For more information about AEGON please refer to our website: www.aegon.com
Canada and Mexico — the Netherlands and the United Kingdom. The Group is also present in a number of other countries, including Hungary, Spain, Belgium, Germany,
Close to 90% of AEGON’s existing core business is life insurance, pensions and related savings and investment products, markets that are large, fast growing and reliably profitable. The Group is also active in accident and health insurance, general insurance, and limited banking activities.
AEGON values its reputation as a shareholder friendly company: its common shares are quoted on the stock exchanges in Amsterdam, Frankfurt, London, New York
(NYSE), Tokyo and Zurich. In addition, AEGON stock options are quoted on the
Euronext in Amsterdam, the Chicago Board Options Exchange and the Philadelphia
1 Adjusted for capital changes and stock-splits 2 Proposed last 3 years last 5 years last 10 years in euro in dollar in pound
Total Return AEGON Shares* % compound growth rate, average per year
Interest charges and other — — —69 —117 —104 —142 —296 Transamerica non-insurance — — — — — 0 29 in EUR billion
Return on assets (ROA, in %)1 1.24 1.24 1.17 0.95 0.87 0.92 0.94 0.97 0.98 0.87 0.87 1 Calculated as net income divided by average assets
Pensions and social security charges 64 64 75 94 103 94 102 124 133 112 91
1 Calculated as sum of income before tax plus commissions and expenses 2 Expenses include commissions and expenses after deferral and amortization of acquisition costs and after reinsured share in commissions and expenses 3 Up to and including 1994 this line also contains the figures of the United Kingdom
Investments for Account of Policyholders Americas 0.0 0.7 1.5 4.4 6.4 7.6 9.7 17.9 20.7 42.0 45.6
Total Investments Insurance Activities in EUR billion Investments General Account in EUR billion
Off balance sheet investments — — — — — — — 16.2 20.2 39.5 46.9 Total Investments Business Units 124.8 137.1 250.3 274.2 1 As of 1996 the interest charges and as of 1997 the overhead expenses are no longer allocated to the business units but reported separately 2 Up to and including 1994 this line also contains the figures of the United Kingdom 3 Calculated as % of average investments
Income before tax general account — — — — — — — — — 1,247 1,571 Income before tax policyholders account2 — — — — — — — — — 171 299
Corporation tax — — — — — —111 —135 —215 —329 —491 —633
Transamerica Non insurance — — — — — — — — — 0 29 in USD billion
Off Balance Sheet Investments — — — — — — — — 21.6 37.0 39.0 in USD million
Income before Tax by Activity Americas in USD million 150 Investments general account
Income before Tax by Activity Traditional life — — — — — — — — — 513 577 Life for account policyholders — — — — — — — — — 134 150
Corporation tax — — — — — —78 —99 —126 —145 —189 —204 in EUR billion
Pre-tax Profit Margin (%) Insurance Activities3 1.8 1.8 1.8 1.9 1.8 1.9 2.1 2.1 2.2 2.1 2.3
Income before Tax by Activity Traditional life — — — — — — — — — 33 31 Life for account policyholders — — — — — — — — — 125 180 Fee business — — — — — — — — — —2 8
Off balance sheet investments — — — — — — — — 1.1 1.0 1.0 in GBP million
Commissions and expenses — — — — — — — — 117 187 200 Expenses/Gross margin ratio 54.7 54.5 47.7 1 As of 1996 the interest charges and as of 1997 the overhead expenses are no longer allocated to the business units but reported separately 2 Includes fees 3 Calculated as % of average investments (whereby pre-tax profit margin excludes fee business)
Income before Tax by Activity Traditional life — — — — — — — — — 33 28 Life for account policyholders — — — — — — — — — —3 —5 Fee business — — — — — — — — — 0 5
Off balance sheet investments — — — — — — — — 0.0 0.1 0.2 in EUR million
United Kingdom New Premium Production Life Insurance Single premium — — — — — — — — — 2,400 2,982 Recurring annualized — — — — — — — — — 203 240 Total Recurring Plus 1/10 Single — — — — — — — — — 443 538 in EUR million
1 Up to and including 1994 this line also contains the figures of the United Kingdom 2 Excluding direct income 3 Calculated as total investment income on equities and real estate before tax divided by the average market value of equities and real estate 4 Calculated as total realized/unrealized gains and losses plus direct investment income divided by the average market value of equities and real estate 10,000 Americas
Amounts owed to credit institutions 1.3 1.3 1.6 2.1 1.6 1.0 1.6 2.1 3.1 4.6 2.0
Return on Equity (ROE, in %)1 32.7 16.0 15.2 13.5 13.9 16.5 16.1 15.0 15.4 14.6 15.7 1 Calculated by dividing net income by the average of shareholders’ equity over the year 250 Investments general account
Total Insurance Investments in EUR billion 250 Technical provision general account
Conversion of debenture loans — 3.6 0.4 0.1 1.2 — — — — — —
Issuance of new shares — — — — — — — 22.3 — 82.5 —
Average Daily Volume Traded 1 Number x 1 million, adjusted for stock-splits 2 Number x 1 million, not adjusted
By Market Capitalization 1 American International Group 228.2 6 Zurich Financial Services 50.6
A company with a corporate philosophy that is shared by AEGON
A company in which people work with passion, energy and imagination, as individuals and in teams, to make AEGON
He was appointed in 1993; his current term will end in 2004. He is a member of the Audit, Compensation and Nominating Committees, respectively.
He joined the Board in 1993; his current term will end in 2004. He is a member of the Nominating Committee.
6 MS K.M.H. PEIJS (DUTCH) A member of the European Parliament
He was appointed in 1993; his current term will end in 2001, when he will reach the statutory retirement age. He is a member of the Audit Committee.
8 G.A. POSTHUMUS (DUTCH) A member of the Council of State in the Netherlands
He joined the Board in 1997; his current term will end in 2001.
11 F.J. DE WIT (DUTCH) Former Chairman of the Executive Board of N.V. Koninklijke KNP BT
The AEGON Supervisory Board consists of eleven independent business and social leaders of three nationalities.
Dutch Social and Economic Council (SER) on possible changes of appointment procedures for members of supervisory boards. We follow the political and public debate with great interest. A formal report of the Supervisory Board’s activities may be found on pages 98 and 99.
Of particular interest this past year has been AEGON’s efforts to introduce greater transparency of the Group’s activities and further improve the quality of information presented in its internal and external reporting. We support management’s commitment to providing shareholders and other interested parties with useful information on AEGON’s financial and operational performance, such as the sensitivity table on page 47, and the breakdown of new business production by product type to be found on pages 34 to 38 of this year’s Annual Report.
We have also followed and discussed with close interest the evolution of AEGON’s shareholder value creation strategy, the integration of 1999s acquisitions in the United States
Board when he reaches the statutory retirement age of 70 years. He was one of the main architects behind the creation of the AEGON Group in 1983. Since 1993 he has been a member of the Supervisory Board and we are grateful for his contributions to the discussions in meetings, fueled by his vast knowledge of AEGON and the insurance world in general. His quick and agile mind made the debate during the meetings of the Supervisory Board very worthwhile. It goes without saying that we will miss him very much as a colleague on the Board. Finally, on a personal note, I would like to thank my colleagues and my predecessor as Chairman of the
The AEGON Group is off to a good start in the new millennium. We look forward to another busy, productive and rewarding year.
Insurance, with a strong emphasis on life insurance and pensions and related savings and investment products.
Earnings per share growth of at least 10% per annum; the minimum return on investment is set at 12% or more after tax on the pricing of new business and at a long-term average of 11% or more after tax for acquisitions. Divestment of non-core activities and underperformers, and disciplined expense management are key to the achievement of these objectives.
AEGON already has a presence in order to build scale and enhance distribution. AEGON limits its annual investment in greenfield and start-up operations to 3% of net income.
> Integration NN Life in Canada > Integration Guardian Financial Services in the UK
Taiwan into one subsidiary > Roll-out of the MoneyMaxx concept in Italy and the USA
The AEGON Executive Board from left to right: Donald J. Shepard, 54 (American), Joseph B.M. Streppel, 51 (Dutch), Paul van de Geijn, 54 (Dutch), Kees J. Storm, Chairman, 58 (Dutch)
INCREASE IN NET INCOME AND A 23% INCREASE IN INCOME PER
These are embodied in the strategy presented on the facing page, and in the distinctive, energetic AEGON culture within our Group, as expressed in our motto: Respect People, Make
United States, the Netherlands and the United Kingdom. We have developed mass-market savings and investment models based on AEGON The Netherlands’ profitable Spaarbeleg product, which we have rolled out in five countries in Europe under the MoneyMaxx banner and in a test phase as
GoalTender in the United States. Capitalizing on the strength of the AEGON name in international financial circles, we are rapidly expanding our wholesale business-to-business offering: sophisticated, customized products including life reinsurance, bank- and corporate-owned life insurance (BOLI/COLI) and
GICs which we sell to governmental agencies and corporate clients. All our units have broadened their pension and retirement savings activities to cover additional market segments and to afford greater flexibility to individual and group customers.
