Exhibit 99.1
Table of contents
CONDENSED CONSOLIDATED INCOME STATEMENT | P 2 | |
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | P 3 | |
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION | P 4 | |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | P 5 | |
CONDENSED CONSOLIDATED CASH FLOW STATEMENT | P 6 | |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS | P 7 |
Unaudited | ![]() | Page 1 |
CONDENSED CONSOLIDATED INCOME STATEMENT
EUR millions (except per share data) | Notes | Q1 2011 | Q1 2010 | |||||||||
Premium income | 4 | 6,277 | 6,163 | |||||||||
Investment income | 5 | 2,111 | 2,092 | |||||||||
Fee and commission income | 460 | 436 | ||||||||||
Other revenues | 2 | 1 | ||||||||||
Total revenues | 8,850 | 8,692 | ||||||||||
Income from reinsurance ceded | 430 | 480 | ||||||||||
Results from financial transactions | 6 | 1,113 | 6,292 | |||||||||
Other income | 7 | 37 | — | |||||||||
Total income | 10,430 | 15,464 | ||||||||||
Benefits and expenses | 8 | 9,859 | 14,800 | |||||||||
Impairment charges / (reversals) | 9 | 64 | 170 | |||||||||
Interest charges and related fees | 111 | 96 | ||||||||||
Other charges | 10 | 28 | — | |||||||||
Total charges | 10,062 | 15,066 | ||||||||||
Share in net result of associates | 5 | 10 | ||||||||||
Income / (loss) before tax | 373 | 408 | ||||||||||
Income tax (expense) / benefit | (46 | ) | (36 | ) | ||||||||
Net income / (loss) | 327 | 372 | ||||||||||
Net income / (loss) attributable to: | ||||||||||||
Equity holders of AEGON N.V. | 327 | 371 | ||||||||||
Non-controlling interests | — | 1 | ||||||||||
Earnings and dividend per share(EUR per share) | ||||||||||||
Earnings per share1 | (0.05 | ) | 0.19 | |||||||||
Diluted earnings per share1,2 | (0.05 | ) | 0.19 | |||||||||
Earnings per share after potential attribution to convertible core capital securities1,3 | — | 0.17 | ||||||||||
Diluted earnings per share after conversion of convertible core capital securities1,2 | — | 0.15 | ||||||||||
Dividend per common share | — | — | ||||||||||
Net income / (loss) per common share calculation | ||||||||||||
Net income / (loss) | 327 | 371 | ||||||||||
Coupons on perpetuals | (44 | ) | (47 | ) | ||||||||
Coupons and premium on convertible core capital securities | (375 | ) | — | |||||||||
Earnings attributable to common shareholders | (92 | ) | 324 | |||||||||
Potential coupon on convertible core capital securities | — | (42 | ) | |||||||||
Earnings after potential attribution to convertible core capital securities | (92 | ) | 282 | |||||||||
Weighted average number of common shares outstanding | 1,765 | 1,707 | ||||||||||
Weighted average number of common shares outstanding, after conversion of convertible core capital securities | — | 2,207 |
1 | After deduction of preferred dividend, coupons on perpetuals and coupons and premium on core capital securities. |
2 | The potential conversion of the convertible core capital securities is taken into account in the calculation of diluted earnings per share if this would have a dilutive effect (i.e. diluted earnings per share would be lower than the earnings after potential attribution to convertible core capital securities). |
3 | Reflect basic earnings per share. For Q1 2011, basic earnings per share is EUR (0.05). |
page 2 | Local knowledge. Global power. | Unaudited |
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
EUR millions | Q1 2011 | Q1 2010 | ||||||
Net income / (loss) | 327 | 372 | ||||||
Other comprehensive income: | ||||||||
Gains / (losses) on revaluation of available-for-sale investments | (200 | ) | 1,785 | |||||
(Gains) / losses transferred to the income statement on disposal and impairment of available-for-sale investments | (61 | ) | (20 | ) | ||||
Changes in revaluation reserve real estate held for own use | (1 | ) | 2 | |||||
Changes in cash flow hedging reserve | (87 | ) | 8 | |||||
Movement in foreign currency translation and net foreign investment hedging reserve | (880 | ) | 853 | |||||
Equity movements of associates | (8 | ) | 18 | |||||
Aggregate tax effect of items recognized in other comprehensive income | 100 | (578 | ) | |||||
Other | 1 | (9 | ) | |||||
Other comprehensive income for the period | (1,136 | ) | 2,059 | |||||
Total comprehensive income | (809 | ) | 2,431 | |||||
Total comprehensive income attributable to: | ||||||||
Equity holders of AEGON N.V. | (809 | ) | 2,428 | |||||
Non-controlling interests | — | 3 |
Unaudited | ![]() | page 3 |
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
EUR millions | Notes | Mar. 31, 2011 | Dec. 31, 2010 | |||||||||
ASSETS | ||||||||||||
Intangible assets | 11 | 4,153 | 4,359 | |||||||||
Investments | 12 | 136,991 | 143,188 | |||||||||
Investments for account of policyholders | 13 | 144,296 | 146,237 | |||||||||
Derivatives | 5,208 | 6,251 | ||||||||||
Investments in associates | 731 | 733 | ||||||||||
Reinsurance assets | 5,297 | 5,580 | ||||||||||
Deferred expenses and rebates | 14 | 11,514 | 11,948 | |||||||||
Other assets and receivables | 8,845 | 8,776 | ||||||||||
Cash and cash equivalents | 4,286 | 5,231 | ||||||||||
Total assets | 321,321 | 332,303 | ||||||||||
EQUITY AND LIABILITIES | ||||||||||||
Shareholders’ equity | 16,881 | 17,210 | ||||||||||
Convertible core capital securities | 16 | 750 | 1,500 | |||||||||
Other equity instruments | 4,706 | 4,704 | ||||||||||
Issued capital and reserves attributable to equity holders of AEGON N.V. | 22,337 | 23,414 | ||||||||||
Non-controlling interests | 11 | 11 | ||||||||||
Group equity | 22,348 | 23,425 | ||||||||||
Trust pass-through securities | 132 | 143 | ||||||||||
Subordinated borrowings | 16 | — | ||||||||||
Insurance contracts | 95,913 | 100,506 | ||||||||||
Insurance contracts for account of policyholders | 76,981 | 77,650 | ||||||||||
Investment contracts | 21,514 | 23,237 | ||||||||||
Investment contracts for account of policyholders | 68,619 | 69,527 | ||||||||||
Derivatives | 5,541 | 5,971 | ||||||||||
Borrowings | 17 | 8,576 | 8,518 | |||||||||
Other liabilities | 21,681 | 23,326 | ||||||||||
Total liabilities | 298,973 | 308,878 | ||||||||||
Total equity and liabilities | 321,321 | 332,303 | ||||||||||
page 4 | Local knowledge. Global power. | Unaudited |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
EUR millions | Share capital 2 | Retained earnings | Revaluation reserves | Other reserves | Convertible core capital securities | Other equity instruments | Issued capital and reserves1 | Non- controlling interests | Total | |||||||||||||||||||||||||||
Three months ended March 31, 2011 | ||||||||||||||||||||||||||||||||||||
