AEGON uses its strength and expertise to create added value for customers, employees, shareholders and the wider community. AEGON does this by encouraging innovation and by growing its businesses profitably and sustainably.
AEGON issues GBP 400 million in senior 30-year unsecured notes; proceeds will be used for general corporate purposes and to repay some short-term debt.
The financial crisis has led us to think differently about our obligation to provide customers with simple, needspecific products, delivered through cost-efficient and value-added channels. This has meant changing the way we are organized, as well as making considerable investments in our business to better serve our customers’ broader needs. In the United States for instance, we are creating a more streamlined organization, consolidating twelve operational units into three customer-focused business divisions – Life &
AEGON’s Management Board in January 2010. Mr. Mullin began his career with
Romania and Turkey. In addition, AEGON has businesses in both France and Spain, as well as China, India and
China, AEGON has operations in provinces across the country, giving it access to a potential market of some 450 million people.
In addition, AEGON also took a number of strategic decisions during the year which had the effect of significantly reducing the company’s overall financial risk position: Running off AEGON’s institutional spread-based �
‘contingency measures’ aimed at protecting the company from further sharp declines in world financial markets. Despite the recovery in financial markets, some of these measures were put into place during 2009 as part of the company’s broader efforts to reduce risk and release capital.
spread-based business in the United States. This will lead to a signifi cant reduction in credit risk, as well as releasing approximately
AEGON also withdrew from the group risk market in the United Kingdom, �
Payment of the interim and final dividends is made in either cash or stock.
People are having to take more responsibility for their pensions. And they’re turning to the private sector – to companies like AEGON – for support. We have to make sure we’re there to help them.
Clearly, this is a very complex subject and we have to balance a number of often conflicting considerations, including the responsibility we have to our clients. Coming up with the right answers to questions might take some time, but we have now approved a plan to develop principles in this area that will eventually cover all our businesses.
We’ve known for some time that Europe’s rules on capital haven’t been adequate. They produced a very arbitrary system of regulation. What the European
Total commissions and expenses declined by 2% in 2009 to EUR 6.0 billion. Overall operating expenses in 2009 totaled EUR 3.3 billion, more or less unchanged from the previous year however, as inflation and an increase in employee benefit expenses offset the company’s cost reduction initiatives and the sale of AEGON’s life insurance business in Taiwan. On a comparable basis 1, operating expenses declined by 5% in 2009.
United Kingdom also saw lower life sales following a decision to adjust the company’s pricing policy.
At the end of 2009, AEGON’s revenue-generating investments totaled EUR 361.0 billion, an increase from
EUR 331.8 billion a year before. The increase was due to new business growth and stronger financial markets during the year, which more than offset the adverse effects of currency movements, the run off of AEGON’s institutional spread business in the United States and the sale of the company’s life insurance operations in Taiwan.
Netherlands, through its Unirobe-Meeùs subsidiary, and in the United Kingdom through Positive Solutions and
AEGON’s roots in the Netherlands can be traced back to the first half of the nineteenth century. Today, AEGON is one of the country’s leading financial services companies and provides a wide range of life insurance products, pensions, mortgages and general insurance.
Market share AEGON in CEE 1 2nd in life in Hungary �
AEGON Americas returned to profit in 2009 as market conditions improved and measures to reduce costs had a positive effect on the overall financial position. As part of these measures during the year, AEGON placed its US
AEGON The Netherlands reported gross deposits for 2009 of EUR 3.4 billion, an increase of 28% compared with the previous year. Net deposits amounted to
EUR 771 million as a result of a substantial rise in savings deposits during the year.
16 million, the result of adverse market conditions and costs associated with adapting the business to a new environment.
its companies’ capital adequacy levels at whichever is the higher of local regulatory requirements, the relevant local Standard & Poor’s requirements for
AEGON’s most significant risk is to changes in financial markets, related particularly to movements in interest rates, equity and credit markets. These risks, whether internal or external, may affect the company’s operations, its earnings, its share price, the value of its investments, or the sale of certain products and services.
