
Currencies
Income statement items: average rate 1 EUR = USD 1.4056 (2010: USD 1.3154).
Income statement items: average rate 1 EUR = GBP 0.8702 (2010: GBP 0.8572).
Balance sheet items: closing rate 1 EUR = USD 1.3417 (2010: USD 1.3648;year-end 2010: USD 1.3362).
Balance sheet items: closing rate 1 EUR = GBP 0.8613 (2010: GBP 0.8599;year-end 2010: GBP 0.8608).
ADDITIONAL INFORMATION
The Hague, November 10, 2011
Press conference call
7:45 am CET: Audio webcast on www.aegon.com
Analyst & investor presentation / conference call
9:00 am CET: Audio webcast on www.aegon.com
Call-in numbers
United States: +1 480 629 9673
United Kingdom: +44 207 153 2027
The Netherlands: +31 45 631 6902
Replay
Two hours after the conference call, a replay will be available on
www.aegon.com and on the following phone numbers:
United Kingdom: +44 207 154 2833, access code: 4481413#
United Sates: +1 303 590 3030, access code: 4481413#
Supplements
AEGON's Q3 2011 Financial Supplement and Condensed Consolidated Interim
Financial Statements are available on www.aegon.com.
About AEGON
As an international life insurance, pension and asset management
company based in The Hague, AEGON has businesses in over twenty
markets in the Americas, Europe and Asia. AEGON companies employ
approximately 26,000 people and have some 40 million customers
across the globe.
Third quarter
Key figures - EUR 2011 Full year 2010
Underlying earnings
before tax 361 million 1.8 billion
New life sales 405 million 2.1 billion
Gross deposits 10.5 billion 33 billion
Revenue-generating
investments (end of
period) 404 billion 413 billion
Contact information
Media relations:
Greg Tucker
+31(0)70 344 8956
gcc-ir@aegon.com
Investor relations:
Willem van den Berg
+31 (0)70 344 8305
877 548 9668 - toll free USA only
ir@aegon.com
www.aegon.com
DISCLAIMERS
Cautionary note regarding non-GAAP measures
This press release includes certain non-GAAP financial measures: underlying earnings
before tax, net underlying earnings, commission and expenses, operating expenses and
value of new business (VNB). The reconciliation of underlying earnings before tax to
the most comparable IFRS measure is provided in Note 3 "Segment information" of our
Condensed consolidated interim financial statements. VNB is not based on IFRS, which
are used to report AEGON's primary financial statements, and should not be viewed as
a substitute for IFRS financial measures. We may define and calculate VNB
differently than other companies. Please see AEGON's Embedded Value Report dated May
12, 2011 for an explanation of how we define and calculate VNB. AEGON believes that
these non-GAAP measures, together with the IFRS information, provide meaningful
supplemental information that our management uses to run our business as well as
useful information for the investment community to evaluate AEGON's business
relative to the businesses of our
Local currencies and constant currency exchange rates
This press release contains certain information about our results and financial
condition in USD for the Americas and GBP for the United Kingdom, because those
businesses operate and are managed primarily in those currencies. Certain
comparative information presented on a constant currency basis eliminates the
effects of changes in currency exchange rates. None of this information is a
substitute for or superior to financial information about us presented in EUR, which
is the currency of our primary financial statements.
Forward-looking statements
The statements contained in this press release that are not historical facts are
forward-looking statements as defined in the US Private Securities Litigation Reform
Act of 1995. The following are words that identify such forward-looking statements:
aim, believe, estimate, target, intend, may, expect, anticipate, predict, project,
counting on, plan, continue, want, forecast, goal, should, would, is confident,
will, and similar expressions as they relate to our company. These statements are
not guarantees of future performance and involve risks, uncertainties and
assumptions that are difficult to predict. We undertake no obligation to publicly
update or revise any forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, which merely reflect company
expectations at the time of writing. Actual results may differ materially from
expectations conveyed in forward-looking statements due to changes caused by various
risks and uncertainties. Such risks and unce
- Changes in general economic conditions, particularly in the United States, the
Netherlands and the United Kingdom;
- Changes in the performance of financial markets, including emerging markets, such as
with regard to:
- The frequency and severity of defaults by issuers in our fixed income investment
portfolios; and
- The effects of corporate bankruptcies and/or accounting restatements on the
financial markets and the resulting decline in
the value of equity and debt securities we hold;
- The frequency and severity of insured loss events;
- Changes affecting mortality, morbidity and other factors that may impact the
profitability of our insurance products;
- Changes affecting interest rate levels and continuing low or rapidly changing
interest rate levels;
- Changes affecting currency exchange rates, in particular the EUR/USD and EUR/GBP
exchange rates;
- Increasing levels of competition in the United States, the Netherlands, the United
Kingdom and emerging markets;
- Changes in laws and regulations, particularly those affecting our operations, the
products we sell, and the attractiveness of certain products to our consumers;
- Regulatory changes relating to the insurance industry in the jurisdictions in which
we operate;
- Acts of God, acts of terrorism, acts of war and pandemics;
- Changes in the policies of central banks and/or governments;
- Lowering of one or more of our debt ratings issued by recognized rating
organizations and the adverse impact such action may have on our ability to raise
capital and on our liquidity and financial condition;
- Lowering of one or more of insurer financial strength ratings of our insurance
subsidiaries and the adverse impact such action may have on premium writings, policy
retention, profitablity of its insurance subsidiaries and liquidity;
- The effect of the European Union's Solvency II requirements and other regulations in
other jurisdictions affecting the capital we are required to maintain;
- Litigation or regulatory action that could require us to pay significant damages or
change the way we do business;
- Customer responsiveness to both new products and distribution channels;
- Competitive, legal, regulatory, or tax changes that affect the distribution cost of
or demand for our products;
- The impact of acquisitions and divestitures, restructerings, product withdrawels and
other unusual tems, including our ability to integrate acquisitions and to obtain
the anticipated results and synergies from acquisitions;
- Our failure to achieve anticipated levels of earnings or operational efficiencies as
well as other cost saving initiatives; and
- The impact our adoption of the International Financial Reporting Standards may have
on our reported financial results and financial condition.
Further details of potential risks and uncertainties affecting the company are
described in the company's filings with Euronext Amsterdam and the US Securities and
Exchange Commission, including the Annual Report on Form 20-F. These forward-looking
statements speak only as of the date of this document. Except as required by any
applicable law or regulation, the company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the company's expectations with
regard thereto or any change in events, conditions or circumstances on which any
such statement is based.
END
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