At beginning of year | 8,184 | 9,421 | 958 | (1,353 | ) | 1,500 | 4,704 | 23,414 | 11 | 23,425 | ||||||||||||||||||||||||||
Net income recognized in the income statement | — | 327 | — | — | — | — | 327 | — | 327 | |||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||||
Gains / (losses) on revaluation of available-for-sale investments | — | — | (200 | ) | — | — | — | (200 | ) | — | (200 | ) | ||||||||||||||||||||||||
(Gains) / losses transferred to income statement on disposal and impairment of available-for-sale investments | — | — | (61 | ) | — | — | — | (61 | ) | — | (61 | ) | ||||||||||||||||||||||||
Changes in revaluation reserve real estate held for own use | — | — | (1 | ) | — | — | — | (1 | ) | — | (1 | ) | ||||||||||||||||||||||||
Changes in cash flow hedging reserve | — | — | (87 | ) | — | — | — | (87 | ) | — | (87 | ) | ||||||||||||||||||||||||
Movement in foreign currency translation and net foreign investment hedging reserves | — | — | — | (880 | ) | — | — | (880 | ) | — | (880 | ) | ||||||||||||||||||||||||
Equity movements of associates | — | — | — | (8 | ) | — | — | (8 | ) | — | (8 | ) | ||||||||||||||||||||||||
Aggregate tax effect of items recognized in other comprehensive income | — | — | 56 | 44 | — | — | 100 | — | 100 | |||||||||||||||||||||||||||
Other | — | 1 | — | — | — | — | 1 | — | 1 | |||||||||||||||||||||||||||
Total other comprehensive income | — | 1 | (293 | ) | (844 | ) | — | — | (1,136 | ) | — | (1,136 | ) | |||||||||||||||||||||||
Total comprehensive income for 2011 | — | 328 | (293 | ) | (844 | ) | — | — | (809 | ) | — | (809 | ) | |||||||||||||||||||||||
Shares issued | 913 | — | — | — | — | — | 913 | — | 913 | |||||||||||||||||||||||||||
Repurchase of convertible core capital securities | — | — | — | — | (750 | ) | — | (750 | ) | — | (750 | ) | ||||||||||||||||||||||||
Coupons on perpetuals | — | (44 | ) | — | — | — | — | (44 | ) | — | (44 | ) | ||||||||||||||||||||||||
Coupons and premium on convertible core capital securities | — | (375 | ) | — | — | — | — | (375 | ) | — | (375 | ) | ||||||||||||||||||||||||
Share options | — | — | — | — | — | 2 | 2 | — | 2 | |||||||||||||||||||||||||||
Other | — | (14 | ) | — | — | — | — | (141 | ) | — | (14 | ) | ||||||||||||||||||||||||
At end of period | 9,097 | 9,316 | 665 | (2,197 | ) | 750 | 4,706 | 22,337 | 11 | 22,348 | ||||||||||||||||||||||||||
Three months ended March 31, 2010 | ||||||||||||||||||||||||||||||||||||
At beginning of year | 8,184 | 7,995 | (1,709 | ) | (2,306 | ) | 2,000 | 4,709 | 18,873 | 10 | 18,883 | |||||||||||||||||||||||||
Net income / (loss) recognized in the income statement | — | 371 | — | — | — | — | 371 | 1 | 372 | |||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||||
Gains / (losses) on revaluation of available-for-sale investments | — | — | 1,785 | — | — | — | 1,785 | — | 1,785 | |||||||||||||||||||||||||||
(Gains) / losses transferred to income statement on disposal and impairment of available-for-sale investments | — | — | (20 | ) | — | — | — | (20 | ) | — | (20 | ) | ||||||||||||||||||||||||
Changes in revaluation reserve real estate held for own use | — | — | 2 | — | — | — | 2 | — | 2 | |||||||||||||||||||||||||||
Changes in cash flow hedging reserve | — | — | 8 | — | — | — | 8 | — | 8 | |||||||||||||||||||||||||||
Movement in foreign currency translation and net foreign investment hedging reserves | — | — | — | 853 | — | — | 853 | — | 853 | |||||||||||||||||||||||||||
Equity movements of associates | — | — | — | 18 | — | — | 18 | — | 18 | |||||||||||||||||||||||||||
Aggregate tax effect of items recognized in other comprehensive income | — | — | (540 | ) | (38 | ) | — | — | (578 | ) | — | (578 | ) | |||||||||||||||||||||||
Other | — | (11 | ) | — | — | — | — | (11 | ) | 2 | (9 | ) | ||||||||||||||||||||||||
Total other comprehensive income | — | (11 | ) | 1,235 | 833 | — | — | 2,057 | 2 | 2,059 | ||||||||||||||||||||||||||
Total comprehensive income / (loss) for 2010 | — | 360 | 1,235 | 833 | — | — | 2,428 | 3 | 2,431 | |||||||||||||||||||||||||||
Coupons on perpetual securities | — | (47 | ) | — | — | — | — | (47 | ) | — | (47 | ) | ||||||||||||||||||||||||
Share options | — | — | — | — | — | (1 | ) | (11 | ) | — | (1 | ) | ||||||||||||||||||||||||
At end of period | 8,184 | 8,308 | (474 | ) | (1,473 | ) | 2,000 | 4,708 | 21,253 | 13 | 21,266 | |||||||||||||||||||||||||
1 | Issued capital and reserves attributable to equity holders of AEGON N.V. |
2 | For a breakdown of share capital please refer to note 15. |
Unaudited | ![]() | page 5 |
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
EUR millions | Q1 2011 | Q1 2010 | ||||||
Cash flow from operating activities | (900 | ) | 358 | |||||
Purchases and disposals of intangible assets | (3 | ) | (7 | ) | ||||
Purchases and disposals of equipment and other assets | (14 | ) | (28 | ) | ||||
Purchases, disposals and dividends of subsidiaries and associates | (4 | ) | (5 | ) | ||||
Cash flow from investing activities | (21 | ) | (40 | ) | ||||
Issuance and purchase of share capital | 913 | — | ||||||
Issuances, repurchases and coupons of convertible core capital securities | (1,125 | ) | — | |||||
Issuances, repurchases and coupons of perpetuals | (59 | ) | (63 | ) | ||||
Issuances and repayments on borrowings | 267 | 41 | ||||||
Cash flow from financing activities | (4 | ) | (22 | ) | ||||
Net increase / (decrease) in cash and cash equivalents | (925 | ) | 296 | |||||
Net cash and cash equivalents at January 1 | 5,174 | 4,013 | ||||||
Effects of changes in exchange rate | (31 | ) | 23 | |||||
Net cash and cash equivalents at end of period | 4,218 | 4,332 | ||||||
Mar. 31, 2011 | Mar. 31, 2010 | |||||||
Cash and cash equivalents | 4,286 | 4,712 | ||||||
Bank overdrafts | (68 | ) | (380 | ) | ||||
Net cash and cash equivalents | 4,218 | 4,332 | ||||||
page 6 | Local knowledge. Global power. | Unaudited |
Notes to the condensed consolidated interim financial statements
Amounts in EUR millions, unless otherwise stated
1. Basis of presentation
The condensed consolidated interim financial statements as at and for the first quarter ended March 31, 2011, have been prepared in accordance with IAS 34 ‘Interim financial reporting’ as adopted by the European Union (EU) as issued by the International Accounting Standards Board (IASB). It does not include all of the information required for a full set of financial statements prepared in accordance with IFRS and should therefore be read together with the 2010 consolidated financial statements of AEGON N.V. as included in AEGON’s Annual Report for 2010. AEGON’s Annual Report for 2010 is available on the corporate website (www.aegon.com).
