Adjustments to prior years include shifts between current and deferred tax. In 2013 the shift between current and deferred tax is mainly caused by an agreement with tax authorities, resulting in an increased current tax receivable and a decreased deferred tax asset.
Income tax calculated using weighted average applicable statutory rates 189 404 316
Difference due to the effects of: Non-taxable income 34 (119) (129)
Changes in deferred tax assets as a result of recognition / write off of previously not recognized / recognized tax losses, tax credits and deductible temporary differences (8) (63) 1
Income tax for the period (income) / charge 134 262 156
In the UK, the corporate income tax rate decreased from 21% to 20% as from April 1, 2015. As per April 1, 2017 the tax rate in the UK
Tax credits in 2015 include tax benefits related to solar investments in the United States.
Items that will not be reclassified to profit and loss: Changes in revaluation reserve real estate held for own use (2) (2) 1
Items that may be reclassified subsequently to profit and loss: Gains / losses on revaluation of available-for-sale investments 810 (1,752) 1,013
Gains / losses transferred to the income statement on disposal and impairment of availablefor -sale investments 124 148 69
Net income / (loss) attributable to common shareholders 476 1,027 602
Net income / (loss) attributable to common shareholders B 3 7 3
Weighted average number of common shares outstanding (in million) 2,101 2,094 2,035
Weighted average number of common shares B outstanding (in million) 584 580 366
To neutralize the dilutive effect of the 2015 interim dividend paid in shares, Aegon executed a share buyback program to repurchase 20,136,673 common shares. Between September 16, 2015, and October 13, 2015, these common shares were repurchased at an average price of EUR 5.2777 per share. These shares will be held as treasury shares and will be used to cover future stock dividends.
Final dividend 2014 The Annual General Meeting of Shareholders on May 20, 2015, approved a final dividend over 2014 of EUR 0.12 per common share payable in either cash or stock, related to the second half of 2014, paid in the first half of 2015. The stock dividend amounted to one new Aegon common share for every 55 common shares held. The stock dividend and cash dividend are approximately equal in value.
Interim dividend 2014 The interim dividend 2014 was paid in cash or stock at the election of the shareholder. The stock dividend amounted to one new Aegon common share for every 58 common shares held. The stock dividend and cash dividend are approximately equal in value. The interim dividend was payable as of September 19, 2014. The interim dividend 2014 for common shares B amounted to 1/40th of the dividend paid on common shares.
Approximately 55% of holders of common shares elected to receive the cash dividend. The remaining 45% have opted for stock dividend. Aegon repurchased common shares to neutralize the dilutive effect of the 2014 interim dividend paid in shares. Aegon executed a program to repurchase 16,319,939 common shares. Between September 17, 2014, and October 15, 2014, these common shares were repurchased at an average price of EUR 6.4900 per share. These shares are held as treasury shares and will be used to cover future stock dividends.
September 17, 2013, and October 14, 2013, 19,047,358 common shares were repurchased under the share buyback program, at an average price of EUR 5.6233 per share.
Net book value Goodwill VOBA Future servicing rights Software Other Total
With the exception of goodwill, all intangible assets have a finite useful life and are amortized accordingly. VOBA and future servicing rights are amortized over the term of the related insurance contracts, which can vary significantly depending on the maturity of the acquired portfolio. VOBA currently recognized is amortized over an average period of 24 years, with an average remaining amortization period of 10 years (2014: 10 years). Future servicing rights are amortized over an average period up to 30 years, of which 10 years remain at December 31, 2015 (2014: 9 years). Software is generally depreciated over an average period of 5 years.
At December 31, 2015, the remaining average amortization period was 3 years (2014: 3 years).
The recoverable amount is the higher of the value in use and fair value less costs of disposal for a cash-generating unit. The operating assumptions used in all the calculations are best estimate assumptions and based on historical data where available.
New Markets - Central & Eastern Europe 39 41 - Other New Markets 35 31
Goodwill in Aegon USA is allocated to its divisions. Value in use calculations of Aegon USA have been actuarially determined based on business plans covering a period of typically five years and pre-tax risk adjusted discount rates. The value in use test in the USA for the Investments & Retirement cash-generating unit (EUR 134 million; 2014: EUR 120 million) assumes business plans covering a period of five years further extrapolated to ten years where the new business levels for years 6-10 assumed a 5% growth rate
Following the acquisition of Mercer, goodwill was recognized for an amount of EUR 66 million reflecting the expected profitability of new business.
Future servicing rights Future servicing rights reduced compared to December 31, 2014 following the sale of Clark Consulting in the third quarter of 2015.