Netherlands saw sales of security leases reach top figures even though the changes in tax regulations reduced the fiscal advantages of these popular installment purchase products.
To offer the best possible products and services at the best possible price, while safeguarding profitability, AEGON
New technology again proved to be an important contributor to productivity and to improved customer service last year. With virtually all business units now fully web-enabled and on-line, the strategic emphasis has moved towards building e-links between different activities, to facilitate cross-selling while respecting local autonomy.
MoneyMaxx roll-out in Europe, continuous updating of the product range, new initiatives to strengthen ties with professional intermediaries, further development of its asset management activities and keeping an open eye for cross-selling opportunities to existing clients.
AEGON UK will actively seek entry to the individual protection and stakeholder pension markets, while further developing its institutional market positions. The delivery of technology-based solutions to improve efficiency and accessibility of services will remain a top priority.
Transamerica Canada will further develop its leading positions in the life, pensions and investment sectors in the wake of the NN Life acquisition last year.
AEGON Hungary will emphasize customer service and satisfaction to continue to outgrow the surging market for life insurance, while keeping a tight control on costs. AEGON Spain will use its strengthened information and data processing infrastructure to improve the quality and productivity of its distribution and administration, while seeking better scale and cost structure through acquisitions and joint ventures.
Certainly there will be bumps in the road ahead, but our organization continues to expand its resources, problemsolving skills and experience in fashioning ‘win-win’ solutions.
Our ability to address important issues, such as the Holocaust inquiries, reflects AEGON’s commitment to dealing with complex matters in a fair and open way, respectful of others’
interests as well as our own. We demonstrated our disciplined approach to acquisitions and divestitures with the agreement reached March 8, 2001 to acquire J.C. Penney’s Direct
Board of AEGON N.V. since 1984. We are greatly indebted to him for his unremitting commitment, his profound expertise in our Board’s discussions and his experience expressed in his contributions to our Group’s international growth. Although we sincerely regret his retirement from our Board, we fully respect his decision and wish him all success in fulfilling the wish he expressed some years ago to have more time for other activities in the community.
Barring unforeseen exceptional circumstances, such as adverse currency and financial market movements and including the impact of the acquisition of the Direct Marketing
Today the customer is in the driver’s seat. Taking advantage of unparalleled access to information and lively competition for new business, the customer has the final say, not only on what to buy, but also on how, when and where. This new market dynamic has been making itself felt in the more advanced markets for some years, but continues to gain strength and is now spreading. It is forcing enormous changes within the insurance and financial services sector, which traditionally has been local, highly regulated and inwardly oriented with more or less the same products. Nowadays, customers want and get an almost unlimited choice, either relatively standardized products comprising various ‘building blocks’ selected by the client, or tailormade, rather complex products that require sophisticated advice from the intermediary.
AEGON’s core life, pension and investment products and services, valued in billions and billions, is highly profitable and growing quickly.
To tap into these opportunities and remain competitive, businesses must increasingly organize themselves around the customers they seek to serve.
Success comes from staying close to customers, understanding their needs and being flexible enough to respond quickly to the changing environment.
AEGON The Netherlands decided to improve information gathering around the customer by adopting a single method to keep the most relevant customer data up to date. Furthermore, the AEGON brand units agreed on a single electronic service system to open up customer data to that same customer and to intermediaries.
In 2000, our specialized units helped to keep AEGON well connected to its clients in fourteen countries, issuing over seventeen million insurance and savings contracts. In addition, its pension units in the United States, the Netherlands, the
AEGON’s core business of life insurance and pensions realized a standardized new premium production of EUR 2,574 million (USD 2,377 million), together with EUR 45,920 million (USD 42,407 million) of deposits and EUR 938 million (USD 866 million) of amounts subscribed in investment contracts. These products range from simple term insurance policies to individual and group savings and pensions to complex, large-scale structured investment contracts for institutions. Whatever their size and shape, all these products are carefully designed to meet important customer needs, be it performance on wealth protection or accumulation, in keeping with the wishes of each customer and the different ways in which we do business in each market. This attention to product design and performance has enabled AEGON’s main units to maintain double-digit organic growth year after year.
In the Netherlands and the United Kingdom the AEGON brand is also employed for supporting the asset management activities. In Hungary, the
AEGON brand is used for premium consumer and corporate products, while the ÁB brand is used in the traditional mass market.
AEGON brand is used for distribution through the professional intermediary and for the endorsement of units with other brand names.
The third main distribution channel is based on partnering: joint ventures or other long-term relationships with financial institutions, marketing groups, and other entities seeking to market insurance or savings products. These include AEGON’s bancassurance ventures with Mexico’s Banamex as well as with local banks in Spain,
Essential to AEGON’s multibrand, multichannel distribution strategy is an equally flexible production capability that leverages powerful economies of scale to deliver the full range of products with maximum speed and efficiency. Central production platforms in each national market combine professional expertise with sophisticated information technology to support a wide range of brands and specialized distribution channels.
AEGON’s decentralized organization is designed to deal with the critical differences in regulation, tax law and market practice that shape insurance and investment activities in each national market. Staffed and managed locally, each unit is free to develop its market opportunities, within the strategic and financial guidelines established for the
Across Europe and the United States, public officials are evaluating the future of statesponsored social security programs with concern; some, including the Labour Government in the United Kingdom, have begun seeking the assistance of private sector pension specialists in developing viable long-term solutions. Its proposals for Stakeholder Pensions, to encourage private provisioning by lower- and middle-income families to supplement existing retirement benefits, were unveiled in 2000. Seeing a profitable opportunity to utilize its existing group pension expertise and excellent relationships with the Independent
IFA partners, to establish itself as a preferred supplier of Stakeholder Pension products, services and advice. Though the Stakeholder Pension opportunity is only just beginning,
Scottish Equitable has seized a strong initial position, from which to take advantage of the resulting business opportunities.
The internet remained an area of extensive development throughout AEGON, as virtually every unit increased its e-business and web-based transactions as a means of better supporting sales and service. Particularly for the business units serving the group pension market, including AEGON USA’s Pension Group, Scottish Equitable within AEGON UK and AEGON Corporate Pensions in the Netherlands, interactive websites are emerging as an optimal means of communicating with plan participants
— convenient, secure, inexpensive and always up-to-date. The internet is also playing an ever greater role in distributor support, by enabling professional intermediaries to access and deploy the Group’s sales and service resources electronically, with all the concomitant benefits in terms of flexibility, speed and quality. E-commerce initiatives such as Coverna in the US, E-Rekening in the Netherlands and
‘dotcorps’ like AEGON connect the best practice of the past with the excitement of the future.
While double-digit autonomous growth provides the basis for AEGON’s continuing progress, acquisitions and selective divestitures have also played an important role boosting financial prospects and rounding out the Group’s strategic position in various markets. Over the past decade, AEGON has completed many acquisitions without major problems, demonstrating its disciplined financial criteria and skill at integrating newly acquired units into the Group.
program, the AEGON USA data center absorbed Transamerica’s data center, realizing annual savings of USD 35 million.
Services into various major outsourced suppliers was achieved three months ahead of schedule and without interruption to service.
> AEGON The Netherlands’ data center improved productivity through an outsourcing agreement.
Quality improvement and advanced security were the major focus in deciding for outsourcing, along with innovative commercial and business processes.
The Group’s worldwide stock option plan — yearly to be decided upon — puts employees and shareholders on the same side and has been an important contributor to AEGON’s financial success. As the Group grows, so too do opportunities for cooperation and shared success among its various business units. This sometimes takes the form of referrals — for example, Diversified
(which includes among others EUR 113 billion; USD 105 billion for its general account and
AEGON USA’S ORGANIC GROWTH ACCELERATED BROADLY LAST YEAR IN THE WAKE OF THE
USA Investment Management reallocated investment responsibilities to optimize the performance of the investment portfolio.
Variable life and variable annuities were the Group’s growth stars last year: AEGON USA
Income before tax in USD Income before tax life insurance in USD
Specializing either by product type (long-term care, reinsurance) or by distribution channel
Financial Markets Division (FMD), further broadened its role with many of the largest financial institutions in the United States as a supplier of high quality retirement, asset accumulation and wealth transfer products and services. Reflecting the rapid growth of variable annuity sales through these channels, the FMD business mix has evolved from almost total reliance on traditional fixed products four years ago to a balanced mix of fixed and variable products in 2000. The Special Markets Group is one of the largest direct marketers of life and supplemental health insurance products in the United States. With the acquisition of J.C. Penney’s Direct Marketing Services in March 2001, they will become the largest direct marketing organization. Transamerica Reinsurance expertise in risk management, financial management and business consulting provides a strong platform for growth in the reinsurance market.