The condensed consolidated interim financial statements have been prepared in accordance with the historical cost convention as modified by the revaluation of investment properties and those financial instruments (including derivatives) and financial liabilities that have been measured at fair value. The condensed consolidated interim financial statements were approved by the Executive Board on May 11, 2011.
The published figures in these condensed consolidated interim financial statements are unaudited.
2. Significant accounting policies
All accounting policies and methods of computation applied in the condensed consolidated interim financial statements are the same as those applied in the 2010 consolidated financial statements, which were prepared in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board as adopted by the European Union.
Taxes on income for the first quarter 2011 interim period are accrued using the tax rate that would be applicable to expected total annual earnings.
The following standards, interpretations, amendments to standards and interpretations became effective in 2011:
• | Amendment to IAS 24 - Related parties disclosures. |
• | Amendment to IFRS 1 - First time adoption. |
• | Amendment to IFRIC 14 - Prepayments of a minimum funding requirement. |
• | Amendment to IAS 32 - Classification of Rights Issues. |
• | IFRIC 19 - Extinguishing financial liabilities with equity instruments. |
• | Improvements to IFRS (2010). |
None of these new or revised standards and interpretations had a significant effect on the condensed consolidated interim financial statements for the period ended March 31, 2011.
Critical accounting estimates
Certain amounts recorded in the condensed consolidated interim financial statements reflect estimates and assumptions made by management. Actual results may differ from the estimates made.
Exchange rates
The following exchange rates are applied for the condensed consolidated interim financial statements:
Income statement items: average rate 1 EUR = USD 1.3663 (2010: USD 1.3838); 1 EUR = GBP 0.8523 (2010: GBP 0.8865). Balance sheet items: closing rate 1 EUR = USD 1.4207 (2010: USD 1.3362); 1 EUR = GBP 0.8837 (2010: GBP 0.8608).
Unaudited | ![]() | page 7 |
3. Segment information
3.1 Income statement
Three months ended March 31, 2011
EUR millions | Americas | The Netherlands | United Kingdom | New Markets | Holding and other activities | Eliminations | Total | Associates eliminations | Total IFRS based | |||||||||||||||||||||||||||
Three months ended March 31, 2011 | ||||||||||||||||||||||||||||||||||||
Underlying earnings before tax geographically | 347 | 81 | 12 | 57 | (82 | ) | (1 | ) | 414 | (4 | ) | 410 | ||||||||||||||||||||||||
Fair value items | (12 | ) | (60 | ) | (1 | ) | — | (12 | ) | — | (85 | ) | — | (85 | ) | |||||||||||||||||||||
Realized gains / (losses) on investments | 25 | 35 | 29 | 2 | — | — | 91 | — | 91 | |||||||||||||||||||||||||||
Impairment charges | (83 | ) | (3 | ) | — | (2 | ) | — | — | (88 | ) | — | (88 | ) | ||||||||||||||||||||||
Impairment reversals | 25 | 1 | — | — | — | — | 26 | — | 26 | |||||||||||||||||||||||||||
Other income / (charges) | — | (8 | ) | (6 | ) | 11 | — | — | (3 | ) | — | (3 | ) | |||||||||||||||||||||||
Run-off businesses | 22 | — | — | — | — | — | 22 | — | 22 | |||||||||||||||||||||||||||
Income before tax | 324 | 46 | 34 | 68 | (94 | ) | (1 | ) | 377 | (4 | ) | 373 | ||||||||||||||||||||||||
Income tax (expense) / benefit | (61 | ) | (7 | ) | 20 | (26 | ) | 24 | — | (50 | ) | 4 | (46 | ) | ||||||||||||||||||||||
Net income | 263 | 39 | 54 | 42 | (70 | ) | (1 | ) | 327 | — | 327 | |||||||||||||||||||||||||
Inter-segment underlying earnings | (34) | (10) | (17) | 58 | 3 | |||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||
Life insurance gross premiums | 1,577 | 1,871 | 1,862 | 369 | — | — | 5,679 | (156 | ) | 5,523 | ||||||||||||||||||||||||||
Accident and health insurance | 440 | 109 | — | 32 | — | — | 581 | — | 581 | |||||||||||||||||||||||||||
General insurance | — | 132 | — | 41 | — | — | 173 | — | 173 | |||||||||||||||||||||||||||
Total gross premiums | 2,017 | 2,112 | 1,862 | 442 | — | — | 6,433 | (156 | ) | 6,277 | ||||||||||||||||||||||||||
Investment income | 954 | 520 | 599 | 56 | 65 | (63 | ) | 2,131 | (20 | ) | 2,111 | |||||||||||||||||||||||||
Fee and commission income | 270 | 95 | 37 | 116 | — | (58 | ) | 460 | 460 | |||||||||||||||||||||||||||
Other revenues | — | — | — | 1 | 1 | — | 2 | — | 2 | |||||||||||||||||||||||||||
Total revenues | 3,241 | 2,727 | 2,498 | 615 | 66 | (121 | ) | 9,026 | (176 | ) | 8,850 | |||||||||||||||||||||||||
Inter-segment revenues | — | 1 | — | 58 | 62 | |||||||||||||||||||||||||||||||
Three months ended March 31, 2010
EUR millions | Americas | The Netherlands | United Kingdom | New Markets | Holding and other activities | Eliminations | Total | Associates eliminations | Total IFRS based | |||||||||||||||||||||||||||
Three months ended March 31, 2010 | ||||||||||||||||||||||||||||||||||||
Underlying earnings before tax geographically | 337 | 104 | 28 | 46 | (68 | ) | (1 | ) | 446 | (3 | ) | 443 | ||||||||||||||||||||||||
Fair value items | (86 | ) | 91 | 3 | 3 | (27 | ) | — | (16 | ) | — | (16 | ) | |||||||||||||||||||||||
Realized gains / (losses) on investments | 24 | 96 | 3 | 3 | — | — | 126 | — | 126 | |||||||||||||||||||||||||||
Impairment charges | (155 | ) | (6 | ) | (11 | ) | (2 | ) | — | — | (174 | ) | — | (174 | ) | |||||||||||||||||||||
Impairment reversals | 16 | 5 | 3 | — | — | — | 24 | — | 24 | |||||||||||||||||||||||||||
Other income / (charges) | — | — | 23 | — | — | — | 23 | — | 23 | |||||||||||||||||||||||||||
Run-off businesses | (18 | ) | — | — | — | — | — | (18 | ) | — | (18 | ) | ||||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||
Income before tax | 118 | 290 | 49 | 50 | (95 | ) | (1 | ) | 411 | (3 | ) | 408 | ||||||||||||||||||||||||
Income tax (expense) / benefit | 39 | (67 | ) | (26 | ) | (13 | ) | 28 | — | (39 | ) | 3 | (36 | ) | ||||||||||||||||||||||
Net income | 157 | 223 | 23 | 37 | (67 | ) | (1 | ) | 372 | — | 372 | |||||||||||||||||||||||||
Inter-segment underlying earnings | (30) | (14) | (13) | 52 | 5 | |||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||
Life insurance gross premiums | 1,548 | 1,749 | 1,947 | 288 | — | — | 5,532 | (116 | ) | 5,416 | ||||||||||||||||||||||||||
Accident and health insurance | 433 | 108 | — | 27 | — | — | 568 | — | 568 | |||||||||||||||||||||||||||
General insurance | — | 135 | — | 44 | — | — | 179 | — | 179 | |||||||||||||||||||||||||||
Total gross premiums | 1,981 | 1,992 | 1,947 | 359 | — | — | 6,279 | (116 | ) | 6,163 | ||||||||||||||||||||||||||
Investment income | 925 | 558 | 559 | 58 | 69 | (58 | ) | 2,111 | (19 | ) | 2,092 | |||||||||||||||||||||||||
Fee and commission income | 253 | 86 | 38 | 112 | — | (53 | ) | 436 | — | 436 | ||||||||||||||||||||||||||
Other revenues | 1 | — | — | 1 | — | 2 | (1 | ) | 1 | |||||||||||||||||||||||||||
Total revenues | 3,160 | 2,636 | 2,544 | 530 | 69 | (111 | ) | 8,828 | (136 | ) | 8,692 | |||||||||||||||||||||||||
Inter-segment revenues | — | — | — | 53 | 58 | |||||||||||||||||||||||||||||||
page 8 | Local knowledge. Global power. | Unaudited |
Underlying earnings
Certain assets held by AEGON Americas, AEGON The Netherlands and AEGON UK are carried at fair value and managed on a total return basis, with no offsetting changes in the valuation of related liabilities. These include assets such as investments in hedge funds, private equities, real estate limited partnerships, convertible bonds and structured products. Underlying earnings exclude any over-or underperformance compared to management’s long-term expected return on assets. Based on current holdings and asset returns, the long-term expected return on an annual basis is 8-10%, depending on asset class, including cash income and market value changes. The expected earnings from these asset classes are net of deferred policy acquisition costs (DPAC) where applicable.