Total investments for general account 160,792 153,653 1 Refer to note 47 Fair value for a summary of all financial assets and financial liabilities at fair value through profit or loss.
Of the debt securities, money market and other short-term investments, mortgage loans and private loans EUR 14,828 million is current (2014: EUR 13,998 million).
Other Movement on the loan allowance account during the year were as follows: Addition charged to income statement (37) (68)
In 2015, 95% of the value of Aegon’s properties, both for general account and for account of policyholders, were appraised (2014: 78%), of which 99% was performed by independent external appraisers (2014: 100%).
Aegon USA has entered into a commercial property portfolio, consisting of office, retail and industrial buildings. These non-cancellable leases have remaining lease terms up to 20 years. Most leases include a clause to enable upward revision of the rental charge on an annual basis according to either a fixed schedule or prevailing market conditions.
Total investments for account of policyholders at fair value through profit or loss, excluding derivatives 1) 199,204 190,366
Total investments for account of policyholders 200,226 191,467 1 Refer to note 47 Fair value for a summary of all financial assets and financial liabilities at fair value through profit or loss.
Derivatives for account of policyholders Derivatives not designated in a hedge 903 830 226 226 1 Refer to note 47 Fair value for a summary of all financial assets and financial liabilities at fair value through profit or loss.
2015 mainly due to the unwind of mutually offsetting derivatives and changes in interest rates and other market movements during the year. See note 47 Fair value for details on fair value measurement of derivatives.
Aegon has entered into free-standing credit derivative transactions. The positions outstanding at the end of the year were: CDSs Notional Fair value Notional Fair value
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 hedges its exposure to the variability of future cash flows from interest rate movements for terms up to 28 years. The cash flows from these hedging instruments are expected to affect the profit and loss for approximately the next 37 years. For the year ended December 31, 2015, the contracts for which cash flow hedge accounting was terminated resulted in deferred gains of EUR 388 million (2014: EUR 146 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. During the year ended
December 31, 2015, none of Aegon’s cash flow hedges were discontinued, as it was highly 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. Aegon projects investment needs many years into the future in order to support the insurance liabilities and pay all contractual obligations arising from the policies in force today.
The periods when the cash flows are expected to occur are as follows: < 1 year 1 – 5 years 5 – 10 years > 10 years 2015 Total
< 1 year 1 – 5 years 5 – 10 years > 10 years 2014 Total
Share in changes in joint ventures equity (note 32.6) (8) 22
Upon disposal an amount of EUR 12 million related to a positive revaluation reserve has been recycled from equity through profit and loss account. The transaction with Ibercaja Banco S.A. was completed in the third quarter of 2014 after obtaining regulatory approval.
On July 30, 2014, Aegon signed a new 25-year agreement to distribute both protection and general insurance products through Banco
Santander Totta’s approximately 600 branches in Portugal. The transaction with Banco Santander Totta was completed in the fourth quarter of 2014 after obtaining regulatory approval. Under the terms of the agreement, Aegon acquired a 51% stake in both a life insurance company as well as a non-life insurance company for a consideration of EUR 42.5 million.
Non-current financial liabilities excluding trade payables and other provisions 426 428
EUR 18 million of the reinsurance assets are current (2014: EUR 11 million).
Gross premium and deposits – existing and new business 126 126
The sales of the Canadian operations and La Mondiale Participations were completed in 2015 and are no longer classified as assets and liabilities held for sale at year end 2015. As a result, no unrealized gains relating to assets and liabilities held for sale are included in other comprehensive income, as of December 31, 2015 (December 31, 2014: EUR 477 million).
La Mondiale On March 3, 2015, after obtaining regulatory approval, Aegon completed the sale of La Mondiale Participations which was classified as held for sale per December 31, 2014. The operations of La Mondiale were included in the New Markets segment (note 5 Segment information). For more information related to the transaction, refer to note 26 Associates.
The table below presents the major types of assets and liabilities included in assets and liabilities classified as held for sale on the consolidated statement of financial position per December 2014.
December 31, 2014 is included below. The fair value hierarchy consists of three levels. Reference is made to note 3 Critical accounting estimates and judgment in applying accounting policies for more details on the fair value hierarchy.
Real estate held for own use and equipment 30.1 575 509
General account real estate held for own use are mainly held by Aegon USA and Aegon the Netherlands, with relatively smaller holdings at Aegon Hungary and Aegon Spain. The carrying value under a historical cost model amounted to EUR 358 million
None of the equipment is held for lease (2014: none). Equipment has not been pledged as security for liabilities, nor are there any restrictions on title. Depreciation expenses have been recorded in Commissions and expenses in the income statement. Equipment is generally depreciated over a period of three to five years.
