As an international life insurance, pension and investment company, AEGON has businesses in over twenty markets in the Americas, Europe and Asia. AEGON companies employ approximately 28,000 people and serve some 40 million customers across the globe.
AEGON’s ambition is to be a leading force in global financial services.
Underlying earnings before tax by line of business 2009 (in EUR million)
AEGON has shareholders all over the world, but 80% are located in the company’s main markets in North America, the Netherlands and the United Kingdom. Another 19% of
AEGON’s shareholders are based elsewhere in Europe, mainly Germany, France, Norway and Switzerland.
In particular, AEGON has seen strong growth in its businesses in Central &
EUR 767 million in new business in 2009 – an important indicator of the company’s future profitability.
Additional information 241 Quarterly results 242 Glossary 248 Corporate and shareholder information 4 Letter of
Board 10 Strategy 15 AEGON and the investment community 18 Marco Keim on
Mark Mullin appointed President of AEGON Americas, with responsibility for operations in the
AEGON announces it is running off its institutional spread-based business in the United States, significantly reducing the company’s overall credit risk.
Financial Officer from Jos Streppel, who retires after 35 years with the company.
AEGON announces decision to withdraw from the group risk market in the United Kingdom in line with strategy to direct more resources to areas of higher growth and return prospects.
USD 500 million through issue of senior unsecured notes in the
This past year, we have taken clear steps to safeguard your continued trust: steps to strengthen AEGON’s balance sheet, reduce risk to financial markets, lower operating costs and to simplify our business and the products we provide. Your ongoing confidence has confirmed that our priorities are the right ones and we are grateful for your confidence.
Toward this end, we have made considerable progress in strengthening our solid platforms in the developing markets of Central & Eastern Europe, where we are now present in six countries. At the same time, we continued to expand our distribution network in China’s prosperous coastal provinces, and also in India, where we are positioning our company to serve a fast-developing and sizeable middle-income customer segment. Also during the year, we aqcuired a 50% stake in Mongeral, one of
Spain by partnering with regional savings banks. Our presence in more than 2,000 branches across the country led to particularly strong and profitable sales during the year.
During 2009, AEGON implemented decisive measures to counter the effects of the severe market turmoil that undermined the world’s financial institutions and threatened the confidence of their customers.
(group risk) in the United Kingdom, and most recently, the sale of our funeral insurance business in the
AEGON’s risk to financial markets, while at the same time lowering the economic capital required to sustain these businesses going forward.
European Commission on Competiveness, detailing the steps we have taken to strengthen AEGON, as required with AEGON’s participation in the Dutch government’s capital support program. At the publication of this
EUR 100 million, resulting in a 5% reduction in AEGON’s 2009 operating expenses on a comparable basis. We remain committed to identifying additional efficiencies aimed at lowering the costs associated with the development, delivery and administration of products and services, while at the same time improving our responsiveness to market opportunities and customer needs. Finally, AEGON generated EUR 767 million value of new business in 2009.
Alexander R. Wynaendts (1960, Dutch) Jan J. Nooitgedagt (1953, Dutch) Mark Mullin (1963, US citizen)
Development. Since 2003, he has been a member of AEGON’s Executive Board, overseeing the company’s international growth strategy. In April 2007,
Chief Operating Officer. A year later, he became CEO and Chairman of AEGON’s
AEGON in 1987, and has held various positions both in the United States and
In January 2009, he was named President of AEGON Americas and worked closely with his predecessor Pat Baird until his appointment as President & CEO twelve months later.
Member of the Management Board, responsible for the Netherlands, brand and corporate sustainability
Marco Keim began his career with accountants Coopers & Lybrand/Van Dien.
Mr. Keim has also worked for aircraft maker Fokker Aircraft and NS Reizigers, part of the Dutch national railway company, NS Group. In 1999, he joined
Swiss Life in the Netherlands as a board member. Three years later, Mr. Keim was appointed CEO before joining AEGON
Member of the Management Board, responsible for Central & Eastern Europe
AEGON Hungary. In that time, he has spearheaded an expansion of AEGON’s businesses not only in Hungary but also across the Central & Eastern
Abbey Life and Royal Insurance before returning to AEGON UK in 1994 as Development Director. In 2002,
Director of AEGON UK before becoming the company’s CEO three years later.
Pat Baird joined AEGON USA in 1976. Since then, he served as Executive Vice President and
Building confidence for life: Our strategy is designed to deliver profitable and sustainable growth over the long term for the benefit of our customers, shareholders and business partners. We achieve this by making the most of AEGON’s global resources and helping millions of people around the world secure their financial futures.
AEGON was formed in 1983, the result of a merger between two Dutch insurance companies, AGO and
Ennia. But AEGON’s roots in the Netherlands can be traced back much further, to the first half of the nineteenth century. AEGON companies in the United
Traditionally, these markets have generated most of the company’s earnings. In recent years however, AEGON
has also expanded its presence elsewhere, establishing new businesses in growth markets in the Americas,
United States and Japan – people are living longer, healthier lives. At the same time, workforces available to finance pension systems are shrinking and governments are increasingly shifting the burden of retirement funding
AEGON is one of the world’s leading providers of life insurance, pensions and investment products. The company has activities in more than twenty countries in the Americas, Europe and Asia, employing some 28,000 people and serving more than 40 million customers. AEGON’s ambition is to be a global leader in helping its customers secure their financial futures and, in doing so, to grow its businesses profitably and sustainably.
America. In many of these areas, economic growth and rising levels of personal wealth have resulted in an increase in long-term demand for pensions, life insurance and investment products. In Central & Eastern
Japan in Asia, and Mexico and Brazil in Latin America. In
1 Source: United Nations World Population Prospects. 2 Source: PriceWaterhouseCoopers ‘Entering the Indian Financial Services Market’.
Insurance companies, meanwhile, are placing greater emphasis on the importance of capital. This is partly a consequence of the global financial crisis, and partly in anticipation of the European Union’s Solvency II capital adequacy rules. In the years ahead, Solvency II will have a significant effect on the insurance industry, particularly in the way insurers manage both risk and capital. AEGON believes these changes, which are still under discussion, should help improve regulation of the insurance industry, and ultimately enhance the protection of policyholders and other beneficiaries.
Economic and financial market conditions continued to be extremely difficult during the first quarter of 2009. The remainder of the year, however, saw a significant improvement, particularly in higher equity markets and narrower corporate credit spreads. This had a positive effect on AEGON’s earnings and capital position. Naturally, AEGON’s underlying businesses were affected by the crisis, particularly as customer behavior changed. Sales volumes declined, but this decline was common to the entire insurance sector. Consequently, throughout the crisis, AEGON maintained a strong franchise and its share of leading markets.
In some areas, the impact was more significant than others. Sales of unitlinked products, for example, decreased because of concerns over equity market volatility. Many customers switched to products offering greater financial guarantees, such as fixed annuities, or else chose to reduce their exposure to equity markets within existing products. During this process,
As part of these objectives, AEGON’s aim has been to further reduce risk and lessen the company’s overall exposure to fluctuations in world financial markets.
Capital, Cost and Contingency – significantly strengthened AEGON’s financial position, improved efficiency and ensured the company would be well placed to take advantage of future opportunities.
EUR 5 billion in capital from the company’s existing businesses by 2012. Given the global financial crisis,
AEGON decided to bring forward these measures. Since the introduction of ‘Unlocking the Global Potential’ in
June 2008, AEGON has freed up a total of EUR 4.9 billion.
EUR 2.9 billion at the end of the previous year. For the time being, given the current uncertain environment,
AEGON believes it necessary and prudent to maintain a substantial capital buffer.
AEGON took included: Reducing the company’s overall exposure to world �
risk management and signifi cantly increasing the resources committed to this area.
Raising EUR 1 billion in August through the sale of a �
equivalent to 5% of the company’s 2008 adjusted cost base. This target was achieved by the end of September 2009, three months ahead of schedule – largely through efficiency improvements, restructuring programs and expense reductions at AEGON’s main operations in the United States, the Netherlands and the United Kingdom. In November, AEGON also announced a reorganization of its sales activities in the Netherlands, resulting in annual cost savings of an additional EUR 15 million.
to a decrease in the company’s long-term interest rate exposure which, in turn, further lowered AEGON’s capital requirements.
As part of its response to the financial crisis, AEGON secured EUR 3 billion in additional core capital in December 2008 from the Dutch State as a necessary precaution against a further possible deterioration in market conditions.
Dutch State. AEGON’s objective is to repay the Dutch State the full amount at the earliest opportunity. At the end of November 2009, AEGON repaid an initial installment of EUR 1 billion, in line with the terms of the company’s agreement with the Dutch State. AEGON’s priority is to repay the remaining
EUR 2 billion as soon as it is feasible and responsible to do so.
In November 2009, AEGON also submitted a plan to the European
Commission, via the Dutch Ministry of Finance, designed to demonstrate that the company’s businesses are fundamentally sound and viable.
“We have worked diligently over the past year to strengthen AEGON’s balance sheet, reduce our risk to financial markets and achieve a broad range of cost and operational efficiencies that will serve to better align our businesses with today’s market realities. Consequently, AEGON is in a better position to respond to the significant opportunities for the life, pensions and asset management sectors internationally.”
This plan was a requirement for all those EU companies, including AEGON, which received state support during the financial crisis. The European Commission is currently in the process of assessing the contents of this plan before deciding whether to approve a continuation of the Dutch State’s support for AEGON.
Since the second half of 2008, the short-term measures taken by AEGON to counter the effects of the global financial crisis have significantly strengthened the company’s overall capital position and left the company well-placed to take advantage of future opportunities for growth. In addition, AEGON’s long-term strategy –
‘Unlocking the Global Potential’ – has been refined to take into account the change in market conditions since the global financial crisis.
As part of this approach, AEGON intends to: Maintain efforts to direct capital to areas that offer �
AEGON continued to invest in its existing businesses, honoring commitments made before the onset of the financial crisis.
Transilvania’s 50% stake in BT AEGON, the Romanian pension joint venture set up by the two companies in 2008.
in Japan began operations. The joint venture, which was agreed in 2007, will initially focus on variable annuities.
A more global approach both to risk and capital management has also been adopted 1.
organization for its asset management operations, designed to strengthen the company’s market position and further improve products and services to customers in Europe, North America and Asia. AEGON
United States, the Netherlands, the United Kingdom and Central & Eastern Europe as well as the company’s joint ventures in Asia.
United States to expand its variable annuities business to markets in both Europe and Japan.
1 For further details, please refer to the Risk and Liquidity and Capital Management sections of this report on pages 40 to 50.
AEGON endeavors to provide financial information that is clear, transparent, accurate and timely. The recent global financial crisis has underscored the importance of maintaining communications with investors and the broader financial community.
These events included: Presentations by senior executives to industry conferences around the �
world 1. During the year, AEGON executives spoke at a number of important industry investor conferences organised by brokers, including
Investor road shows in North America, Europe and Asia, with individual �
In total, during 2009, there were meetings with approximately 600 institutional investors in 38 different locations.
This policy, formally adopted in February 2008, sets out rules and guidelines for interaction between AEGON and its investors in line with recommendations from the Monitoring Committee overseeing the
“What’s important, particularly in uncertain times, is that we maintain a dialogue with our investors. That we’re out there, providing investors with the information they need to make the right decisions at the right time. As a result, what we provide has to be clear, transparent, accurate and timely. And that’s something that’s more important today, given everything we’ve seen in the financial markets, than ever before.”
AEGON’s voting share capital. All resolutions presented to the meeting were adopted. During the meeting,
Share price information 1 2005 -2007 based on adjusted data. 2 Not measurable.
The vast majority of AEGON’s shareholders are located either in North America or in Europe. Approximately 88% of the company’s common shares are held by institutional investors such as pension and investment funds. These institutional investors include Vereniging
In addition, AEGON is also active on world debt markets, using its strong credit rating to issue debt instruments in various currencies.
AEGON recognizes the importance of a clear, stable and coherent dividend policy. Dividend payments to shareholders depend on the company’s cash flow and capital postion.
AEGON’s policy is that the total dividend for the year should be composed of two parts: An interim dividend, announced at the same time as �
A fi nal divided, proposed in March and voted on at the �
Though the company’s capital position remains strong, cash flows during the year were adversely affected by higher than average impairments. As a result, AEGON
Record date for attending/voting at AEGON annual General Meeting of Shareholders, April 29
Extremely important. It’s about how you manage your business, and how you build trust not only among your customers and shareholders, but also in the wider community. These issues – how we treat our customers and employees, how we invest, how we protect the value of our brand – are becoming more and more important.
This is a very broad topic. What is AEGON’s approach to sustainability?
We have businesses in more than twenty countries around the world – and something like 40 million customers. That’s a big responsibility. Traditionally, we’ve always been a decentralized company. Now, we’re moving toward a more integrated approach – in sustainability, as well as in other aspects of our activities. That means taking into account different cultures within the organization and finding a way of working more closely together, which admittedly won’t always be easy. In my view, it’s one of the big challenges for the next few years.
It also means listening more to our stakeholders. That’s why we now organize a regular stakeholder review; we want to hear what our shareholders, business partners and our customers have to say.
“We want to apply basic principles of responsible investment to our entire portfolio.”
AEGON is one of the world’s largest institutional investors. With investments, there are always diffi cult choices to be made…
At the end of 2009, we had just over EUR 360 billion in revenue-generating investments. Part of that is for our own account, but most is invested on behalf of our customers and policyholders, so we take our responsibilities very seriously. This is an area where we think we can make a difference.
But now we want to go a step further. We want to apply basic principles of responsible investment to our entire portfolio. And we want to make sure we engage regularly and consistently with those companies in which we invest so that together we can tackle areas of concern – whether they’re to do with the weapons industry, which has been a matter for discussion in the
Marco Keim Chief Executive Officer of AEGON The Netherlands and member of the Management Board
AEGON believes that business success is not incompatible with respect for the environment, human rights and the broader communities in which it operates. Indeed, the company recognizes that creating a sustainable business means taking into account the interests of all its stakeholders, including customers, employees, business partners and investors.
AEGON also believes that it can make a valuable contribution to the communities in which it operates, not only as a provider of long-term financial products and services, but also as a responsible employer and investor. AEGON’s long-term objective is to grow its businesses profitably and sustainably.
The global insurance industry plays an important role in helping communities around the world deal with some of the biggest economic and social challenges of the 21st century, including aging populations, climate change, sustainable development, the need for responsible investment and demand for greater financial literacy. AEGON’s Sustainability strategy and initiatives help strengthen the company’s reputation among customers, investors and the wider public, as well as supporting its business objectives and the value of the
For more information about AEGON’s Sustainability strategy and initiatives, please refer to the company’s 2009 Sustainability Report, available online at www.aegon.com.
Building confidence for life: Despite difficult business conditions, we took decisive measures in 2008 and 2009 to ensure continued customer confidence, and to position our company for new opportunities opening up in both our established and emerging markets.
JAN NOOITGEDAGT ON SOLVENCY II � New rules on solvency will bring changes to the way European insurers manage their risk and capital. Chief Financial Officer, Jan Nooitgedagt, explains why he believes Solvency II will benefit the insurance industry over the long term, and talks about his first year as AEGON’s CFO – a year that saw the company further strengthen its financial position.
However, if we manage these changes well, I’m convinced they’ll be of enormous benefit not just to the industry, but also to our customers and shareholders as well.
Over the past year, we’ve seen a considerable improvement in market conditions. Through the year, our quarterly earnings have steadily increased, and for 2009 we returned to a net profit. More importantly perhaps, our revenues have also held up well – an indication of continued customer confidence in AEGON.
There are lessons to be learned from the global financial crisis. The importance of strong risk management. The importance of customer loyalty and trust. And the paramount importance of capital. This, of course, is where Solvency II comes in.
Commission is now doing is developing a much more modern approach, where the amount of capital an
This is a very important principle. It should mean a more efficient system for insurers – one that will reward strong risk management. We believe that
Ultimately, it should also result in greater security for customers and policyholders who invest their money with us. That’s very important, particularly at a time of such economic uncertainty.
For AEGON, Solvency II is very much a step in the right direction. We are already managing our business within a risk-based framework. In effect,
Solvency II will change the regulatory framework in Europe into a system based consistently on risk and insurance companies’ appetite for risk. In turn, this should lead to fewer constraints when it comes to managing our combined risk and capital position.
Union is still an area of substantial uncertainty both for regulators and companies.
Jan Nooitgedagt Chief Financial Officer and Member of AEGON’s Executive Board
“The measures we have taken have significantly strengthened our overall financial position, and we were able last November to repay a first installment of the EUR 3 billion the Dutch State provided to AEGON at the end of 2008.”
Throughout 2009, AEGON saw a steady improvement in its quarterly earnings. However, annual earnings figures were adversely affected by losses sustained during the first three months of the year.
EUR 1.2 billion, a reflection primarily of lower investment income as a result of increased cash balances following
Earnings were also affected by higher employee benefit expenses, and lower fee income. These factors were partly offset by lower charges related to the amortization of deferred policy acquisition costs and reserve strengthening in the United States. AEGON’s operations in the Americas and the United Kingdom reported lower year-on-year underlying earnings; earnings from the Netherlands and Central & Eastern
By line of business, AEGON reported a 15% increase in earnings from its Life & Protection activities in 2009, helped by a substantial rise in earnings in the
United States. Life Reinsurance returned to profit in 2009 after a loss the previous year, while losses from
Individual Savings & Retirement Products declined significantly as a result of improved market conditions.
EUR 1.1 billion. Most of the turnaround was attributable to an improvement in world financial markets, which led to a better performance from AEGON’s fair value items and an income tax credit. The sale of AEGON’s life insurance business in Taiwan in August, meanwhile, resulted in a one-off loss of EUR 385 million.
EUR 668 million, related primarily to intercompany reinsurance treaties between the United States and
Ireland. The credit was a partial reversal of tax losses incurred the previous year.
AEGON introduced a number of cost reduction measures in 2009, saving a total of EUR 250 million, well ahead of the company’s target for the year of EUR 150 million.
Eastern Europe, a consequence of continued weak economic conditions. AEGON’s businesses in the
1 Excluding the impact of restructuring charges, increased employee benefi t expenses in the United States and currency movements.
Despite difficult market conditions, AEGON’s value of new business decreased by just 8% to EUR 767 million, evidence of continued customer confidence and
AEGON’s core capital rose significantly during the year to EUR 15.9 billion, up from EUR 9.1 billion at the end of 2008, as a result of a substantial increase in the value of the company’s investments, a EUR 1 billion equity issue and the inclusion of 2009 net income. These factors were offset in part by the repayment of EUR 1 billion in core capital to the Dutch State, as well as coupon, premium and dividend payments on AEGON securities.