In addition, certain products offered by AEGON Americas contain guarantees and are reported on a fair value basis, including the segregated funds offered by AEGON Canada and the total return annuities and guarantees on variable annuities of AEGON USA. The earnings on these products are impacted by movements in equity markets and risk free interest rates. Short-term developments in the financial markets may therefore cause volatility in earnings. Included in underlying earnings is a long-term expected return on these products and excluded is any over- or underperformance compared to management’s expected return. The fair value movements of certain guarantees and the fair value change of derivatives that hedge certain risks on these guarantees of AEGON The Netherlands and Variable Annuities Europe (included in New Markets) are excluded from underlying earnings, the long-term expected return for these guarantees is set at zero.
Holding and other activities include certain issued bonds that are held at fair value through profit or loss. The interest rate risk on these bonds is hedged using swaps. The fair value movement resulting from changes in AEGON’s credit spread used in the valuation of these bonds are excluded from underlying earnings and reported under fair value items.
Fair value items
Fair value items include the ‘over’ or ‘under’ performance of investments and guarantees held at fair value for which the expected long-term return is included in underlying earnings.
In addition, hedge ineffectiveness on hedge transactions, fair value changes on economic hedges without natural offset in earnings and for which no hedge accounting is applied and fair value movements on real estate are included under fair value items.
Realized gains or losses on investments
Includes realized gains and losses on available-for-sale investments, as well as mortgage and loan portfolios.
Impairment charges / reversals
Includes impairments (reversals) on available-for-sale debt securities and impairments on shares including the effect of deferred policyholder acquisition costs and mortgage and loan portfolios on amortized cost and associates.
Other income or charges
Other income or charges is used to report any items which cannot be directly allocated to a specific line of business. Also items that are outside the normal course of business are included under this heading.
Other charges include restructuring charges that are considered other charges for segment reporting purposes because these are outside the normal course of business. In the condensed consolidated income statement, these charges are included in operating expenses.
Run-off businesses
Includes underlying results of business units where management has decided to exit the market and to run-off the existing block of business. Currently, this line includes the run-off of the institutional spread-based business, structured settlements blocks of business, BOLI/COLI business and Life Reinsurance business in the United States. AEGON has other blocks of businesses for which sales have been discontinued and of which the earnings are included in underlying earnings.
Unaudited | ![]() | page 9 |
On April 26, 2011, AEGON publicly announced the decision of its Executive Board to divest its life reinsurance activities, Transamerica Reinsurance, to SCOR. These activities are no longer reported in underlying earnings but are reflected in the run-off businesses line in the segment reporting (both in 2011 and in 2010). More details on this transaction are given in note 19.
Also, in December 2010, AEGON publicly announced the decision of its Executive Board to discontinue new sales of executive non-qualified benefit plans and related Bank-Owned
and Corporate-Owned Life Insurance (BOLI/COLI) business in the United States. Earnings from the BOLI/COLI business is no longer reported in underlying earnings but reflected in the run-off business line in the segment reporting (both in 2011 and in 2010).
The comparative figures, affecting the Americas segment, regarding the underlying earnings and the run-off businesses have been revised as follows:
Reclassification | ||||||||||||||||
EUR millions | Reported | BOLI/COLI | Reinsurance | Revised | ||||||||||||
Three months ended March 31, 2010 | ||||||||||||||||
Underlying earnings before tax geographically | 488 | (12 | ) | (30 | ) | 446 | ||||||||||
Fair value items | (16 | ) | (16 | ) | ||||||||||||
Realized gains / (losses) on investments | 126 | 126 | ||||||||||||||
Impairment charges | (174 | ) | (174 | ) | ||||||||||||
Impairment reversals | 24 | 24 | ||||||||||||||
Other income / (charges) | 23 | 23 | ||||||||||||||
Run-off businesses | (60 | ) | 12 | 30 | (18 | ) | ||||||||||
Income before tax | 411 | 411 | ||||||||||||||
Income tax (expense) /benefit | (39 | ) | (39 | ) | ||||||||||||
Net income | 372 | 372 | ||||||||||||||
Share in earnings of associates
Earnings from the company’s associates in insurance companies in Spain, India, Brazil and Mexico are reported on an underlying earnings basis. Other associates are included on a net income basis.
Non-IFRS measures
This report includes the non-IFRS financial measure: underlying earnings before tax. The reconciliation of this measure to the most comparable IFRS measures is presented in the tables in this note. This non-IFRS measure is calculated by consolidating on a proportionate basis the revenues and expenses of the company’s associated companies in Spain, India, Brazil and Mexico. AEGON believes that its non-IFRS measure provides meaningful information about the underlying operating results of our business including insight into the financial measures that senior management uses in managing the business.
Among other things senior management is compensated based in part on AEGON’s results against targets using the non-IFRS measure presented here. While many other insurers in AEGON’s peer group present substantially similar non-IFRS measures, the non-IFRS measure presented in this document may nevertheless differ from the non-IFRS measures presented by other insurers. There is no standardized meaning to these measures under IFRS or any other recognized set of accounting standards and readers are cautioned to consider carefully the different ways in which AEGON and its peers present similar information before comparing them.