During the year, AEGON took a series of measures designed to counter the effects of the crisis and, where required, limit the company’s exposure to major financial risks.
AEGON’s Chief Risk Officer will continue to attend all meetings of the GRCC, but will report directly to the
States led to a signifi cant reduction in the company’s overall credit risk, as well as releasing approximately
In addition, AEGON also measures its EU Insurance Group Directive (IGD)
3.7 billion, up from EUR 2.9 billion twelve months previously. AEGON’s IGD ratio stood at 204%.
excluding the company’s revaluation reserve, plus the convertible core capital securities provided by the
Securities and Junior Perpetual Capital Securities, as well as other equity reserves. At the end of 2009,
Building confidence for life: AEGON has a clear and well-defined system of corporate governance, designed to safeguard the long-term interests of the company’s customers, shareholders, business partners and employees.
In 2009, the Supervisory Board held a total of seven regular meetings and several additional conference call meetings. No member of the Supervisory Board was frequently absent from these meetings.
Taiwan was discussed. The Board formally approved the transaction in April. The sale was completed in August.
Charter of AEGON’s Management Board, which was established to assist the company’s Executive Board in its work. The Management Board comprises six members, including the members of the Executive Board.
During 2009, the main item of discussion was the design of a new
Boards would like to express their gratitude to Mr. Eustace for his years of outstanding service to the company, and the significant contribution he has made to
Boards of Siemens Nederland N.V. and the Dutch dairy company Royal FrieslandCampina N.V.
Executive Board matches these targets as closely as possible. For those members of the Executive Board who have employment contracts pre-dating the present
If an Executive Board member retires, vesting shall occur two years after his retirement date.
Mr. Wynaendts was appointed Chief Executive Offi cer in April 2008. His base salary was increased in 2008 to refl ect his appointment 1 as CEO. There was no further change to Mr. Wynaendts’ base salary in 2009. Mr. Nooitgedagt was appointed Chief Financial Offi cer in April 2009. His total salary therefore covers only the period from April to 2 the end of December and is based on an annual salary of EUR 700,000. Mr. Streppel stepped down as Chief Financial Offi cer in April 2009. The salary shown therefore covers the fi rst four months of the 3 year. In line with the pension arrangements for Executive Board members, Mr. Streppel is entitled to his fi xed compensation until he reaches the age of 62. The company accrued EUR 2.6 million to cover this entitlement. Mr. Shepard retired as Chief Executive Offi cer and Chairman of AEGON’s Executive Board in April 2008. The salary shown therefore 4 covers the fi rst four months of that year only.
Board have the option of stepping down at the age of 60.
AEGON’s Articles of Incorporation provide for a larger majority and a higher quorum than those advocated by the Code. Given that the company has no specific antitakeover measures, the current system is deemed appropriate within the context of the 1983 Merger
Ownership structure 1 and exercise of control AEGON has authorized capital of EUR 610 million, divided into: 3 billion ‘common’ shares, each with a par value of �
Each common share carries one vote. However, in line with their higher par value, Vereniging AEGON, the holder of preferred shares, may in certain circumstances carry 25/12, or approximately 2.08, votes per share
Shareholders may cancel the binding character of such nominations with a majority of two-thirds of votes cast, representing at least one half of AEGON’s issued capital.
General Meeting of Shareholders has the power to annul this suspension.
Basic earnings per share (EUR per share) 1 45 (0.16) (0.92) 1.47
Aggregate tax effect of items recognized in other comprehensive income – – (2,369) 54 – – (2,315) – (2,315)
Aggregate tax effect of items recognized in other comprehensive income – – 2,964 (88) – – 2,876 – 2,876
and with Part 9 of Book 2 of the Netherlands Civil Code. The consolidated financial statements have been prepared in accordance with the historical cost convention as modified by the revaluation of investment properties and those financial instruments (including derivatives) and financial liabilities that have been measured at fair value. Information on the standards and interpretations that were adopted in 2009 is provided below in paragraph 2.2.1. Certain amounts in prior years have been reclassified to conform to the current year presentation.