AEGON serves approximately 40 million customers in the Americas, Europe and Asia. Over the past year,
AEGON companies have helped customers adjust to today’s uncertain, more difficult economic climate. In some cases, new products have been launched; in others, AEGON has taken steps to improve customer service. In the wake of the global financial crisis, AEGON
improve customer service, including an information campaign with the slogan ‘eerlijk over…’, or ‘honest about…’, aimed at explaining sometimes complex fi nancial products in clear, straightforward language.
its customers, simplifi ed the language the company uses in product brochures and extended the terms and conditions of its protection policies to meet customers’ needs.
In Turkey, a new system was set up to keep customers �
further improved the way it handles telephone calls, resulting in a 16% increase in customer satisfaction in this area.
AEGON was formed in 1983, but the company’s history stretches back to the early years of the nineteenth century. Today, AEGON has operations in more than twenty countries around the world and employs approximately 28,000 people. AEGON’s main businesses are in the United States, the Netherlands and the United Kingdom, but the company also has operations in six countries in Central & Eastern Europe as well as in Spain and France. In recent years, AEGON has also built businesses in the growth markets of Asia and Latin America.
AEGON is one of the world’s leading providers of life insurance and financial protection products, serving millions of customers across the globe. AEGON
AEGON provides a wide variety of savings and retirement products, including retail mutual funds and fixed and variable annuities. AEGON provides individual savings and retirement products mainly in the United
With people living longer lives and governments increasingly shifting responsibility for retirement provisioning to the private sector, AEGON believes demand for pensions will continue to grow in the years ahead. AEGON has strong pension businesses not only in its main markets – the United States, the Netherlands and the United Kingdom – but also in new, emerging markets like Central & Eastern Europe.
AEGON provides a range of life and annuity reinsurance products. The company’s core product – mortality risk transfer – is offered primarily through coinsurance, but is also available under yearly renewable term arrangements. AEGON offers life reinsurance services in the United States and Asia.
Generally, AEGON offers non-life insurance cover only when it serves the company’s distribution objectives to do so. The company offers some limited general insurance in the Netherlands and in Hungary – primarily car, liability, household and fire insurance.
Origen. In both countries, AEGON companies sell and distribute a wide range of insurance products and other financial services.
Underlying earnings before tax by geographical area In EUR million 1 Including Holding and other.
Share of global workforce50% Share of global underlying earnings before tax
Share of global workforce19% Share of global underlying earnings before tax
India, as well as a joint venture with Sony Life in Japan.
Eastern Europe (CEE). In Spain, AEGON is the country’s sixth largest provider of life insurance and in France
Share of global workforce17% Share of global underlying earnings before tax
Share of global revenuegenerating investments 43 56million UK pounds billion UK pounds
1 Market shares based on various external sources and company estimates.
While business conditions in the Americas remained uncertain, AEGON took steps to reduce risk, lower costs and free up more capital.
automotive credit and its institutional spread-based businesses in run-off. Earnings in 2009 were further helped by a partial reversal of tax losses incurred the previous year, and a return to profit at AEGON’s Life reinsurance and Individual savings & Retirement businesses. These factors were partly offset, however, by lower investment income as a result of increased cash balances following AEGON’s decision during the year to run off its institutional spread-based business. Earnings for 2009 were also impacted by impairments, a rise in employee benefit plan expenses and the impact of measures to release capital and reduce financial risk.
USD 697 million, compared with a loss for the previous year of USD 2.0 billion, due primarily to market conditions during the year. AEGON also booked a tax credit in 2009 of USD 590 million related to crossborder intercompany reinsurance treaties, a partial reversal of tax losses incurred the previous year. Fair value items also showed a strong improvement during 2009, offset partly by losses relating to a hedge on financial guarantees. Though impairments declined during the course of the year, they were higher than in 2008, at USD 1.1 billion, a reflection primarily of continued poor conditions in the US housing market.
USD 5.0 billion. Operating expenses were 3% higher as significant cost reductions during the year were more than offset by restructuring charges and an increase in employee benefit plan expenses. On a comparable basis, operating expenses decreased in 2009 by 6%.
AEGON experienced a gradual improvement in sales in the Americas during the course of 2009. Overall however, sales continued to be adversely affected by uncertain economic conditions. Despite this, AEGON was able to maintain a robust franchise in its main markets.
New life sales declined 18% to USD 776 million, partly as a result of tighter credit markets and reduced lending.
Gross deposits – excluding institutional guaranteed products – declined 10% to USD 22.9 billion in 2009.
Including institutional guaranteed products, gross deposits declined 45% in 2009 to USD 29.0 billion, primarily the result of AEGON’s decision during the year to run off its US institutional spread-based business.
Value of new business in the Americas declined 32% in 2009 to USD 412 million. The decline was due mostly to lower sales of life insurance and the closure of the spread-based institutional business.
USD 307.4 billion as improved financial market conditions during the year were offset by net outflows, the result of running off the company’s institutional spread-based business.
AEGON experienced a gradual improvement in sales in the Americas during the course of 2009, despite uncertain economic conditions.
Earnings overview AEGON Americas Amounts in USD million 2009 2008 year-on-year comparison
Life & Protection business. Lower impairment charges and an increase in gains on investments also contributed to net income for the year, though markets in the
Netherlands remained competitive and a reorganization of the company’s sales operations led to additional restructuring charges.
Pensions & Asset management meanwhile declined. In 2008, earnings from this line of business had included exceptional technical results and non-recurring dividend income of EUR 75 million. AEGON The Netherlands’
Commissions and expenses declined 7% during the year to EUR 1.2 billion. Operating costs were also down 7% to
EUR 184 million, up from EUR 43 million the year before.
This increase was attributable to increased demand for pensions and higher margins on mortgages during the year.
EUR 70.9 billion in 2009, due mainly to an improvement in market conditions.
AEGON UK saw a decline in net income for 2009, mainly the result of higher impairments and lower underlying earnings from the company’s main businesses. Difficult conditions in equity and corporate bond markets, in particular, had an adverse effect on the company’s earnings during the year. Operating costs were higher in 2009 due to higher restructering costs and costs associated with adapting the businesses to the changing regulatory environment.
Underlying earnings declined to GBP 43 million in 2009 as lower equity markets led to a decrease in fee income in AEGON’s unit-linked pension business in the United
Asset management also declined due mainly to the program to improve the consistency of customer records. AEGON’s Distribution operations in the United
GBP 64 million the previous year. Gains on investments and a tax credit during the year were more than offset by lower underlying earnings and an increase in impairments. Impairments rose to GBP 163 million, most related to hybrid securities issued by UK and Irish banks.
AEGON UK’s value of new business declined 18% in 2009 to GBP 152 million, due to lower sales volumes.
As a result of the recovery of the financial markets and net inflows, revenue-generating investments increased 18% in 2009 to GBP 55.8 billion at the end of December
Earnings overview AEGON United Kingdom Amounts in GBP million 2009 2008 year-on-year comparison
Earnings from AEGON’s associates increased as a result of improved performance from both the company’s joint ventures in Spain and La Mondiale, AEGON’s partner in
EUR 385 million from the sale of the company’s life insurance activities in Taiwan. This charge more than offset higher underlying earnings for the year, as well as gains on investments and lower impairments.
EUR 195 million, due mainly to the impact of cost reduction measures during the year and the exclusion of the company’s life insurance business in Taiwan, which was sold in August 2009.
EUR 195 million, reflecting AEGON’s withdrawal from the life insurance market in Taiwan. Excluding Taiwan, sales rose during the year as increases in both Spain and
Earnings from Other Countries were strong in 2009 thanks to further growth in Central & Eastern Europe and an improved performance in Spain.
RISK MANAGEMENT � As an insurance company, AEGON manages risk on behalf of its customers and other stakeholders. As a result, the company is exposed to a variety of underwriting, operational and financial risks. AEGON’s risk management and control systems are designed to ensure that these risks are managed as effectively and efficiently as possible.
To accomplish this, AEGON has established two basic objectives for its risk management strategy: AA capital adequacy requirements: AEGON maintains �
As an international provider of life insurance, pensions and other long-term investment and savings products,
The effects of the global financial crisis that began in 2008 continued to be felt in 2009. Equity markets showed a recovery after the first quarter, but remained depressed for much of the year. Similarly, credit spreads and bond default rates peaked in the first quarter, but both eased significantly afterwards. During 2008, the official base rates of leading industrial nations were reduced to record low levels, and remained at these levels for the whole of 2009. Economic conditions remained difficult, causing companies to fail or scale back their operations. These factors had implications not only for AEGON’s sales and earnings, but also for the company’s capital and liquidity position. AEGON
1 Please note that the information here is intended as an overview only. A more detailed explanation of credit risk, equity and other investment risk, interest rate risk, currency exchange rate risk, liquidity risk, underwriting risk and operational risk, as well as other company-wide risk management policies may be found on pages 118 to 142 of this report. Further information on sensitivity analyses may also be found on these pages.
Interest rate risk Interest rates remained at low levels during 2009. This had important consequences, particularly for investment income and for the margins on financial guarantees included in certain policies. During the year, AEGON took further steps to reduce such guarantees. AEGON’s operations in Taiwan, which carried significant long-term interest rate risk, were sold in August 2009. Continued low interest rates in 2010 may however have an adverse effect on new business rates and lead to lower lapse rates.
As an international company, AEGON is exposed to movements in currency rates. However, AEGON does not consider this exposure to be material. The company holds its capital base in various currencies in amounts that correspond to the book value of individual country units, thus mitigating currency risk. AEGON does hedge cash flows from operating subsidiaries as part of its broader liquidity and capital management.
Operational risk Like other companies, AEGON faces risks resulting from operational failures or external events, such as changes in regulations and natural or man-made disasters. AEGON’s systems and processes are designed to support complex products and transactions and to avoid such issues as system failures, financial crime and breaches of security. AEGON is constantly working on analyses studying such operational risks and regularly develops contingency plans to deal with them. These plans also cover extreme event scenarios, such as the possibility of mortality pandemics in one or more of the company’s main markets.
AEGON has a strong culture of risk management, based on a clear, well-defined governance framework.
To institute a proper system of checks and balances by �
ensuring that senior management is aware at all times of material risk exposure.
threat of insolvency from an over-concentration of risk in particular areas.
AEGON’s risk management framework is represented across all levels of the organization. This ensures a coherent and integrated approach to risk management throughout the company. Similarly, AEGON has a number of company-wide risk policies in place, which detail specific operating guidelines and limits. These policies are designed to keep overall risk-specific exposures to a manageable level. Any breach of policy limits or warning levels trigger immediate remedial action or heightened monitoring. Further risk policies may be developed at a local level to cover situations specific to particular country or business units.
AEGON’s risk management governance structure has four basic layers: The Supervisory Board (and the Supervisory Board �
The Executive Board and the Group Chief Risk Officer report to the Risk Committee of AEGON’s Supervisory
The GRCC is responsible for overseeing AEGON’s solvency position, ensuring that risk-taking is within overall tolerance levels and that the company’s capital position is sufficient to support AA capital adequacy requirements. As such, the GRCC also works closely with the company’s Group Finance, Group Treasury & Capital
Executive Board should any risk threaten the company’s economic solvency, statutory solvency or its operations.
In line with AEGON’s integrated approach to risk management, the company’s Chief Financial Officer is both a member of the Executive Board and Chairman of the GRCC. AEGON’s Chief Risk Officer (CRO), its Group
The GRCC is also responsible for ensuring best risk management practices are adhered to, as well as for promoting strong risk management as an important part of AEGON’s overall corporate culture.
In addition, the GRCC provides oversight for individual country unit Risk and Capital Committees (RCCs). As such, the GRCC receives regular reports from RCCs, reviews major decisions and oversees compliance with company-wide risk policies.
RCCs have been established at each of AEGON’s country units and, within the United States, at each business unit. The responsibilities and prerogatives of the RCCs are set out in their respective charters and are similar in content to those of the GRCC, but applicable to local circumstances. AEGON’s regional Chief Risk Officers are members of every operating unit RCC for which they have oversight responsibility.
AEGON’s risk management staff structure is also integrated. Regional CROs for the Americas, Europe and
Even before the second half of 2008, AEGON’s own risk management scenarios had recognized the possibility of such extreme market conditions. However, neither the imminent nature of the threat nor its severity were considered a serious scenario at the time by most independent economic commentators.
to risk management, and signifi cantly increasing the resources committed to this area.
AEGON frequently reviews the functioning of its risk management framework, and decided recently to introduce a number of measures aimed at further strengthening the company’s approach. This approach is based on having three so-called ‘lines of defense’: Line management �
Capital Committee (GRCC) will focus increasingly on the overall management of the company’s balance sheet, within boundaries set by AEGON’s risk tolerance levels and risk policies.
Executive Board on matters such as compliance with existing risk policies, risk exposures and potential threats to the company’s solvency or its operations.
These measures were implemented during the second half of 2008, and continued throughout 2009. During that time, AEGON made considerable progress toward its aims: Reducing risk – Since the start of the financial crisis, reducing risk has helped protect AEGON’s businesses from any further deterioration in market conditions.
Over the longer term, reduced levels of financial risk will result in more stable earnings for the company. In addition to the measures outlined above, AEGON took a number of specific steps in 2009 that helped further reduce the company’s financial risk: AEGON’s decision in February 2009 to run off its �
of hedging equity risk at its US, Dutch and Canadian operations, with the objective of protecting the company against a possible deterioration in equity markets.
United Kingdom and the automotive risk market in the United States, reducing risk and releasing additional capital.
AEGON released a total of EUR 4.9 billion in capital from its existing businesses. Capital was released through a combination of risk reduction, steps to further improve capital efficiency and the adoption of a more active approach to capital management. AEGON’s aim is to maintain a sufficient capital buffer to protect the company’s long-term business and its credit and insurance financial strength ratings.
Lowering operating costs – AEGON’s aim was to reduce operating expenses in 2009 by EUR 150 million, equivalent to 5% of the company’s operating expenses 1.
This target was achieved by the end of September 2009, three months ahead of schedule, largely through improvements in efficiency, restructuring programs and expense reductions at AEGON’s main operations in the
In December 2008, AEGON also secured EUR 3 billion in additional core capital from Vereniging AEGON, funded by the Dutch State. This was part of a broader program of support for banks and insurers in the Netherlands during the financial crisis. AEGON has now repaid the
AEGON aims to repay the remaining amount as soon as it is feasible and responsible to do so, subject to adequate capital. During the year, AEGON also carried out a number of transactions designed to further strengthen the company’s capital position and enhance overall financial flexibility (details of these transactions may be found on page 46).
EUR 3.7 billion, an improvement from EUR 2.9 billion at the end of 2008, and one of the main objectives of
AEGON’s risk management strategy. AEGON’s solvency ratio, under the European Insurance Group Directive, stood at 204% at the end of 2009.
The second half of 2009 brought an improvement in market conditions, particularly in higher equity markets and narrower credit spreads. Despite this improvement, economic and financial conditions remain uncertain.
Consequently, repaying the Dutch State at the earliest feasible opportunity and measures designed to further reduce risk, release additional capital from existing businesses and lower operating expenses will remain significant priorities for AEGON in 2010.
1 On an adjusted basis, excluding the impact of restructuring charges, increases in employee benefi t plan expenses and currency effects.
so as to maintain and refl ect capital strength while permitting an effi cient capital structure.
and capital markets on competitive terms, so that the company’s overall cost of capital is minimized.
Taken together, these goals strengthen AEGON’s ability to withstand losses from adverse business and market conditions, enhance its financial flexibility, and serve the interests of the company’s stakeholders.
AEGON’s Group Treasury & Capital Management department manages and coordinates liquidity and capital management strategy and processes under the remit of the Group Risk & Capital Committee (see pages
As a result of these measures, AEGON was able to release EUR 3.3 billion in capital from its businesses in 2009, significantly above the company’s target for the year of EUR 1.5 billion.
capital was made available for AEGON’s operations in the United States via a transaction that realized the value of a portion of future profi ts from an existing book of traditional life business.
AEGON’s subsidiaries are primarily engaged in the life insurance business, which is a long-term business with relatively illiquid liabilities and generally matching assets. Liquidity consists of both liquid assets held in investment portfolios, as well as inflows generated by premium payments and customer deposits. These are used primarily to purchase investments, as well as to fund benefit payments to policyholders, policy surrenders, operating expenses, and to pay dividends to
AEGON’s aim is to ensure that liquidity is sufficient to meet cash demands even under extreme conditions. The amount of liquidity held is determined by the company’s liquidity risk policy, which ensures that AEGON and its operating companies maintain a prudent liquidity profile.
Liquidity is measured and stress-tested consistently across the company, and a liquidity stress management plan is maintained at Group Treasury & Capital
Management and at individual country units. Stress tests combine a ’severe surrender’ scenario with an ‘impaired asset’ scenario. AEGON’s liquidity policy requires that all operating units measure the period they can maintain a projected positive cash balance without needing to sell any non-cash assets, while meeting all cash demands for a period of two years 1.
At the end of 2009, AEGON N.V. held at group level a balance of EUR 1.4 billion in excess cash compared with
AEGON companies have also issued debt securities that, for the large part, are guaranteed by AEGON N.V.
In addition, AEGON has access to domestic and international money markets through AEGON N.V.’s and
has not drawn any amounts under any of its liquidity back-up facilities.
Capital leverage � – AEGON sets out clear guidelines on the amounts of capital securities and debt the company can use as part of its overall capital base.
Bank. The IGD ratio is a weighted average of Solvency I capital requirements for operations inside the European Union and local regulatory requirements for those outside. In the United States, for example, required capital for life insurance companies is equivalent to twice the upper end of the Company
National Association of Insurance Commissioners. The IGD ratio takes into account the capital of the insurance group as a whole.
Capital adequacy is managed at company-wide, country and operating unit levels, as well as by individual legal entities within the organization.
As a matter of policy, AEGON maintains operating companies’ capital adequacy at whichever is the higher of the following: Local regulatory requirements �
“What we’ve done over the past year is further reduce our investment risk and execute on a number of strategic decisions, free up capital from our businesses – and begin to deploy that capital more efficiently. That has helped protect our businesses, but it has also helped protect our customers. But we’ve only just begun redeploying our capital: over the longer term, this approach will mean a better balanced investment of our capital and higher quality earnings for the company. As a result, we’ll be able to repay what we owe the Dutch State and put more resources into those areas where we believe we can generate stronger growth and higher returns – something that will benefit our shareholders, customers and business partners alike”.
