Financial statements of Aegon N.V. Income statement of Aegon N.V. 294
In 2013, Mr. Button was appointed as CFO and as a member of the Executive Board of Aegon. He is also a member of the Management Board.
Aegon’s common shares are listed on stock exchanges in Amsterdam (Euronext) and New York (NYSE). Aegon’s main operating units are separate legal entities and operate under the laws of their respective countries. The shares of these legal entities are directly or indirectly held by three intermediate holding companies incorporated under Dutch law: Aegon Europe
to EUR 1,939 million compared with 2014. The recurring impact of the actuarial assumption changes and model updates implemented in the third quarters of 2014 and 2015 and adverse claims experience in the United States were more than offset by favorable currency movements.
Of which Income tax from certain proportionately consolidated joint ventures and associates included in income before tax (10) (8) (33%)
EUR 8.3 billion. Aegon’s shareholders’ equity, excluding revaluation reserves and defined benefit plan remeasurements, amounted to EUR 17.6 billion on December 31, 2014.
Underlying earnings before tax Underlying earnings before tax in 2015 decreased by 12% to
USD 2 million in 2015, while 2014 included a benefit of
Aegon Brazil In 2009, Aegon acquired a 50% interest in Mongeral Aegon
de C.V., a Mexican life insurance company. In 2013, Aegon entered into a joint venture with Administradora Akaan S.A. de C.V. to create Akaan-Aegon S.A.P.I. de C.V. and explore financial service opportunities. This organization is in the start-up phase and will initially focus on third-party asset management. As of
Overview of business lines Aegon USA Life & Protection Life & Protection (L&P) offers a comprehensive portfolio of protection solutions to customers in a broad range of market segments. Consumers may choose to purchase through independent distributors, sales associates with an exclusive relationship to Transamerica, through the worksite, or directly from Aegon USA’s subsidiaries.
The premium amount for variable universal life insurance is flexible and, within contract limits, may be changed by the consumer as needed, although these changes can result in a change in the coverage amount. The investment feature usually includes 'sub-accounts,' which function like mutual funds and can provide exposure to stocks and bonds. This exposure offers the possibility of an increased (or decreased) rate of return over a universal life or permanent insurance policy.
Regulation and supervision Aegon USA Aegon USA's insurance companies and the business they conduct in the US are regulated primarily at a US state level, with some activities, products and services also subject to federal regulation.
Research (OFR). The FIO is authorized to review the insurance market in the US and make recommendations to Congress, and the OFR conducts research in financial services, including insurance, in support of such oversight. In addition, the FIO is authorized to establish US insurance policy in international matters. Finally, the Federal Reserve Board also has authority to establish capital standards for systemically significant insurers and to participate in the establishment of international insurance capital standards. In the area of privacy, there has been increased scrutiny at a state, federal and international level following a number of high-profile data breaches of financial services and other companies. As a result, Congress and federal regulators are considering options to combat data breaches and cyber-threats, in addition to those already imposed by the Gramm-Leach-Bliley
Aegon expects to discontinue additional contracts in the proxy channel in 2015.
In 2013, Aegon the Netherlands launched Kroodle, one of the world's first insurance companies to operate primarily through Facebook. It enables customers in the Netherlands to purchase insurance and manage their accounts through their
During 2015, this level was approximately 4% of general account technical provision or, if no interest guarantees were provided, approximately 1% of technical provisions with investments for the account of policyholders, and an additional 0.3% charge for value at risk. General insurance companies were, under Solvency I, required to maintain shareholders' equity of equal to or greater than 18% of gross written premiums a year, or 23% of the three-year average of gross claims.
Most of the liabilities of Aegon the Netherlands, insurance or otherwise, are long-term. Scenarios and optimization analyses are conducted for fixed income, equities and real estate asset classes. The result is an asset allocation and hedges representing the desired risk-return profile. Constraints, such as the minimum return on equity or economic required capital and the minimum desired solvency ratio, are also taken into account.
�� Underlying earnings before tax from Pensions increased by 108% to GBP 33 million in 2015 compared with 2014.
This was primarily driven by lower expenses, positive market movements and policy adjustments resulting from market movements and higher lapses.
Underlying earnings before tax Underlying earnings before tax in the United Kingdom increased 24% to GBP 92 million compared with 2013. Higher underlying earnings before tax in Pensions more than offset lower underlying earnings before tax from the Life business. �� Underlying earnings before tax from Life decreased 9% to
Overview of sales and distribution channels Aegon UK has three main distribution channels: Financial
Customer. An award-winning platform supports all of these channels in an integrated way. It continued to be one of the fastest-growing platforms in the UK market in 20151.