Providing innovative savings and investment products to institutional clients, along with retirement plans for small to large employer groups, the Pension Group’s three business units all continue to grow at a rapid pace, lifting their profit contribution, which now represents 15% of AEGON USA’s total.
Particularly in the corporate pension area, the use of web-based information and online customer service transactions has become a key competitive strength. Awardwinning user-friendly participant account access and state-of-the-art financial planning tools have been successfully introduced to over 10,000 corporate customers, representing some one million individual participants. In the institutional market, a close working relationship with major clients and a growing array of new product designs for specific institutional market niches enabled AEGON USA’s small team of specialists to generate over USD 16.6 billion in wholesale production last year.
With the acquisition and successful integration of NN Life last year, Transamerica Canada quickly and decisively established itself as the Canadian leader with a 17% share of the sale of individual life insurance and segregated asset funds.
Transamerica Canada strengthened its distribution network of some 18,000 sales people, boosting volumes and margins simultaneously. The key task in the coming year will be to further diversify the product offering and develop a multibrand strategy while relying on
The key tasks in the coming year will be to improve efficiency and service to distribution partners through the delivery of web based solutions, further diversify product offerings and accelerate growth through acquisition while relying on Transamerica Life Canada’s position as an efficient, low-cost provider.
Seguros Banamex AEGON and Afore Banamex AEGON, the joint ventures with Banamex,
Together, they have made Mexico AEGON’s fifth largest national market in terms of profit contribution. Growth benefited from strong underlying demand for pension and life insurance products and from consolidation in the Mexican banking sector. The continuing improvement in the sales skills of the banking branch network has increased both the quality and level of business. In the current year, expansion of the personal insurance product offering should further reinforce the productivity and leverage the effectiveness of the branch network.
North of the border, the two partners are cooperating on VITAmerica, a pilot project targeted at serving the insurance and investment needs of the fast growing and increasingly affluent Hispanic population in the United States.
Seguros Banamex AEGON will implement a ‘one stop shopping’ experience through the expansion of new product offerings. Key thrusts will target a higher average premium and a higher persistency of the current portfolio. Corporate sales initiatives will be in worksite marketing. In the pension business the aim is to increase market share in the most cost-effective way. Sales efforts in health will also include high-end major medical insurance. Results from the pilot program related to the VITAmerica project are expected to be concluded.
The management team of AEGON The Netherlands from left to right: Johan G. van der Werf, Paul van de Geijn, Chairman, Jan M. Overmeer, Theo E.M.J. Bouts, Edgar W. Koning
writing and pricing policy. Personal insurance is getting more and more emphasis, object insurance less.
AEGON The Netherlands’ support for its key distribution partners, the professional intermediaries, takes the form not only of training and technical assistance but occasionally even more direct involvement: AEGON The Netherlands has financed the
Cost control and productivity drives last year included the outsourcing of certain EDP
functions, expanding the use of shared production platforms to support multiple brands, and growing reliance on money-saving technologies such as the internet and call centers.
The Netherlands, continued its roll-out and is now active in six countries outside the
Netherlands, including the United States (see page 15). The activities in Germany and
Belgium continued to achieve growth in the production of their unit-linked products. In the autumn of 2000 MoneyMaxx Italy was started.
In 2001 AEGON The Netherlands will continue the MoneyMaxx roll-out in Europe and further strengthen the relationship with the independent intermediary, e.g. via the internet, and will continuously update the product range, especially investment and savings products. The company will also remain alert to cross-selling opportunities to existing customer databases and strengthen its asset management activities.
MARKETS. NET PROFITS ROSE 38%, WHILE NEW BUSINESS VOLUMES INCREASED BY 21%.
By rounding out Scottish Equitable’s traditional strengths in pensions and investments with well-designed employee benefit and individual protection products, the Guardian acquisition has reinforced Scottish Equitable’s strategy of making itself the preferred choice for Independent Financial Advisors (IFAs), who remain the UK’s largest and fastest growing distribution channel for life assurance, pension and investment products. The strategy to gain a presence in markets complementary to existing strong market positions was also behind the acquisition in 2000 of HS Administrative Services, a leading provider of third-party pension administrative services for large blue chip corporate clients.
needed to operate profitably in stakeholder pensions. Together with its IFA partners, it will aggressively target this potentially huge growth area, while continuing to benefit from the buoyancy of the general pensions market.
Management UK enjoyed successful growth in its second year as an autonomous business unit: assets under management totaled GBP 34 billion at year-end, including over a billion pounds in third-party mandates. AEGON Asset Management UK’s recognized expertise in both bond and equity investment, and its growing array of specialized equity mutual funds, provide effective asset management support to AEGON UK’s other business units, and also provide the basis for pursuing additional third-party business.
Accordingly, management worked to further flatten the organization and streamline the reporting structure, encourage individual salesmanship and productivity and eliminate organizational inefficiencies and overlaps. As a result, activities are increasingly grouped around and focused on specific market segments. Equally important, costs remained well under control and are set for further reductions in the coming year.
In the non-life sector, ÁB-AEGON retained its dominant position in household insurance, increasing its market share to over 50%, while scaling back its motor insurance portfolio to improve returns. Profitability remains good. Although internet is not yet a commonly used channel in the Hungarian market, further internet initiatives were taken into 2000 by launching another unit-linked product, which made a promising start.
In 2001, AEGON Hungary’s top priorities will be to further improve customer service and satisfaction, continue to outgrow the surging market for life insurance and retain a tight control on costs. MoneyMaxx Hungary is well positioned and has set ambitious objectives for 2001.
The management team of AEGON Hungary from left to right: Andrea Horváth, János Bártok, Gábor Kepecs, Chairman, Róbert Kovács, Attila Kéri
MEASURES IN THE MOTOR INSURANCE BUSINESS, ENABLED AEGON SPAIN TO POST A SOLID
This country unit also profited from a keen eye on external growth opportunities, including the successful integration of Covadonga, a life insurer acquired late in 1999, as well as bancassurance opportunities. Strong forward momentum — the formation of a new sales team specializing in serving Spain’s fast-changing group pension sector and the successful roll-out of MoneyMaxx in the Spanish market — all bode well for continuing progress in the life sector.
Non-life activities benefited from the easing of the crisis in motor insurance resulting in a somewhat more acceptable price level; AEGON Spain’s vigorous efforts to help its agents identify and eliminate bad risks and fraudulent claims, while attracting preferred risks, have sanitized the motor insurance portfolio and restored profitability with only a minor dip in overall premium volume. Household and other general insurance also benefited from the improved agent relationship. Health insurance grew in line with the market and yielded good returns.
The MoneyMaxx activities continued to grow according to plan: both the response to the intensive marketing campaign and the number of new clients.
AEGON Spain will continue to improve the quality and productivity of its distribution channels, drawing on strengthened information and data processing resources; rationalization of administration and cost control; and improving scale through acquisitions and/or joint ventures. The MoneyMaxx growth scenario will be maintained.
Transamerica’s Taiwanese operation. Its growing scale and the high productivity of its career agents, coupled with AEGON’s financial support, established a sound platform for further growth in Taiwan’s consolidating insurance market. The AEGON and
Simultaneously, AEGON is well advanced in talks with potential local partners to establish a life insurance joint venture in India.
On general account life products, AEGON carries the investment risk and earns a spread (difference between investment performance and crediting rates to customers) and/or realizes mortality results.
Also includes funding agreements, which are issued to non-tax qualified clients. These are usually perpetual with no stated final maturity and liquidity option. The contract is terminated at the notification of the client; notice provisions range from three months to 13 months in advance of the payout date.
individuals (independent) agents United States pension funds brokers Netherlands companies direct response United Kingdom banks worksite marketing Canada financial institutions Hungary IFAs Spain
Mexico Taiwan individuals financial institutions United States (independent) agents Canada brokers
Includes variable universal life (USA/Canada), tontine plans (the Netherlands) and unit-linked life insurance (Europe).
Annuities allow the client to save for the future on a tax-deferred basis and allow payout options that meet the client's need for income upon maturity. This can be in the form of a lump sum, income for life or income for a period of time.
Includes products that generate fee income for AEGON by providing management, administrative or risk services related to off balance sheet assets (i.e. equity or bond funds, third-party managed assets and collective investment trusts). Much of this income is generated by synthetic GICs which differ from traditional GICs in that the client owns the assets. The contract defines a crediting rate based on a formula that is inclusive of portfolio gains and losses. The crediting rate is reset regularly and based on an analysis of the assets; AEGON guarantees that it will not fall below 0% for a specific period of time.
This category also includes investment products, which offer index-linked returns and generate fee income.
Limited forms of health insurance, including disability insurance, are offered. AEGON offers no major medical coverage.
Supplemental health insurance normally pays a specified amount for a covered occurrence, or a deductible or coinsurance amount not paid by primary coverage.
Amsterdam. Financial support from AEGON Group and AEGON Americas enabled both institutes to attract young, enthusiastic scholars to do research into prostate and breast cancer, to develop new treatment techniques and new therapies. It also enabled exchanges between these institutes so that expertise could be shared.