AEGON believes the non-IFRS measure shown herein, when read together with the reported IFRS financial statements, provides meaningful supplemental information for the investing public to evaluate AEGON’s business after eliminating the impact of current IFRS accounting policies for financial instruments and insurance contracts, which embed a number of accounting policy alternatives that companies may select in presenting their results (i.e. companies can use different local GAAPs) and that can make the comparability from period to period difficult.
page 10 | Local knowledge. Global power. | Unaudited |
3.2 Investments geographically
At March 31, 2011
amounts in million EUR (unless otherwise stated) | ||||||||||||||||||||||||||||||||||||
Americas USD | United Kingdom GBP | At March 31, 2011 | Americas | The Netherlands | United Kingdom | New Markets | Holding & other activities | Eliminations | Total EUR | |||||||||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||||||||||
1,858 | 53 | Shares | 1,308 | 936 | 60 | 76 | — | (3 | ) | 2,377 | ||||||||||||||||||||||||||
88,461 | 7,795 | Debt securities | 62,265 | 17,321 | 8,821 | 2,096 | — | — | 90,503 | |||||||||||||||||||||||||||
14,905 | 7 | Loans | 10,491 | 17,113 | 8 | 625 | — | — | 28,237 | |||||||||||||||||||||||||||
17,952 | — | Other financial assets | 12,636 | 40 | — | 129 | 320 | — | 13,125 | |||||||||||||||||||||||||||
1,009 | — | Investments in real estate | 711 | 2,038 | — | — | — | — | 2,749 | |||||||||||||||||||||||||||
124,185 | 7,855 | Investments general account | 87,411 | 37,448 | 8,889 | 2,926 | 320 | (3 | ) | 136,991 | ||||||||||||||||||||||||||
— | 25,638 | Shares | — | 7,755 | 29,012 | 3,323 | — | (6 | ) | 40,084 | ||||||||||||||||||||||||||
— | 12,772 | Debt securities | — | 15,247 | 14,453 | 257 | — | — | 29,957 | |||||||||||||||||||||||||||
82,459 | 6,814 | Separate accounts and investment funds | 58,041 | — | 7,710 | 1,292 | — | — | 67,043 | |||||||||||||||||||||||||||
— | 3,652 | Other financial assets | — | 625 | 4,133 | 1,338 | — | — | 6,096 | |||||||||||||||||||||||||||
— | 986 | Investments in real estate | — | — | 1,116 | — | — | — | 1,116 | |||||||||||||||||||||||||||
82,459 | 49,862 | Investments for account of policyholders | 58,041 | 23,627 | 56,424 | 6,210 | — | (6 | ) | 144,296 | ||||||||||||||||||||||||||
206,644 | 57,717 | Investments on balance sheet | 145,452 | 61,075 | 65,313 | 9,136 | 320 | (9 | ) | 281,287 | ||||||||||||||||||||||||||
118,205 | — | Off balance sheet investments third parties | 83,202 | 12,318 | — | 23,075 | — | — | 118,595 | |||||||||||||||||||||||||||
324,849 | 57,717 | Total revenue generating investments | 228,654 | 73,393 | 65,313 | 32,211 | 320 | (9 | ) | 399,882 | ||||||||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||||||||||
102,043 | 7,779 | Available-for-sale | 71,825 | 18,086 | 8,802 | 2,033 | 1 | — | 100,747 | |||||||||||||||||||||||||||
14,905 | 7 | Loans | 10,491 | 17,113 | 8 | 625 | — | — | 28,237 | |||||||||||||||||||||||||||
— | — | Held-to-maturity | — | — | — | 138 | — | — | 138 | |||||||||||||||||||||||||||
88,687 | 48,945 | Financial assets at fair value through profit or loss | 62,425 | 23,838 | 55,387 | 6,340 | 319 | (9 | ) | 148,300 | ||||||||||||||||||||||||||
1,009 | 986 | Investments in real estate | 711 | 2,038 | 1,116 | — | — | — | 3,865 | |||||||||||||||||||||||||||
206,644 | 57,717 | Total investments on balance sheet | 145,452 | 61,075 | 65,313 | 9,136 | 320 | (9 | ) | 281,287 | ||||||||||||||||||||||||||
113 | 8 | Investments in associates | 79 | 59 | 9 | 580 | 4 | — | 731 | |||||||||||||||||||||||||||
27,169 | 5,686 | Other assets | 19,123 | 9,927 | 6,434 | 1,735 | 29,373 | (27,289 | ) | 39,303 | ||||||||||||||||||||||||||
233,926 | 63,411 | Consolidated total assets | 164,654 | 71,061 | 71,756 | 11,451 | 29,697 | (27,298 | ) | 321,321 | ||||||||||||||||||||||||||
At December 31, 2010
amounts in million EUR (unless otherwise stated) | ||||||||||||||||||||||||||||||||||||
Americas USD | United Kingdom GBP | At December 31, 2010 | Americas | The Netherlands | United Kingdom | New Markets | Holding & other activities | Eliminations | Total EUR | |||||||||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||||||||||
1,737 | 53 | Shares | 1,300 | 945 | 62 | 72 | — | (3 | ) | 2,376 | ||||||||||||||||||||||||||
89,687 | 7,917 | Debt securities | 67,121 | 18,504 | 9,198 | 2,041 | — | — | 96,864 | |||||||||||||||||||||||||||
15,249 | 8 | Loans | 11,412 | 15,629 | 9 | 653 | — | — | 27,703 | |||||||||||||||||||||||||||
17,481 | — | Other financial assets | 13,083 | 40 | — | 45 | 293 | — | 13,461 | |||||||||||||||||||||||||||
974 | — | Investments in real estate | 729 | 2,055 | — | — | — | — | 2,784 | |||||||||||||||||||||||||||
125,128 | 7,978 | Investments general account | 93,645 | 37,173 | 9,269 | 2,811 | 293 | (3 | ) | 143,188 | ||||||||||||||||||||||||||
— | 25,470 | Shares | — | 8,087 | 29,589 | 3,139 | — | (5 | ) | 40,810 | ||||||||||||||||||||||||||
— | 13,573 | Debt securities | — | 14,435 | 15,768 | 223 | — | — | 30,426 | |||||||||||||||||||||||||||
79,308 | 6,393 | Separate accounts and investment funds | 59,353 | — | 7,427 | 1,309 | — | — | 68,089 | |||||||||||||||||||||||||||
— | 3,250 | Other financial assets | — | 536 | 3,775 | 1,467 | — | — | 5,778 | |||||||||||||||||||||||||||
— | 976 | Investments in real estate | — | — | 1,134 | — | — | — | 1,134 | |||||||||||||||||||||||||||
79,308 | 49,662 | Investments for account of policyholders | 59,353 | 23,058 | 57,693 | 6,138 | — | (5 | ) | 146,237 | ||||||||||||||||||||||||||