In 2009, the capital position of AEGON’s operating companies improved from the previous year, and remained strong. At the end of 2009, AEGON had an excess over and above its capital requirements of EUR
Leverage is defined as the relative amount of non-core capital in AEGON’s overall capital base. The capital base reflects the capital employed across the company and consists of: Core capital (comprising shareholders’ equity, �
At the end of 2009, AEGON’s core capital – comprising shareholders’ equity and the convertible core capital securities issued in 2008, but excluding the company’s revaluation reserve – totaled EUR 15.9 billion, compared with EUR 16.2 billion twelve months previously.
Group equity consists of core capital, including the revaluation reserve, plus other equity securities. These other securities include Perpetual Cumulative Capital
At the end of 2009, AEGON’s financial flexibility – the company’s excess capital plus its additional leverage capacity 1 – amounted to EUR 3.7 billion. This figure gives an indication of the company’s capacity to deploy capital internally either by using funds it already holds in the form of excess capital or else by obtaining additional funds through the issuance of further debt.
In December 2008, as part of the company’s response to the financial crisis, AEGON secured EUR 3 billion in additional convertible core capital from Vereniging
Dutch State as part of a broader program to support fundamentally sound and viable banks and insurance companies in the Netherlands during the financial crisis.
Fitch insurance financial strength ratings (IFSR) and ratings outlook for AEGON’s primary life insurance companies in its leading country units were as follows: AEGON USA IFSR
AEGON’s financial reporting process and the company’s internal control framework. Based on risk assessments performed, the Executive Board, under the supervision of the Supervisory Board and its Audit Committee, is responsible for determining the overall internal audit work and for monitoring the integrity of the financial statements of AEGON N.V.
Executive Board is informed of any risks that threaten the economic/statutory solvency or operations of the company.
provide reasonable assurance that the company’s fi nancial reporting does not contain any material inaccuracies.
management and control systems will not continue to function properly in 2010.
Board. The Supervisory Board currently consists of twelve members (for further details on the individual members of AEGON’s Supervisory Board, please see pages 61-63).
Details of AEGON’s corporate governance structure as well as a summary of the company’s compliance with the
In accordance with AEGON’s Supervisory Board Rules, all regular meetings in 2009 were preceded by preparatory meetings, attended by the Chairman and Vice Chairman of the Supervisory Board, as well as by the Chief
Executive Officer and Chief Financial Officer from the company’s Executive Board.
Boards attended all Supervisory Board meetings held in 2009. AEGON’s Director of Group Finance also attended meetings during which the Supervisory Board discussed the annual results for 2008, all quarterly results and value of new business (VNB) figures published in 2009, as well as press releases relating to these matters.
Representatives from Ernst & Young, AEGON’s external auditor, also attended the discussions on the company’s 2008 annual results.
The Supervisory Board is entrusted with the task of supervising and advising the Executive Board on its management of the company as well as overseeing AEGON’s strategy and the general course of its businesses.
In May 2009, the Supervisory Board held its annual strategy meeting in
Cedar Rapids, in the United States, the site of AEGON’s US corporate headquarters. During the two-day meeting, the Supervisory Board and the
Board also reviewed management’s measures in response to the global financial crisis since mid-2008: Capital release and preservation actions �
Possbile repayment of a fi rst installment of EUR 1 billion to the �
The Supervisory Board also discussed the implications of the crisis for
AEGON’s financial and capital position. The Board noted that, post crisis, underlying earnings will be lower, because of lower market returns and the effect of the company’s capital preservation measures.
The Board and management also discussed, and agreed, that AEGON’s objective, as announced in 2008, was still valid: to be a global leader in helping customers secure their financial futures, resulting in sustainable, profitable growth. It was acknowledged that the financial crisis had slowed the implementation of AEGON’s strategy, but had not altered it. The Board noted that fundamental economic and demographic change, such as aging populations, increased financial market volatility, reduced safety nets from governments, particularly in Europe and Japan, would lead to growing demand for many of AEGON’s products and services.
Individual members of the Management Board provided updates of their business units and market positions to the Supervisory Board, and presented their key strategic priorities and ambitions for the near term.
At the end of the two-day meeting, the Board expressed its support for AEGON’s long-term strategy, as set out on pages 10 to 14 of this
EUR 3 billion in core capital provided by the Dutch State. The Board and management agreed that AEGON
AEGON has emerged from the crisis in a stronger position both to deal with the challenges ahead and to take advantage of the opportunities opening up in the company’s markets.
in 2008 and in accordance with EU rules on state aid,
AEGON submitted a viability plan, via the Dutch Ministry of Finance, to the European Commission in November 2009. The purpose of this plan was, among others, to demonstrate AEGON’s fundamental soundness and longterm viability. During meetings and conference calls, management has kept the Board informed of progress with this plan. The European Commission is currently in the process of assessing the contents of this plan before deciding whether to approve the Dutch State’s support for AEGON.
In February 2009, the Supervisory Board convened to discuss the preliminary unaudited results for the fourth quarter of 2008, which were released on February 17. In
figures. The Board also reviewed and approved the company’s annual accounts for 2008. The Board decided to pay a preferred dividend of 5.75% on the outstanding preferred shares, which was charged to the free distributable reserves.
Committees, were informed of the impact of fair value movements on the valuation of guarantees. The development of AEGON’s investment portfolio and impairment levels were also regularly addressed.
During the year, as in 2008, AEGON’s capital position was a key point of focus for the Supervisory Board and its
Board discussed and approved an EUR 1 billion equity issue, announced on August 13. Proceeds from this equity issue were used to repay EUR 1 billion of the total
EUR 3 billion in core capital obtained in 2008 from the company’s largest shareholder, Vereniging AEGON, and funded by the Dutch State. The Dutch Central Bank gave its formal consent for this repayment, and the repayment was made on November 30, 2009.
At its December meeting, the Supervisory Board reviewed and discussed AEGON’s Group Plan for 20102014, including the 2010 budget and the 2010 Capital
The Board was pleased to see that AEGON Sony Life �
Insurance Company, established in 2007, received fi nal approval to launch business operations in Japan.
Netherlands. The negotiations with the buyer were concluded in February 2010.
Bank. These meetings discussed a number of issues including the changing regulatory landscape for financial companies, as well as AEGON’s system of governance and risk management and its capital position. Other members of AEGON senior management also held separate meetings with representatives of the Dutch
The appointment of Dudley G. Eustace for a new term �
All proposals above were accepted by shareholders at their General Meeting in April 2009. At the same meeting, shareholders appointed Jan J. Nooitgedagt as member of the Executive Board as successor to Joseph B.M. Streppel, the company’s Chief Financial Officer. On the same date,
Supervisory Board was held in December. This year’s theme was Solvency II, a European Directive requiring insurance companies to take an economic risk-based approach to the management of their balance sheets, and adopt market-consistent valuation for all assets and liabilities. During this session, AEGON’s Chief Financial
Board will revisit this topic during 2010, and will discuss with management the possible consequences for the company.
The Supervisory Board relies on its four committees to prepare specific issues for decision-making by the Board.
The Audit Committee held nine meetings in 2009, one of which was a combined meeting with the company’s
Finance and the Group Internal Auditor. Representatives from Ernst & Young, AEGON’s external auditor, also attended most of these meetings. In addition, officials from AEGON’s Group Risk department and the Group
Audit Committee. During the year, discussions focused on the following topics: Quarterly results, annual accounts and the audit �
AEGON’s 2008 Embedded Value Report and the company’s annual VNB figures.
The Audit Committee recommended that Ernst & Young be reappointed for the 2009 financial year. In addition, the Committee confirmed that Shemaya Levy and Ben van der Veer qualify as financial experts within the terms and conditions of both the Dutch Corporate Governance
During 2009, the Audit Committee received an update each quarter on the activities of the Group Internal
Auditor, AEGON’s compliance with US SOX 404 legislation (Sarbanes Oxley) and an overview of fraud and general compliance issues. During these meetings, the Audit Committee held separate sessions with the
Group Internal Auditor, as well as with external auditors, to discuss their findings. Members of the Executive
Results for the fi rst six months of 2009 (Form 6-K) �
AEGON’s Risk Committee convened five times, including a combined meeting with the Audit Committee. The members of AEGON’s Executive Board, the company’s
AEGON’s Enterprise Risk Management framework. The committee also advises the Executive Board with respect to the company’s risk management strategy and policies.
Management governance and risk tolerance limits and risk level policies and compliance, as well as operational risk management. Furthermore, the Committee discussed
AEGON’s Nominating Committee held three meetings in 2009. The Chief Executive Officer attended all meetings.
During the year, the Nominating Committee discussed the composition of the Supervisory Board and its committees, as well as existing and forthcoming vacancies.
The Compensation Committee held six meetings and conference calls in 2009, also attended at times by either the Chief Executive Officer and/or the Chief Financial Officer.
The committee assessed the outcome of this plan under the terms of AEGON’s Executive Board Remuneration Policy, and advised the
Committee also discussed the 2009 performance targets for members of the Executive Board, and made recommendations, which were later approved by the Supervisory Board.
After a number of discussions, the Committee agreed to submit a draft
Policy to the Supervisory Board in December 2009. The Board approved this proposal, and it was decided to consult with a number of institutional shareholders, or their representatives on this subject at the beginning of 2010. The proposed new Remuneration Policy will be put to shareholders for adoption at their next annual General Meeting, scheduled for April 29, 2010.
Supervisory Board fees were found generally to be below the 25th percentile of prevailing market levels. Because of the market environment, members of the Supervisory Board agreed to forego any increases in 2009.
Executive Board prior to his retirement in April 2002. Mr. Storm joined the
AEGON’s long-term success and the growth of its businesses around the world.
Supervisory Boards would like to wish Mr. Eustace every success for the years ahead.
Docters van Leeuwen to the Supervisory Board. In addition, Shemaya Levy was reappointed for another four-year term of office after his previous mandate expired in 2009.
In 2010, the current term of Kornelis J. Storm will expire.
Mr. Storm for reappointment as member of the Board for a further term of four years. His biography will be provided together with the agenda for the 2010 General
Executive Board and the company’s employees for the measures they have taken over this past year to help strengthen AEGON’s financial position and ensure the continued confidence of its customers. Members of the
MEMBERS OF THE SUPERVISORY BOARD � Dudley G. Eustace (Born 1936, joint British and Canadian nationality)
Dudley G. Eustace is a former Chairman of London-based Smith & Nephew plc. He has also served as Vice Chairman of Royal Philips Electronics N.V. Mr. Eustace was appointed to
Ventures and a former Chairman of the Board of Directors at AEGON USA Inc. He was first appointed to AEGON’s Supervisory Board in 2004. His current term will end in 2012. He is also a member of the Board of Directors of Computer Sciences Corp. and Hospira Inc.
Robert J. Routs is a former Executive Director for Downstream at Royal Dutch Shell.
Mr. Routs is also a member of the Supervisory Board of KPN N.V. and the Board of Directors at Canadian Utilities, Ltd. He sits on the Economic Development Board of the Singapore
International Advisory Council and on the Board of business school INSEAD.
Public Administration and is a former Chairman of both the Dutch Financial Markets
Authority (AFM) and the Holland Financial Center. He was appointed to AEGON’s Supervisory
Greene & MacRae (now Dewey & LeBoeuf). Ms. Kempler was appointed to AEGON’s Supervisory
Board in 2008. Her current term ends in 2012. She also sits on the Board of The Risk
Reinsurance and Insurance Arbitration Society and the International Association of Insurance
Receivers. Ms. Kempler is certified by IMSA (Insurance Market Standards Association).
Shemaya Levy is a retired Executive Vice President and Chief Financial Officer of the Renault
Kornelis J. Storm is a former Chairman of the Executive Board of AEGON N.V. He was appointed to AEGON’s Supervisory Board in 2002. His current term will end in 2010.
Unilever NV and Unilever PLC. Mr. Storm also serves as a member of the Board of Directors of Anheuser-Busch InBev SA (Belgium) and Baxter International Inc. (United States).
Ben van der Veer is a former Chairman of the Board of Management of KPMG N.V. He was appointed to AEGON’s Supervisory Board in 2008. His current term will end in 2012.
Mr. Van der Veer is also a member of the Supervisory Boards of TomTom NV, Reed Elsevier
Aon Groep Nederland BV and Aon Jauch & Hübener GmbH. He is Chairman of the Benelux
Advisory Board of Leonardo & Co. B.V. and Chairman of the INSEAD Dutch Council.
Supervisory Board in 2003. His current term will end in 2011. Mr. Van Wijk is also a member of the Supervisory Board of Randstad Holding nv and Chairman of Skyteam.
conditions for the employment of Executive Board members and the remuneration for members of the company’s Supervisory Board. Each year, AEGON’s
Supervisory Board. Any material changes must also be referred to the General Meeting of Shareholders for adoption.
AEGON’s Compensation Committee is drawn from members of the company’s Supervisory Board. The
Each of these fees is a fixed amount. Members of AEGON’s
Supervisory Board do not receive any performance or equity-related compensation, and do not accrue pension rights with the company. These measures are designed to ensure the independence of Supervisory Board members and strengthen the overall effectiveness of
Supervisory Board are entitled to the following fees: Base fee Amount in EUR per annum
1 AEGON has four Committees in total: Audit, Compensation, Nominating and Risk. 2 AEGON pays a higher fee to members of its Audit Committee because of the additional workload involved. Information on members of the Supervisory Board may be found on pages 61–63. 3 In the case of intercontinental travel, this fee is EUR 2,500.
AEGON’s Remuneration Policy for the Executive Board is reviewed each year by the company’s Compensation
Board. In addition, the policy is used as a framework to determine remuneration for members of the company’s
For this purpose, two separate peer groups have been established, one for US-based Executive Board members and a second for members based in Europe.
Companies included in these two peer groups have been chosen according to the following criteria: Industry (preferably life insurance) �
Periodically, AEGON’s Supervisory Board reviews the composition of these two groups to ensure they continue to provide a reliable basis for comparison.
1 Details of AEGON’s new remuneration policy will be included as part of the agenda of the company’s next annual General Meeting of Shareholders, due to take place in The Hague on April 29, 2010. This agenda will be available at www.aegon.com from March 29, 2010.
Supervisory Board uses a range between the 40th and 60th percentile of the relevant peer group as an objective. Each year, the Supervisory Board reviews
Remuneration Policy, the compensation breakdown may differ from the numbers indicated in the table above.
Long-term incentive compensation, on the other hand, is paid in the form of conditionally granted shares.
The value of these shares is calculated using the fair value of a single share at the start of the financial year.
A member of the Executive Board has acted in a way �
or long-term business is being impacted by signifi cant and exceptional circumstances that are not refl ected in the pre-determined indicators, it may set up an ad hoc committee to consider possible adjustments.
compensation may be adjusted, but only within a range of between 75% and 125% of the originally calculated entitlement 2.
1 For this calculation, the ‘additive’ method is used, i.e. targets are set and performance assessed for each separate indicator independently of the targets and performances of other indicators.
Each year, AEGON details amounts paid to members of its Executive Board, in the form of both fixed and variable compensation.
Fixed compensation provides Executive Board members with a base salary. The amount is paid each year.
1 For details on AEGON’s Remuneration Policy with regard to members of the Executive Board, please refer to pages 66 to 68.
Variable compensation comprises two separate elements: Short-term incentive compensation, paid in cash �
For Mr. Nooitgedagt, the defined pension contribution equals 25% of his base salary.
This plan was formulated under AEGON’s previous Remuneration Policy and was based on a three-year period. The plan matured in 2009 and 75% of the shares and option rights vested as expected.
Under the terms of AEGON’s Remuneration Policy, Executive Board members were not entitled to payments under this plan. This was also in line with the provisions of AEGON’s capital support agreement with the Dutch State.
In line with the March 2009 gentlemen’s agreement in the Dutch financial sector, no variable compensation will be granted to members of the Executive Board for the year 2009.
Overview of AEGON’s corporate governance structure AEGON is a public company under Dutch law. It is governed by three corporate bodies: the General Meeting of Shareholders, which meets at least once every year, the Executive Board and the Supervisory Board 2. As a listed company based in the Netherlands, AEGON is subject to the Dutch Corporate Governance Code.
More than three-quarters of the company’s shareholders are located in the Americas, the Netherlands and the
A General Meeting of Shareholders is held at least once a year. Its main function is to decide matters such as the adoption of annual accounts, the approval of dividend payments and appointments to AEGON’s Supervisory and Executive Boards.
Meeting of Shareholders, to speak and vote, either in person or by proxy granted in writing. This includes electronically submitted proxies. All shareholders wishing to take part must, however, provide proof of their identity and shareholding, and must notify the company ahead of time of their intention to attend the meeting.
3 AEGON’s Articles of Incorporation are available on the company’s website at www.aegon.com.
Each member of the Board has duties related to his or her specific area of expertise. The number of Executive
Supervisory Board operates according to the principles of collective responsibility and accountability.
The Supervisory Board also oversees the activities of several committees. These committees are composed exclusively of Supervisory Board members and deal with specific issues related to AEGON’s financial accounts, risk management strategy, executive remuneration and appointments. These committees are: The Audit Committee �
AEGON endeavors to ensure that the composition of the company’s Supervisory Board is well balanced. A profile
(available at www.aegon.com) has been drawn up outlining the required qualifications of its members.
Supervisory Board members are no longer eligible for appointment after the age of 70, unless the Board itself decides to make an exception. Supervisory Board members’ remuneration is determined by the General
The original Code, dated December 2003, was amended in 2008 to take into account proposals put forward by the Monitoring Committee, which oversees the Code.
Generally, AEGON applies the best practice provisions set out in the Code. For an extensive review of AEGON’s compliance with the Code, please refer to the ‘Corporate
(www.aegon.com). A detailed explanation is given below for those instances where AEGON does not fully apply the best practice provisions of the Code. In these few instances, AEGON adheres, as far as possible, to the spirit of the Code.
Alex Wynaendts’ employment agreement have been waived and exit arrangements limited to a maximum of one year’s fixed salary. As a result, AEGON is currently in full compliance with this provision. Details of Executive
For this reason, a protocol has been drawn up authorizing the CEO and CFO to continue their existing practice with respect to their dealings with Vereniging
Supervisory Board, was asked to remain in office for a further year despite having served the maximum term allowed by the Code. It was felt that Mr. Eustace’s considerable experience would be invaluable at a time when a number of members had only recently joined the Supervisory Board. At the General Meeting of
At the end of 2009, a total of 1,736,049,139 common shares and 280,710,000 preferred shares had been issued. These represent respectively 74.8% and 25.2%
Of AEGON’s common shares, approximately 88% were held by institutional investors at the end of 2009, and the remaining 12% by retail shareholders. More than three-quarters of AEGON’s shareholders are located in
Preferred shares carry the right to a preferred dividend on the paid-in amount. No other dividend is paid on the preferred shares. In the event AEGON is liquidated, the paid-in amount on preferred shares will be reimbursed before any payments on common shares are made.
