Exhibit 99.1
VERSION 5.30 P.M. PRESS RELEASE |
AEGON REPORTS ON FIRST HALF YEAR 2004 RESULTS
NET INCOME AMOUNTED TO EUR 790 MILLION IN THE FIRST SIX MONTHS OF 2004, COMPARED TO EUR 329 MILLION IN 2003
STRONG GROWTH IN EARNINGS IN ALL MAJOR COUNTRY UNITS ON A COMPARABLE BASIS
INTERIM DIVIDEND DECLARED OF EUR 0.21 PER COMMON SHARE, A 5% INCREASE COMPARED TO THE PRIOR YEAR
HIGHLIGHTS – Second quarter and first six months 2004
(amounts in millions, except per share data, 2003 adjusted for comparability(1))
Second quarter 2004 | First six months 2004 | Second quarter 2004 | Second as | First six months 2004 | First six as | At constant currency exchange rates | ||||||||||||||
USD | USD | EUR | EUR | % | EUR | EUR | % | % | ||||||||||||
569 | 1,091 | Income before realized gains and losses on shares and real estate | 472 | 303 | 56 | 889 | 612 | 45 | 57 | |||||||||||
127 | 238 | Realized gains and losses on shares and real estate | 105 | (159 | ) | — | 194 | (283 | ) | — | — | |||||||||
696 | 1,329 | Income before tax | 577 | 144 | 301 | 1,083 | 329 | 229 | 280 | |||||||||||
422 | 777 | Net income before realized gains and losses on shares and real estate | 349 | 316 | 10 | 633 | 602 | 5 | 15 | |||||||||||
526 | 969 | Net income | 436 | 159 | 174 | 790 | 329 | 140 | 182 | |||||||||||
0.26 | 0.49 | Net income before realized gains and losses on shares and real estate per share | 0.22 | 0.20 | 10 | 0.40 | 0.38 | 5 | 16 | |||||||||||
0.33 | 0.61 | Net income per share | 0.28 | 0.09 | 211 | 0.50 | 0.19 | 163 | 218 |
1) | Please refer to page 22 and 23 for first half year and second quarter data as reported |
Published figures are unaudited
The Hague, the Netherlands, August 12, 2004
“The strong and continuing earnings improvement across all of our major country units is a clear indication that our business is progressing in line with our priorities,” said Donald J. Shepard, Chairman of the Executive Board.
“While production was mixed, our profit margins have improved in keeping with our ongoing focus on profitability in our most important core businesses. The fact that we have raised the interim dividend is a further indication of our improved cash flows and stronger capital position.”
Note: 2003 financial data have been adjusted for the change in accounting principles related to the discontinuance of the indirect income method for recognizing gains and losses on shares and real estate and the adoption of SOP 03-1. For details, please refer to page 21 and/or to our first quarter 2004 earnings release for a reconciliation of ‘as reported’ to ‘as adjusted’.
Page 1
Income before realized gains and losses on shares and real estate from the group’s core operations continued to show strong progress across all major country units. Income before realized gains and losses on shares and real estate increased 45% to EUR 889 million in the first six months this year. At constant currency exchange rates the increase was 57%. The main factors driving the improvement in results were improved product spreads, higher interest results and increased fee income as well as improved equity and credit markets. The group’s core operations exclude Transamerica Finance Corporation (TFC), the majority of which was sold in late 2003 and early 2004. In the first six months of 2004, the TFC contribution amounted to a net loss of EUR 14 million compared to a net profit of EUR 169 million in the first half of 2003.
AEGON reports strong increases in net income and net income per share for the first six months of 2004, on a comparable basis. Net income, which includes realized gains and losses on shares and real estate, amounted to EUR 790 million in the first six months of 2004. Net income per share amounted to EUR 0.50 in the first half of 2004. On a comparable basis, net income per share was EUR 0.19 in the first half of 2003. The significant increase in both measures primarily reflects the change in realized gains and losses on shares and real estate, which can be volatile between reporting periods. Management therefore believes that net income before realized gains and losses on shares and real estate is a valuable indicator of AEGON’s financial performance.
Net income before realized gains and losses on shares and real estate increased 5% to EUR 633 million for the first six months of 2004. The increase reflects the strong contribution to income by our country units, which more than compensated the lower income from TFC. The sale of the majority of TFC late last year and early this year distorts comparison of net income in the first six months of this year with the same period the prior year. At constant currency exchange rates, net income before realized gains and losses on shares and real estate showed an increase of 15% in the first six months this year compared to the same period last year.
Realized gains on shares and real estate in the first six months of 2004 amounted to EUR 194 million on a pretax basis (EUR 157 million net of tax), compared to a net realized loss of EUR 283 million (EUR 273 million net of tax) in the first six months of 2003. At June 30, 2004, the revaluation reserve, comprising of unrealized gains and losses on shares and real estate, amounted to EUR 1,507 million compared to EUR 1,393 million at year-end 2003.
Total revenue generating investments rose 7% during the first six months of 2004 from EUR 284 billion at year-end 2003 to EUR 305 billion.
An interim dividend of EUR 0.21 per common share has been declared. This represents a 5% increase compared to the interim dividend and the final dividend of 2003, which were both EUR 0.20 per share. AEGON recognizes the importance of offering its shareholders a stable and adequate dividend, which is supported by the company’s cash flow and capital position.
Included in this report are financial measures, pre-tax as well as after-tax, that exclude realized gains and losses on shares and real estate. Net income before realized gains and losses on shares and real estate is a non-GAAP measure. Management uses this non-GAAP measure, in addition to GAAP measures, as an indicator of AEGON’s financial performance and believes that the presentation of this measure provides useful and important information to analysts and investors. This non-GAAP measure should be seen as part of a range of supplementary measures, that assist in achieving greater transparency and understanding of insurance reporting and can help investors and analysts in comparing AEGON with its peers. Reconciliation of this measure to the most comparable GAAP measure is provided on page 24.
Page 2
Key points for the first six months 2004
• | Income before realized gains and losses on shares and real estate increased 46% to USD 958 million (31% to EUR 781 million) in the Americas, increased 58% to EUR 175 million in the Netherlands and rose 19% to GBP 69 million (20% to EUR 102 million) in the United Kingdom. Income before realized gains and losses on shares and real estate in Other countries increased 28% to EUR 50 million. |
• | Additions to the default provision in the United States were USD 137 million (EUR 112 million) compared to USD 293 million (EUR 265 million) in the first six months of 2003. Actual default losses charged against the provision were USD 137 million (EUR 112 million), compared to USD 284 million (EUR 257 million) in the first half of 2003. The default provision remains at USD 277 million. |
• | On an operating basis, TFC reported an income before tax of EUR 27 million (USD 33 million) in the first six month of 2004. After interest expenses, TFC’s pre-tax loss amounted to EUR 22 million (USD 27 million), with a net loss of EUR 14 million (USD 16 million). TFC contributed EUR 169 million (USD 187 million) to net income in the first six months of 2003. |
• | Total revenue generating investments rose 7% during the first six months of 2004 from EUR 284 billion at year-end 2003 to EUR 305 billion. In the Americas revenue generating investments rose 5% to USD 238 billion (9% to EUR 196 billion), increased 5% to EUR 55 billion in the Netherlands, remained stable at GBP 34 billion in the United Kingdom (increased 5% to EUR 51 billion) and increased 15% to EUR 4 billion in Other countries. |
• | Standardized new life production, when compared to the first six months of 2003, was down 3% to USD 531 million (down 12% to EUR 433 million) in the Americas, declined 20% to EUR 118 million in the Netherlands, was 3% higher at GBP 333 million (5% higher at EUR 494 million) in the United Kingdom and decreased 33% to EUR 110 million in Other countries primarily due to lower production as well as currency translation effects in Taiwan. |
• | Variable annuity account balances rose 3% to USD 43.6 billion (7% to EUR 35.9 billion) in the first six months of 2004. New variable annuity deposits in the Americas declined 27% to USD 2,901 million (declined 35% to EUR 2,364 million) compared to the first six months last year. The decline reflects the discontinuance of the guaranteed minimum income benefit (GMIB) feature in the first quarter last year, which primarily affected the wire-house and broker-dealer distribution channels. New production of variable annuities in our pension business continued to be strong and increased by 40% to USD 1.4 billion (increased 26% to EUR 1.1 billion). |
• | Fixed annuity account balances decreased slightly to USD 44.6 billion (increased 3% to EUR 36.7 billion). New fixed annuity deposits in the Americas of USD 1,656 million were 51% lower (decreased 55% to EUR 1,350 million) compared to the first six months of last year as a result of reductions in policyholder crediting rates and adjustments to compensation structures made last year. Deposits in our pension business were strong. Fixed annuity earnings improved from USD 108 million (EUR 98 million) in the first half of 2003 to USD 195 million (EUR 159 million) in the first half of 2004 due to lower bond defaults and higher spreads. |