Leading Benefactor of the Year among Business Organizations Award in 2000.
of such companies worldwide. At a local level AEGON USA has established programs which strongly encourage local offices and facilities to participate in waste reduction and energy saving practices, beyond compliance with law. Another example of the Group’s commitment to sustainability is its energy consumption monitor and the energy reduction program as conducted in AEGON The
In today’s volatile labor market it is more important than ever to retain and develop our employees.
In the Netherlands, for example, flexibility in labor contracts increases our appeal as an attractive employer. Equally, employee benefits are regarded as vital elements of our personnel policy.
Across our entire Group, training programs have been initiated on all levels in the organization to maintain and further improve our human resources. AEGON University started its seventh annual program in which people from across the Group participated in lectures and intensive workshops by top scholars from leading academic institutions. Scottish Equitable Employee Benefits, part of our operation in the UK, received the Award for Customer Service Excellence, a prestigious Merit Award backed by the Institute of Customer Service and the Society of Consumer Affairs Professionals.
Scottish Equitable received the award because it was recognized that training and performance in the fields of employee benefits and quality customer service provides a key competitive advantage, particularly in the IFA market. As part of the Transamerica integration, AEGON USA set up the
As at As at As at As at As at 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec.
The expansion and internationalization of AEGON’s business activities has seen a parallel broadening of its investor base.
EUR 1 billion of securities in 2000 — have made AEGON a well-known name in global credit markets.
Starting 2001, AEGON will slightly modify its system of accounting for capital gains on equities and real estate to bring the system more in line with practices of other insurance companies. Previously, AEGON applied a cap on recognizing indirect return of 7% after tax under this system as a more conservative treatment. Starting 2001, this cap will be removed. The indirect return will continue to be based on the average return over the past 30 years and the seven year average unit value. AEGON will report its autonomous earnings growth for 2001 excluding the effect of this accounting change.
Transamerica non-insurance businesses was changed as a result of the decision to retain the majority of these businesses for an indefinite period of time. Under Dutch
AEGON’s consolidated balance sheet at net asset value, and the results of these operations are included in net income.
autonomous increase of earnings per share in 2000 reflects the continuing strong growth of AEGON’s core operations. The autonomous increase before tax was 14%. Net income in 2000 amounted to EUR 2,066 million, a 32% increase. Currency exchange rate differences account for the largest part of the difference between the autonomous and reported earnings growth and had a positive effect of 10% on consolidated earnings reported in euro. The remainder of the difference is the balance of acquisitions and divestitures. The acquisitions from 1999 in the
to EUR 11.5 billion (USD 10.7 billion). Investment income increased by 44% (6% autonomous). On page 81-82 details of premium income, investment income and deposits are presented.
Starting with the full year results of 2000, AEGON provides a further segmentation of life insurance and pension earnings, which are commented on in the country unit results which follow. In general, all life and pension product segments were positively influenced by the inclusion of the acquired activities as well as the currency effect.
EUR 172 million due to improved results in the Netherlands and a positive currency influence, offset somewhat by lower results in US dollars in the USA.
Net income increased 33% — in US dollar terms — to
USD 1,237 million in the full year. Income before tax rose 32% to USD 1,870 million. Gross margin showed a 29%
included since July 21 of 1999 and many of these activities have been merged into the AEGON USA structure. The transition of corporate-wide systems was successfully completed in the second half of 2000. No separate figures are available for the Transamerica insurance activities as the integration is largely completed. Expense reductions realized from the integration totaled USD 145 million in 2000, and the expected total annual savings are expected to reach USD 200 million after all consolidation activities are completed and the benefits realized for a full year.
USD 1,743 million (1999: USD 1,285 million). All life segments were positively influenced by the acquired
USD 853 million (up 39%), while income from fixed annuities was USD 426 million, up 19%. Income before tax from GICs and funding agreements amounted to USD 165 million, which was up 18%. Life for the account of policyholders contributed
Traditional life results include positive development of single premium institutional balances (BOLI), fixed universal life balances, policy reserves and favorable investment spreads. Fixed annuity and GIC results also reflect favorable investment spreads as well as higher account balances.
Variable life and annuities reflect higher average account balances during the year. Fee income reflects higher average mutual fund balances during the year. All life segments have benefited from improved expense margins.
8,299 million, up 65%. GIC deposits and funding agreements totaled USD 10,664 million, which was an increase of 11%.
USD 124 million (1999: USD 131 million), reflecting the run-off of some discontinued product lines. Accident & health insurance premium income totaled USD 1,722 million (1999: USD 1,341 million).
Excluding the earnings contribution from Labouchere, net income rose 11%, while income before tax rose 14% to
EUR 840 million. Excluding Labouchere, gross margin increased 9%, while commissions and expenses increased by 1%.
EUR 577 million, an increase of 12%, while life for the account of policyholders amounted to EUR 150 million, up 12%.
Expecting this shift to occur, AEGON The Netherlands concentrated its efforts on expanding its market position in the single premium product segment. This movement towards
New premium production and total deposits AEGON Americas in EUR million
EUR 66 million, despite several large claims, amongst which claims resulting from the explosion of a fireworks factory in Enschede. The increase can be attributed to the 70%
GBP 219 million. Overall gross margin increased by 22%, while commissions and expenses rose 7%.
GBP 180 million, which was an increase of 44%. Fee business contributed GBP 8 million. The decrease in traditional life insurance income is in line with expectations and flows with the shift in consumer preference for more flexible products with investments for the account of policyholders.
The growth of the in-force block plus market value increases resulted in higher fund management and asset related charges compared to 1999. Assets under management amount to GBP 34 billion at December 31.
Total net income from the activities in other countries amounted to EUR 48 million (1999: EUR 11 million loss).
and totaled EUR 44 million (1999: EUR 40 million). The insurance operations in Hungary continued their earnings growth as new premium production surged in excess of the overall market growth rate and persistency improved, reflecting the improvement in sales quality and customer service, strong cost control, a successful annuity redemption campaign and favorable claim experiences.
New premium production and total deposits AEGON the Netherlands in EUR million
The non-insurance operations acquired with the Transamerica acquisition include lending, leasing and real estate services.
USD 92 million from July 21 to December 31, 1999). The earnings decline is primarily due to strategic divestitures, higher interest cost and increased credit losses, which were partially offset by an increase in income from the lending business.
Revenues increased 4% to USD 2,135 million. The increase was mainly attributable to higher lending revenues from larger net finance receivables outstanding.
During the fourth quarter, the assets of the domestic products leasing division and certain retail finance receivables were sold resulting in a small book profit.
Currency risk is managed based on AEGON’s currency policies. For investments, these policies are based on asset and liability matching principles. Equity held in subsidiaries is kept in local currencies to the extent shareholders’ equity is required to satisfy regulatory and self imposed capital requirements. This ensures that capital held by Group units will support the local insurance business irrespective of currency movements. However, this may result in effects on
AEGON decided to end its policy of hedging the income streams from AEGON’s main non-Dutch Group units for the translation to euro beginning in 2000. As a result, earnings may fluctuate due to currency translation.
its exposure to non-financial market risks in its mortality and longevity risk analysis, its established counterpart risk policies, reinsurance and IT standards, and has business continuity programs in place in its country units. AEGON uses common derivative financial instruments such as interest rate swaps, options, futures and foreign exchange contracts to hedge its exposures related to both investments and borrowings. AEGON does not hold or issue derivative instruments for speculative trading purposes.
(EUR 460 million). Realized and unrealized results and the release of indirect return on the equity and real estate investment portfolio had a negative effect on equity of
Labouchere. The balance of total goodwill and book profits was EUR 1,647 million negative. Further negative effects include share repurchases to hedge AEGON’s staff and management option plans (EUR 423 million), cash settlement of stock option plans (EUR 200 million) and convertible subordinated loans (EUR 24 million).
To facilitate the debt funding related to the Transamerica acquisition, AEGON founded AEGON Funding Corp. during 1999 and AEGON Funding Corp. II in 2000. Funding raised by these entities enjoys a full and unconditional guarantee from AEGON N.V. AEGON Funding Corp raises funds through a
USD 100 million each during 2000. AEGON accessed the perpetual debt market in the Netherlands towards the end of 2000 with EUR 450 million 6.875% Perpetual Subordinated
Cumulative Bonds. This bond was increased to a total nominal amount of EUR 700 million early 2001. With regard to other funding activities operational funding requirements were slightly higher in 2000 compared to previous years as a result of the funding provided to Transamerica Finance Corp.
Transamerica non-insurance businesses internally, and to guarantee outstanding amounts under Transamerica Finance
increase of 15% in these exchange rates would result in a positive impact on net income of 11% and on shareholders’
equity of 11%. Movements of other currency exchange rates have an immaterial impact on net income and shareholders’
Conversely, an increase of 15% in these markets would result in a positive impact on net income of 7.5% and on shareholders’ equity of 10%. AEGON is not directly exposed to commodity markets.