Together, this represents 33% of AEGON’s voting capital, given that, as stated above, preferred shares carry multiple voting rights.
Markets Authority on March 16, 2010, US-based investment management firm Dodge & Cox owns a total of 113 million common shares, representing 5% of the issued share capital and voting rights in the company.
Vereniging AEGON has voluntarily waived its right to cast 25/12 votes per preferred share, except in the event of a ‘special cause’.
These ‘special causes’ include 2: The acquisition by a third party of an interest in �
group of persons, whether individually or as a group, other than in a transaction approved by the company’s
Vereniging AEGON’s share of the company’s voting capital represents 22.8%. For more information on
Statements in this Annual Report, which begin on page 228, or the website of Vereniging AEGON
There are no restrictions whatsoever on the exercise of voting rights by holders of common shares, either with regard to the number of votes or the time period in which they may be exercised. The voting rights attached to preferred shares held by Vereniging AEGON, are however subject to restrictions (please see Special
The General Meeting of Shareholders may, in addition, bring forward a resolution to appoint someone not nominated by the Supervisory Board. Such a resolution also requires a two-thirds majority of votes cast, representing at least one half of AEGON’s issued capital.
1 The Preferred Shares Voting Rights Agreement is published on AEGON’s website (www.aegon.com). 2 These special causes are defi ned in greater detail in the Preferred Shares Voting Right Agreement, available on AEGON’s website
temporary protection against potential unfriendly actions by hostile bidders. Vereniging AEGON, AEGON’s largest shareholder, may, in effect, block any hostile attempt to replace the company’s Executive or
Members of AEGON’s Supervisory and Executive Boards may only be suspended or dismissed by the General
issued capital, unless the suspension or dismissal has first been proposed by the company’s Supervisory
Board. A member of the Executive Board may also be suspended by the Supervisory Board, though the
A resolution authorizing the Executive Board to issue new shares is usually presented at AEGON’s annual
Executive Board to acquire the company’s shares under terms and conditions determined by the General Meeting of Shareholders.
AEGON is not party to any significant agreements which may take effect, alter or terminate, conditional on a change of control following a public offer for the outstanding shares of the company, other than those customary in the financial markets (for example: financial arrangements, loans and joint venture agreements).
Executive Board contain provisions entitling them to severance payments, should their employment be terminated as the result of a merger or takeover 1. As part of the capital support transaction agreed with the
1 Employment contracts for members of AEGON’s Executive Board are available on the company’s website (www.aegon.com).
CONSOLIDATED INCOME STATEMENT OF AEGON N.V. � FOR THE YEAR ENDED DECEMBER 31
Amounts in EUR million (except per share data) Note 2009 2008 2007
Share in profi t / (loss) of associates 23 24 36
Diluted earnings per share (EUR per share) 1 45 (0.16) (0.92) 1.47
(Gains) / losses transferred to the income statement on disposal and impairment of available-for-sale investments 640 718 (891)
Changes in revaluation reserve real estate held for own use (1) 8 7
Aggregate tax effect of items recognized in other comprehensive income (2,315) 2,876 879
Net income recognized in the income statement – 204 – – – – 204 – 204
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY OF AEGON N.V. � FOR THE YEAR ENDED DECEMBER 31, 2009
Coupons on perpetual securities – (189) – – – – (189) – (189)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY OF AEGON N.V. � FOR THE YEAR ENDED DECEMBER 31, 2008
Other comprehensive income: Gains / (losses) on revaluation of available-for-sale investments – – (2,147) – – (2,147) – (2,147)
Other equity instruments issued – – – – 745 745 – 745
Cash fl ow movements on operating items not refl ected in income (8,565) (10,380) (10,732)
CONSOLIDATED CASH FLOW STATEMENT OF AEGON N.V. � FOR THE YEAR ENDED DECEMBER 31
Disposal of subsidiaries and associates, net of cash 11 – 9
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 1 (5,574) 2,386 (4,718)
Included in net increase / (decrease) in cash and cash equivalents are interest received (2009: EUR 7,778 million; 2008: EUR 8,614 million and 1 2007: EUR 8,715 million) dividends received (2009: EUR 816 million; 2008: EUR 925 million and 2007: EUR 886 million) and interest paid (2009: EUR 510 million; 2008: EUR 356 million and 2007: EUR 422 million).
The cash flow statement is prepared according to the indirect method.
CONSOLIDATED CASH FLOW STATEMENT OF AEGON N.V. � FOR THE YEAR ENDED DECEMBER 31 > CONTINUATION
The Hague. AEGON N.V. serves as the holding company for the
AEGON N.V. (or ‘the Company’), its subsidiaries and its proportionally consolidated joint ventures (AEGON or ‘the
Group’) have life insurance and pensions operations in over twenty countries in Europe, the Americas and Asia and are also active in savings and investment operations, accident and health insurance, general insurance and limited banking operations. Headquarters are located in The Hague, the Netherlands. The Group employs approximately 28,000 people worldwide.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. � AMOUNTS IN EUR MILLION, UNLESS OTHERWISE STATED
affecting the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Those estimates are inherently subject to change and actual results could differ from those estimates. Included among the material
The consolidated financial statements of AEGON N.V. were approved by the Executive Board and by the Supervisory Board on March 24, 2010. The financial statements are put to the
Annual General Meeting of Shareholders on April 29, 2010 for adoption. The shareholders’ meeting can decide not to adopt the financial statements but cannot amend them.
Group’s operating segments and replaces the requirement to determine primary (geographical) and secondary (business)
In addition, the standard introduces the statement of comprehensive income: it presents all items of recognized income and expenses, either in one single statement, or in two linked statements. AEGON has elected to present two statements. The adoption of this standard did not have any impact on equity or net income. In accordance with the transitional requirements of the standard, AEGON has provided full comparative information.
The adoption of this amendment had no impact on the financial position or performance of the Group.
The IASB issued, in May 2008, a number of minor amendments to IFRS which resulted from the IASB’s 2008 annual improvements project. These amendments, which were effective from January 1, 2009, deal with minor changes to the wordings used in the individual standards and seek to remove editorial and other inconsistencies in the literature.
IFRIC 13 � Customer loyalty programmes; IFRIC 15 � Agreements for the construction of real estate; IFRS 1 (revised) � First time adoption of IFRS.
The following standards, amendments to existing standards and interpretations, published prior to January 1, 2010, were not early adopted by the Group and will be applied in future years: IFRS 3 (revised) � Business Combinations; IAS 27 (revised) � Consolidated and separate fi nancial statements; Improvements to IFRS (2009); �
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 2.2.2 - 2.3
contingent payments subsequently re-measured at fair value through profit or loss. All transaction costs will be expensed.
This standard comes into effect for business combinations for which the acquisition date is on or after the beginning of the first annual period beginning on or after July 1, 2009. The requirements of this standard will be applied by AEGON in all acquisitions starting from January 1, 2010. This standard does not have any impact on the current income and equity of AEGON.
This set of improvements to IFRS issued by the IASB in April 2009 makes a number of minor amendments to 12 different standards and interpretations. These amendments, which are effective for accounting periods beginning on either July 1, 2009 or January 1, 2010, will all be applied by AEGON in its 2010 financial statements to the extent they are relevant. None of these amendments are expected to have a material change to the classification, measurement or presentation of any items in
IFRS 9 Financial Instruments addresses classification and measurement of financial assets, is available for early adoption immediately but mandatory only for accounting periods beginning on or after January 1, 2013. IFRS 9 replaces the multiple classification and measurement models in IAS 39 with a single model that has only two classification categories: amortized cost and fair value. IFRS 9 represents the first stage in the IASB’s planned replacement of IAS 39. IFRS 9 is expected to have a significant impact on the Group’s financial statements because it will potentially result in a reclassification and remeasurement of AEGON’s financial assets. However the full impact of IFRS 9 will only be clear after the remaining stages of the IASB’s project on IAS 39 completed and issued.
Amendment to IFRS 2 � Share Based Payments (Group cash settled and share based payment transactions); 1
The subsidiary’s assets, liabilities and contingent liabilities are measured at fair value on the acquisition date and are subsequently accounted for in accordance with the Group’s accounting principles, which is consistent with IFRS. Intra-group transactions, including AEGON N.V. shares held by subsidiaries, which are recognized as treasury shares in equity, are eliminated. Intra-group losses are eliminated, except to the extent that the underlying asset is impaired. Minority interests are initially stated at their share in the fair value of the net assets on the acquisition date and subsequently adjusted for the minority’s share in changes in the subsidiary’s equity.
Any difference between the net proceeds and the carrying amount of the subsidiary is recognized in the income statement.
On consolidation of an investment fund, a liability is recognized to the extent that the Group is legally obliged to buy back participations held by third parties. The liability is presented in the consolidated financial statement as investment contracts for account of policyholders. Where this is not the case, other participations held by third parties are presented as minority interests in equity. The assets allocated to participations held by third parties or by the Group on behalf of policyholders are presented in the consolidated financial statements as investments for account of policyholders.
Company operates. Each company in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 2.4 - 2.5
Central and Eastern Europe, Spain, France, Asia and European variable annuities. Main business lines include life and protection, pensions and asset management and general insurance.
In addition, underlying earnings is a key performance indicator on which the executive board manages AEGON’s performance.
In addition, certain products offered by AEGON Americas contain guarantees and are reported on a fair value basis, including the segregated funds offered by AEGON Canada and the total return annuities and certain guarantees on variable annuities of AEGON USA. The earnings on these products are impacted by movements in equity markets and risk free interest rates. Short-term developments in the financial markets may therefore cause volatility in earnings. Included in underlying earnings is a long-term expected return on these products.
Europe (included in Other countries) are excluded from underlying earnings, the long-term expected return for these guarantees is set at zero.
The consolidated financial statements provide information on the fair value of all financial assets, including those carried at amortized cost where the values are provided in the notes to the financial statements.
A financial asset is derecognized when the contractual rights to the asset’s cash flows expire, when the Group has transferred the asset and substantially all the risks and rewards of ownership, or when the Group has transferred the asset without transfer of substantially all the risks and rewards of ownership, provided the other party can sell or pledge the asset. Financial assets, in respect of which the Group has neither transferred nor retained all the risks and rewards, are recognized to the extent of the Group’s continuing involvement. If significantly all risks are retained, the assets are not derecognized.
On derecognition, the difference between the disposal proceeds and the carrying amount is recognized in the income statement as a realized gain or loss. Any cumulative unrealized gain or loss previously recognized in the revaluation reserve in shareholders’ equity is also recognized in the income statement.
All property is initially recognized at cost. Subsequently, investments in real estate are measured at fair value with the changes in fair value recognized in the income statement.
Real estate held for own use is carried at its revalued amount, which is the fair value at the date of revaluation less subsequent accumulated depreciation and impairment losses.
The Group develops property itself with the intention to hold it as investments in real estate. During the construction phase both the land and the building are presented as investments in real estate and carried at fair value unless this cannot be determined reliably in which case the real estate is valued at directly attributable costs, including borrowing costs. This represents a change in accounting policy which has been applied with effect from January 1, 2009. In prior years, such real estate was included in ‘Other assets and receivables’, carried at cost and not depreciated. When the construction phase was completed, the properties were transferred to investments in real estate at their carrying value and only then revalued to fair value. All fair value gains or losses are recognized in the income statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 2.9 - 2.10
to an underlying variable, that require little or no net initial investment and are settled at a future date.
As part of its asset liability management, the Group enters into economic hedges to limit its risk exposure. These transactions are assessed to determine whether hedge accounting can and should be applied.
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
hedging relationship is considered effective if the results of the hedging instrument are within a ratio of 80% to 125% of the result of the hedged item.
or losses in shareholders’ equity are amortized into the income statement when the income statement is impacted by the variability of the cash flow from the hedged item.
The Group’s share in losses is recognized until the investment in the associate’s equity and any other long-term interest that are part of the net investment are reduced to nil, unless guarantees exist.
Reinsurance assets are measured consistently with the amounts associated with the underlying insurance contracts and in accordance with the terms of each reinsurance contract.
Acquisition costs are deferred to the extent that they are recoverable and are subsequently amortized based on either the expected future premiums or the expected gross profit margins. For products sold in the United States and Canada with amortization based on expected gross profit margins, the amortization period and pattern are reviewed at each reporting date and any change in estimates is recognized in the income statement. Estimates include, but are not limited to: an economic perspective in terms of future returns on bond and equity instruments, mortality, disability and lapse assumptions, maintenance expenses and expected inflation rates. For all products, DPAC, in conjunction with VOBA where appropriate, is assessed for recoverability at least annually on a country-bycountry basis and is considered in the liability adequacy test for each reporting period. If appropriate, the assumptions included in the determination of estimated gross profits are adjusted.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 2.11 - 2.16
Interest rebates that are expected to be recovered in future periods are deferred and amortized as the surplus interest is realized. They are considered in the liability adequacy test for insurance liabilities.
For equity instruments, a significant or prolonged decline in fair value below initial cost is considered objective evidence of impairment and always results in a loss being recognized in the income statement. Equity investments are impaired to the asset’s fair value and any unrealized gain or loss previously recognized in shareholders’ equity is taken to the income statement as an impairment loss. The amount exceeding the balance of previously recognized unrealized gains or losses is recognized in the income statement.
and coupon payments are payable only if AEGON pays dividends on ordinary shares. Both the perpetual and convertible core capital securities are classified as equity rather than debt, are measured at par and those that are denominated in US dollars are translated using historical exchange rates.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 2.17 - 2.19
Trust pass-through securities, subordinated loans and other borrowings are initially recognized at their fair value including directly attributable transaction costs and are subsequently carried at amortized cost using the effective interest rate method, with the exception of specific borrowings that are designated as at fair value through profit or loss to eliminate, or significantly reduce, an accounting mismatch, or specific borrowings which are carried as at fair value through the profit and loss as part of a fair value hedge relationship. The liability is derecognized when the Group’s obligation under the contract expires, is discharged or is cancelled.
In the United States, the additional liability for guaranteed minimum benefits that are not bifurcated is determined each period by estimating the expected value of benefits in excess of the projected account balance and recognizing the excess over the accumulation period based on total expected assessments.
The reserve for unearned premiums includes premiums received for risks that have not yet expired. Generally the reserve is released over the term of the contract and is recognized as premium income.
Plan assets are qualifying insurance policies and assets held by long-term employee benefit funds that can only be used to pay the employee benefits under the plan and are not available to the Group’s creditors. They are measured at fair value and are deducted in determining the amount recognized on the balance sheet.
Premium loadings for instalment payments and additional payments by the policyholder towards costs borne by the insurer are included in the gross premiums. Rebates that form part of the premium rate, such as no-claim rebates, are deducted from the gross premium, others are recognized as an expense. Depending on the applicable local accounting principles, bonuses that are used to increase the insured benefits may be recognized as gross premiums.
Fees and commissions from investment management services and mutual funds, and from sales activities are recognized as revenue over the period in which the services are performed or the sales have been closed.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 2.25 - 3
Verliespolis and Stichting Woekerpolis Claim to reduce charges for customers of its unit-linked insurance policies in the
amortization schedule and the revised schedule, which is based on estimates of actual and future gross profits, is recognized in the income statement as an expense or a benefit in the period of determination. At December 31, 2009, the reversion to the mean assumptions for variable products, primarily variable annuities, were as follows in the United States: gross long-term equity growth rate of 9% (2008: 9%); gross short-term growth rate of 7.25% (2008: 15%); gross short- and long-term fixed security growth rate of 6% (2008: 6%); and the gross shortand long-term growth rate for money market funds of 3.5%
Fair value of fi nancial instruments, borrowings and derivatives determined using valuation techniques
The estimated fair values of AEGON’s financial assets and liabilities are presented in the respective notes to the balance sheet together with their carrying values. The estimated fair
values correspond with the amounts at which the financial instruments at AEGON’s best estimate could have been traded at the balance sheet date between knowledgeable, willing parties in arm’s length transactions. When available, AEGON
uses quoted market prices in active markets to determine the fair value of investments and derivatives. In the absence of an active market, the fair value of investments in financial assets is estimated by using other market observable data such as corroborated external quotes and present value or other valuation techniques. An active market is one in which transactions are taking place regularly on an arm’s length basis.
Valuation techniques are used when AEGON determines the market is inactive or quoted market prices are not available for the asset or liability at the measurement date. However, the fair value measurement objective remains the same, that is, to arrive at the price at which an orderly transaction would occur between market participants at the measurement date.
Therefore, unobservable inputs reflect AEGON’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These inputs are developed based on the best information available.
AEGON employs an oversight structure over valuation of financial instruments that includes appropriate segregation of duties. Senior management, independent of the investing functions, is responsible for the oversight of control and valuation policies and for reporting the results of these policies.
Third party pricing services will often determine prices using recently reported trades for identical or similar securities. The pricing service makes adjustments for the elapsed time from the trade date to the balance sheet date to take into account available market information. Lacking recently reported trades, third party pricing services and brokers will use modeling techniques to determine a security price where expected future cash flows are developed based on the performance of the underlying collateral and discounted using an estimated market rate. Also included within the modeling techniques for ABS –
Credit ratings are also an important consideration in the valuation of securities and are included in the internal process for determining AEGON’s view of the risk associated with each security. However, AEGON does not rely solely on external credit ratings and there is an internal process, based on market observable inputs, for determining AEGON’s view of the risks associated with each security.
Fair values for exchange-traded derivatives, principally futures and certain options, are based on quoted market prices in active markets. Fair values for over-the-counter (OTC)
The fair values of these guarantees are calculated as the present value of future expected payments to policyholders less the present value of assessed rider fees attributable to the guarantees. Given the complexity and long-term nature of these guarantees which are unlike instruments available in financial markets, their fair values are determined by using stochastic techniques under a variety of market return scenarios.
AEGON), adjusted to reflect the subordination of senior debt holders at the holding company level to the position of policyholders at the operating company level (who have priority in payments to other creditors). Because CDS spreads for US
Life insurers differ significantly from that for European life insurers, AEGON’s assumptions are set by region to reflect these differences in the valuation of the guarantee embedded in the insurance contracts.
Since many of the assumptions are unobservable and are considered to be significant inputs to the liability valuation, the liability included in future policy benefits has been reflected within Level III of the fair value hierarchy. Refer to note 47 for more details about AEGON’s guarantees.
Assumptions on customer behaviour, such as lapses, included in the models are derived in the same way as the assumptions used to measure insurance liabilities.
