Exhibit 99.1
PRESS RELEASE 263263 Media Relations: +31 (0)70 344 88 93 Investor Relations: +31 (0)70 344 83 05 (NL) +1 877 548 96 68 (USA) |
AEGON REPORTS FIRST SIX MONTHS 2005 RESULTS
¨ | STANDARDIZED NEW LIFE PRODUCTION INCREASED 16% TO EUR 1,342 MILLION IN THE FIRST SIX MONTHS OF 2005 AND 29% IN THE SECOND QUARTER TO EUR 732 MILLION |
¨ | OPERATING EARNINGS BEFORE TAX DECREASED 2% TO EUR 944 MILLION IN THE FIRST SIX MONTHS AND INCREASED 12% TO EUR 507 MILLION IN THE SECOND QUARTER |
¨ | NET INCOME IN THE FIRST SIX MONTHS INCREASED 32% TO EUR 1,426 MILLION AND 71% TO EUR 760 MILLION IN THE SECOND QUARTER OF 2005 |
¨ | INTERIM DIVIDEND RAISED TO EUR 0.22 PER COMMON SHARE |
The Hague, August 11, 2005
“We are pleased to report a significant increase in life production and the continued strengthening of distribution during the first half of this year,” said AEGON Chairman Donald J. Shepard. “The announced acquisition in Poland marks another important step in our growth strategy for Central and Eastern Europe. We also achieved further expansion in China with the opening of our Beijing branch and the new license in Nanjing. The progress that we have made across our businesses so far this year indicates that our strategy for growing AEGON’s core business profitably is on track.”
During the first six months, standardized new life production increased 16%. New life production in the Americas increased 13%, primarily reflecting strong Bank-Owned Life Insurance / Company-Owned Life Insurance (BOLI/COLI) production during the first quarter, continued strong traditional and Universal Life (UL) sales in the Agency channel and increased reinsurance sales. The Netherlands saw a solid improvement in group pension business in the first quarter, driving the increase in life production for the first six months. Life production in the United Kingdom decreased during the first six months, as first quarter production was affected by certain pricing and other changes in the core pensions markets. The second quarter showed a solid pick up in UK life production. Taiwan experienced exceptionally strong growth in life production, particularly in the second quarter, due to increased sales of traditional life products, which is unlikely to be repeated in the second half of the year.
HIGHLIGHTS Amounts in EUR millions, except per share data | Second quarter 2005 | | Second quarter 2004 | % | First six months 2005 | First six months 2004 | % | Constant currency exchange rates % | |||||||
Operating earnings before tax | 507 | 453 | 12 | 944 | 963 | (2) | 2 | ||||||||
Net gains/losses on investments and impairment charges | 567 | 84 | 859 | 274 | |||||||||||
Non recurring income/expense items | (16 | ) | 18 | 176 | 211 | (17) | (17) | ||||||||
Income before tax | 1,058 | 555 | 91 | 1,979 | 1,448 | 37 | 40 | ||||||||
Net income | 760 | 444 | 71 | 1,426 | 1,077 | 32 | 35 | ||||||||
- per share | 0.42 | 0.22 | 91 | 0.84 | 0.63 | 33 | 36 |
Highlights
amounts in millions
USD | EUR | EUR | ||||||||||||||||||||||||
First six months | Second quarter | First six months | ||||||||||||||||||||||||
2005 | 2004 | % | 2005 | 2004 | % | 2005 | 2004 | % | ||||||||||||||||||
By product segment | ||||||||||||||||||||||||||
462 | 324 | 43 | Traditional life | 238 | 138 | 72 | 359 | 264 | 36 | |||||||||||||||||
100 | 174 | (43) | Life for account of policyholders | 21 | 76 | (72) | 78 | 142 | (45) | |||||||||||||||||
212 | 145 | 46 | Fixed annuities | 113 | 15 | 165 | 118 | 40 | ||||||||||||||||||
(4 | ) | 140 | (103) | Variable annuities | (37 | ) | 68 | (154) | (3 | ) | 114 | (103) | ||||||||||||||
161 | 227 | (29) | Institutional guaranteed products | 62 | 84 | (26) | 125 | 185 | (32) | |||||||||||||||||
67 | 40 | 68 | Fee - off balance sheet products | 31 | 14 | 121 | 52 | 33 | 58 | |||||||||||||||||
64 | 32 | 100 | Reinsurance | 21 | 5 | 50 | 26 | 92 | ||||||||||||||||||
235 | 205 | 15 | Accident and health insurance | 96 | 85 | 13 | 183 | 167 | 10 | |||||||||||||||||
45 | 53 | (15) | General insurance | 18 | 22 | (18) | 35 | 43 | (19) | |||||||||||||||||
(5 | ) | 11 | (145) | Banking activities | (10 | ) | 4 | (4 | ) | 9 | (144) | |||||||||||||||
68 | 10 | Other | 41 | (8 | ) | 53 | 8 | |||||||||||||||||||
(191 | ) | (179 | ) | 7 | Interest charges and other | (87 | ) | (50 | ) | 74 | (149 | ) | (146 | ) | 2 | |||||||||||
1,214 | 1,182 | 3 | Operating earnings before tax | 507 | 453 | 12 | 944 | 963 | (2) | |||||||||||||||||
1,090 | 348 | Net gains/losses on investments | 546 | 92 | 848 | 284 | 199 | |||||||||||||||||||
14 | (13 | ) | Impairment charges | 21 | (8 | ) | 11 | (10 | ) | |||||||||||||||||
227 | 259 | (12) | Non recurring income/expense items | (16 | ) | 18 | (189) | 176 | 211 | (17) | ||||||||||||||||
2,545 | 1,776 | 43 | Income before tax | 1,058 | 555 | 91 | 1,979 | 1,448 | 37 | |||||||||||||||||
10 | 16 | (38) | Share in profit/(loss) of associates | 5 | 12 | (58) | 8 | 13 | (38) | |||||||||||||||||
(716 | ) | (471 | ) | 52 | Corporation tax | (300 | ) | (122 | ) | 146 | (557 | ) | (384 | ) | 45 | |||||||||||
(5 | ) | 0 | 0 | Minority interests | (3 | ) | (1 | ) | (4 | ) | 0 | 0 | ||||||||||||||
1,834 | 1,321 | 39 | Net income | 760 | 444 | 71 | 1,426 | 1,077 | 32 | |||||||||||||||||
Income before tax geographically | ||||||||||||||||||||||||||
1,206 | 1,082 | 11 | Americas | 470 | 317 | 48 | 938 | 882 | 6 | |||||||||||||||||
1,047 | 439 | 138 | The Netherlands | 576 | 205 | 181 | 814 | 358 | 127 | |||||||||||||||||
205 | 98 | 109 | United Kingdom | 95 | 32 | 197 | 159 | 80 | 99 | |||||||||||||||||
266 | 68 | Other countries | (1 | ) | 27 | (104) | 207 | 55 | ||||||||||||||||||
2,724 | 1,687 | 61 | Income before tax business units | 1,140 | 581 | 96 | 2,118 | 1,375 | 54 | |||||||||||||||||
(179 | ) | 89 | Holding and other activities | (82 | ) | (26 | ) | (139 | ) | 73 | ||||||||||||||||
2,545 | 1,776 | 43 | Income before tax | 1,058 | 555 | 91 | 1,979 | 1,448 | 37 | |||||||||||||||||
3,559 | 3,606 | (1) | Commissions and expenses | 1,417 | 1,483 | (4) | 2,768 | 2,939 | (6) | |||||||||||||||||
Amounts per common share of EUR 0.12 | ||||||||||||||||||||||||||
1.08 | 0.77 | 40 | Net income1 | 0.42 | 0.22 | 91 | 0.84 | 0.63 | 33 | |||||||||||||||||
1.08 | 0.77 | 40 | Net income fully diluted1 | 0.42 | 0.22 | 91 | 0.84 | 0.63 | 33 | |||||||||||||||||
At June 30 2005 | | At Dec. 31 2004 | | At June 30 2005 | | At Dec. 31 2004 | | |||||||||||||||||||
12.66 | 11.46 | 10 | Shareholders’ equity | 10.47 | 8.41 | 24 | ||||||||||||||||||||
12.84 | 11.66 | 10 | Shareholders’ equity after full conversion | 10.62 | 8.56 | 24 | ||||||||||||||||||||
Number of employees | 27,152 | 27,607 | (2) | |||||||||||||||||||||||
Outstanding common shares: | ||||||||||||||||||||||||||
- Number of common shares (millions) | 1,577 | 1,530 | 3 | |||||||||||||||||||||||
- Weighted average number (millions) | 1,533 | 1,494 | 3 |
1 After deduction of preferred dividend and coupons on perpetuals.
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Sales of annuity and institutional guaranteed products in the Americas increased 4% compared to the first six months of 2004. Lower deposits in fixed annuities in the first six months of 2005 reflect our pricing discipline and the interest rate environment. New fixed annuity deposits in the second quarter were higher than in the first quarter driven by increased sales through the bank channel and in the pension business. Variable annuity deposits benefited from increasing retail sales. Institutional guaranteed product sales were also higher. Off balance sheet production increased in all country units with the largest portion coming from the UK.
Operating earnings before tax in the first half of 2005 decreased 2% to EUR 944 million (andincreased 2% on a constant currency basis). The Netherlands and the United Kingdom reported increases in operating earnings. The increase in operating earnings in the Netherlands primarily reflects higher investment income and improved underwriting results, partly offset by additions to provisions for guarantees and for improvements to certain life products. The increase in operating earnings in the UK mainly reflects the positive impact from higher equity and bond markets. The decrease in operating earnings in the Americas is largely due to lower earnings from segregated fund business in Canada and currency translation effects. The divestiture of the general insurance activities in Spain at the beginning of this year is the primary reason for the decline in operating earnings in Other countries. In the second quarter of this year, operating earnings before tax increased 12% to EUR 507 million when compared to the same period last year. Each of the three major country units reported higher operating earnings before tax in the second quarter compared to the prior year period.
Net income increased 32% to EUR 1,426 million in the first six months of 2005 (35% on a constant currency basis) primarily reflecting increased net gains on investments. Net income per share increased 33% to EUR 0.84, after taking into account the payment of the dividend on preferred shares and the accrued coupons on perpetual capital securities.
Net gains/losses on investments and impairment charges together amounted to a gain of EUR 859 million compared to a gain of EUR 274 million in the first six months of 2004. Non recurring income amounted to EUR 176 million before tax, reflecting the book gain on the sale of the Spanish general insurance activities.
Commission and expenses decreased 6% to EUR 2,768 million (3% at constant currency exchange rates). The sale of most of Transamerica Finance Corporation’s businesses in the course of 2004 as well as expense savings in AEGON USA and AEGON UK contributed to lower operating expenses.