The movements in the provision for doubtful debts during the year were as follows: Additions charged to earnings (14) (9)
EUR 8 billion (2014: EUR 11 billion) of cash collateral is received related to securities lending, repurchase agreements and margins on derivatives transactions. A corresponding liability to repay the cash is recognized in other liabilities (note 44 Other liabilities). Refer to
note 49 Transfer of financial assets for details on collateral received and paid. Investment of cash collateral received is restricted through limitations on credit worthiness, duration, approved investment categories and borrower limits. EUR 463 million
The weighted effective interest rate on short-term deposits was 0.21% (2014: 0.03%) and these deposits have an average maturity of
During 2015 the interest rate was unchanged at 0.05% (2014: 0.05%). The average minimum required balance on deposit by the Dutch
Net cash and cash equivalents at December 31, 2015, are positively impacted by effects of changes in exchange rates of
Net cash flows from investing activities decreased by EUR 587 million to a EUR 71 million outflow (2013: EUR 516 million outflow).
The decrease is mainly driven by a lower cash inflow from disposals of joint ventures and associates.
Plans for senior management and the issuance of shares on June 14, 2013, being the final dividend 2012 in the form of stock dividend.
Shareholders on May 15, 2013. For details refer to the 'major shareholders' section included in the 'other information' to the financial statements of Aegon N.V.
32.3 Treasury shares On the balance sheet date, Aegon N.V. and its subsidiaries held 44,531,558 (2014: 51,317,190) of its own common shares with a par value of EUR 0.12 each.
Movements in the number of treasury shares of Aegon N.V. were as follows: Number of shares (thousands)
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 policyholders. These shares have been treated as treasury shares and are (de)recognized at the consideration paid or received.
The closing balances of the revaluation reserve for available-for-sale investments relate to the following instruments: Revaluation reserve for available-for-sale investments 4,546 6,741 2,287
USD 250 million floating LIBOR rate 1) Quarterly, December 15 2016 212 212 212
EUR 950 million floating DSL rate 3) Quarterly, July 15 2016 950 950 950 1 The coupon of the USD 250 million junior perpetual capital securities is reset each quarter based on the then prevailing three-month LIBOR yield plus a spread of 87.5 basis points, with a minimum of 4%.
Year of next call 2015 2014 2013 1 The coupon of the EUR 136 million bonds was originally set at 7.25% until October 14, 2008. Subsequently, the coupon has been reset at 5.185% until
October 14, 2018. 2 The coupon of the EUR 203 million bonds was originally set at 7.125% until March 4, 2011. Subsequently, the coupon has been reset at 4.26% until 3 The coupon of the EUR 114 million bonds was originally set at 8% until June 8, 2005. Subsequently, the coupon has been reset at 4.156% until 2015 and 4 If the bonds are not called on the respective call dates and after consecutive period of ten years, the coupons will be reset at the then prevailing effective yield of ten-year Dutch government securities plus a spread of 85 basis points.
The bonds have the same subordination provisions as dated subordinated debt. In addition, the conditions of the bonds contain provisions for interest deferral.
The securities are subordinated and rank senior to the junior perpetual capital securities, equally with the perpetual cumulative subordinated bonds and fixed floating subordinated notes, and junior to all other liabilities. The conditions of the securities contain certain provisions for optional and required cancellation of interest payments. The securities have a stated maturity of 30 years, however, Aegon has the right to call the securities for redemption at par for the first time on the first coupon date in 2017, or on any coupon payment date thereafter.
On April 25, 2014, Aegon issued EUR 700 million of subordinated notes, first callable on April 25, 2024, and maturing on April 25, 2044. The coupon is fixed at 4% until the first call date and floating thereafter.
Subordinated borrowings include a liability of EUR 65 million (2014: EUR 54 million) relating to the USD 525 million non-cumulative subordinated notes issued on February 7, 2012. The liability component of the non-cumulative subordinated notes is related to the redemption amount. For further information on the non-cumulative subordinated notes and their subordination refer to note 33
USD 190 million 1) 7.625% Semi-annually, November 15 1997 2037 n.a. 46 41 1 Issued by a subsidiary of, and guaranteed by Aegon N.V.
The fair value of these loans amounted to EUR 146 million (2014: EUR 139 million).