• | Compared to year-end 2003, shareholders’ equity increased by EUR 1,126 million to EUR 15,093 million. AEGON’s capital leverage ratio improved in the first six months of 2004. Shareholders’ equity represents 72% of the total capital base compared to 71% at year-end 2003. |
• | An interim dividend of EUR 0.21 per common share has been declared. This represents a 5% increase compared to the interim dividend and the final dividend of 2003, which were both EUR 0.20 per share. |
Page 3
Key points for the second quarter 2004
• | Income before realized gains and losses on shares and real estate increased 50% to USD 475 million (43% to EUR 395 million) in the Americas, increased 40% to EUR 88 million in the Netherlands and rose 28% to GBP 37 million (31% to EUR 55 million) in the United Kingdom. Income before realized gains and losses on shares and real estate in Other countries increased 35% to EUR 27 million. |
• | Additions to the default provision in the United States benefited from an improved credit market and were below pricing assumptions. Actual default losses charged against the default provision were USD 87 million (EUR 82 million), compared to USD 134 million (EUR 117 million) in the second quarter of 2003. An amount of USD 87 million (EUR 82 million) was added to the default provision compared to USD 144 million (EUR 126 million) in the second quarter of 2003. |
• | Standardized new life production, when compared to the first quarter of 2004, was up 18% to USD 287 million (up 22% to EUR 238 million) in the Americas, declined 24% to EUR 51 million in the Netherlands, was 11% lower at GBP 157 million (9% lower at EUR 235 million) in the United Kingdom and decreased 36% to EUR 43 million in Other countries primarily due to lower production in Taiwan. Standardized new life production, when compared to the second quarter of 2003, was down 3% to USD 287 million (down 8% to EUR 238 million) in the Americas, declined 32% to EUR 51 million in the Netherlands, was 2% lower at GBP 157 million (2% higher at EUR 235 million) in the United Kingdom and decreased 38% to EUR 43 million in Other countries primarily due to lower production as well as adverse currency translation effects in Taiwan. |
• | New variable annuity deposits in the Americas declined 7% to USD 1,304 million (declined 9% to EUR 1,087 million) compared to the second quarter last year. Compared to the first quarter of 2004, variable annuity deposits declined 18%, largely due to strong institutional sales in the first quarter of the year. |
• | New fixed annuity deposits in the Americas decreased by 50% compared to the second quarter of last year as a result of reductions in policyholder crediting rates and adjustments to compensation structures made last year. However, production of USD 826 million (EUR 686 million) was fairly stable compared to the preceding two quarters. |
• | On an operating basis, TFC reported an income before tax of EUR 22 million (USD 26 million) in the second quarter of 2004. After interest expense, TFC’s pre-tax result amounted to EUR 4 million (USD 5 million), with a net income contribution of EUR 2 million (USD 3 million). TFC contributed EUR 96 million (USD 109 million) to net income in the second quarter of 2003. The net results reported in the second quarter compare favorably with the loss of EUR 16 million reported in the first quarter of this year. The majority of TFC was sold in late 2003 and early 2004. The remaining part of TFC, mainly consisting of maritime container and European trailer leasing, is consolidated as of January 1, 2004. |
Page 4
Highlights
(2003 adjusted for comparison)
amounts in millions
USD | EUR | EUR | ||||||||||||||||||||||||
First six months | Second quarter | First six months | ||||||||||||||||||||||||
2004 | 2003 | % | 2004 | 2003 | % | 2004 | 2003 | % | ||||||||||||||||||
Income by product segment | ||||||||||||||||||||||||||
440 | 415 | 6 | Traditional life | 158 | 182 | (13 | ) | 359 | 376 | (5 | ) | |||||||||||||||
195 | 108 | 81 | Fixed annuities | 85 | 38 | 124 | 159 | 98 | 62 | |||||||||||||||||
118 | 82 | 44 | GICs and funding agreements | 42 | 33 | 27 | 96 | 74 | 30 | |||||||||||||||||
214 | 117 | 83 | Life for account policyholders | 91 | 47 | 94 | 174 | 106 | 64 | |||||||||||||||||
85 | 7 | Variable annuities | 58 | 10 | 69 | 6 | ||||||||||||||||||||
49 | 22 | 123 | Fee business | 20 | 12 | 67 | 40 | 20 | 100 | |||||||||||||||||
1,101 | 751 | 47 | Life insurance | 454 | 322 | 41 | 897 | 680 | 32 | |||||||||||||||||
189 | 116 | 63 | Accident and health insurance | 80 | 50 | 60 | 154 | 105 | 47 | |||||||||||||||||
59 | 48 | 23 | General insurance | 27 | 28 | (4 | ) | 48 | 43 | 12 | ||||||||||||||||
1,349 | 915 | 47 | Insurance income | 561 | 400 | 40 | 1,099 | 828 | 33 | |||||||||||||||||
11 | 2 | Banking activities | 4 | 2 | 100 | 9 | 2 | |||||||||||||||||||
(269 | ) | (241 | ) | 12 | Interest charges and other | (93 | ) | (99 | ) | (6 | ) | (219 | ) | (218 | ) | 0 | ||||||||||
1,091 | 676 | 61 | Income before realized gains and losseson shares and real estate | 472 | 303 | 56 | 889 | 612 | 45 | |||||||||||||||||
238 | (313 | ) | Realized gains and losses on shares and real estate | 105 | (159 | ) | 194 | (283 | ) | |||||||||||||||||
1,329 | 363 | Income before tax | 577 | 144 | 1,083 | 329 | ||||||||||||||||||||
(360 | ) | (187 | ) | 93 | Corporation tax | (141 | ) | (81 | ) | 74 | (293 | ) | (169 | ) | 73 | |||||||||||
— | 187 | Transamerica Finance Corporation | — | 96 | — | 169 | ||||||||||||||||||||
969 | 363 | 167 | Net income | 436 | 159 | 174 | 790 | 329 | 140 | |||||||||||||||||
Income geographically | ||||||||||||||||||||||||||
1,061 | 628 | 69 | Americas | 436 | 260 | 68 | 865 | 569 | 52 | |||||||||||||||||
344 | (152 | ) | The Netherlands | 150 | (82 | ) | 280 | (138 | ) | |||||||||||||||||
125 | 87 | 44 | United Kingdom | 55 | 41 | 34 | 102 | 79 | 29 | |||||||||||||||||
68 | 41 | 66 | Other countries | 29 | 24 | 21 | 55 | 37 | 49 | |||||||||||||||||
1,598 | 604 | 165 | Income before tax business units | 670 | 243 | 176 | 1,302 | 547 | 138 | |||||||||||||||||
(269 | ) | (241 | ) | 12 | Interest charges and other | (93 | ) | (99 | ) | (6 | ) | (219 | ) | (218 | ) | 0 | ||||||||||
1,329 | 363 | Income before tax | 577 | 144 | 1,083 | 329 | ||||||||||||||||||||
(360 | ) | (187 | ) | 93 | Corporation tax | (141 | ) | (81 | ) | 74 | (293 | ) | (169 | ) | 73 | |||||||||||
— | 187 | Transamerica Finance Corporation | — | 96 | — | 169 | ||||||||||||||||||||
969 | 363 | 167 | Net income | 436 | 159 | 174 | 790 | 329 | 140 | |||||||||||||||||
949 | Net income historically reported | 859 | ||||||||||||||||||||||||
4,626 | 3,532 | 31 | Gross margin | 1,948 | 1,616 | 21 | 3,770 | 3,197 | 18 | |||||||||||||||||
3,535 | 2,856 | 24 | Commissions and expenses | 1,476 | 1,313 | 12 | 2,881 | 2,585 | 11 | |||||||||||||||||
777 | 665 | 17 | Net income before realized gains and losses on shares and real estate | 349 | 316 | 10 | 633 | 602 | 5 | |||||||||||||||||
Amounts per common share of EUR 0.12 | ||||||||||||||||||||||||||
0.61 | 0.21 | 190 | Net income1 | 0.28 | 0.09 | 0.50 | 0.19 | 163 | ||||||||||||||||||
0.61 | 0.21 | 190 | Net income fully diluted1 | 0.28 | 0.09 | 0.50 | 0.19 | 163 | ||||||||||||||||||
0.49 | 0.42 | 17 | Net income before realized gains and losses on shares and real estate | 0.22 | 0.20 | 10 | 0.40 | 0.38 | 5 | |||||||||||||||||
At June 30 2004 | At Dec. 31 2003 | At June 30 | At Dec. 31 | |||||||||||||||||||||||
10.47 | 8.46 | 24 | Shareholders’ equity2 | 8.61 | 7.98 | 8 | ||||||||||||||||||||
10.65 | 8.87 | 20 | Shareholders’ equity after full conversion2 | 8.76 | 8.34 | 5 | ||||||||||||||||||||
Number of employees3 | 27,607 | 28,491 | (3 | ) | ||||||||||||||||||||||
Outstanding common shares: | ||||||||||||||||||||||||||
- Number of common shares (millions) | 1,530 | 1,501 | 2 | |||||||||||||||||||||||
- Weighted average number (millions) | 1,494 | 1,471 | 2 | |||||||||||||||||||||||
1 | Based on the weighted average number of common shares, adjusted for repurchased own shares. |
2 | Based on the number of common shares outstanding at the end of the period, adjusted for repurchased own shares. |
3 | The 2003 figure has been adjusted for self-employed agents which are no longer included. |
Page 5
Revenues and production
(2003 adjusted for comparison)
amounts in millions
USD | EUR | EUR | ||||||||||||||||||||||||
First six months | Second quarter | First six months | ||||||||||||||||||||||||
2004 | 2003 | % | 2004 | 2003 | % | 2004 | 2003 | % | ||||||||||||||||||
Revenues | ||||||||||||||||||||||||||
1,150 | 1,085 | 6 | Life general account single premiums | 515 | 480 | 7 | 937 | 982 | (5 | ) | ||||||||||||||||
3,314 | 3,028 | 9 | Life general account recurring premiums | 1,277 | 1,240 | 3 | 2,701 | 2,740 | (1 | ) | ||||||||||||||||
2,592 | 2,685 | (3 | ) | Life policyholders account single premiums | 970 | 1,113 | (13 | ) | 2,113 | 2,430 | (13 | ) | ||||||||||||||
2,999 | 2,560 | 17 | Life policyholders account recurring premiums | 1,011 | 917 | 10 | 2,444 | 2,317 | 5 | |||||||||||||||||
10,055 | 9,358 | 7 | Total life insurance gross premiums | 3,773 | 3,750 | 1 | 8,195 | 8,469 | (3 | ) | ||||||||||||||||
1,488 | 1,417 | 5 | Accident and health insurance premiums | 587 | 580 | 1 | 1,213 | 1,282 | (5 | ) | ||||||||||||||||
544 | 485 | 12 | General insurance premiums | 204 | 207 | (1 | ) | 443 | 439 | 1 | ||||||||||||||||
12,087 | 11,260 | 7 | Total gross premiums | 4,564 | 4,537 | 1 | 9,851 | 10,190 | (3 | ) | ||||||||||||||||
4,157 | 3,427 | 21 | Investment income insurance activities | 1,727 | 1,551 | 11 | 3,388 | 3,101 | 9 | |||||||||||||||||
783 | 598 | 31 | Fees and commissions | 330 | 252 | 31 | 638 | 541 | 18 | |||||||||||||||||
173 | 204 | (15 | ) | Income from banking activities | 68 | 91 | (25 | ) | 141 | 185 | (24 | ) | ||||||||||||||