A parallel decrease of worldwide interest rates of 1% from the current levels would have a positive effect on earnings of approximately 1% . Conversely, a parallel increase of worldwide interest rates of 1% would have a 1% negative influence on earnings.
As a consequence of the insurance and savings features in our products, the AEGON Group is exposed to mortality and longevity risk. On a regular basis we perform sensitivity analysis, which quantify the effect of mortality and longevity developments on our portfolios and technical provisions. If life expectancy would increase by one year, compared to our existing reserving basis, the positive effect on the technical provisions would be less than 0.5%. This implies that the
AEGON Group has a well-balanced portfolio, in terms of mortality and longevity. Therefore, changes to mortality and longevity developments are not a current concern relative to our strong reserving basis.
for approval at the AGM. An interim dividend of EUR 0.30 was declared in August 2000. Dividends are based on net income per share.
Increase of equity and real estate markets of 15% between 7.0% and 8.0% between 9.5% and 10.5% Decrease of equity and real estate markets of 15% between –7.0% and –8.0% between –9.0% and –10.0%
Increase in average life expectancy of one year less than –0.5% 1 Basic assumptions: no correlation between markets and risks; unchanged conditions for all other assets and liabilities; no management actions taken; all changes are relative to forecasts for 2001.
1999. Shareholders may opt to receive the dividend entirely in cash or entirely in stock. Depending on its capital position,
AEGON can vary relative value of the cash and the stock dividend. Based on our capital position relative to the standards mentioned above, we have decided this year not to indicate a preference to our shareholders to receive the final dividend in cash or shares. Therefore, there is no difference in the value of the cash and stock alternative for the proposed final dividend for 2000. The procedure is set forth on page 95. AEGON will continue to offer the option to receive dividends in cash or in shares in 2001.
50 Consolidated balance sheets 52 Summarized consolidated income statements 53 Consolidated income statements 55 Consolidated cash flow statements 56 Notes to the consolidated financial statements 58 Notes to the consolidated balance sheets 69 Notes to the consolidated income statements 80 Segment information 86 Group companies 87 Balance sheets of AEGON N.V.
94 Other Information 97 Auditor’s report 98 Report of the Supervisory Board to shareholders 100 Corporate governance 102 Members of the Supervisory Board of AEGON N.V.
Investments 106,343 108,774 Investments for the account of policyholders 5 251,853 114,286 108,276
Prepayments and accrued income 180 105 Other prepayments and accrued income 425 193 105
Current liabilities 4,050 3,114 Payables out of direct insurance 9,593 4,353 3,100 1,905 4,636 Amounts owed to credit institutions 4,511 2,047 4,615 4,838 5,319 Entrusted savings accounts and deposits 11,457 5,199 5,294
CONSOLIDATED INCOME STATEMENTS In accordance with Dutch Accounting Principles Amounts in millions number NLG EUR EUR
Operating expenses banking activities and other expenses 7 –187 –85 –211
Invested and acquired –6,531 –2,283 Real estate and shares –15,585 –7,072 –2,153
–14 0 Withdrawal of preferred shares –33 –15 0 0 0 Change in deposits withheld from reinsurers 0 0 0
–221 –171 Change in liquid assets –527 –239 –161 0.9235 1.0605 Translation rate EUR/USD: weighted average exchange rate
On August 3, 2000, AEGON completed the sale of its banking subsidiary Labouchere to Banque Internationale à Luxembourg, a member of the Dexia Group. The book profit of approximately EUR 574 million has not been included in profit but has been taken directly to reserves. Article 362:4 of Book 2 of the Dutch Civil Code has been applied since including such a relatively large amount in profit would distort the legally required view of the profit of a life insurance company.
In the consolidated financial statements of AEGON N.V. all group companies have been included, except for some group companies for which the aggregate financial effect is relatively insignificant and for companies which are not intended to be held for a long-term ownership. Also group companies of which consolidation would not result in a fair view of the group because of dissimilar activities have not been consolidated. The financial statements of these latter companies have been added separately in the notes. Their results have been included in the income statements on a separate line. Participations in joint ventures have been consolidated proportionally. Due to their insignificance the minority interests are included under other current liabilities. A list of names and locations of the most important group companies is given on page 86. With regard to the income statements of AEGON N.V., article 402, Book 2 of the Dutch Civil Code has been applied.
AEGON uses derivative financial instruments to hedge interest rate risks, foreign currency risks and equity market risks related to assets and liabilities. Derivatives are not used for trading purposes.
Derivatives included in the balance sheet, such as options on shares and bonds and also futures, are valued at market value or at the amounts received on written options. Foreign currency amounts are converted at the year-end exchange rates. Realized and unrealized results on derivative financial instruments are recognized in the same period and likewise as the results of the related investments and debt.
All other currency exchange rate differences are included in the income statements.
The most important closing rates are: Dutch Guilder (NLG) 2.20371 2.20371
Where not otherwise stated, balance sheet items are carried at face value. If necessary a provision for bad and doubtful debts is deducted. Assets and liabilities from banking activities and gains and losses on these activities are accounted for in accordance with the rules for banks.
Unrealized and realized gains and losses on the share investments as well as results, expenses and currency exchange rate differences from hedging transactions are recognized in the revaluation account, taking into account the related (deferred) taxes.
When optional dividend is taken up in shares, an amount equal to the cash dividend is credited to income. The participation in AEGON Aandelenfonds N.V. is also accounted for under this caption. Purchase price of the portfolio amounts to EUR 7,653 million (1999: EUR 4,983 million).
Market value of the portfolio amounts to EUR 18,791 million (1999: EUR 15,952 million). As no market exists for these investments, market value is calculated based on current interest rate, maturity and risk assumptions. 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.
Private placements are shown at amortized cost representing the cash value at the balance sheet date of future interest and principal repayment components based on the effective interest rate on the date of acquisition. Realized gains and losses from transactions within the private placements and bond portfolios valued at amortized cost are deferred and released to the income statements in annual installments over the estimated average remaining maturity term of the investments sold.
Market value of the portfolio amounts to EUR 23,916 million (1999: EUR 21,193 million). As no market exists for these investments, market value is calculated based on current interest rates, maturity and risk assumptions. 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 74 million (1999: EUR 67 million).
Receivables out of share lease agreements and others 4,956 2,249 1,470
Other receivables include items for an amount of EUR 847 million maturing within one year. The remaining items have terms maturing beyond one year. The provision for doubtful debts for these receivables amounts to EUR 15 million (1999: EUR 14 million).
Equipment is shown at original cost less depreciation over the estimated useful life. Office
Data furniture processing & other Total Total systems equipment equipment equipment EUR EUR EUR NLG
For the notes to the share capital, reserves and stock options refer to page 89 and following.
Interest rate 77/8%, coupon date September 29 2005 250 114 114
The coupons of the NLG 250 million 8% bonds, NLG 450 million 71⁄8% bonds and NLG 300 million 71⁄4% bonds are set at 8% until June 8, 2005, at 71⁄8% until March 4, 2011 and at 71⁄4% until October 14, 2008 respectively. On these dates, and after every consecutive period of ten years, the coupons will be reset at the then prevailing yield of 9 — 10 years Dutch State Loans plus a surcharge of 0.85%. The coupon of the other four loans is fixed.
The loans have the same subordination provisions as dated subordinated debt. The conditions of the loans contain certain provisions for interest deferral and for the availability of principal amounts to meet losses.
Although the loans have no stated maturity, AEGON has the right to call the loans for redemption at par for the first time on the coupon date in the years as specified above, and thereafter on the coupon date after every consecutive period of ten years, with the exception of the 67⁄8% bonds, which are callable every year on the coupon date after the initial call date in 2005. The market value of these loans amounts to EUR 1,356 million (1999: EUR 871 million).
USD 190 million 75⁄8% Capital Trust Pass-through Securities 1997/37 450 204 188
Capital Trust Pass-through Securities (TRUPS) are securities through which the holders participate in a trust. The assets of these trusts exist of junior subordinated deferrable interest debentures of Transamerica. The trusts have been included in the consolidated financial statements. The TRUPS carry certain provisions with regard to deferral of distributions. The TRUPS have maturity terms of 30 to 40 years with a fixed coupon. Earlier redemption is possible for the USD 100 million 74/5% Capital Trust Pass-through Securities on or after December 1, 2006.
The market value of these loans amounts to EUR 658 million (1999: EUR 539 million).
These loans are subordinated to all other liabilities and borrowings. The subordinated loans have an average remaining term of five years. For an amount of EUR 360 million the remaining term is (more than) 5 years. The coupons vary from 4.75% to 8.25%.
The subordinated convertible loan is a USD 600 million 4.75% loan 1994 — 2004, convertible into AEGON common shares on or after May 15, 1995 up to and including November 1, 2004 at a conversion rate of 720 common shares with a nominal value of EUR 0.12 per USD 5,000 principal amount, and an exchange rate of NLG 1.728 per US dollar. Early redemption is allowed on or after November 1, 2001, against an amount that will give an effective yield of 7.5% per year, with a premium of 1.43% decreasing to 0% in 2004. Redemption at maturity will be at 138.9%.
