AEGON Increases Profitability During Fourth Quarter
By Aegon N.v., PRNEWednesday, February 24, 2010
THE HAGUE, February 25, 2010 -
- Strong Increase in Underlying Earnings and Net Income
- Underlying Earnings Before Tax of EUR 427 Million
- Net Income of EUR 393 Million, due to Improved Earnings, Realized
Gains on Investments and Lower Impairments
- Impairments of EUR 209 million, the Lowest Level in Six Quarters
- Cost Reduction Measures of EUR 250 Million Realized in 2009,
Exceeding Target of EUR 150 Million
- Robust sales demonstrating solid franchise
- New Life Sales of EUR 549 Million, Driven by Strong Sales in Most
Businesses
- Net Deposits, Excluding Institutional Guaranteed Products, of EUR
1.5 Billion, due to Strong Sales of Pensions and Retail Mutual
Funds
- Profitable Sales With Value of New Business of EUR 216 Million and
an Internal Rate of Return of 17.6%
- Continued Strong Capital Position
- EUR 0.8 Billion in Capital Freed-Up in Q4, Totaling EUR 3.3 Billion
in 2009
- Excess Capital of EUR 3.7 Billion by end December
- Insurance Group Directive a) Capital Surplus of EUR 6.7 Billion,
Equivalent to Solvency Ratio of 204%
- No Dividend on Common Shares
Statement of Alex Wynaendts, CEO
"Clearly, the steps we have taken over the past year have delivered solid
results - a return to profit, reduced expenses, and continued customer
confidence, resulting in increased sales in all country units. AEGON today is
in a stronger financial position, which enabled us to repay one-third of the
capital we obtained from the Dutch government. Given the uncertain
environment, we believe that it continues to be prudent to maintain a
substantial capital buffer, as reflected in our strong capital position.
Although impairments improved during the quarter, they remained at elevated
levels for the year, which led to lower cash flows from our operating units.
Consequently, AEGON will not declare a dividend to common shareholders.
Looking ahead, we are confident that our strategy will continue to reinforce
AEGON's strong position in the gradually improving economic environment."
KEY PERFORMANCE INDICATORS
amounts in EUR Notes Q4 Q3 % Q4 2008 % FY 2009 FY 2008 %
millions 2009 2009
Underlying
earnings
before tax 1 427 351 22 (181) - 1,160 1,573 (26)
Net income 2 393 145 171 (1,182) - 204 (1,082) -
New life sales 3 549 484 13 598 (8) 2,045 2,631 (22)
Gross deposits
excluding
Institutional
Guaranteed
Products 4 5,932 5,978 (1) 5,970 (1) 23,628 22,371 6
Value of new
business (VNB) 216 169 28 233 (7) 767 837 (8)
Return on
equity 5 8.9% 8.4% 6 (8.7%) - 5.9% 6.6% (11)
For footnotes see page 23.
Supplements: AEGON's Q4 2009 Financial Supplement and Condensed
Consolidated Interim Financial Statements are available on
www.aegon.com
STRATEGIC HIGHLIGHTS
AEGON continued to deliver on its strategic priorities:
- To reallocate capital toward business with higher growth and return
prospects
- To improve growth and returns from existing businesses
- To reduce financial markets risk
- To manage AEGON as an international company.
Portfolio review
AEGON continues to assess its businesses to ensure they meet requirements
in terms of earnings growth, cash flow and return on capital. As part of this
review, AEGON sold its funeral insurance business in the Netherlands in
January 2010 for EUR 212 million. The sale will have a positive effect on
AEGON's excess capital position and is expected to result in a modest book
gain in the first half of 2010.
Cost measures
During 2009, AEGON realized cost reduction measures of EUR 250 million,
significantly above the company's target for the year of EUR 150 million.
Excluding the impact of restructuring charges, increased employee benefit
expenses in the United States and currency movements, operating costs
decreased in 2009 by 5% on a comparable basis.
AEGON's total workforce, excluding agent employees, declined by 7% during
the year to just over 25,000 employees. The decline was due mainly to
restructuring in the United States and the United Kingdom, as well as the
sale of real estate brokerage activities in the Netherlands and the sale of
the company's life insurance operations in Taiwan.
Capital & risk management
Capital preservation
During the fourth quarter of 2009, a further EUR 0.8 billion of capital
was released from AEGON's businesses, bringing the total for 2009 as a whole
to EUR 3.3 billion.
Excess capital
- Excess capital above S&P AA capital adequacy requirements amounted to
EUR 3.7 billion at the end of the fourth quarter 2009, down from EUR
4.8 billion at the end of third quarter of 2009. The decline was due
primarily to repayment of one-third of the EUR 3 billion in core
capital provided by the Dutch State at the end of 2008. The repayment,
including interest and premium for repayment, totaled EUR 1.15 billion.
- De-risking and capital efficiency measures added EUR 0.8 billion to
excess capital but were offset by other items, mainly related to higher
regulatory and rating agency capital requirements for longevity and
default provisioning. Statutory earnings of EUR 0.3 billion were partly
offset by impairments of EUR 0.2 billion.
- Under current uncertain circumstances, AEGON aims to maintain a
substantial capital buffer.
Core capital
- At year-end 2009, core capital, excluding the revaluation reserves,
amounted to EUR 15.9 billion or 75% of the total capital base, well
above AEGON's self-imposed minimum target of 70%6,7.
- Core capital, including the revaluation reserves, totaled EUR 14.2
billion, comprising EUR 12.2 billion in shareholders' equity and a
further EUR 2 billion in convertible core capital securities.
- Shareholders' equity per common share of EUR 5.88.
- The revaluation reserves amounted to a negative EUR 1.7 billion, a
marginal improvement from the third quarter of 2009 as the positive
effects of tightening credit spreads were almost entirely offset by the
impact of rising risk-free interest rates and realized gains.
- At the end of December 31, 2009, the Insurance Group Directive (IGD)
capital surplus totaled EUR 6.7 billion, equivalent to a solvency ratio
of 204%.
Improved risk profile
As announced in February last year, AEGON is running off its
institutional spread-based business in the United States. The run-off will
significantly reduce AEGON's exposure to credit risk and help lessen overall
sensitivity to fluctuations in financial markets. During the course of 2009,
as planned, account balances of this business were reduced by USD 11.5
billion to USD 21.3 billion. During 2010, these balances are expected to be
reduced by a further USD 8.5 billion. 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 realized a negative spread on these
assets which adversely impacted underlying earnings.
Dividend
AEGON's dividend policy remains unchanged and is based on its capital
position and cash flows. Although the capital position is strong, cash flows
were impacted by higher than average impairments in 2009. Therefore, AEGON
will not declare a dividend to common shareholders over the fiscal year 2009.
Manage AEGON as an international company
At the end of the fourth quarter, AEGON launched a variable annuity
product in the Netherlands, part of a broader effort to use existing
knowledge and expertise in the United States to expand the company's variable
annuities business in Europe and Japan. Currently, variable annuity products
are being sold in the United Kingdom, the Netherlands and France. In
addition, toward the end of 2009, AEGON's joint venture with Sony Life
launched its first variable annuity product in the Japanese market. The
product is beingdistributed through Sony Life's Lifeplanner channel and
several banks, including megabank Sumitomo Mitsui Banking Corp. Sales will be
reported starting in the first quarter of 2010.
New reporting structure
From the first quarter of 2010, AEGON will adjust its segment reporting
structure to reflect recent structural changes in its organization.
Comparable full year 2008 and quarterly 2009 numbers will be published on
April 12, 2010. The day after, on April 13, AEGON will host a meeting in
London to provide a further explanation to analysts and investors.