17,200 | 15,489 | 11 | Total revenues business units | 6,689 | 6,431 | 4 | 14,018 | 14,017 | 0 | |||||||||||||||||
242 | 3 | Income from other activities | 103 | 1 | 197 | 3 | ||||||||||||||||||||
17,442 | 15,492 | 13 | Total revenues | 6,792 | 6,432 | 6 | 14,215 | 14,020 | 1 | |||||||||||||||||
Revenues by product segment | ||||||||||||||||||||||||||
14,470 | 13,407 | 8 | Life insurance | 5,607 | 5,585 | 0 | 11,793 | 12,133 | (3 | ) | ||||||||||||||||
1,737 | 1,670 | 4 | Accident and health insurance | 688 | 690 | (0 | ) | 1,416 | 1,511 | (6 | ) | |||||||||||||||
582 | 520 | 12 | General insurance | 221 | 224 | (1 | ) | 474 | 471 | 1 | ||||||||||||||||
173 | 204 | (15 | ) | Banking activities | 68 | 91 | (25 | ) | 141 | 185 | (24 | ) | ||||||||||||||
242 | 3 | Other activities | 103 | 1 | 197 | 3 | ||||||||||||||||||||
238 | (313 | ) | Realized gains and losses on shares and real estate | 105 | (159 | ) | 194 | (283 | ) | |||||||||||||||||
17,442 | 15,491 | 13 | Total revenues | 6,792 | 6,432 | 6 | 14,215 | 14,020 | 1 | |||||||||||||||||
2,580 | 6,062 | (57 | ) | Investment income for account of policyholders | 279 | 7,035 | (96 | ) | 2,103 | 5,486 | (62 | ) | ||||||||||||||
Standardized new premium production life insurance | ||||||||||||||||||||||||||
3,587 | 3,449 | 4 | Single premiums | 1,371 | 1,406 | (2 | ) | 2,923 | 3,121 | (6 | ) | |||||||||||||||
1,059 | 1,064 | (0 | ) | Recurring premiums annualized | 431 | 495 | (13 | ) | 863 | 963 | (10 | ) | ||||||||||||||
1,418 | 1,409 | 1 | Total recurring plus 1/10 single | 568 | 635 | (11 | ) | 1,155 | 1,275 | (9 | ) | |||||||||||||||
Deposits | ||||||||||||||||||||||||||
1,656 | 3,350 | (51 | ) | Fixed annuities | 686 | 1,443 | (52 | ) | 1,350 | 3,032 | (55 | ) | ||||||||||||||
4,814 | 5,554 | (13 | ) | GICs and funding agreements | 1,999 | 2,539 | (21 | ) | 3,923 | 5,026 | (22 | ) | ||||||||||||||
2,901 | 3,990 | (27 | ) | Variable annuities | 1,087 | 1,201 | (9 | ) | 2,364 | 3,611 | (35 | ) | ||||||||||||||
9,371 | 12,894 | (27 | ) | Total | 3,772 | 5,183 | (27 | ) | 7,637 | 11,669 | (35 | ) | ||||||||||||||
1,997 | 1,683 | 19 | Savings deposits | 1,080 | 752 | 44 | 1,628 | 1,523 | 7 | |||||||||||||||||
11,368 | 14,577 | (22 | ) | Total production on balance sheet | 4,852 | 5,935 | (18 | ) | 9,265 | 13,192 | (30 | ) | ||||||||||||||
Net deposits | ||||||||||||||||||||||||||
(1,238) | 1,231 | Fixed annuities | (553 | ) | 385 | (1,009 | ) | 1,114 | ||||||||||||||||||
1,187 | 1,476 | (20 | ) | GICs and funding agreements | 531 | 710 | (25 | ) | 967 | 1,336 | (28 | ) | ||||||||||||||
596 | 1,965 | (70 | ) | Variable annuities | 165 | 308 | (46 | ) | 486 | 1,778 | (73 | ) | ||||||||||||||
545 | 4,672 | (88 | ) | Total | 143 | 1,403 | (90 | ) | 444 | 4,228 | (89 | ) | ||||||||||||||
26 | (496 | ) | Savings deposits | 222 | (146 | ) | 21 | (449 | ) | |||||||||||||||||
571 | 4,176 | (86 | ) | Total net deposits | 365 | 1,257 | (71 | ) | 465 | 3,779 | (88 | ) | ||||||||||||||
Off balance sheet production | ||||||||||||||||||||||||||
3,181 | 7,061 | (55 | ) | Synthetic GICs | 1,387 | 3,251 | (57 | ) | 2,593 | 6,390 | (59 | ) | ||||||||||||||
6,607 | 5,461 | 21 | Mutual funds/Collective Trusts and other managed assets | 2,432 | 2,417 | 1 | 5,385 | 4,942 | 9 | |||||||||||||||||
9,788 | 12,522 | (22 | ) | Total production off balance sheet | 3,819 | 5,668 | (33 | ) | 7,978 | 11,332 | (30 | ) | ||||||||||||||
Page 6
Investments, assets and capital geographically
amounts in million EUR (unless otherwise stated) | ||||||||||||||||
Americas USD | United Kingdom GBP | At June 30, 2004 | Americas | The Netherlands | United Kingdom | Other countries | Total EUR | Total USD | ||||||||
Investments | ||||||||||||||||
116,289 | 1,380 | Fixed income | 95,672 | 13,242 | 2,057 | 2,221 | 113,192 | 137,585 | ||||||||
4,359 | 71 | Shares and real estate | 3,586 | 5,693 | 105 | 113 | 9,497 | 11,543 | ||||||||
120,648 | 1,451 | Total general account | 99,258 | 18,935 | 2,162 | 2,334 | 122,689 | 149,128 | ||||||||
12,329 | 16,444 | Fixed income | 10,143 | 11,659 | 24,514 | 434 | 46,750 | 56,825 | ||||||||
35,236 | 15,276 | Shares and real estate | 28,989 | 7,336 | 22,773 | 217 | 59,315 | 72,097 | ||||||||
47,565 | 31,720 | Total policyholders account | 39,132 | 18,995 | 47,287 | 651 | 106,065 | 128,922 | ||||||||
168,213 | 33,171 | Total insurance activities | 138,390 | 37,930 | 49,449 | 2,985 | 228,754 | 278,050 | ||||||||
— | — | Banking activities | — | 6,339 | — | — | 6,339 | 7,705 | ||||||||
69,569 | 837 | Off balance sheet assets | 57,235 | 10,957 | 1,248 | 619 | 70,059 | 85,157 | ||||||||
237,782 | 34,008 | Total business units | 195,625 | 55,226 | 50,697 | 3,604 | 305,152 | 370,912 | ||||||||
Other investments | 66 | 80 | ||||||||||||||
Total group | 305,218 | 370,992 | ||||||||||||||
175,899 | 33,830 | Assets business units | 144,713 | 46,121 | 50,432 | 3,265 | 244,531 | 297,227 | ||||||||
Other assets | 454 | 552 | ||||||||||||||
Total assets on balance sheet | 244,985 | 297,779 | ||||||||||||||
18,010 | 2,214 | Capital in units | 14,817 | 3,112 | 3,301 | 500 | 21,730 | 26,413 | ||||||||
Total capital base | 21,013 | 25,541 | ||||||||||||||
Other net liabilities | 717 | 872 | ||||||||||||||
Total | 21,730 | 26,413 | ||||||||||||||
At June 30, 2003 | ||||||||||||||||
Investments | ||||||||||||||||
113,173 | 1,058 | Fixed income | 99,040 | 11,732 | 1,527 | 1,667 | 113,966 | 130,229 | ||||||||
3,536 | 84 | Shares and real estate | 3,094 | 5,062 | 121 | 116 | 8,393 | 9,591 | ||||||||
116,709 | 1,142 | Total general account | 102,134 | 16,794 | 1,648 | 1,783 | 122,359 | 139,820 | ||||||||
12,924 | 16,356 | Fixed income | 11,310 | 11,330 | 23,595 | 356 | 46,591 | 53,239 | ||||||||
28,039 | 13,652 | Shares and real estate | 24,538 | 6,920 | 19,694 | 191 | 51,343 | 58,670 | ||||||||
40,963 | 30,008 | Total policyholders account | 35,848 | 18,250 | 43,289 | 547 | 97,934 | 111,909 | ||||||||
157,672 | 31,150 | Total insurance activities | 137,982 | 35,044 | 44,937 | 2,330 | 220,293 | 251,729 | ||||||||
— | — | Banking activities | — | 6,935 | — | — | 6,935 | 7,925 | ||||||||
58,233 | 887 | Off balance sheet assets | 50,961 | 8,714 | 1,279 | 455 | 61,409 | 70,172 | ||||||||
215,905 | 32,037 | Total business units | 188,943 | 50,693 | 46,216 | 2,785 | 288,637 | 329,826 | ||||||||
Other investments | 24 | 27 | ||||||||||||||
Total group | 288,661 | 329,853 | ||||||||||||||
165,454 | 31,618 | Assets business units | 144,792 | 44,022 | 45,612 | 2,691 | 237,117 | 270,954 | ||||||||
Other assets | 3,408 | 3,894 | ||||||||||||||
Total assets on balance sheet | 240,525 | 274,848 | ||||||||||||||
16,903 | 2,050 | Capital in units | 14,792 | 2,543 | 2,958 | 420 | 20,713 | 23,669 | ||||||||
Total capital base | 19,112 | 21,839 | ||||||||||||||
Other net liabilities | 1,601 | 1,830 | ||||||||||||||
Total | 20,713 | 23,669 | ||||||||||||||
As at December 31, 2003 | ||||||||||||||||
Investments | ||||||||||||||||
113,396 | 1,316 | Fixed income | 89,783 | 12,330 | 1,868 | 1,846 | 105,827 | 133,660 | ||||||||
3,831 | 76 | Shares and real estate | 3,033 | 5,502 | 108 | 141 | 8,784 | 11,094 | ||||||||
117,227 | 1,392 | Total general account | 92,816 | 17,832 | 1,976 | 1,987 | 114,611 | 144,754 | ||||||||
12,478 | 16,592 | Fixed income | 9,880 | 11,096 | 23,542 | 427 | 44,945 | 56,766 | ||||||||
33,472 | 15,085 | Shares and real estate | 26,502 | 7,032 | 21,403 | 207 | 55,144 | 69,647 | ||||||||
45,950 | 31,677 | Total policyholders account | 36,382 | 18,128 | 44,945 | 634 | 100,089 | 126,412 | ||||||||
163,177 | 33,069 | Total insurance activities | 129,198 | 35,960 | 46,921 | 2,621 | 214,700 | 271,166 | ||||||||
— | — | Banking activities | — | 6,360 | — | — | 6,360 | 8,033 | ||||||||
63,750 | 954 | Off balance sheet assets | 50,475 | 10,514 | 1,354 | 509 | 62,852 | 79,382 | ||||||||
226,927 | 34,023 | Total business units | 179,673 | 52,834 | 48,275 | 3,130 | 283,912 | 358,581 | ||||||||
Other investments | 223 | 281 | ||||||||||||||
Total group | 284,135 | 358,862 | ||||||||||||||
168,993 | 33,681 | Assets business units | 133,803 | 45,855 | 47,788 | 3,059 | 230,505 | 291,128 | ||||||||
Other assets | 3,471 | 4,384 | ||||||||||||||
Total assets on balance sheet | 233,976 | 295,512 | ||||||||||||||
17,517 | 2,173 | Capital in units | 13,869 | 2,865 | 3,083 | 481 | 20,298 | 25,636 | ||||||||
Total capital base | 19,632 | 24,795 | ||||||||||||||
Other net liabilities | 666 | 841 | ||||||||||||||
Total | 20,298 | 25,636 | ||||||||||||||
Page 7
REPORT OF THE COUNTRY UNITS
Americas
(2003 adjusted for comparison)
amounts in millions
USD | USD | EUR | |||||||||||||||||||||||||
Second quarter | First six months | First six months | |||||||||||||||||||||||||
2004 | 2003 | % | 2004 | 2003 | % | 2004 | 2003 | % | |||||||||||||||||||
Income by product segment | |||||||||||||||||||||||||||
132 | 141 | (6 | ) | Traditional life | 331 | 303 | 9 | 270 | 274 | (1 | ) | ||||||||||||||||
103 | 44 | 134 | Fixed annuities | 195 | 108 | 81 | 159 | 98 | 62 | ||||||||||||||||||
50 | 38 | 32 | GICs and funding agreements | 118 | 82 | 44 | 96 | 74 | 30 | ||||||||||||||||||
27 | 22 | 23 | Life for account of policyholders | 48 | 43 | 12 | 39 | 40 | (3 | ) | |||||||||||||||||
71 | 11 | Variable annuities | 85 | 7 | 69 | 6 | |||||||||||||||||||||
7 | 6 | 17 | Fee business | 13 | 10 | 30 | 11 | 9 | 22 | ||||||||||||||||||
390 | 262 | 49 | Life insurance | 790 | 553 | 43 | 644 | 501 | 29 | ||||||||||||||||||
85 | 54 | 57 | Accident and health insurance | 168 | 104 | 62 | 137 | 94 | 46 | ||||||||||||||||||
475 | 316 | 50 | Insurance income | 958 | 657 | 46 | 781 | 595 | 31 | ||||||||||||||||||
370 | 277 | 34 | of which general account | 812 | 597 | 36 | 662 | 540 | 23 | ||||||||||||||||||
105 | 39 | 169 | of which policyholders account1 | 146 | 60 | 143 | 119 | 55 | 116 | ||||||||||||||||||
475 | 316 | 50 | Income before realized gains and losses on shares and real estate | 958 | 657 | 46 | 781 | 595 | 31 | ||||||||||||||||||