Revenue generating investments amounted to EUR 335 billion at June 30, 2005 and increased 11% compared to year-end 2004.
Shareholders’ equity at June 30, 2005 amounted to EUR 18,402 million, an increase of 23% compared to December 31, 2004. An interim dividend of EUR 0.22 per common share has been declared. This represents a 5% increase compared to the interim dividend of 2004 and is supported by the company’s strong underlying cash flows and solid capital position. The interim dividend will be payable in either cash or stock at the election of the shareholder. The value of the stock dividend will be approximately 5% higher than the dividend in cash.
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REPORT OF THE COUNTRY UNITS
Americas
amounts in millions
USD | USD | EUR | ||||||||||||||||||||||||
Second quarter | First six months | First six months | ||||||||||||||||||||||||
2005 | 2004 | % | 2005 | 2004 | % | 2005 | 2004 | % | ||||||||||||||||||
Income by product segment | ||||||||||||||||||||||||||
149 | 141 | 6 | Traditional life | 291 | 298 | (2) | 226 | 243 | (7) | |||||||||||||||||
28 | 28 | 0 | Life for account of policyholders | 58 | 51 | 14 | 45 | 42 | 7 | |||||||||||||||||
144 | 16 | Fixed annuities | 212 | 145 | 46 | 165 | 118 | 40 | ||||||||||||||||||
(48 | ) | 82 | Variable annuities | (4 | ) | 139 | (3 | ) | 114 | |||||||||||||||||
78 | 101 | (23) | Institutional guaranteed products | 161 | 227 | (29) | 125 | 185 | (32) | |||||||||||||||||
31 | 3 | Fee - off balance sheet products | 44 | 7 | 34 | 6 | ||||||||||||||||||||
26 | 5 | Reinsurance | 64 | 31 | 106 | 50 | 26 | 92 | ||||||||||||||||||
94 | 95 | (1) | Accident and health insurance | 198 | 189 | 5 | 154 | 154 | 0 | |||||||||||||||||
502 | 471 | 7 | Operating earnings before tax | 1,024 | 1,087 | (6) | 796 | 888 | (10) | |||||||||||||||||
51 | (87 | ) | Net gains/losses on investments | 123 | 5 | 96 | 2 | |||||||||||||||||||
39 | (9 | ) | Impairment charges | 59 | (10 | ) | 46 | (8 | ) | |||||||||||||||||
592 | 375 | 58 | Income before tax | 1,206 | 1,082 | 11 | 938 | 882 | 6 | |||||||||||||||||
(158 | ) | (73 | ) | 116 | Corporation tax | (348 | ) | (297 | ) | 17 | (271 | ) | (242 | ) | 12 | |||||||||||
1 | (1 | ) | Minority interests | 1 | 0 | 0 | 1 | 0 | 0 | |||||||||||||||||
435 | 301 | 45 | Net income | 859 | 785 | 9 | 668 | 640 | 4 | |||||||||||||||||
Revenues | ||||||||||||||||||||||||||
199 | 386 | (48) | Life general account single premiums | 414 | 617 | (33) | 322 | 503 | (36) | |||||||||||||||||
1,340 | 1,216 | 10 | Life general account recurring premiums | 2,651 | 2,414 | 10 | 2,062 | 1,967 | 5 | |||||||||||||||||
32 | 34 | (6) | Life policyholders account single premiums | 345 | 67 | 268 | 55 | |||||||||||||||||||
287 | 282 | 2 | Life policyholders account recurring premiums | 580 | 600 | (3) | 451 | 489 | (8) | |||||||||||||||||
1,858 | 1,918 | (3) | Total life insurance gross premiums | 3,990 | 3,698 | 8 | 3,103 | 3,014 | 3 | |||||||||||||||||
643 | 638 | 1 | Accident and health insurance | 1,277 | 1,258 | 2 | 993 | 1,025 | (3) | |||||||||||||||||
2,501 | 2,556 | (2) | Total gross premiums | 5,267 | 4,956 | 6 | 4,096 | 4,039 | 1 | |||||||||||||||||
1,612 | 1,552 | 4 | Investment income insurance activities | 3,279 | 3,074 | 7 | 2,550 | 2,505 | 2 | |||||||||||||||||
258 | 251 | 3 | Fees and commissions | 525 | 505 | 4 | 408 | 412 | (1) | |||||||||||||||||
4,371 | 4,359 | 0 | Total revenues | 9,071 | 8,535 | 6 | 7,054 | 6,956 | 1 | |||||||||||||||||
767 | 74 | Other operating income | 1,174 | 1,863 | (37) | 913 | 1,518 | (40) | ||||||||||||||||||
5,138 | 4,433 | 16 | Revenues and operating income | 10,245 | 10,398 | (1) | 7,967 | 8,474 | (6) | |||||||||||||||||
52 | (62 | ) | 184 | Other income | 137 | 56 | 145 | 107 | 46 | 133 | ||||||||||||||||
5,190 | 4,371 | 19 | Total revenues and other income | 10,382 | 10,454 | (1) | 8,074 | 8,520 | (5) | |||||||||||||||||
1,053 | 1,078 | (2) | Commissions and expenses | 2,090 | 2,129 | (2) | 1,625 | 1,735 | (6) | |||||||||||||||||
Standardized new premium production insurance | ||||||||||||||||||||||||||
206 | 272 | (24) | Life single premiums | 698 | 501 | 39 | 543 | 408 | 33 | |||||||||||||||||
271 | 260 | 4 | Life recurring premiums annualized | 528 | 481 | 10 | 411 | 392 | 5 | |||||||||||||||||
292 | 287 | 2 | Life total recurring plus 1/10 single | 598 | 531 | 13 | 465 | 433 | 7 | |||||||||||||||||
Gross deposits | ||||||||||||||||||||||||||
524 | 826 | (37) | Fixed annuities | 1,025 | 1,656 | (38) | 797 | 1,350 | (41) | |||||||||||||||||
2,521 | 2,408 | 5 | Institutional guaranteed products | 5,698 | 4,814 | 18 | 4,431 | 3,923 | 13 | |||||||||||||||||
1,423 | 1,233 | 15 | Variable annuities | 2,951 | 2,789 | 6 | 2,295 | 2,273 | 1 | |||||||||||||||||
4,468 | 4,467 | 0 | Total production on balance sheet | 9,674 | 9,259 | 4 | 7,523 | 7,546 | (0) | |||||||||||||||||
Off balance sheet production | ||||||||||||||||||||||||||
1,723 | 1,673 | 3 | Synthetic GICs | 3,307 | 3,181 | 4 | 2,572 | 2,593 | (1) | |||||||||||||||||
2,394 | 2,604 | (8) | Mutual funds/ Collective Trusts and other managed assets | 5,953 | 5,890 | 1 | 4,629 | 4,800 | (4) | |||||||||||||||||
4,117 | 4,277 | (4) | Total production off balance sheet | 9,260 | 9,071 | 2 | 7,201 | 7,393 | (3) |
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The Americas (the AEGON USA companies and AEGON Canada)
¨ | Operating earnings before tax decreased 6% to USD 1,024 million in the first six months of 2005 compared to the same period in the prior year. The Americas represented 73% of operating earnings before tax generated by the country units. |
¨ | Total revenue generating investments remained level compared to year-end 2004 at USD 257 billion. |
¨ | Standardized new life production increased 13% to USD 598 million. |
¨ | Operating expenses were equal to last year at USD 858 million. |
Results
Operating earnings before tax decreased 6% to USD 1,024 million, primarily as a result of lower earnings from the Canadian segregated funds business. Volatile items, which are identified and explained on page 8, reduced operating earnings by USD 24 million in the first six months of 2005 and contributed a positive USD 65 million in the same period last year. Solid earnings growth in the life for account of policyholders, fixed annuity, fee – off balance sheet and reinsurance lines of business was partially offset by lower product spreads in the institutional guaranteed products line and lower earnings from variable annuities due to a non-recurring DPAC reduction.
Second quarter operating earnings before tax of USD 502 million increased 7% from USD 471 million in the second quarter of 2004. The volatile items reduced earnings by USD 13 million in the second quarter of 2005 compared to a negative impact of USD 81 million in the same quarter in 2004. Strong earnings growth in the reinsurance business was more than offset by lower product spreads on both institutional guaranteed products and fixed annuities, and a non-recurring DPAC reduction in variable annuities.
Net gains on investments amounted to USD 123 million compared to USD 5 million in the first six months of 2004. Impairment charges amounted to a net recovery of USD 59 million this year compared to a net charge of USD 10 million in the same period in 2004. During the first six months of 2005, gross asset impairments were more than offset by impairment recoveries of USD 128 million. Net income, which includes net gains/losses on investments and impairment charges, increased 9% to USD 859 million.
Traditional life / Life for account of policyholders
Standardized new life production increased 4% to USD 461 million compared to the same period last year. This number does not include the standardized new life production of reinsurance, which is reported as a separate line of business. The increase in standardized new life production primarily reflects increased BOLI/COLI production during the first quarter of 2005 where sales tend to occur in large amounts but not on a regular or predictable basis and continued strong traditional and UL sales in the Agency channel.
Operating earnings before tax for traditional life decreased 2% to USD 291 million in the first six months of 2005 compared to the same period last year, primarily due to unfavorable mortality claims in the Agency channel during 2005 relative to favorable experience in 2004.
Operating earnings before tax from life for account of policyholders increased 14% to USD 58 million compared to the same period in 2004. The increase is primarily the result of growth of the in-force business.
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Fixed annuities
Fixed annuity new deposits of USD 1,025 million decreased 38% in the first six months of 2005 compared to 2004, although deposits in the second quarter were 5% higher than the first quarter of 2005. The lower fixed annuity production relative to 2004 reflects AEGON’s continued commitment to write profitable business with acceptable risk profiles and the current low interest rate environment. Fixed annuity account balances of USD 53.3 billion were USD 0.8 billion lower than first quarter levels as new deposits were more than offset by withdrawals.
Fixed annuity operating earnings before tax increased 46% to USD 212 million in the first six months of 2005 compared to the same period last year. The total return annuity and the fair value movements of certain financial assets had a significant effect on operating earnings before tax. These volatile items contributed a negative USD 40 million in the first six months of 2004 compared to a positive USD 11 million in the first six months this year. The remaining favorable earnings was due to higher mortality on payout annuity business partially offset by a modest spread compression in the second quarter of this year.
Product spreads on the largest segment of the fixed annuity book were 216 basis points for the second quarter on an IFRS pre-tax operating basis, which also excludes the impact of prepayment fees on commercial mortgage loans. Pre-tax operating spreads declined 14 basis points compared to the first quarter due to lower portfolio yields, although half of this decline was due to equity and real estate based limited partnerships in which incremental cash income tends to be uneven over time.