FINANCIAL HIGHLIGHTS
FINANCIAL OVERVIEW
EUR millions Q4 Q3 % Q4 2008 % FY 2009 FY 2008 %
2009 2009
Underlying earnings
before tax by line
of business
Life and
protection 267 280 (5) 121 121 1,052 911 15
Individual
savings and
retirement
products 78 79 (1) (433) - (94) (146) 36
Pensions and
asset management 105 29 - 179 (41) 259 508 (49)
Institutional
products (5) 5 - 100 - 118 405 (71)
Life reinsurance 16 15 7 (114) - 21 (63) -
Distribution (9) (1) - (19) 53 (3) 1 -
General
insurance 18 7 157 (3) - 36 45 (20)
Interest charges
and other (48) (69) 30 (17) (182) (252) (112) (125)
Share in net
results of
associates 5 6 (17) 5 - 23 24 (4)
Underlying
earnings before tax 427 351 22 (181) - 1,160 1,573 (26)
Over/(under)
performance of fair
value items (174) (58) (200) (770) 77 (460) (1,619) 72
Operating
earnings before tax 253 293 (14) (951) - 700 (46) -
Operating earnings before
tax by line of business
Life and
protection 250 289 (13) 104 140 988 795 24
Individual
savings and
retirement
products (36) (61) 41 (902) 96 (315) (922) 66
Pensions and
asset management 79 69 14 224 (65) 48 251 (81)
Institutional
products (20) 37 - (54) 63 161 8 -
Life reinsurance 40 43 (7) (319) - 203 (361) -
Distribution (9) (1) - (19) 53 (3) 1 -
General
insurance 18 7 157 (3) - 36 45 (20)
Interest charges
and other (74) (96) 23 13 - (441) 113 -
Share in net
results of
associates 5 6 (17) 5 - 23 24 (4)
Operating
earnings before tax 253 293 (14) (951) - 700 (46) -
Gains/(losses)
on investments 324 (100) - 136 138 432 35 -
Impairment
charges (209) (285) 27 (501) 58 (1,273) (1,038) (23)
Other
income/(charges) 5 48 (90) 38 (87) (323) (12) -
Income before tax 373 (44) - (1,278) - (464) (1,061) 56
Income tax 20 189 (89) 96 (79) 668 (21) -
Net income 393 145 171 (1,182) - 204 (1,082) -
Net underlying
earnings 373 309 21 (69) - 1,025 1,234 (17)
Net operating
earnings 278 272 2 (623) - 718 69 -
Underlying earnings
geographically
Americas 304 289 5 (234) - 805 1,073 (25)
The Netherlands 95 102 (7) 75 27 398 378 5
United Kingdom 34 (13) - 13 162 48 141 (66)
Other countries 42 42 - (17) - 161 93 73
Holding and other (48) (69) 30 (18) (167) (252) (112) (125)
Underlying
earnings before tax 427 351 22 (181) - 1,160 1,573 (26)
Operating earnings
geographically
Americas 201 213 (6) (1,167) - 775 (587) -
The Netherlands 52 141 (63) 227 (77) 151 213 (29)
United Kingdom 34 (6) - (6) - 54 122 (56)
Other countries 40 41 (2) (17) - 161 93 73
Holding and other (74) (96) 23 12 - (441) 113 -
Operating earnings
before tax 253 293 (14) (951) - 700 (46) -
Commissions and
expenses 1,388 1,473 (6) 1,863 (25) 5,983 6,109 (2)
of which
operating expenses 830 776 7 928 (11) 3,262 3,272 -
OPERATIONAL HIGHLIGHTS
Underlying earnings before tax
AEGON's underlying earnings before tax amounted to EUR 427 million for
the fourth quarter. Financial markets had a positive effect particularly
compared with the same quarter last year, when the company's earnings were
severely impacted by the turmoil in world financial markets.
In the Americas, underlying earnings totaled USD 446 million compared
with a loss of USD 412 million a year earlier. The improvement was due mainly
to the recovery in financial markets, which had a positive effect on both
technical results and fee income. These more than offset lower investment
income as a result of increased cash balances in relation to the run-off of
AEGON's institutional spread-based business in the United States.
Underlying earnings in the Netherlands increased to EUR 95 million, up
from EUR 75 million in the fourth quarter last year. This increase was mainly
the result of improved technical results including several provision
releases. Investment income was lower, primarily because the fourth quarter
of 2008 included substantial non-recurring dividend income.
In the United Kingdom, underlying earnings amounted to GBP 30 million, a
sharp increase from the fourth quarter of 2008, as significantly higher fee
income from improved equity and bond markets offset lower earnings from life
and protection and losses from distribution companies.
Underlying earnings from Other Countries totaled EUR 42 million in the
fourth quarter, driven mainly by further growth in Central & Eastern Europe
and Spain. Earnings for the same quarter last year included a sizeable
one-time charge in Taiwan. AEGON's Taiwanese life insurance operations were
sold during 2009 and its results are no longer included in the company's
income statements. Excluding Taiwan, underlying earnings before tax increased
24%.
Expenses for the holding company amounted to EUR 48 million in the fourth
quarter of 2009, compared with EUR 17 million last year, primarily a result
of higher funding costs.
Fair value items
Fair value items include the over- or underperformance on certain assets
held at fair value through profit or loss. In the fourth quarter, these
showed an underperformance of EUR 174 million, a significant improvement
compared with an underperformance of EUR 770 million in the fourth quarter of
2008. In the Americas, the underperformance of EUR 103 million was primarily
attributable to losses on a macro equity hedge and negative revaluation
of real estate related assets. Underperformance of fair value items in the
Netherlands of EUR 43 million was due mainly to the impact of movements in
the fair value of guarantees and related hedges. In addition, the further
narrowing of AEGON's own credit spread resulted in a loss of EUR 26 million
for the holding company.
Gains on investments
Gains on investments amounted to EUR 324 million in the fourth quarter, a
result primarily of trading in AEGON's bond portfolios. In the Netherlands,
investment gains were mainly the result of adjustments in the bond portfolio,
in part driven by asset and liability management.
Impairment charges
Impairment charges decreased sharply compared with the fourth quarter of
2008 to EUR 209 million, the lowest level in six quarters, though they
remained above AEGON's long-term average expectations. Impairments on US
housing related assets totaled EUR 92 million, while the remainder was
related mostly to hybrid securities issued by Irish and UK banks.
Income tax
Income tax in the fourth quarter amounted to
EUR 20 million and included a tax benefit of
EUR 20 million related to cross border intercompany reinsurance transactions
between Ireland and the United States. Tax gains related to these internal
transactions totaled EUR 419 million in 2009, and are a partial reversal of
the EUR 490 million in tax charges incurred during 2008.
Net income
AEGON's net income increased to EUR 393 million compared with a loss in
the fourth quarter of 2008. The improvement was the result of higher
underlying earnings, as well as a significant improvement in the performance
of fair value items, gains on investments, a sharp decline in the level of
impairments and taxes.
Commissions & expenses
Total commissions and expenses declined by 25% compared with Q4 2008 to
EUR 1.4 billion, a result primarily of accelerated amortization of deferred
policy acquisition costs in the Americas in the fourth quarter of 2008
related to last year's lower equity markets. Operating expenses decreased by
11% to EUR 830 million as a result of significant cost savings and weakening
of the US dollar.