Amendment to IFRS 7 � Financial Instruments: Improving disclosures about Financial Instruments
The Group applies a policy of treating transactions with minority interests as transactions with parties external to the
protection, individual savings and retirement, pensions and asset management, institutional products and life reinsurance.
The adoption of IFRS 8 did not have any impact on equity or net income. In accordance with the transitional requirements of the standard, AEGON has provided full comparative information.
VOBA, in conjunction with DPAC where appropriate, is assessed for recoverability at least annually on a country-by-country basis and the portion determined not to be recoverable is charged to the income statement. VOBA is considered in the liability adequacy test for each reporting period.
Qualitative methods may include comparison of critical terms of the derivative to the hedged item. Quantitative methods include a comparison of the changes in the fair value or discounted cash flow of the hedging instrument to the hedged item. A
Perpetual securities have no final maturity date, repayment is at the discretion of AEGON and for junior perpetual capital securities AEGON has the option to defer coupon payments at its discretion. Convertible core capital securities can be converted into ordinary shares of AEGON, through a predetermined formula, or repaid at the discretion of AEGON
This means that the increase in the liability is also charged to equity to offset the unrealized gains rather than to the income statement.
Aggregation levels are set either on geographical jurisdiction or at the level of portfolio of contracts that are subject to broadly similar risks and managed together as a single portfolio. To the extent that the tests involve discounting of future cash flows, the interest rate applied is based on market rates or is based on management’s expectation of the future return on investments.
Group’s shares. The cost is recognized in the income statement, together with a corresponding increase in shareholders’ equity, as the services are rendered. During this period the cumulative expense recognized at the reporting date reflects management’s best estimate of the number of shares expected to vest ultimately.
In addition, certain acquisition costs related to the sale of new policies and the purchase of policies already in force are recorded as DPAC and VOBA assets respectively and
Although not necessarily determinative, indicators that a market is inactive are lower transaction volumes, reduced transaction sizes and, in some cases, no observable trading activity for short periods. A fair value measurement assumes that an asset or liability is exchanged in an orderly transaction between market participants, and accordingly, fair value is not determined based upon a forced liquidation or distressed sale.
Correlations of market returns across underlying indices are based on actual observed market returns and their interrelationships over a number of years preceding the valuation date. The volume of observable option trading from which volatilities are implied diminishes markedly after five years; and therefore, AEGON uses a volatility curve which grades from market based implied volatilities for five years to a long-term forward rate assumption of 25% in 2009 and 2008. The
The expected returns are based on risk-free rates, such as the current London Inter-Bank Offered Rate (LIBOR) swap rates and associated forward rates or the current rates on local government bonds. Market volatility assumptions for each underlying index are based on observed market implied volatility data and / or observed market performance.
Level III: inputs for the asset or liability that are not based on �
In accordance with the first time adoption requirements of the amendment to IFRS 7, this information is required only for the current year and comparative information is not required. In prior years, AEGON used a similar, but not the same, fair value classification hierarchy. The valuation and classification process for the prior year has not been re-performed in order to compute this comparative disclosure however the movement tables below do indicate those instances where there were significant movements between the fair value hierarchy levels during 2009.
There is no one signifi cant unobservable assumption or combination of assumptions that could be identifi ed and used to compute a reasonably alternative assumption analysis for this portfolio.
Results of AEGON’s sensitivity analyses are presented throughout this section to show the estimated sensitivity of net income and equity to various scenarios. For each type of market risk, the analysis shows how net income and equity would have been affected by changes in the relevant risk variable that were reasonably possible at the reporting date. For each sensitivity test the impact of a reasonably possible change in a single factor is shown. The analysis considers the interdependency between interest rates and lapse behavior for products sold in the Americas where there is clear evidence of dynamic lapse behavior. Management action is taken into account to the extent that it is part of AEGON’s regular policies and procedures, such as established hedging programs. However, incidental management actions that would require a change in policies and procedures are not considered.