49 | (19 | ) | Realized gains and losses on shares and real estate | 103 | (29 | ) | 84 | (26 | ) | ||||||||||||||||||
524 | 297 | 76 | Income before tax | 1,061 | 628 | 69 | 865 | 569 | 52 | ||||||||||||||||||
(152 | ) | (80 | ) | 90 | Corporation tax | (330 | ) | (182 | ) | 81 | (269 | ) | (166 | ) | 62 | ||||||||||||
372 | 217 | 71 | Net income | 731 | 446 | 64 | 596 | 403 | 48 | ||||||||||||||||||
Revenues | |||||||||||||||||||||||||||
386 | 243 | 59 | Life general account single premiums | 617 | 430 | 43 | 503 | 389 | 29 | ||||||||||||||||||
1,221 | 1,176 | 4 | Life general account recurring premiums | 2,433 | 2,319 | 5 | 1,983 | 2,099 | (6 | ) | |||||||||||||||||
36 | 134 | (73 | ) | Life policyholders account single premiums2 | 68 | 265 | (74 | ) | 55 | 240 | (77 | ) | |||||||||||||||
303 | 211 | 44 | Life policyholders account recurring premiums2 | 639 | 450 | 42 | 521 | 407 | 28 | ||||||||||||||||||
1,946 | 1,764 | 10 | Total life insurance gross premiums | 3,757 | 3,464 | 8 | 3,062 | 3,135 | (2 | ) | |||||||||||||||||
646 | 604 | 7 | Accident and health insurance premiums | 1,276 | 1,241 | 3 | 1,040 | 1,123 | (7 | ) | |||||||||||||||||
2,592 | 2,368 | 9 | Total gross premiums | 5,033 | 4,705 | 7 | 4,102 | 4,258 | (4 | ) | |||||||||||||||||
1,617 | 1,571 | 3 | Investment income insurance activities | 3,249 | 3,056 | 6 | 2,648 | 2,766 | (4 | ) | |||||||||||||||||
250 | 191 | 31 | Fees and commissions | 504 | 397 | 27 | 411 | 359 | 14 | ||||||||||||||||||
4,459 | 4,130 | 8 | Total revenues | 8,786 | 8,158 | 8 | 7,161 | 7,383 | (3 | ) | |||||||||||||||||
(39 | ) | 3,744 | Investment income for account of policyholders | 1,189 | 3,201 | (63 | ) | 969 | 2,897 | (67 | ) | ||||||||||||||||
Gross margin, commissions and expenses | |||||||||||||||||||||||||||
1,523 | 1,258 | 21 | Gross margin | 3,048 | 2,480 | 23 | 2,484 | 2,245 | 11 | ||||||||||||||||||
1,048 | 942 | 11 | Commissions and expenses | 2,090 | 1,823 | 15 | 1,703 | 1,650 | 3 | ||||||||||||||||||
Standardized new premium production life insurance | |||||||||||||||||||||||||||
272 | 323 | (16 | ) | Single premiums | 501 | 625 | (20 | ) | 408 | 566 | (28 | ) | |||||||||||||||
260 | 262 | (1 | ) | Recurring premiums annualized | 481 | 482 | (0 | ) | 392 | 436 | (10 | ) | |||||||||||||||
287 | 295 | (3 | ) | Total recurring plus 1/10 single | 531 | 545 | (3 | ) | 433 | 493 | (12 | ) | |||||||||||||||
Deposits | |||||||||||||||||||||||||||
826 | 1,645 | (50 | ) | Fixed annuities | 1,656 | 3,350 | (51 | ) | 1,350 | 3,032 | (55 | ) | |||||||||||||||
2,408 | 2,885 | (17 | ) | GICs and funding agreements | 4,814 | 5,554 | (13 | ) | 3,923 | 5,026 | (22 | ) | |||||||||||||||
1,304 | 1,404 | (7 | ) | Variable annuities | 2,901 | 3,990 | (27 | ) | 2,364 | 3,611 | (35 | ) | |||||||||||||||
4,538 | 5,934 | (24 | ) | Total production on balance sheet | 9,371 | 12,894 | (27 | ) | 7,637 | 11,669 | (35 | ) | |||||||||||||||
Off balance sheet production | |||||||||||||||||||||||||||
1,673 | 3,693 | (55 | ) | Synthetic GICs | 3,181 | 7,061 | (55 | ) | 2,593 | 6,390 | (59 | ) | |||||||||||||||
2,605 | 1,581 | 65 | Mutual funds/Collective Trusts and other managed assets | 5,890 | 3,862 | 53 | 4,800 | 3,495 | 37 | ||||||||||||||||||
4,278 | 5,274 | (19 | ) | Total production off balance sheet | 9,071 | 10,923 | (17 | ) | 7,393 | 9,885 | (25 | ) | |||||||||||||||
1 | Includes also variable annuities and fee business. |
2 | Effective January 1, 2004, for reasons of consistency, USD 108 million additional variable universal life premiums, in the past recognized as single premiums, have been reclassified to renewal premiums. |
Page 8
The Americas (the AEGON USA companies and AEGON Canada)
During the first six months of 2004, earnings across all product lines have shown strong improvements driven largely by an improved operating environment compared to the same period last year. Life production has remained strong in the agency and brokerage channels. Sales of Variable Universal Life products are gaining favor due to the equity market improvements over the past year. Efforts to focus on cost management continue to pay off as actual to allowables, a measure of planned expense levels to production, continues to remain within an acceptable range. New initiatives to expand existing operations outside the United States (such as AEGON Direct Marketing Services), expanding product offerings for the high net worth client base and retaining more post-retirement assets, are being taken.
Results
First six months 2004 income before realized gains and losses on shares and real estate increased 46% to USD 958 million, while net income, which includes realized gains and losses on shares and real estate, increased 64% to USD 731 million compared to the same period in 2003.
For the second quarter of 2004, income before realized gains and losses on shares and real estate amounted to USD 475 million, a 50% increase compared to the second quarter of 2003. Net income increased 71% to USD 372 million.
The 2004 six months results have benefited primarily from lower credit default losses and an improvement in overall spreads. Additions to the asset default provision were USD 137 million compared to USD 293 million for the first six months of 2003. Realized gains on shares and real estate of USD 103 million (compared to a loss of USD 29 million in the same period of 2003) contributed to the increase in income before tax for the first six months of 2004.
Total revenues of USD 8,786 million for the first six months of 2004 increased 8% compared to the same period in 2003, driven by increased sales, higher investment income, and higher fee income due to the higher assets under management.
Investment income of USD 3,249 million was 6% higher than the first six months of 2003. Besides the impact of realized gains, this reflects portfolio growth due to general account sales and low lapses, which was partially offset by lower new money interest rates.
Traditional/Account of Policyholders
For the first six months of 2004, life production, measured on a standardized new premium basis, decreased 3% to USD 531 million compared to the first six months of 2003. Sales momentum in the Agency Group remained strong with recurring premium sales increasing 11% over the same period 2003. Institutional business (reinsurance andCompany-Owned Life Insurance) was down for the same period due to the uneven nature of these sales. Single premiums declined as certain recurring premiums on variable universal life contracts were recorded as single premiums in 2003. Effective January 1, 2004 these premiums are reported as renewal premiums.
Traditional life income before realized gains and losses on shares and real estate of USD 331 million increased 9% over 2003. Lower additions to the default provision, of USD 34 million versus USD 94 million in the first half of 2003, were partially offset by lower investment yields on fixed income investments and an increase in mortality claims in reinsurance.
Life for account of policyholders income before realized gains and losses on shares and real estate of USD 48 million increased 12%. The increase was due primarily to improved claims experience. Policyholder account balances and the related asset fees grew as a result of the higher average equity market.
Note: prior year results have been adjusted for comparison due to accounting changes implemented January 1, 2004 (see page 21)
Page 9
Fixed annuities
Fixed annuity account balances of USD 44.6 billion were modestly lower than at year-end 2003. Deposits of USD 1.7 billion decreased 51% compared to the first six months of 2003 due to lower policyholder crediting rates and adjustments to commission rates. Deposits during the second quarter of 2004 were relatively stable compared with the prior two quarters. Withdrawals from existing contracts continue to be at low levels, reflecting lower new money crediting rates available on new policies.
Fixed annuity income before realized gains and losses on shares and real estate of USD 195 million for the first six months of 2004, increased 81%. The significant improvement in earnings is largely due to lower additions to the default provision. Gross bond defaults were USD 35 million compared to USD 111 million during the first six months of 2003. Product spreads have improved as crediting rates were lowered on both existing and new deposits throughout 2003 and early 2004 taking the majority of the existing contracts to date to the contractual minimum. Spread on the largest segment of the fixed annuity book improved to 225 basis points at the end of the first six months of this year and the return is at the hurdle rate. The spread includes 12 basis points of realized gains on equity-like investments. The spread at the end of the first quarter this year was revised upward to 217 basis points from 209 basis points, including 8 basis points of realized gains on equity-like investments. Gross spreads are before investment expenses and priced bond defaults, and amounted to 269 basis points at the end of the first six months of 2004.
GICs and funding agreements
GIC and funding agreement account balances increased 6% to USD 28.8 billion over the first six months 2004 compared to the year-end 2003 level. Production of USD 4.8 billion was down 13% compared to the first six months of 2003. The tight credit spreads in the market have impacted 2004 sales as disciplined pricing has been maintained.
GICs and funding agreements income before realized gains and losses on shares and real estate increased 44% to USD 118 million compared to the first half of 2003. The increase includes a one-time positive effect of USD 16 million related to the performance of a loan portfolio that was recognized in the first quarter of 2004. Improved product spreads and growth in assets were the other primary factors contributing to the increase.