SALES
EUR millions Q4 2009 Q3 2009 % Q4 % FY 2009 FY %
2008 2008
New life
sales
Life single
premiums 2,161 1,732 25 2,327 (7) 7,422 10,532 (30)
Life
recurring
premiums
annualized 333 311 7 366 (9) 1,303 1,578 (17)
Total
recurring
plus 1/10
single 549 484 13 598 (8) 2,045 2,631 (22)
New premium
production accident
and health insurance 126 125 1 161 (22) 561 614 (9)
New premium
production
general
insurance 21 12 75 17 24 56 68 (18)
Gross deposits (on
and off balance) by
line of business
Fixed
annuities 387 434 (11) 1,676 (77) 3,377 4,057 (17)
Variable
annuities 699 693 1 590 18 3,055 2,636 16
Saving
deposits 1,017 978 4 590 72 3,032 2,473 23
Retail mutual
funds 855 949 (10) 501 71 3,117 2,698 16
Pensions and
asset
management 2,973 2,924 2 2,613 14 11,045 10,505 5
Institutional
guaranteed
products 598 764 (22) 5,963 (90) 4,325 18,380 (76)
Life
reinsurance 1 - - - - 2 2 -
Total gross
deposits 6,530 6,742 (3) 11,933 (45) 27,953 40,751 (31)
Total gross deposits
excl. institutional
guaranteed products 5,932 5,978 (1) 5,970 (1) 23,628 22,371 6
Net deposits (on and off
balance) by line of
business
Fixed
annuities (226) (225) - 593 - 382 71 -
Variable
annuities 12 149 (92) (114) - 651 (441) -
Saving
deposits 454 440 3 (535) - 870 (699) -
Retail mutual
funds 304 255 19 (182) - 484 590 (18)
Pensions and
asset
management 997 1,373 (27) 257 - 3,122 1,769 76
Institutional
guaranteed
products (7,153) (3,473) (106) 1,679 - (14,412) 2,185 -
Life
reinsurance (11) (12) 8 (19) 42 (51) (61) 16
Total net
deposits (5,623) (1,493) - 1,679 - (8,954) 3,414 -
Total net deposits
excl. institutional
guaranteed products 1,530 1,980 (23) - - 5,458 1,229 -
REVENUE GENERATING INVESTMENTS
Dec. 31, Sept. 30,
2009 2009 %
Revenue generating investments
(total) 361,018 354,033 2
Investments general
account 134,205 132,617 1
Investments for account
of policyholders 125,845 119,647 5
Off balance sheet
investments third
parties 100,968 101,769 (1)
New life sales
New life sales totaled EUR 549 million, up 13% compared with the third
quarter. Most businesses reported increased sales for the quarter. In the
Netherlands and the United Kingdom, sales increased primarily as a result of
a rise in demand for AEGON's pension products. In Spain and Asia, sales
increased as AEGON's businesses continued to expand, while in Central &
Eastern Europe sales were unchanged from the third quarter.
Deposits
Gross deposits, excluding institutional guaranteed products, totaled
EUR 5.9 billion in the fourth quarter. Pension deposits, saving deposits and
variable annuities were all strong. However, as anticipated, fixed annuity
deposits were lower, and will continue to be managed toward a lower level.
Net deposits, excluding institutional guaranteed products, remained strong at
EUR 1.5 billion.
Value of new business
Value of new business showed a substantial improvement across almost all
countries compared with the third quarter and amounted to EUR 216 million. In
the Americas, the increase was due mainly to higher margins for variable
annuities and life reinsurance, while in the Netherlands higher spreads on
mortgages was the main driver. Higher sales volumes were the main reason for
an increase in value of new business in Spain.
Revenue-generating investments
Revenue-generating investments rose to EUR 361 billion at the end of
December 2009, up 2% from the third quarter. The increase was mainly the
result of a further rise in equity markets and a stronger US dollar at the
end of the fourth quarter of 2009.
APPENDIX I — Americas –The Netherlands –United Kingdom –Other
Countries
FINANCIAL OVERVIEW, Q4 2009 GEOGRAPHICALLY
amounts in million EUR (unless otherwise stated)
United
Americas Kingdom
USD GBP
Underlying earnings before tax
by line of business
269 10 Life and protection
Individual savings and
136 - retirement products
22 28 Pensions and asset management
Institutional
(2) - products
22 - Life reinsurance
- (8) Distribution
- - General insurance
- - Interest charges and other
Share in net results of
(1) - associates
446 30 Underlying earnings before tax
(143) - Over/(under) performance of
fair value items
303 30 Operating earnings before tax
Operating earnings before tax
by line of business
266 10 Life and protection
(25) - Individual savings and
retirement products
23 28 Pensions and asset management
(22) - Institutional
products
62 - Life reinsurance
- (8) Distribution
- - General insurance
- - Interest charges and other
(1) - Share in net results of
associates
303 30 Operating earnings before tax
74 30 Gains/(losses) on investments
(231) (49) Impairment charges
- 8 Other income/(charges)
146 19 Income before tax
120 (4) Income
tax
266 15 Net income
403 30 Net underlying earnings
345 30 Net operating earnings
(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 178 62 12 15 - 267
protection
Individual 101 (27) - 4 - 78
savings and
retirement
products
Pensions and 15 53 32 5 - 105
asset management
Institutional (5) - - - - (5)
products
Life reinsurance 16 - - - - 16
Distribution - 1 (10) - - (9)
General - 8 - 10 - 18
insurance
Interest charges - - - - (48) (48)
and other
Share in net (1) (2) - 8 - 5
results of
associates
Underlying 304 95 34 42 (48) 427
earnings before
tax
Over/(under) (103) (43) - (2) (26) (174)
performance of
fair value items
Operating 201 52 34 40 (74) 253
earnings before
tax
Operating
earnings
before tax
by line of
business
Life and 177 46 12 15 - 250
protection
Individual (11) (27) - 2 - (36)
savings and
retirement
products
Pensions and 16 26 32 5 - 79
asset management
Institutional (20) - - - - (20)
products
Life reinsurance 40 - - - - 40
Distribution - 1 (10) - - (9)
General - 8 - 10 - 18
insurance
Interest charges - - - - (74) (74)
and other
Share in net (1) (2) - 8 - 5
results of
associates
Operating 201 52 34 40 (74) 253
earnings before
tax
Gains/(losses) 54 190 33 (1) 48 324
on investments
Impairment (145) 7 (54) (17) - (209)
charges
Other - - 8 (4) 1 5
income/(charges)
Income before 110 249 21 18 (25) 373
tax
Income tax 71 (45) (5) - (1) 20
Net income 181 204 16 18 (26) 393
Net underlying 275 73 33 33 (41) 373
earnings
Net operating 232 41 34 31 (60) 278
earnings
FINANCIAL OVERVIEW, FY 2009 YEAR-TO-DATE GEOGRAPHICALLY
amounts in million EUR (unless otherwise stated)
United
Americas Kingdom
USD GBP
Underlying earnings before tax
by line of business
967 38 Life and protection
(84) - Individual savings and
retirement products
59 21 Pensions and asset management
166 - Institutional
products
29 - Life reinsurance
- (16) Distribution
- - General insurance
- - Interest charges and other
(5) - Share in net results of
associates
1,132 43 Underlying earnings before tax
(42) 5 Over/(under) performance of
fair value items
1,090 48 Operating earnings before tax
Operating earnings before tax
by line of business
933 38 Life and protection
(394) - Individual savings and
retirement products
45 26 Pensions and asset management
226 - Institutional
products
285 - Life reinsurance
- (16) Distribution
- - General insurance
- - Interest charges and other
(5) - Share in net results of
associates
1,090 48 Operating earnings before tax
8 90 Gains/(losses) on investments
(1,337) (163) Impairment charges
(4) 59 Other income/(charges)
(243) 34 Income before tax
940 (29) Income
tax
697 5 Net income
1,048 56 Net underlying earnings
1,055 59 Net operating earnings
(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 687 262 43 60 - 1,052
protection
Individual (59) (54) - 19 - (94)
savings and
retirement
products
Pensions and 42 174 24 19 - 259
asset management
Institutional 118 - - - - 118
products
Life reinsurance 21 - - - - 21
Distribution - 16 (19) - - (3)
General - 1 - 35 - 36
insurance
Interest charges - - - - (252) (252)
and other
Share in net (4) (1) - 28 - 23
results of
associates
Underlying 805 398 48 161 (252) 1,160
earnings before
tax
Over/(under) (30) (247) 6 - (189) (460)
performance of
fair value items
Operating 775 151 54 161 (441) 700
earnings before
tax
Operating
earnings
before tax
by line of
business
Life and 663 222 43 60 - 988
protection
Individual (280) (54) - 19 - (315)
savings and
retirement
products
Pensions and 32 (33) 30 19 - 48
asset management
Institutional 161 - - - - 161
products
Life reinsurance 203 - - - - 203
Distribution - 16 (19) - - (3)
General - 1 - 35 - 36
insurance
Interest charges - - - - (441) (441)
and other
Share in net (4) (1) - 28 - 23
results of
associates
Operating 775 151 54 161 (441) 700
earnings before
tax
Gains/(losses) 6 224 101 7 94 432
on investments
Impairment (951) (111) (183) (23) (5) (1,273)
charges
Other (3) - 66 (387) 1 (323)
income/(charges)
Income before (173) 264 38 (242) (351) (464)
tax
Income tax 669 (23) (33) (43) 98 668
Net income 496 241 5 (285) (253) 204
Net underlying 745 299 62 112 (193) 1,025
earnings
Net operating 750 114 67 112 (325) 718
earnings
AMERICAS
- Underlying earnings before tax increase to USD 446 million
- New life sales up 3% from previous quarter to USD 208 million
- Net deposits excluding IGP* total USD 1.4 billion, driven by strong
pension sales
- Value of new business rises to USD 128 million as a result of higher
margins
Underlying earnings before tax
Underlying earnings before tax for the fourth quarter of 2009 amounted to
USD 446 million.
