AEGON Returns to Profit in Q3 2009
By Aegon N.v., PRNEWednesday, November 11, 2009
THE HAGUE, The Netherlands, November 12 -
- Net income improved to EUR 145 million
- Underlying earnings before tax of EUR 351 million, impacted by lower
equity markets, de-risking measures and EUR 66 million of exceptional
charges
- Improved fair value items as result of rising financial markets,
Offset by equity hedging
- Lower impairments of EUR 285 million: substantially lower impairments
on US housing market related assets
- Cost savings measures target for 2009 of EUR 150 million achieved
- Continued profitable sales, evidence of a strong franchise
- New life sales of EUR 484 million, supported by a 11% increase in US
retail sales
- Net deposits, excluding institutional guaranteed products, of EUR 2
billion due to strong sales of pensions, increased savings deposits
and improved persistency
- VNB of EUR 169 million
- Further strengthened capital position
- EUR 0.9 billion in capital freed up in Q3, including recent capital
management transaction of USD 650 million
- Excess capital of EUR 4.8 billion by end September, including the
equity offering of EUR 1 billion
- Repayment of EUR 1 billion on November 30 by repurchase of 250
Million convertible core capital securities
- Revaluation reserves improved by EUR 3.3 billion, mainly a result of
narrowing credit spreads
- IGDa) solvency ratio increased further to 211%
Statement Alex Wynaendts, CEO
AEGON's improved capital position, the strength of our franchise and
return to profit in the third quarter are evidence that the actions we
initiated a year ago were the right ones at the right time. On November 30 we
will repay EUR 1 billion to the Dutch government, an important first step
toward full repayment of the capital support AEGON received last year. We are
pleased that our strong capital position has enabled us to take this step
while continuing to maintain a larger capital buffer, a necessary precaution
in the current environment. We are also encouraged by the improved sales and
net deposits for the quarter and the continued confidence of our customers.
Moreover, we have achieved our full-year cost savings target of EUR 150
million and further reduced AEGON's risk to financial markets. AEGON today is
in a strong position and we remain committed to further executing our
strategy to position our businesses for long-term growth and profitability.
KEY PERFORMANCE INDICATORS
Notes Q3 2009 Q2 % Q3 % Ytd Ytd %
amounts in
EUR millionsb) 2009 2008 2009 2008
Underlying
earnings
before tax 1 351 404 (13) 500 (30) 733 1,754 (58)
Net income 2 145 (161) N.M. (329) N.M. (189) 100 N.M.
New life sales 3 484 469 3 618 (22) 1,496 2,033 (26)
Gross deposits
excluding
Institutional
Guaranteed
Products 4 6,795 5,647 20 5,364 27 18,835 16,401 15
Value of new
business (VNB) 169 181 (7) 206 (18) 551 604 (9)
Return on equity 5 8.4% 10.3% (18) 8.7% (3) 5.0% 10.9% (54)
For footnotes see page 27.
AEGON has set out three long-term strategic priorities:
1. To reallocate capital toward businesses with higher growth and return
prospects;
2. To improve growth and returns from existing businesses;
3. To manage AEGON as an international company.
AEGON further aims to reduce its earnings sensitivity to financial
markets to generate more stable earnings going forward.
Portfolio review
AEGON continues to assess its businesses to ensure they meet requirements
in terms of earnings growth, cash flow and return on capital potential. As a
result of this portfolio review AEGON is running off its institutional
spread-based and auto credit businesses in the US, its group risk business in
the UK, and has sold its Taiwanese life insurance operations.
Cost measures
AEGON made further progress in implementing cost saving measures and has
achieved its 2009 target of EUR 150 million. Operating expenses for the first
nine months of 2009 declined by 5%, excluding the impact of restructuring
charges, increased employee benefit plan expenses and currency effects.
Recently, AEGON announced that it will reorganize its Dutch sales
organization, which will result in an annual cost savings of EUR 15 million.
This reorganization involves compulsory redundancies and will result in a
charge of EUR 20 million.
Capital preservation
During Q3 2009, a further EUR 0.9 billion of capital was released from
AEGON's businesses, bringing the total for the first nine months of 2009 to
EUR 2.5 billion and EUR 4.2 billion since the initiation of the capital
preservation program in June 2008.
Capital & risk management
Excess capital
- Excess capital above AA capital adequacy requirements amounted to EUR
4.8 billion, up from EUR 3.5 billion at the end of Q2 2009. In normal
circumstances AEGON aims to maintain an excess capital of EUR 1.5 to 2
billion. However, in the current environment AEGON aims to maintain a
substantially larger capital buffer.
- De-risking and capital efficiency measures totaling EUR 0.9 billion and
statutory earnings of EUR 0.4 billion further added to AEGON's excess
capital position, partly offset by rating migration in the United
States of EUR 0.2 billion, impairment charges of EUR 0.2 billion and
other items. AEGON has included in its Q3 2009 results the recently
announced capital management transaction that releases approximately
USD 650 million of additional regulatory capital to its US operations.
- AEGON successfully completed a EUR 1 billion equity issue on August 13,
2009. The proceeds of which will be used to repay one-third of the EUR
3 billion of core capital the company secured last year through its
Largest shareholder, Vereniging AEGON and funded by the Dutch State. As
announced, AEGON will repay this EUR 1 billion on November 30.
IFRS core capital
- At the end of September 2009, core capital, excluding the revaluation
reserves, totaled EUR 16.4 billion or 80% of the total capital base,
well above AEGON's self-imposed minimum target of 70%7,8.
- Core capital, including the revaluation reserve, amounted to EUR 14.6
billion, consisting of EUR 11.6 billion in shareholders' equity and
EUR 3 billion in convertible core capital securities.
- AEGON's revaluation reserves improved by a significant amount of EUR
3.3 billion, during Q3 2009 to a negative EUR 1.8 billion at September
30, 2009. Approximately 85% of the improvement of the revaluation
reserves is related to the narrowing of credit spreads and
approximately 15% is the result of lower risk-free interest rates.
AEGON recently submitted a plan, through the Dutch Ministry of Finance,
to the European Commission to demonstrate that its businesses are
fundamentally sound and viable. This plan is a requirement for all financial
institutions that received state support during the financial crisis. The
timing and outcome of this process have not been specified.
Improved risk profile
To reduce AEGON's sensitivity to financial markets, AEGON has
substantially reduced its equity and credit market risk. In addition, AEGON
lowered its long-term interest rate risk by selling the Taiwanese life
insurance business.
Equity market sensitivity
During Q3 2009, AEGON further reduced exposure to equity markets by
hedging 50% of the indirect equity exposure embedded in guarantees within its
Dutch business, using futures and limiting future earnings volatility.
Credit market sensitivity
As a result of the decision to reduce sensitivity to financial markets,
AEGON is running off its institutional spread-based business, reducing its
exposure to credit risk. By the end of 2010, these balances will have
decreased by approximately USD 20 billion, freeing up approximately USD 0.8
billion of capital.
In order to fund these outflows, assets from the institutional
spread-based business have been transferred internally to other businesses in
the United States in exchange for cash. As a result, the institutional
spread-based business realizes a negative spread on these assets which
negatively impacts underlying earnings. In the first nine months of 2009,
AEGON has reduced its institutional spread-based balances by USD 9 billion.
Following the compression of credit spreads, AEGON has decided to reduce
its exposure to credit derivatives, further reducing AEGON's earnings and
capital volatility to financial markets.
Manage AEGON as an international company
- AEGON's new global asset management business formally started on
October 1, combining its international asset management operations in
one international organization.
- A European data center was opened in the United Kingdom, bringing
together the data centers from the United Kingdom and the Netherlands,
saving costs and significantly improving efficiency.
- To further improve marketing effectiveness, AEGON Scottish Equitable
will be rebranded solely as AEGON. Brand awareness in the United Kindom
has increased strongly since AEGON became the lead partner of British
tennis.
- Leveraging on expertise in the United States and the United Kingdom,
further progress has been made in developing variable annuity products.
Product launches are planned in Q4 both in the Netherlands and Japan.
FINANCIAL OVERVIEW
EUR Notes Q3 Q2 2009 % Q3 2008 % Ytd Ytd %
millions 2009 2009 2008
Underlying
earnings
before tax
by line of business
Life and
protection 280 266 5 286 (2) 785 790 (1)
Individual savings
and retirement
products 79 62 27 56 41 (172) 287 N.M.
