Joseph B.M. Streppel started his career in 1973 at one of AEGON’s predecessors, and has served in several treasury and investment positions. In 1986 he became CFO and in 1987 he joined the Executive Board of FGH Bank. In 1991 he became CEO and Chairman of Labouchere and in 1995 also of FGH Bank. In 1998 he became CFO of AEGON N.V. Since May 2000 Jos Streppel has been a member of the Executive Board of AEGON N.V.
AEGON Group businesses encourage product innovation and reward value creation. New products and service initiatives are developed by local business units who understand the needs of customers and partners, and of intermediaries and other distributors, and are offered at the best price thanks to a continuous focus on cost-control.
Chairman of Reed Elsevier PLC and a retired Chairman and CEO of Unilever
Executive Board, we are establishing a fourth committee, alongside the existing Nominating, Audit, and Compensation
For our customers this means delivering products that provide financial protection and asset accumulation and a service level that is the best practice among our peers.
The macro-economic factors driving the life and pension markets we serve — demographic trends, changes in traditional social security systems and a reaffirmation of the value of insurance protection — continued to create opportunities, throughout the Group in 2001. The shift by customers toward more risk-averse fixed return instruments and away from unit-linked products was especially noteworthy. AEGON’s well-balanced product portfolio and flexible, responsive marketing enabled it to adjust to and profit from these changes. Similarly, balance and flexibility should allow us to benefit from the underlying growth in life and pension demand, particularly with a return to better economic times.
The migration toward private pension systems and greater investment awareness of populations in the core
I found it a privilege to know a lot of people within the AEGON organization personally, thanks in part to the yearly Optiek meetings, which gave us on the Executive
The traditional model of insurance was built around a limited product range and strongly centralized administration. As consumers have become increasingly knowledgeable and demanding, AEGON’s ability to provide informed advice and responsive service tailored to each individual client’s situation proved an essential ingredient in its success. Customers in different regions or economic strata require different products and prefer different distribution channels.
This balanced product portfolio is mirrored by AEGON’s balanced approach to portfolio investment. Investment strategy is geared toward long term and relatively stable returns based on careful matching of
Traditional products balance the portfolio Traditional insurance products regained leadership in 2001, in sharp contrast to the trend of recent years that has increasingly favored variable universal life and variable annuities.
assets and liabilities. Nearly half the EUR 251 billion of investments shown on
By focusing on high quality fixed income assets, AEGON worked hard to mitigate the worst effects of the negative investment climate last year.
Money Concepts is the largest franchised financial planning company in Canada.
Likewise, AEGON UK’s center in Lytham St Anne’s engaged in initiatives to build multi-brand production platforms and databases. In the Netherlands, the centralized production platform was outsourced and this set-up further improved AEGON The Netherlands cost/revenue ratio. Another important result of this approach was the cutting of policy issuance time and a decline in error rates.
For instance AEGON has extended its commitment to environment and sustainability issues by taking a leading role in the sponsorship of a research and education program to be coordinated at the University of Groningen.
The Worksite Marketing division enjoyed more of the growth initiated in 2000 with its re-branding as Transamerica
partnership interests for USD 1.24 billion, plus USD 40 million in dividends on the companies’ 2001 profits.
AEGON Canada fulfilled its growth mandate throughout 2001 with the acquisition of Money Concepts (Canada) Ltd., a financial planning franchisee with 97 offices and 348 franchisees, to expand its distribution capabilities.
HS Administrative Services, acquired in 2000, is one of the largest third party pension scheme administrators, and opens the door to many new business opportunities for
In the life sector production rose as the rationale for private pensions continued to gain wider acceptance despite some backtracking on pension reform by the Government. The majority of life sales came through the Composite sales channel, focusing on the mass market.
With variable products selling strongly, AEGON Hungary launched a number of innovative products including a fast-growing endowment-type mortgage. AEGON Hungary is already the country’s largest institutional investor and is, in partnership with a leading Austrian bank, playing an innovative role in local mortgage financing with the provision of tied insurance products. AEGON Hungary is well placed to expand market share in private sector group pensions once there is greater clarity in reforms to the social security system. In the meantime, it continues to acquire group pension customers including the 7,000-person group pension plan of a major European industrial group.
National market coverage was extended using the multichannel strategy and by focusing on the quality of agent relationships.
The earnings comparison with the prior year has been positively influenced by the additional EUR 132 million of income before tax from the acquired JC Penney’s direct marketing insurance operations and the EUR 343 million of income before tax (EUR 294 million after tax) from the sale of our joint ventures in Mexico. Earnings were adversely influenced by higher additions to the provisions for default losses, as well as the influence of depressed equity markets on sales, account balances and fees.