IFRS 7 for financial instruments that are measured in the balance sheet at fair value. In accordance with this amendment
AEGON uses the following hierarchy for determining and disclosing the fair value of financial instruments: Level I: quoted prices (unadjusted) in active markets for �
(that is, as prices) or indirectly (that is, derived from prices of identical or similar assets and liabilities) using valuation techniques for which all signifi cant inputs are based on observable market data; and
observable market data (that is, unobservable inputs) using valuation techniques for which any signifi cant input is not based on observable market data.
The table below shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy: Financial assets carried at fair value Level I Level II Level III Total
The investments for account of policyholders included in the table above represents those investments carried at fair value through profi t or loss. 1
During the year, the amount of assets transferred from Level I
to Level II classification was EUR 498 million. The reason for the change in level relates to changes in liquidity for specific debt securities.
Investments for account of policyholders 3,329 (191) – 473 (835) – – – 2,776 (25)
During the year AEGON transferred certain financial instruments from Levels I and II to Level III of the fair value hierarchy. The amount of the total assets transferred was
Since transfer, all such assets have been valued using valuation models incorporating significant non market-observable inputs.
Similarly, during the year AEGON transferred certain financial instruments from Level III to other levels of the fair value hierarchy. The recorded amount of the total assets transferred was EUR 2,517 million. The change in level was a result of a return of activity in the market for these securities.
d. Derivatives exclude derivatives for account of policyholders amounting to EUR 143 million.
The following table shows the sensitivity of the fair value of
Financial assets designated at fair value through profi t or loss 1
(EUR 3,020 million). For corporate bonds the most signifi cant unobservable input for the valuation of these securities is the credit spread / illiquidity premium. AEGON adjusted the price, based on the bid / ask spread AEGON observed in the market for these type of securities. For investments in structured debt securities (ABS, RMBS and CMBS), the most signifi cant
Derivatives also include embedded derivatives related to guarantees (EUR 0.8 billion) for which the most signifi cant unobservable input is the credit spread. The credit spread was increased or decreased by 20 basis points.
ABS-Housing securities, CMBS and RMBS are monitored and reviewed on a monthly basis with detailed modeling completed on each portfolio quarterly. Model output is generated under a base and several stress-case scenarios. ABS-Housing, CMBS and
RMBS asset specialists utilize modeling software to perform a loan-by-loan, bottom-up approach to modeling. The ABS-housing models incorporate market estimates on the property market, borrowing characteristics, propensity of a borrower to defaults or prepay and the overall security structure.
In addition, at least quarterly, AEGON reviews all ABS-Housing securities, CMBS and RMBS that have been in an unrealized loss position of greater than 12 months and those with a month to month market value decline of 5%. Additional reviews include a realized loss analysis and analysis of holdings with a price decline of more than 10% or more during the quarter. ABS-
More detailed cash flow modeling was performed on issuances identified through stress testing as being most at risk for payment interruption, such as issuances with a disproportionate number of borrowers from states experiencing significant declines in home values. Cash flows were modeled using the current collateral pool and capital structure to determine whether there has been an adverse change in cash flows (i.e. an event has occurred that would impact estimated future cash flows). Defaults were estimated by identifying the loans that are in various delinquency buckets and defaulting a certain percentage of them over the near-term and long-term.
Recent payment history, a percentage of on-going delinquency rates and a constant repayment rate are also incorporated into the model. Once the entire pool is modeled, AEGON can determine whether the particular tranche or holding is at risk for payment interruption.
The valuation utilized the best available information, including assumptions and projections considered reasonable and supportable by management. The assumptions used in the valuation involve significant judgments and estimates. Refer to note 6 for more details.
Deferred tax assets are established for the tax benefit related to deductible temporary differences, carry forwards of unused tax losses and carry forwards of unused tax credits when in the judgment of management it is more likely than not that AEGON
will receive the tax benefits. Since there is no absolute assurance that these assets will ultimately be realized, management reviews AEGON’s deferred tax positions periodically to determine if it is more likely than not that the assets will be realized. Periodic reviews include, among other things, the nature and amount of the taxable income and deductible expenses, the expected timing when certain assets will be used or liabilities will be required to be reported and the reliability of historical profitability of businesses expected to provide future earnings. Furthermore, management considers tax-planning strategies it can utilize to increase the likelihood that the tax assets will be realized. These strategies are also considered in the periodic reviews.
Management exercises judgment in evaluating the probability that a loss will be incurred. The estimate of the amount of a loss requires management judgment in the selection of a proper calculation model and the specific assumptions related to the particular exposure.
Many of these policies are group wide while others are specific to the unique situation of local businesses. The group level policies limit the Group’s exposure to major risks such as equity, interest rates, credit and currency. The limits in these policies in aggregate remain within the Group’s overall tolerance for risk and the Group’s financial resources. Operating within this policy framework, AEGON employs risk management programs including asset liability management (ALM) processes and models, hedging programs (which are largely conducted via the use of derivatives) and insurance programs (which are largely conducted through the use of reinsurance). These risk management programs are in place in each country unit and are not only used to manage risk in each unit, but are also part of the Group’s overall risk management.
AEGON also measures the sensitivity of net income and shareholders’ equity under both stochastic and deterministic scenarios. Management uses the insight gained through these
Each sensitivity analysis reflects the extent to which the shock tested would affect management’s critical accounting estimates and judgment in applying AEGON’s accounting policies. 1 Marketconsistent assumptions underlying the measurement of nonlisted assets and liabilities are adjusted to reflect the shock tested. The shock may also affect the measurement of assets and liabilities based on assumptions that are not observable in the market. For example, a shock in interest rates may lead to changes in the amortization schedule of deferred policy acquisition costs or to increased impairment losses on equity investments. Although management’s short-term assumptions may change if there is a reasonable change in a risk factor, long-term assumptions will generally not be revised unless there is evidence that the movement is permanent. This fact is reflected in the sensitivity analyses provided below.
The accounting mismatch inherent in IFRS is also apparent in the reported sensitivities. A change in interest rates has an immediate impact on the carrying amount of assets measured at fair value. However the shock will not have a similar effect on the carrying amount of the related insurance liabilities that are measured based on prudent assumptions or on management’s long term expectations. Consequently, the different measurement bases for assets and liabilities lead to increased volatility in IFRS net income and equity. AEGON has classified a significant part of its investment portfolio as “available for sale”, 1 Please refer to Note 3 for a description of the critical accounting estimates and judgments.
which is one of the main reasons why the economic shocks tested have a different impact on net income than on equity.
The sensitivities do not reflect what the net income for the period would have been if risk variables had been different because the analysis is based on the exposures in existence at the reporting date rather than on those that actually occurred during the year. Nor are the results of the sensitivities intended to be an accurate prediction of AEGON’s future equity or earnings. The analysis does not take into account the impact of future new business, which is an important component of
AEGON’s future earnings. It also does not consider all methods available to management to respond to changes in the financial environment, such as changing investment portfolio allocations or adjusting premiums and crediting rates. Furthermore, the results of the analyses cannot be extrapolated for wider variations since effects do not tend to be linear. No risk management process can clearly predict future results.
As an international group, AEGON is subject to foreign currency translation risk. Foreign currency exposure exists when policies are denominated in currencies other than the issuer’s functional currency. Currency risk in the investment portfolios backing insurance and investment liabilities is 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 self-imposed capital requirements.
AEGON holds the remainder of its capital base (convertible core capital securities, perpetual capital securities, subordinated and senior debt) in various currencies in amounts that are targeted to correspond to the book value of the country units. This balancing mitigates currency translation impacts on equity and leverage ratios. AEGON does not hedge the income streams from the main non-euro units and, as a result, earnings may fluctuate due to currency translation. As AEGON has significant business segments in the Americas and in the United Kingdom, the principal sources of exposure from currency fluctuations are from the differences between the US dollar and the euro and between the UK pound and the euro. AEGON may experience significant changes in net income and shareholders’
Decrease by 15% of non-euro currencies relative to the euro 204 (1,180)
The effect of currency exchange movements is refl ected as a one-time shift up or down in the value of the non-euro currencies relative to the euro on 1
For some products, cash flows are less predictable as a result of policyholder actions that can be affected by the level of interest rates.
This activity may result in cash payments by AEGON requiring the sale of invested assets at a time when the prices of those assets are adversely affected by the increase in market interest rates; this may result in realized investment losses.
These cash payments to policyholders result in a decrease in total invested assets and a decrease in net income. Among other things, early withdrawals may also require accelerated amortization of DPAC, which in turn reduces net income.
AEGON manages interest rate risk closely taking into account all of the complexity regarding policyholder behavior and management action. AEGON employs sophisticated interest rate measurement techniques and actively uses derivatives and other risk mitigation tools to closely manage its interest rate risk exposure. AEGON operates an interest rate risk policy that reflected in the sensitivities because many of these liabilities are not measured at fair value. Over time, the short-term reduction in net income due to rising interest rates would be offset by higher net income in later years, all else being equal.
Therefore, rising interest rates are not considered a long-term risk to the Group.
limits the amount of interest rate risk to which the Group is exposed. All derivative use is governed by AEGON’s Derivative
As premiums and deposits are received, these funds are invested to pay for future policyholder obligations. For general account products, AEGON typically bears the risk for investment performance equalling the return of principal and interest.
Money market and other short-term investments – carried at fair value 10,064 8,464
Other fi nancial assets – carried at amortized cost – 15
positions during 2009. For a fee, AEGON USA had taken credit exposure on a credit index, i.e. super-senior tranches of the
negotiating settlement terms for an EUR 99 million notional liquidity facility agreement. Per these terms, AEGON issues embedded contingent options, which reflects potential exposure to underlying senior tranches of synthetic CDOs with a notional of EUR 1.8 billion when losses exceed the fair value of collateral assigned by the counterparty (fair value of collateral is
AEGON manages credit risk exposure by individual counterparty, sector and asset class, including cash positions. Normally it mitigates credit risk in derivative contracts by entering into collateral agreements, where practical, and in International
Swaps and Derivatives Association (ISDA) master netting agreements for each of AEGON’s legal entities to facilitate
Agreements that outline the acceptable collateral require high quality instruments to be posted. Nearly all securities received as collateral are US Treasuries or US Agency bonds. In 2009
For the resulting net credit risk exposure, AEGON employs deterministic and stochastic credit risk modelling in order to assess the Group’s credit risk profile, associated earnings and capital implications due to various credit loss scenarios.
(Fitch, Moody’s and S&P) and AEGON’s internal rating of the counterparty. If an exposure exceeds the stated limit then the exposure must be reduced to the limit for the country unit and rating category as soon as possible. Exceptions to these limits can only be made after explicit approval from AEGON’s Group
At December 31, 2009 there was one violation of the Credit
Deutsche Bank and HSBC. AEGON had large investments in sovereign backed assets, the largest being in the USA,
The Netherlands, Germany, France and the United Kingdom, but highly rated sovereign assets are excluded from the policy.
AEGON group level counterparty exposure limits were revised at the end of 2009 as follows: Credit rating In EUR million Revised limit Previous limit
AEGON’s major country units, excluding reinsurance assets, are presented in the table that follows, organized by rating category and split by assets that are valued at fair value and assets that are valued at amortized cost. Disclosure of ratings follows a hierarchy of S&P, Moody’s Fitch, Internal, National Association of Insurance Commissioners (NAIC).
Past due and / or impaired assets 413 715 245 286 – 67 135 5 793 1,073
ABSs – Collateralized Bond Obligations (CBOs) 582 640 – – 1,222
The fair value of AEGON The Netherlands mortgage portfolio as per December 31, 2009 amounts to EUR 11,476 million. The loan to value (LTV) amounts to about 95%. A significant part of the portfolio (51%) is government guaranteed. 1.0% of the portfolio is in delinquency (delinquency is defined as 60 days in arrear).
Credit risk concentrations – debt securities and money market investments Americas
Past due and / or impaired assets 266 9 2 16 293
Past due and / or impaired assets 82 192 – 112 386
Included in the debt securities and money market investments are EUR 70 million of assets that have been classified as held-to-maturity and are therefore carried at amortized cost
(2008: EUR 8 million) and EUR 59 million is corporate exposure
Included in our debt securities and money market investments are EUR 2,192 million of exposures to countries that have experienced downgrades in 2009 or are on credit watch: Amortized cost 2009
The fair values of these instruments were determined as follows: Level II Level III Total
AEGON Americas holds EUR 1,341 million (2008: EUR 1,819 million) of ABS-Housing securities of which AEGON USA holds
629 million (2008: EUR 1,023 million). ABS Housing securities are secured by pools of residential mortgage loans primarily those which are categorized as sub prime. The unrealized loss is primarily due to decreased liquidity and increased credit spreads in the market combined with significant increases in expected losses on loans within the underlying pools. Expected losses within the underlying pools are generally higher than original expectations, primarily in certain later-vintage adjustable rate mortgage loan pools, which has led to some rating downgrades in these securities.
AEGON USA does not currently invest in or originate whole loan residential mortgages. AEGON USA categorizes asset backed securities issued by a securitization trust as having subprime mortgage exposure when the average credit score of the underlying mortgage borrowers in a securitization trust is below 660 at issuance. AEGON USA also categorizes asset backed securities issued by a securitization trust with second lien mortgages as subprime mortgage exposure, even though a significant percentage of second lien mortgage borrowers may not necessarily have credit scores below 660 at issuance.
As of December 31, 2009, the amortized cost of investments backed by subprime mortgage loans was EUR 1,202 million
The table also provides the market values of the ABS subprime mortgage exposure by quality and vintage: Market value by Quality and Vintage
AAA AA A BBB < BBB Total 2009 – – – – – –
Second lien collateral primarily composed of loans to prime and Alt-A borrowers.1
Total Subprime Mortgages – Floating Rate 195 153 19 30 54 451 2008 – – – – – –
The Group’s RMBS mainly includes government sponsored enterprise (GSE) guaranteed passthroughs, whole loan passthroughs, Alt-A MBS and negative amortization MBS.
All RMBS securities are monitored and reviewed on a monthly basis with detailed modeling completed on each portfolio quarterly. Model output is generated under base and several stress-case scenarios. RMBS asset specialists utilize modeling software to perform a loan-by-loan, bottom-up approach to modeling. Models incorporate external loan-level analytics to identify the riskiest securities. The results from the models are then closely analyzed by the asset specialist to determine whether or not a principal or interest loss is expected to occur.
Reverse mortgage fl oaters 292 – – – – 292 350
EUR 667 million at December 31, 2009 (2008: EUR 743 million).
December 31, 2009 (2008: EUR 524 million). Alt-A loans are made to borrowers whose qualifying mortgage characteristics do not meet the standard underwriting criteria established by the GSEs (Government-Sponsored Enterprises). The typical
AEGON’s investments in Alt-A mortgages are in the form of mortgage backed securities. AEGON's Alt-A investments are primarily backed by loans with fixed interest rates for the entire term of the loan. The tables below summarize the credit quality of the underlying loans backing the securities and the vintage year.
(typically 110% to 125% of the original loan amount), the loan recalibrates to a fully amortizing level and a new minimum payment amount is determined. The homeowner’s new minimum payment amount can be significantly higher than the original minimum payment amount. The timing of when these loans reach their negative amortization cap will vary, and is a function of the accrual rate on each loan, the minimum payment rate on each loan and the negative amortization limit itself. Typically, these loans are estimated to reach their negative amortization limit between 3 and 5 years from the date of origination.
AEGON’s exposure to negative amortization mortgages is primarily to super-senior securities. The following table provides the market values of the Negative Amortization
of commercial mortgage backed securities (CMBS). The unrealized loss on CMBS is EUR 878 million (2008: EUR 1,817 million). The underlying mortgages have varying risk characteristics and are pooled together and sold in different rated tranches. The Group’s CMBS include conduit, large loan, single borrower, commercial real estate collateral debt obligations (CRE CDOs), government agency, and franchise loan receivable trusts.
The total gross unrealized loss on CMBS of AEGON USA is
EUR 921 million, and the total net unrealized loss on CMBS of
AEGON USA is EUR 878 million. Over the past 18 months, the commercial real estate market has continued to weaken.
As property fundamentals deteriorate, CMBS loan delinquencies have been climbing. The introduction of the 20% and 30%
(2008: EUR 1,948 million). These are securitizations of underlying pools of credit cards receivables, auto financing loans, small business loans, bank loans and other receivables.
The underlying assets have varying credit ratings and are pooled together and sold in tranches. See the table below for the breakdown of the non housing ABS exposure of AEGON USA.
CDOs backed by ABS, Corp Bonds, Bank Loans 357 162 33 15 29 596 719
The fair values of AEGON USA’s ABS- non housing instruments were determined as follows: Level II Level III Total
The unrealized loss in the small business loan ABS portfolio is a function of decreased liquidity and increased spreads as new issuance within this sector has come to a halt. Additionally, delinquencies and losses in the collateral pools within AEGON’s small business loan securitizations have increased since 2007, as a result of the overall economic slowdown which has resulted in decreased sales and profits at small businesses nationwide.
The capital bases of banks and other financial firms have been strained as they are forced to retain assets on their balance sheets that had previously been securitized and to write down certain mortgage-related and corporate credit-related assets.
Financial companies within AEGON’s financial sector are generally high in credit quality, and as a whole represent a large portion of the corporate debt market. The financial sector has seen a large impact to valuations from the broader market volatility given it is a focal point of the current concerns.
About EUR 1.7 billion of the bonds in AEGON USA’s portfolio are wrapped by monoline insurers (2008: EUR 2.6 billion), of which
EUR 381 million of bonds (2008: EUR 792 million) in the
EUR 160 million (2008: EUR 157 million), although an insolvency by one of the monolines could create significant market price volatility for the affected holdings.
The following table breaks down bonds in AEGON USA’s portfolio that are wrapped by monoline insurers. The disclosure by rating follows a hierarchy of S&P, Moody’s, Fitch, internal, and NAIC.
Of the remaining 13% (2008: 12%), no individual monoline insurer represents more than 10% of the total wrapped portfolio.
The tables that follow provide information on past due and individually impaired financial assets. An asset is past due when a counterparty has failed to make a payment when contractually due. Assets are impaired when an impairment loss has been charged to the income statement relating to this asset. After the impairment loss is reversed in subsequent periods, the asset is no longer considered to be impaired.
When the terms and conditions of financial assets have been renegotiated, the terms and conditions of the new agreement apply in determining whether the financial assets are past due.
There were renegotiated assets of EUR 13 million that would have been past due or impaired if they had not been renegotiated in the reporting year (2008: nil). At December 31, 2009
EUR 165 million (2008: EUR 140 million) collateral and other credit enhancements are held related to financial assets that were past due or individually impaired.