Pensions and asset
management 29 83 (65) 79 (63) 154 329 (53)
Institutional
products 5 29 (83) 98 (95) 123 305 (60)
Life reinsurance 15 13 15 8 88 5 51 (90)
Distribution (1) 1 N.M. 3 N.M. 6 20 (70)
General insurance 7 12 (42) 11 (36) 18 48 (63)
Interest charges
and other (69) (72) 4 (40) (73) (204) (95) (115)
Share in net
results of
associates 6 10 (40) (1) N.M. 18 19 (5)
Underlying
earnings before
tax 351 404 (13) 500 (30) 733 1,754 (58)
Over/(under)
performance of
fair value items (58) (31) (87) (456) 87 (286) (849) 66
Operating earnings
before tax 293 373 (21) 44 N.M. 447 905 (51)
Operating earnings
before tax by line
of business
Life and
protection 289 270 7 214 35 738 691 7
Individual savings
and retirement
products (61) 88 N.M. (101) 40 (279) (20) N.M.
Pensions and asset
management 69 35 97 (51) N.M. (31) 27 N.M.
Institutional
products 37 131 (72) (38) N.M. 181 62 192
Life reinsurance 43 61 (30) (76) N.M. 163 (42) N.M.
Distribution (1) 1 N.M. 3 N.M. 6 20 (70)
General insurance 7 12 (42) 11 (36) 18 48 (63)
Interest charges
and other (96) (235) 59 83 N.M. (367) 100 N.M.
Share in net
results of
associates 6 10 (40) (1) N.M. 18 19 (5)
Operating
earnings
before tax 293 373 (21) 44 N.M. 447 905 (51)
Gains/(losses)
on investments (100) 35 N.M. 25 N.M. 108 (101) N.M.
Impairment
charges (285) (393) 27 (407) 30 (1,064) (537) (98)
Other income/
(charges) 48 (353) N.M. (5) N.M. (328) (50) N.M.
Income before
tax (44) (338) 87 (343) 87 (837) 217 N.M.
Income tax 189 177 7 14 N.M. 648 (117) N.M.
Net income 145 (161) N.M. (329) N.M. (189) 100 N.M.
Net underlying
earnings 309 357 (13) 363 (15) 652 1,303 (50)
Net operating
earnings 272 331 (18) 38 N.M. 440 692 (36)
Underlying
earnings
geographically
Americas 289 280 3 388 (26) 501 1,307 (62)
The Netherlands 102 129 (21) 74 38 303 303 -
United Kingdom (13) 20 N.M. 35 N.M. 14 128 (89)
Other countries 42 47 (11) 42 - 119 110 8
Holding and other (69) (72) 4 (39) (77) (204) (94) (117)
Underlying
earnings
before tax 351 404 (13) 500 (30) 733 1,754 (58)
Operating
earnings
geographically
Americas 213 461 (54) (65) N.M. 574 580 (1)
The Netherlands 141 76 86 (52) N.M. 99 (14) N.M.
United Kingdom (6) 22 N.M. 35 N.M. 20 128 (84)
Other countries 41 49 (16) 42 (2) 121 110 10
Holding and other (96) (235) 59 84 N.M. (367) 101 N.M.
Operating
earnings
before tax 293 373 (21) 44 N.M. 447 905 (51)
Commissions and
expenses 1,473 1,504 (2) 1,315 12 4,595 4,246 8
of which
operating
expenses 776 814 (5) 789 (2) 2,432 2,344 4
Underlying earnings before tax
In Q3 2009, underlying earnings before tax amounted to EUR 351 million.
Underlying earnings were impacted by de-risking measures implemented to
counter the effects of the financial crisis. These measures impacted Q3
earnings by approximately EUR 40 million. Underlying earnings were also
impacted by lower equity markets and by several exceptional items (EUR 66
million). Excluding exceptional items, underlying earnings would have been
EUR 417 million for the third quarter.
The exceptional items were:
- Provisions related to a program to improve the consistency of customer
records in the United Kingdom of EUR 43 million;
- Accelerated amortization of deferred policy acquisition cost (DPAC) of
EUR 23 million in the fixed annuity business, as a result of the
internal asset transfers related to the run-off of the institutional
spread-based business in the United States.
Underlying earnings in the Americas decreased 30% to USD 403 million
compared with Q3 2008, as a result of lower product spreads, reduced fees
from lower asset balances, increased employee benefit plan expenses and
accelerated DPAC in the fixed annuity business. Product spreads in the
Institutional spread-based business have been significantly reduced due to
asset transfers to other US businesses in exchange for cash. In Q3 2008, the
Americas results included DPAC charges related to variable annuities and
unfavorable mortality experience for Life Reinsurance.
In the Netherlands, underlying earnings increased to EUR 102 million, or
38%, compared with Q3 2008, primarily the result of higher investment income
in the life and pensions businesses.
In the United Kingdom, underlying earnings decreased compared to Q3 2008
to a loss of GBP 11 million. This was mainly the result of an exceptional
charge of GBP 38 million related to a program to improve the consistency of
customer records.
Underlying earnings from Other countries totalled EUR 42 million.
Excluding the results of AEGON's Taiwanese Life business, which was sold in
Q2 2009, underlying earnings before tax were up 60%. This increase was mainly
driven by improved results for CAM Vida, one of AEGON's Spanish bank
partners, and the Life business in Central & Eastern Europe (CEE).
Interest charges and other, included in underlying earnings before tax,
represent holding expenses and amounted to a charge of EUR 69 million. The
increase compared with Q3 2008 is mainly attributable to higher interest
expenses.
Fair value items
In the Americas, fair value items showed an underperformance of USD 97
million (EUR 76 million). The overperformance of fair value assets, total
return annuities, credit derivatives and GMWB guarantees, were more than
offset by the result of AEGON's equity hedge program related to its retail
variable annuity portfolio in the United States which amounted to a loss of
USD 252 million (EUR 184 million). In the Netherlands, fair value items
over-performed by EUR 39 million due to the positive impact of movements in
the fair value of guarantees and related hedges. Fair value items for the
holding consist of three bonds issued by AEGON, which, together with related
hedges, are held at fair value through profit or loss. Further narrowing of
AEGON's own credit spread during Q3 2009 resulted in a loss of EUR 27
million.
Results on investments
During Q3 2009, AEGON recorded losses on investments totaling EUR 100
million. Trading gains on the bond portfolios in the Netherlands and the
United Kingdom were more than offset by trading losses in the Americas and
depreciation of direct residential real estate investments in the
Netherlands.
Impairment charges
Net impairment charges decreased significantly compared with Q3 2008 to
EUR 285 million. However, net impairments remained higher than AEGON's
average long-term impairment expectations. Impairments on US housing market
related assets of EUR 74 million were considerably lower compared with
previous quarters. In the United Kingdom impairments increased to EUR 80
million, related to corporate credit investments.
Income tax
The third quarter of 2009 included a tax gain of
EUR 154 million related to cross border intercompany reinsurance transactions
between Ireland and the United States. These reinsurance transactions are
accounted for at fair value in both tax jurisdictions. While losses in the
United States were taxed at 35%, gains in Ireland were taxed at 12.5%. The
tax gains related to these internal transactions, totaling EUR 399 million in
the first nine months of 2009, are a partial reversal of the EUR 490 million
of tax charges for the full year 2008.
Net income
Net income increased to EUR 145 million compared to a loss in Q3 2008,
primarily the result of improved results of fair value items, lower
impairment charges and the reversal of prior year tax charges.
Commissions and expenses
Operating expenses declined 2% in Q3 2009 compared with Q3 2008.
Operating expenses for the first nine months of 2009 declined by 5%,
excluding the impact of restructuring charges, increased employee benefit
plan expenses and currency effects. Total commissions and expenses in the
first nine months increased primarily as a result of higher DPAC amortization
in the Americas related to lower equity markets in Q1 2009. Consistent with
lower sales levels, fewer expenses were deferred and commissions decreased
compared to the first three quarters of 2008.
New life sales
Total new life sales were up 3% compared with Q2 2009 to EUR 484 million
as a result of higher single premium sales. In the Americas, retail life
sales increased by 11% as a result of strong term life sales and higher
universal life sales, while in the Netherlands the increase in sales was
driven by group pension contracts. In the United Kingdom, sales declined,
mainly as a result of the closure of the group risk business. In Central &
Eastern Europe (CEE), new life sales increased 21% compared to Q2 2009, while
in Spain sales declined during the quarter. In Asia sales were level with Q2
2009.
Deposits
Total gross deposits, excluding institutional guaranteed products,
increased to EUR 6.8 billion, or 20% compared with Q2 2009. The increase was
the result of strong pension and retail mutual fund deposits in the United
States, higher savings deposits in the Netherlands, new asset management
contracts in the United Kingdom and higher mutual fund sales in China. As
anticipated, gross deposits of fixed annuities were lower as crediting rates
have been lowered, while variable annuity deposits declined in both the
Americas and the United Kingdom. Net deposits, excluding institutional
guaranteed products, increased to EUR 2 billion, mainly due to the large
increase in deposits and improved persistency in pensions and asset
management.
