AEGON TOUCHES THE LIVES OF MILLIONS OF PEOPLE AROUND THE WORLD IN MANY DIFFERENT WAYS.
OUR AIM IS TO HELP THEM ALL CREATE BETTER FUTURES. OUR ACTIONS TOWARDS THAT END ARE DRIVEN
For our employees we strive to create a thriving, energetic business culture in which personal respect is encouraged and performance is rewarded.
The Supervisory Board relies upon four committees to prepare specific issues for decision by the Board. Each committee has four members, drawn from the Supervisory Board. All the members of each committee are independent.
De Wit as members, held one meeting in 2002, also attended by the Executive Board’s Chairman. Discussions concentrated on the remuneration of the Executive Board members.
De Ruiter and Olcay as members, held two meetings in 2002, also attended by the Executive Board’s Chairman. The
Mrs. Rembe and Messrs. Olcay and De Wit will end. They are eligible for reappointment and are willing to remain on the
Additionally, the transaction widened ownership through a larger free-float of AEGON shares and improved index weightings. The realignment strengthened AEGON’s equity capital and kept leverage within limits applied by AEGON and reinforces AEGON’s capital base.
Effective distribution and cost efficiency are two of the principal keys to success. Multiple distribution channels, and targeted branding, have helped AEGON build an impressive client base of millions of clients around the world. This, together with a broad range of well-designed products and effective cost management, has made AEGON one of the leading publicly quoted life insurance companies in the world.
The opportunities for partnering are nowhere more important than in Europe, where we expect significant growth. Here, fundamental changes to pension provision are unfolding as state-funded retirement programs weigh heavily on the rising indebtedness of EU member states, already challenging the terms of the EU Stability and Growth Pact. Changing demographics, increased life expectancy and rising costs all render the European economy progressively less able to support the ongoing burden of the old 'pay as you go' schemes. The probable long-term solution is a migration to the largely funded approaches already adopted by the Netherlands and the United
Another step towards this came in September 2002 when AEGON announced an alliance with
On a comparable basis AEGON USA reduced its operating costs during the year while achieving strong sales growth. Its cost achievements were largely the result of shared business processes, ICT systems and centralized financial management within AEGON Financial Partners. Outsourcing, centralized purchasing and increased ICT support also contributed to the 2002 cost reduction.
volatile market and further improvements in its service and efficiency were realized through technology enhancements.
In addition, AEGON UK launched a replacement for the traditional ‘With Profits’ product that levels investment returns without including guarantees – a product that will permit more efficient management of AEGON UK’s capital base. This investment offering is consistent with the direction recommended by the Sandler review of the UK retail savings industry. The launch of critical illness cover and income protection products in the individual protection market further strengthened AEGON UK’s product offerings.
AEGON’s activities in mainland China took a significant step forward in May 2002 with AEGON’s entry into a joint venture agreement with China National Offshore Oil Corporation,
Following the establishment of a Tokyo liaison office existing activities in the Asia-Pacific life reinsurance markets will be integrated. In Japan AEGON continues to study business opportunities.
AEGON’s earnings and capital benefited from rising equity markets, low credit defaults and relatively stable interest rates.
AEGON performs sensitivity analyses for its most significant business risks to assess the variability of income and shareholders’ equity based on changes to the selected risk parameters and reviews the scenarios included in these analyses each year. The insights drawn from these analyses are used by AEGON’s management to consider actions that may be taken, if necessary.
DPAC are subject to recoverability testing at the end of each reporting period. DPAC related to insurance contracts with fixed premiums are amortized as a percentage of premiums over the life of the contracts. The assumptions are locked in at issue and additional amortization is recorded if loss recognition testing indicates unrecoverability. For flexible premium insurance and investment type contracts, variable annuities, unit-linked products and fixed annuities, the DPAC is amortized as a percentage of gross profits. For products in the Americas the assumptions are unlocked periodically and the amortization is adjusted over time as actual gross profits emerge. For flexible premium products in the Netherlands and the UK the amortization pattern established at issue is followed and recoverability testing is performed.
During 2002, AEGON Derivatives N.V. began acting as counterparty in some derivatives transactions. In 2003, we plan to transfer most of our outstanding over-the-counter derivatives transactions to AEGON Derivatives N.V., and will start to use collateral agreements, which are being put in place with our derivative counterparties. AEGON’s derivative policy states that AEGON entities may only engage in medium- and long-term over-the-counter uncollateralized derivative 2002 SELECTED EXPOSURE REDUCTIONS Amounts Average
Independent and tied agents, direct marketing, franchise sales force, worksite marketing, internet, retailers
• Strong development of the existing agent networks • Increase the use of Servimed* by agents • Commercial segmentation policy and specific product design for the different segments
CUSTOMERS pension funds* financial institutions* money market funds** municipalities** overseas investors**
Much of this income is generated by synthetic GICs which differ from traditional GICs by being structured as an offbalance fee-based product with the customer retaining ownership and control of the asset. The trust GIC permits the purchaser to own and manage the investment asset related to these contracts while receiving a guarantee from the company to provide cash advances in the event that qualified plan benefit requests exceed plan cash flow. The cash flow advances allow the customer to avoid liquidation of assets to pay benefits.