204,436 | 57,640 | Investments on balance sheet | 152,998 | 60,231 | 66,962 | 8,949 | 293 | (8 | ) | 289,425 | ||||||||||||||||||||||||||
115,297 | — | Off balance sheet investments third parties | 86,287 | 12,353 | — | 25,126 | — | — | 123,766 | |||||||||||||||||||||||||||
319,733 | 57,640 | Total revenue generating investments | 239,285 | 72,584 | 66,962 | 34,075 | 293 | (8 | ) | 413,191 | ||||||||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||||||||||
102,792 | 7,899 | Available-for-sale | 76,929 | 19,261 | 9,177 | 1,879 | 4 | — | 107,250 | |||||||||||||||||||||||||||
15,249 | 8 | Loans | 11,412 | 15,629 | 9 | 653 | — | — | 27,703 | |||||||||||||||||||||||||||
— | — | Held-to-maturity | — | — | — | 139 | — | — | 139 | |||||||||||||||||||||||||||
85,421 | 48,757 | Financial assets at fair value through profit or loss | 63,928 | 23,286 | 56,642 | 6,278 | 289 | (8 | ) | 150,415 | ||||||||||||||||||||||||||
974 | 976 | Investments in real estate | 729 | 2,055 | 1,134 | — | — | — | 3,918 | |||||||||||||||||||||||||||
204,436 | 57,640 | Total investments on balance sheet | 152,998 | 60,231 | 66,962 | 8,949 | 293 | (8 | ) | 289,425 | ||||||||||||||||||||||||||
114 | 8 | Investments in associates | 85 | 59 | 9 | 576 | 4 | _ | 733 | |||||||||||||||||||||||||||
27,165 | 5,415 | Other assets | 20,331 | 11,626 | 6,290 | 1,703 | 30,824 | (28,629 | ) | 42,145 | ||||||||||||||||||||||||||
231,715 | 63,063 | Consolidated total assets | 173,414 | 71,916 | 73,261 | 11,228 | 31,121 | (28,637 | ) | 332,303 | ||||||||||||||||||||||||||
Unaudited | ![]() | page 11 |
4. Premium income and premium to reinsurers
EUR millions | Q1 2011 | Q1 2010 | ||||||
Gross | ||||||||
Life | 5,523 | 5,416 | ||||||
Non-Life | 754 | 747 | ||||||
6,277 | 6,163 | |||||||
Reinsurance | ||||||||
Life | 362 | 327 | ||||||
Non-Life | 81 | 78 | ||||||
443 | 405 | |||||||
5. Investment income
EUR millions | Q1 2011 | Q1 2010 | ||||||
Interest income | 1,837 | 1,877 | ||||||
Dividend income | 228 | 173 | ||||||
Rental income | 46 | 42 | ||||||
Total investment income | 2,111 | 2,092 | ||||||
Investment income related to general account | 1,471 | 1,490 | ||||||
Investment income account of policyholders | 640 | 602 | ||||||
Total | 2,111 | 2,092 | ||||||
6. Result from financial transaction
EUR millions | Q1 2011 | Q1 2010 | ||||||
Net fair value change of general account financial investments at FVTPL other than derivatives | 127 | 46 | ||||||
Realized gains and losses on financial investments | 104 | 151 | ||||||
Gains and (losses) on investments in real estate | (11 | ) | (4 | ) | ||||
Net fair value change of derivatives | (523 | ) | 804 | |||||
Net fair value change on for account of policyholder financial assets at FVTPL | 1,410 | 5,238 | ||||||
Net fair value change on investments in real estate for account of policyholders | 6 | 52 | ||||||
Net foreign currency gains and (losses) | (8 | ) | 32 | |||||
Net fair value change on borrowings and other financial liabilities | 8 | (27 | ) | |||||
Total | 1,113 | 6,292 | ||||||
Net fair value changes on for account of policyholder financial assets at fair value through profit and loss are offset by
amounts in Claims and Benefits reported in the Benefits and expenses line (note 8).
page 12 | Local knowledge. Global power. | Unaudited |
7. Other income
Other income relates to a benefit related to a settlement of legal claims.
8. Benefits and expenses
EUR millions | Q1 2011 | Q1 2010 | ||||||
Claims and Benefits | 9,068 | 13,908 | ||||||
Employee expenses | 537 | 515 | ||||||
Administration expenses | 284 | 279 | ||||||
Deferred expenses | (387 | ) | (377 | ) | ||||
Amortization charges | 357 | 475 | ||||||
Total | 9,859 | 14,800 | ||||||
9. Impairment charges / (reversals)
EUR millions | Q1 2011 | Q1 2010 | ||||||
Impairment charges / (reversals) comprise: | ||||||||
Impairment charges on financial assets, excluding receivables1 | 88 | 193 | ||||||
Impairment reversals on financial assets, excluding receivables1 | (26 | ) | (24 | ) | ||||
Impairment charges / (reversals) on non-financial assets and receivables | 2 | 1 | ||||||
Total | 64 | 170 | ||||||
Impairment charges on financial assets, excluding receivables, from: | ||||||||
Shares | 2 | 3 | ||||||
Debt securities and money market instruments | 70 | 169 | ||||||
Loans | 9 | 21 | ||||||
Other | 7 | — | ||||||
Total | 88 | 193 | ||||||
Impairment reversals on financial assets, excluding receivables, from: | ||||||||
Debt securities and money market instruments | (24 | ) | (24 | ) | ||||
Loans | (2 | ) | — | |||||
Total | (26 | ) | (24 | ) | ||||
1 | Impairment charges / (reversals) on financial assets, excluding receivables, are excluded from underlying earnings before tax for segment reporting (refer to note 3). |
10. Other charges
Other charges in Q1 2011 included an annual charge related to a bank tax charged by the Hungarian government of EUR 20 million.
Unaudited | ![]() | page 13 |
11. Intangible assets
EUR millions | Mar. 31, 2011 | Dec. 31, 2010 | ||||||
Goodwill | 641 | 652 | ||||||
VOBA | 3,055 | 3,221 | ||||||
Future servicing rights | 416 | 444 | ||||||
Software | 31 | 32 | ||||||
Other | 10 | 10 | ||||||
Total intangible assets | 4,153 | 4,359 | ||||||
The decrease in goodwill and future servicing rights is mainly attributable to foreign currency effects. In addition, future servicing rights decreased due to amortization.
The decrease in value of business acquired (VOBA) is mainly attributable to foreign currency effects and amortizations partly offset by the impact of shadow accounting.