Sources of underwriting risk include policyholder behavior (such as lapses or surrender of policies) and policy claims (such as mortality and morbidity). In general, Aegon is at risk if policy lapses increase as sometimes Aegon is unable to fully recover up front expenses in selling a product despite the presence of commission recoveries or surrender charges and fees. 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
Aegon the Netherlands partially hedges the risk of future longevity increases in the Netherlands related to a part of its insurance liabilities. In 2012, Aegon the Netherlands bought a longevity index derivative, which will pay out if in 2032 the mortality rates have decreased more than a predetermined percentage compared to the base scenario at the moment of signing the contract. Payout of the derivative is defined based on a 'cumulative cash index', which represents the cumulative payout to a predefined (synthetic) insured population in relation to the expected payout (in the base scenario) to this same population. Both parties in the contract have the possibility to terminate the contract after 10 years (early termination clause). The payout is maximized at a predetermined percentage compared to the base scenario.
Non-life insurance - Unearned premiums and unexpired risks 5,202 4,572 - Incurred but not reported claims 1,002 737
Transfer (to) / from insurance contracts for account of policyholders 1,046 (401)
Net exchange differences 438 460 36.3 Insurance contracts for account of policyholders
Transfer (to) / from insurance contracts for account of policyholders - (3,525) (3,525)
(GMWB) is offered directly on some variable annuity products Aegon issues and is also assumed from a ceding company. Additionally,
At December 31, 2015, the contract had a value of EUR 69 million (2014: EUR 59 million). Aegon entered into a derivative program to mitigate the overall exposure to equity market and interest rate risks associated with the reinsurance contract. This program involves selling equity futures contracts (S&P 500, Midcap, Russell 2000, and the MCSI EAFE index in accordance with Aegon’s exposure) 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.
b. Total return annuities Total Return Annuity (TRA) is an annuity product in the 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.
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. The estimates are reviewed regularly and any resulting adjustment to the additional liability is recognized in the income statement. The benefits used in calculating the liabilities are based on the average benefits payable over a range of stochastic scenarios. Where applicable, the calculation of the liability incorporates a percentage of the potential annuitizations that may be elected by the contract holder.
Net amount at risk 5) 4,205 4,871 1 Guaranteed minimum investment return in the Netherlands.
EUR 500 million Unsecured Notes 3% July 18 2012 / 17 499 499
EUR 75 million Medium-Term Notes 1) 4.625% December 9 2004 / 19 86 88
USD 500 million Senior Notes 1), 2) 5.75% Semi-annually 2005 / 20 530 483
GBP 250 million Medium-Term Notes 6.125% December 15 1999 / 31 337 320
GBP 400 million Senior Unsecured Notes 6.625% Semi-annually 2009 / 39 536 508 1 Measured at fair value. 2 Issued by subsidiaries of, and guaranteed by, Aegon N.V.
In October 2015, Aegon established a EUR 5 billion Conditional Pass-Through Covered Bond (CPTCB) Programme, secured by prime
Dutch residential mortgage loans. This programme is UCITS and CRD IV compliant and registered with the Dutch Central Bank. On
November 24, 2015, Aegon placed its inaugural 5-year, EUR 750 million Conditional Pass Through Covered Bonds at 8 basis points over mid swaps resulting in an effective yield of 0.267%.
EUR 1,018 million “SAECURE 7” RMBS Note 1), 2) Floating Quarterly 2010 / 15 - 772
EUR 212 / USD 600 "SAECURE 11" RMBS Note 1), 5) Floating Quarterly 2012 / 15 - 620
EUR 450 million ECB LTRO 1) Floating At Maturity 2015 / 16 450 -
EUR 225 million ECB MRO 1) Floating At Maturity 2015 / 16 225 -
EUR 1,500 million "SAECURE 10" RMBS Note 1), 6) Floating Quarterly 2011 / 16 1,094 1,196
EUR 750 million Conditional Pass-Through Covered Bond 1), 4) 0.267% Annual 2015 / 20 747 -
Aegon’s general account investments. 8 The first optional redemption date is October 2017; the legal maturity date is July 2092. Notes are fully collateralized by mortgage loans which are part of
Aegon’s general account investments. 9 The first optional redemption date is February 2018; the legal maturity date is November 2093. Notes are fully collateralized by mortgage loans which are part of
Aegon’s general account investments. 10 The first optional redemption date is January 2019; the legal maturity date is January 2092. Notes are fully collateralized by mortgage loans which are part of
Aegon’s general account investments. 12 This debenture is issued by a wholly owned captive that is consolidated in the Aegon N.V. consolidated financial statements. A guarantee has been provided by
Aegon N.V. - refer to note 48 Commitments and contingencies. 13 This debenture is issued by a wholly owned captive that is consolidated in the Aegon N.V. consolidated financial statements.