Variable annuities
Variable annuity account balances have increased 3% to USD 43.6 billion since year-end 2003. Variable annuity deposits of USD 2.9 billion decreased 27% compared to the first half of 2003. The decrease is largely due to the discontinuance of the guaranteed minimum income benefit (GMIB) feature in the first quarter of 2003. Compared to the first quarter of 2004, variable annuity deposits declined 18%, largely due to strong institutional sales in the first quarter of the year. Total sales of the new Guaranteed Principal Solution (GPS) product, which features a guaranteed minimum withdrawal benefit (GMWB), were USD 255 million for the first six months of 2004. An additional new product is currently under development.
Variable annuity income before realized gains and losses on shares and real estate increased from USD 7 million in the first half of 2003 to USD 85 million in the first half of 2004. The 2004 results include a USD 12 million non-recurring gain on the mark to market on a minimum guarantee liability. Hedges have been implemented to minimize the interest rate and equity risk for these products. The increase in income also reflects higher fees and related gross profits that have resulted from the favorable equity market performance and sales, as well as USD 16 million higher earnings due to lower lapses.
Page 10
Fee business
Fee based products described here include managed assets such as mutual funds, collective investment trusts and synthetic GICs. First six months 2004 production was USD 9.1 billion, a 17% decrease compared to the first six months 2003. Mutual fund sales of USD 5.9 billion increased 53%, reflecting the expanded marketing relationships with wire-house networks. Synthetic GIC sales of USD 3.2 billion decreased 55% as equity products are now attracting more funds than stable value alternatives. Fee based assets have increased 9% since year-end 2003 totaling USD 69.6 billion.
Fee business income before realized gains and losses on shares and real estate of USD 13 million increased 30% compared to the first six months 2003. Income was positively impacted by growth in assets due to deposits and equity market appreciation. This was partially offset by increased expenses.
Accident and Health Business
In line with our strategy to focus on profitable growth, Long Term Care sales will cease during the first half of 2005. New business no longer meets our return objectives relative to the risk associated with the product.
Accident and health premiums were higher than in the first six months 2003 due to higher sales through sponsored direct marketing programs along with premium rate increases on certain health products. Accident and health income before realized gains and losses on shares and real estate of USD 168 million increased 62% compared to the adjusted first six months 2003 results. Lower additions to the default provision combined with improved claims experience and premium rate increases in certain health products improved overall profitability.
Commissions and expenses
Commissions and expenses include commissions, operating expenses and the net change in policy acquisition costs. Commissions and expenses of USD 2,090 million increased 15% compared to the first six months 2003. Commissions declined 9% to USD 1,203 million as a result of lower annuity production and commission restructuring efforts. Operating expenses of USD 890 million increased USD 34 million or 4% due primarily to higher regulatory and compliance costs, information system implementations and increased investment management fees paid to outside fund managers – reflecting the growth in assets under management.
Page 11
The Netherlands
(2003 adjusted for comparison) | amounts in millions |
EUR | EUR | |||||||||||||||||
Second quarter | First six months | |||||||||||||||||
2004 | 2003 | % | 2004 | 2003 | % | |||||||||||||
Income by product segment | ||||||||||||||||||
40 | 52 | (23 | ) | Traditional life | 84 | 90 | (7 | ) | ||||||||||
12 | (10 | ) | Life for account of policyholders | 25 | (16 | ) | ||||||||||||
11 | 5 | 120 | Fee business | 22 | 10 | 120 | ||||||||||||
63 | 47 | 34 | Life insurance | 131 | 84 | 56 | ||||||||||||
7 | 2 | Accident and health insurance | 13 | 8 | 63 | |||||||||||||
14 | 12 | 17 | General insurance | 22 | 17 | 29 | ||||||||||||
84 | 61 | 38 | Insurance income | 166 | 109 | 52 | ||||||||||||
61 | 66 | (8 | ) | of which general account | 119 | 115 | 3 | |||||||||||
23 | (5 | ) | of which policyholders account1 | 47 | (6 | ) | ||||||||||||
84 | 61 | 38 | Insurance income | 166 | 109 | 52 | ||||||||||||
4 | 2 | 100 | Banking activities2 | 9 | 2 | |||||||||||||
88 | 63 | 40 | Income before realized gains and losses on shares and real estate | 175 | 111 | 58 | ||||||||||||
62 | (145 | ) | Realized gains and losses on shares and real estate | 105 | (249 | ) | ||||||||||||
150 | (82 | ) | Income before tax | 280 | (138 | ) | ||||||||||||
(17 | ) | (19 | ) | (11 | ) | Corporation tax | (45 | ) | (27 | ) | 67 | |||||||
133 | (101 | ) | Net income | 235 | (165 | ) | ||||||||||||
Revenues | ||||||||||||||||||
115 | 200 | (43 | ) | Life general account single premiums | 297 | 440 | (33 | ) | ||||||||||
67 | 66 | 2 | Life general account recurring premiums3 | 360 | 356 | 1 | ||||||||||||
71 | 132 | (46 | ) | Life policyholders account single premiums | 215 | 253 | (15 | ) | ||||||||||
283 | 267 | 6 | Life policyholders account recurring premiums3 | 970 | 954 | 2 | ||||||||||||
536 | 665 | (19 | ) | Total life insurance gross premiums | 1,842 | 2,003 | (8 | ) | ||||||||||
33 | 34 | (3 | ) | Accident and health insurance premiums | 124 | 114 | 9 | |||||||||||
112 | 122 | (8 | ) | General insurance premiums | 261 | 269 | (3 | ) | ||||||||||
681 | 821 | (17 | ) | Total gross premiums | 2,227 | 2,386 | (7 | ) | ||||||||||
311 | 98 | Investment income insurance activities | 599 | 210 | 185 | |||||||||||||
91 | 60 | 52 | Fees and commissions | 165 | 134 | 23 | ||||||||||||
68 | 91 | (25 | ) | Income from banking activities | 141 | 185 | (24 | ) | ||||||||||
1,151 | 1,070 | 8 | Total revenues | 3,132 | 2,915 | 7 | ||||||||||||
137 | 599 | (77 | ) | Investment income for account of policyholders | 599 | 373 | 61 | |||||||||||
Gross margin, commissions and expenses | ||||||||||||||||||
378 | 329 | 15 | Gross margin | 717 | 616 | 16 | ||||||||||||
290 | 266 | 9 | Commissions and expenses | 542 | 505 | 7 | ||||||||||||
Standardized new premium productionlife insurance | ||||||||||||||||||
171 | 295 | (42 | ) | Single premiums | 468 | 612 | (24 | ) | ||||||||||
34 | 46 | (26 | ) | Recurring premiums annualized | 71 | 87 | (18 | ) | ||||||||||
51 | 75 | (32 | ) | Total recurring plus 1/10 single | 118 | 148 | (20 | ) | ||||||||||
Deposits | ||||||||||||||||||
1,080 | 752 | 44 | Savings deposits4 | 1,628 | 1,523 | 7 | ||||||||||||
1,080 | 752 | 44 | Total production on balance sheet | 1,628 | 1,523 | 7 | ||||||||||||
Off balance sheet production | ||||||||||||||||||
166 | 948 | (82 | ) | Mutual funds and other managed assets | 411 | 1,109 | (63 | ) | ||||||||||
166 | 948 | (82 | ) | Total production off balance sheet | 411 | 1,109 | (63 | ) | ||||||||||
1 | Includes also fee business. |
2 | Includes income on off balance sheet type products. |
3 | Reflected in the column first six months is a reclassification of EUR 62 million from general account recurring premiums to policyholders account recurring premiums relating to Q1 2004. |
4 | Reflected in the column first six months is an adjustment of EUR 410 million to savings deposits relating to Q1 2004. |
Page 12
The Netherlands
In view of the significant changes in the market and customer needs, the operating structure through independent business units has been abandoned. The new organizational structure and revised strategy aim to provide better services to our clients with higher value-added products sold through multiple and more broad based distribution channels. In the past six months, 13 different front and back offices have been integrated into one company with five Service Centers and four Marketing and Sales organizations. The number of geographical locations has been reduced from five to three. Staffing levels at the end of the first six months of 2004 were 4% lower than last year, whereby a substantial portion of the planned 10-15% reduction in staffing levels over the coming three years has already been achieved.
Due to market circumstances and the revised strategy, sales through a number of large distributors with one-sided product offerings decreased. The strong focus on profitable production led to lower single premium production.
Results
Income before realized gains and losses on shares and real estate totaled EUR 175 million during the first six months of 2004, a 58% increase compared to the same period in 2003. The increase largely reflects lower additions to provisions for credit risk and minimum guarantees, as well as a number of extraordinary items, which are specified below.
For the second quarter of 2004, income before realized gains and losses on shares and real estate amounted to EUR 88 million, a 40% increase compared to the second quarter of 2003.
The most important extraordinary items positively affecting the results were: receipts from a fraud insurance payout (EUR 16 million in the second quarter), release of a provision for dividends on preferred shares (EUR 26 million, of which EUR 19 million in the second quarter) partly offset by a EUR 27 million addition to the provision made in the second quarter for medical costs for retired personnel, under FAS 106.
On a pretax basis, realized gains on shares and real estate amounted to EUR 105 million during the first six months of 2004. This compares to a negative EUR 249 million in the comparable period of last year. As a result, net income, which includes realized gains and losses on shares and real estate, improved substantially to EUR 235 million, compared with a net loss of EUR 165 million in the same period last year.
Traditional/Account of Policyholders
Overall standardized new life production showed a decline of 20% to EUR 118 million compared to the first six months 2003. This reflects overall difficult market circumstances, pricing discipline in the individual single premium segment and the absence of large case group contracts.
First six months 2004 Traditional Life income before realized gains and losses on shares and real estate decreased by 7% to EUR 84 million. This mainly reflects lower loadings due to lower production, accelerated DPAC amortization and additional provisions for medical costs for retired personnel. Better results on morbidity and higher investment income partly offset this.
Life for account of policyholders income before realized gains and losses on shares and real estate amounted to EUR 25 million, compared to a loss of EUR 16 million in the first six months of last year. This is primarily a result of lower additions to the provision for guaranteed benefits and positive morbidity results, partly offset by higher lapses and an additional provision for medical cost for retired personnel.
Note: prior year results have been adjusted for comparison due to accounting changes implemented January 1, 2004 (see page 21)
Page 13
Fee business
Income before realized gains and losses on shares and real estate on fee business showed a favorable development in the first six months of 2004, with a 120% increase to EUR 22 million. This increase is largely due to better results at the distribution units, a stable development in asset management profits and higher results at TKP Pensioen.
Off balance sheet production decreased by 63% to EUR 411 million, reflecting the volatility of institutional business. In the first six months of 2003 a large new contract was signed.
Non-life insurance
Accident and health income before realized gains and losses on shares and real estate was EUR 13 million, a 63% increase compared to the first six months of 2003. General insurance reported a 29% increase in the first six months 2004 to EUR 22 million. The improved accident and health results are mainly driven by a strengthened position in the sick leave (ziekteverzuim) segment, whereas general insurance continues to benefit from favorable claims experience.