Institutional guaranteed products
Institutional guaranteed product sales amounted to USD 5.7 billion, an increase of 18% compared to the same period in 2004. Higher sales were primarily in traditional and municipal GIC products as well as medium term note funding agreements. The account balances of institutional guaranteed spread products at June 30, 2005 increased slightly from first quarter to USD 32.4 billion.
Institutional guaranteed products operating earnings before tax decreased 29% to USD 161 million in the first six months of 2005 compared to the same period last year. The decline in operating earnings before tax was primarily due to the impact of decreased product spreads due to the rise in short term interest rates in addition to the one-time positive impact of USD 16 million in 2004 related to the performance of a loan portfolio.
Variable annuities
Variable annuity new deposits of USD 2,951 million increased 6% compared to the first six months of 2004, reflecting a 7% increase for retail variable annuities. The new retail product, “5 for Life”, that was introduced in the fourth quarter of 2004 continues to gain momentum and sales of this product increased during the second quarter to USD 126 million, a 54% increase over the first quarter. Variable annuity account balances increased USD 0.9 billion to USD 44.7 billion compared to the end of the first quarter of 2005.
Variable annuities experienced an operating loss before tax of USD 4 million for the first six months of 2005 compared to operating earnings before tax of USD 139 million for the same period in 2004. This decline was primarily due to the impact of the valuation of Canadian segregated funds with maturity guarantees. This product contributed an operating loss of USD 65 million in 2005 compared to operating earnings of USD 64 million in the same period in 2004. In addition, earnings included a non-recurring DPAC reduction of USD 25 million in the second quarter.
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Fee – off balance sheet products
Off balance sheet products include managed assets such as mutual funds, collective investment trusts and synthetic GICs. Off balance sheet production was USD 9.3 billion, a 2% increase compared to the same period last year. Mutual fund sales of USD 6.0 billion in the first six months of 2005 increased slightly from USD 5.9 billion in the comparable period in 2004. Synthetic GIC sales of USD 3.3 billion in 2005 increased 4%. Off balance sheet assets declined 2% compared to year-end 2004 and totaled USD 74.5 billion on June 30, 2005.
Operating earnings before tax from fee – off balance sheet products of USD 44 million increased USD 37 million compared to the first six months of 2004. The increase in operating earnings is due to a one-time release of USD 20 million during the second quarter from a long-term deferred compensation plan, lower expenses and higher fees from growth in assets under management. The deferred compensation accrual was released once conditions for payment from the plan were not fulfilled during 2005.
Reinsurance
Reinsurance standardized new life production of USD 137 million increased USD 48 million or 54% compared to the first six months of 2004 reflecting strong sales in both the domestic and international life markets.
Reinsurance operating earnings before tax increased 106% to USD 64 million compared to the same period last year. The increase in operating earnings primarily reflects strong growth of the in force business and more favorable mortality experience relative to adverse experience in the second quarter of 2004. Mortality experience during the second quarter was USD 10 million unfavorable relative to first quarter 2005, although this was more than offset by a non-recurring adjustment to premium due from retrocessionaires and a positive DPAC adjustment related to a fixed annuity treaty renegotiation.
Accident and health business
Accident and health premium revenue of USD 1,277 million increased 2% compared to the same period last year due to increased sales through sponsored programs along with premium rate increases on certain health products. The discontinuance of new sales of long-term care policies announced in mid 2004 has reduced the growth in premiums.
Accident and health operating earnings before tax of USD 198 million increased USD 9 million over the first six months of 2004. The increase primarily reflects improved claims and persistency experience.
Commissions and expenses
Commissions and operating expenses of USD 2,090 million decreased 2% compared to the same period last year. Operating expenses of USD 858 million were comparable to the same period last year. Expense reductions from operating efficiencies have been offset by higher compliance and regulatory costs.
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Impact of volatile items in the Americas
Operating earnings before tax on an IFRS basis are generally expected to be more volatile than income before realized gains and losses on shares and real estate reported on the previous DAP basis for the Americas. In particular, there are three items that are expected to create significant volatility due to the fair value nature of the underlying valuation. In aggregate, these items contributed negatively to 2005 year to date operating earnings before tax by USD 24 million compared to a positive USD 65 million in the same period last year. These items are as follows:
Asset valuation – certain financial assets that are managed on a total return basis, such as hedge funds, convertible bonds, and certain limited partnerships, are carried at fair value with no offsetting changes in the fair value of liabilities. As of June 30, 2005, these assets totaled USD 2.8 billion or just over 2% of the general account portfolio in the Americas. The valuation of these assets contributed USD 61 million to operating earnings before tax in the first six months of 2005 compared to USD 72 million in the same period last year. The impact of this is notable in the traditional life, fixed annuity and institutional guaranteed products lines of business.
Total return annuity – this annuity product provides customers with a pass-through of the total return on an underlying portfolio of investment securities (typically a mix of corporate and convertible bonds) subject to a cumulative minimum guarantee. Both the assets and liabilities are carried at fair value. However, due to the minimum guarantee, not all of the asset market value changes will be offset in the liability valuation. This product exists in both the fixed annuity and reinsurance lines of business and in both cases represents closed blocks. Product balances as of June 30, 2005 were USD 2.3 billion in fixed annuities and USD 0.6 billion in reinsurance. This item contributed a negative USD 71 million to the 2004 first six months operating earnings before tax, compared to a negative USD 20 million this year.
Segregated funds maturity guarantees – segregated funds sold in Canada and reported in the variable annuity line of business contain ten-year maturity guarantees that are carried at fair value using market-based risk neutral scenario techniques. The operating earnings impact from these guarantees is generally positive for higher equity market returns and higher interest rates, and conversely negative for lower equity market returns and lower interest rates. As of June 30, 2005 segregated fund balances with maturity guarantees totaled USD 3.9 billion. This product contributed negative USD 65 million to operating earnings before tax this year, compared to positive USD 64 million in the first six months last year. The decline during the second quarter of 2005 was primarily due to the significant decrease in the risk free interest rate during the second quarter, in addition to a charge of USD 27 million for changes in best estimate assumptions regarding policyholder lapses.
Please refer to page 24 for an overview of the effects of the above-mentioned volatile items on operating earnings by product line.
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The Netherlands
amounts in millions
EUR | EUR | |||||||||||||||||||
Second quarter | First six months | |||||||||||||||||||
2005 | 2004 | % | 2005 | 2004 | % | |||||||||||||||
Income by product segment | ||||||||||||||||||||
114 | 13 | Traditional life | 122 | 16 | ||||||||||||||||
(49 | ) | 9 | Life for account of policyholders | (62 | ) | 19 | ||||||||||||||
4 | 10 | (60) | Fee - off balance sheet products | 14 | 22 | (36) | ||||||||||||||
20 | 4 | Accident and health insurance | 28 | 9 | ||||||||||||||||
10 | 11 | (9) | General insurance | 20 | 18 | 11 | ||||||||||||||
(10 | ) | 4 | Banking activities1 | (4 | ) | 9 | ||||||||||||||
89 | 51 | 75 | Operating earnings before tax | 118 | 93 | 27 | ||||||||||||||
496 | 155 | Net gains/losses on investments | 730 | 267 | 173 | |||||||||||||||
(9 | ) | (1 | ) | Impairment charges | (34 | ) | (2 | ) | ||||||||||||
576 | 205 | 181 | Income before tax | 814 | 358 | 127 | ||||||||||||||
0 | 10 | (100) | Share in profit/(loss) of associates | 0 | 10 | (100) | ||||||||||||||
(145 | ) | (42 | ) | Corporation tax | (215 | ) | (81 | ) | 165 | |||||||||||
(5 | ) | 0 | Minority interests | (5 | ) | 0 | ||||||||||||||
426 | 173 | 146 | Net income | 594 | 287 | 107 | ||||||||||||||
Revenues | ||||||||||||||||||||
93 | 115 | (19) | Life general account single premiums | 227 | 297 | (24) | ||||||||||||||
51 | 67 | (24) | Life general account recurring premiums | 341 | 360 | (5) | ||||||||||||||
107 | 45 | 138 | Life policyholders account single premiums | 383 | 180 | 113 | ||||||||||||||
240 | 289 | (17) | Life policyholders account recurring premiums | 964 | 940 | 3 | ||||||||||||||
491 | 516 | (5) | Total life insurance gross premiums | 1,915 | 1,777 | 8 | ||||||||||||||
35 | 33 | 6 | Accident and health insurance | 131 | 124 | 6 | ||||||||||||||
117 | 112 | 4 | General insurance | 260 | 261 | (0) | ||||||||||||||
643 | 661 | (3) | Total gross premiums | 2,306 | 2,162 | 7 | ||||||||||||||
517 | 402 | 29 | Investment income insurance activities | 948 | 798 | 19 | ||||||||||||||
80 | 91 | (12) | Fees and commissions | 160 | 165 | (3) | ||||||||||||||
18 | 24 | (25) | Income from banking activities | 46 | 54 | (15) | ||||||||||||||
1,258 | 1,178 | 7 | Total revenues | 3,460 | 3,179 | 9 | ||||||||||||||
504 | (56 | ) | Other operating income | 703 | 213 | |||||||||||||||
1,762 | 1,122 | 57 | Revenues and operating income | 4,163 | 3,392 | 23 | ||||||||||||||
496 | 155 | Other income | 730 | 267 | 173 | |||||||||||||||
2,258 | 1,277 | 77 | Total revenues and other income | 4,893 | 3,659 | 34 | ||||||||||||||
286 | 250 | 14 | Commissions and expenses | 580 | 526 | 10 | ||||||||||||||
Standardized new premium production insurance | ||||||||||||||||||||
188 | 171 | 10 | Life single premiums | 583 | 468 | 25 | ||||||||||||||
30 | 34 | (12) | Life recurring premiums annualized | 67 | 71 | (6) | ||||||||||||||
49 | 51 | (4) | Life total recurring plus 1/10 single | 125 | 118 | 6 | ||||||||||||||
12 | 13 | (8) | Non-life premiums | 27 | 32 | (16) | ||||||||||||||
Gross deposits | ||||||||||||||||||||
641 | 1,080 | (41) | Saving deposits | 1,501 | 1,628 | (8) | ||||||||||||||
641 | 1,080 | (41) | Total production on balance sheet | 1,501 | 1,628 | (8) | ||||||||||||||
Off balance sheet production | ||||||||||||||||||||
17 | 166 | (90) | Mutual funds and other managed assets | 495 | 411 | 20 | ||||||||||||||
17 | 166 | (90) | Total production off balance sheet | 495 | 411 | 20 | ||||||||||||||
1 Includes income on off balance sheet type products. |
Page 9
AEGON The Netherlands
¨ | Operating earnings before tax increased 27% to EUR 118 million in the first six months of 2005 compared to the same period last year. The Netherlands represented 11% of operating earnings before tax generated by the country units. |
¨ | Total revenue generating investments increased 5% to EUR 61.1 billion compared to year-end 2004 levels. |
¨ | Standardized new life production increased 6% to EUR 125 million. |
¨ | Operating expenses increased 26% compared to the first six months of 2004 to EUR 393 million, primarily due to additions to provisions and the implementation of programs to enhance the service performance of the organization. |
Results
Operating earnings before tax totaled EUR 118 million in the first six months, a 27% increase compared to the same period in 2004. The increase in operating earnings primarily reflects higher investment income as well as improved underwriting results. These positive effects were partially offset by higher provisions. Additional provisions for guarantees reflecting adjustments to assumptions for interest rates amounted to EUR 71 million. In the first quarter of 2005 additional provisions for improvements to certain life products (“spaarkas”) amounted to EUR 35 million, to which a further EUR 6 million was added in the second quarter. Compared to the first six months of last year, additional provisions for equity lease products amounted to EUR 9 million in the first six months of 2005. Operating earnings before tax in the second quarter of 2005 amounted to EUR 89 million, a 75% increase over the comparable period last year.