- Earnings from Life & Protection were strong in the fourth quarter and
totaled USD 269 million.
- Individual Savings & Retirement earnings amounted to USD 136 million.
Within variable annuities, a write-down of intangible assets related to
the Merrill Lynch Life company acquisition of USD 22 million was offset
by a positive unlocking of deferred policy acquisition costs.
- Pensions & Asset Management earnings were in line with the same quarter
last year as higher fees from higher asset balances were offset by
increased employee benefit plan expenses.
- Institutional guaranteed products spreads declined significantly due to
an accumulation of cash necessary to run-off the business as well as
the amortization of unrealized losses on assets transferred to other
portfolios in exchange for cash.
- Earnings from Life Reinsurance totaled USD 22 million. Net reserve
strengthening was partly offset by favorable mortality experience
during the quarter.
Net income
Net income amounted to USD 266 million, a strong improvement from the
loss in Q4 2008. The improvement was the result of higher underlying
earnings, the improved performance of fair value items, gains on investments
and substantially lower impairment charges.
The underperformance of fair value items of USD 143 million was
attributable to macro equity hedge losses (USD 72 million), negative
revaluations of real estate related assets partly offset by strong private
equity and hedge fund returns (USD 36 million), and fair value annuity losses
(USD 35 million) driven by a tightening in credit spreads and policyholder
behavior assumption changes.
*IGP= institutional guaranteed products
Gains on investments totaled USD 74 million, primarily the result of
profits realized by trading in the bond portfolio.
Impairments, though still above AEGON's long-term expectations, continued
to trend down from the high levels experienced during the second half of
2008. During the fourth quarter, impairments amounted to USD 231 million.
Net income included a tax gain of USD 42 million related to cross border
intercompany reinsurance treaties. Tax gains from these internal transactions
totaled USD 590 million in 2009 and are a partial reversal of tax charges of
USD 718 million during 2008.
Commissions and expenses
Total commissions and expenses decreased 21% to USD 1.1 billion. The
fourth quarter last year included substantial accelerated deferred policy
acquisition costs amortization following lower equity markets. Operating
expenses increased 4% to USD 549 million as significant expense reductions
were more than offset by an increase in employee benefit plan expenses.
Sales and deposits
Total new life sales increased 3% compared with Q3 2009. New premium
production for accident and health products increased 3% compared with Q3
2009 as new initiatives more than offset the run-off of the automotive credit
business in the United States.
Total gross deposits, excluding IGP*, increased 13% compared with Q3
2009. As a result of active management of the fixed annuity book, deposits
declined to USD 648 million in Q4 2009, while variable annuity deposits
continued to develop favorably and amounted to USD 965 million. Mutual fund
deposits increased by 18% to USD 862 million as a result of improved market
conditions.
Pension deposits increased 22% in the quarter to USD 3.3 billion. Net
pension deposits remained very strong at USD 1.6 billion for the fourth
quarter.
Value of new business
Value of new business improved to USD 128 million due primarily to higher
margins in the variable annuity and life reinsurance businesses. The internal
rate of return increased to 14.7%, mainly as a result of improved margins on
variable annuities.
Revenue-generating investments
Revenue-generating investments declined by 1% in the fourth quarter to USD
307 billion at the end of December 2009 as outflows related to the run-off of
the institutional spread-based business were partly offset by strong net
inflows from pension and retail businesses.
AMERICAS - EARNINGS
USD millions Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 %
Underlying
earnings before
tax by line of
business
Life 189 193 (2) 159 19 653 769 (15)
Accident and
health 80 67 19 68 18 314 363 (13)
Life and
protection 269 260 3 227 19 967 1,132 (15)
Fixed annuities 103 62 66 86 20 311 368 (15)
Variable
annuities 45 50 (10) (709) - (356) (587) 39
Retail mutual
funds (12) (8) (50) - - (39) 8 -
Individual
savings and
retirement
products 136 104 31 (623) - (84) (211) 60
Pensions and
asset management 22 10 120 23 (4) 59 150 (61)
Institutional
guaranteed
products (17) 1 - 127 - 119 544 (78)
BOLI/COLI 15 9 67 4 - 47 50 (6)
Institutional
products (2) 10 - 131 - 166 594 (72)
Life reinsurance 22 20 10 (170) - 29 (93) -
Share in net
results of
associates (1) (1) - - - (5) 1 -
Underlying
earnings before
tax 446 403 11 (412) - 1,132 1,573 (28)
Over/(under)
performance of
fair value items (143) (97) (47) (1,330) 89 (42) (2,434) 98
Operating
earnings before
tax 303 306 (1) (1,742) - 1,090 (861) -
Operating
earnings before
tax by line of
business
Life 187 197 (5) 70 167 636 593 7
Accident and
health 79 66 20 43 84 297 321 (7)
Life and
protection 266 263 1 113 135 933 914 2
Fixed annuities 106 87 22 (110) - 315 (68) -
Variable
annuities (119) (164) 27 (1,185) 90 (670) (1,289) 48
Retail mutual
funds (12) (8) (50) - - (39) 8 -
Individual
savings and
retirement
products (25) (85) 71 (1,295) 98 (394) (1,349) 71
Pensions and
asset management 23 10 130 (11) - 45 91 (51)
Institutional
guaranteed
products (36) 47 - (76) 53 185 (15) -
BOLI/COLI 14 9 56 (8) - 41 26 58
Institutional
products (22) 56 - (84) 74 226 11 -
Life reinsurance 62 63 (2) (465) - 285 (529) -
Share in net
results of
associates (1) (1) - - - (5) 1 -
Operating
earnings before
tax 303 306 (1) (1,742) - 1,090 (861) -
Gains/(losses)
on investments 74 (98) - (10) - 8 (103) -
Impairment
charges (231) (287) 20 (499) 54 (1,337) (1,138) (17)
Other
income/(charges) - (5) - (1) - (4) 6 -
Income before 146 (84) - (2,252) - (243) (2,096) 88
tax
Income tax 120 316 (62) 393 (69) 940 74 -
Net income 266 232 15 (1,859) - 697 (2,022) -
Net underlying
earnings 403 359 12 (279) - 1,048 1,143 (8)
Net operating
earnings 345 295 17 (1,136) - 1,055 (491) -
-
Commissions and
expenses 1,141 1,295 (12) 1,451 (21) 5,009 4,961 1
of which
operating
expenses 549 539 2 527 4 2,227 2,167 3
For the amounts
in euro see the
Financial
Supplement.