12. Investments
EUR millions | Mar. 31, 2011 | Dec. 31, 2010 | ||||||
Available-for-sale (AFS) | 100,747 | 107,250 | ||||||
Loans | 28,237 | 27,703 | ||||||
Held-to-maturity (HTM) | 138 | 139 | ||||||
Financial assets at fair value through profit or loss (FVTPL) | 5,120 | 5,312 | ||||||
Financial assets, excluding derivatives | 134,242 | 140,404 | ||||||
Investments in real estate | 2,749 | 2,784 | ||||||
Total investments for general account | 136,991 | 143,188 | ||||||
Total financial assets, excluding derivatives
AFS | FVTPL | HTM | Loans | Total | ||||||||||||||||
Shares | 1,293 | 1,084 | — | — | 2,377 | |||||||||||||||
Debt securities | 88,757 | 1,608 | 138 | — | 90,503 | |||||||||||||||
Money market and other short term investments | 9,891 | 697 | — | — | 10,588 | |||||||||||||||
Mortgages | — | — | — | 24,487 | 24,487 | |||||||||||||||
Private loans | — | — | — | 790 | 790 | |||||||||||||||
Deposits with financial institutions | — | — | — | 750 | 750 | |||||||||||||||
Policy loans | — | — | — | 2,038 | 2,038 | |||||||||||||||
Receivables out of share lease agreements | — | — | — | 23 | 23 | |||||||||||||||
Other | 806 | 1,731 | — | 149 | 2,686 | |||||||||||||||
Mar. 31,2011 | 100,747 | 5,120 | 138 | 28,237 | 134,242 | |||||||||||||||
AFS | FVTPL | HTM | Loans | Total | ||||||||||||||||
Shares | 1,298 | 1,078 | — | — | 2,376 | |||||||||||||||
Debt securities | 94,936 | 1,789 | 139 | — | 96,864 | |||||||||||||||
Money market and other short term investments | 10,141 | 659 | — | — | 10,800 | |||||||||||||||
Mortgages | — | — | — | 23,781 | 23,781 | |||||||||||||||
Private loans | — | — | — | 829 | 829 | |||||||||||||||
Deposits with financial institutions | — | — | — | 748 | 748 | |||||||||||||||
Policy loans | — | — | — | 2,169 | 2,169 | |||||||||||||||
Receivables out of share lease agreements | — | — | — | 25 | 25 | |||||||||||||||
Other | 875 | 1,786 | — | 151 | 2,812 | |||||||||||||||
Dec. 31,2010 | 107,250 | 5,312 | 139 | 27,703 | 140,404 | |||||||||||||||
page 14 | Local knowledge. Global power. | Unaudited |
Government bond investments
Included in the available for sale debt securities and money market investments are EUR 1,121 million (December 31, 2010: EUR 1,250 million) of exposures to central governments of
European peripheral countries of Portugal, Italy, Ireland, Greece and Spain. The table below provides the amortized cost and fair value of AEGON’s exposure to central governments of these countries.
EXPOSURE TO CENTRAL GOVERNMENTS OF EUROPEAN PERIPHERAL COUNTRIES
EUR millions | Mar. 31, 2011 | Dec. 31, 2010 | ||||||||||||||
Amortized cost | Fair value | Amortized cost | Fair value | |||||||||||||
Portugal | 33 | 30 | 33 | 32 | ||||||||||||
Italy | 87 | 84 | 114 | 112 | ||||||||||||
Ireland | 35 | 29 | 37 | 32 | ||||||||||||
Greece | 6 | 5 | 58 | 45 | ||||||||||||
Spain | 960 | 866 | 1,008 | 904 | ||||||||||||
Total | 1,121 | 1,014 | 1,250 | 1,125 | ||||||||||||
13. Investments for account of policyholders
EUR millions | Mar. 31, 2011 | Dec. 31, 2010 | ||||||
Shares | 40,084 | 40,810 | ||||||
Debt securities | 29,957 | 30,426 | ||||||
Money market and short-term investments | 2,376 | 2,597 | ||||||
Deposits with financial institutions | 3,069 | 2,630 | ||||||
Separate accounts and unconsolidated investment funds | 67,043 | 68,089 | ||||||
Other | 651 | 551 | ||||||
Total investments for account of policyholders at fair value through profit or loss, excluding derivatives | 143,180 | 145,103 | ||||||
Investment in real estate | 1,116 | 1,134 | ||||||
Total investments for account of policyholders | 144,296 | 146,237 | ||||||
14. Deferred expenses and rebates
EUR millions | Mar. 31, 2011 | Dec. 31, 2010 | ||||||
DPAC for insurance contracts and investment contracts with discretionary participation features | 10,920 | 11,341 | ||||||
Deferred transaction costs for investment management services | 372 | 380 | ||||||
Unamortized interest rate rebates | 222 | 227 | ||||||
Total deferred expenses and rebates | 11,514 | 11,948 | ||||||
Deferred policy acquisition costs (DPAC) balances decreased, reflecting changes in foreign currency exchange rates and
amortizations partly offset by newly deferred expenses and the impact of shadow accounting.
Unaudited | ![]() | page 15 |
15. Share capital
EUR millions | Mar. 31, 2011 | Dec. 31, 2010 | ||||||
Share capital - par value | 310 | 278 | ||||||
Share premium | 8,787 | 7,906 | ||||||
Total share capital | 9,097 | 8,184 | ||||||
Share capital - par value | ||||||||
Balance at January 1 | 278 | 278 | ||||||
Issuance | 32 | — | ||||||
Balance | 310 | 278 | ||||||
Share premium | ||||||||
Balance at January 1 | 7,906 | 7,906 | ||||||
Issuance | 881 | — | ||||||
Balance | 8,787 | 7,906 | ||||||
On March 1, 2011, AEGON completed the issue of 173,604,912 new common shares of AEGON N.V. with a par value of EUR 0.12. The shares were issued at a price of EUR 5.20 per share. The proceeds of EUR 903 million were used to fund part of the repurchase of the convertible core capital securities described in note 16. The new shares have been listed on Euronext Amsterdam, the principal market for AEGON’s common shares.
On March 15, 2011, Vereniging AEGON exercised its option rights to purchase 41,042,000 class B preferred shares at par value of EUR 0.25 in order to avoid dilution of its voting rights following the issuance of 10% new common shares completed on March 1, 2011.
16. Convertible core capital securities
On March 15, 2011, AEGON repurchased EUR 750 million in principal amount of the original EUR 3 billion in convertible core capital securities from the Dutch State. The total
payment to the Dutch State amounted to EUR 1.125 billion of which EUR 750 million related to the repurchase of 187.5 million convertible core capital securities and EUR 375 million related to the premium attached to this repurchase.
17. Borrowings
EUR millions | Mar. 31, 2011 | Dec. 31, 2010 | ||||||
Debentures and other loans | 7,353 | 7,742 | ||||||
Commercial paper | 952 | 701 | ||||||
Short term deposits | 203 | 18 | ||||||
Bank overdrafts | 68 | 57 | ||||||
Total borrowings | 8,576 | 8,518 | ||||||
Debentures and other loans decreased due to redemptions and negative impact of foreign currency exchange rates.
Included in Debentures and other loans is EUR 955 million relating to borrowings measured at fair value (2010: EUR 987 million).
Commercial paper, Short term deposits and Bank overdrafts vary with the normal course of business.
page 16 | Local knowledge. Global power. | Unaudited |
18. Commitments and contingencies
There have been no material changes in contingent assets and liabilities reported in the 2010 consolidated financial statements of AEGON.
19. Events after the balance sheet date
On April 14, 2011, AEGON The Netherlands completed the sale of EUR 1.5 billion Class A residential mortgage backed securities (RMBS) to a broad group of institutional investors. These securities consist of two tranches:
• | EUR 375 million of class A1 notes with an expected weighted average life of 1.9 years and priced at par with a coupon of three month Euribor plus 0.95 %. |
• | EUR 1,125 million of class A2 notes with an expected weighted average life of 4.9 years and priced at par with a coupon of three month Euribor plus 1.35 %. |
The securities were issued under the Dutch SAECURE program. The net proceeds will be used to finance a part of the existing Dutch mortgage portfolio of AEGON The Netherlands.
On April 26, 2011, AEGON announced the divestment of its life reinsurance business, Transamerica Reinsurance, to SCOR. The divestment will result in a total after-tax consideration of USD 1.4 billion, consisting of cash proceeds of USD 0.9 billion and capital release of USD 0.5 billion.
Under the agreement, AEGON will divest its global life reinsurance activities with the exception of selected blocks of business that are to be retained by AEGON. The retained businesses with a book value of USD 0.4 billion comprise mainly the variable annuity guarantee business.