Value of new business
Value of new business amounted to EUR 169 million in Q3 2009, a decline
of 7% compared with Q2 2009. VNB in the Netherlands increased as a result of
higher sales volumes and improved margins, and in the Americas, VNB increased
slightly in local currency. However, these increases were more than offset by
declines in the United Kingdom and Other countries, as well as currency
effects.
Revenue-generating investments
Revenue-generating investments increased to
EUR 354 billion during Q3 2009, an increase of 4% compared with Q2 2009. This
is the result of a further rise in equity markets combined with narrowing
credit spreads and slightly lower interest rate levels in addition to net
inflows.
SALES
EUR Notes Q3 Ytd Ytd
millions 2009 Q2 2009 % Q3 2008 % 2009 2008 %
New life sales
Life single
premiums 1,732 1,504 15 2,568 (33) 5,261 8,205 (36)
Life recurring
premiums
annualized 311 318 (2) 361 (14) 970 1,212 (20)
Total recurring
plus 1/10 single 484 469 3 618 (22) 1,496 2,033 (26)
New premium
production
accident and
health insurance 125 146 (14) 146 (14) 435 453 (4)
New premium
production
general
insurance 12 11 9 19 (37) 35 51 (31)
Gross deposits
(on and off
balance) by line
of business
Fixed annuities 434 928 (53) 1,200 (64) 2,990 2,381 26
Variable
annuities 693 949 (27) 644 8 2,356 2,046 15
Saving deposits 1,795 779 130 547 N.M. 3,154 1,883 67
Retail mutual
funds 949 671 41 725 31 2,262 2,197 3
Pensions
and asset
management 2,924 2,319 26 2,248 30 8,072 7,892 2
Institutional
guaranteed
products 764 1,115 (31) 5,687 (87) 3,727 12,417 (70)
Life reinsurance - 1 N.M. - N.M. 1 2 (50)
Total gross
deposits 7,559 6,762 12 11,051 (32) 22,562 28,818 (22)
Total gross
deposits excl.
institutional
guaranteed
products 6,795 5,647 20 5,364 27 18,835 16,401 15
Net deposits
(on and off
balance)
by line of
business
Fixed annuities (225) 145 N.M. 297 N.M. 608 (522) N.M.
Variable
annuities 149 412 (64) (73) N.M. 639 (327) N.M.
Saving deposits 440 43 N.M. (206) N.M. 416 (164) N.M.
Retail mutual
funds 255 23 N.M. 185 38 180 772 (77)
Pensions and
asset management 1,373 246 N.M. 162 N.M. 2,125 1,512 41
Institutional
guaranteed
products (3,473) (1,432) (143) 1,300 N.M. (7,259) 506 N.M.
Life
reinsurance (12) (12) - (13) 8 (40) (42) 5
Total net
deposits (1,493) (575) (160) 1,652 N.M. (3,331) 1,735 N.M.
Total net
deposits
excl.
institutional
guaranteed
products 1,980 857 131 352 N.M. 3,928 1,229 N.M.
REVENUE GENERATING INVESTMENTS
Sept. June
30, 30,
2009 2009 %
Revenue generating investments (total) 354,033 341,815 4
Investments general account 132,617 131,533 1
Investments for account of policyholders 119,647 112,107 7
Off balance sheet investments third parties 101,769 98,175 4
FINANCIAL OVERVIEW, Q3 2009 GEOGRAPHICALLY
United
Americas Kingdom
USD GBP
Underlying earnings before tax by line of business
260 10 Life and protection
104 - Individual savings and retirement products
10 (18) Pensions and asset management
10 - Institutional products
20 - Life reinsurance
- (3) Distribution
- - General insurance
- - Interest charges and other
(1) - Share in net results of associates
403 (11) Underlying earnings before tax
(97) 6 Over/(under) performance of fair value items
306 (5) Operating earnings before tax
Operating earnings before tax by line of business
263 10 Life and protection
(85) - Individual savings and retirement products
10 (12) Pensions and asset management
56 - Institutional products
63 - Life reinsurance
- (3) Distribution
- - General insurance
- - Interest charges and other
(1) - Share in net results of associates
306 (5) Operating earnings before tax
(98) 26 Gains/(losses) on investments
(287) (70) Impairment charges
(5) 43 Other income/(charges)
(84) (6) Income before tax
316 (27) Income tax
232 (33) Net income
359 (5) Net underlying earnings
295 (1) Net operating earnings
(table continued)
amounts in million EUR (unless otherwise stated)
Holding,
other
The United Other activities & Total
Americas Netherlands Kingdom countries eliminations EUR
Underlying earnings
before tax by line
of business
Life and
protection 181 70 10 19 - 280
Individual
savings and
retirement
products 83 (8) - 4 - 79
Pensions and asset
management 6 38 (19) 4 - 29
Institutional
products 5 - - - - 5
Life reinsurance 15 - - - - 15
Distribution - 3 (4) - - (1)
General insurance - (2) - 9 - 7
Interest charges
and other - - - - (69) (69)
Share in net
results of
associates (1) 1 - 6 - 6
Underlying earnings
before tax 289 102 (13) 42 (69) 351
Over/(under)
performance of
fair value items (76) 39 7 (1) (27) (58)
Operating earnings
before tax 213 141 (6) 41 (96) 293
Operating earnings
before tax by line
of business
Life and
protection 184 76 10 19 - 289
Individual savings
and retirement
products (56) (8) - 3 - (61)
Pensions and asset
management 6 71 (12) 4 - 69
Institutional
products 37 - - - - 37
Life reinsurance 43 - - - - 43
Distribution - 3 (4) - - (1)
General insurance - (2) - 9 - 7
Interest charges
and other - - - - (96) (96)
Share in net
results of
associates (1) 1 - 6 - 6
Operating earnings
before tax 213 141 (6) 41 (96) 293
Gains/(losses) on
investments (73) (34) 30 2 (25) (100)
Impairment
charges (192) (12) (80) (1) - (285)
Other income/
(charges) (3) - 49 2 - 48
Income before tax (55) 95 (7) 44 (121) (44)
Income tax 221 (21) (30) (13) 32 189
Net income 166 74 (37) 31 (89) 145
Net underlying
earnings 255 78 (6) 32 (50) 309
Net operating
earnings 207 106 (1) 31 (71) 272
- Underlying earnings of USD 403 million, a further improvement over
recent quarters
- Retail new life sales increased 11% sequentially
- Net deposits* of USD 933 million, evidence of strong franchise
Underlying earnings before tax
Underlying earnings before tax decreased to
USD 403 million compared to Q3 2008 and include lower institutional products
spreads, increased employee benefit plan expenses of USD 63 million and lower
fee based revenues.
- Earnings from Life & Protection declined to
USD 260 million. The positive mortality experience was more than offset
By lower persistency and increased employee benefit plan expenses (USD
33 million);
- Individual Savings & Retirement earnings increased to USD 104 million,
primarily due to extraordinary 2008 reserve strengthening and
accelerated DPAC amortization in the variable annuity business. The
increased equity markets in Q3 2009 did not lead to a reserve release
on the variable annuity book, but resulted in lowering AEGON's
medium-term equity market return assumptions to 8%, below the long-term
assumption of 9%. Fixed annuity earnings were impacted by lower yields
from higher than average cash balances and an exceptional DPAC charge
of USD 31 million, related to the internal transfer of assets. Earnings
in Q3 2009 were also impacted by USD 11 million from increased employee
benefit plan expenses;
- Pensions & Asset Management earnings decreased to USD 10 million, due
mainly to reduced fees as a result of lower equity markets and higher
cash balances. Earnings also included USD 11 million from increased
employee benefit plan expenses;
- Institutional products spreads have declined significantly due to the
build up of cash required to run-off the business as well as the
amortization of unrealized losses on assets transferred to other
portfolios in exchange for cash. The amortization consolidates to zero
in aggregate, however, it was established to mirror a non-distressed
market value transfer of the assets between portfolios.
- Earnings from Life Reinsurance increased to
USD 20 million primarily due to favorable mortality relative to Q3
2008.
Net income
Net income improved to USD 232 million for Q3 2009 compared to a loss of
USD 578 million for the comparable period last year.
The underperformance of fair value items of USD 97 million is primarily
the result of the negative impact of USD 252 million related to a macro
hedge. This hedge was implemented during Q2 2009 to reduce the sensitivity of
AEGON's capital position to equity market movements within AEGON's retail
variable annuity portfolio. These hedge instruments are carried at fair value
through profit or loss. Most other fair value items overperformed their
expected returns.
Realized losses on investments amounted to USD 98 million, resulting
primarily from trading in the bond portfolio.
Although net impairments were at their lowest level in five quarters,
they continue to be above AEGON's average long-term impairment expectations
and totaled USD 287 million, of which USD 117 million was related to
structured assets.