AMERICAS - SALES
USD millions Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 %
New life sales
Life single
premiums 184 193 (5) 262 (30) 606 931 (35)
Life recurring
premiums
annualized 189 183 3 179 6 715 852 (16)
Total recurring
plus 1/10 single 208 202 3 205 1 776 945 (18)
Life 149 152 (2) 138 8 566 669 (15)
BOLI/COLI 1 1 - 15 (93) 4 36 (89)
Life reinsurance 58 49 18 52 12 206 240 (14)
Total recurring
plus 1/10 single 208 202 3 205 1 776 945 (18)
New premium
production
accident and
health insurance 184 178 3 205 (10) 758 870 (13)
Gross deposits
(on and off
balance) by line
of business
Fixed annuities 648 691 (6) 2,328 (72) 4,751 5,947 (20)
Variable
annuities 965 912 6 747 29 3,728 3,680 1
Retail mutual
funds 862 732 18 396 118 2,414 2,813 (14)
Pensions and
asset management 3,394 2,841 19 2,771 22 12,027 12,987 (7)
Institutional
guaranteed
products 972 1,158 (16) 8,075 (88) 6,085 26,945 (77)
Life reinsurance - 1 - 1 - 2 4 (50)
Total gross
deposits 6,841 6,335 8 14,318 (52) 29,007 52,376 (45)
Total gross
deposits
excl.
institutional
guaranteed
products 5,869 5,177 13 6,243 (6) 22,922 25,431 (10)
Net deposits (on
and off balance)
by line of
business
Fixed annuities (296) (278) (6) 896 - 538 103 -
Variable
annuities (51) 153 - (150) 66 415 (811) -
Retail mutual
funds 383 236 62 (219) - 467 778 (40)
Pensions and
asset management 1,361 839 62 24 - 3,584 2,660 35
Institutional
guaranteed
products (10,320) (4,906) (110) 2,433 - (20,280) 3,203 -
Life
reinsurance (17) (17) - (25) 32 (72) (89) 19
Total net
deposits (8,940) (3,973) (125) 2,959 - (15,348) 5,844 -
Total net
deposits excl.
institutional
guaranteed
products 1,380 933 48 526 162 4,932 2,641 87
REVENUE
GENERATING
INVESTMENTS
Dec. 31, Sept.
30,
2009 2009 %
Revenue 307,375 310,483 (1)
generating
investments
(total)
Investments 123,560 125,712 (2)
general account
Investments for 71,915 68,927 4
account of
policyholders
Off balance 111,900 115,844 (3)
sheet
investments
third parties
For the amounts in euro
see the Financial
Supplement.
THE NETHERLANDS
- Underlying earnings increase 27% to EUR 95 million
- Net income improves 65% to EUR 204 million
- Strong demand for pensions leads to new life sales of EUR 93 million
- Value of new business rises to EUR 66 million on higher margins and
volumes
Underlying earnings before tax
Underlying earnings before tax amounted to EUR 95 million. Several
separate provision releases totaling EUR 36 million more than offset charges
of EUR 22 million related to a reorganization of the sales operations and EUR
9 million for the deposit guarantee scheme in the Netherlands following the
failures of two banks, Icesave and DSB.
- Earnings from Life & Protection increased to EUR 62 million. Life
results improved mainly as a result of higher investment income, higher
earnings from mortgages and lower costs, partly offset by charges
related to a reorganization of the sales operations. Earnings also
included several releases of provisions.
- For Savings, improved margins were more than offset by charges related
to a reorganization of the sales operations and the failures of Icesave
and DSB, which led to an underlying loss of EUR 27 million.
- Pensions & Asset Management earnings declined compared with last year
to EUR 53 million. Q4 2008 included a one-off dividend of EUR 75
million and exceptional technical results of EUR 37 million. Current
quarter results included a release of provisions.
- Earnings from Distribution amounted to
EUR 1 million. Lower volumes in the Dutch insurance market continue to
have repercussions for the earnings of this business.
- General insurance earnings increased to EUR 8 million and included a
charge related to the reorganization of the Dutch sales operations.
Net income
Net income increased by two-thirds compared with Q4 2008 to EUR 204
million. The improvement was a result of higher underlying earnings, lower
impairment charges and increased gains on investments partly offset by an
underperformance on fair value items. Gains on investments totaled EUR 190
million, mainly the result of adjustments in the bond portfolio, in part
driven by asset and liability management. Fair value items underperformed by
EUR 43 million mainly because of the impact of fair value movements of
guarantees and related hedges. Impairments amounted to a positive EUR 7
million as a result of the recovery of previously impaired securities.
Commissions and expenses
Commissions and expenses decreased by 15% compared with Q4 2008 to EUR
321 million. As a result of significant cost savings, operating costs
declined by 13% to EUR 258 million.
Sales and deposits
As a result of improved service and customer satisfaction, evidenced by
recent surveys, demand for AEGON's group pension products increased. This
resulted in pension sales of EUR 72 million. Meanwhile, life sales rose to
EUR 21 million as a result of an increase in recurring premium production
related to mortgages. In total, new life sales amounted to EUR 93 million.
Value of new business
Higher volumes and margins in the mortgage business resulted in an
increase in the value of new business to EUR 66 million. The internal rate of
return for AEGON's Dutch activities continues to be high at 14.9%, driven
mainly by the mortgage business.
Revenue-generating investments
Revenue-generating investments rose to EUR 70.9 billion at the end of
December 2009, up 2% compared with the previous quarter, primarily the result
of continued net inflows.
THE NETHERLANDS - EARNINGS
EUR millions Q4 Q3 % Q4 % FY FY %
2009 2009 2008 2009 2008
Underlying earnings
before tax by line of
business
Life 61 61 - (34) - 234 43 -
Accident and health 1 9 (89) (3) - 28 23 22
Life and protection 62 70 (11) (37) - 262 66 -
Saving products (27) (8) - (20) (35) (54) (14) -
Individual savings and
retirement products (27) (8) - (20) (35) (54) (14) -
Pensions and asset
management 53 38 39 169 (69) 174 308 (44)
Distribution 1 3 (67) (22) - 16 3 -
General insurance 8 (2) - (15) - 1 8 (88)
Share in net results of
associates (2) 1 - - - (1) 7 -
Underlying earnings
before tax 95 102 (7) 75 27 398 378 5
Over/(under)
performance of fair
value items (43) 39 - 152 - (247) (165) (50)
Operating earnings
before tax 52 141 (63) 227 (77) 151 213 (29)
Operating earnings
before tax by line of
business
Life 45 67 (33) 29 55 194 75 159
Accident and health 1 9 (89) (3) - 28 23 22
Life and protection 46 76 (39) 26 77 222 98 127
Saving products (27) (8) - (20) (35) (54) (14) -
Individual savings and
retirement products (27) (8) - (20) (35) (54) (14) -
Pensions and asset
management 26 71 (63) 258 (90) (33) 111 -
Distribution 1 3 (67) (22) - 16 3 -
General insurance 8 (2) - (15) - 1 8 (88)
Share in net results of
associates (2) 1 - - - (1) 7 -
Operating earnings
before tax 52 141 (63) 227 (77) 151 213 (29)
Gains/(losses) on
investments 190 (34) - 84 126 224 20 -
Impairment charges 7 (12) - (68) - (111) (138) 20
Income before tax 249 95 162 243 2 264 95 178
Income tax (45) (21) (114) (119) 62 (23) (1) -
Net income 204 74 176 124 65 241 94 156
Net underlying earnings 73 78 (6) 80 (9) 299 326 (8)
Net operating earnings 41 106 (61) 129 (68) 114 139 (18)
Commissions and
expenses 321 279 15 376 (15) 1,181 1,269 (7)
of which operating
expenses 258 206 25 297 (13) 873 934 (7)
THE NETHERLANDS - SALES
EUR millions Q4 Q3 % Q4 % FY FY %
2009 2009 2008 2009 2008
New life sales
Life single premiums 638 329 94 225 184 1,503 1,324 14
Life recurring premiums
annualized 29 20 45 18 61 89 86 3
Total recurring plus
1/10 single 93 52 79 41 127 239 219 9
Life 21 19 11 20 5 82 97 (15)
Pensions 72 33 118 21 - 157 122 29
Total recurring plus
1/10 single 93 52 79 41 127 239 219 9
New premium production
accident and health
insurance 4 3 33 4 - 17 15 13
New premium production
general insurance 7 6 17 7 - 26 28 (7)
Gross deposits (on and
off balance) by line of
business
Saving deposits 1,017 978 4 590 72 3,032 2,473 23
Pensions and asset
management 166 173 (4) 83 100 412 228 81
Total gross deposits 1,183 1,151 3 673 76 3,444 2,701 28
Net deposits (on and
off balance) by line of
business
Saving deposits 454 440 3 (535) - 870 (699) -
Pensions and asset
management (123) 210 - 14 - (99) (38) (161)
Total net deposits 331 650 (49) (521) - 771 (737) -
REVENUE GENERATING
INVESTMENTS
Dec. Sept.