Operating earnings include volatile items that are explained in more detail on page 12. These items contributed EUR 8 million to operating earnings in the first six months of 2004, compared to a contribution of EUR 44 million in the first six months of this year, of which EUR 59 million in the second quarter.
Net income, which includes net gains/losses on investments and impairment charges, more than doubled to EUR 594 million compared to EUR 287 million in the comparable period. Net gains/losses on investments amounted to EUR 730 million compared to EUR 267 million in the first six months of 2004. The increase is mainly due to the increase in market value of derivatives. The impairment charges of EUR 34 million primarily relate to charges for AEGON Germany booked in the first quarter. The sale of AEGON Germany was completed on July 14, 2005.
Net income for the second quarter amounted to EUR 426 million compared to EUR 173 million in the second quarter of 2004, the result of the higher operating earnings and higher net gains/losses on investments.
Traditional life / Life for account of policyholders
Standardized new life production increased 6% compared to the first six months of 2004 to EUR 125 million. This reflects solid performance in the group pension business, particularly in the first quarter, where a number of large contracts were closed. The prospects for institutional pension products look promising. However, individual life production continued to be challenging during the first half of the year, with lower mortgage related production and a decline in single premium production due to lower immediate annuity sales as a result of disciplined pricing.
Page 10
Operating earnings before tax for traditional life amounted to EUR 122 million, compared to EUR 16 million in the the same period last year. This reflects higher interest income from ALM swaps and improved technical results. The effect of valuation of derivatives and certain financial assets carried at fair value added EUR 39 million to operating earnings before tax compared to a contribution of EUR 8 million in the first six months of last year.
Operating earnings before tax from life for account of policyholders amounted to a loss of EUR 62 million, compared to a profit of EUR 19 million in the first six months of last year. This is largely due to additional provisions for guarantees and the addition to the provision for improvements related to “spaarkas” life insurance products.
The additional provisions for guarantees on the separate account and unit-linked business amounted to EUR 71 million in the second quarter. The largest part of the additional provision relates to the unit-linked business and reflects the effect of the strong decline in interest rates on the risk-neutral market value calculation of these guarantees.
Fee – off balance sheet products
Operating earnings before tax from fee business amounted to EUR 14 million, compared to the EUR 22 million achieved in the first six months of 2004. This mainly reflects higher personnel costs at the distribution units. Off balance sheet production increased 20% to EUR 495 million, reflecting growth in asset-only group pension contracts in the first quarter.
Non-life insurance
Accident and health operating earnings before tax increased to EUR 28 million compared to EUR 9 million in the first six months of 2004. Disability products and sick leave coverage generated improved results due to a favorable claims experience. Accident and health premiums increased 6% compared to the first six months of 2004 to EUR 131 million. The increase in premium income reflects growth of the in-force portfolio following the strong production in 2004, created by the withdrawal of the government from the sick leave and disability for self employed markets.
General insurance operating earnings before tax increased 11% to EUR 20 million. In particular Fire continued to perform well, with low claims experience and low lapse rates, while Motor results also improved. General insurance premiums were essentially stable at EUR 260 million.
Banking activities
Operating earnings before tax from banking activities amounted to a loss of EUR 4 million, compared to a profit of EUR 9 million in the first six months of 2004. In consideration of the ‘Duisenberg’ formula, and after a thorough review of its provisions for lease products, AEGON added EUR 9 million to its provisions. Savings account balances amounted to EUR 5.5 billion, unchanged from year-end 2004.
Commission and expenses
Commissions and expenses of EUR 580 million was 10% higher than in the first six months of 2004. Operating expenses amounted to EUR 393 million, 26% higher than in the comparable period. This is primarily due to additions to a number of non recurring items, such as the additional provisions for product improvements related to certain life products and additional provisions for equity lease products. Excluding these effects, operating expenses were up around 4% reflecting investments made in the service performance of the organization and costs to handle the “spaarkas” and lease product improvements.
Page 11
Impact of volatile items in the Netherlands
Operating earnings before tax on an IFRS basis are generally expected to be more volatile than income before realized gains and losses on shares and real estate reported on the previous DAP basis for the Netherlands. In particular, there are two items that are expected to create significant short-term volatility due to the fair value nature of the underlying valuation. In aggregate, these items contributed EUR 8 million to operating earnings in the first six months of 2004, compared to EUR 44 million in the first six months of this year. These items are as follows:
Derivatives used in portfolio allocation: AEGON The Netherlands uses derivatives to manage the asset allocation of its investment portfolio. These derivatives are carried at fair value with no offsetting changes in the fair value of liabilities. The valuation of these derivatives contributed a negative EUR 9 million to operating earnings before tax in the first six months of 2004, compared to a negative EUR 7 million this year.
Asset valuation – certain financial assets, such as an investment in a private equity fund, are carried at fair value with no offsetting changes in the fair value of liabilities. As of June 30, 2005, these assets totaled EUR 208 million. This item contributed EUR 17 million to operating earnings before tax in the first six months of 2004, compared to EUR 35 million in the first six months of this year. Other investments at fair value had an impact on the second quarter results of EUR 16 million.
Please refer to page 24 for an overview of the effects of the above-mentioned volatile items on operating earnings by product line.
Page 12
United Kingdom
amounts in millions
GBP | GBP | EUR | ||||||||||||||||||||||||
Second quarter | First six months | First six months | ||||||||||||||||||||||||
2005 | 2004 | % | 2005 | 2004 | % | 2005 | 2004 | % | ||||||||||||||||||
Income by product segment | ||||||||||||||||||||||||||
0 | 0 | 0 | Traditional life | 1 | (5 | ) | 2 | (7 | ) | |||||||||||||||||
32 | 27 | 19 | Life for account of policyholders | 64 | 52 | 23 | 94 | 78 | 21 | |||||||||||||||||
1 | 0 | 0 | Fee - off balance sheet products | 2 | 1 | 100 | 3 | 1 | ||||||||||||||||||
30 | (5 | ) | Other1 | 38 | 6 | 55 | 8 | |||||||||||||||||||
63 | 22 | 186 | Operating earnings before tax | 105 | 54 | 94 | 154 | 80 | 93 | |||||||||||||||||
2 | 0 | Net gains/losses on investments | 4 | 0 | 6 | 0 | ||||||||||||||||||||
(1 | ) | 0 | Impairment charges | (1 | ) | 0 | (1 | ) | 0 | |||||||||||||||||
64 | 22 | 191 | Income before tax | 108 | 54 | 100 | 159 | 80 | 99 | |||||||||||||||||
(30 | ) | 5 | Corporation tax attributable to policyholder return | (38 | ) | (6 | ) | (55 | ) | (8 | ) | |||||||||||||||
34 | 27 | 26 | Income before corporation tax on shareholders return | 70 | 48 | 46 | 104 | 72 | 44 | |||||||||||||||||
0 | 0 | 0 | Share in profit/(loss) of associates | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
(7 | ) | (6 | ) | 17 | Corporation tax on shareholders return | (17 | ) | (10 | ) | 70 | (26 | ) | (16 | ) | 63 | |||||||||||
0 | 0 | 0 | Minority interests | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
27 | 21 | 29 | Net income | 53 | 38 | 39 | 78 | 56 | 39 | |||||||||||||||||
Revenues | ||||||||||||||||||||||||||
68 | 50 | 36 | Life general account single premiums | 112 | 85 | 32 | 164 | 126 | 30 | |||||||||||||||||
48 | 43 | 12 | Life general account recurring premiums | 91 | 79 | 15 | 133 | 118 | 13 | |||||||||||||||||
285 | 420 | (32) | Life policyholders account single premiums | 680 | 872 | (22) | 994 | 1,295 | (23) | |||||||||||||||||
306 | 286 | 7 | Life policyholders account recurring premiums | 606 | 578 | 5 | 885 | 859 | 3 | |||||||||||||||||
707 | 799 | (12) | Total gross premiums | 1,489 | 1,614 | (8) | 2,176 | 2,398 | (9) | |||||||||||||||||
373 | 359 | 4 | Investment income insurance activities | 770 | 742 | 4 | 1,124 | 1,103 | 2 | |||||||||||||||||
42 | 29 | 45 | Fees and commissions | 75 | 57 | 32 | 109 | 85 | 28 | |||||||||||||||||
1,122 | 1,187 | (5) | Total revenues | 2,334 | 2,413 | (3) | 3,409 | 3,586 | (5) | |||||||||||||||||
1,534 | 299 | Other operating income | 2,023 | 568 | 2,955 | 845 | ||||||||||||||||||||
2,656 | 1,486 | 79 | Revenues and operating income | 4,357 | 2,981 | 46 | 6,364 | 4,431 | 44 | |||||||||||||||||
2 | 1 | 100 | Other income | 4 | 1 | 6 | 1 | |||||||||||||||||||
2,658 | 1,487 | 79 | Total revenues and other income | 4,361 | 2,982 | 46 | 6,370 | 4,432 | 44 | |||||||||||||||||
126 | 109 | 16 | Commissions and expenses | 242 | 222 | 9 | 354 | 330 | 7 | |||||||||||||||||
Standardized new premium productioninsurance2 | ||||||||||||||||||||||||||
741 | 644 | 15 | Life single premiums | 1,367 | 1,368 | (0) | 1,996 | 2,033 | (2) | |||||||||||||||||
103 | 92 | 12 | Life recurring premiums annualized | 184 | 196 | (6) | 269 | 291 | (8) | |||||||||||||||||
177 | 156 | 13 | Life total recurring plus 1/10 single | 321 | 333 | (4) | 469 | 494 | (5) | |||||||||||||||||
Off balance sheet production
| ||||||||||||||||||||||||||
589 | 33 | Mutual funds and other managed assets | 669 | 59 | 977 | 87 | ||||||||||||||||||||
589 | 33 | Total production off balance sheet | 669 | 59 | 977 | 87 | ||||||||||||||||||||
1 Other is currently used to report charges made to policyholders in respect of corporation tax. There is an equal and opposite tax charge which is reported in the line Corporation tax attributable to policyholder return. 2 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. |
Page 13
AEGON UK
¨ | Operating earnings before tax increased 94% compared to the first six months of 2004 to GBP 105 million and 40% when excluding the effects of corporation tax attributable to policyholders. The United Kingdom accounted for 14% of operating earnings before tax generated by the country units. |
¨ | Total revenue generating investments increased 7% to GBP 38.5 billion compared to year-end 2004 levels. |
¨ | Standardized new life production decreased by 4% to GBP 321 million compared to the first six months of 2004. Standardized new life production in the second quarter increased 13% compared to the second quarter of 2004 and 23% compared to the first quarter of 2005. |
¨ | Operating expenses decreased 4% compared to the first six months of 2004 to GBP 174 million. |
Results
Operating earnings before tax totaled GBP 105 million in the first six months, a 94% rise compared to the same period in 2004. Included in operating earnings are charges made to policyholders in respect of corporation tax, which are offset by an equal and directly related tax amount not included in operating earnings. When excluding the corporation tax attributable to policyholders, operating earnings before tax increased by 40%. This is a more meaningful indicator of business performance. Net income, which includes net gains/losses on investments, impairment charges and corporation tax on the shareholders return, increased 39% to GBP 53 million.