Non-life insurance: Unearned premiums and unexpired risks 972 218 54 1,244 2,741
Provisions for annuities are for annuity and GIC products sold in the United States. Annuities are single premium payment insurance products which have significant savings characteristics. Guaranteed investment contracts (GICs) provide protection of principal and a guaranteed rate of interest and are issued on both a fixed rate and a floating rate basis to retirement savings plans. Both benefit reserves are equal to the full accumulated contract values.
Policy acquisition costs are costs that are directly or indirectly related to the conclusion of insurance contracts. Part of the acquisition costs is deferred and deducted from the technical provision life insurance.
Unearned premiums represent the unearned part of premiums received. Furthermore, when necessary this item also includes a special provision to compensate for the increasing age of persons insured under health and personal accident policies.
Incurred related to: Paid related to: — current year –1,474 –669 –596
Net balance at December 31: Plus reinsurance recoverables 1,307 593 259
Provisions for insurance of which the policyholder bears the investment risk and for insurance-linked
This provision includes unit-linked insurance contracts, separate investment funds group life, insurance-linked savings deposits and the liabilities of AEGON UK related to the non-participating funds as well as the participating funds (EUR 26,931 million). The amount of EUR 731 million credited to the income statement is the total of premium receipt and benefits of EUR 2,764 million and the investment income for the account of policyholders amounting to EUR –3,495 million. Also the liabilities of the acquired pension business of Diversified Investment Advisors are recognized under this heading to the extent that the contractholder bears the economic risk.
The provisions are generally shown at book value of the related investments.
Nominal value of these tax liabilities amounts to EUR 3,383 million.
At December 31, 2000 subsidiaries of AEGON USA had net operating loss carry-forwards for US tax purposes expiring at various dates through 2020. Subsidiaries in Germany and Spain also had net operating loss carry-forwards. These total loss carry-forwards of approximately EUR 800 million have not been recognized in the provision.
Remaining 2000 terms more 2000 1999 Total 1-5 years than 5 years Total Total NLG EUR EUR EUR EUR
The repayment periods of borrowings vary from in excess of one year up to a maximum of 37 years. The coupons vary from 2.5% to 10% per annum. Borrowings include debenture loans for EUR 969 million. The market value of the long-term liabilities amounts to EUR 4,013 million (1999: EUR 3,727 million).
AEGON’s obligations related to the acquisition of Diversified Investment Advisors from the Mutual of New York, consist of payments relating to the assets and liabilities for a remaining period of two years. AEGON will then purchase the remaining business in force based on a formula described in the agreement.
1 Analysis of premiums life insurance 2000 Life insurance Investments for the account of policyholders
Gross operating expenses –636 –52 –44 –10 –96 –23 –5 –866 –1,908
Result technical account non-life in NLG 346 –24 37 7 35 33 17 451
Balance of reinsurance ceded 4 –1 –1 –2 –10 –5 –2 –17
The combined ratio is the sum of the ratio of net incurred claims to net premiums earned and the ratio of net commissions and expenses to premiums own account. Although a ratio over 100% suggests a loss, the ratio does not include investment income. With the inclusion of investment income in the calculation, all of AEGON’s major product lines except legal liability motor were profitable.
Interest on liquid assets and other 847 76 0 923 2,034
Indirect income real estate and shares 577 18 0 595 1,311
Indirect income real estate and shares 376 18 0 394 1Of which allocated internal rent for real estate in own use an amount of EUR 17 million (1999: EUR 14 million), based on market conditions.
In the income statement the structural total return on investments in real estate and shares is recognized. This total return includes the realized direct income (rents and dividends) of the reporting period and an amount of indirect income. The total return is calculated by determining the average of the total return yield over the last 30 years and multiplying this average yield by the average value of these investments over the last seven years, adjusted for investment purchases and sales. The indirect income from these investments is then calculated as the difference between the total return and the realized direct income. As a measure of conservatism, the indirect income is capped at a level of 7% after tax on the average investment portfolio. As a consequence, an amount of EUR 108 million was not released to earnings in 2000 (1999: EUR 49 million).
Technical provisions with investments for the account of policyholders –1,611 –731 16,338
Granted interest rate rebates amount to EUR 61 million (1999: EUR 17 million), almost entirely relating to the Dutch companies.
Commissions and profit sharing from reinsurers –335 –128 — –463 –1,020
Technical and non-technical accounts include the following: Pension premiums -181 -82 –22
Expenses include allocated housing expenses from real estate in own use for an amount of EUR 17 million (1999: EUR 14 million), based on market conditions. Claims processing costs are included in benefits and surrenders and claims for own account; investment expenses are included in investment charges.
In the Netherlands benefits are based on past service and final pay. Regular improvements of benefits and increases in pensions are fully funded yearly and immediately charged to the income statements.
The average number of employees was 24,377 of which 4,112 agent-employees (1999: 22,070 of which 4,647 agent-employees). The specification per geographical area is given on page 81.
Remuneration of members of the Supervisory Board (art. 383 paragraph 1, Book 2 of the Dutch Civil Code) amounted to EUR 336,000 (1999: EUR 355,000), of which EUR 16,000 was related to retired members of the Supervisory Board.
Investment expenses and interest charges in NLG 652 20 1,565 2,237
Income on investments held against shareholders’ equity does not form part of the technical results. The amounts transferred to the non-technical account include direct yield on allocated investments or are based on the average direct yield of the investment portfolio.
The following is a reconciliation of the expected tax on income with the actual tax expense: Statutory tax rate 2,173 986 748
Increases (decreases) in taxes resulting from: Dividend income exclusions and credits -240 –109 –41
From July 21, 1999 up to the first six months of 2000 dividends declared were included in earnings for an amount that offset the funding cost. Effective July 1, 2000, net income of the non-insurance businesses has been included in consolidated earnings.
The non-insurance businesses of Transamerica include lending, leasing and real estate information services. The lending business makes commercial loans through three operations: distribution finance, business credit and equipment financial services. Leasing is comprised of the Company’s marine container and European trailer operations. Real estate information services provides tax and flood hazard services primarily to mortgage originators and servicers. Due to their diversity in operations in relation to the operations of AEGON, these group companies have not been consolidated. Following are the consolidated balance sheets, consolidated income statements and notes thereto of Transamerica Finance Corporation, established in Delaware and operating from San Francisco, California, USA. Valuation and determination of results are based on Dutch accounting principles.
Equipment is shown at cost less depreciation over the estimated useful life.
Income 165 — GICs and funding agreements 179 — — — — — 179
— — Other financial products5 — 47 — — — — 47
Interest charges & other –443 1,870 219 Income before tax business units 2,025 888 360 52 13 –8
–633 –59 Corporation tax business units –686 –204 –98 –8 0 –1
— — Other financial products5 — 29 — — — — 29
— — Banking activities Labouchere5 — 126 — — — — 126
–491 –40 Corporation tax business units –463 –189 –60 –4 5 0
Net income 1,570 1Includes income on traditional and fixed universal life products.
2Includes income on variable universal life, unitised pension and other unit-linked products with investments for account of policyholders. 3Includes income on off-balance sheet type products. For AEGON The Netherlands included in ‘Other financial products’. 4Includes also variable annuities and fees. 5Banking activities divided in ‘Other financial products’ and ‘Labouchere’.
Commissions and expenses 2,762 200 business units 2,991 534 329 74 96 42
Average number of employees (incl. agents) 14,987 3,059 4,404 717 789 421 24,377
Commissions and expenses 2,162 187 business units 2,039 664 284 76 99 25
DEPOSITS AND NEW PREMIUM PRODUCTION amounts in million EUR (unless otherwise stated)
Deposits 10,664 — Fixed GICs and funding agreements 11,547 — — — — — 11,547
— — Savings deposits — 3,528 — — — — 3,528 23,555 — Total production on balance sheet 25,506 3,528 — — — — 29,034
— — Investment contracts1 — 465 — — — — 465
Mutual funds/collective trusts and 9,259 294 Total production off balance sheet 8,731 250 446 60 — — 9,487
Total investments for account policyholders 42,436 16,528 32,228 513 114,286 100
Synthetic GICs, mutual funds and other off balance sheet investments 39,003 3,287 1,003 154 46,964
Synthetic GICs, mutual funds and other off balance sheet investments2 37,047 986 980 96 39,535
Total investments 256,799 1Labouchere not included. 2The 1999 UK amount has been restated.