Net income also included a tax gain of USD 211 million related to cross
border intercompany reinsurance treaties. This gain is a partial reversal of
previous tax charges of USD 718 million on these internal transactions in
2008.
Commissions and expenses
Total commissions and expenses increased by 28% compared with Q3 2008 as
a result of higher DAC amortization charges. Operating expenses were level
with the third quarter last year. However, operating expenses for the first
nine months of 2009, excluding employee benefit plan costs and restructuring
charges, decreased by 9%.
Sales and deposits
Total new life sales increased 10% to USD 202 million compared with Q2
2009. Retail new life sales increased 11%, primarily as a result of strong
term life sales. This is the second quarter of growth after five consecutive
quarters of declining retail life sales. Life reinsurance sales increased 4%,
while activity in the BOLI/COLI market remained limited in the current
economic environment.
Sales of accident and health products declined by 8% compared with Q2
2009, due to the run-off of the auto credit business.
In line with management expectations, fixed annuity deposits declined to
USD 691 million as a result of lower crediting rates offered to customers.
Variable annuity deposits declined to USD 912 million, a strong result
considering recent product repricing. Mutual fund sales increased
substantially, mainly as a result of improved equity markets.
Pension deposits of USD 2.7 billion continue to be strong taking into
account lower takeover balances due to lower equity markets compared to last
year. As a result of the decision to run-off the institutional spread-based
balances, no new spread-based business is being sold.
Value of new business
Value of new business increased 2% over Q2 2009 to USD 92 million as
higher VNB from life, pensions and variable annuities more than offset the
decline in VNB from lower fixed annuity production. The internal rate of
return improved over Q2 2009 to 12.1%.
Revenue-generating investments
Revenue-generating investments for the Americas increased 5% during Q3
2009 to USD 310 billion, as a decline in spread-based institutional balances
was more than compensated by improvements of financial markets and continued
net inflows.
AMERICAS - EARNINGS
USD Q3
millions Notes 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 2008 %
Underlying
earnings
before tax by
line of
business
Life 193 118 64 237 (19) 464 610 (24)
Accident and
health 67 99 (32) 86 (22) 234 295 (21)
Life and
protection 260 217 20 323 (20) 698 905 (23)
Fixed annuities 62 60 3 82 (24) 208 282 (26)
Variable
annuities 50 29 72 (16) N.M. (401) 122 N.M.
Retail mutual
funds (8) (10) 20 1 N.M. (27) 8 N.M.
Individual
savings and
retirement
products 104 79 32 67 55 (220) 412 N.M.
Pensions and
asset management 10 17 (41) 32 (69) 37 127 (71)
Institutional
guaranteed products 1 30 (97) 135 (99) 136 417 (67)
BOLI/COLI 9 11 (18) 11 (18) 32 46 (30)
Institutional
products 10 41 (76) 146 (93) 168 463 (64)
Life reinsurance 20 17 18 11 82 7 77 (91)
Share in net
results of
associates (1) - N.M. (1) - (4) 1 N.M.
Underlying
earnings before
tax 403 371 9 578 (30) 686 1,985 (65)
Over/(under)
performance of
fair value
items (97) 240 N.M. (685) 86 101 (1,104) N.M.
Operating earnings
before tax 306 611 (50) (107) N.M. 787 881 (11)
Operating earnings
before tax by line
of business
Life 197 132 49 156 26 449 523 (14)
Accident and
health 66 96 (31) 71 (7) 218 278 (22)
Life and
protection 263 228 15 227 16 667 801 (17)
Fixed annuities 87 81 7 (99) N.M. 209 42 N.M.
Variable
annuities (164) 39 N.M. (70) (134) (551) (104) N.M.
Retail mutual
funds (8) (10) 20 1 N.M. (27) 8 N.M.
Individual
savings and
retirement
products (85) 110 N.M. (168) 49 (369) (54) N.M.
Pensions and
asset management 10 15 (33) 10 - 22 102 (78)
Institutional
guaranteed
products 47 166 (72) (58) N.M. 221 61 N.M.
BOLI/COLI 9 8 13 - N.M. 27 34 (21)
Institutional
products 56 174 (68) (58) N.M. 248 95 161
Life reinsurance 63 84 (25) (117) N.M. 223 (64) N.M.
Share in net
results of
associates (1) - N.M. (1) - (4) 1 N.M.
Operating
earnings before
tax 306 611 (50) (107) N.M. 787 881 (11)
Gains/(losses)
on investments (98) (4) N.M. 51 N.M. (66) (93) 29
Impairment
charges (287) (449) 36 (492) 42 (1,106) (639) (73)
Other income/
(charges) (5) - N.M. 7 N.M. (4) 7 N.M.
Income before
tax (84) 158 N.M. (541) 84 (389) 156 N.M.
Income tax 316 214 48 (37) N.M. 820 (319) N.M.
Net income 232 372 (38) (578) N.M. 431 (163) N.M.
Net underlying
earnings 359 343 5 398 (10) 645 1,422 (55)
Net operating
earnings 295 505 (42) (82) N.M. 710 645 10
Commissions and
expenses 1,295 1,262 3 1,013 28 3,868 3,510 10
of which
operating
expenses 539 577 (7) 538 - 1,678 1,640 2
For the amounts in euro see the Financial Supplement.
AMERICAS - SALES
USD Q3
millions Notes 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 2008 %
New life sales
Life single
premiums 193 138 40 210 (8) 422 669 (37)
Life recurring
premiums
annualized 183 170 8 195 (6) 526 673 (22)
Total recurring
plus 1/10 single 202 184 10 216 (6) 568 740 (23)
Life 152 137 11 160 (5) 417 531 (21)
BOLI/COLI 1 - N.M. 1 - 3 21 (86)
Life reinsurance 49 47 4 55 (11) 148 188 (21)
Total recurring
plus 1/10 single 202 184 10 216 (6) 568 740 (23)
New premium
production
accident and
health insurance 178 193 (8) 213 (16) 574 665 (14)
Gross deposits
(on and off
balance) by line
of business
Fixed annuities 691 1,292 (47) 1,811 (62) 4,103 3,619 13
Variable
annuities 912 1,071 (15) 912 - 2,763 2,933 (6)
Retail mutual
funds 732 513 43 758 (3) 1,552 2,417 (36)
Pensions and
asset management 2,841 2,623 8 2,834 - 8,633 10,216 (15)
Institutional
guaranteed
products 1,158 1,548 (25) 8,567 (86) 5,113 18,870 (73)
Life reinsurance 1 1 - - N.M. 2 3 (33)
Total gross
deposits 6,335 7,048 (10) 14,882 (57) 22,166 38,058 (42)
Total gross
deposits excl.
institutional
guaranteed
products 5,177 5,500 (6) 6,315 (18) 17,053 19,188 (11)
Net deposits
(on and off
balance) by line
of business
Fixed annuities (278) 216 N.M. 461 N.M. 834 (793) N.M.
Variable
annuities 153 353 (57) (154) N.M. 466 (661) N.M.
Retail mutual
funds 236 104 127 276 (14) 84 997 (92)
Pensions and
asset management 839 331 153 503 67 2,223 2,636 (16)
Institutional
guaranteed
products (4,906) (1,989) (147) 1,986 N.M. (9,960) 770 N.M.
Life
reinsurance (17) (18) 6 (20) 15 (55) (64) 14
Total net
deposits (3,973) (1,003) N.M. 3,052 N.M. (6,408) 2,885 N.M.
Total net
deposits excl.
institutional
guaranteed
products 933 986 (5) 1,066 (12) 3,552 2,115 68
REVENUE GENERATING INVESTMENTS
Sept. June
30, 30,
2009 2009 %
Revenue generating investments (total) 310,483 295,325 5
Investments general account 125,712 123,131 2
Investments for account of policyholders 68,927 62,000 11
Off balance sheet investments third parties 115,844 110,194 5
For the amounts in euro see the Financial Supplement.
- Underlying earnings increased to EUR 102 million due to higher life and
pensions profits
- Net income improved to EUR 74 million as fair value items turn positive
- New life sales increased 63% sequentially, driven by higher group
pensions sales
- Value of new business increased to EUR 51 million, the result of higher
margins and volumes
Underlying earnings before tax
Underlying earnings before tax increased 38% to EUR 102 million compared
with Q3 2008.
- Earnings from Life & Protection increased to EUR 70 million as higher
investment income in the Life business more than compensated for lower
underwriting results in Accident & Health. Q3 2008
included costs for modifying unit-linked insurance products of EUR 28
million;
- Continued fierce competition in the savings market and low short-term
interest rates led the Savings business to report a loss of EUR 8
million;
- Pensions & Asset Management earnings increased to EUR 38 million.