The increase in operating earnings primarily reflects the positive effect of the higher equity and bond markets on policy fee income and higher mortality/morbidity results in annuity and term business. The comparable period in 2004 included a GBP 5 million restructuring charge, which was booked in the first quarter of that year.
Operating earnings before tax in the second quarter of 2005 amounted to GBP 63 million, a 186% increase over the comparable period last year. When excluding the corporation tax attributable to policyholders, operating earnings before tax increased by 22%. Net income for the period increased 29% to GBP 27 million.
Traditional life / Life for account of policyholders
Standardized new life production decreased 4% compared to the first six months of 2004, mainly reflecting pricing and commission changes made throughout 2004 in our core pensions markets. AEGON UK further reduced commission on both group pensions in early 2005 and individual pensions business in late 2004. These moves especially impacted production in the first quarter. Standardized new life production in the second quarter increased 13% compared to the second quarter of 2004 and 23% compared to the first quarter of 2005. In the second quarter, AEGON UK has achieved solid growth in onshore bonds and group risk.
Operating earnings before tax for traditional life amounted to GBP 1 million, compared to a loss of GBP 5 million in the first six months of 2004. This reflects higher profits on annuity and term business on the back of improved mortality/morbidity results, while the first quarter of 2004 included a GBP 5 million restructuring charge.
Operating earnings before tax from life for account of policyholders was GBP 64 million, an increase of 23% compared to the first six months last year. This mainly reflects the impact of the higher equity and bond market on policyholder fee income.
Page 14
Fee – off balance sheet products
Operating earnings before tax from the fee business segment amounted to GBP 2 million. Positive Solutions had a strong first six months with a marked increase in the number of RI’s (Registered Individual) and their productivity. In the first half of the year, Origen entered into a partnership with Resolution Life Group to provide financial advice to those of their three million policyholders who want our advice. Initial results from the pilot have been encouraging. In asset management, AEGON UK saw strong performance in retail and institutional sales, with retail fund sales in the first half exceeding full year 2004 sales. Total off balance sheet production amounted to GBP 669 million compared to GBP 59 million in the first half of last year.
Commission and expenses
Commissions and expenses rose 9% to GBP 242 million. This reflects lower operating expenses, offset by growth in the distribution businesses. Operating expenses declined 4% to GBP 174 million as a result of the restructuring program.
Page 15
Other countries
amounts in millions
EUR | EUR | |||||||||||||||||||
Second quarter | First six months | |||||||||||||||||||
2005 | 2004 | % | 2005 | 2004 | % | |||||||||||||||
Income by product segment | ||||||||||||||||||||
6 | 8 | (25) | Traditional life | 9 | 12 | (25) | ||||||||||||||
0 | 2 | (100) | Life for account of policyholders | 1 | 3 | (67) | ||||||||||||||
1 | 2 | (50) | Fee-off balance sheet products | 1 | 4 | (75) | ||||||||||||||
1 | 2 | (50) | Accident and health insurance | 1 | 4 | (75) | ||||||||||||||
8 | 11 | (27) | General insurance | 15 | 25 | (40) | ||||||||||||||
(2 | ) | 0 | Other | (2 | ) | 0 | ||||||||||||||
14 | 25 | (44) | Operating earnings before tax | 25 | 48 | (48) | ||||||||||||||
1 | 2 | (50) | Net gains/losses on investments | 6 | 7 | (14) | ||||||||||||||
(16 | ) | 0 | Non recurring income/expense items | 176 | 0 | |||||||||||||||
(1 | ) | 27 | (104) | Income before tax | 207 | 55 | ||||||||||||||
5 | 1 | Share in profit/(loss) of associates | 8 | 2 | ||||||||||||||||
1 | (7 | ) | (114) | Corporation tax | (33 | ) | (14 | ) | 136 | |||||||||||
5 | 21 | (76) | Net income | 182 | 43 | |||||||||||||||
Revenues | ||||||||||||||||||||
4 | 7 | (43) | Life general account single premiums | 9 | 11 | (18) | ||||||||||||||
299 | 130 | 130 | Life general account recurring premiums | 443 | 239 | 85 | ||||||||||||||
3 | 1 | Life policyholders account single premiums | 11 | 4 | 175 | |||||||||||||||
32 | 27 | 19 | Life policyholders account recurring premiums | 62 | 52 | 19 | ||||||||||||||
338 | 165 | 105 | Total life insurance gross premiums | 525 | 306 | 72 | ||||||||||||||
13 | 18 | (28) | Accident and health insurance | 39 | 49 | (20) | ||||||||||||||
31 | 92 | (66) | General insurance | 65 | 182 | (64) | ||||||||||||||
382 | 275 | 39 | Total gross premiums | 629 | 537 | 17 | ||||||||||||||
40 | 38 | 5 | Investment income insurance activities | 75 | 69 | 9 | ||||||||||||||
4 | 4 | 0 | Fees and commissions | 9 | 7 | 29 | ||||||||||||||
426 | 317 | 34 | Total revenues | 713 | 613 | 16 | ||||||||||||||
19 | 7 | 171 | Other operating income | 32 | 27 | 19 | ||||||||||||||
445 | 324 | 37 | Revenues and operating income | 745 | 640 | 16 | ||||||||||||||
(14 | ) | 2 | Other income | 182 | 8 | |||||||||||||||
431 | 326 | 32 | Total revenues and other income | 927 | 648 | 43 | ||||||||||||||
67 | 71 | (6) | Commissions and expenses | 126 | 141 | (11) | ||||||||||||||
Standardized new premium productioninsurance | ||||||||||||||||||||
9 | 7 | 29 | Life single premiums | 20 | 14 | 43 | ||||||||||||||
190 | 43 | Life recurring premiums annualized | 281 | 109 | 158 | |||||||||||||||
191 | 43 | Life total recurring plus 1/10 single | 283 | 110 | 157 | |||||||||||||||
Gross deposits | ||||||||||||||||||||
1 | 1 | 0 | Variable annuities | 2 | 1 | 100 | ||||||||||||||
1 | 1 | 0 | Total production on balance sheet | 2 | 1 | 100 | ||||||||||||||
Off balance sheet production | ||||||||||||||||||||
49 | 44 | 11 | Mutual funds and other managed assets | 159 | 87 | 83 | ||||||||||||||
49 | 44 | 11 | Total production off balance sheet | 159 | 87 | 83 |
Page 16
Other countries
¨ | Operating earnings before tax amounted to EUR 25 million compared to EUR 48 million in the first six months of 2004. Other countries accounted for 2% of operating earnings before tax generated by the country units. |
¨ | Total revenue generating investments increased 10% to EUR 4.3 billion compared to year-end 2004 levels. |
¨ | Standardized new life production increased 157% to EUR 283 million. |
¨ | Operating expenses increased 2% compared to the first six months of 2004 and amounted to EUR 62 million. |
Results
Operating earnings before tax in Other countries amounted to EUR 25 million compared to EUR 48 million in the first six months of 2004. The decrease reflects primarily the lower contribution to operating earnings from Spain due to the sale of the general insurance activities as of January 1, 2005. In the first six months of 2004 operating earnings from these activities amounted to EUR 20 million. Higher operating earnings in Hungary partially offset the decrease. Start-up losses were higher than the prior year due to the new venture in the Czech Republic and the start of a pension fund business in Slovakia. Net income, which includes net gains/losses on investments and the gain of EUR 176 million on the sale of the general insurance activities in Spain, amounted to EUR 182 million compared to EUR 43 million in the first six months of 2004. Net gains on investments amounted to EUR 6 million, compared to EUR 7 million in the first six months of the prior year.
On December 30, 2004, AEGON N.V. announced that it had entered into an agreement to sell AEGON Seguros Generales, its general insurance subsidiary in Spain, to Italian mutual insurance company Reale Mutua Group effective January 1, 2005. The final book gain on this transaction amounted to EUR 176 million on a pre-tax basis, as opposed to EUR 192 million initially reported in the first quarter of 2005. The final calculation of the assets divested resulted in a higher book value than previously assumed. This item has been included in non-recurring income.
In China, AEGON-CNOOC completed its Beijing branch registration on April 1, 2005. Since launching AEGON-CNOOC’s headquarters in Shanghai in May 2003, Beijing is the first branch office in China. In addition, on June 7, 2005 AEGON-CNOOC announced that it received a license from the regulatory authorities to start life insurance activities in Nanjing. This license makes AEGON-CNOOC an early foreign entrant into the Nanjing insurance market and the province of Jiangsu, one of the fastest growing and most developed provinces of China.
Traditional life/ Life for account of policyholders
New life production in Taiwan in the first six months of 2005 increased 217% compared to the same period in 2004 to NTD 10.7 billion (EUR 264 million). Most of the new business growth was derived from the brokerage and bank channels. Production in the second quarter was exceptionally high as sales increased sharply before commissions on certain whole life products were decreased. The adjustment follows revised reserving requirements mandated by the regulator that apply retroactively as of the beginning of 2005. Total gross premiums increased 115% to NTD 15,427 million (EUR 382 million) for the first six months of 2005 from the NTD 7,178 million (EUR 176 million) reported for the same period of 2004, mainly due to growth in new business of recurring traditional life.