31, 30,
2009 2009 %
Revenue generating 70,861 69,656 2
investments (total)
Investments general 36,144 35,496 2
account
Investments for account 21,749 21,044 3
of policyholders
Off balance sheet 12,968 13,116 (1)
investments third
parties
UNITED KINGDOM
- Underlying earnings before tax increase to GBP 30 million
- New life sales up 9% compared with Q3 2009 to GBP 237 million
- Higher sales lead to value of new business of GBP 32 million, up 10%
compared with Q3 2009
Underlying earnings before tax
Underlying earnings before tax increased to GBP 30 million in the fourth
quarter, mainly as a result of a strong recovery in financial markets and
business growth.
- Earnings from Life & Protection amounted to GBP 10 million. Earnings in
the fourth quarter last year had included a one-off benefit.
- Pensions & Asset Management earnings increased to GBP 28 million, due
to a strong recovery in financial markets.
- Distribution recorded a loss of GBP 8 million as a result of lower
income due to adverse market conditions and costs associated with
adapting the business to the new environment.
Net income
Net income amounted to GBP 15 million in Q4 2009 as the result of higher
underlying earnings, an improved performance of fair value items and gains on
investments, partly offset by an increase in impairments. Gains on
investments totaled GBP 30 million, mainly from bond trading. Impairments
increased in the fourth quarter to GBP 49 million, mostly related to hybrid
securities issued by Irish and UK banks.
Commissions and expenses
Total commissions and expenses were up 8% compared with Q4 2008 to GBP
186 million, mainly as a result of a lower deferral of expenses and the
release of employee benefit reserves in the fourth quarter last year.
Operating expenses decreased by 1%, as cost savings measures led to lower
expenses.
Sales and deposits
New life sales increased by 9% compared with Q3 2009 to GBP 237 million.
Sales of group and individual pensions increased, though annuity production
was lower, as planned following repricing. Gross deposits declined to GBP 270
million, compared with a very strong third quarter.
Value of new business
Value of new business increased compared with Q3 2009, in line with
higher pension sales, to GBP 32 million. The internal rate of return on new
business remained stable at 13.5%.
Revenue-generating investments
As a result of a further recovery in financial markets and net inflows,
revenue-generating investments increased to GBP 55.8 billion at the end of
December 2009.
UNITED KINGDOM - EARNINGS
GBP millions Notes Q4 Q3 % Q4 % FY FY %
2009 2009 2008 2009 2008
Underlying earnings
before tax by line
of business
Life 10 10 - 18 (44) 38 46 (17)
Life and protection 10 10 - 18 (44) 38 46 (17)
Pensions and asset
management 28 (18) - (8) - 21 68 (69)
Distribution (8) (3) (167) 3 - (16) (1) -
Underlying earnings
before tax 30 (11) - 13 131 43 113 (62)
Over/(under)
performance of fair
value items - 6 - (15) - 5 (15) -
Operating earnings
before tax 30 (5) - (2) - 48 98 (51)
Operating earnings
before tax by line
of business
Life 10 10 - 18 (44) 38 46 (17)
Life and protection 10 10 - 18 (44) 38 46 (17)
Pensions and asset
management 28 (12) - (23) - 26 53 (51)
Distribution (8) (3) (167) 3 - (16) (1) -
Operating earnings
before tax 30 (5) - (2) - 48 98 (51)
Gains/(losses) on
investments 30 26 15 (16) - 90 (17) -
Impairment charges (49) (70) 30 2 - (163) (18) -
Other
income/(charges) 8 8 43 (81) 28 (71) 59 (14) -
Income before tax 19 (6) - 12 58 34 49 (31)
Income tax
attributable to
policyholder return (8) (43) 81 (28) 71 (59) 14 -
Income before
income tax on
shareholders return 11 (49) - (16) - (25) 63 -
Income tax on
shareholders return 4 16 (75) 8 (50) 30 1 -
Net income 15 (33) - (8) - 5 64 (92)
Net underlying
earnings 30 (5) - 17 76 56 104 (46)
Net operating
earnings 30 (1) - 2 - 59 89 (34)
Commissions and
expenses 186 167 11 173 8 687 662 4
of which operating
expenses 113 109 4 114 (1) 428 414 3
For the amounts in euro see the Financial Supplement.
UNITED KINGDOM - SALES
GBP millions Notes Q4 Q3 % Q4 % FY FY %
2009 2009 2008 2009 2008
New life sales 9
Life single
premiums 1,171 1,066 10 1,548 (24) 4,571 6,470 (29)
Life recurring
premiums annualized 120 111 8 134 (10) 486 575 (15)
Total recurring
plus 1/10 single 237 218 9 289 (18) 943 1,222 (23)
Life 31 40 (23) 66 (53) 183 251 (27)
Pensions 206 178 16 223 (8) 760 971 (22)
Total recurring
plus 1/10 single 237 218 9 289 (18) 943 1,222 (23)
Gross deposits (on
and off balance) by
line of business
Pensions and asset
management 270 491 (45) 152 78 1,076 542 99
Total gross
deposits 270 491 (45) 152 78 1,076 542 99
Net deposits (on
and off balance) by
line of business
Pensions and asset
management 98 402 (76) 11 - 269 (322) -
Total net deposits 98 402 (76) 11 - 269 (322) -
REVENUE GENERATING
INVESTMENTS
Dec. Sept.
31, 30,
2009 2009 %
Revenue generating 55,774 54,224 3
investments (total)
Investments general 7,031 6,779 4
account
Investments for 45,975 44,795 3
account of
policyholders
Off balance sheet 2,768 2,650 4
investments third
parties
For the amounts in euro
see the Financial
Supplement.
OTHER COUNTRIES
- Underlying earnings before tax increase to EUR 42 million
- New life sales increase 39% to EUR 57 million compared with Q3 2009,
primarily driven by higher sales in Spain
- Value of new business rises to EUR 30 million, due mainly to growth in
sales
Underlying earnings before tax
Underlying earnings before tax totaled EUR 42 million, driven mainly by
further growth in Central & Eastern Europe (CEE) and Spain. Earnings for the
same quarter last year had included a sizeable one-off charge associated with
the company's Taiwanese operations. The sale of these operations was
completed in August 2009, and results are no longer included in AEGON's
earnings.
- Earnings from Life & Protection increased to
EUR 15 million, mainly as a result of growth in CEE - particularly in
Slovakia and the Czech Republic - as well as improved results from
AEGON's joint ventures in Spain. Results last year were impacted by an
accelerated amortization of deferred acquisition costs in Taiwan of EUR
43 million.
- Individual Savings & Retirement earnings improved to EUR 4 million as
AEGON's Chinese asset management joint venture increased its asset
balances on the back of a strong recovery in the Chinese equity market.
- Earnings from Pensions & Asset Management rose to EUR 5 million as a
result of higher asset balances and cost efficiencies in CEE.
- General Insurance earnings remained high at EUR 10 million, while the
fourth quarter last year had included a reserve release of EUR 2
million.
Net income
Net income from Other Countries increased to EUR 18 million as a result
of higher underlying earnings, lower losses on investments and lower
impairments. Net income for the fourth quarter last year had included an
equity impairment in Taiwan of EUR 45 million.
Commissions and expenses
Commissions and expenses, excluding Taiwan, were unchanged compared with
the fourth quarter last year. Operating expenses, also excluding Taiwan, were
also stable, despite continued growth in the business.
Sales and deposits
As a result of strong growth in both single and recurring premium
production, total new life sales increased 39% from the third quarter to EUR
57 million.
- In Spain, new life sales increased to EUR 30 million as a result of the
introduction of new products and successful sales campaigns. Sales for
the partnership with regional savings bank CAM, which are not
consolidated in the company's accounts, amounted to EUR 26 million on a
100% basis;
- In CEE, new life sales remained unchanged at EUR 21 million, while new
premium production for non-life increased to EUR 14 million as a result
of a greater focus on sales of household insurance;
- In Asia, new life sales in China increased to EUR 6 million, as a
result of higher recurring premium production in most distribution
channels. AEGON's joint venture in India, which is not consolidated,
recorded new life sales for the quarter of EUR 7 million on a 100%
basis.