INVESTMENT INCOME ALLOCATED TO THE NON-TECHNICAL ACCOUNT 10 -26 –27 –27
The carrying value and fair value of the private placements are as follows: Carrying Unrealized Unrealized Fair value gains losses value
CHANGES IN INVESTMENTS GENERAL ACCOUNT Currency exchange rate Balance at Disposed differences Balance at January 1, and Revalu- and other December 2002 Acquired redeemed ations changes1 31, 2002
Prepaid pension costs on employee plans 1,730 1,857 Other prepayments and accrued income 215 150
In Canada the variable annuity products sold are known as segregated funds. Segregated funds are similar to mutual funds except with a ‘capital protection guarantee’ for mortality and maturity. The initial guarantee period is ten years. The ten year period may be reset at the clients’ option. The management expense ratios (‘MER’s’) charged to the funds are not guaranteed and can be increased at the management’s discretion. The provisions for the minimum guarantees on segregated funds are established consistent with the method described for the minimum guarantees on the variable annuity contracts sold in the United States.
The changes in the carrying value of the VOBA are as follows: Balance at January 1 7,158 6,831 Amortization charged to the income statement –719 –695 Currency exchange rate differences –910 295 Other changes –182 727
Futures contracts are carried at fair value and require daily cash settlement. Changes in the fair value of interest rate futures that qualify as hedges are deferred and recognized as an adjustment of the hedged item, while changes in the fair value of equity futures are recognized in income.
RESULT TECHNICAL ACCOUNT NON-LIFE 194 7 18 2 8 11 9 249
NOTES TO THE CONSOLIDATED INCOME STATEMENTS Amounts in EUR millions 78 AEGON GROUP
Technical and non-technical accounts include the following: Pension premiums —92 —111 —82 Other social security charges 205 189 173
Breakdown: Taxes currently due 583 709 469 Taxes deferred due to temporary differences –230 209 364
Transamerica Finance Corporation determines its allowance for losses by taking into account expected losses in each business, the ratio of the allowance for losses to net finance receivables outstanding and the ratio of net credit losses to average net finance receivables outstanding. A specific reserve is established for impaired receivables when it is deemed probable that not all future principal and interest payments will be collected in accordance with the applicable contractual terms. This provision is reviewed and updated quarterly.
Equipment held for lease 1,551 2,025 Assets held for sale 113 399
The weighted average interest rates on short-term borrowings at December 31, 2002 and 2001 were 1.94% and 2.63% respectively.
1,694 1,939 –13 Life general account single premiums 1,789 2,165 –17 5,386 4,954 9 Life general account recurring premiums 5,689 5,533 3 5,900 5,697 4 Life policyholders account single premiums 6,232 6,363 –2 3,817 3,779 1 Life policyholders account recurring premiums 4,031 4,220 –4 16,797 16,369 3 Total life insurance gross premiums 17,741 18,281 –3 2,697 2,290 18 Accident and health insurance premiums 2,848 2,558 11 44 83 –47 Income from other activities 47 93 –49
9,827 10,922 –10 GICs and funding agreements 10,379 12,198 –15 30,113 27,438 10 TOTAL PRODUCTION ON BALANCE SHEET 31,805 30,643 4
TOTAL INSURANCE 651 879 –26 of which general account 602 687 –12 of which policyholders account 49 192 –74 BANKING ACTIVITIES1 8 45 –82
AEGON Asset Management UK plc, London AEGON UK plc, London AEGON UK Distribution Holdings Ltd., London Guardian Assurance plc, Lytham St Annes Guardian Linked Life Assurance Limited, Lytham St Annes Guardian Pensions Management Limited, Lytham St Annes HS Administrative Services Limited, Chester Scottish Equitable plc, Edinburgh Scottish Equitable International Holdings plc, London
5. Dividend or an interim dividend on common shares may take place as a cash payment but also as a payment in common shares, or to the choice of the holders of common shares as a cash payment and/or as a payment in common shares, in all cases out of the profit and/or out of a surplus fund.
We have audited the financial statements of AEGON N.V., The Hague, for the year 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
Real estate –804 –847 –48 –61 –59 The Netherlands: appraisal value United States: cost less depreciation
W.F.C. Stevens (1938), Dutch nationality, is a senator in the Dutch Parliament and a retired partner/senior counsel of Baker & McKenzie. He was appointed in 1997; his current term will end in 2005. He is a member of the Supervisory Boards of a number of Dutch companies, among which NIB Capital, Schiphol Groep and TBI Holdings. He is a member of the Compensation Committee.
Value as of Annualized return in local currencies December 31, Return Return last Return last
From May 13 Payment of dividend and delivery new shares August 7 Release results first six months 2003