Banking activities
Income before realized gains and losses on shares and real estate from banking activities increased to EUR 9 million from EUR 2 million in the same period last year, reflecting lower additions to credit provisions and higher spreads. Savings account balances at the end of the first six months of 2004, compared to year-end 2003, were 3% higher at EUR 5.8 billion. New deposits amounted to EUR 1.6 billion, an increase of 7% compared to the first six months of 2003.
Commissions and expenses
Commissions and expenses of EUR 542 million were 7% higher in the first six months compared to the same period last year. Operating expenses, including the contribution for FAS 106, increased 17% to EUR 317 million. On like-for-like basis operating expenses decreased slightly. Commissions declined 20% to EUR 161 million due primarily to lower volumes.
Page 14
United Kingdom
(2003 adjusted for comparison)
amounts in millions
GBP | GBP | EUR | |||||||||||||||||||||||||
Second quarter | First six months | First six months | |||||||||||||||||||||||||
2004 | 2003 | % | 2004 | 2003 | % | 2004 | 2003 | % | |||||||||||||||||||
Income by product segment | |||||||||||||||||||||||||||
0 | 0 | Traditional life | (4 | ) | (1 | ) | (7 | ) | (1 | ) | |||||||||||||||||
37 | 29 | 28 | Life for account of policyholders | 72 | 61 | 18 | 107 | 89 | 20 | ||||||||||||||||||
0 | 0 | Fee business | 1 | (2 | ) | 2 | (3 | ) | |||||||||||||||||||
37 | 29 | 28 | Insurance income | 69 | 58 | 19 | 102 | 85 | 20 | ||||||||||||||||||
0 | 0 | of which general account | (4 | ) | (1 | ) | (7 | ) | (1 | ) | |||||||||||||||||
37 | 29 | 28 | of which policyholders account1 | 73 | 59 | 24 | 109 | 86 | 27 | ||||||||||||||||||
37 | 29 | 28 | Income before realized gains and losses on shares and real estate | 69 | 58 | 19 | 102 | 85 | 20 | ||||||||||||||||||
0 | 0 | Realized gains and losses on shares and real estate | 0 | (4 | ) | 0 | (6 | ) | |||||||||||||||||||
37 | 29 | 28 | Income before tax | 69 | 54 | 28 | 102 | 79 | 29 | ||||||||||||||||||
(11 | ) | (9 | ) | 22 | Corporation tax | (20 | ) | (16 | ) | 25 | (29 | ) | (23 | ) | 26 | ||||||||||||
26 | 20 | 30 | Net income | 49 | 38 | 29 | 73 | 56 | 30 | ||||||||||||||||||
Revenues | |||||||||||||||||||||||||||
50 | 43 | 16 | Life general account single premiums | 85 | 99 | (14 | ) | 126 | 145 | (13 | ) | ||||||||||||||||
43 | 29 | 48 | Life general account recurring premiums | 79 | 50 | 58 | 118 | 73 | 62 | ||||||||||||||||||
578 | 604 | (4 | ) | Life policyholders account single premiums | 1,238 | 1,320 | (6 | ) | 1,839 | 1,929 | (5 | ) | |||||||||||||||
299 | 290 | 3 | Life policyholders account recurring premiums | 606 | 582 | 4 | 901 | 850 | 6 | ||||||||||||||||||
970 | 966 | 0 | Total gross premiums | 2,008 | 2,051 | (2 | ) | 2,984 | 2,997 | (0 | ) | ||||||||||||||||
24 | 25 | (4 | ) | Investment income insurance activities | 47 | 41 | 15 | 70 | 60 | 17 | |||||||||||||||||
18 | 16 | 13 | Fees and commissions | 37 | 29 | 28 | 55 | 42 | 31 | ||||||||||||||||||
1,012 | 1,007 | 0 | Total revenues | 2,092 | 2,121 | (1 | ) | 3,109 | 3,099 | 0 | |||||||||||||||||
101 | 2,036 | (95 | ) | Investment income for account of policyholders | 351 | 1,506 | (77 | ) | 521 | 2,201 | (76 | ) | |||||||||||||||
Gross margin, commissions and expenses | |||||||||||||||||||||||||||
139 | 126 | 10 | Gross margin | 276 | 246 | 12 | 409 | 359 | 14 | ||||||||||||||||||
102 | 97 | 5 | Commissions and expenses | 207 | 188 | 10 | 307 | 274 | 12 | ||||||||||||||||||
Standardized new premium production life insurance | |||||||||||||||||||||||||||
644 | 578 | 11 | Single premiums | 1,368 | 1,319 | 4 | 2,033 | 1,928 | 5 | ||||||||||||||||||
92 | 103 | (11 | ) | Recurring premiums annualized | 196 | 190 | 3 | 291 | 278 | 5 | |||||||||||||||||
157 | 161 | (2 | ) | Total recurring plus 1/10 single | 333 | 322 | 3 | 494 | 471 | 5 | |||||||||||||||||
Off balance sheet production | |||||||||||||||||||||||||||
33 | 42 | (21 | ) | Mutual funds and other managed assets | 59 | 169 | (65 | ) | 87 | 247 | (65 | ) | |||||||||||||||
33 | 42 | (21 | ) | Total production off balance sheet | 59 | 169 | (65 | ) | 87 | 247 | (65 | ) | |||||||||||||||
1 | Includes also fee business. |
Page 15
United Kingdom
During the first half of the year, AEGON UK has continued to gain market share in the IFA market and has solidified its top five position in this market. In May, AEGON UK launched Origen, bringing together five of its award winning IFA businesses. Origen harnesses some of the UK’s leading advisers for annuities, advice to the corporate market, healthcare, investments, pensions and professional connections together under one brand. With Origen, AEGON UK has established a broad based platform for growing its distribution business.
Results
Income before realized gains and losses on shares and real estate increased by 19% to GBP 69 million during the first six months of the year, compared to GBP 58 million in the first half of 2003. Net income, which includes realized gains and losses on shares and real estate, amounted to GBP 49 million, a 29% increase compared to the same period last year. For the second quarter of 2004, net income amounted to GBP 26 million, a 30% increase compared to the second quarter of 2003.
The increase in net income was primarily due to higher management fees on equity linked funds as a result of higher average equity markets. The average FTSE level over the first half of 2004 was 16% above the comparable 2003 period.
There were no realized gains or losses on shares and real estate during the first half of 2004, compared to GBP 4 million of net realized losses during the first half of 2003.
Traditional/Account of Policyholders
Standardized new life production during the first six months of 2004 increased 3% to GBP 333 million. The increase reflects growth in the core individual and group pensions businesses, partly offset by a fall in asset management institutional sales.
Income before realized gains and losses on shares and real estate from traditional life amounted to a loss of GBP 4 million during the first half of 2004. The main reason for this is a GBP 5 million restructuring charge in the first quarter 2004 related to the additional cost reduction program implemented this year.
Income before realized gains and losses on shares and real estate from life for account of policyholders of GBP 72 million increased 18% during the first six months of 2004 compared to the same period last year. This primarily reflects higher average equity market levels compared to the prior year.
Commissions and expenses
Commissions and expenses increased 11% to GBP 207 million, due largely to higher DPAC amortization, growth (including two acquisitions) in the distribution companies and restructuring charge for the cost reduction program. The total restructuring charge related to the cost reduction program is expected to be GBP 10 million in 2004, of which GBP 5 million has been accounted for in the first six months of 2004. Before deferral of DPAC, operating expense savings amounted to GBP 15 million.
Note: prior year results have been adjusted for comparison due to accounting changes implemented January 1, 2004 (see page 21)
Page 16
Other countries
(2003 adjusted for comparison)
amounts in millions
EUR | EUR | |||||||||||||||||
Second quarter | First six months | |||||||||||||||||
2004 | 2003 | % | 2004 | 2003 | % | |||||||||||||
Income by product segment | ||||||||||||||||||
8 | 6 | 33 | Traditional life | 12 | 13 | (8 | ) | |||||||||||
1 | (5 | ) | Life for account of policyholders | 3 | (7 | ) | ||||||||||||
3 | 2 | 50 | Fee business | 5 | 4 | 25 | ||||||||||||
12 | 3 | Life insurance | 20 | 10 | 100 | |||||||||||||
2 | 1 | 100 | Accident and health insurance | 4 | 3 | 33 | ||||||||||||
13 | 16 | (19 | ) | General insurance | 26 | 26 | 0 | |||||||||||
27 | 20 | 35 | Insurance income | 50 | 39 | 28 | ||||||||||||
23 | 23 | 0 | of which general account | 42 | 42 | 0 | ||||||||||||
4 | (3 | ) | of which policyholders account1 | 8 | (3 | ) | ||||||||||||
27 | 20 | 35 | Income before realized gains and losseson shares and real estate | 50 | 39 | 28 | ||||||||||||
2 | 4 | (50 | ) | Realized gains and losses on shares and real estate | 5 | (2 | ) | |||||||||||
29 | 24 | 21 | Income before tax | 55 | 37 | 49 | ||||||||||||
(7 | ) | (7 | ) | 0 | Corporation tax | (14 | ) | (10 | ) | 40 | ||||||||
22 | 17 | 29 | Net income | 41 | 27 | 52 | ||||||||||||
Revenues | ||||||||||||||||||
7 | 3 | 133 | Life general account single premiums | 11 | 8 | 38 | ||||||||||||
131 | 99 | 32 | Life general account recurring premiums | 240 | 212 | 13 | ||||||||||||
1 | 3 | (67 | ) | Life policyholders account single premiums | 4 | 8 | (50 | ) | ||||||||||
27 | 53 | (49 | ) | Life policyholders account recurring premiums | 52 | 106 | (51 | ) | ||||||||||
166 | 158 | 5 | Total life insurance gross premiums | 307 | 334 | (8 | ) | |||||||||||
18 | 17 | 6 | Accident and health insurance premiums | 49 | 45 | 9 | ||||||||||||
92 | 85 | 8 | General insurance premiums | 182 | 170 | 7 | ||||||||||||
276 | 260 | 6 | Total gross premiums | 538 | 549 | (2 | ) | |||||||||||
37 | 35 | 6 | Investment income insurance activities | 71 | 65 | 9 | ||||||||||||
4 | 3 | 33 | Fees and commissions | 7 | 6 | 17 | ||||||||||||
317 | 298 | 6 | Total revenues | 616 | 620 | (1 | ) | |||||||||||
2 | 40 | (95 | ) | Investment income for the account of policyholders | 14 | 15 | (7 | ) | ||||||||||
Gross margin, commissions and expenses | ||||||||||||||||||
95 | 86 | 10 | Gross margin | 186 | 171 | 9 | ||||||||||||
68 | 66 | 3 | Commissions and expenses | 136 | 132 | 3 | ||||||||||||
Standardized new premium productionlife insurance | ||||||||||||||||||
7 | 5 | 40 | Single premiums | 14 | 15 | (7 | ) | |||||||||||
43 | 69 | (38 | ) | Recurring premiums annualized | 109 | 162 | (33 | ) | ||||||||||
43 | 69 | (38 | ) | Total recurring plus 1/10 single | 110 | 163 | (33 | ) | ||||||||||
Off balance sheet production | ||||||||||||||||||
44 | 43 | 2 | Mutual funds and other managed assets | 87 | 91 | (4 | ) | |||||||||||
44 | 43 | 2 | Total production off balance sheet | 87 | 91 | (4 | ) | |||||||||||
1 | Includes also fee business. |
Explanatory notes
The published figures are unaudited.