Gross deposits decreased compared with the third quarter to EUR 591
million primarily as a result of the introduction of new retail mutual funds
in China resulted in high inflows during the third quarter.
Value of new business
Value of new business increased 43% compared with the previous quarter to
EUR 30 million, mainly as a result of improved sales in both Spain and
Hungary. The internal rate of return remained at a high level.
Revenue-generating investments
Revenue-generating investments increased 6% during the quarter to EUR
12.3 billion at the end of December 2009. The increase was due mainly to
market appreciation and net inflows.
OTHER COUNTRIES - EARNINGS
EUR millions Q4 Q3 % Q4 % FY FY %
2009 2009 2008 2009 2008
Underlying earnings
before tax by line of
business
Life 15 19 (21) (41) - 58 11 -
Accident and health - - - 1 - 2 5 (60)
Life and protection 15 19 (21) (40) - 60 16 -
Variable annuities (1) (1) - - - - (1) -
Saving products - - - - - 1 - -
Retail mutual funds 5 5 - 3 67 18 13 38
Individual savings and
retirement products 4 4 - 3 33 19 12 58
Pensions and asset
management 5 4 25 2 150 19 12 58
General insurance 10 9 11 12 (17) 35 37 (5)
Share in net results of
associates 8 6 33 6 33 28 16 75
Underlying earnings
before tax 42 42 - (17) - 161 93 73
Over/(under) performance
of fair value items (2) (1) (100) - - - - -
Operating earnings
before tax 40 41 (2) (17) - 161 93 73
Operating earnings
before tax by line of
business
Life 15 19 (21) (41) - 58 11 -
Accident and health - - - 1 - 2 5 (60)
Life and protection 15 19 (21) (40) - 60 16 -
Variable annuities (3) (2) (50) - - - (1) -
Saving products - - - - - 1 - -
Retail mutual funds 5 5 - 3 67 18 13 38
Individual savings and
retirement products 2 3 (33) 3 (33) 19 12 58
Pensions and asset
management 5 4 25 2 150 19 12 58
General insurance 10 9 11 12 (17) 35 37 (5)
Share in net results of
associates 8 6 33 6 33 28 16 75
Operating earnings
before tax 40 41 (2) (17) - 161 93 73
Gains/(losses) on
investments (1) 2 - (10) 90 7 (10) -
Impairment charges (17) (1) - (49) 65 (23) (68) 66
Other income/(charges) (4) 2 - 1 - (387) 1 -
Income before tax 18 44 (59) (75) - (242) 16 -
Income tax - (13) - 9 - (43) (25) (72)
Net income 18 31 (42) (66) - (285) (9) -
Net underlying earnings 33 32 3 (10) - 112 64 75
Net operating earnings 31 31 - (10) - 112 64 75
Commissions and expenses 88 81 9 175 (50) 340 494 (31)
of which operating
expenses 54 47 15 66 (18) 195 211 (8)
OTHER COUNTRIES - SALES
EUR millions Q4 Q3 % Q4 % FY FY %
2009 2009 2008 2009 2008
New life sales
Life single premiums 103 44 134 69 49 353 445 (21)
Life recurring premiums
annualized 47 37 27 52 (10) 160 189 (15)
Total recurring plus
1/10 single 57 41 39 58 (2) 195 233 (16)
Life 57 41 39 58 (2) 195 232 (16)
Saving products - - - - - - 1 -
Total recurring plus
1/10 single 57 41 39 58 (2) 195 233 (16)
New premium production
accident and health
insurance 1 1 - 2 (50) 5 6 (17)
New premium production
general insurance 14 6 133 10 40 30 40 (25)
Gross deposits (on and
off balance)
Variable annuities 64 65 (2) 10 - 406 126 -
Retail mutual funds 271 433 (37) 173 57 1,402 779 80
Pensions and asset
management 256 238 8 211 21 878 737 19
Total gross deposits 591 736 (20) 394 50 2,686 1,642 64
Net deposits (on and off
balance)
Variable annuities 56 44 27 5 - 356 113 -
Retail mutual funds 33 80 (59) (56) - 152 59 158
Pensions and asset
management 85 127 (33) 141 (40) 372 397 (6)
Total net deposits 174 251 (31) 90 93 880 569 55
REVENUE GENERATING
INVESTMENTS
Dec. Sept.
31, 30,
2009 2009 %
Revenue generating 12,327 11,667 6
investments (total)
Investments general 2,706 2,765 (2)
account
Investments for account 2,413 2,275 6
of policyholders
Off balance sheet 7,208 6,627 9
investments third
parties
APPENDIX II –Tables
NET UNDERLYING EARNINGS GEOGRAPHICALLY
EUR millions Notes Q4 Q3 % Q4 2008 % FY FY 2008 %
2009 2009 2009
1
Americas 275 255 8 (155) - 745 780 (4)
The Netherlands 73 78 (6) 80 (9) 299 326 (8)
United Kingdom 33 (6) - 19 74 62 131 (53)
Other countries 33 32 3 (10) - 112 64 75
Holding and
other (41) (50) 18 (3) - (193) (67) (188)
Net underlying
earnings 373 309 21 (69) - 1,025 1,234 (17)
OVER/UNDER PERFORMANCE OF
FAIR VALUE ITEMS
EUR millions
Operating
earnings before
tax 253 293 (14) (951) - 700 (46) -
(Over)/under
performance of
fair value items
- Americas 103 76 36 933 (89) 30 1,660 (98)
(Over)/under
performance of fair
value items - The
Netherlands 43 (39) - (152) - 247 165 50
(Over)/under
performance of fair
value items - United
Kingdom - (7) - 19 - (6) 19 -
(Over)/under
performance of fair
value items - Other
countries 2 1 100 - - - - -
(Over)/under
performance of fair
value items - Holding
and other 26 27 (4) (30) - 189 (225) -
Underlying
earnings before
tax 427 351 22 (181) - 1,160 1,573 (26)
Net underlying
earnings 373 309 21 (69) - 1,025 1,234 (17)
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) 3 - (114) 97 (34) (218) 84
Individual
savings and
retirement
products (161) (189) 15 (672) 76 (310) (1,138) 73
Pensions and
asset management 1 - - (34) - (14) (59) 76
Institutional
products (20) 46 - (215) 91 60 (583) -
Life reinsurance 40 43 (7) (295) - 256 (436) -
Total
over/(under)
performance of
fair value items (143) (97) (47) (1,330) 89 (42) (2,434) 98
Total over/(under)
performance of fair
value items in EUR (103) (76) (36) (933) 89 (30) (1,660) 98
THE NETHERLANDS - OVER/UNDER PERFORMANCE OF FAIR VALUE ITEMS
EUR millions
Over/(under) performance of fair
value items by line of business
Life and
protection (16) 6 - 63 - (40) 32 -
Pensions and
asset management (27) 33 - 89 - (207) (197) (5)
Total
over/(under)
performance of
fair value items (43) 39 - 152 - (247) (165) (50)
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 - (15) - 5 (15) -
Total
over/(under)
performance of
fair value items - 6 - (15) - 5 (15) -
OTHER COUNTRIES - OVER/UNDER PERFORMANCE OF FAIR VALUE ITEMS
EUR millions
Over/(under) performance of fair
value items by line of business
Variable
annuities (2) (1) (100) - - - - -
Total
over/(under)
performance of
fair value items (2) (1) (100) - - - - -
SALES
EUR millions Q4 2009 Q3 2009 % Q4 % FY 2009 FY %
2008 2008
New life sales 549 484 13 598 (8) 2,045 2,631 (22)
Gross deposits (on
and off balance) 6,530 6,742 (3) 11,933 (45) 27,953 40,751 (31)
New life sales
Life single
premiums 2,161 1,732 25 2,327 (7) 7,422 10,532 (30)
Life recurring
premiums annualized 333 311 7 366 (9) 1,303 1,578 (17)
Total recurring
plus 1/10 single 549 484 13 598 (8) 2,045 2,631 (22)
Life 211 212 - 265 (20) 885 1,101 (20)
Saving products - - - - - - 1 -
Pensions 299 238 26 283 6 1,011 1,341 (25)
BOLI/COLI 1 - - 11 (91) 3 25 (88)
Life reinsurance 38 34 12 39 (3) 146 163 (10)
Total recurring
plus 1/10 single 549 484 13 598 (8) 2,045 2,631 (22)
New premium
production accident
and health
insurance 126 125 1 161 (22) 561 614 (9)
New premium
production general
insurance 21 12 75 17 24 56 68 (18)
Gross deposits (on
and off balance)
Fixed annuities 387 434 (11) 1,676 (77) 3,377 4,057 (17)
Variable annuities 699 693 1 590 18 3,055 2,636 16
Saving products 1,017 978 4 590 72 3,032 2,473 23
Retail mutual funds 855 949 (10) 501 71 3,117 2,698 16
Pensions and asset
management 2,973 2,924 2 2,613 14 11,045 10,505 5
Institutional
guaranteed products 598 764 (22) 5,963 (90) 4,325 18,380 (76)
Life reinsurance 1 - - - - 2 2 -
Total gross
deposits 6,530 6,742 (3) 11,933 (45) 27,953 40,751 (31)
Total gross
deposits excl.