The divestment of Transamerica Reinsurance (TARe) will consist of a series of reinsurance agreements between various statutory insurance entities and SCOR for the US domestic business. In addition, SCOR will acquire Transamerica International Reinsurance Ireland (TIRI), a company that includes reinsurance
contracts that are assumed by AEGON US domestic companies which have been retroceded to TIRI, and will take over the operational assets and systems of TARe.
The business residing in Transamerica International Reinsurance, Bermuda (TIRe) will be retroceded to SCOR. TIRe will continue to provide reserve credit security for redundant reserves to AEGON USA’s ceding companies. AEGON will maintain approximately half of the collateral requirements needed for reinsurance reserve financing. This obligation provides reserve credit security and will run-off over 15 years.
Structuring the transaction as a reinsurance arrangement leaves AEGON exposed to a counter-party risk of SCOR not performing on the reinsurance contracts as the business matures. For such an event, certain levels of collateral related to the reinsured contracts will be placed in trust for AEGON’s benefit. SCOR is rated A2/A by Moody’s and Standard & Poor’s, both with positive outlooks.
The transaction will be accounted for primarily as a reinsurance transaction between AEGON and SCOR. Certain fixed assets and certain investment assets will be transferred with any related gain (loss) being recognized. As a result, the divestment will have no significant impact on shareholders’ equity. Earnings on the business retained as well as amortization of prepaid cost of reinsurance will be reflected in the run-off businesses line in AEGON’s segment reporting.
The reinsurance business being retained by AEGON, which is comprised primarily of the variable annuity guarantee business, is substantially hedged for financial market risks and produces normalized results which are negligible. In addition, various administration, service and asset management contracts are part of the transaction. The combined result, consisting primarily of the amortization of the prepaid cost of reinsurance, is approximately USD 40 million before tax per annum initially. These costs are expected to trend down as the contracts mature. Transamerica Reinsurance realized underlying earnings before tax of USD 105 million in 2010.
Unaudited | ![]() | page 17 |
Disclaimers
Cautionary note regarding non-GAAP measures
This document include non-GAAP financial measures: underlying earnings before tax. The reconciliation of underlying earnings before tax to the most comparable IFRS measure is provided in Note 3 “Segment information” of this report. AEGON believes that this non-GAAP measure, together with the IFRS information, provide a meaningful measure for the investment community to evaluate AEGON’s business relative to the businesses of our peers.
Local currencies and constant currency exchange rates
This document contains certain information about our results and financial condition in USD for the Americas and GBP for the United Kingdom, because those businesses operate and are managed primarily in those currencies. Certain comparative information presented on a constant currency basis eliminates the effects of changes in currency exchange rates. None of this information is a substitute for or superior to financial information about us presented in EUR, which is the currency of our primary financial statements.
Forward-looking statements
The statements contained in this document that are not historical facts are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995. The following are words that identify such forward-looking statements: aim, believe, estimate, target, intend, may, expect, anticipate, predict, project, counting on, plan, continue, want, forecast, goal, should, would, is confident, will, and similar expressions as they relate to our company. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. We undertake no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which merely reflect company expectations at the time of writing. Actual results may differ materially from expectations conveyed in forward-looking statements due to changes caused by various risks and uncertainties. Such risks and uncertainties include but are 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, such as with regard to: |
• | The frequency and severity of defaults by issuers in our fixed income investment portfolios; and |
• | The effects of corporate bankruptcies and/or accounting restatements on the financial markets and the resulting decline in the value of equity and debt securities we hold; |
• | The frequency and severity of insured loss events; |
• | Changes affecting mortality, morbidity, persistence and other factors that may impact the profitability of our insurance products; |
• | Changes affecting interest rate levels and continuing low or rapidly changing interest rate levels; |
• | Changes affecting currency exchange rates, in particular the EUR/USD and EUR/GBP exchange rates; |
• | Increasing levels of competition in the United States, the Netherlands, the United Kingdom and emerging markets; |
• | Changes in laws and regulations, particularly those affecting our operations, the products we sell, and the attractiveness of certain products to our consumers; |
• | Regulatory changes relating to the insurance industry in the jurisdictions in which we operate; |
• | Acts of God, acts of terrorism, acts of war and pandemics; |
• | Changes in the policies of central banks and/or governments; |
• | Lowering of one or more of our debt ratings issued by recognized rating organizations and the adverse impact such action may have on our ability to raise capital and on our liquidity and financial condition; |
• | Lowering of one or more of insurer financial strength ratings of our insurance subsidiaries and the adverse impact such action may have on the premium writings, policy retention, profitability of its insurance subsidiaries and liquidity; |
• | The effect of the European Union’s Solvency II requirements and other regulations in other jurisdictions affecting the capital we are required to maintain; |
• | Litigation or regulatory action that could require us to pay significant damages or change the way we do business; |
• | Customer responsiveness to both new products and distribution channels; |
• | Competitive, legal, regulatory, or tax changes that affect the distribution cost of or demand for our products; |
• | The impact of acquisitions and divestitures, restructurings, product withdrawals and other unusual items, including our ability to integrate acquisitions and to obtain the anticipated results and synergies from acquisitions; |
• | Our failure to achieve anticipated levels of earnings or operational efficiencies as well as other cost saving initiatives; |
• | Our inability to obtain consent from the Dutch Central Bank to repurchase our Core Capital Securities; and |
• | The non-fulfillment of the conditions precedent underlying the agreement to divest Transamerica reinsurance. |
Further details of potential risks and uncertainties affecting the company are described in the company’s filings with Euronext Amsterdam and the US Securities and Exchange Commission, including the Annual Report on Form 20-F. These forward-looking statements speak only as of the date of this document. Except as required by any applicable law or regulation, the company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
page 18 | Local knowledge. Global power. | Unaudited |
Corporate and shareholder information
Headquarters | Publication date figures in 2011 | |||||
AEGON N.V. | Thursday, August 11, 2011 | Results second quarter 2011 | ||||
P.O. Box 85 | Thursday, November 10, 2011 | Results third quarter 2011 | ||||
2501 CB The Hague | ||||||
The Netherlands | ||||||
Telephone | +31 (0) 70 344 32 10 | |||||
www.aegon.com | ||||||
Group Corporate Communications & Investor Relations | ||||||
Media relations | ||||||
Telephone | +31 (0) 70 344 89 56 | |||||
gcc-ir@aegon.com | ||||||
Investor relations | ||||||
Telephone | +31 (0) 70 344 83 05 | |||||
or | 877 548 96 68 - toll free, USA only | |||||
ir@aegon.com |
AEGON’s Q1 2011 press release, Financial Supplement and the Embedded Value Report 2010 are available on www.aegon.com.
Unaudited | ![]() | Page 19 |
About AEGON
Throughout their working lives and into retirement, millions of people around the world rely on AEGON to help them secure their long-term financial futures.
As an international life insurance, pension and asset management company, AEGON has businesses in over twenty markets in the Americas, Europe and Asia. AEGON companies employ approximately 27,000 people and serve some 40 million customers across the globe.
AEGON uses its strength and expertise to create added value for customers, shareholders, employees and the wider community. AEGON does this by encouraging innovation and by growing its businesses profitably and sustainably.
AEGON’s ambition is to be a leader in all its chosen markets by 2015.
Local knowledge. Global power. |