Past due but not impaired assets > 1 year Total > 1 year Total
Debt securities - carried at fair value 19 – 1 20 36 – – 36
Exposure to equity, real estate and capital markets exists in both assets and liabilities. Asset exposure exists through direct equity investment, where AEGON bears all or most of the volatility in returns and investment performance risk. Equity market exposure is also present in insurance and investment contracts for account of policyholders where funds are invested in equities, such as variable annuities, unit-linked products and mutual funds. Although most of the risk remains with the policyholder, lower investment returns can reduce the asset management fee earned by AEGON on the asset balance in these products. In addition, some of this business has minimum return or accumulation guarantees.
Past due and / or impaired assets 83 260 1 – 344
Past due and / or impaired assets 54 219 1 45 371
AEGON holds EUR 28,389 million of general account investments in cash, money market products and sovereign bonds that are readily saleable or redeemable on demand.
The maturity analysis on the next page shows the remaining contractual maturities of each category of financial liabilities
For example, when the amount payable varies with changes in an index, the amount disclosed may be based on the level of the index at the reporting date. The amounts included below for financial guarantee contracts are the maximum amounts the
Group could be forced to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Group considers that it is more likely than not that no amount will be payable under the arrangement.
Maturity analysis – gross undiscounted contractual cash fl ows (for non-derivatives)
Investment contracts for account of policyholders 2 12,791 7,592 – – – 20,383
Insurance contracts for account of policyholders – 5,490 21,821 17,945 70,682 115,938
Insurance contracts for account of policyholders – 3,480 19,162 15,960 76,503 115,105
Investment contracts for account of policyholders 189 2,784 13,193 15,117 56,589 87,872
For mortality and morbidity risk, AEGON sells certain types of policies that are at risk if mortality or morbidity increases, such as term life insurance and accident insurance, and sells certain types of policies that are at risk if mortality decreases
Sensitivity analysis of net income and shareholders’ equity to various underwriting risks is shown in the table that follows on the next page. The sensitivities represent an increase or decrease of mortality and morbidity rates over 2009. Increases in mortality rates lead to an increase in the level of benefits and claims. The impact on net income and equity of sales transactions of investments required to meet the higher cash outflow is reflected in the sensitivities.
A change in actual experience with mortality or morbidity rates may not lead to a change in the assumptions underlying the measurement of the insurance liabilities as management may recognize that the change is temporary. Life insurers are also exposed to longevity risk. In practice, however, this longevity risk can be mitigated, for example by adjusting premium.
State notified the European Commission of the issuance by us in December 2008 of EUR 3 billion of non-voting convertible core capital securities to Vereniging AEGON, which was funded by the Dutch State. Last year, the European Commission found the aid provided by the Dutch State to be compatible with the common market, raised no objection against the notified aid and authorized it as emergency intervention in the face of the financial crisis for a period of six months. Emergency intervention is required to be re-evaluated after six months on the basis of a credible and substantiated plan for the long term viability of AEGON. Provided a credible plan is submitted, the authorization of the emergency intervention is automatically prolonged until the European Commission reaches its decision on this viability plan. The European Commission distinguishes between institutions which are fundamentally sound and institutions suffering from more structural solvency problems.
(restructuring) measures than those currently foreseen in order to find the Dutch State aid compatible with the common market.
Should the European Commission conclude that, on the basis of the viability plan or at any time as long as the Dutch State loan to Vereniging AEGON is in place, the Dutch State aid ceases to be compatible with the common market, the European
Underlying earnings before tax geographically 805 398 48 161 (252) – 1,160
Total operating earnings before tax 775 151 54 161 (441) – 700
Gains and losses on investments 275 465 (8) 14 – – 746
Accident and health insurance 1,848 203 – 71 – – 2,122
The reconciliation of this measure to the Income before tax is shown below. AEGON believes that underlying earnings before tax, together with the other information included in this report, provides a meaningful measure for the investing public to evaluate AEGON’s business relative to the businesses of its peers.
Fair value changes on economic hedges for which no hedge accounting is applied 36 152 (46) (340)
Realized gains and (losses) on repurchased debt 40 11 – –
Impairment charges / (reversals) on fi nancial assets, excluding receivables 1,005 111 183 23 5 1,327
Impairment charges / (reversals) on non-fi nancial assets and receivables 22 15 1 – – 38
Impairment charges / (reversals) on fi nancial assets, excluding receivables 815 138 22 70 34 1,079
Impairment charges / (reversals) on non-fi nancial assets and receivables 38 – – 3 – 41
Impairment charges / (reversals) on fi nancial assets, excluding receivables 44 24 3 – – 71
Impairment charges / (reversals) on non-fi nancial assets and receivables 28 – – 2 – 30
VOBA and future servicing rights 2,741 155 757 203 – – 3,856
Off balance sheet investments third parties 77,676 12,968 3,116 7,208 – – 100,968
Investments in real estate 488 2,040 – – – – 2,528
Amortization / depreciation through income statement – 332 26 18 3 379
Amortization / depreciation through income statement – 212 13 11 4 240
EUR 30 million and EUR 39 million relates to acquisition in
Of additions to goodwill in 2009 of EUR 6 million, an amount of
EUR 3 million, EUR 1 million and EUR 2 million relates to acquisitions in Romania, United States and the Netherlands respectively. Refer to note 52 for further information on the business combinations entered into by AEGON in 2008 and 2009.
The goodwill balance has been allocated across the cashgenerating units which are expected to benefit from the synergies inherent in the goodwill. Goodwill is tested for impairment both annually and in addition, when there are specific indicators of a potential impairment. The recoverable amount is the higher of the value in use and fair value less costs to sell for a cash-generating unit. A geographical summary of the cash-generating units to which the goodwill is allocated is as follows: Americas
Value in use calculations have been actuarially determined based on business plans covering a period of typically 5 years and pre-tax risk adjusted discount rates ranging between 11%
plans covering a period of 5 years further extrapolated to 10 years where the new business levels for years 6-10 assumed a 5% growth rate, pre-tax risk adjusted discount rate of 17%.
The VOBA currently recognized is amortized over an average period of 12 to 15 years, with an average remaining amortization period of 11 years (2008: 11 years). Future servicing rights are amortized over an average period up to 35 years, of which 13 remains at December 31, 2009 (2008: 13 years). Software is generally depreciated over a period of three to five years.
At December 31, 2009, the remaining depreciation period was 2 years (2008: 2 years).
Financial assets at fair value through profi t or loss (FVTPL) 1 5,076 5,603
Refer to note 49 for a summary of all fi nancial assets and fi nancial liabilities at fair value through profi t or loss.1
Deposits with fi nancial institutions – – – 1,047 1,047 1,047
Money market and other short-term investments 8,318 146 – – 8,464 8,464
Deposits with fi nancial institutions – – – 1,640 1,640 1,640
Of the debt securities, money market and other short-term investments, mortgages and private loans EUR 23,788 million is current (2008: EUR 17,883 million).
As part of the AEGON Levensverzekering N.V. funding program the company regularly enters into securitization contracts for its mortgage loans. At December 31, 2009 a total of five publicly placed and one privately placed securitization contracts were outstanding with a total value of EUR 3.9 billion
AEGON Nederland with the issuance of mortgage-backed securities. The transfer of ownership title will take place only if the borrowers are duly notified by the special purpose company upon the occurrence of certain pre-defined ‘notification events’.
At the same time AEGON entered into a fixed-to-floating swap agreement with the contract parties under which AEGON
agreed to pay the floating rate (EURIBOR based) and receive the fixed rate (yield from the mortgage receivables). After a period of seven years, the interest of the notes issued by the special purpose company in respect of this transaction will stepup, together with a similar step-up in the fixed-to-floating swap agreement. At that same time, the special purpose company has the right to call the notes. A deferred purchase arrangement forming part of the contract to sell the mortgage loans to the special purpose company entitles AEGON
EUR 13 million ( 2008: EUR 13 million) continues to be recognized as a financial asset on balance, representing the interest rate risk retained by AEGON in respect of the fourth publicly placed securitization contract.
AEGON owns EUR 194 million (2008: EUR 201 million) of shares in the Federal Home Loan Bank that are measured at par, which equals the amortized cost value. The bank has implicit financial support from the United States government. The redemption value of the shares is fixed at par and can only be redeemed by the bank.
Only other insignificant amounts of unquoted equity instruments are measured at cost.
Movement on the loan allowance account during the year were as follows: Addition charged to income statement (132) (49)
Refer to note 51 for a discussion of collateral received and paid.
In 2009, 89% of the value of AEGON’s properties, both for general account and for account of policyholders, were appraised (2008: 95%), of which 92% was performed by independent external appraisers (2008: 84%).
Rental income of EUR 86 million (2008: EUR 96 million; 2007: EUR 89 million) is reported as part of investment income in the income statement. EUR 7 million (2008: nil; 2007: nil) is attributable to rent on foreclosed real estate.
arising from investment property that generated rental income during the period amounted to EUR 65 million
(2008: EUR 53 million; 2007: EUR 53 million). EUR 2 million
Refer to note 50 for a summary of contractual obligations to purchase investment property or for repairs, maintenance or enhancements.
Refer to note 49 for a summary of all fi nancial assets and fi nancial liabilities at fair value through profi t or loss.2
Embedded derivatives that are not closely related to the host contracts have been bifurcated and recorded at fair value in the balance sheet. These bifurcated embedded derivatives are embedded in various institutional products, modified coinsurance and unit linked insurance contracts in the form of guarantees for minimum benefits. As a result of movements in financial markets in 2009 (increased long-term interest rates, lower implied equity volatilities and increased equity markets)
Another strategy used is to synthetically replicate corporate credit exposures with credit derivatives. This involves the purchase of high quality low risk assets and the sale of credit derivatives. The program is designed to purchase asset positions that are already subject to review by management, but may not be available under the same terms and conditions in the cash bond market. AEGON holds financial derivatives for trading purposes.
The market disruption resulted in AEGON and the counterparty negotiating settlement terms for EUR 99 million notional liquidity facility agreement. Per these terms, AEGON issues embedded contingent options, which reflects potential exposure to underlying senior tranches of synthetic CDOs with a notional of EUR 1.8 billion when losses exceed the fair value of collateral assigned by the counterparty (fair value of collateral is
AEGON has entered into interest rate swap agreements that effectively convert certain fixed-rate assets and liabilities to a floating-rate basis (generally to six months or less LIBOR). These hedges are used for portfolio management to better match assets to liabilities or to protect the value of the hedged item from interest rate movements. These agreements involve the payment or receipt of fixed-rate interest amounts in exchange for floating-rate interest amounts over the life of the agreement without the exchange of the underlying principal amounts.
AEGON has entered primarily into interest rate swap agreements that effectively convert certain variable-rate assets and liabilities to a fixed-rate basis in order to match the cash flows of the assets and liabilities within AEGON’s portfolio more closely. These agreements involve the payment or receipt of variable-rate interest amounts in exchange for fixed-rate interest amounts over the life of the agreement without the exchange of the underlying principal amounts. AEGON is hedging its exposure to the variability of future cash flows from the interest rate movements for terms up to 32 years for hedges converting existing floating-rate assets and liabilities to fixed-rate assets.
AEGON uses forward starting interest rate swap agreements to hedge the variability in future cash flows associated with the forecasted purchase of fixed-income assets. These agreements reduce the impact of future interest rate changes on the forecasted transaction. Fair value adjustments for these interest rate swaps are deferred and recorded in equity until the occurrence of the forecasted transaction at which time the interest rate swaps will be terminated. The accumulated gain or loss in equity will be amortized into investment income as the acquired asset affects income. AEGON is hedging its exposure to the variability of future cash flows from interest rate movements for terms up to 23 years. The cash flows from these hedging instruments are expected to affect the profit and loss for approximately the next 42 years. For the year ended
EUR 35 million that are recognized directly in equity to be reclassified into net income during the period when the cash flows occur of the underlying hedged items. For the same year, none of AEGON’s cash flow hedges were discontinued, as it was probable that the original forecasted transactions would occur by the end of the originally specified time period documented at the inception of the hedging relationship.
In addition, AEGON also makes use of cross currency swaps to convert variable or fixed foreign currency cash flows into fixed cash flows in local currencies. The cash flows from these hedging instruments are expected to occur over the next 7 to 8 years. These agreements involve the exchange of the underlying principal amounts.
States, United Kingdom and Canada are funded in Euros. When the debt funding of investments is not in the functional currency of the investment, AEGON uses derivatives to swap the currency exposure of the debt instrument to the appropriate functional currency. This policy will ensure that total capital will reflect currency movements without distorting debt to shareholders’ equity ratios. AEGON utilizes various financial instruments as designated hedging instruments of its foreign investments. These instruments include subordinated borrowings, long-term and short-term borrowings, short-term debts to credit institutions, cross currency swap contracts and forward foreign exchange contracts.
All associates are unlisted and are accounted for using the equity method and are considered to be non-current. The investments in associates include interest in insurance companies that are required to maintain a minimum solvency margin based on local directives. 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 of associates.
Amounts due from reinsurers in respect of claims already paid by the Group on the contracts that are reinsured are included in other assets and receivables (note 13).
EUR 46 million of the reinsurance assets are current (2008: EUR 56 million).
Gross premium and deposits – existing and new business 803 77 880
Movements during the year in reinsurance assets relating to non-life insurance: 2009 2008
Costs deferred / rebates granted during the year 1,555 57 37
Account of policyholders real estate held for own use Equipment Total
Realized gains / (losses) through income statement 1 – – 1
Realized gains / (losses) through income statement 1 (7) – (6)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 13.1 - 13.2
General account real estate held for own use are mainly held by
54% of the value of the general account real estate held for own use was last revalued in 2009 (2008: 47%), based on market value appraisals by qualified internal and external appraisers. 98% of the appraisals in 2009 were performed by independent external appraisers (2008: 76%).
The movements in the provision for doubtful debts during the year were as follows: Additions charged to earnings (21) (4)
The weighted effective interest rate on short-term deposits was 0.49% (2008: 1.96%) and these deposits have an average maturity of 4.27 days (2008: 8.52 days).
The majority of cash is not subject to any restrictions. However, the Dutch Central Bank requires AEGON The Netherlands to hold 2% of its assets relating to banking activities in an account with the Dutch Central Bank. This amount on deposit is reassessed on a monthly basis and carries interest at approximately 1.0% (2008: 2.5%). The balance at the end of the year was EUR 98 million (2008: EUR 86 million).
Issued share capital and reserves attributable to shareholders of AEGON N.V.
There are restrictions on the amount of funds that companies within the Group may transfer in the form of cash dividends or otherwise to the parent company. These restrictions stem from solvency and legal requirements. Refer to note 48 for a description of these requirements.
Vereniging AEGON, in case of an issuance of shares by AEGON
AEGON as a result of exercising these option rights would increase its voting power to more than 33 percent. Class B
preferred shares will then be issued at par value (EUR 0.25), unless a higher issue price is agreed.
In the years 2003 through 2007 35,170,000 class B preferred shares were issued under these option rights. In 2008, no option rights were exercised. In 2009, Vereniging AEGON
exercised its option rights to purchase in aggregate 33,860,000 class B preferred shares at par value to correct dilution caused by AEGON’s EUR 1 billion equity issue as completed in August 2009.
AEGON has agreed to exercise one vote only per preferred share, except in the event of a ‘special cause’, such as the acquisition of a 15% interest in AEGON N.V., a tender offer for
With regard to granted share appreciation rights and option rights and their valuation refer to note 40.
As part of their insurance and investment operations, subsidiaries within the Group also hold AEGON N.V. common shares, both for their own account and for account of
gain or loss from the hedged cash flow. No amounts have been released from equity to be included in the initial measurement of non-financial assets or liabilities.
The net foreign investment hedging reserve is made up of unrealized gains and losses on the effective portions of hedging
Dutch government amounted to EUR 1.15 billon. Under the terms of AEGON’s agreement with the Dutch government, the premium for repayment amounted to EUR 108 million based on the volume weighted average share price of AEGON shares of
This amount has been fixed at 110% for 2009, rising to 120%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 16 - 17
USD 500 million fl oating CMS rate 3 Quarterly, July 15 2014 402 402 402
Perpetual cumulative subordinated bonds Coupon rate Coupon date Year of fi rst call 2009 2008 2007
The coupon of the EUR 114 million bonds was originally set at 8% until June 8, 2005. As of this date, the coupon is reset at 4.156% until 2015.2
The coupon of the EUR 136 million bonds was originally set at 7.25% until October 14, 2008. As of this date, the coupon is reset at 5.185% until 3
USD 225 million 2 7.65% Semi-annually, December 1 1996 2026 n.a. 82 105
The fair value of these loans amount to EUR 41 million at
Losses recognized as a result of liability adequacy testing 6 –
Gross premium and deposits – existing and new business 1,625 1,093
Gross premium and deposits – existing and new business 5,760 5,931
Gross premium and deposits – existing and new business 4,645 6,366 11,011
USD 133 million Zero Coupon Bonds 1 1982 / 10 90 82
EUR 900 million ECB Facility 2 1.00% July 1 2009 / 10 900 –
USD 200 million Zero Coupon Bonds 1 1982 / 12 98 89
USD 750 million Senior Notes 4.75% Semi-annually 2003 / 13 521 539
USD 500 million Senior Notes 1 5.75% Semi-annually 2005 / 20 357 333
GBP 250 million Note issue agreement 2,3,4 April 21 2008 / 23 242 262
USD 1.54 billion Variable Funding Surplus Note 1,3 Floating Quarterly 2006 / 36 816 705
EUR 132 million on shareholders’ equity (2008: positive impact of EUR 156 million). The cumulative negative impact of AEGON’s credit spread, based on observable market data, on income before tax amounted to EUR 36 million (2008: EUR 225 million).
The difference between the contractually required payment at maturity date and the carrying amount of the borrowing amount to EUR 43 million (2008: EUR 184 million).
The EUR 900 million European Central Bank Facility is part of the Long Term Refinancing Operation (LTRO) program and is fully collateralized.
Present value of wholly unfunded obligations 1,831 1,644 1,622 1,768 1,817
Present value of wholly or partly funded obligations 3 4 4 4 4
Present value of wholly or partly funded obligations 2,548 2,148 2,361 2,491 2,546
Present value of wholly unfunded obligations 1 2,055 1,875 1,846 2,015 2,071
included in planned assets was nil in both 2009 and 2008.
Expected return on plan assets (133) – (133) (193) – (193)
Movements during the year of the present value of the defi ned benefi t obligations: 2009 2008
Movements during the year in plan assets for retirement benefi t plans: 2009 2008
Breakdown of plan assets for retirement benefi t plans: 2009 2008
The principal actuarial assumptions that apply for the year ended December 31, 2009 are as follows: Assumed health care trend rates: Health care cost trend rate assumed for next year 8.00% 9.00%
Rate that the cost trend rate gradually declines to 5.00% 5.00%
Consequently, the return on these assets do not form part of the calculation of defined benefit expenses.