Traditional life includes income on traditional and fixed universal life products.
Life insurance with investments for account of policyholders includes income on variable universal life, unitised
pension (UK), other unit-linked products with investments for account of policyholders and with profit fund in the UK.
Fee business includes income on off balance sheet type products.
Gross margin is calculated as the sum of income before realized gains and losses on shares and real estate and
commissions and expenses.
Currencies
Income statement items: average rate 1 EUR = USD 1.2270 (2003: USD 1.1050).
Balance sheet items: closing rate 1 EUR = USD 1.2155 (2003: USD 1.1427; year-end 2003: USD 1.2630).
Page 17
Other countries
Income before realized gains and losses in the first six months of 2004 amounted to EUR 50 million, a 28% increase compared to the EUR 39 million achieved in the comparable period of 2003. The increase was largely driven by improvements in Spain and Hungary.
Traditional/Account of Policyholders
Standardized new life production in Other countries decreased 33% to EUR 110 million, largely driven by lower production as well as adverse currency translation effects in Taiwan.
New life production in Taiwan declined 32% to NTD 3,368 million (EUR 83 million) in the first six months of 2004. Life premium income was up 27% to NTD 7.2 billion (EUR 176 million) reflecting strong sales of recurring premium business in the previous year and good persistency. Customer acceptance levels of unit-linked recurring premium products are still low.
In Hungary, new standardized life production remained stable at HUF 2,484 million (EUR 10 million) in the first six months of 2004.
In Spain, new standardized life production increased from EUR 12 million to EUR 15 million compared to the first six months of 2003.
Non-life insurance
Total non-life insurance premiums increased 7% compared to the first six months of 2003. Non-life premiums in Hungary increased 17% to EUR 56 million due to successful car insurance sales, while non-life premiums in Spain increased 5% to EUR 175 million.
Non-life results have remained stable compared to last year. Higher results in Spain due to continued improvement in the claims ratio were offset by a decrease of results in Hungary, mainly due to higher claims following storms in May and June.
Commissions and expenses
Commissions and expenses increased by 3% to EUR 136 million for the first six months of 2004.
Note: prior year results have been adjusted for comparison due to accounting changes implemented January 1, 2004 (see page 21)
Page 18
Summarized consolidated income statements
(2003 adjusted for comparison)
amounts in millions
USD | EUR | EUR | ||||||||||||||||||||||||
First six months | Second quarter | First six months | ||||||||||||||||||||||||
2004 | 2003 | % | 2004 | 2003 | % | 2004 | 2003 | % | ||||||||||||||||||
Revenues | ||||||||||||||||||||||||||
12,087 | 11,260 | 7 | Gross premiums | 4,564 | 4,537 | 1 | 9,851 | 10,190 | (3 | ) | ||||||||||||||||
4,399 | 3,430 | 28 | Investment income | 1,830 | 1,552 | 18 | 3,585 | 3,104 | 15 | |||||||||||||||||
783 | 598 | 31 | Fees and commissions | 330 | 252 | 31 | 638 | 541 | 18 | |||||||||||||||||
173 | 204 | (15 | ) | Income from banking activities | 68 | 91 | (25 | ) | 141 | 185 | (24 | ) | ||||||||||||||
17,442 | 15,492 | 13 | Total revenues | 6,792 | 6,432 | 6 | 14,215 | 14,020 | 1 | |||||||||||||||||
Benefits and expenses | ||||||||||||||||||||||||||
1,474 | 1,114 | 32 | Premiums to reinsurers | 650 | 487 | 33 | 1,201 | 1,008 | 19 | |||||||||||||||||
10,458 | 10,367 | 1 | Benefits paid and provided | 3,841 | 4,174 | (8 | ) | 8,523 | 9,382 | (9 | ) | |||||||||||||||
98 | 102 | (4 | ) | Profit sharing and rebates | 38 | 44 | (14 | ) | 80 | 92 | (13 | ) | ||||||||||||||
3,535 | 2,856 | 24 | Commissions and expenses for own account | 1,476 | 1,313 | 12 | 2,881 | 2,585 | 11 | |||||||||||||||||
397 | 356 | 12 | Interest | 146 | 156 | (6 | ) | 324 | 322 | 1 | ||||||||||||||||
151 | 334 | (55 | ) | Miscellaneous income and expenditure | 64 | 114 | (44 | ) | 123 | 302 | (59 | ) | ||||||||||||||
16,113 | 15,129 | 7 | Total benefits and expenses | 6,215 | 6,288 | (1 | ) | 13,132 | 13,691 | (4 | ) | |||||||||||||||
1,329 | 363 | Income before tax | 577 | 144 | 1,083 | 329 | ||||||||||||||||||||
(360) | (187 | ) | 93 | Corporation tax | (141 | ) | (81 | ) | 74 | (293 | ) | (169 | ) | 73 | ||||||||||||
— | 187 | Transamerica Finance Corporation | — | 96 | — | 169 | ||||||||||||||||||||
969 | 363 | 167 | Net income | 436 | 159 | 174 | 790 | 329 | 140 | |||||||||||||||||
Condensed consolidated balance sheets | amounts in millions | |||||||||||||||||||||||||
At June 30 | At Dec. 31 2003 | At June 30 | At June 30 | At June 30 | At Dec.31 2003 | |||||||||||||||||||||
USD | USD | % | USD | EUR | EUR | EUR | % | |||||||||||||||||||
156,913 | 153,068 | 3 | Investments | 147,772 | 129,318 | 129,094 | 121,194 | 7 | ||||||||||||||||||
293 | 3,643 | (92 | ) | Group companies and participations | 3,601 | 3,151 | 241 | 2,884 | (92 | ) | ||||||||||||||||
128,922 | 126,412 | 2 | Investments for account of policyholders | 111,909 | 97,934 | 106,065 | 100,089 | 8 | ||||||||||||||||||
11,651 | 12,389 | (6 | ) | Other assets | 11,566 | 10,122 | 9,585 | 9,809 | (2 | ) | ||||||||||||||||
297,779 | 295,512 | 1 | Total assets | 274,848 | 240,525 | 244,985 | 233,976 | 5 | ||||||||||||||||||
18,346 | 17,640 | 4 | Total shareholders’ equity1 | 15,360 | 13,442 | 15,093 | 13,967 | 8 | ||||||||||||||||||
2,358 | 2,431 | (3 | ) | Capital securities | 2,248 | 1,967 | 1,940 | 1,925 | 1 | |||||||||||||||||
560 | 571 | (2 | ) | Subordinated loans | 661 | 579 | 461 | 452 | 2 | |||||||||||||||||
4,277 | 4,153 | 3 | Senior debt related to insurance activities | 3,570 | 3,124 | 3,519 | 3,288 | 7 | ||||||||||||||||||
25,541 | 24,795 | 3 | Total capital base | 21,839 | 19,112 | 21,013 | 19,632 | 7 | ||||||||||||||||||
121,228 | 118,879 | 2 | Technical provisions2 | 115,302 | 100,903 | 99,735 | 94,124 | 6 | ||||||||||||||||||
128,922 | 126,412 | 2 | Technical provisions with investments for account of policyholders3 | 111,909 | 97,934 | 106,065 | 100,089 | 8 | ||||||||||||||||||
22,088 | 25,426 | (13 | ) | Other liabilities4 | 25,798 | 22,576 | 18,172 | 20,131 | (10 | ) | ||||||||||||||||
297,779 | 295,512 | 1 | Total shareholders’ equity and liabilities | 274,848 | 240,525 | 244,985 | 233,976 | 5 | ||||||||||||||||||
1 Shareholders’ equity January 1 as reported | 14,231 | 14,132 | 14,231 | |||||||||||||||||||||||
Effect of SOP 03-1 implementation | (161 | ) | (165 | ) | (161 | ) | ||||||||||||||||||||
Realized portion of revaluation account transferred to other surplus fund | (2,056 | ) | (1,281 | ) | (2,056 | ) | ||||||||||||||||||||
Increase in other surplus fund - transferred from revaluation account | 2,056 | 1,281 | 2,056 | |||||||||||||||||||||||
Shareholders’ equity January 1 adjusted | 14,070 | 13,967 | 14,070 | |||||||||||||||||||||||
Net income | 329 | 790 | 1,033 | |||||||||||||||||||||||
Dividend paid | — | (233 | ) | (147 | ) | |||||||||||||||||||||
Paid in surplus / Issuance of new shares | — | — | 3 | |||||||||||||||||||||||
Currency exchange rate differences | (1,025 | ) | 485 | (1,730 | ) | |||||||||||||||||||||
Goodwill | (273 | ) | (212 | ) | (358 | ) | ||||||||||||||||||||
Repurchased and sold own shares | 19 | 57 | 19 | |||||||||||||||||||||||
Change revaluation account | 437 | 114 | 851 | |||||||||||||||||||||||
Sale TFC businesses | — | 163 | 307 | |||||||||||||||||||||||
Other changes | (115 | ) | (38 | ) | (81 | ) | ||||||||||||||||||||
18,346 | 17,640 | Shareholders’ equity end of period5 | 15,360 | 13,442 | 15,093 | 13,967 | ||||||||||||||||||||
% | % | |||||||||||||||||||||||||
44,553 | 44,906 | (1 | ) | 2 Of which fixed annuities | 44,482 | 38,927 | 36,654 | 35,555 | 3 | |||||||||||||||||
28,767 | 27,209 | 6 | 2 Of which GICs and fundingagreements | 27,837 | 24,361 | 23,667 | 21,543 | 10 | ||||||||||||||||||
(17,191) | (17,260 | ) | 0 | 2 Of which deferred policy acquisition costs | (17,095 | ) | (14,960 | ) | (14,143 | ) | (13,666 | ) | 3 | |||||||||||||
43,598 | 42,260 | 3 | 3 Of which variable annuities | 37,698 | 32,990 | 35,868 | 33,460 | 7 | ||||||||||||||||||
7,091 | 7,144 | (1 | ) | 4 Of which savings accounts | 7,012 | 6,136 | 5,834 | 5,656 | 3 | |||||||||||||||||
1,832 | 1,759 | 4 | 5 Including revaluation account | 1,119 | 979 | 1,507 | 1,393 | 8 |
Page 19
REPORT OF THE HOLDING COMPANY
Capital and funding
Shareholder’s equity at June 30, 2004 amounted to EUR 15,093 million, an increase of EUR 1,126 million compared to December 31, 2003. The increase is largely due to positive exchange rate translations of EUR 485 million, an increase in the revaluation reserve of EUR 114 million, the EUR 163 million book gain on the disposal of the majority of TFC’s commercial finance business, and net income of EUR 790 million. In addition, a goodwill charge of EUR 212 million was incurred primarily as a result of the acquisitions of distribution companies in the Netherlands and the United Kingdom and the joint venture with CAM in Spain. Implementation of Statement of Position (SOP) 03-1 in AEGON USA resulted in a decline of EUR 165 million in the opening balance of shareholders’ equity on January 1, 2004.