The Digital Solutions business is responsible for our new digital propositions sold through Retail Advisor, Workplace and Direct to
Products �� Aegon UK’s main product focus is onretirement solutions and protection products.
Authority’s (FSA) Retail Distribution Review (which has regulated provision in order to bring about greater transparency of charging and improve the quality of financial advice) and of
industry sales data show that annuity sales fell by 70% in the first half of 2015 compared with the first half of 2014, while income drawdown sales rose by 67%. In addition, many customers chose to withdraw part of their pension pot tax-free.
The PRA is responsible for the prudential regulation of deposit takers, insurers and major investment firms. The FCA is responsible for regulating firms' conduct in retail and wholesale markets. It is also responsible for the prudential regulation of those firms that do not come under the PRA's remit.
With-profit fund The invested assets, insurance and investment contract liabilities of Aegon UK's with-profit fund are included in 'for account of policyholder assets and liabilities'. Assets and liabilities are always equal, as an excess of assets over liabilities regarding guaranteed benefits and constructive obligations is classified as an insurance or investment contract liability. All assets in the Scottish Equitable with-profit fund are held 100% for participating policyholders.
Guarantees With the exception of 'Aegon Secure Lifetime Income' and '5 for
�� New life sales in Spain & Portugal declined by 20% in 2015 compared with 2014 to EUR 39 million due to a lower sales contribution from bancassurance joint ventures in Spain.
�� Underlying earnings before tax from Spain & France decreased 15% in 2014 to EUR 28 million compared with 2013. Positive results from the joint venture with Banco Santander in Spain were more than offset by the impact of the divestment of partnerships and continuing investments in order to grow the business.
business decreased 21% in 2014 to EUR 34 million compared with 2013, mainly a result of lower sales of the direct marketing activities in Asia. New premium production from Aegon’s general insurance business was up 29% to EUR 45 million compared with 2013, driven by the successful sales campaigns of the joint venture with Banco Santander in Spain.
Annuities Europe decreased in 2014 compared with 2013, while the gross deposits in Spain & France were higher.
As of September 2015, it was ranked eighth for unit-linked products in Poland, based on gross written premiums4. In addition, at the end of June 2015, Aegon Life Ukraine was the fifth largest in the market, based on the first six months’ premium income5.
(including Aegon’s ownership percentages) are: �� Aegon THTF Life Insurance Co. Ltd. (50%); �� Aegon Life Insurance Co. Ltd. (49%); �� Aegon Sony Life Insurance Co. Ltd. (50%); �� SA Reinsurance Ltd. (50%); �� Transamerica Life (Bermuda) Ltd. (wholly-owned); and �� Aegon Direct and Affinity Marketing Services companies
Co. Ltd. to Aegon THTF Life Insurance Co. Ltd. (Aegon THTF) on
RCC and a management-level IC. Regular reviews of risk and capital matters are conducted by the RCC, while the IC focuses on the areas of investment performance and mismatch risk.
General insurance Aegon Spain first offered general insurance products in 2013 through its joint venture with Banco Santander. The offering focuses mainly on household protection products, distributed through the banking network of partner Banco Santander.
Portuguese regulations also incorporate all requirements from the relevant EU directives.
The Central Bank of Ireland has sole responsibility for the prudential supervision and regulation of Aegon Ireland.
Aegon Ireland has been using the Standard Formula to calculate the solvency position of its insurance activities. The combined
Overview of business lines Aegon Asset Management has three distinct client segments.
For third-party business, Aegon Asset Management distributes its investment strategies directly to its clients. The wholesale businesses typically sell collective investment vehicles (mutual funds) to customers through wholesale distributors and independent intermediaries. The main asset classes are fixed income and equities, and the funds are usually managed against a benchmark or peer group target. The institutional businesses typically sell tailored services to large corporations or pension funds. Aegon Asset Management employs a full range of asset classes, and manages the funds against objectives, targets and risk profiles agreed with clients. Aegon Asset Management offers both absolute and relative return products.
Competition in main locations Aegon Asset Management competes with other asset management companies to acquire business from openarchitecture Aegon insurance units and third parties. Its competitors include global asset managers (both from financial conglomerates and stand-alone) and local specialists in the countries in which it operates. In general, competition varies according to the type of asset class and style of management.