Higher investment income was partly offset by lower technical results;
- Earnings from Distribution decreased to EUR 3 million due to a slowdown
in the real estate and mortgage market;
- Adverse claims experience in Fire and pressure on premiums in Motor
resulted in a loss of EUR 2 million for General Insurance.
Net income
Net income improved to EUR 74 million. Fair value items in Q3 2009
included a net benefit of EUR 41 million, due to the positive impact of
movements in the fair value of guarantees and related hedges. Losses on
investments amounted to EUR 34 million as depreciation of AEGON's direct real
estate portfolio was only partly offset by gains on bonds. Impairment charges
have improved considerably over recent quarters. Impairments during the
quarter were mainly related to private equity investments.
Commissions and expenses
Commissions and expenses decreased slightly compared with Q3 2008. Cost
savings measures are being implemented and are on track to reach the 2009
target. Operating expenses for the first nine months of 2009 decreased by 3%
compared with last year.
Sales and deposits
Pension sales totaling EUR 33 million were strong, mainly as a result of
several new contracts. The group pension market in the Netherlands, however,
proves to be volatile. Life sales were EUR 19 million, level with Q2 2009. Of
the new mortgage production, 70% was sold with a national mortgage guarantee
(NHG). Gross deposits were up strongly compared with Q2 2009. Net deposits
turned positive as a result of the increased savings deposits.
Value of new business
Higher sales volumes and margins in life, mortgages and pensions led to
an increased value of new business of EUR 51 million. The improvement of the
internal rate of return was mainly driven by a shift in business mix.
Revenue-generating investments
Compared to the end of Q2 2009, revenue-generating investments increased
6% to EUR 69.7 billion as a result of lower interest rates, improved credit
spreads and net inflows.
THE NETHERLANDS - EARNINGS
EUR Q3
millions Notes 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 2008 %
Underlying
earnings before
tax by line of
business
Life 61 68 (10) 16 N.M. 173 77 125
Accident and health 9 7 29 14 (36) 27 26 4
Life and protection 70 75 (7) 30 133 200 103 94
Saving products (8) (10) 20 5 N.M. (27) 6 N.M.
Individual savings
and retirement
products (8) (10) 20 5 N.M. (27) 6 N.M.
Pensions and asset
management 38 57 (33) 28 36 121 139 (13)
Distribution 3 3 - 6 (50) 15 25 (40)
General insurance (2) 4 N.M. 4 N.M. (7) 23 N.M.
Share in net
results of
associates 1 - N.M. 1 - 1 7 (86)
Underlying earnings
before tax 102 129 (21) 74 38 303 303 -
Over/(under)
performance of
fair value items 39 (53) N.M. (126) N.M. (204) (317) 36
Operating earnings
before tax 141 76 86 (52) N.M. 99 (14) N.M.
Operating earnings
before tax by line
of business
Life 67 64 5 6 N.M. 149 46 N.M.
Accident and health 9 7 29 14 (36) 27 26 4
Life and protection 76 71 7 20 N.M. 176 72 144
Saving products (8) (10) 20 5 N.M. (27) 6 N.M.
Individual savings
and retirement
products (8) (10) 20 5 N.M. (27) 6 N.M.
Pensions and asset
management 71 8 N.M. (88) N.M. (59) (147) 60
Distribution 3 3 - 6 (50) 15 25 (40)
General insurance (2) 4 N.M. 4 N.M. (7) 23 N.M.
Share in net
results of
associates 1 - N.M. 1 - 1 7 (86)
Operating earnings
before tax 141 76 86 (52) N.M. 99 (14) N.M.
Gains/(losses) on
investments (34) (42) 19 (25) (36) 34 (64) N.M.
Impairment
charges (12) (28) 57 (49) 76 (118) (70) (69)
Income before tax 95 6 N.M. (126) N.M. 15 (148) N.M.
Income tax (21) (2) N.M. 72 N.M. 22 118 (81)
Net income 74 4 N.M. (54) N.M. 37 (30) N.M.
Net underlying
earnings 78 93 (16) 62 26 226 246 (8)
Net operating
earnings 106 54 96 (32) N.M. 73 10 N.M.
Commissions and
expenses 279 274 2 284 (2) 860 893 (4)
of which operating
expenses 206 192 7 211 (2) 615 637 (3)
THE NETHERLANDS - SALES
EUR Q3
millions Notes 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 2008 %
New life sales
Life single
premiums 329 145 127 211 56 865 1,099 (21)
Life recurring
premiums
annualized 20 17 18 18 11 60 68 (12)
Total recurring
plus 1/10 single 52 32 63 39 33 146 178 (18)
Life 19 19 - 23 (17) 61 77 (21)
Pensions 33 13 154 16 106 85 101 (16)
Total recurring
plus 1/10 single 52 32 63 39 33 146 178 (18)
New premium
production
accident and
health insurance 3 3 - 2 50 13 11 18
New premium
production general
insurance 6 6 - 6 - 19 21 (10)
Gross deposits
(on and off
balance) by line
of business
Saving deposits 1,795 779 130 547 N.M. 3,154 1,883 67
Pensions and asset
management 173 62 179 18 N.M. 246 145 70
Total gross
deposits 1,968 841 134 565 N.M. 3,400 2,028 68
Net deposits (on
and off balance) by
line of business
Saving deposits 440 43 N.M. (206) N.M. 416 (164) N.M.
Pensions and asset
management 210 (73) N.M. (156) N.M. 24 (52) N.M.
Total net deposits 650 (30) N.M. (362) N.M. 440 (216) N.M.
REVENUE GENERATING INVESTMENTS
Sept. June
30, 30,
2009 2009 %
Revenue generating investments (total) 69,656 65,772 6
Investments general account 35,496 33,907 5
Investments for account of policyholders 21,044 20,065 5
Off balance sheet investments third parties 13,116 11,800 11
- Underlying loss before tax of GPB 11 million, mainly as a result of
exceptional charges
- Net loss of GBP 33 million, mainly driven by impairment charges
- Net deposits substantially increased as a result of several new asset
management mandates
- Value of new business decreased to GBP 29 million, mainly due to lower
annuity margins
Underlying earnings before tax
Underlying earnings before tax decreased compared with Q3 2008 to a loss
of GBP 11 million, mainly as a result of an exceptional charge of GBP 38
million related to a program to improve consistency of customer records.
- Earnings from Life & Protection amounted to
GBP 10 million, in-line with the comparable period last year;
- Pensions & Asset Management recorded a loss of GBP 18 million as growth
of the business was more than offset by the exceptional charge of GBP
38 million related to a program to improve consistency of customer
records;
- Distribution experienced lower income due to difficult market
conditions for mortgage and investment products, which resulted in a
loss for the quarter of GBP 3 million.
Regarding the program to improve the quality and consistency of customer
records and operational effectiveness, an analysis of customer records is
being conducted. This analysis is expected to be completed by the end of
2009. Two examples of issues identified which will be addressed during this
program are: improving the quality of records to enable AEGON to return money
to former customers who have unclaimed assets, and rebating fund charges to
customers who have overpaid. AEGON is determined to resolve these issues
during this program.
Net income
AEGON reported a loss of GBP 33 million in the United Kingdom in Q3 2009,
primarily due to an underlying loss and higher impairments. Gains on
investments totaled GBP 26 million, including a GBP 14 million gain on a
derivative instrument for which hedge accounting could no longer be applied.
Impairments increased to GBP 70 million, related to corporate credit
investments.
Commissions and expenses
Total commissions and expenses increased 4% compared with Q3 2008, while
operating expenses increased 9% as a result of higher restructuring costs and
a rise in risk and regulatory costs.
Sales and deposits
New life sales decreased by 2% to GBP 218 million compared to Q2 2009 as
increases in annuity and personal pensions sales were offset by lower group
pensions and employee benefit production. The latter is a result of the
decision to close the group risk business. Gross deposits substantially
increased over Q2 2009 to GBP 491 million as a result of several new asset
management mandates.
Value of new business
Value of new business in Q3 2009 declined to
GBP 29 million, primarily a result of lower margins on annuity products. The
internal rate of return in the United Kingdom remained stable compared to Q2
2009 at 13.4%.
Revenue-generating investments
Revenue-generating investments increased 15% to GBP 54.2 billion,
primarily as a result of a strong recovery in financial markets.
UNITED KINGDOM - EARNINGS
GBP Q3
millions Notes 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 2008 %
Underlying
earnings before
tax by line of
business
Life 10 11 (9) 9 11 28 28 -
Life and
protection 10 11 (9) 9 11 28 28 -
Pensions and
asset management (18) 8 N.M. 21 N.M. (7) 76 N.M.
Distribution (3) (2) (50) (2) (50) (8) (4) (100)
Underlying
earnings before
tax (11) 17 N.M. 28 N.M. 13 100 (87)
Over/(under)
performance of
fair value items 6 2 200 - N.M. 5 - N.M.