In Hungary, standardized new life production declined 20% to HUF 2 billion (EUR 8 million), compensated by growth of the pension fund management business.
In Spain, standardized new life production amounted to EUR 9 million compared to EUR 15 million in the first six months of 2004. This reflects the cancellation of a collaboration agreement with a large
Page 17
agent and the slow down of production from general insurance agents as a consequence of the sale of the non-life activities. Measures are being implemented that are expected to restore production levels through this channel. The partnership with CAM continued to develop favorably, generating premium income of EUR 305 million and standardized new life production of EUR 128 million in the first six months of the year. The partnership with CAM is not consolidated in AEGON’s accounts and AEGON includes its share in the results of the partnership in the lineshare in profit / (loss) of associates.
Total life insurance operating earnings before tax from Other countries amounted to EUR 10 million compared to EUR 15 million in the first six months of 2004, mainly reflecting decreased results from traditional life in Hungary and start-up costs in new operations.
Fee - off balance sheet products
In Hungary, off balance sheet deposits increased 76% to HUF 39.0 billion (EUR 158 million), mainly reflecting increased pension fund deposits. The number of pension fund members increased to 565 thousand. Off balance sheet investments grew by 57% to HUF 242 billion (EUR 979 million) compared to the end of June, 2004 and increased 23% compared to the year-end 2004 level.
Total fee - off balance sheet operating earnings before tax from Other countries amounted to EUR 1 million, with solid growth in the profitability of the Hungarian operations offset by start-up costs of the Slovakian pension business.
Non-life insurance
In Hungary, non-life premium income increased by 13% to HUF 16.1 billion (EUR 65 million) mainly as a result of successful expansion of the car insurance portfolio and growth in household insurance. Following the sale of the general insurance activities, non-life premiums in Spain now only include health insurance. Excluding the general insurance premiums, non-life premiums in Spain increased 7% to EUR 38 million.
Non-life operating earnings before tax amounted to EUR 16 million compared to EUR 29 million in the same period last year.
Commission and expenses
Commission and expenses decreased 11% to EUR 126 million. Operating expenses increased 2% compared to the first six months of 2004 to EUR 62 million.
Associates
AEGON’s share in the profit of associates amounted to EUR 8 million, compared to EUR 2 million in the first six months of 2004. This line represents the income on the partnership with CAM (49.99% interest), which became operational in June, 2004. It also includes the income on the 35% stake in La Mondiale Participation (20% in the comparable period).
Page 18
Condensed consolidated balance sheets
amounts in millions
At June 30 2005 USD | At Dec.31 2004 USD | % | At June 30 2004 USD | At June 30 2004 EUR | | At June 30 2005 EUR | | At Dec.31 2004 EUR | | % | |||||||||||
173,798 | 176,485 | (2) | Investments | 163,045 | 134,138 | 143,730 | 129,568 | 11 | |||||||||||||
138,460 | 140,398 | (1) | Investments for account of policyholders | 126,256 | 103,872 | 114,505 | 103,075 | 11 | |||||||||||||
634 | 669 | (5) | Investments in associates | 373 | 307 | 524 | 491 | 7 | |||||||||||||
49,427 | 49,473 | (0) | Other assets and receivables | 44,633 | 36,720 | 40,876 | 36,321 | 13 | |||||||||||||
362,319 | 367,025 | (1) | Total assets | 334,307 | 275,037 | 299,635 | 269,455 | 11 | |||||||||||||
22,252 | 20,347 | 9 | Total shareholders’ equity | 17,041 | 14,020 | 18,402 | 14,938 | 23 | |||||||||||||
173 | 173 | 0 | Minority interest third parties | 139 | 114 | 143 | 127 | 13 | |||||||||||||
2,648 | 1,794 | 48 | Junior perpetual capital securities | 0 | 0 | 2,190 | 1,317 | 66 | |||||||||||||
1,834 | 2,066 | (11) | Perpetual cumulative subordinated bonds | 1,844 | 1,517 | 1,517 | 1,517 | 0 | |||||||||||||
26,907 | 24,380 | 10 | Group equity | 19,024 | 15,651 | 22,252 | 17,899 | 24 | |||||||||||||
515 | 515 | 0 | Trust pass-through securities | 515 | 424 | 426 | 378 | 13 | |||||||||||||
337 | 346 | (3) | Subordinated loans | 560 | 461 | 279 | 254 | 10 | |||||||||||||
1,831 | 3,092 | (41) | Senior debt related to insurance activities | 4,278 | 3,519 | 1,514 | 2,270 | (33) | |||||||||||||
29,590 | 28,333 | 4 | Total capital base | 24,377 | 20,055 | 24,471 | 20,801 | 18 | |||||||||||||
109,694 | 111,864 | (2) | Insurance contracts | 106,252 | 87,414 | 90,716 | 82,126 | 10 | |||||||||||||
81,694 | 83,008 | (2) | Insurance contracts for account of policyholders | 74,697 | 61,454 | 67,560 | 60,941 | 11 | |||||||||||||
46,458 | 46,164 | 1 | Investment contracts | 45,062 | 37,073 | 38,420 | 33,892 | 13 | |||||||||||||
63,329 | 62,649 | 1 | Investment contracts for account of policyholders | 55,063 | 45,301 | 52,373 | 45,994 | 14 | |||||||||||||
31,554 | 35,007 | (10) | Other liabilities | 28,856 | 23,740 | 26,095 | 25,701 | 2 | |||||||||||||
362,319 | 367,025 | (1) | Total equity and liabilities | 334,307 | 275,037 | 299,635 | 269,455 | 11 | |||||||||||||
Shareholders’ equity roll forward
| amounts in millions
| ||||||||||||||||||||
At June 30 2005 USD | At Dec.31 2004 USD | At June 30 2004 USD | At June 30 2004 EUR | | At June 30 2005 EUR | | At Dec.31 2004 EUR | | |||||||||||||
Shareholders’ equity January 1 | 13,330 | 14,938 | 13,330 | ||||||||||||||||||
Net income | 1,077 | 1,426 | 2,259 | ||||||||||||||||||
Dividend paid | (233 | ) | (169 | ) | (351 | ) | |||||||||||||||
Change in foreign currency translation reserve | 437 | 1,190 | (685 | ) | |||||||||||||||||
Repurchased and sold own shares | 54 | 71 | 27 | ||||||||||||||||||
Change fair value reserve | (633 | ) | 875 | 473 | |||||||||||||||||
Coupons on perpetuals (net of tax) | (36 | ) | (59 | ) | (84 | ) | |||||||||||||||
Other changes | 24 | 130 | (31 | ) | |||||||||||||||||
22,252 | 20,347 | Shareholders’ equity end of period | 17,041 | 14,020 | 18,402 | 14,938 | |||||||||||||||
Additional balance sheet information | amounts in millions
| ||||||||||||||||||||
At June 30 2005 USD | At Dec.31 2004 USD | % | At June 30 2004 USD | At June 30 2004 EUR | | At June 30 2005 EUR | | At Dec.31 2004 EUR | | % | |||||||||||
Assets | |||||||||||||||||||||
10,421 | 10,594 | (2) | Deferred policy acquisition costs | 10,860 | 8,935 | 8,618 | 7,778 | 11 | |||||||||||||
Equity | |||||||||||||||||||||
2,551 | 2,874 | (11) | Preferred shares | 2,562 | 2,108 | 2,110 | 2,110 | 0 | |||||||||||||
3,788 | 3,076 | 23 | Fair value reserve | 1,339 | 1,102 | 3,133 | 2,258 | 39 | |||||||||||||
Liabilities | |||||||||||||||||||||
53,325 | 54,487 | (2) | Fixed annuities | 54,891 | 45,159 | 44,099 | 40,002 | 10 | |||||||||||||
32,370 | 31,098 | 4 | Institutional guaranteed products | 30,830 | 25,364 | 26,770 | 22,831 | 17 | |||||||||||||
44,692 | 44,439 | 1 | Variable annuities | 41,506 | 34,147 | 36,960 | 32,625 | 13 | |||||||||||||
6,704 | 7,517 | (11) | Savings accounts | 7,091 | 5,834 | 5,544 | 5,519 | 0 |
Page 19
REPORT OF THE HOLDING COMPANY
Capital and funding
Shareholders’ equity at June 30, 2005 amounted to EUR 18.4 billion, an increase of EUR 3.5 billion or 23% compared to December 31, 2004. The main items positively impacting shareholders’ equity were net income of EUR 1,426 million, currency exchange rate effects of EUR 1,190 million and an increase in the fair value reserve of EUR 875 million.
At June 30, 2005 shareholders’ equity represented 75% of the total capital base, comfortably within target levels. Group equity, which includes perpetual capital securities and minority interests, represented 91% of the total capital base at June 30, 2005.
Dividend
An interim dividend of EUR 0.22 per common share has been declared, a 5% increase compared to the interim dividend of the previous year. 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. The record date for AEGON’s shares listed on the Euronext Amsterdam and the New York Stock Exchange is August 12, 2005 and August 17, 2005 respectively. AEGON shares will be quoted ex-dividend on August 15, 2005. The election period will run from August 15 up to and including September 12, 2005. The stock fraction will be based on the average share price on Euronext Amsterdam from September 13 through September 19, 2005. The dividend will be payable as of September 23, 2005.
Interest charges and other
Interest rate charges and other amounted to EUR 149 million in the first half of 2005, a EUR 3 million increase compared to the same period in 2004.
Subsequent events
On July 14, AEGON completed the sale of its German subsidiary, AEGON Lebensversicherungs-AG, which operates under the name MoneyMaxx, to Deutscher Ring. The agreement on the sale was announced on April 15, 2005.
On July 21, AEGON-CNOOC Life Insurance Company Ltd., the 50/50 joint venture of AEGON with China National Offshore Oil Corporation (CNOOC), announced that it had signed national cooperation agreements with two leading banks in the Peoples Republic of China: the Industrial and Commercial Bank of China (ICBC) and the Bank of Communications (BoCom). These agreements will give AEGON-CNOOC the opportunity to provide a broad range of life insurance and accident and supplemental health insurance products to the customer bases of both ICBC and BoCom. These national agreements with ICBC and BoCom strengthen AEGON-CNOOC’s range of distribution channels that includes banks, agents, brokers and direct marketing and will support the company’s geographic expansion across the Peoples Republic of China.
On July 25, AEGON reached an agreement with Spanish savings bank Caja de Badajoz to establish a 50-50 life insurance joint venture to sell life insurance, accident and pension products through the branch network of Caja de Badajoz. Caja de Badajoz will provide the joint venture exclusive access to its network of 200 branches. AEGON will contribute its insurance expertise. In addition, the joint venture will make use of the back office capabilities of AEGON’s existing platform in Spain.