Committee (SBRC); �� The Executive Board and the Management Board; �� The Enterprise Risk Management Committee and the Group
Board meetings. The Group’s CRO discusses ERM and related matters, and is a member of the Management Board.
Business unit CROs have either a direct reporting line to the Group's CRO or one of the regional CROs that reports directly to the Group's CRO.
Governance Aegon’s Corporate Treasury department manages and coordinates capital and liquidity management strategies and processes. As such, the department is responsible for managing the capitalization of the Aegon Group and the holding company in line with Aegon’s Capital Management Policy. The capitalization levels are discussed and approved by Aegon’s Management Board.
Improving risk-return profile Aegon continues to take measures to improve its risk-return profile. These measures include, for instance, the continued run-off of Aegon’s spread-based institutional business in the United States, the sale of Aegon’s Canadian life insurance business, the strategic growth in fee-based earnings, and extensive asset-liability management and hedging programs.
On December 31, 2015, Aegon had EUR 125 million outstanding under these programs.
In order to ensure the holding company's ability to fulfil its cash obligations, it is Aegon’s policy that the holding company holds liquid assets in reserve to fund a minimum of 1.5 years of holding company operating and funding expenses, without having to rely on the receipt of funds from its subsidiaries and without the need to access capital and money markets.
(ACL) for US insurance entities, 100% Solvency I required capital for Dutch insurance companies, and 100% Solvency I Pillar 1 capital for insurance companies in the United Kingdom.
December 31, 2014, an increase that reflects the net impact of dividends from subsidiaries, capital injections in subsidiaries, divestments, acquisitions, deleveraging initiatives, holding expenses and capital returns to shareholders.
Aegon uses cash flows from its operating subsidiaries to pay holding expenses, including funding costs. The remaining cash flow is available to execute Aegon’s strategy and to fund dividends on its shares. When determining whether to declare or propose a dividend, Aegon’s Executive Board balances prudence with offering an attractive return to shareholders.
(the rules for which are set out in detail in the Solvency II rules and guidelines); (b) use an internal model (for which the approval of the supervisory authorities is required); or (c) use a partial internal model (a combination of the standard formula and an internal model). An internal model is developed by the insurance or reinsurance company in question, and should better reflect the actual risk profile of the insurance or reinsurance company than the standard formula. Aegon (as a group) uses a partial internal model.
Report were discussed in the March meeting in the presence of the external auditor PwC.
Educational sessions and Board review The Board and its Committees received updates and presentations on topics ranging from Solvency II and investor relations, to developments in information security and reinsurance. The Audit
Supervisory Board committees The Supervisory Board has four committees that discuss specific issues in depth and prepare items about which the full Board makes decisions. The committees report verbally about their discussions to the full Supervisory Board at Supervisory Board meetings. Supervisory Board members receive all minutes of the committee meetings. Committee meetings are open to all members of the Board, regardless of membership of the committees. All committee reports have been prepared by the respective committees and were approved by the Supervisory
Committee and has an annual combined meeting, which was this year held in December. The focus during this combined meeting was on financial reporting and associated controls, key risk tolerances and risk management tools, IT security, and regulatory compliance matters, the latter of which included discussions about the status and scope of the Company’s Solvency II (SII)
Governance Code and any other applicable corporate governance legislation and regulations.
An update of the Supervisory Board Profile was also discussed and approved in 2015.
Dutch law (at least 30% of the seats should be filled by women and at least 30% by men). Following the appointment of
The Netherlands in relation to (future) legislation and interpretation thereof by the financial services industry. In addition, a number of discussions took place with regard to the extent to which disparities in pay between different countries affect the recruitment of senior management; and the best way to ensure a balance across the Company.
Financial Group, Mr. Dineen was Senior Vice President and head of Merrill Lynch's Managed Asset Group. He was appointed to
Supervisory Board in 2013, and her current term ends in 2017.
Variable compensation already paid out may also be retrieved under certain circumstances ('Claw-back').
Supervisory Board (Remuneration Committee) has discussed and endorsed the 2015 total compensation for the Executive Board.
The Supervisory Board asks the Remuneration Committee to review these criteria in detail prior to each vesting and to document its findings. Based on this analysis, the Committee may then put forward a proposal to the Supervisory Board to adjust unvested variable compensation. Deferred variable compensation may only be adjusted downwards. Ex-post, risk-based assessments concern deferred variable compensation, not fixed compensation.