AEGON USA, Inc., Cedar Rapids, (Iowa USA) AUSA Life Insurance Company, Inc., Purchase (New York USA) Bankers United Life Assurance Company, Cedar Rapids (Iowa USA) Commonwealth General Corporation, Wilmington (Delaware USA) First AUSA Life Insurance Company, Baltimore (Maryland USA) Life Investors Insurance Company of America, Cedar Rapids (Iowa USA) Monumental Life Insurance Company, Baltimore (Maryland USA) PFL Life Insurance Company, Cedar Rapids (Iowa USA) Peoples Benefit Life Insurance Company, Cedar Rapids (Iowa USA) Veterans Life Insurance Company, Springfield (Illinois USA) Western Reserve Life Assurance Co. of Ohio, Columbus (Ohio USA) Transamerica Corporation, Wilmington (Delaware USA) Transamerica Insurance Corp. of California, Los Angeles (California USA) Transamerica Life Insurance and Annuity Company, Charlotte (North Carolina USA) Transamerica Life Insurance Company of Canada, Scarborough (Ontario Canada) Transamerica Occidental Life Insurance Company, Los Angeles (California USA) Seguros Banamex AEGON S.A., Mexico (Mexico) (48%) Afore Banamex AEGON S.A., Mexico (Mexico) (48%)
AEGON Bank N.V., Utrecht AEGON Financiële Diensten B.V., The Hague AEGON International N.V., The Hague AEGON Levensverzekering N.V., The Hague AEGON Nederland N.V., The Hague AEGON Schadeverzekering N.V., The Hague AEGON Spaarkas N.V., The Hague AEGON Vastgoed Holding B.V., The Hague AMVEST Vastgoed B.V., Utrecht (50%) AXENT/AEGON Leven N.V., Utrecht AXENT/AEGON Schade N.V., Utrecht Nederlandse Verzekeringsgroep Leven N.V., Groningen Nederlandse Verzekeringsgroep Schade N.V., Groningen Van Nierop Assuradeuren N.V., Amsterdam Spaarbeleg Kas N.V., Utrecht
NOTES TO THE BALANCE SHEETS OF AEGON N.V. Amounts in millions
Unless otherwise stated, balance sheet items are valued in accordance with the accounting principles described in the notes to the consolidated balance sheets.
The weighted average number of EUR 0.12 common shares over 2000 was 1,315,381,814 (1999: 1,225,362,569 recalculated to reflect the stock split). The repurchased own shares, although included in the issued and outstanding number of shares, are eliminated in the calculation of the weighted average number of shares (see page 92).
The following tables set forth the changes in the years 1999 and 2000 as well as the breakdown of the options outstanding.
2Weighted average exercise price of the outstanding options in USD calculated at the closing rate. 3As of the 1995 series the exercise period for a small part of the options is 74 months. 4Including bonus rights, which do not entitle to buy AEGON shares but provide the same financial benefits.
Stock options exercisable as of December 31, 2000 amount to 10,760,566 (1999: 6,996,094) and their weighted average exercise price amounts to EUR 13.45 (1999: EUR 9.02).
The breakdown of the stock options granted in 2000 is as follows: Executive Board 640,000, other senior executives 4,125,300 other employees 5,844,400 (1999: 800,000, 3,335,300 and 4,790,000 respectively, recalculated for the split in May 2000). For detailed information about the Executive Board’s options refer to page 74.
Unrealized gains and losses on real estate and shares –73 –33 1,380
Unrealized gains and losses in previous years on real estate and shares sold in the reporting year –5,738 –2,604 –726
Transfer to the income statements of indirect income on real estate and shares –1,311 –595 –394
Movements in the numbers of shares were as follows: Balance at January 1 10,407,281
The purchase value of the shares acquired has been deducted from the other surplus fund.
As AEGON is at this time not aiming to strengthen its equity by increasing the outstanding number of shares through conversions of this bond, it elected to pay part of the conversion in cash in lieu of shares. The accompanying release of surplus has been charged to the general surplus fund resulting in the same effect as would have occurred in case the conversion had taken place in shares and an equal number of shares had been purchased by AEGON and then cancelled.
The repayment periods of borrowings vary from in excess of one year up to a maximum of 31 years. The interest rates vary from 2.5% to 9.9% per annum.
FGH BANK N.V., for the sake of a. all creditors, to whom FGH BANK owes from deeds prior to February 27, 1987, and from all loans contracted by FGH BANK
after February 27, 1987, up to March 30, 1998 as far as not privileged or subordinated; b. those whom FGH BANK guaranteed or assumed several liability prior to February 27, 1987. The sales agreement with Hypo-Vereinsbank includes recourse against that bank for liabilities emerging from above guarantees.
1 If the approved income statements show a profit, the Supervisory Board may decide, upon the proposal of the Executive Board, to set aside part of the profit to augment and/or form surplus funds.
2 Profits may only be distributed as far as the Company’s equity exceeds the amount of the paid and called part of the share capital increased by the surplus funds to be maintained according to the law.
6 A dividend or interim dividend shall be declared and paid as from a day to be fixed to this end by the Executive Board. Different days may be fixed for this purpose for: — shares to bearer for which K-certificates have been issued; — shares to bearer for which CF-certificates have been issued; — registered shares for which certificates of share have been issued; as well as for: — registered shares for which no certificates of share have been issued. Furthermore common shares and preferred shares can be treated differently. Each day which has been fixed shall be announced with due regard to regulations applicable to the Company.
7 For a dividend or an interim dividend on a share for which a CF-certificate has been issued, such party shall be entitled as a holder of the share at a time fixed by the Executive Board. In order to exercise the right to a dividend or an interim dividend referred to in the preceding sentence, the rightful claimant must see to it that the dividend sheet is, at the time mentioned there, in the custody of a custodian as referred to in Article 4 paragraph 5. For the distribution of a dividend or interim dividend mentioned in this paragraph, the Company shall be discharged towards the rightful claimants by payment to the institution mentioned in Article 4, paragraph 5 or to one or more third parties to be designated by such institution and the Company, in favor of those in whose names the dividend sheets are in the custodians’ custody at the aforesaid time.
8 A party in whose name the share is registered in the share register at a date fixed to this end by the Executive Board, shall be entitled to a dividend or an interim dividend on a registered share for which no certificate of share has been issued, or on a registered share for which a certificate of share has been issued.
9 Different times may be fixed for the shares mentioned in the paragraphs 7 and 8. Each time which has been fixed shall be announced with due regard to regulations applicable for the Company.
11 The Executive Board is authorized, subject to the approval of the Supervisory Board, to decide that a dividend or an interim dividend on common shares shall not take place as a cash payment but as a payment in common shares, or to decide that holders of common shares shall have a choice to receive a dividend or an interim dividend 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, provided that the Executive Board is designated by the general meeting as stated in Article 5, paragraphs 1 and 3. Subject to approval of the Supervisory Board the Executive Board shall also determine the conditions for the aforementioned choices.
12 Dividends which have not been claimed within five years of the first day upon which they were made payable shall lapse to the Company.
It is proposed that the final dividend will be made available entirely in cash or entirely in stock to be paid out of the paid-in surplus or, if so requested, out of the 2000 net income. The value of the final dividend in shares will be approximately equal to that of the final dividend in cash.
Finally, an amount of EUR 1,090 million will be retained and added to the general surplus fund.
At balance sheet date AEGON N.V. had one shareholder holding an interest of more than 5%, as during 2000 ING Group disposed of its 5.2% interest in AEGON N.V. The remaining major shareholder is the Dutch association ‘Vereniging AEGON’, an independent shareholder of AEGON N.V.
The objective of the Vereniging is the balanced representation of the interests of AEGON N.V. and all of its stakeholders, i.e. AEGON Group companies, insured parties, employees, shareholders and other relations of the said companies.
In accordance with the stipulations of the 1983 Merger Agreement the Vereniging has a majority vote at the general meeting of shareholders of AEGON N.V. This is achieved by holding a minority interest in common shares and holding all issued preferred shares in AEGON N.V. As of December 31, 2000 this voting right stood at 53% (1999: 53%) and the Vereniging held 37% (1999: 33%) of the common shares in AEGON N.V. The holding of common shares is intended to be increased gradually to approximately 40% while the holding of preferred shares will be reduced simultaneously.
Purchase at an average price of EUR 38.06 per share — 48,703,020
As of December 31, 2000 the General Meeting of Members of the Vereniging consisted of 20 elected members. Sixteen of these are not, nor have been an employee or former employee of AEGON N.V., nor an employee or former employee of a company associated with AEGON N.V. in a group, nor a (former) member of the Supervisory Board or the Executive Board of AEGON N.V. They hold the majority of the voting rights. Of the four other members two are elected from among the members of the Supervisory Board and two are elected from among the members of the Executive Board of AEGON N.V.
The Annual Report 2000 of the Vereniging and further information may be obtained through the Secretary (telephone: +31 70 344 82 88, e-mail: Secretariaat@VerenigingAEGON.nl, fax: +31 70 347 79 29).
In our opinion, the financial statements give a true and fair view of the financial position of the company as at 31 December, 2000 and of the result for the year then ended in accordance with accounting principles generally accepted in the Netherlands and comply with the financial reporting requirements included in Part 9, Book 2 of the Netherlands Civil Code.