Page 20
Summarized consolidated income statements
amounts in millions | ||||||||||||||||||||||||||
USD | EUR | EUR | ||||||||||||||||||||||||
First six months | Second quarter | First six months | ||||||||||||||||||||||||
2005 | 2004 | % | 2005 | 2004 | % | 2005 | 2004 | % | ||||||||||||||||||
18,904 | 17,830 | 6 | Revenues | 6,842 | 6,995 | (2) | 14,701 | 14,531 | 1 | |||||||||||||||||
5,930 | 3,244 | 83 | Other operating income | 3,376 | 519 | 4,612 | 2,644 | 74 | ||||||||||||||||||
24,834 | 21,074 | 18 | Revenues and operating income | 10,218 | 7,514 | 36 | 19,313 | 17,175 | 12 | |||||||||||||||||
1,339 | 663 | 102 | Other income | 527 | 134 | 1,041 | 541 | 92 | ||||||||||||||||||
26,173 | 21,737 | 20 | Total revenues and other income | 10,745 | 7,648 | 40 | 20,354 | 17,716 | 15 | |||||||||||||||||
23,173 | 18,870 | 23 | Benefits and expenses | 10,292 | 6,617 | 56 | 18,021 | 15,379 | 17 | |||||||||||||||||
448 | 1,022 | (56) | Other operating charges | (581 | ) | 444 | 348 | 833 | (58) | |||||||||||||||||
23,621 | 19,892 | 19 | Benefits, expenses and operating charges | 9,711 | 7,061 | 38 | 18,369 | 16,212 | 13 | |||||||||||||||||
7 | 69 | (90) | Other charges | (24 | ) | 32 | 6 | 56 | (89) | |||||||||||||||||
23,628 | 19,961 | 18 | Total benefits, expenses and other charges | 9,687 | 7,093 | 37 | 18,375 | 16,268 | 13 | |||||||||||||||||
2,545 | 1,776 | 43 | Income before tax | 1,058 | 555 | 91 | 1,979 | 1,448 | 37 | |||||||||||||||||
10 | 16 | (38) | Share in profit/(loss) of associates | 5 | 12 | (58) | 8 | 13 | (38) | |||||||||||||||||
(716 | ) | (471 | ) | 52 | Corporation tax | (300 | ) | (122 | ) | 146 | (557 | ) | (384 | ) | 45 | |||||||||||
1,839 | 1,321 | 39 | Income after tax | 763 | 445 | 71 | 1,430 | 1,077 | 33 | |||||||||||||||||
(5 | ) | 0 | Minority interests | (3 | ) | (1 | ) | (4 | ) | 0 | ||||||||||||||||
1,834 | 1,321 | 39 | Net income | 760 | 444 | 71 | 1,426 | 1,077 | 32 | |||||||||||||||||
24,834 | 21,074 | 18 | Revenues and operating income | 10,218 | 7,514 | 36 | 19,313 | 17,175 | 12 | |||||||||||||||||
23,621 | 19,892 | 19 | Benefits, expenses and operating charges | 9,711 | 7,061 | 38 | 18,369 | 16,212 | 13 | |||||||||||||||||
1,213 | 1,182 | 3 | Operating earnings before tax | 507 | 453 | 12 | 944 | 963 | (2) |
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.Variable annuities includes segregated funds.
Institutional guaranteed products includes income on GICs and funding agreements.
Fee business includes income on off balance sheet type products.
Otheris currently used to report any exceptional items which cannot be directly allocated to a specific line of business.
Currencies
Income statement items: average rate 1 EUR = USD 1.2859 (2004: USD 1.2270).
Balance sheet items: closing rate 1 EUR = USD 1.2092 (2004: USD 1.2155; year-end 2004: USD 1.3621).
Page 21
Revenues and production
amounts in millions | ||||||||||||||||||||||||||
USD | EUR | EUR | ||||||||||||||||||||||||
First six months | Second quarter | First six months | ||||||||||||||||||||||||
2005 | 2004 | % | 2005 | 2004 | % | 2005 | 2004 | % | ||||||||||||||||||
Revenues | ||||||||||||||||||||||||||
928 | 1,150 | (19) | Life general account single premiums | 355 | 515 | (31) | 722 | 937 | (23) | |||||||||||||||||
3,831 | 3,293 | 16 | Life general account recurring premiums | 1,483 | 1,271 | 17 | 2,979 | 2,684 | 11 | |||||||||||||||||
2,130 | 1,882 | 13 | Life policyholders account single premiums | 562 | 704 | (20) | 1,656 | 1,534 | 8 | |||||||||||||||||
3,037 | 2,871 | 6 | Life policyholders account recurring premiums | 954 | 980 | (3) | 2,362 | 2,340 | 1 | |||||||||||||||||
9,926 | 9,196 | 8 | Total life insurance gross premiums | 3,354 | 3,470 | (3) | 7,719 | 7,495 | 3 | |||||||||||||||||
1,495 | 1,470 | 2 | Accident and health insurance | 558 | 580 | (4) | 1,163 | 1,198 | (3) | |||||||||||||||||
418 | 544 | (23) | General insurance | 148 | 204 | (27) | 325 | 443 | (27) | |||||||||||||||||
11,839 | 11,210 | 6 | Total gross premiums | 4,060 | 4,254 | (5) | 9,207 | 9,136 | 1 | |||||||||||||||||
6,067 | 5,500 | 10 | Investment income | 2,398 | 2,272 | 6 | 4,718 | 4,482 | 5 | |||||||||||||||||
882 | 821 | 7 | Fees and commission income | 349 | 348 | 0 | 686 | 669 | 3 | |||||||||||||||||
59 | 66 | (11) | Income from banking activities (spread) | 18 | 24 | (25) | 46 | 54 | (15) | |||||||||||||||||
18,847 | 17,597 | 7 | Total revenues business units | 6,825 | 6,898 | (1) | 14,657 | 14,341 | 2 | |||||||||||||||||
57 | 233 | (76) | Other revenues | 17 | 97 | (82) | 44 | 190 | (77) | |||||||||||||||||
18,904 | 17,830 | 6 | Total revenues | 6,842 | 6,995 | (2) | 14,701 | 14,531 | 1 | |||||||||||||||||
5,930 | 3,244 | 83 | Other operating income | 3,376 | 519 | 4,612 | 2,644 | 74 | ||||||||||||||||||
24,834 | 21,074 | 18 | Revenues and operating income | 10,218 | 7,514 | 36 | 19,313 | 17,175 | 12 | |||||||||||||||||
1,339 | 663 | 102 | Other income | 527 | 134 | 1,041 | 541 | 92 | ||||||||||||||||||
26,173 | 21,737 | 20 | Total revenues and other income | 10,745 | 7,648 | 40 | 20,354 | 17,716 | 15 | |||||||||||||||||
Revenues and operating income by product segment | ||||||||||||||||||||||||||
22,313 | 18,215 | 22 | Life insurance | 9,284 | 6,372 | 46 | 17,352 | 14,845 | 17 | |||||||||||||||||
1,914 | 1,934 | (1) | Accident and health insurance | 722 | 776 | (7) | 1,489 | 1,576 | (6) | |||||||||||||||||
458 | 590 | (22) | General insurance | 170 | 225 | (24) | 356 | 481 | (26) | |||||||||||||||||
59 | 66 | (11) | Banking activities | 18 | 24 | (25) | 46 | 54 | (15) | |||||||||||||||||
90 | 269 | (67) | Other activities | 24 | 117 | (79) | 70 | 219 | (68) | |||||||||||||||||
24,834 | 21,074 | 18 | Total revenues and operating income | 10,218 | 7,514 | 36 | 19,313 | 17,175 | 12 | |||||||||||||||||
Standardized new premium production insurance | ||||||||||||||||||||||||||
4,040 | 3,587 | 13 | Life single premiums | 1,458 | 1,371 | 6 | 3,142 | 2,923 | 7 | |||||||||||||||||
1,322 | 1,059 | 25 | Life recurring premiums annualized | 586 | 431 | 36 | 1,028 | 863 | 19 | |||||||||||||||||
1,726 | 1,418 | 22 | Life total recurring plus 1/10 single | 732 | 568 | 29 | 1,342 | 1,155 | 16 | |||||||||||||||||
Gross deposits | ||||||||||||||||||||||||||
1,025 | 1,656 | (38) | Fixed annuities | 415 | 686 | (40) | 797 | 1,350 | (41) | |||||||||||||||||
5,698 | 4,814 | 18 | Institutional guaranteed products | 2,008 | 1,999 | 0 | 4,431 | 3,923 | 13 | |||||||||||||||||
2,953 | 2,790 | 6 | Variable annuities | 1,131 | 1,030 | 10 | 2,297 | 2,274 | 1 | |||||||||||||||||
9,676 | 9,260 | 4 | Total | 3,554 | 3,715 | (4) | 7,525 | 7,547 | (0) | |||||||||||||||||
1,930 | 1,997 | (3) | Savings deposits | 641 | 1,080 | (41) | 1,501 | 1,628 | (8) | |||||||||||||||||
11,606 | 11,257 | 3 | Total production on balance sheet | 4,195 | 4,795 | (13) | 9,026 | 9,175 | (2) | |||||||||||||||||
Net deposits | ||||||||||||||||||||||||||
(2,496 | ) | (1,284 | ) | (94) | Fixed annuities | (1,031 | ) | (577 | ) | (79) | (1,941 | ) | (1,046 | ) | (86) | |||||||||||
724 | 1,187 | (39) | Institutional guaranteed products | 432 | 531 | (19) | 563 | 967 | (42) | |||||||||||||||||
409 | 485 | (16) | Variable annuities | 116 | 106 | 9 | 318 | 395 | (19) | |||||||||||||||||
(1,363 | ) | 388 | Total | (483 | ) | 60 | (1,060 | ) | 316 | |||||||||||||||||
(156 | ) | 26 | Savings deposits | 12 | 222 | (95) | (121 | ) | 21 | |||||||||||||||||
(1,519 | ) | 414 | Total net deposits | (471 | ) | 282 | (1,181 | ) | 337 | |||||||||||||||||
Off balance sheet production | ||||||||||||||||||||||||||
3,307 | 3,181 | 4 | Synthetic GICs | 1,364 | 1,387 | (2) | 2,572 | 2,593 | (1) | |||||||||||||||||
Mutual funds/Collective Trusts and | ||||||||||||||||||||||||||
8,050 | 6,607 | 22 | other managed assets | 2,842 | 2,432 | 17 | 6,260 | 5,385 | 16 | |||||||||||||||||
11,357 | 9,788 | 16 | Total production off balance sheet | 4,206 | 3,819 | 10 | 8,832 | 7,978 | 11 |
Page 22
Investments geographically
amounts in million EUR (unless otherwise stated)
Americas USD | United Kingdom GBP | At June 30, 2005 | Americas | The Netherlands | United Kingdom | Other countries | Total1 EUR | Total1 USD | ||||||||||
Investments | ||||||||||||||||||
2,311 | 377 | Shares | 1,911 | 5,109 | 560 | 38 | 7,599 | 9,189 | ||||||||||
105,085 | 1,886 | Bonds | 86,905 | 14,819 | 2,797 | 2,708 | 107,257 | 129,695 | ||||||||||
16,732 | 0 | Loans | 13,837 | 7,114 | 0 | 91 | 21,137 | 25,559 | ||||||||||
5,530 | 0 | Other financial assets | 4,573 | 901 | 0 | 35 | 5,510 | 6,662 | ||||||||||
399 | 0 | Investments in real estate | 330 | 1,663 | 0 | 1 | 1,994 | 2,411 | ||||||||||
176 | 0 | Real estate for own use | 146 | 20 | 0 | 33 | 233 | 282 | ||||||||||
130,233 | 2,263 | Investments general account | 107,702 | 29,626 | 3,357 | 2,906 | 143,730 | 173,798 | ||||||||||
52,112 | 34,745 | Investments for account of policyholders | 43,096 | 19,467 | 51,535 | 416 | 114,505 | 138,460 | ||||||||||
182,345 | 37,008 | Investments on balance sheet | 150,798 | 49,093 | 54,892 | 3,322 | 258,235 | 312,258 | ||||||||||
74,478 | 1,464 | Off balance sheet investments third parties | 61,593 | 12,054 | 2,172 | 986 | 76,805 | 92,873 | ||||||||||
256,823 | 38,472 | Investments | 212,391 | 61,147 | 57,064 | 4,308 | 335,040 | 405,131 | ||||||||||
Investments | ||||||||||||||||||
102,871 | 1,913 | Available for sale financial assets | 85,074 | 19,813 | 2,837 | 1,874 | 109,625 | 132,559 | ||||||||||
16,732 | 0 | Loans | 13,837 | 7,114 | 0 | 91 | 21,137 | 25,559 | ||||||||||
0 | 0 | Financial assets held-to-maturity | 0 | 0 | 0 | 905 | 905 | 1,094 | ||||||||||
62,166 | 34,279 | Financial assets at fair value through profit or loss | 51,411 | 20,483 | 50,845 | 418 | 123,131 | 148,890 | ||||||||||
399 | 734 | Investments in real estate | 330 | 1,663 | 1,088 | 1 | 3,082 | 3,727 | ||||||||||
177 | 82 | Real estate held for own use | 146 | 20 | 122 | 33 | 355 | 429 | ||||||||||
182,345 | 37,008 | Total investments | 150,798 | 49,093 | 54,892 | 3,322 | 258,235 | 312,258 |