Insurance while he is seconded on an expatriate assignment to the Netherlands.
The arrangements with current members of the Executive Board contain provisions for severance payments in the event that their agreement is terminated as a result of a merger or takeover.
(the so called 'ex-post assessment') or to lower the payout of the up-front payment of the 2015 performance year variable compensation that vests in 2016 (the so called 'ex-ante assessment').
Aegon is incorporated and based in the Netherlands. As a company established in the Netherlands, Aegon must comply with Dutch law and is subject to the Dutch Corporate Governance Code.
Dutch Corporate Governance Code As a company based in the Netherlands, Aegon adheres to the Dutch Corporate Governance Code and supports its principles for sound and responsible corporate governance. Aegon regards the Code as an effective means to help ensure that the interests of all stakeholders are duly represented and taken into account.
Merger Agreement under which Aegon was formed. However, to mitigate any possible negative effects stemming from this, the Supervisory Board has decided that, in the absence of any hostile action, it will only make nominations for the appointment of members to the Executive and Supervisory Boards that are non-binding in nature.
The Remuneration Policy as regards the members of the Executive Board is adopted by the General Meeting of
EUR USD GBP CAD CNY CZK HUF PLN RON TRY UAH
Income tax relating to items that may be reclassified 783 (2,018) 1,295
Income tax relating to items that may be reclassified - - (1,968) - (50) - (2,018) - (2,018)
Items that may be reclassified subsequently to profit or loss: Gains / (losses) on revaluation of available-for-sale investments - - (3,376) - - - (3,376) - (3,376)
Purchase of individual intangible assets (other than VOBA and future servicing rights) (52) (28) (22)
To qualify for hedge accounting, the hedge relationship is designated and formally documented at inception, detailing the particular risk management objective and strategy for the hedge (which includes the item and risk that is being hedged), the derivative that is being used and how hedge effectiveness is being assessed. A derivative has to be effective in accomplishing the objective of offsetting either changes in fair value or cash flows for the risk being hedged. The effectiveness of the hedging relationship is evaluated on a prospective and retrospective basis using qualitative and quantitative measures of correlation. 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 hedging relationship is considered effective if the results of the hedging instrument are within a ratio of 80% to 125% of the results of the hedged item.
DPAC is derecognized when the related contracts are settled or disposed.
contracts that are subject to broadly similar risks and managed together as a single portfolio. Specifically, in the Netherlands and the UK the liability adequacy test is performed on a consolidated basis for all life and non-life business, whereas in the Americas it is performed at the level of the portfolio of contracts. 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. These future returns on investments take into account management’s best estimate related to the actual investments and, where applicable, reinvestments of these investments at maturity. Aegon the Netherlands, as required locally, adjusts the outcome of the liability adequacy test for the difference between the fair value and the book value of the assets that are measured at amortized cost in the balance sheet.
Net fair value change of derivatives All changes in fair value are recognized in the income statement, unless the derivative has been designated as a hedging instrument in a cash flow hedge or a hedge of a net investment in a foreign operation. Fair value movements of fair value hedge instruments are offset by the fair value movements of the hedged item, and the resulting hedge ineffectiveness, if any, is included in this line. In addition, the fair value movements of bifurcated embedded derivatives are included in this line.
The judgment as to whether a market is active may include, although not necessarily determinative, lower transaction volumes, reduced transaction sizes and, in some cases, no observable trading activity for short periods. In inactive markets, assurance is obtained that the transaction price provides evidence of fair value or it is determined that adjustments to transaction prices are necessary to measure the fair value of the instrument.
Increase by 15% of other non-euro currencies relative to the euro 111 3,040
Of which held by Aegon Americas, NL and UK 100,715 9,029 (1,766) 107,979 83,616 24,363
As of December 31, 2015, there are EUR 8,797 million (December 31, 2014: EUR 11,452 million) of gross unrealized gains and
portfolio are as follows: prepayment assumptions range from approximately 3% to 16% with a weighted average of approximately 6.1% (December 31, 2014: 6.2%), assumed defaults on delinquent loans range from 68% to 100% with a weighted average of approximately 89.6% (December 31, 2014: 89.9%), assumed defaults on current loans are dependent on the specific security’s collateral attributes and historical performance, while loss severity assumptions range from approximately 20% to 103%, with a weighted average of approximately 72.1% (December 31, 2014: 73.3%).