Assumptions used to determine benefit obligations at year end: Discount rate 5.30% 5.75%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 26
Health care cost trend rate assumed for next year 1.50-2.00% 1.50-2.00%
Assumptions used to determine benefit obligations at year end: Discount rate 5.70% 6.00%
Assumptions used to determine net periodic benefit costs for the year ended December 31, 2009: Discount rate 6.00% 5.90%
Acquisitions through business combinations – – – 2 – – 1 3
Acquisitions through business combinations – 2 – 37 – – – 39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 27 - 28
In the previous year (2008: EUR 280 million; 2007: nil) the utilization of tax losses was also dependent on retaining bonds and similar investments until the earlier of market recovery or maturity.
Deferred corporate income tax assets in respect of deductible temporary differences relating to available for sale financial assets are recognized to the extent that the realization of the related tax benefit through the future taxable profits is probable.
The recognition of the deferred tax asset of EUR 1,855 million
(2008: EUR 3,761 million; 2007: nil) is dependent on future taxable profits in excess of the profits arising from the reversal of existing taxable temporary differences. For an amount of
The table that follows shows the not recognized deferred corporate income tax assets in respect of tax losses that can be carried forward to future taxable income:
AEGON did not recognize deferred corporate income tax assets in respect of deductible temporary differences relating to deferred acquisition costs, insurance contracts, available for sale financial assets and other items for the amount of
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 29 - 32
Financial assets designated fair value through profi t or loss 143 223 255
(2008: EUR 10 million; 2007: EUR 7 million) in respect of interest income accrued on impaired financial assets.
financial assets and liabilities that are not carried at fair value with changes in the fair value recognized in the income statement (2008: EUR 25 million; 2007: EUR 6 million).
Included in fee and commission income is EUR 103 million of fees on trust and fiduciary activities (2008: EUR 85 million; 2007: EUR 74 million). EUR 4 million of fees were recognized on
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 33 - 36
Gains and (losses) on investments in real estate (179) (48) 137
Net fair value change on for account of policyholder fi nancial assets at fair value through profi t or loss 15,219 (27,490) 4,380
Net fair value change on investments in real estate for account of policyholders (37) (557) (402)
Net fair value change on borrowings and other fi nancial liabilities (138) 105 (2)
Realized gains and losses on fi nancial investments comprise: 2009 2008 2007
The ineffective portion of hedge transactions to which hedge accounting is applied comprises: 2009 2008 2007
Fair value change on hedged items in a fair valued hedge (158) 202 253
Investments for account of policyholders comprise of financial assets and investments in real estate. Refer to note 8 for further information. Financial assets for account of policyholders are classified as at fair value through profit or
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 37 - 40
EUR 27 million (2008: EUR 26 million; 2007: EUR 23 million)
EUR 78 million (2008: EUR 14 million; 2007: EUR 1 million) that is classified for segment reporting purposes as non underlying earnings as an offset against realized gains and losses and impairments on financial investments.
employees, have been offered both share appreciation rights and share options. These share appreciation rights and share options have been granted at an exercise price equal to the market price of the shares at the date of the grant. The rights and options granted in 2004 -2008 vest after three years and can only be exercised during the four years after the vesting date. The rights and options granted in 2003 and 2002 vest after two years and can only be exercised during the five years after the vesting date. Vesting and exercisability depend on continuing employment of the individual employee to whom the rights and options have been granted. Option plans are settled in equity, whilst stock appreciation rights are settled in cash or provide the employee with the choice of settlement.
Executive Board decides to implement such plans, that decision has to be approved by the Supervisory Board.
In 2009 no share appreciation rights were granted. The following assumptions were used in estimating the fair value of share appreciation rights granted in 2007 and 2008, at
December 31 of the year they were granted: Expected dividend yield 7.77% 7.18%
The liability related to share appreciation rights is valued at fair value at each balance sheet date. Refer to note 29 for details.
EUR (5) million (2008: EUR (34) million; 2007: EUR (16) million)
The following tables present the movements in number of share options, as well as the breakdown by the year in which they were granted.
(2008: EUR 19 million and 2007: EUR 18 million) and are recognized in the income statement as part of ‘Commissions and expenses’.
No share appreciation rights and share options were granted in 2009. The fair value of a share appreciation right or share option at the grant date in 2008 and 2007 amounted to respectively EUR 1.57 and EUR 2.87. These amounts are equal to the weighted average fair value for the respective years.
At December 31, 2009, the total compensation cost related to non-vested awards not yet recognized is estimated at
EUR 5 million (2008: EUR 19 million). The weighted average period over which it is expected to be recognized is 0.8 years
No cash is received from exercise of share options during 2009, 2008 and 2007. Cash used to settle share appreciation rights amounts to EUR 0 million in 2009 (2008: EUR 0.4 million; 2007: EUR 17 million).
No share appreciation rights and share options were granted in 2009. The breakdown of the share appreciation rights and share options granted in 2008 and 2007 is as follows: senior executives 2008: 4,747,500 and 2007: 4,157,500 and other employees 2008: 5,822,700 and 2007: 5,674,200.
Impairment charges on fi nancial assets, excluding receivables 1 1,463 1,115 135
Impairment reversals on fi nancial assets, excluding receivables 1 (136) (36) (64)
Impairment charges / (reversals) on fi nancial assets, excluding receivables, are excluded from underlying earnings before tax for segment reporting 1
Impairment charges on fi nancial assets, excluding receivables, from: 2009 2008 2007
Impairment reversals on fi nancial assets, excluding receivables, from: 2009 2008 2007
The interest charges accrued on financial assets and liabilities that are not carried at fair value through profit or loss amounted to EUR 288 million (2008: EUR 375 million; 2007: EUR 314 million).
In 2009, other charges included a loss of EUR 385 million resulting from the sale of AEGON Taiwan. The proceeds from the sale amounted to EUR 11 million. The value of the assets and liabilities sold amounted to EUR 4,457 million and
In 2007 AEGON refined its method of calculating the fair value of the guarantees included in its unit-linked products in order to align these calculations with the calculations currently used for the group pension contracts and traditional products. This change in accounting estimate has been applied prospectively.
EUR 181 million and were reported as part of Other charges.
Income tax calculated using weighted average applicable statutory rates (200) (423) 973
Difference due to the effects of: Non-taxable income 21 2 (261)
and 2007: 31.6%). The change from 2008 to 2009 is primarily due to a change in the profitability of the countries and, to a limited extent, due to a change in applicable statutory tax rates.
Hungary the corporate tax rate will increase from 16% in 2009 to 19% in 2010, but the solidarity tax (4%) will cease to exist as from 2010. In Canada the federal corporate tax rate decreased from 19.5% in 2008 to 19% in 2009. The rate will further decrease to 15% in 2012.
Different tax rates on overseas earnings in the reconciliation between standard and effective income tax primarily consists of results on intercompany reinsurance treaties between Ireland and the United States. These reinsurance treaties are accounted for at fair value in both tax jurisdictions and eliminated in
assumed that all dilutive share options have been exercised at the exercise price, or adjusted exercise price if necessary.
AEGON N.V. share during the year. The difference between the number of dilutive options issued and the number of common shares that would have been issued at the average market price has been treated as an issue of common shares for no consideration.
The number of share options that has not been included in the weighted average number of common shares used in the calculation of diluted earnings per share, because these share options were anti-dilutive for the periods presented, amounted
The potential conversion of the convertible core capital securities is not taken into account in the calculation of the diluted earnings per share as this would have an anti-dilutive effect.
Weighted average number of common shares for diluted earnings per share calculation (thousands) 1,586,699 1,506,862 1,562,577
bifurcated embedded derivatives, valued at fair value and presented as derivatives (refer note 2.10 and note 3).
(in the range of 3% to 4%) if the premium has been paid for a consecutive period of at least ten years and is invested in a mixed fund and / or fixed-income funds. No guarantees are given for equity investments only.
The following table provides information on the liabilities for financial guarantees for minimum benefits: United States 1 Canada 1
The net amount at risk represents the difference between the maximum amount payable under the guarantees and the account value.4
In addition AEGON reinsures the elective guaranteed minimum withdrawal benefit rider issued with a ceding company’s variable annuity contracts. The rider is essentially a return of premium guarantee, which is payable over a period of at least fourteen years from the date that the policyholder elects to start withdrawals. At contract inception, the guaranteed remaining balance is equal to the premium payment. The periodic withdrawal is paid by the ceding company until the account value is insufficient to cover additional withdrawals.
The reinsurance contract is accounted for as a derivative and is carried in AEGON’s balance sheet at fair value. At December 31, 2009, the contract had a value of EUR 90 million
This program involves selling S&P 500 futures contracts to mitigate the effect of equity market movement on the reinsurance contract and the purchase of over-the-counter interest rate swaps to mitigate the effect of movements in interest rates on the reinsurance contracts.
United States which provides customers with a pass-through of the total return on an underlying portfolio of investment securities (typically a mix of corporate and convertible bonds)
subject to a cumulative minimum guarantee. Both the assets and liabilities are carried at fair value, however, due to the minimum guarantee not all of the changes in the market value of the asset will be offset in the valuation of the liability. This product exists in both the fixed annuity and life reinsurance lines of business and in both cases represents closed blocks.
The reinsurance contract is in the form of modified coinsurance so only the liability for the minimum guarantee is recorded on our books.
The GMIB feature provides for minimum payments if the contractholder elects to convert to an immediate payout annuity.
The additional liability for guaranteed minimum benefits that are not bifurcated are determined (based on ASC 944) each period by estimating the expected value of benefits in excess of the projected account balance and recognizing the excess over the accumulation period based on total expected assessments.
GMDB 1 GMIB 2 Total 4 GMDB 1 GMIB 2 Total 4
GMDB 1 GMIB 2 Total 3 GMDB 1 GMIB 2 Total 3
The net amount at risk is defi ned as the present value of the minimum guaranteed annuity payments available to the contract holder determined in 5 accordance with the terms of the contract in excess of the current account balance.
The net amount at risk represents the difference between the maximum amount payable under the guarantees and the account value.3
The credit spread is set by using the credit default swap (CDS)
European life insurers, AEGON’s assumptions reflect these differences in the valuation. If the credit spreads were 20 basis points higher or lower respectively, and holding all other variables constant in the valuation model, 2009 income before tax would have been EUR 136 million and EUR 145 million higher or lower respectively (2008: EUR 255 million higher or lower).
(2008: EUR (758) million and EUR 1,434 million related to increases in risk free rates (2008: EUR (3,474) million) offset by
Additionally, AEGON manages capital adequacy at the level of its country units and their operating companies. The goal is to ensure that AEGON companies maintain their strong financial strength. AEGON maintains its companies’ capital adequacy levels at whichever is the higher of local regulatory requirements and the relevant local Standard & Poor’s requirements for very strong capitalization, and any additionally self-imposed economic requirements.
EUR 5,458 million, net income of EUR 204 million and a number of other effects, including dividends paid (EUR 122 million).
The table that follows reconciles total shareholders’ equity to the total capital base: Total shareholders’ equity 12,164 6,055
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 48
Borrowings not related to capital funding of insurance activities consists of operational funding including US regulation XXX and guideline AXXX redundant reserves. In the ordinary course of business, AEGON N.V. may at times have borrowings, which are offset by cash and cash equivalents available for future capital management activities, such as funding capital contributions in its subsidiaries, redemption of borrowings or payment of dividends to its shareholders. The Total Capital Base is a non-
AEGON N.V. is subject to certain financial covenants in some of its financial agreements (such as issued debentures, credit facilities and ISDA agreements). Under these financial covenants, an event of default may occur if and when any financial indebtedness of any member of the group is not paid when due, or not paid within any applicable grace period. The financial agreements may also include a cross default provision which may be triggered if and when any financial indebtedness of any member of the group is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default.
formula. The RBC formula measures exposures to investment risk, insurance risk, market risk, and general business risk. Life reinsurance is treated as life insurance. The most pertinent RBC
At the end of 2009 the combined risk based capital ratio of
AEGON’s life insurance subsidiaries in the United States was approximately 362% of the CAL RBC and approximately 724%
For the insurance and reinsurance undertakings of AEGON in the EU, the European Solvency I directives are applicable, as implemented in the relevant member states. Solvency I allows member states to require solvency standards, exceeding the minimum requirements set by the Solvency I directives.
The Netherlands and the UK have set higher solvency standards, as explained below. For life insurance companies the Solvency I
For AEGON UK, the published measure continues to be the most stringent requirement. At the end of 2009 AEGON UK’s aggregate Pillar 1 capital ratio was approximately 135%
(excluding with profit funds). In the local solvency surplus calculation for regulatory filings the local regulator (FSA) only allows the available capital number of the With-Profits Funds included in overall available capital to be equal to the amount of
AEGON N.V. is subject to legal restrictions on the amount of dividends it can pay to its shareholders. Under Dutch law the amount that is available to pay dividends consists of total shareholders’ equity less the issued and outstanding capital and less the reserves required by law. The revaluation account and legal reserves, foreign currency translation reserve and other, cannot be freely distributed. In case of negative balances for individual reserves legally to be retained, no distributions can be made out of retained earnings to the level of these negative amounts. Total distributable reserves under Dutch law amount to EUR 7,623 million at December 31, 2009
In addition AEGON’s subsidiaries, principally insurance companies, are subject to restrictions on the amounts of funds they may transfer in the form of cash dividends or otherwise to their parent companies. There can be no assurance that these restrictions will not limit or restrict AEGON in its ability to pay dividends in the future.
OPTAS N.V., an indirect subsidiary of AEGON N.V., holds statutory reserves of EUR 861 million (2008: EUR 821 million)
OPTAS N.V. which represents the increase in statutory reserves since the acquisition of OPTAS N.V. by AEGON.
elected to designate these investments for account of policyholders at fair value through profit or loss, a classification of financial assets as available-for sale would result in accumulation of unrealized gains and losses in a revaluation reserve within equity whilst changes to the liability would be reflected in net income (accounting mismatch).
The Group manages certain portfolios on a total return basis which have been designated as at fair value through profit or loss. This includes portfolios of investments in limited partnerships and limited liability companies (primarily hedge funds) for which the performance is assessed internally on a total return basis. In addition, some investments that include an embedded derivative that would otherwise have required bifurcation, such as convertible instruments, preferred shares and credit linked notes, have been designated at fair value through profit or loss.
Investments for general account backing insurance and investment liabilities that are carried at fair value with changes in the fair value recognized in the income statement are designated at fair value through profit or loss. The Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 49 - 50
With the exception of the financial liabilities with discretionary participating features that are not subject to the classification and measurement requirements for financial instruments, all investment contracts for account of policyholders that are carried at fair value or at the fair value of the linked assets are included in the table on the previous page.
With the exception of derivatives designated as a hedging instrument, all derivatives held for general account and held for account of policyholders are included in the table above.
There are also no differences between the carrying amounts of these financial liabilities and the contractual amounts payable at maturity (net of surrender penalties).
Guarantees include those given on account of asset management commitments and guarantees associated with the sale of investments in low-income housing tax credit partnerships in the United States. Standby letters of credit amounts reflected above are the liquidity commitment notional amounts. In addition to the guarantees shown in the table, guarantees have been given for fulfillment of contractual obligations such as investment mandates related to investment funds.
AEGON N.V. has guaranteed and is severally liable for the following: Due and punctual payment of payables due under letter of �
At December 31, 2009, the letter of credit arrangements amounted to EUR 3,492 million (2008: EUR 3,544 million); as at that date no amounts had been drawn, or were due under these facilities.
Due and punctual payment of any amounts owed to third �
AEGON is involved in litigation in the ordinary course of business, including litigation where compensatory or punitive damages and mass or class relief are sought. In particular, certain current and former customers, and groups representing customers, have initiated litigation and certain groups are encouraging others to bring lawsuits in respect of certain products. The products involved in the Netherlands include securities leasing products and unit linked products (so called
AEGON has established litigation policies to deal with the claims defending when the claim is without merit and seeking to settle in certain circumstances. This and any other litigation AEGON
In addition, in recent years, the insurance industry has increasingly been the subject of litigation, investigations, regulatory activity and challenges by various governmental and enforcement authorities and policyholder advocate groups concerning certain practices. AEGON subsidiaries have received inquiries from local authorities and policyholder advocate groups in various jurisdictions including the United States, the
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 51
AEGON subsidiaries have been informed that the regulators may seek fines or other monetary penalties or changes in the way AEGON conducts its business.
The operating lease obligations relate mainly to office space leased from third parties. The total of future minimum sublease payments expected to be received on non-cancelable subleases is EUR (9) million.
OPTAS, a life insurance company AEGON acquired at the beginning of 2007. The court rejected a request to order a restatement of AEGON’s financial statements over 2007.
The foundation representing the employers and insured harbor employees in the harbors appealed to the Dutch Supreme
Financial assets at fair value through profi t or loss 51 39
The carrying amount of non-cash financial assets that have been transferred to another party under security lending and repurchase activities where the counterparty does not have the right to sell or repledge amount to EUR 57 million
The sum of cash and non-cash collateral is typically greater than the market value of the related securities loaned.
In addition, AEGON can receive collateral related to derivative transactions that it enters into. The credit support agreement will normally dictate the threshold over which collateral needs to be pledged by AEGON or its counterparty. Transactions requiring AEGON or its counterparty to post collateral are typically the result of over-the-counter derivative trades, comprised mostly of interest rate swaps, currency swaps and credit swaps.
financial assets as collateral for general account liabilities and contingent liabilities. None (2008: none) of the financial assets pledged can be sold or repledged by the counterparty.
cash collateral on securities borrowed and derivative transactions and EUR 9 million (2008: EUR 8 million) on reverse repurchase agreements, refer to note 13.2.
EUR 0.6 million respectively. Goodwill of EUR 3 million reflects the future new business and synergies with existing business.
In May 2009, AEGON completed the acquisition of a 50% (noncontrolling ) interest in Mongeral SA Seguros e Previdência
Acquired assets included EUR 11 million cash positions. Goodwill of EUR 167 million was recognized. Since the acquisition date, the company has attributed EUR 0 million to net income in 2008. If the acquisition had been as of January 1, 2008, contribution to net income and total revenues would amount to
Ankara Emeklilik Anonim Şirketi. The total purchase price amounted to EUR 34 million. Since the acquisition date, the company has attributed EUR (3) million (loss) to net income in 2008. If the acquisition had been as of January 1, 2008, contribution to net income and total revenues would amount to respectively EUR (7) million (loss) and EUR 11 million. As a result of the acquisition, assets and liabilities were recognized for
EUR 54 million and EUR 20 million respectively, including a cash position of EUR 5 million. Goodwill of EUR 30 million reflects the future new business and synergies with existing business.