institutional
guaranteed products 5,932 5,978 (1) 5,970 (1) 23,628 22,371 6
Net deposits (on
and off balance) by
line of business
Fixed annuities (226) (225) - 593 - 382 71 -
Variable annuities 12 149 (92) (114) - 651 (441) -
Saving deposits 454 440 3 (535) - 870 (699) -
Retail mutual funds 304 255 19 (182) - 484 590 (18)
Pensions and asset
management 997 1,373 (27) 257 - 3,122 1,769 76
Institutional
guaranteed products(7,153) (3,473) (106) 1,679 - (14,412) 2,185 -
Life reinsurance (11) (12) 8 (19) 42 (51) (61) 16
Total net deposits (5,623) (1,493) - 1,679 - (8,954) 3,414 -
Total net deposits
excl. institutional
guaranteed products 1,530 1,980 (23) - - 5,458 1,229 -
EMPLOYEE NUMBERS At At
Dec. Dec.
31, 31,
2009 2008
Number of employees 28,382 31,425
Agents 3,292 4,446
Number of employees 25,090 26,979
excl. agents
VALUE OF NEW BUSINESS AND IRR
VNB VNB VNB VNB VNB
EUR Q4 Q3 2009 % Q4 % FY FY 2008 %
millions, 2009 2008 2009
after tax
Americas 85 63 35 124 (31) 293 412 (29)
The 66 51 29 13 - 184 43 -
Netherlands
United 35 34 3 60 (42) 170 234 (27)
Kingdom
Other 30 21 43 35 (14) 120 148 (19)
Countries
Total 216 169 28 233 (7) 767 837 (8)
IRR % IRR% IRR%
EUR Q4 Q3 2009 Q4
millions, 2009 2008
after tax
Americas 14.7 12.1 12.4
The 14.9 21.8 10.8
Netherlands
United 13.5 13.4 14.0
Kingdom
Other 36.2 37.6 37.2
Countries
Total 17.6 18.5 16.5
MODELED NEW BUSINESS, APE AND DEPOSITS
Premium business Premium
business
APE APE
EUR Notes Q4 Q3 2009 % Q4 % FY FY 2008 %
millions 2009 2008 2009
10
Americas 235 251 (6) 279 (16) 997 1,097 (9)
The 120 87 38 75 60 328 300 9
Netherlands
United 250 247 1 341 (27) 1,070 1,514 (29)
Kingdom
Other 79 60 32 113 (30) 357 409 (13)
Countries
Total 684 645 6 809 (15) 2,753 3,321 (17)
Deposit business Deposit
business
Deposits Deposits
EUR Q4 Q3 2009 % Q4 % FY FY 2008 %
millions 2009 2008 2009
Americas 3,022 4,367 (31) 8,718 (65) 17,753 30,151 (41)
Other 108 95 14 23 - 525 98 -
Countries
Total 3,130 4,462 (30) 8,742 (64) 18,278 30,249 (40)
VNB/PVNBP SUMMARY
Premium business Premium business
VNB PVNBP VNB/ VNB/ APE VNB PVNBP VNB/ VNB/ APE
PVNBP PVNBP
EUR Notes Q4 % % FY % %
millions 2009 2009
11
Americas 44 1,195 3.7 18.7 142 4,690 3.0 14.2
The 66 1,210 5.4 55.1 184 2,763 6.7 56.0
Netherlands
United 35 1,650 2.1 13.8 170 6,938 2.5 15.9
Kingdom
Other 26 556 4.6 32.4 115 2,690 4.3 32.2
Countries
Total 170 4,611 3.7 24.9 611 17,080 3.6 22.2
Deposit business Deposit business
VNB PVNBP VNB/ VNB/ VNB PVNBP VNB/ VNB/
PVNBP Deposits PVNBP Deposits
EUR Notes Q4 % % FY % %
millions 2009 2009
11
Americas 41 3,736 1.1 1.4 151 23,589 0.6 0.9
Other 5 307 1.5 4.2 5 1,230 0.4 0.9
Countries Total 46 4,043 1.1 1.5 156 24,819 0.6 0.9
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 26 mln in Q4 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. In the previous quarters of 2009
gross saving deposits of AEGON The Netherlands were overstated by EUR
130 million, EUR 192 million and EUR 817 million in Q1, Q2 and Q3,
respectively. Net deposits were not impacted. Comparative figures
have been restated.
5) Return on equity is calculated by dividing the net underlying
earnings after cost of leverage by the average shareholders' equity
excluding the preferred shares and the revaluation reserve.
6) Capital securities that are denominated in foreign currencies are,
for purposes of calculating the capital base ratio, revalued to the
period-end exchange rate.
7) All ratios exclude AEGON's revaluation reserve.
Included in other non-operating income/(charges) are charges made to
policyholders with respect to income tax.
9) There is an equal and opposite tax charge which is reported in the
line Income tax attributable to policyholder return.
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.
10) APE = recurring premium + 1/10 single premium.
11) PVNBP: Present Value New Business Premium.
a) 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 calculation of the IGD ratio
excludes the available and required capital of the UK With-Profit
funds. In the UK solvency surplus calculation the local regulator
only allows the available capital number of the With-Profits funds
included in overall local available capital to be equal to the amount
of With-Profits funds' required capital.
b) The results in this release are unaudited.
Currencies
Income statement items: average rate 1 EUR = USD 1.4071 (2008:USD 1.4660)
Income statement items: average rate 1 EUR = GBP 0.8903 (2008:GBP 0.7961)
Balance sheet items: closing rate 1 EUR = USD 1.4406 (2008: USD 1.3917)
Balance sheet items: closing rate 1 EUR = GBP 0.8881 (2008: GBP 0.9525)
ADDITIONAL INFORMATION
Press conference
9:00 am CET
Audio webcast on www.aegon.com
Analyst & investor presentation / conference call
15:00 am CET
Audio webcast on www.aegon.com
Call-in numbers (listen only):
USA: +1-480-629-9822
UK: +44-208-515-2301
NL: +31-20-796-5332
Supplements
AEGON's Q4 2009 Financial Supplement and Condensed Consolidated Interim
Financial Statements are available on www.aegon.com.
Record date AGM
The record date for attending and voting at the Annual General Meeting of
Shareholders of AEGON N.V. is March 30, 2010. The agenda will be available on
AEGON's website from March 29, 2010.
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 28,000 people
and have more than 40 million customers across the globe.
Full year Full year
Key figures - EUR 2009 2008
Underlying earnings
before tax 1.2 billion 1.6 billion
New life sales 2.0 billion 2.6 billion
Gross deposits (excl.
inst. guar. prod.) 23.6 billion 22.4 billion
Revenue generating
investments
(end of period) 361 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 pages 7 and 8. A reconciliation of
(net) underlying earnings to operating earnings before tax is provided on
page 23. 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;
- 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;
- 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; 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
Tags: AEGON N.V., February 25, Netherlands, The hague