Once the entire pool is modeled, the results are closely analyzed by Aegon’s asset specialists to determine whether or not Aegon’s particular tranche or holding is at risk for not collecting all contractual cash flows taking into account the seniority and other terms of the tranches held. Aegon impairs its particular tranche to fair value where it would not be able to receive all contractual cash flows.
Corporate - Financial sector The Corporate - Financial sector is further subdivided into banking, brokerage, insurance, REIT’s and Financial - Other sub-sectors.
At December 31, 2015 Investment grade carrying value of securities with gross unrealized losses
Fair value items Fair value items include the over- or underperformance of investments and guarantees held at fair value for which the expected long-term return is included in underlying earnings before tax. Changes to these long-term return assumptions are also included in the fair value items.
The ineffective portion of hedge transactions to which hedge accounting is applied comprises: 2015 2014 2013
(USD 8 million). Please see also note 51 Business combinations for more details.
EUR 176 million related to the sale of joint ventures with Unnim and CAM. The book gain of Unnim of EUR 102 million included an amount of EUR 26 million which was recycled from equity through profit and loss. The net gain of EUR 74 million related to the sale of
(EBA) and its predecessor (CEBS) issued under the successive European CRD frameworks (in particular CRD III and IV) are prominent examples. The rules have been adopted in Aegon’s Global Remuneration Framework. After the performance period, and based on the framework, variable compensation, if any, is partially made available and partly deferred. Variable compensation is paid in both cash and in Aegon N.V. shares. The shares were conditionally granted at the beginning of the year at the average share price on the Euronext stock exchange in Amsterdam during the period between December 15 preceding a plan year and January 15 of the plan year.
Board all variable compensation has vested after three years following the performance period. At vesting, the variable compensation is transferred to the individual employees. Additional holding periods of up to three years may apply for vested shares. Members of the Executive Board and the members of the Management Board who are based in the Netherlands are not entitled to execute any transactions regarding the shares for a period of three years following vesting (with the exception of shares sold to meet income tax obligations).
EUR 269 million (2014: EUR 242 million; 2013: EUR 239 million).
Basic earnings per common share B (EUR per share) 0.01 0.01 0.01
Dividend paid on common shares B amounted to 1/40th of the dividend paid on common shares.
For the years ended December 31, 2015, 2014, and 2013, Aegon recognized gains and (losses) related to the ineffectiveness portion of designated fair value hedges of EUR (17) million, EUR 45 million and EUR 10 million respectively. No portion of derivatives was excluded when assessing hedge effectiveness.
Such restrictions can affect the ability of these associates to transfer funds in the form of cash dividends, or repayment of loans or advances, and therefore, there can be no assurance that these restrictions will not become a limitation in the future. There are no unrecognized shares of losses in associates. The financial statements of the principal associates have the same reporting date as the Group. Refer to note 52 Group companies for a listing of the investments in associates and the Group’s percentage holding.
In July 2013, Vereniging Aegon exercised its option right to purchase 12,691,745 common shares B with a par value of EUR 0.12 to mitigate the dilution caused by the issuance of shares on May 1, 2013 and May 16, 2013, in connection with the Long Term Incentive
USD 500 million floating CMS rate 2) Quarterly, July 15 2016 402 402 402
3 The coupon of the EUR 950 million junior perpetual capital securities is reset each quarter based on the then prevailing ten-year Dutch government bond yield plus a spread of ten basis points, with a maximum of 8%.
The sum insured at maturity or upon the death of the beneficiary has a minimum guaranteed return (in the range of 3% to 4%) if
c. Life contingent guarantees in the United States Certain variable insurance contracts in the United States also provide guaranteed minimum death benefits (GMDB) and guaranteed minimum income benefits (GMIB). Under a GMDB, the beneficiaries receive the greater of the account balance or the guaranteed amount upon the death of the insured. The net amount at risk for GMDB contracts is defined as the current GMDB in excess of the capital account balance at the balance sheet date.
USD 305 million Note issue agreement 1) 5.54% / 8.88% Quarterly 2002 / 22 - 46
Aegon USA also sponsors supplemental retirement plans to provide senior management with benefits in excess of normal retirement benefits. The plans are unfunded and are not qualified under the Internal Revenue Code. The supplemental retirement plans are governed by either Aegon USA, LLC, or the Compensation Committee of the Board of Directors of Aegon US Holding Corporation.