Operating
earnings before
tax (5) 19 N.M. 28 N.M. 18 100 (82)
Operating
earnings before
tax by line of
business
Life 10 11 (9) 9 11 28 28 -
Life and
protection 10 11 (9) 9 11 28 28 -
Pensions and
asset management (12) 10 N.M. 21 N.M. (2) 76 N.M.
Distribution (3) (2) (50) (2) (50) (8) (4) (100)
Operating
earnings before
tax (5) 19 N.M. 28 N.M. 18 100 (82)
Gains/(losses)
on investments 26 25 4 (3) N.M. 60 (1) N.M.
Impairment
charges (70) (31) (126) (11) N.M. (114) (20) N.M.
Other income/
(charges) 9 43 30 43 (7) N.M. 51 (42) N.M.
Income before
tax (6) 43 N.M. 7 N.M. 15 37 (59)
Income tax
attributable to
policyholder
return (43) (30) (43) 7 N.M. (51) 42 N.M.
Income before
income tax on
shareholders
return (49) 13 N.M. 14 N.M. (36) 79 N.M.
Income tax on
shareholders
return 16 5 N.M. 1 N.M. 26 (7) N.M.
Net income (33) 18 N.M. 15 N.M. (10) 72 N.M.
Net underlying
earnings (5) 21 N.M. 26 N.M. 26 87 (70)
Net operating
earnings (1) 22 N.M. 26 N.M. 29 87 (67)
Commissions and
expenses 167 175 (5) 160 4 501 489 2
of which
operating
expenses 109 106 3 100 9 315 300 5
For the amounts in euro see the Financial Supplement.
UNITED KINGDOM - SALES
GBP Q3
millions Notes 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 2008 %
New life sales 10
Life single
premiums 1,066 1,017 5 1,696 (37) 3,400 4,922 (31)
Life recurring
premiums
annualized 111 122 (9) 134 (17) 366 441 (17)
Total recurring
plus 1/10 single 218 223 (2) 303 (28) 706 933 (24)
Life 40 41 (2) 71 (44) 152 185 (18)
Pensions 178 182 (2) 232 (23) 554 748 (26)
Total recurring
plus 1/10 single 218 223 (2) 303 (28) 706 933 (24)
Gross deposits
(on and off
balance) by line
of business
Pensions and
asset management 491 134 N.M. 86 N.M. 806 390 107
Total gross
deposits 491 134 N.M. 86 N.M. 806 390 107
Net deposits (on
and off balance)
by line of
business
Pensions and
asset management 402 26 N.M. (85) N.M. 171 (333) N.M.
Total net
deposits 402 26 N.M. (85) N.M. 171 (333) N.M.
REVENUE GENERATING INVESTMENTS
Sept. June
30, 30,
2009 2009 %
Revenue generating investments (total) 54,224 47,136 15
Investments general account 6,779 5,858 16
Investments for account of policyholders 44,795 39,313 14
Off balance sheet investments third parties 2,650 1,965 35
For the amounts in euro see the Financial Supplement.
- Net income increased to EUR 31 million
- Increase of net deposits to EUR 251 million, driven mainly by retail
mutual fund sales
- Value of new business decreased to EUR 21 million, mainly due to lower
sales in Spain
Underlying earnings before tax
Underlying earnings before tax from Other countries remained level
compared with the third quarter of last year and totaled EUR 42 million.
However, excluding the results of Taiwan, underlying earnings were up 60%
mainly driven by improved results in Spain and the CEE.
- Earnings from Life & Protection, excluding Taiwan, increased mainly as
a result of growth in the Hungarian mortgage business, higher surrender
charges and improved results from AEGON's joint ventures in Spain and
China;
- Individual Savings & Retirement earnings were level at EUR 4 million
compared with Q3 2008;
- Earnings from Pensions & Asset Management were level at EUR 4 million
compared with Q3 2008. The sizeable increase in the number of pension
fund participants to 2.1 million, however, was offset by lower assets
under management due to lower market levels;
- General Insurance results increased to EUR 9 million on the back of
better claims experience, while the comparable period last year
included reserve strengthening;
- The share in net results of associates improved considerably given that
last years' results were impacted by impairment charges at CAM.
Net income
Other countries' net income increased to EUR 31 million mainly as a
result of higher underlying earnings, higher gains on investments and lower
impairments.
Commissions and expenses
Commissions and expenses, excluding Taiwan, decreased 5%, as higher
commissions and operating expenses were more than offset by an increase in
deferred expenses. Operating expenses increased due to continued growth of
the business, while commissions also increased as a result of a shift in
business mix towards recurring premium business.
Sales and deposits
Total new life sales of EUR 41 million were lower compared with Q2 2009
as the lower production in Spain and China more than offset growth in the
CEE.
- New life sales in the CEE increased to EUR 21 million as a result of
higher recurring premium production compared with Q2 2009.
- In Asia, new life sales were level with Q2 2009 and totaled EUR 6
million. Commissions on a certain product were lowered in China,
impacting sales in the agency channel.
- New life sales in Spain declined substantially from Q2 2009 levels to
EUR 14 million. New life sales resulting from AEGON's bank partnership
With CAM, which is not consolidated in AEGON's accounts, amounted to
EUR 9 million.
- Sales of general insurance products in Hungary increased to EUR 6
million in what continues to be a competitive market.
Total gross deposits from Other countries increased 13% compared with Q2
2009 to EUR 736 million.
- European variable annuity deposits declined to EUR 65 million as a
result of the introduction of a new, re-priced product in the United
Kingdom;
- Retail mutual fund deposits increased to EUR 433 million, mainly as a
result of the introduction of new funds and higher equity market levels
in China;
- Pensions & Asset Management deposits increased to EUR 238 million,
primarily as a result of new asset management contracts in China.
Value of new business
Value of new business from Other countries in Q3 2009 totaled EUR 21
million, a 38% decrease compared with Q2 2009.
The higher contribution from Variable Annuities Europe was more than
offset by lower VNB from Spain. The contributions of CEE and Asia were level
compared to Q2 2009 and in-line with sales. The internal rate of return for
Other countries remained at a high level.
Revenue-generating investments
During Q3 2009, revenue-generating investments increased 8% to EUR 11.7
billion compared with Q2 2009 as a result of market appreciation and
net inflows.
OTHER COUNTRIES - EARNINGS
EUR Q3
millions Notes 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 2008 %
Underlying
earnings
before tax by
line of business
Life 19 17 12 29 (34) 43 52 (17)
Accident and health - 1 N.M. 1 N.M. 2 4 (50)
Life and protection 19 18 6 30 (37) 45 56 (20)
Variable annuities (1) 2 N.M. - N.M. 1 (1) N.M.
Saving products - - N.M. (1) N.M. 1 - N.M.
Retail mutual funds 5 4 25 5 - 13 10 30
Individual savings
and retirement
products 4 6 (33) 4 - 15 9 67
Pensions and asset
management 4 5 (20) 4 - 14 10 40
General insurance 9 8 13 7 29 25 25 -
Share in net
results of
associates 6 10 (40) (3) N.M. 20 10 100
Underlying
earnings before
tax 42 47 (11) 42 - 119 110 8
Over/(under)
performance of
fair value items (1) 2 N.M. - N.M. 2 - N.M.
Operating
earnings before
tax 41 49 (16) 42 (2) 121 110 10
Operating earnings
before tax by line
of business
Life 19 17 12 29 (34) 43 52 (17)
Accident and health - 1 N.M. 1 N.M. 2 4 (50)
Life and protection 19 18 6 30 (37) 45 56 (20)
Variable annuities (2) 4 N.M. - N.M. 3 (1) N.M.
Saving products - - N.M. (1) N.M. 1 - N.M.
Retail mutual funds 5 4 25 5 - 13 10 30
Individual savings
and retirement
products 3 8 (63) 4 (25) 17 9 89
Pensions and asset
management 4 5 (20) 4 - 14 10 40
General insurance 9 8 13 7 29 25 25 -
Share in net
results of
associates 6 10 (40) (3) N.M. 20 10 100
Operating earnings
before tax 41 49 (16) 42 (2) 121 110 10
Gains/(losses)
on investments 2 2 - (5) N.M. 8 - N.M.
Impairment charges (1) - N.M. (18) 94 (6) (19) 68
Other income/
(charges) 2 (385) N.M. - N.M. (383) - N.M.
Income before tax 44 (334) N.M. 19 132 (260) 91 N.M.
Income tax (13) (9) (44) (10) (30) (43) (34) (26)
Net income 31 (343) N.M. 9 N.M. (303) 57 N.M.
