REG-Aegon N.V.: 3rd Quarter Results
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Q3 2009 RESULTS RELEASE
NOVEMBER 12, 2009
AEGON
AEGON returns to profit in Q3 2009
- 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 Q2 % Q3 % Ytd Ytd %
amounts in EUR millionsb) 2009 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.
STRATEGIC HIGHLIGHTS AND SHORT-TERM PRIORITIES
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
Q3
EUR millions Notes 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 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
OPERATIONAL HIGHLIGHTS
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 millions Notes Q3 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 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
amounts
in million
EUR
(unless
otherwise
stated)
Holding,
United other
Americas Kingdom The United Other activities & Total
USD GBP Americas Netherlands Kingdom countries eliminations EUR
Underlying
earnings
before tax
by line
of business
Life and
260 10 protection 181 70 10 19 - 280
Individual
savings and
retirement
104 - products 83 (8) - 4 - 79
Pensions and
asset
10 (18) management 6 38 (19) 4 - 29
Institutional
10 - products 5 - - - - 5
Life
20 - reinsurance 15 - - - - 15
- (3) Distribution - 3 (4) - - (1)
General
- - insurance - (2) - 9 - 7
Interest
charges
- - and other - - - - (69) (69)
Share in
net results
(1) - of associates (1) 1 - 6 - 6
Underlying
earnings
403 (11) before tax 289 102 (13) 42 (69) 351
Over/(under)
performance
(97) 6 of fair value items (76) 39 7 (1) (27) (58)
Operating
earnings
306 (5) before tax 213 141 (6) 41 (96) 293
Operating
earnings
before tax
by line of
business
Life and
263 10 protection 184 76 10 19 - 289
Individual
savings
and
retirement
(85) - products (56) (8) - 3 - (61)
Pensions and
asset
10 (12) management 6 71 (12) 4 - 69
Institutional
56 - products 37 - - - - 37
Life
63 - reinsurance 43 - - - - 43
- (3) Distribution - 3 (4) - - (1)
General
- - insurance - (2) - 9 - 7
Interest
charges
- - and other - - - - (96) (96)
Share in
net results
(1) - of associates (1) 1 - 6 - 6
Operating
earnings
306 (5) before tax 213 141 (6) 41 (96) 293
Gains/
(losses)
on
(98) 26 investments (73) (34) 30 2 (25) (100)
Impairment
(287) (70) charges (192) (12) (80) (1) - (285)
Other
income/
(5) 43 (charges) (3) - 49 2 - 48
Income
(84) (6) before tax (55) 95 (7) 44 (121) (44)
316 (27) Income tax 221 (21) (30) (13) 32 189
232 (33) Net income 166 74 (37) 31 (89) 145
Net
underlying
359 (5) earnings 255 78 (6) 32 (50) 309
Net
operating
295 (1) earnings 207 106 (1) 31 (71) 272
AMERICAS
- 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 millions Notes Q3 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 millions Notes Q3 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
THE NETHERLANDS
- 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 millions Notes Q3 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 millions Notes Q3 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
UNITED KINGDOM
- 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 millions Notes Q3 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 millions Notes Q3 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.
OTHER COUNTRIES
- 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 millions Notes Q3 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 millions Notes Q3 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
APPENDIX II
NET UNDERLYING EARNINGS GEOGRAPHICALLY
EUR millions Notes Q3 2009 Q2 2009 % Q3 2008 % Ytd 2009 Ytd 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, after tax Notes Q3 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 millions Notes Q3 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 millions Notes Q3 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 PVNBP VNB/ PVNBP VNB/ APE VNB PVNBP VNB/ PVNBP VNB/ APE
EUR millions Notes Q3 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 PVNBP VNB/ PVNBP VNB/ Deposits VNB PVNBP VNB/ PVNBP VNB/ Deposits
EUR millions Notes Q3 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.
8) All ratios exclude AEGON's revaluation reserve.
Included in other non-operating income/(charges) are charges made to policyholders with
9) respect to income tax.
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
10) 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.
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.
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).
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
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
DISCLAIMERS
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.
END
END
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