Lower fixed annuity results include an addition to the default provision of EUR 256 million for 2001 compared to
Lower income before tax from banking activities is due to depressed equity market performance, lower interest spreads and additional risk provisions. The shift in consumer preference away from equity linked products continues to drive substantial increases in savings deposits at the expense of investment contract sales.
Reduced interest charges and other are due to the inclusion of EUR 40 million of profit from run-off UK
The Board has proposed an increased dividend for the 18th year in a row. Based on a pay-out ratio of 47%, a 12%
These risks are inherent to the business and are regarded as primary risks. Operational risks are risks that arise in business processes and are viewed as secondary risks.
were limited. Claims on life insurance policies following the attacks in New York and Washington were lower than originally estimated and the effect on earnings is confirmed at EUR 34 million (USD 30 million) net of reinsurance. The
The counterparty ratings used for assessing counterparty exposure within AEGON USA are internal ratings, based on both published ratings by rating agencies and in-house analysis. In general, the internal ratings tend to be in line with the ratings issued by the rating agencies.
AEGON establishes provisions for credit risk in the normal course of business. AEGON added EUR 804 million to its default provisions during the year, leaving a balance at year-end of EUR 489 million.
AEGON translates these into their potential financial consequences. In some cases, AEGON buys insurance coverage as means of protection against operational risks.
% of total % of countries % of total In EUR million equity general general at 31 Dec. Size investment account account
The financial statements have been drawn up in euro as well as in dollars.
Provision for life insurance Gross 94 –4,466 Reinsurers’ share 889 662 983 –3,804
Shares in group companies 1,332 1,603 Loans to group companies 1,877 629 Other participations 71 64 Loans to other participations 0 4
Market value of these investments amounts to EUR 74,581 million (2000: EUR 61,191 million). For a proper understanding it should be noted that this market value is not part of the matching of these investments with the related insurance liabilities, which are not stated at market value either. The provision for doubtful debts for these investments amounts to EUR 276 million (2000: EUR 110 million).
Bonds and other fixed rate securities 61,240 69,410 –62,232 — 5,242 73,660 Loans guaranteed by mortgages 18,244 4,035 –2,488 — 746 20,537
Cash on hand and balances with banks 357 352 Short-term investments 511 373
The services include: — management of investments for institutional investors and of mutual funds in the retail business; — offering of synthetic GICs which guarantee to plan sponsors benefit responsiveness, whether or not in the form of annuities, in the event that qualified plan benefit requests exceed plan cash flows. The plan sponsor agrees to reimburse for such benefit payments with interest.
The tax burden in The Netherlands reflects the benefit of special tax rules for which the Company and its subsidiaries qualify, including an equalization reserve and tax exempt investment in subsidized housing and certain participations.
Long-term borrowings 4,926 5,956 Short-term borrowings 3,182 4,248 Other liabilities 1,053 1,146 Accruals and deferred income 348 331 Provisions for deferred taxation 462 443 Shareholders’ equity 1,273 1,558
Income by product segment of which general account 14 31 –55 22 52 –58
Revaluation group companies –1,537 436 –1,101 60 Currency exchange rate differences –50 –50 –105 Cash settlement subordinated convertible loan –68 –68 –24 Goodwill –286 –286 –2,254 Sale Mexico 602 602 — Settlement stock option plans –71 –71 –200 Other movements –46 –46 597
The minimum of the revaluation account for the consolidated investments as required by law amounts to EUR 739 million (2000: EUR 1,214 million).
The market value of the long-term liabilities amounts to EUR 1,911 million (2000: EUR 1,202 million).
As usual, special meetings of the Supervisory Board were dedicated to AEGON’s business strategy and the budget for 2002. For AEGON’s strategy, please refer to page 4. The Board’s meetings in 2001 dealt with many other items, including actuarial analyses, the development of AEGON’s embedded value, fair value issues, AEGON’s dividend policy, AEGON’s ‘Funding Plan’ and ‘Currency Exposure’, AEGON’s worldwide employee and management stock option plans for 2001 plus the hedging of the stock options granted in 2001. Also discussed were management development and personnel issues, such as the composition of AEGON’s international top management.
For personal data on all members of the Supervisory Board, please refer to page 100.
Deferred taxation (including taxation on US GAAP adjustments) –934 –752 418 155 The Netherlands: calculated using discounted tax rates United States: calculated using nominal tax rates
In the years 2002 through 2006 the following amounts are due: EUR 1,517 million in 2002, EUR 449 million in 2003, EUR 1,296 million in 2004, EUR 787 million in 2005 and EUR 555 million in 2006.
USD exchange rate 0.9555 0.9556 0.8765 0.9305 At end of period
The common shares of AEGON N.V. are quoted on stock exchanges in: ● Amsterdam (AEGN.AS) ● Frankfurt (AEGN.F) ● London (AEGNq.L) ● New York, NYSE (AEG.N) ● Tokyo (AEGON.T) ● Zurich (AEGN.S)