The contributions to the retirement benefit plan of Aegon the Netherlands are paid by both the employees and the employer, with the employer contribution being variable. The benefits covered are retirement benefits, disability, death and survivor pension and are based on an average salary system. The defined benefit plans were unfunded by EUR 2,683 million at December 31, 2015 (2014: EUR 2,774 million). As the assets held by Aegon the Netherlands for retirement benefits do not meet the definition of plan assets, they were not deducted in calculating this amount. Instead, these assets are recognized as general account assets. Consequently, the return on these assets do not form part of the calculation of defined benefit expenses.
Policyholder assets, and their returns, belong to policyholders and do not impact Aegon’s net income or equity. The effect on total assets is offset by the effect on total liabilities. Derivatives exclude derivatives for account of policyholders amounting to EUR 113 million (2014: EUR 129).
The results of the Canadian operations reflect amounts previously recorded in Other Comprehensive Income that were reclassified into the income statement including CAD 178 million (EUR 127 million) release of the foreign currency translation reserve, CAD (72) million
New Markets �� Aegon España S.A., Madrid (Spain) (99.98%); �� Aegon Magyarország Általános Biztosító Zártkörűen Működő Részvénytársaság, Budapest (Hungary); �� Aegon Towarzystwo Ubezpieczeń na Życie Spółka Akcyjna, Warsaw (Poland); �� Private Joint Stock Company “Insurance Company Aegon Life Ukraine”, Kiev (Ukraine); and �� Transamerica Life (Bermuda) Ltd., Hamilton, Bermuda.
Vereniging Aegon may exercise its call option on common shares B to keep or restore its total stake at 32.6% irrespective of the circumstances that caused the total shareholding to be or become lower than 32.6% (see also the section 'Major Shareholders').
In 2013 a special tax-levy (‘crisis tax’), as introduced by the Dutch government, was accrued for members of the Management Board employed in the Netherlands. In 2013 this amounted to EUR 1.0 million. The special tax levy is no longer applicable as from 2014.
IFRS expenses related to variable compensation amounted to EUR 5.0 million (2014: EUR 5.6 million; 2013: EUR 6.3 million)
EUR 185 and EUR 157 respectively. The number of shares to be made available in 2016 relating to performance year 2015 is 30,219 and 23,621 for Mr. Wynaendts and Mr. Button respectively. To the vested shares, with the exception of shares sold to meet income tax obligations, a retention (holding) period is applicable for a future three years, before they are at the disposal of the Executive Board members.
Book 2 of the Netherlands Civil Code. Based on article 2:362.8 of the Netherlands Civil Code, the valuation principles applied are based on International Financial Reporting Standards as adopted by the EU (IFRS), as used for the preparation of the consolidated financial statements of the Group.
On June 15, 2014, Aegon redeemed junior perpetual capital securities with a coupon of 7.25% issued in 2007. The junior perpetual capital securities were originally issued at par with a carrying value of EUR 745 million. The principal amount of USD 1,050 million was repaid with accrued interest. The cumulative foreign currency result at redemption was recorded directly in retained earnings.
Non-cumulative subordinated notes Coupon rate Coupon date, as of Year of next call 2015 2014
These notes are recognized as a compound instrument due to the nature of this financial instrument. Compound instruments are separated into an equity component and a liability component. At December 31, 2015, the equity component amounted to
What we have audited We have audited the accompanying financial statements 2015 of Aegon N.V., The Hague, the Netherlands (‘the Company’).
We are independent of Aegon N.V. in accordance with the 'Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten' (ViO) and other relevant independence requirements in the Netherlands. Furthermore we have complied with the 'Verordening gedrags- en beroepsregels accountants' (VGBA).
Netherlands required a full-scope audit of their financial information. Specific audit procedures on certain account balances and classes of transactions were also performed in relation to, amongst others, Central and Eastern Europe, Spain and Asset Management to ensure we obtained appropriate coverage across all account balances.
The Group has insurance contract liabilities stated at EUR 235.7 billion at December 31, 2015 representing 60% of the Group’s total liabilities. This is an area that involves significant judgement over uncertain future outcomes, including primarily the timing and ultimate full settlement of long term policyholder liabilities, and therefore we considered it a key audit matter for our audit.
Disclosure and estimated impact to equity and income before tax as a result of adoption of voluntary changes in accounting policies in 2016 Refer to Note 2.35 'Future adoption of voluntary changes in accounting policies'.