In June 2008, AEGON acquired 100% of the shares of the
The total purchase price amounted to EUR 139 million. Since the acquisition date, the company has attributed EUR 1 million to net income in 2008. If the acquisition had been as of January 1, 2008, contribution to net income and total revenues would amount to respectively EUR 4 million and EUR 14 million. As a result of the acquisition, assets and liabilities were recognized for EUR 156 million and EUR 17 million respectively, including a cash position of EUR 4 million. Goodwill of EUR 39 million reflects the future new business and potential synergies with existing business.
EUR 1 million. Goodwill of EUR 6 million reflects the future new business and potential synergies with existing business.
In April 2008, AEGON acquired a 49% stake in Industrial Fund
Management Co., Ltd, a Chinese mutual fund manager. The company is renamed AEGON Industrial Fund Management Co.
In December 2007, AEGON USA acquired 100% of the shares of
In June 2007, AEGON acquired OPTAS N.V., a Dutch life insurance company specializing in employee benefit products and services within the Dutch group pension market for EUR 1.5 billion
equity of OPTAS is subject to restrictions as set out in the articles of association of the company. These restrictions assure continued fulfillment of existing policy obligations and will remain in force after the acquisition. Since the acquisition,
OPTAS has contributed EUR 11 million to AEGON’s income before tax in 2007. Had the acquisition taken place on 1 January 2007, OPTAS’ contribution to the Group’s net income is estimated at EUR 22 million, contribution to revenues would have been approximately EUR 251 million.
and EUR 20 million cost basis of Clark common stock already owned by AEGON and transaction costs. Since the acquisition date, Clark has contributed EUR 4.6 million to the net income of
AEGON. If the acquisition had taken place as of January 1, 2007,
EUR 12 million. Assets of EUR 81 million and liabilities of
EUR 9 million were recognized due to the acquisition. Goodwill amounting to EUR 23 million reflects the future new business to be generated and potential synergies with existing businesses.
On August 31, 2009 AEGON completed the sale of its Taiwanese life insurance business to Zhongwie Company Ltd, announced on April 22, 2009 for an amount of EUR 11 million. The result on the disposal presented under other charges (note 43) was a loss of EUR 385 million.
has issued a statement of liability as meant in article 403 of
Seguros, Terrassa (Spain) life and accident insurance and pension company (50%)
Capital Partners LP (‘Prisma LP’) which serves as an investment manager for certain of AEGON’s hedge fund investments as well as for other third parties, in exchange for management fees.
AEGON does not have other arrangements, contractual or otherwise, that would give AEGON more than half of the voting power of Prisma LP.
Refer to note 10 for further details on investments in associates.
EUR 108 million based on the volume weighted average share price of AEGON shares of EUR 4.8315 during the five trading days from November 23 until November 27. The amount repaid includes accrued interest from May 22, 2009 of EUR 44 million.
exercised its option rights to purchase 2,690,000, respectively 3,190,000 class B preferred shares at par value to correct dilution caused by AEGON’s stock dividend issuances and treasury stock sales during the year. On October 1, 2009,
Vereniging AEGON exercised its option rights to purchase in aggregate 33,860,000 class B preferred shares at par value to correct dilution caused by AEGON’s EUR 1 billion equity issue as completed in August 2009.
In the Netherlands, AEGON employees may make use of financing and insurance facilities for prices which are equivalent to the price available for agents. The benefit for AEGON
The Management Board, which assists the Executive Board in pursuing AEGON’s strategic goals, is formed by members of the
Mr. Streppel is entitled to his fixed compensation until he reaches the age of 62. The Company accrued EUR 2.6 million for this entitlement.
Termination benefits paid in 2008 relate to Mr. Van der Werf who stepped down as CEO of AEGON the Netherlands at the beginning of 2008. The termination benefits were based on existing contractual agreements and include compensation for entitlements to variable compensation which may have had matured beyond 2008. Additional information on the remuneration and share-based compensation of members of the Executive Board and the Supervisory Board is disclosed in the following sections.
The two tables below show the number of shares and options conditionally granted based on LTI plans related to financial years prior to 2009.
At the balance sheet date, Mr. Wynaendts had mortgage loans with AEGON or any AEGON related company totalling to
EUR 1,485,292, with interest rates of 4.1%, 4.3%, 4.4% and 5.4%. These loans were made in AEGON’s ordinary course of business, pursuant to a widely available employee benefit program on terms comparable to other AEGON employees in the Netherlands and were approved in advance by the
Robert J. Routs (as of April 23, 2008) 70,942 40,673 –
In 2008 an amount of EUR 7,000 was paid to Mr. Docters van
Karla M.H. Peijs (as of April 25, 2007) 1,400 1,400 900
Dirk P.M. Verbeek (as of April 23, 2008) 982 n.a. n.a.
EUR 70 million in gross written premiums. The sale agreement is subject to the consultation of AEGON’s Central Works Council, in addition to the approvals of the relevant regulatory authorities.
Tokyo Stock Exchange is negligible and does not justify the related expenses.
which are part of the financial statements of AEGON N.V., The
December 31, 2009, the consolidated income statement, statement of comprehensive income, statement of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and notes.
Report of the Executive Board in accordance with Part 9 of
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
Pursuant to the legal requirement under 2:393 sub 5 part f of the Netherlands Civil Code, we report, to the extent of our competence, that the management board report is consistent with the consolidated financial statements as required by 2:391 sub 4 of the Netherlands Civil Code.
Before profi t appropriation, amounts in EUR million Note 2009 2008
Amsterdam, New York and London. AEGON will delist from the Tokyo Stock Exchange on March 27, 2010.
Group’) have life insurance and pensions operations in over twenty countries in Europe, the Americas and Asia and are also active in savings and investment operations, accident and health insurance, general insurance and limited banking operations.
Part 9 of 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 (IFRS), as used for the preparation of the consolidated financial statements of the Group.
As of January 1, 2009 legal reserves are presented on the face of the balance sheet broken down by their nature: foreign currency translation reserve and legal reserves in respect of group companies.
Transactions in foreign currencies are translated to the functional currency using the exchange rates prevailing at the date of the transaction. At the balance sheet date monetary assets, monetary liabilities and own equity instruments in foreign currencies are translated at the prevailing exchange rate. Non-monetary items carried at cost are translated using the exchange rate at the date of the transaction, whilst assets carried at fair value are translated at the exchange rate when the fair value was determined. Exchange differences on monetary items are recognized in the income statement when they arise, except when they are deferred in equity as a result of a qualifying cash flow or net investment hedge. Exchange differences on non-monetary items are recognized in equity or the income statement accordingly consistently with other gains and losses on these items.
The group companies are stated at their net asset value, determined on the basis of IFRS as applied in the consolidated financial statements of the Group. For details on the accounting policies applied for the group companies refer to the consolidated financial statements on page 80 and following.
They are released over time to the income statement in line with the change in factors (including time) that market participants would consider in setting a price for the asset.
All derivatives are recognized on the balance sheet at fair value.
In addition to common shares and preferred shares, the company has issued perpetual securities and convertible core capital securities. Perpetual securities have no final maturity date, repayment is at the discretion of the issuer and AEGON
reacquired by the Group and are deducted from equity (Retained earnings) regardless of the objective of the transaction. No gain or loss is recognized on the purchase, sale, issue or cancellation of the instruments. The consideration paid or received is recognized directly in equity. All treasury shares are eliminated in the calculation of earnings per common share and dividend per common share.
Net income / (loss) for the fi nancial year 253 (1,337)
The debt securities comprise Dutch government bonds. The bonds mature in the years between 2018 and 2023. These government bonds have been transferred to another party under repurchase activities. AEGON retains substantially all risk and rewards of the transferred assets. The assets are transferred in return for cash collateral (refer note 14).
EUR 1 billion of capital. As part of the issuance 157.8 million ordinary shares of a par value of EUR 0.12 were issued and 32.7 million treasury shares were reissued. The shares were issued at EUR 5.25 per share. Expenses relating to this share issuance amounting to EUR 14 million have been charged to retained earnings. On October 1, 2009 Vereniging AEGON used its right to purchase preferred shares B for an amount of
The following table shows the movement during the year in the number of common shares: Number of common shares 2009 2008
The shares repurchased by AEGON, although included in the issued and outstanding number of shares, are excluded from the calculation of the weighted average number of shares. The number has been adjusted for share dividend.
AEGON by the members of the Boards is included in note 54 to the consolidated financial statements of the Group.
Dividend preferred shares – – – – – (122) – – (122)
Changes in revaluation subsidiaries – – (6,553) – – – – – (6,553)
Dividend common shares – – – – – (548) – – (548)
Coupons on convertible core capital securities and perpetual securities, net of tax – – – – – (310) – – (310)
The balance of the revaluation account, which includes revaluation reserves for real estate and investments that do not have a frequent market listing, consists for EUR 2,787 million
(2008: EUR 2,728 million) of items with positive revaluation and for EUR (4,161) million of items with negative revaluation
which are restricted. Included in AEGON N.V.’s legal reserves is an amount of EUR 321 million related to OPTAS N.V. which represents the increase in statutory reserves since the acquisition of OPTAS N.V. by AEGON (2008: EUR 69 million).
(EUR 212 million) has been reclassified to the legal reserves in respect of group companies.
EUR 0.12 each. Most of the shares have been purchased to neutralize the dilution effect of issued share dividend and to hedge share appreciation rights and stock options granted to executives and employees. Movements in the number of repurchased own shares held by AEGON N.V. were as follows: Transactions in 2009: Sale: 1 transaction, price EUR 5.25 (32,654,191) –
EUR 4.8315 during the five trading days from November 23 until
NOTES TO THE FINANCIAL STATEMENTS OF AEGON N.V. NOTE 10 - 11
This amount has been fixed at 110% for 2009, rising to 120% for 2010 and 125% for 2011 and beyond. The coupon is not tax deductible. Vereniging AEGON will use income from the nonvoting securities to service the loan from the Dutch government.
USD 250 million fl oating LIBOR rate 1 Quarterly, December 15 2010 212 212
Coupon rate Coupon date Year of fi rst call 2009 2008Perpetual cumulative subordinated bonds
The repayment periods of borrowings vary from within one year up to a maximum of 30 years. The interest rates vary from 4.125 to 9.000% per annum. The market value of the long-term borrowings amounts to EUR 3,256 million (2008: EUR 1,218 million).
During Q4 2009, AEGON issued USD 500 million senior unsecured notes due December 1, 2015. These senior notes are being offered under AEGON’s existing shelf registration statement in the United States. The notes, issued at a price of 99.74, carry a coupon of 4.625%. AEGON also issued
USD 6 billion debt issuance program at a price of 98.87. The notes carry a coupon of 6.625%.
All short-term borrowings have a maturity of less than one year.
Loans from and payables to group companies have a maturity of less than one year. Other includes derivatives with negative fair values of EUR 255 million (2008: EUR 403 million) and income tax payable for EUR 30 million (2008: income tax receivable for EUR 56 million).
AEGON is obligated to return this amount upon termination of the repurchase agreements (refer note 5). The repurchase agreements mature in the years 2018, 2019 and 2023. The interest rates are based upon a 3-months floating EUREPO plus 27 basis points.
AEGON N.V. has entered into a contingent capital agreement amounting to GBP 200 million with its subsidiary Scottish
Equitable Ltd. In the event Scottish Equitable’s solvency capital requirements would fall below a set limit, AEGON N.V. will repay an internal loan from Scottish Equitable. The agreement, which expires on June 30, 2011, has been fully collateralized through assets held in a custody account.
Other than the Executive Board members, there were no employees employed by AEGON N.V. in either 2009 or 2008.
Egeria for an amount of EUR 212 million. Under the agreement, the nineteen employees affected by the sale will retain their jobs, as well as maintain similar employment conditions. In 2009, AEGON’s funeral insurance business generated approximately EUR 70 million in gross written premiums.
On February 26, 2010 AEGON announced that it will delist from the Tokyo Stock Exchange on March 27, 2010. AEGON applied for delisting as the volume of AEGON shares traded on the
We have audited the accompanying company financial statements for the year 2009 (as set out on pages 221 to 236)
Management is responsible for the preparation and fair presentation of the company financial statements and for the preparation of the Report of the Executive Board, both in accordance with Part 9 of Book 2 of the Netherlands Civil Code.
December 31, 2009, and of its result for the year then ended in accordance with Part 9 of Book 2 of the Netherlands Civil Code.
AUDITOR’S REPORT � TO: THE SUPERVISORY BOARD AND THE EXECUTIVE BOARD OF AEGON N.V.
N.V. The relevant provisions read as follows: 1. The General Meeting of Shareholders shall adopt the annual accounts.
3. From the net profi t as refl ected in the profi t and loss account, if it is suffi cient to this end after a part of the profi t has been set aside for augmenting and / or forming reserves in accordance with 2, fi rst of all the holders of preferred shares shall receive, on the amount paid on their preferred shares, a dividend the percentage of which, on an annual basis, shall be equal to the European Central Bank’s fi xed interest percentage for basic refi nancing transactions, to be increased by 1.75 percentage points, all applicable to the fi rst trading day on Euronext Amsterdam in the fi nancial year to which the dividend relates. Apart from this, no other dividend is to be paid on the preferred shares.
proposal to pay a dividend shall be dealt with as a separate agenda item at the General Meeting of Shareholders.
Supervisory Board, decide that a distribution on common shares shall not take place as a cash payment but as a payment in common shares, or decide that holders of common shares shall have the option to receive a distribution as a cash payment and / or as a payment in common shares, in all cases out of the profi t and / or at the expense of reserves. Subject to the approval of the Supervisory Board, the Executive Board shall also determine the conditions applicable to the aforementioned choices.
It was decided not to declare the final dividend for 2008 and the interim 2009. A cash dividend of 4.25% on the amount paid-in on the class A and class B preferred shares shall be paid to the holder of the preferred shares.
AEGON N.V. This enabled Vereniging AEGON to maintain voting control at the General Meeting of Shareholders of AEGON N.V.
In September 2002, AEGON N.V. effected a non-dilutive capital restructuring whereby Vereniging AEGON sold 350,000,000 of its common shares, of which 143,600,000 common shares were sold directly by Vereniging AEGON in a secondary offering outside the United States and 206,400,000 common shares were purchased by AEGON N.V. from Vereniging AEGON. AEGON
N.V. subsequently sold these common shares in a global offering. The purchase price for the 206,400,000 common shares sold by Vereniging AEGON to AEGON N.V. was EUR
EUR 0.12 held by Vereniging AEGON were converted into 211,680,000 new class A preferred shares with nominal value of
B preferred shares as would enable Vereniging AEGON to prevent or correct dilution to below its actual percentage of voting shares, unless Vereniging AEGON as a result of exercising these option rights would increase its voting power to more than 33 percent. Class B preferred shares will then be issued at par value (EUR 0.25), unless a higher issue price is agreed. In the years 2003 through 2007 35,170,000 class B
preferred shares were issued under these option rights. In 2008, no option rights existed. In 2009, Vereniging AEGON
exercised its option rights to purchase an additional 33,860,000 class B preferred shares to prevent dilution caused by AEGON’s share issuance in August 2009.
Vereniging AEGON, based on the number of outstanding and voting shares (excluding issued common shares held in treasury by AEGON N.V.) at December 31, 2009, amounts to approximately 22.76%. In the event of a ‘special cause’, Vereniging AEGON’s voting rights will increase, currently to 33.00%, for up to six months per ‘special cause’.
AEGON N.V. The two other members are both elected by the
Board of AEGON N.V. Resolutions of the Executive Committee, other than with regard to amendment of the Articles of
Vereniging AEGON, a special procedure is in place to provide for the need of a unanimous proposal from the Executive
Committee, thereby including the consent of the representatives of AEGON N.V. at the Executive Committee. Following the amendment of the Articles of Association as effected on
September 13, 2005, this requirement does not apply in the event of a hostile change of control at the General Meeting of
may amend its Articles of Incorporation without the cooperation of AEGON N.V.
Underlying earnings before tax by line of business 116 115 56 (433) (146) Individual savings and retirement products (313) 62 79 78 (94)
(888) 971 1,652 1,679 3,414 Net deposits (on and off balance sheet) (1,263) (575) (1,493) (5,623) (8,954)
New premium production accident and health insurance 164 146 125 126 561 16 16 19 17 68 New premium production general insurance 12 11 12 21 56
Actuarial funding is used on those contracts that have surrender penalties and the company will hold a minimum of the surrender value at all times.
Assets held by long-term employee benefit funds are part of plan assets. These are assets (other than non-transferable financial instruments issued by the reporting entity) that: Are held by an entity that is legally separate from the �
Are available to be used only to pay or fund employee �
specifi ed type of contract; Realized and / or unrealized investment returns on a •
The profi t or loss of the company, fund or other entity that •
A contractual right to receive cash or another fi nancial asset �
A contract that will or may be settled in the entity’s own �
to receive a variable number of the entity’s own equity instruments; or
Financial liability is any liability that is: A contractual obligation to deliver cash or another fi nancial �
to deliver a variable number of the entity’s own equity instruments; or
Insurance asset is an insurer’s contractual right under an insurance contract.
(the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event)
Projected unit credit method is an actuarial valuation method that sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation.
These are insurance policies issued by an insurer that is not a related party of the reporting entity, if the proceeds of the policies: Can be used only to pay or fund employee benefi ts under a �
Recognition is the process of incorporating in the balance sheet or income statement an item that meets the definition of an element and satisfies the following criteria for recognition: It is probable that any future economic benefi t associated �
with the item will fl ow to or from the entity; and
Value of Business Acquired (VOBA) the difference between the fair value and the carrying amount of the insurance liabilities recognized when a portfolio of insurance contracts is acquired (directly from another insurance company or as part of a business combination).
WACC is an abbreviation for Weighted Average Cost of Capital which represents the average cost of capital of an entity, taking into account all sources of capital (from equity and debt), weighted by their current market values.
US Private Securities Litigation Reform Act of 1995. The following are words that identify such forward-looking statements: aim, believe, estimate, target, intend, may, expect, anticipate, predict, project, counting on, plan, continue, want, forecast, goal, should, would, is confident, will, and similar expressions as they relate to our company. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. We undertake no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which merely reflect company expectations at the time of writing.
our operations, the products we sell, and the attractiveness of certain products to our consumers
Lowering of one or more of our debt ratings issued by �
recognized rating organizations and the adverse impact such action may have on our ability to raise capital and on our liquidity and fi nancial condition
of our insurance subsidiaries and the adverse impact such action may have on the premium writings, policy retention, profi tability of its insurance subsidiaries and liquidity
product withdrawals and other unusual items, including our ability to integrate acquisitions and to obtain the anticipated results and synergies from acquisitions