Unrealized gains and losses on these assets are not recognized in the income statement but are booked directly to the revaluation reserves in equity, unless impaired. As a result, economic sensitivities predominantly impact equity but leave net income unaffected. The effect of movements of the revaluation reserve on capitalization ratios and capital adequacy are minimal. AEGON's target ratio for the composition of its capital base is based on shareholders' equity excluding the revaluation reserve.
Parallel Movement of Yield Curve Estimated approximate effects on net income Estimated approximate effects on equity
Other fi nancial assets – carried at fair value 2,430 2,983
Under the credit name limit policy, AEGON’s largest credit exposures are to Bank of America, JPMorgan, Morgan Stanley,
Past due and / or impaired assets 82 324 206 228 – 3 115 59 403 666
Governments across the world have attempted to stabilize market liquidity and investor confidence via extraordinary measures, including providing substantial support to banks and insurance companies.
Bonds wrapped by monoline insurers Cost price Market value Cost price Market value
Changes in sensitivities between 2009 and 2008 arise mainly as a result of additional equity hedges during 2009 which reduces the impact of market movements. Also, the guarantees contracts that expose AEGON to equity risk are less in the money decreasing the sensitivity on DPAC amortization. The equity sensitivities related to the guarantees are non linear because of the impact of guarantees and DPAC amortization.
Total operating earnings before tax 2,102 37 271 142 (195) 10 2,367
Gains and (losses) on investments in real estate 36 (179) (48) 137
plans covering a period of 5 years further extrapolated to 15 years where the new business levels for years 6-15 were set equal to the year 5 new business level, pre-tax risk adjusted discount rate of 12%.
A consortium was established to bring all interested parties together and an agreement was reached in January 2009.
Changes to valuation of expected future benefi ts (29) (1) (30)
Changes to valuation of expected future benefi ts 147 (4) 143
Gross premium and deposits – existing and new business 211 239
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 12 - 13
AEGON USA and AEGON The Netherlands, with relatively smaller holdings in Hungary and Spain and are carried at revalued amounts. The carrying value under a historical cost model amounts to EUR 297 million (2008: EUR 210 million).
Transactions in 2009: Sale: 1 transaction, price EUR 5.25 (32,654) – –
for 2010 and 125% for 2011 and beyond. The coupon is not tax deductible. Vereniging AEGON will use income from the nonvoting securities to service the loan from the Dutch government.
EUR 1 billion Senior Notes 7.00% April 29 2009 / 12 996 –
GBP 400 million Senior Unsecured Notes 6.625% Semi-annually 2009 / 39 443 –
(2008: EUR 845 million) relating to borrowings measured at fair value. Proceeds have been swapped to US Dollar floatingrate. For the year 2009, AEGON’s credit spread had a negative impact of EUR 189 million on income before tax (2008: positive impact of EUR 225 million) and a negative impact of
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 25 - 26
The assets of the scheme are held under trust separately from those of the Group. The assets of the scheme are held in policies effected with Scottish Equitable plc. The scheme is closed to new entrants. Under IAS 19, the defined benefit plan has a deficit of EUR 339 million at December 31, 2009 (2008: EUR 186 million).
Fair value changes on economic hedges for which no hedge accounting is applied 152 (46) (340)
Fair value change on hedging instruments in a fair value hedge 127 (164) (242)
The costs related to the share options amount to EUR 10 million
AEGON’s consolidated result, while losses in the United States are taxed at 35% and gains in Ireland are taxed at 12.5%.
Diluted earnings per share is calculated by adjusting the average number of shares outstanding for share options. For the purpose of calculating diluted earnings per share, AEGON
senior debt holders at the holding company level to the position of policyholders at the operating company level (who have priority in payments to other creditors). Because CDS spreads for United States life insurers differed significantly from that for
used a long term equity implied volatility assumption that was 5 volatility points higher or lower, the impact on income before tax would have been a decrease of EUR 155 million or an increase of EUR 136 million, respectively, in 2009 IFRS income before tax (2008: EUR 100 million decrease or increase).