All Supervisory Board meetings were also attended by Executive Board members. Those meetings in which the 1999 results and the 2000 quarterly results were discussed, were also attended by the Directors of the Group Finance Department and the Corporate Actuarial Department. Representatives from Ernst & Young, AEGON’s external auditor, attended the discussion regarding the 1999 results.
Time was also devoted to the integration of the acquisitions, made in 1999 in the United States (Transamerica), the United Kingdom (Guardian) and Spain (Covadonga) as well as to the divestiture of Labouchere and various non-core activities. The Executive Board’s decision to retain the non-insurance business of Transamerica was discussed and approved during an extra meeting, after careful evaluation of the alternatives.
Without prejudicing to its responsibilities, the Supervisory Board has constituted three Committees from among its members to deal more extensively with specific matters. Each Committee has four members.
Discussions in 2000 were again focused on the Committee’s permanent agenda: the annual accounts and the auditing of these accounts by Ernst & Young; accounting principles; internal control systems; actuarial analyses; AEGON’s ‘Funding Plan’ and ‘Currency Exposure’. The Audit Committee subsequently advised the Supervisory Board on its findings.
The then Chairman and the Vice-Chairman of the Supervisory Board and Messrs. Tabaksblat and Peters were members of the Audit Committee. Following Mr. Van Schaik’s retirement on May 4, 2000, Mr. Tabaksblat became Chairman and Mr. Eustace joined as a member. In order to emphasize the Committee’s independence, Mr. Eustace will be appointed Chairman of the Audit Committee as from March 8, 2001; Mr. Tabaksblat will then be a member. In accordance with the Charter of the Audit Committee, all members are highly experienced and competent in financial and accounting matters.
The Compensation Committee, active since 1989, held two meetings in 2000, attended also by the Executive Board’s Chairman. Discussions concentrated on the remuneration of the Supervisory Board and Executive Board members and the stock options for the Executive Board members. The Supervisory Board’s current Chairman and Vice-Chairman, and Sir Michael Jenkins and Mr. De Wit are members of this Committee.
AEGON’s continued strong growth reflects the unwavering commitment and dedication of the Executive Board and all the other members of the AEGON community worldwide. We congratulate them on their fine performance and for their energy and professionalism in responding to ever-changing markets and in keeping AEGON on its long-standing growth track.
Rules and Regulations have been adopted, for internal use, in which procedures and the Board’s duties, activities and allocation of tasks are laid down.
Furthermore, AEGON was one of those actively involved in the establishment of the Dutch ‘Stichting Communicatiekanaal Aandeelhouders’ (Shareholders’ Communication Channel Foundation), established in April 1998 for better and direct communication with shareholders, a pilot project for three years. Shareholders with a securities account in the Netherlands and participating in this Communication Channel can use the possibility offered by the Foundation to receive the annual report and the agenda for the AGM. Also a system is introduced which will offer shareholders the possibility of voting without attending a meeting in person. Furthermore, for both management and (groups of) shareholders the Communication Channel may serve to solicit proxies.
According to Dutch corporate law and AEGON N.V.’s Articles of Incorporation, shareholders in a meeting are authorized as follows: ● To approve the annual accounts, including profit appropriation and dividend. Furthermore, to discharge the Executive Board from liability with respect to its management and the Supervisory Board with respect to the supervision thereof, insofar as such management appears from the annual accounts.
D.G. Eustace, 64 (British), is Chairman of Smith+Nephew plc (London, UK) and former Vice-Chairman of Royal Philips Electronics N.V. He joined the Board in 1997; his current term will end in 2001. He is Chairman of the Audit Committee. He is a member of the Supervisory Board of three Dutch companies, among which Royal Dutch Airlines (KLM) and Royal KPN.
Sir Michael Jenkins, KCMG, 65 (British), is Vice-Chairman of Dresdner Kleinwort Wasserstein (London, UK). He was appointed in 1995; his current term will end in 2003. He is a member of the Compensation Committee. He is also a former British Ambassador to the Netherlands and a member of the Trilateral Commission.
Ms. T. Rembe, 64 (American), is a partner of Pillsbury Winthrop LLP (San Francisco, USA). She joined the Board in 2000; her current term will end in 2004. She is a member of the Board of Directors of Potlach Corporation (USA) and SBC Communications (USA)
W.F.C. Stevens, 63 (Dutch), is a senior partner of Caron & Stevens/Baker & McKenzie. He joined the Board in 1997; his current term will end in 2001. He is a member of the Supervisory Boards of seven Dutch companies, among which NIB Capital and TBI Holdings, aside from some board memberships which are exercised in relation to his principal occupation. Furthermore, he is a senator of the Dutch Government.
F.J. de Wit, 61 (Dutch), is a former Chairman of the Executive Board of Royal KNP BT. He was appointed in 1990; his current term will end in 2004. He is a member of the Compensation Committee. He is also a member of the Supervisory Boards of Océ and PontEecen.
Amounts in accordance with Dutch accounting principles 12,844 13,543 2,066 1,570
The Netherlands: calculated on recent assumptions United States: calculated on assumptions when the policy was issued or on recent assumptions
Realized gains and losses on bonds and private placements –78 33 –348 –261
The Netherlands: realized gains and losses on shares and real estate are added to the revaluation account. From this reserve amounts are released to income, so that together with the direct yield, a 30 year moving average total rate of return is recognized.
Deferred taxation (including taxation on US GAAP adjustments) –861 –512 155 262
The Netherlands: calculated using discounted tax rates United States: calculated using nominal tax rates
Cash settlements of convertible loan and stock options — — –24 –116
The Netherlands: accrued as a liability United States: not recognized until they become irrevocable
Certain expenses are recorded in different periods on the two bases of accounting
Approximate amounts in accordance with US GAAP 18,965 17,050 2,588 1,601
Approximate amounts in accordance with US GAAP in NLG 41,793 37,573 5,703 3,528
In 2000 major differences between amounts on Dutch accounting principles and those on US accounting principles compared to the amounts of 1999 are explained as follows: Goodwill increased primarily because of the change in accounting for the non-insurance businesses of Transamerica. Realized and unrealized gains and losses by their nature can show large fluctuations. The cash settlement of the convertible loan is related to the repurchase and early redemption of the company’s convertible debt.
The balance of other items includes primarily provisions not accounted for under US GAAP such as for euro and general default reserves, as well as in 2000 the result of the sale of Labouchere and of other divestitures.
USD 200 million 63/4% Domestic Debentures (Transamerica Corp.) 1996/06 May/Nov 15 215 199
USD 450 million 63/4% Eurobonds (AEGON Funding Corp.) 1999/02 November 15 484 348
Subordinated loans NLG 500 million Floating Rate / Fixed Rate subordinated Eurobonds 1992/04 September 15 160 161
USD 400 million 8% subordinated Notes 1994/06 Feb/Aug 15 285 293
USD 600 million 43/4% subordinated convertible Eurobonds 1994/04 November 1 16 20
QUARTERLY RESULTS Amounts in millions 2000 USD 2000 EUR NLG I II III IV total I II III IV total total
USD exchange rate 0.9555 0.9556 0.8765 0.9305 At end of period 2.20371 NLG exchange rate
–52 –49 –65 –91 –257 Interest charges & other –46 –47 –62 –87 –242
–125 –130 –155 –238 –648 Corporation tax –111 –123 –149 –228 –611
USD exchange rate 1.07419 1.03280 1.06650 1.00460 At end of period
AEGON N.V. Mariahoeveplein 50 P.O. Box 202 2501 CE The Hague The Netherlands
AEGON N.V. stock options are quoted at the Euronext Amsterdam, the Chicago Board Options Exchange and the Philadelphia Stock Exchange.
AEGON N.V. P.O. Box 202 2501 CE The Hague The Netherlands
Key events in 2000 10 January Acquisition of NN Life Insurance Company of Canada by Transamerica Canada 21 February Announcement of the merger of real estate investment fund Amvest in the Netherlands with Rodamco 1 March Announcement of the plans to divest Transamerica’s Finance business 1/2 March Announcement of Mr. Frank C. Herringer’s intention to step down from the Executive Board 9 March Announcement stock-split (2:1)
29 June AEGON issues a USD 260 million bond 24 July Change in status and accounting of non-insurance business Transamerica 3 August Completion of the sale of Labouchere in the Netherlands to Dexia 13 December AEGON issues EUR 450 million perpetual subordinated cumulative bonds
25 May Final dividend payable 9 August Results first six months 2001 13 August Start election period optional interim dividend (up to and including 3 September)
The statements contained in this annual report that are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are made based upon management’s current expectations and beliefs concerning future developments and their potential effects upon the company. There can be no assurance that future developments affecting the company will have those anticipated by management. Actual results may differ materially from those included in the forward-looking statements.
AEGON Photo, The Hague (NL), Peter Howard (USA), Richard Anderson (USA), Nigel Davies (UK)