The revaluation reserve amounted to EUR 1,507 million on June 30, 2004, compared to EUR 1,393 million at year-end 2003.
At June 30, 2004, shareholders’ equity represented 72% of AEGON’s total capital base, while senior and dated subordinated debt comprised 19% of the total capital base. Capital securities accounted for the remaining 9%. AEGON manages its shareholders’ equity to be at least 70% of the total capital base. While shareholders’ equity and debt were influenced by currency exchange rates, the equity to total capital base ratio was not materially affected as the debt is managed in proportion to the local currency of invested capital in the subsidiaries. In July of 2004, AEGON successfully completed the issuance of EUR 500 million and USD 250 million in Perpetual Capital Securities, rated A- by S&P and A3 by Moody’s. The proceeds of the issue will be used to refinance maturing senior debt. This transaction further strengthens the quality of AEGON’s capital base.
On July 9, 2004, Moody’s changed its outlook on AEGON debt ratings to stable from negative. The rating agency also affirmed its insurance financial strength (IFS) ratings on AEGON’s U.S. operating companies, as well as its rating on AEGON’s main U.K. operating company.
On July 20, 2004, Standard & Poor’s Ratings Services affirmed its ‘A+/A-1’ long- and short-term counterparty credit ratings on AEGON N.V. At the same time, S&P affirmed its ‘AA’ long-term counterparty credit and insurer financial strength ratings on the principal operating companies of the group in Europe and North America.
Dividend
An interim dividend of EUR 0.21 per common share has been declared. The interim dividend will be paid in cash or stock at the election of the shareholder. The interim dividend in shares will be around 5% higher than the value of the cash dividend. AEGON shares will be quoted ex-dividend on August 16, 2004. The election period will run from August 16 up to and including September 13, 2004. The stock fraction will be based on the average share price on Euronext Amsterdam from September 14 through September 20, 2004. The dividend will be payable as of September 24, 2004.
Interest charges and other
Interest charges and other increased from EUR 218 million in the first six months of 2003 to EUR 219 million. The remaining TFC businesses, mainly consisting of maritime container and European trailer leasing, are included in the consolidated results and reported in Interest charges and other. TFC reported a loss of EUR 22 million before tax. On an operating basis, TFC reported income before tax of EUR 27 million in the first six months of this year.
Note: prior year results have been adjusted for comparison due to accounting changes implemented January 1, 2004 (see page 21)
Page 20
Supplemental Disclosure
Comparability Adjustments made to certain amounts reported in the 2003 Financials.
The adjustments made to the 2003 financial amounts presented in this report are made for comparability purposes.
The following adjustments have been adopted as of January 1, 2004:
• | Discontinuance of the indirect income method. Gains and losses on shares and real estate are no longer recognized in the income statement by applying the indirect income method, but instead are recognized when realized. |
• | Statement of Position (SOP) 03-1 issued by the Accounting Standards Executive Committee (AcSEC) of the AICPA. SOP 03-1 addresses a number of items within FAS 97, and two elements in particular have an effect on AEGON USA, resulting in a change in the opening balance of shareholders’ equity at January 1, 2004 of EUR 165 million. Firstly, shareholders’ equity has been reduced (EUR 179 million) related to the establishment of additional mortality based reserves on universal life contracts. The implementation changes the timing of the recognition of mortality profits into earnings. Secondly, shareholders’ equity has been increased (EUR 14 million) for the SOP methodology for reserving for minimum guaranteed living and death benefits on variable annuity and variable life contracts. The effects of the adoption of SOP 03-1 are relevant for the Americas and the group totals only. |
Page 21
HIGHLIGHTS – First six months 2004
(amounts in millions, except per share data, 2003 adjusted for comparability)
First six months 2004 | First six months 2003 as adjusted | First six months 2003 as reported | First six months 2004 | First six months 2003 as adjusted | At constant currency exchange rates | First six months 2003 as reported | ||||||||||||
USD | USD | USD | EUR | EUR | % | % | EUR | |||||||||||
1,091 | 676 | 705 | Income before realized gains and losses/indirect income on shares and real estate | 889 | 612 | 45 | 57 | 639 | ||||||||||
238 | (313 | ) | — | Realized gains and losses on shares and real estate | 194 | (283 | ) | — | — | — | ||||||||
— | — | 343 | Indirect income on shares and real estate | — | — | — | — | 310 | ||||||||||
1,329 | 363 | 1,048 | Income before tax | 1,083 | 329 | 229 | 280 | 949 | ||||||||||
777 | 665 | — | Net income before realized gains and losses on shares and real estate | 633 | 602 | 5 | 15 | — | ||||||||||
969 | 363 | 949 | Net income | 790 | 329 | 140 | 182 | 859 | ||||||||||
0.49 | 0.42 | — | Net income before realized gains and losses on shares and real estate per share | 0.40 | 0.38 | 5 | 16 | — | ||||||||||
0.61 | 0.21 | 0.61 | Net income per share | 0.50 | 0.19 | 163 | 218 | 0.55 |
Published figures are unaudited
Page 22
HIGHLIGHTS – Second quarter 2004
(amounts in millions, except per share data, 2003 adjusted for comparability)
Second quarter 2004 | Second quarter 2003 as adjusted | Second quarter 2003 as reported | Second quarter 2004 | Second quarter 2003 as adjusted | % | Second quarter 2003 as reported | ||||||||||
USD | USD | USD | EUR | EUR | EUR | |||||||||||
569 | 345 | 364 | Income before realized gains and losses / indirect income on shares and real estate | 472 | 303 | 56 | 321 | |||||||||
127 | (180 | ) | — | Realized gains and losses on shares and real estate | 105 | (159 | ) | — | — | |||||||
— | — | 208 | Indirect income on shares and real estate | — | — | — | 184 | |||||||||
696 | 165 | 572 | Income before tax | 577 | 144 | — | 505 | |||||||||
422 | 358 | — | Net income before realized gains and losses on shares and real estate | 349 | 316 | 10 | — | |||||||||
526 | 181 | 528 | Net income | 436 | 159 | 174 | 466 | |||||||||
0.26 | 0.23 | — | Net income before realized gains and losses on shares and real estate per share | 0.22 | 0.20 | 10 | — | |||||||||
0.33 | 0.10 | 0.34 | Net income per share | 0.28 | 0.09 | 211 | 0.30 |
Published figures are unaudited
Page 23
Non GAAP measures (Regulation G)
This press release includes a non-GAAP financial measure: Net income before realized gains and losses on shares and real estate. The reconciliation of this measure to the most comparable GAAP measure is shown below in accordance with Regulation G. AEGON believes the non-GAAP measure shown herein, together with the GAAP information, provides a meaningful measure for the investing public to evaluate AEGON’s business relative to the businesses of our peers.
In EUR million | Per common share | In EUR million | Per common share | |||||||
Second quarter 2004 | Second quarter 2003 (adjusted) | |||||||||
Net income before realized gains and losses on shares and real estate | 349 | 0.22 | 316 | 0.20 | ||||||
Realized gains and losses on shares and real estate | 105 | (159 | ) | |||||||
Corporation tax on realized gains and losses on shares and real estate | (18 | ) | 2 | |||||||
Net income | 436 | 0.28 | 159 | 0.09 | ||||||
First six months 2004 | First six months 2003 (adjusted) | |||||||||
Net income before realized gains and losses on shares and real estate | 633 | 0.40 | 602 | 0.38 | ||||||
Realized gains and losses on shares and real estate | 194 | (283 | ) | |||||||
Corporation tax on realized gains and losses on shares and real estate | (37 | ) | 10 | |||||||
Net income | 790 | 0.50 | 329 | 0.19 |
Supplemental reconciliation information for comparison purposes
In EUR million | Per common share | ||||
Third quarter 2003 (adjusted) | |||||
Net income before realized gains and losses on shares and real estate | 336 | 0.21 | |||
Realized gains and losses on shares and real estate | 101 | ||||
Corporation tax on realized gains and losses on shares and real estate | (2 | ) | |||
Net income | 435 | 0.28 | |||
Fourth quarter 2003 (adjusted) | |||||
Net income before realized gains and losses on shares and real estate | 339 | 0.21 | |||
Realized gains and losses on shares and real estate | (88 | ) | |||
Corporation tax on realized gains and losses on shares and real estate | 18 | ||||
Net income | 269 | 0.17 | |||
Total year 2003 (adjusted) | |||||
Net income before realized gains and losses on shares and real estate | 1,277 | 0.80 | |||
Realized gains and losses on shares and real estate | (270 | ) | |||
Corporation tax on realized gains and losses on shares and real estate | 26 | ||||
Net income | 1,033 | 0.64 |
Page 24
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 in 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 euro, 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 U.S. Private Securities Litigation Reform Act of 1995. Words such as ‘believe’, ‘estimate’, ‘intend’, ‘may’, ‘expect’, ‘anticipate’, ‘predict’, ‘project’, ‘counting on’, ‘plan’, ‘continue’, ‘want’, ‘forecast’, ‘should’, ‘would’, ‘is confident’ and ‘will’ and similar expressions as they relate to us are intended to identify such forward-looking statements. 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 speak only as of their dates.
All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations, including, but not limited to, the following:
• | 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, including: |
• | 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 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 affect the profitability of our insurance products; |
• | Changes affecting interest rate levels and continuing low interest rate levels; |
• | Changes affecting currency exchange rates, including 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 and acts of war; |
• | Changes in the policies of central banks and/or foreign governments; |
• | 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; |
• | Our failure to achieve anticipated levels of earnings or operational efficiencies as well as other cost saving initiatives. |
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AEGON N.V.
Group Corporate Affairs & Investor Relations
The Hague, the Netherlands | ||
Analysts & Investors | +31 (0)70 344 83 05 | |
Media | +31 (0)70 344 83 44 | |
gca-ir@aegon.nl | ||
Baltimore, the United States | ||
Analysts & Investors | 1 877 548 9668 (Toll free) / 1 410 576 4577 | |
Media | +1 410 576 4526 | |
ir@aegonusa.com |
Web site: www.aegon.com
Analyst and investor conference call
An analyst and investor conference call on the first six months and second quarter 2004 earnings will be held today at 15.00 MET DST (14.00 BST; 09.00 a.m. ET).
Thelisten-only phone numbers for the conference call are as follows:
+31 (0) 45 6316901 (the Netherlands) |
+44 (0) 208 4006308 (United Kingdom) |
+1 303 262 2130 (United States and Canada) |
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