Net underlying
earnings 32 38 (16) 30 7 79 74 7
Net operating
earnings 31 40 (23) 30 3 81 74 9
Commissions and
expenses 81 73 11 112 (28) 252 319 (21)
of which operating
expenses 47 42 12 53 (11) 141 145 (3)
OTHER COUNTRIES - SALES
EUR Q3
millions Notes 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 2008 %
New life sales 10
Life single
premiums 44 94 (53) 83 (47) 250 376 (34)
Life recurring
premiums
annualized 37 37 - 43 (14) 113 137 (18)
Total recurring
plus 1/10 single 41 47 (13) 52 (21) 138 175 (21)
Life 41 47 (13) 52 (21) 138 174 (21)
Saving products - - N.M. - N.M. - 1 N.M.
Total recurring
plus 1/10 single 41 47 (13) 52 (21) 138 175 (21)
New premium
production
accident and
health insurance 1 1 - 1 - 4 4 -
New premium
production
general insurance 6 5 20 13 (54) 16 30 (47)
Gross deposits
(on and off
balance)
Variable annuities 65 162 (60) 34 91 342 116 195
Retail mutual
funds 433 292 48 218 99 1,131 606 87
Pensions and asset
management 238 199 20 222 7 622 526 18
Total gross
deposits 736 653 13 474 55 2,095 1,248 68
Net deposits (on
and off balance)
Variable annuities 44 147 (70) 31 42 300 108 178
Retail mutual
funds 80 (59) N.M. (1) N.M. 119 115 3
Pensions and asset
management 127 67 90 83 53 287 256 12
Total net
deposits 251 155 62 113 122 706 479 47
REVENUE GENERATING INVESTMENTS
Sept. June
30, 30,
2009 2009 %
Revenue generating investments (total) 11,667 10,760 8
Investments general account 2,765 2,608 6
Investments for account of policyholders 2,275 2,046 11
Off balance sheet investments third parties 6,627 6,106 9
NET UNDERLYING EARNINGS GEOGRAPHICALLY
EUR Q3 Q3 Ytd Ytd
millions Notes 2009 Q2 2009 % 2008 % 2009 2008 %
1
Americas 255 259 (2) 266 (4) 470 935 (50)
The Netherlands 6 78 93 (16) 62 26 226 246 (8)
United Kingdom (6) 24 N.M. 33 N.M. 29 112 (74)
Other countries 32 38 (16) 30 7 79 74 7
Holding and other (50) (57) 12 (28) (79) (152) (64)(138)
Net underlying
earnings 309 357 (13) 363 (15) 652 1,303 (50)
OVER/UNDER PERFORMANCE OF FAIR VALUE ITEMS
EUR millions
Operating earnings
before tax 293 373 (21) 44 N.M. 447 905 (51)
(Over)/under
performance of fair
value items - Americas 76 (181) N.M. 453 (83) (73) 727 N.M.
(Over)/under
performance of fair
value items - The
Netherlands 6 (39) 53 N.M. 126 N.M. 204 317 (36)
(Over)/under
performance of fair
value items - United
Kingdom (7) (2) N.M. - N.M. (6) - N.M.
(Over)/under
performance of fair
value items - Other
countries 1 (2) N.M. - N.M. (2) - N.M.
(Over)/under
performance of fair
value items - Holding
and other 27 163 (83) (123) N.M. 163 (195) N.M.
Underlying earnings
before tax 351 404 (13) 500 (30) 733 1,754 (58)
Net underlying
earnings 309 357 (13) 363 (15) 652 1,303 (50)
AMERICAS - OVER/UNDER PERFORMANCE OF FAIR VALUE ITEMS
USD millions
Over/(under)
performance of fair
value items by line
of business
Life and protection 3 11 (73) (96) N.M. (31) (104) 70
Individual savings
and retirement
products (189) 31 N.M. (235) 20 (149) (466) 68
Pensions and asset
management - (2) N.M. (22) N.M. (15) (25) 40
Institutional products 46 133 (65) (204) N.M. 80 (368) N.M.
Life reinsurance 43 67 (36) (128) N.M. 216 (141) N.M.
Total over/(under)
performance of fair
value items (97) 240 N.M. (685) 86 101 (1,104) N.M.
Total over/(under)
performance of fair
value items in EUR (76) 181 N.M. (453) 83 73 (727) N.M.
THE NETHERLANDS - OVER/UNDER PERFORMANCE OF FAIR VALUE ITEMS
EUR millions 6
Over/(under)
performance of
fair value items
by line of
business
Life and
protection 6 (4) N.M. (10) N.M. (24) (31) 23
Pensions and
asset management 33 (49) N.M. (116) N.M. (180) (286) 37
Total over/(under)
performance of fair
value items 39 (53) N.M. (126) N.M. (204) (317) 36
UNITED KINGDOM - OVER/UNDER PERFORMANCE OF FAIR VALUE ITEMS
GBP millions
Over/(under)
performance of fair
value items by line
of business
Pensions and asset
management 6 2 200 - N.M. 5 - N.M.
Total over/(under)
performance of fair
value items 6 2 200 - N.M. 5 - N.M.
OTHER COUNTRIES - OVER/UNDER PERFORMANCE OF FAIR VALUE ITEMS
EUR millions
Over/(under)
performance of
fair value items by
line of business
Variable annuities (1) 2 N.M. - N.M. 2 - N.M.
Total over/(under)
performance of fair
value items (1) 2 N.M. - N.M. 2 - N.M.
SALES
EUR millions Q3 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 2008 %
New life sales 484 469 3 618 (22) 1,496 2,033 (26)
Gross deposits
(on and off
balance) 7,559 6,762 12 11,051 (32) 22,562 28,818 (22)
New life sales
Life single
premiums 1,732 1,504 15 2,568 (33) 5,261 8,205 (36)
Life recurring
premiums
annualized 311 318 (2) 361 (14) 970 1,212 (20)
Total recurring
plus 1/10 single 484 469 3 618 (22) 1,496 2,033 (26)
Life 212 213 - 272 (22) 674 836 (19)
Saving products - - N.M. - N.M. - 1 N.M.
Pensions 238 221 8 308 (23) 712 1,058 (33)
BOLI/COLI - 1 N.M. 1 N.M. 2 14 (86)
Life reinsurance 34 34 - 37 (8) 108 124 (13)
Total recurring
plus 1/10 single 484 469 3 618 (22) 1,496 2,033 (26)
New premium
production
accident and
health insurance 125 146 (14) 146 (14) 435 453 (4)
New premium
production general
insurance 12 11 9 19 (37) 35 51 (31)
Gross deposits
(on and off
balance)
Fixed annuities 434 928 (53) 1,200 (64) 2,990 2,381 26
Variable
annuities 693 949 (27) 644 8 2,356 2,046 15
Saving products 1,795 779 130 547 N.M. 3,154 1,883 67
Retail mutual
funds 949 671 41 725 31 2,262 2,197 3
Pensions and
asset management 2,924 2,319 26 2,248 30 8,072 7,892 2
Institutional
guaranteed
products 764 1,115 (31) 5,687 (87) 3,727 12,417 (70)
Life reinsurance - 1 N.M. - N.M. 1 2 (50)
Total gross
deposits 7,559 6,762 12 11,051 (32) 22,562 28,818 (22)
Total gross
deposits excl.
institutional
guaranteed
products 6,795 5,647 20 5,364 27 18,835 16,401 15
Net deposits
(on and off
balance) by line
of business
Fixed annuities (225) 145 N.M. 297 N.M. 608 (522) N.M.
Variable
annuities 149 412 (64) (73) N.M. 639 (327) N.M.
Saving deposits 440 43 N.M. (206) N.M. 416 (164) N.M.
Retail mutual
funds 255 23 N.M. 185 38 180 772 (77)
Pensions and
asset management 1,373 246 N.M. 162 N.M. 2,125 1,512 41
Institutional
guaranteed
products (3,473) (1,432) (143) 1,300 N.M. (7,259) 506 N.M.
Life reinsurance (12) (12) - (13) 8 (40) (42) 5
Total net
deposits (1,493) (575) (160) 1,652 N.M. (3,331) 1,735 N.M.
Total net
deposits excl.
institutional
guaranteed
products 1,980 857 131 352 N.M. 3,928 1,229 N.M.
EMPLOYEE NUMBERS At At
Sept. 30, Dec. 31,
2009 2008
Number of employees 29,032 31,425
VALUE OF NEW BUSINESS AND IRR
VNB VNB VNB VNB VNB
EUR EUR EUR EUR EUR
EUR millions, Q3
after tax Notes 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 2008 %
Americas 63 66 (5) 109 (42) 207 288 (28)
The Netherlands 51 36 42 8 N.M. 118 31 N.M.