Appendix to our auditor’s report on the financial statements 2015 of Aegon N.V. In addition to what is included in our auditor’s report we have further set out in this appendix our responsibilities for the audit of the financial statements and explained what an audit involves.
The auditor’s responsibilities for the audit of the financial statements We have exercised professional judgement and have maintained professional scepticism throughout the audit in accordance with
Shareholders of Aegon N.V., in which event Vereniging Aegon may amend its Articles of Association without the cooperation of
February 10, 2016, and regular monthly contributions of GBP 527.91 (gross) are being received into this policy. Individual Personal
Pension #4 has a current value of GBP 5,810.54 as at February 10, 2016, and no further contributions are being received into this policy. The related annual net profit arising from these four contracts, which is difficult to calculate with precision, is estimated to be
IFRS. This is inconsistent with the IFRS accounting on much of Aegon’s liabilities, where corresponding economic gains from higher interest rates do not affect shareholders' equity or income in the shorter term. Over time, the short-term reduction in shareholder equity and income due to rising interest rates would be offset in later years, all else being equal.
As an international group, Aegon is subject to foreign currency translation risk. Foreign currency exposure also exists when policies are denominated in currencies other than Aegon’s functional currency. Currency risk in the investment portfolios backing insurance and investment liabilities are managed using asset liability matching principles. Assets allocated to equity are kept in local currencies to the extent shareholders’ equity is required to satisfy regulatory and Aegon’s self-imposed capital requirements. Therefore, currency exchange rate fluctuations may affect the level of Aegon’s consolidated shareholders’ equity as a result of translation of the equity of
Certain products, particularly our variable annuity products, include guarantees of minimum surrender values or income streams for stated periods or for life, which may be in excess of account values. These guarantees are designed, among other things, to protect policyholders against downturns in equity markets and interest rates. As a result, a drop in equity markets, an increase in equity volatility, or lower interest rates could result in an increase in the valuation of Aegon’s liabilities associated with these products. An increase in these liabilities may decrease our net income. Aegon uses a variety of hedging and risk management strategies to mitigate these risks. However, these strategies may not be fully effective and hedging instruments may not fully offset the costs of guarantees or may otherwise be insufficient in relation to our obligations. Estimates and assumptions Aegon makes in connection with hedging activities may fail to fully reflect or correspond to the actual (longer term) exposure in respect of guarantees. Further, unexpected policyholder behavior may cause our hedging to be less effective. The above factors could have a material adverse effect on our results of operations, financial condition or liquidity.
However, for a variety of reasons, Aegon may not be able to implement actions to mitigate the impact of Regulation XXX and AG38 on future sales of term or universal life insurance products, potentially resulting in an adverse impact on these products and Aegon’s market position in the life insurance market. In addition, the NAIC is reviewing internal captive reinsurance, the vehicle used in many capital management actions.
Solvency II. In this respect, the development of ComFrame as well as the requirements or standards applicable to G-SIIs could lead to
Furthermore, the terms of contracts, including debt obligations may be varied (e.g. the variation of maturity of a debt instrument).
The Dutch Intervention Act and the Bank Recovery and Resolution Directive aim to ensure that financial public support will only be used as a last resort after having assessed and exploited, to the maximum extent practicable, the resolution tools, including the bail-in tool.
based on the present value at the time of the decision. While parties such as the Ombudsman Financiële Dienstverlening (the
The US Government, as well as state and local governments, also considers from time to time tax law changes that may increase the amount of taxes that Aegon pays. For example, the Obama Administration has proposed in its annual budget for each of the past five years to change the methodology to determine the dividends received deduction (DRD) related to variable life insurance and variable annuity contracts. Congress has not, however acted on these proposals. The DRD reduces the amount of dividend income subject to tax and is a significant component of the difference between Aegon’s effective tax rate and the federal statutory tax rate of 35%. A change in the DRD, including the possible elimination of this deduction, may reduce Aegon’s consolidated net income.
In connection with its refinancing in September 2002, Vereniging Aegon entered into an equity repurchase facility and a back-up credit facility. On February 9, 2010, both facilities were replaced by a three year term and revolving facilities agreement with a consortium of banks. In 2013, Vereniging Aegon entered into a new three year term and revolving facilities agreement with the same consortium of banks, replacing the three year term and revolving facilities agreement entered into in 2010. Under this agreement, Aegon’s common shares in the possession of Vereniging Aegon are pledged to the consortium of banks. If Vereniging Aegon were to default under the facilities agreement in force at that time, the lenders may dispose of Aegon’s common shares held by them as collateral in order to satisfy amounts outstanding.