Core capital, which consists of shareholders’ equity and the convertible core capital securities that were issued in 2008 (see below), was EUR 14,164 million at December 31, 2009 compared to EUR 9,055 million at December 31, 2008. Shareholders’
measure is the company action level (CAL) RBC. This is the highest regulatory intervention level and is the level at which a company has to submit a plan to its state regulators. The CAL is 200% of the authorized control level (ACL), the level at which regulators are permitted to seize control of the company.
has been involved in over the last twelve months have not had any significant effects on the financial position or profitability of AEGON N.V. or the Group. However, there can be no assurances that AEGON will be able to resolve existing litigation in the manner it expects or that existing or future litigation will not result in unexpected liability.
connection with a dispute with unions and employers in the harbors of Rotterdam regarding the consolidation of equity of
Court. AEGON does not expect the Dutch Supreme Court decision to have a material adverse effect on the company’s financial position or profitability.
in Hungary for a total purchase price of EUR 21 million. The companies merged subsequently. Since the acquisition date, the company has attributed EUR 1 million to net income in 2008. If the acquisition had been as of January 1, 2008, contribution to net income and total revenues would amount to respectively
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 53
As a result, notwithstanding AEGON’s 57% economic interest, the company can not exercise voting control since AEGON only appoints three out of the seven board members, AEGON cannot remove the majority of the management board members and
Mr. Streppel retired as CFO and Member of AEGON’s Executive Board in April 2009.6
Supervisory Board. In accordance with the terms of the contracts, no principal repayments were received on the loans in 2009.
O. John Olcay (up to April 23, 2008) – 22,054 66,250
Common shares held by Supervisory Board members Shares held in AEGON at December 31 2009 2008 2007
We have audited the accompanying consolidated financial statements for the year 2009 (as set out on pages 80 to 219)
December 31, 2009, and of its result and its cash flows for the year then ended in accordance with International Financial
Cash comprises cash at banks and in-hand. Cash equivalents are short-term highly liquid investments that are readily convertible to known cash amounts, are subject to insignificant risks of changes in value and are held for the purpose of meeting short-term cash requirements. Money market investments that are held for investment purposes (backing insurance liabilities, investment liabilities or equity based on asset liability management considerations) are not included in cash and cash equivalents but are presented as investment or investment for account of policyholders.
AEGON or repaid at the discretion of AEGON and coupon payments are payable only if AEGON pays dividend on ordinary shares. Both the perpetual and convertible core capital securities are classified as equity rather than debt, are measured at par and those that are denominated in US dollars are translated using historical exchange rates.
one-for-one basis. In this situation, the Dutch government may opt for repayment in cash (at the original issue price of EUR 4).
The coupon of the EUR 203 million bonds is set at 7.125% until March 4, 2011. 1
OPTAS, a life insurance company AEGON acquired at the beginning of 2007. The court rejected a request to order a restatement of AEGON’s financial statements over 2007. The foundation representing the employers and insured harbor employees in the harbors appealed to the Dutch Supreme
This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the company financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
6. The Executive Board may, subject to the approval of the
AEGON’s beneficial ownership interest in AEGON N.V.’s common shares decreased from approximately 37% to approximately 12% and its beneficial ownership interest in AEGON N.V.’s voting shares (excluding issued common shares held in treasury by
EUR 0.25 and the paid-in capital on the preferred shares was increased by EUR 120,000 to EUR 52,920,000. The voting rights pertaining to the new preferred shares (the class A preferred shares as well as the class B preferred shares which may be issued to Vereniging AEGON under the option agreement as described in the following sections) were adjusted accordingly to 25/12 vote per preferred share.
The item has a cost or value that can be measured with �
Litigation or regulatory action that could require us to pay �