United Kingdom 34 45 (24) 57 (40) 136 174 (22)
Other Countries 21 34 (38) 32 (34) 90 112 (20)
Total 169 181 (7) 206 (18) 551 604 (9)
IRR % IRR% IRR%
EUR millions, after tax Notes Q3 2009 Q2 2009 Q3 2008
Americas 12.1 11.1 12.3
The Netherlands 21.8 29.5 11.5
United Kingdom 13.4 13.8 13.6
Other Countries 37.6 39.5 45.5
Total 18.5 21.9 17.7
MODELED NEW BUSINESS, APE AND DEPOSITS
Premium business Premium business
APE APE
EUR Q3
millions Notes 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 2008 %
11
Americas 251 245 2 255 (2) 762 817 (7)
The Netherlands 87 44 98 55 58 209 225 (7)
United Kingdom 247 261 (5) 371 (33) 820 1,173 (30)
Other Countries 60 104 (42) 89 (33) 278 296 (6)
Total 645 654 (1) 769 (16) 2,068 2,511 (18)
Deposit business Deposit business
Deposits Deposits
EUR Q3
millions Notes 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 2008 %
Americas 4,367 5,112 (15) 8,808 (50) 14,731 21,432 (31)
Other Countries 95 186 (49) 24 N.M. 417 75 N.M.
Total 4,462 5,298 (16) 8,832 (49) 15,148 21,507 (30)
VNB/PVNBP SUMMARY
Premium business Premium business
VNB/ VNB/ VNB/ VNB/
VNB PVNBP PVNBP APE VNB PVNBP PVNBP APE
EUR Q3
millions Notes 2009 % % Ytd 2009 % %
12
Americas 33 1,158 2.9 13.2 98 3,495 2.8 12.8
The Netherlands 51 553 9.2 58.7 118 1,552 7.6 56.6
United Kingdom 34 1,645 2.1 13.6 136 5,288 2.6 16.6
Other Countries 19 382 4.9 31.3 90 2,134 4.2 32.2
Total 137 3,737 3.7 21.2 441 12,469 3.5 21.3
Deposit business Deposit business
VNB/ VNB/ VNB/ VNB/
VNB PVNBP PVNBP VNB PVNBP PVNBP Dep-
Deposits osits
EUR Q3
millions Notes 2009 % % Ytd 2009 % %
12
Americas 30 6,965 0.4 0.7 110 19,852 0.6 0.7
Other Countries 3 257 1.0 2.8 - 924 - -
Total 32 7,221 0.4 0.7 110 20,776 0.5 0.7
Notes:
1) 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 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 these assets. Based on current holdings and asset class
returns, the long-term expected return on an annual basis is 8-10%,
depending on the asset class, including cash income and market value
changes. The expected earnings from these asset classes are net of
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 any over- or underperformance compared to
management's expected return is excluded from underlying earnings.
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
Other countries) are excluded from underlying earnings.
The Holding includes 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 change in AEGON's credit spread resulted in a
loss of EUR 27 mln in Q3 2009 on the fair value movement on these
bonds.
2) Net income refers to net income attributable to equity holders of
AEGON N.V.
3) New life sales is defined as new recurring premiums + 1/10 of single
premiums.
4) Deposits on and off balance sheet.
5) Return on equity is calculated by dividing the net underlying
earnings after cost of leverage by the average shareholders' equity
excluding the preferred shares and the revaluation reserve.
6) In order to maintain consistency in definitions, starting in the
fourth quarter 2008, the net impact of the fair value movements of
guarantees and the related hedges in the Netherlands has been
excluded from underlying earnings. Previously, differences in fair
value between guarantees and related hedges, referenced as hedge
ineffectiveness, were reported in gain/losses on investments. Results
from previous years have been adjusted.
7) Capital securities that are denominated in foreign currencies are,
for purposes of calculating the capital base ratio, revalued to the
period-end exchange rate.
All ratios exclude AEGON's revaluation reserve.
9) Included in other non-operating income/(charges) are charges made to
policyholders with respect to income tax.
There is an equal and opposite tax charge which is reported in the
line Income tax attributable to policyholder return.
10) 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.
11) APE = recurring premium + 1/10 single premium.
12) PVNBP: Present Value New Business Premium.
Currencies
Income statement items: average rate 1 EUR = USD 1.3720
(2008: USD 1.5197).
Income statement items: average rate 1 EUR = GBP 0.8855
(2008: GBP 0.7825).
Balance sheet items: closing rate 1 EUR = USD 1.4643 (2008: USD 1.4303;
year-end 2008: USD 1.3917).
Balance sheet items: closing rate 1 EUR = GBP 0.9093 (2008: GBP 0.7903;
year-end 2008: GBP 0.9525).
a) The calculation of the IGD (Insurance Group Directive) capital surplus
and ratio are based on Solvency I capital requirements on IFRS for entities
within the EU (Pillar I for AEGON UK), and local regulatory solvency
measurements for non-EU entities. Specifically, required capital for the life
insurance companies in the US is calculated as two times the upper end of the
Company Action Level range (200%) as applied by the National Association of
Insurance Commissioners in the US. The methodology to calculate the ratio for
the Netherlands has been adjusted to include the excess value above the
technical provisions, calculated according to the local regulatory liability
adequacy test, as of Q2 2009. This method has been refined in the third
quarter - the comparable IGD ratio as per end of Q2 2009 would have been 194%
(reported Q2 2009: 202%).
b) The results in this release are unaudited.
The Hague, November 12, 2009
Media conference call
8:00 am CET
Audio webcast on www.aegon.com
Analyst & investor call
15:00 am CET
Audio webcast on www.aegon.com
Call-in numbers (listen only):
USA: +1-480-629-9822
UK: + 44-208-515-2302
NL: +31-20-796-5332
Supplements
AEGON's Q3 2009 Financial Supplement and Condensed Consolidated Interim
Financial Statements are available on www.aegon.com.
About AEGON
As an international life insurance, pension and investment company based
in The Hague, AEGON has businesses in over twenty markets in the Americas,
Europe and Asia. AEGON companies employ approximately 29,000 people
and have over 40 million customers across the globe.
Full year
Key figures - EUR Q3 2009 2008
Underlying earnings
before tax 351 million 1.6 billion
New life sales 484 million 2.6 billion
Gross deposits 6.8 billion 40.8 billion
Revenue generating
investments
(end of period) 354 billion 332 billion
Cautionary note regarding non-GAAP measures
This press release includes certain non-GAAP financial measures: net
operating earnings, operating earnings before tax, underlying earnings before
tax, net underlying earnings and value of new business. The reconciliation of
underlying earnings before tax and operating earnings before tax to the most
comparable IFRS measures is provided on page 9. A reconciliation of (net)
underlying earnings to operating earnings before tax is provided on page 28.
Value of new business is not based on IFRS, which are used to report AEGON's
quarterly statements and should not be viewed as a substitute for IFRS
financial measures. AEGON believes that these non-GAAP measures, 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 press release contains certain information about our results and
financial condition in USD for the Americas and GBP for the United Kingdom,
because those businesses operate and are managed primarily in those
currencies. Certain comparative information presented on a constant currency
basis eliminates the effects of changes in currency exchange rates. None of
this information is a substitute for or superior to financial information
about us presented in EUR, which is the currency of our primary financial
statements.
Forward-looking statements
The statements contained in this press release that are not historical
facts are forward-looking statements as defined in the US Private Securities
Litigation Reform Act of 1995. The following are words that identify such
forward-looking statements: aim, believe, estimate, target, intend, may,
expect, anticipate, predict, project, counting on, plan, continue, want,
forecast, goal, should, would, is confident, will, and similar expressions as
they relate to our company. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions that are
difficult to predict. We undertake no obligation to publicly update or revise
any forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which merely reflect company
expectations at the time of writing. Actual results may differ materially
from expectations conveyed in forward-looking statements due to changes
caused by various risks and uncertainties. Such risks and 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 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;
- Effects of deliberations of the European Commission regarding the aid
we received from the Dutch State in December 2008;
- Changes in the policies of central banks and/or 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; and
- The impact our adoption of the International Financial Reporting
Standards may have on our reported financial results and financial
condition.
Further details of potential risks and uncertainties affecting the
company are described in the company's filings with Euronext Amsterdam and
the US Securities and Exchange Commission, including the Annual Report on
Form 20-F. These forward-looking statements speak only as of the date of this
document. Except as required by any applicable law or regulation, the company
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in the company's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based.
Contact information
Media relations: Greg Tucker
+31(0)70-344-8956
gcc-ir@aegon.com
Investor relations: Gerbrand Nijman
+31(0)70-344-8305
877-548-9668 - toll free USA only
ir@aegon.com
www.aegon.com
Contact information: Media relations: Greg Tucker, +31(0)70-344-8956, gcc-ir at aegon.com; Investor relations: Gerbrand Nijman, +31(0)70-344-8305, 877-548-9668 - toll free USA only, ir at aegon.com, www.aegon.com
Tags: AEGON N.V., Netherlands, The hague, The Netherlands