This means that in the absence of a Special Cause Vereniging Aegon may cast one vote for every common share it holds and one vote only for every 40 common shares B. A Special Cause includes the acquisition of a 15% interest in Aegon N.V., a tender offer for
Vereniging Aegon under normal circumstances amounted to approximately 14.5%, based on the number of outstanding and voting shares (excluding issued common shares held in treasury by Aegon N.V.). In the event of a Special Cause, Vereniging Aegon’s voting rights will increase to 32.6% for up to six months.
Other principal offices owned by Aegon are located in The Hague, the Netherlands; Budapest, Hungary; and Madrid, Spain. Aegon owns its headquarters and leases other offices in the Netherlands (Leeuwarden) and the United Kingdom under long-term leases. Aegon believes that its properties are adequate to meet its current needs.
On Euronext Amsterdam only Euronext registered shares may be traded, and on NYSE New York only New York Registry Shares may be traded.
This section does not address the Netherlands tax consequences for: i. Investment institutions (fiscale beleggingsinstellingen); ii. Pension funds, exempt investment institutions (vrijgestelde beleggingsinstellingen) or other entities that are exempt from Netherlands corporate income tax; iii. Corporate holders of Aegon common shares, the shareholding of which qualifies for the participation exemption (deelnemingsvrijstelling ) of the Netherlands corporate income tax act 1969 (Wet op de vennootschapsbelasting 1969). Generally speaking, a shareholding is considered to qualify as a participation for the participation exemption if it represents an interest of 5% or more of the nominal paid-up share capital; Holders of Aegon common shares holding a substantial interest (aanmerkelijk belang) or deemed substantial interest (fictief aanmerkelijk belang) in Aegon and holders of Aegon common shares of whom a certain related person holds a substantial interest in Aegon. Generally speaking, a substantial interest in Aegon arises if a person, alone or, where such person is an individual, together with his or her partner (statutory defined term), directly or indirectly, holds or is deemed to hold (i) an interest of 5% or more of the total of capital issued by Aegon or of 5% or more of the issued capital of a certain class of Aegon shares, (ii) rights to acquire, directly or indirectly, such interest or (iii) certain profit sharing rights in Aegon; iv. Persons to whom the beneficial interest in Aegon common shares is attributed based on the separated private assets (afgezonderd particulier vermogen) provisions of the Netherlands income tax act 2001 (Wet inkomstenbelasting 2001); v. Entities which are a resident of Aruba, Curacao or Sint Maarten that have an enterprise which is carried on through a permanent establishment or a permanent representative on Bonaire, Sint Eustatius or Saba, to which permanent establishment or permanent representative the Aegon common shares are attributable; vi. Holders of Aegon common shares which are not considered the beneficial owner (uiteindelijk gerechtigde) of these shares or of the benefits derived from or realised in respect of the Aegon common shares; and vii. Individuals to whom Aegon common shares or the income therefrom are attributable to employment activities which are taxed as employment income in the Netherlands.
Aegon must transfer to the Dutch tax authorities all Netherlands dividend withholding tax it withholds on dividends it distributed with respect to the Aegon common shares. Provided certain conditions are met, Aegon may apply a reduction with respect to the withholding tax that it has to pay over to the Dutch tax authorities. This reduction can be applied if Aegon distributes dividends that stem from dividends Aegon itself has received from certain qualifying non-Netherlands subsidiaries, provided these dividends received by Aegon are exempt from Dutch corporate income tax and were subject to withholding tax of at least 5% upon distribution to Aegon.
Backup withholding and information reporting requirements may apply to certain payments on the common shares and to proceeds of a sale or redemption of the common shares to US holders made within the United States. Aegon, its agent, a broker, or any paying agent, as the case may be, may be required to withhold tax from any payment that is subject to backup withholding if a US holder fails to furnish the US holder's taxpayer identification number, fails to certify that such US holder is not subject to backup withholding, or fails to otherwise comply with the applicable requirements of the backup withholding rules. Certain US holders are not subject to the backup withholding and information reporting requirements.
Equity method is a method of accounting whereby the investment is initially recognized at cost and adjusted thereafter for the post-acquisition change in the investor´s share of net assets of the investee. The profit or loss of the investor includes the investor´s share of the profit or loss of the investee.