1 Includes investments of holding and other activities.
Assets and capital geographically
amounts in million EUR (unless otherwise stated)
Americas USD | United Kingdom GBP | Americas | The Netherlands | United Kingdom | Other countries | Total EUR | Total USD | |||||||||||
At June 30, 2005 | ||||||||||||||||||
206,643 | 43,761 | Assets business units | 170,892 | 54,645 | 64,908 | 4,541 | 294,986 | 356,697 | ||||||||||
Other assets | 4,649 | 5,622 | ||||||||||||||||
Total assets on balance sheet | 299,635 | 362,319 | ||||||||||||||||
18,761 | 2,077 | Capital in units | 15,515 | 5,129 | 3,080 | 1,259 | 24,983 | 30,209 | ||||||||||
Total capital base | 24,471 | 29,590 | ||||||||||||||||
Other net liabilities | 512 | 619 | ||||||||||||||||
Total | 24,983 | 30,209 | ||||||||||||||||
At June 30, 2004 | ||||||||||||||||||
194,103 | 38,319 | Assets business units | 159,690 | 50,385 | 57,125 | 3,157 | 270,357 | 328,619 | ||||||||||
Other assets | 4,680 | 5,688 | ||||||||||||||||
Total assets on balance sheet | 275,037 | 334,307 | ||||||||||||||||
16,983 | 2,010 | Capital in units | 13,972 | 3,294 | 2,997 | 677 | 20,940 | 25,453 | ||||||||||
Total capital base | 20,055 | 24,377 | ||||||||||||||||
Other net liabilities | 885 | 1,076 | ||||||||||||||||
Total | 20,940 | 25,453 | ||||||||||||||||
At December 31, 2004 | ||||||||||||||||||
204,192 | 41,425 | Assets business units | 149,910 | 52,413 | 58,751 | 3,799 | 264,873 | 360,784 | ||||||||||
Other assets | 4,582 | 6,241 | ||||||||||||||||
Total assets on balance sheet | 269,455 | 367,025 | ||||||||||||||||
18,222 | 2,024 | Capital in units | 13,378 | 4,144 | 2,870 | 1,006 | 21,398 | 29,146 | ||||||||||
Total capital base | 20,801 | 28,333 | ||||||||||||||||
Other net liabilities | 597 | 813 | ||||||||||||||||
Total | 21,398 | 29,146 |
Page 23
Volatile items
Americas
amounts in millions
USD | USD | EUR | ||||||||||||||||||||||||
Second quarter | First six months | First six months | ||||||||||||||||||||||||
2005 | 2004 | % | 2005 | 2004 | % | 2005 | 2004 | % | ||||||||||||||||||
Asset valuation | ||||||||||||||||||||||||||
12 | (4 | ) | Traditional life | 14 | 9 | 56 | 11 | 7 | 57 | |||||||||||||||||
0 | 1 | (100) | Life for account of policyholders | 1 | 3 | (67) | 1 | 2 | (50) | |||||||||||||||||
17 | 2 | Fixed annuities | 22 | 31 | (29) | 17 | 25 | (32) | ||||||||||||||||||
1 | 0 | 0 | Variable annuities | 1 | 4 | (75) | 1 | 4 | (75) | |||||||||||||||||
11 | (8 | ) | Institutional guaranteed products | 18 | 19 | (5) | 14 | 16 | (13) | |||||||||||||||||
0 | 0 | 0 | Fee - off balance sheet products | 0 | 1 | (100) | 0 | 1 | (100) | |||||||||||||||||
2 | (3 | ) | Reinsurance | 2 | 1 | 100 | 2 | 1 | 100 | |||||||||||||||||
2 | 0 | 0 | Accident and health insurance | 3 | 4 | (25) | 2 | 3 | (33) | |||||||||||||||||
45 | (12 | ) | Total asset valuation | 61 | 72 | (15) | 48 | 59 | (19) | |||||||||||||||||
Total return annuity | ||||||||||||||||||||||||||
32 | (106 | ) | Fixed annuities | (11 | ) | (71 | ) | 85 | (9 | ) | (58 | ) | 84 | |||||||||||||
(20 | ) | 0 | Reinsurance | (9 | ) | 0 | (7 | ) | 0 | |||||||||||||||||
12 | (106 | ) | Total return annuity | (20 | ) | (71 | ) | 72 | (16 | ) | (58 | ) | 72 | |||||||||||||
Segregated funds | ||||||||||||||||||||||||||
(70 | ) | 37 | Variable annuities | (65 | ) | 64 | (51 | ) | 52 | |||||||||||||||||
(70 | ) | 37 | Total segregated funds | (65 | ) | 64 | (51 | ) | 52 | |||||||||||||||||
(13 | ) | (81 | ) | 84 | Total volatile items | (24 | ) | 65 | (19 | ) | 53 | |||||||||||||||
The Netherlands | ||||||||||||||||||||||||||
EUR | EUR | |||||||||||||||||||||||||
Second quarter | First six months | |||||||||||||||||||||||||
2005 | 2004 | % | 2005 | 2004 | % | |||||||||||||||||||||
Asset valuation | ||||||||||||||||||||||||||
36 | 4 | Traditional life | 43 | 14 | ||||||||||||||||||||||
7 | 1 | Life for account of policyholders | 8 | 3 | 167 | |||||||||||||||||||||
43 | 5 | Total asset valuation | 51 | 17 | ||||||||||||||||||||||
Derivatives | ||||||||||||||||||||||||||
14 | (9 | ) | Traditional life | (4 | ) | (6 | ) | 33 | ||||||||||||||||||
2 | (2 | ) | Life for account of policyholders | (1 | ) | (1 | ) | 0 | ||||||||||||||||||
0 | (1 | ) | Accident and health insurance | (1 | ) | (1 | ) | 0 | ||||||||||||||||||
0 | (1 | ) | General insurance | (1 | ) | (1 | ) | 0 | ||||||||||||||||||
16 | (13 | ) | Total derivatives | (7 | ) | (9 | ) | 22 | ||||||||||||||||||
59 | (8 | ) | Total volatile items | 44 | 8 |
Page 24
Disclaimer
AEGON’s balance sheets at January 1, 2004, December 31, 2004 and June 30, 2005, including shareholders’ equity at those dates, and the 2004 and 2005 quarterly results by line of business and by segment have been derived from accounting policies based on IFRS as at March 31, 2004 (referred to as the ‘stable platform’). These accounting policies, and consequently the information presented, may still change due to changes in IFRS up to December 31, 2005. Furthermore, additional review and analysis may cause key impacts to change. All information published in this press release is unaudited, may include roundings and has to be considered as preliminary information until AEGON publishes its 2005 financial statements.
Local currencies and constant currency exchange rates
This press release contains certain information about our results and financial condition in USD for the Americas, GBP for the United Kingdom, HUF for Hungary and NTD for Taiwan 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 and rapidly changing 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; |
¨ | The impact on our reported financial results and financial condition as a result of our adoption of International Financial Reporting Standards. |
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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 88 93 | |
gca-ir@aegon.com |
Baltimore, the United States
Analysts & Investors | +1 877 548 9668 (toll free) / +1 410 576 45 77 | |
Media | +1 410 576 45 26 | |
ir@aegonusa.com |
Website:www.aegon.com
Press conference
A press conference on the first six months of 2005 results will be held this morning at AEGON’s headquarters in the Hague at 11.30 am (local time). This press conference will be webcast live on AEGON’s homepage (www.aegon.com).
Analyst and investor conference call
An analyst and investor conference call on the first six months 2005 results will be held today at 15.00 CET (14.00 BST; 09.00 a.m. ET).
Thelisten-only phone numbers for the conference call are as follows:
+31 (0)20 796 5001 | (the Netherlands) | |
+44 (0)20 7154 2666 | (United Kingdom) | |
+1 866 864 9344 | (United States and Canada) |
Audio webcast
The conference call and Q&A session can be followed simultaneously via an audio webcast on our website: www.aegon.com.
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