Other Borrowings measured at fair value amounted to EUR 616 million (2014: EUR 571 million). For the year 2015, Aegon’s credit spread had a negative impact of EUR 4 million on income before tax (2014: negative impact of EUR 19 million) and a negative impact of
The remaining provisions mainly consist of provisions regarding Aegon’s decision to abolish back-end loaded fees on unit-linked policies in Poland of EUR 12 million (2014: EUR 17 million), restructuring provisions of EUR 68 million (2014: EUR 69 million), provisions for unearned commission of EUR 27 million (2014: EUR 31 million), litigation provisions of EUR 14 million (2014: EUR 20 million) and other provisions of EUR 54 million (2014: EUR 34 million) mainly consisting of the remaining provision related to the harbor workers’
Remeasurements of defined benefit plans (209) (25) (234) 1,156 - 1,156
Aegon included in plan assets was nil in both 2015 and 2014.
Net interest on the net defined benefit liability (asset) 119 10 129 110 10 121
Movements during the year of the present value of the defined benefit obligations 2015 2014
Aegon USA. The Board of Managers has the full power and discretion to administer the plan and to apply all of its provisions, including such responsibilities as, but not limited to, developing the investment policy and managing assets for the plan, maintaining required funding levels for the plan, deciding questions related to eligibility and benefit amounts, resolving disputes that may arise from plan participants and for complying with the plan provisions, and legal requirements related to the plan and its operation. The benefits are based on years of service and the employee’s eligible annual compensation. The plans provide benefits based on a traditional final average formula or a cash balance formula (which defines the accrued benefit in terms of a stated account balance), depending on the age and service of the plan participant. The defined benefit plans were unfunded by EUR 863 million at December 31, 2015 (2014: EUR 709 million unfunded).
100 basis points increase in health care trend rate 17 18 100 basis points decrease in health care trend rate (15) (16)
Aegon the Netherlands also has a post-retirement medical plan that contributes to the health care coverage of employees and beneficiaries after retirement. For this plan, the Aegon the Netherlands has the responsibility to administer the plan in accordance with its terms, and decides questions related to eligibility and determines plan provisions and benefit amounts. In addition, Aegon the Netherlands has the obligation to interpret the provisions of the plans, and to comply with any statutory reporting and disclosure requirements. Finally, Aegon the Netherlands reviews the terms of the plans and makes changes to the plans if and when appropriate.
The liability related to this plan amounted to EUR 61 million at December 31, 2015 (2014: EUR 46 million).
The weighted average duration of the defined benefit obligation is 18.6 years (2014: 19.1 years).
The pension scheme Trustees are required to carry out triennial valuations on the scheme’s funding position, with the latest valuation being as at March 31, 2013. As part of this triennial valuation process, a schedule of contributions is agreed between the Trustees and
The investment strategy for the scheme is determined by the trustees in consultation with Aegon UK. Currently 40% of assets are invested in growth assets (i.e. primarily equities) and 60% are liability driven investments where the investments are a portfolio of fixed interest and inflation-linked bonds and related derivatives, selected to broadly match the interest rate and inflation profile of liabilities.
New Markets Businesses included in New Markets mostly operate defined contribution plans.
EUR 366 million; tax EUR 71 million) the realization of the deferred tax asset is dependent on the projection of future taxable profits from existing business in excess of the profits arising from the reversal of existing taxable temporary differences.
For the following amounts, arranged by loss carry forward periods, the deferred corporate income tax asset is not recognized: Gross amounts Not recognized deferred tax assets
Deferred corporate income tax assets in respect of deductible temporary differences are recognized to the extent that the realization of the related tax benefit through future taxable profits is probable. For the following amounts relating to Available-for-sale financial assets, Defined benefit plans and Other items the recognition of the deferred corporate income tax asset is dependent on future taxable profits in excess of the profits arising from the reversal of existing taxable temporary differences: Notes to the consolidated financial statements Note 43258
Deferred corporate income tax asset dependent on retaining bonds and similar investments until the earlier of market recovery or maturity 1,766 641 617 224
Deferred corporate income tax liabilities have not been recognized for withholding tax and other taxes that would be payable on the unremitted earnings of certain subsidiaries. The unremitted earnings totaled gross EUR 1,769 million; tax EUR 442 million
46 Capital and solvency Aegon’s total capitalization reflects the capital employed in insurance activities and consists of shareholders’ capital and total gross financial leverage. Aegon aims to keep total gross financial leverage below 30% of total capitalization as measured by the gross financial leverage ratio. The gross financial leverage ratio is calculated by dividing the total gross financial leverage by the total capitalization. At December 31, 2015, the gross financial leverage ratio was 27.0% (2014: 28.7%).
The following table shows the composition of the total capitalization and the calculation of the gross financial leverage ratio: Total shareholders’ equity 32 23,931 24,293
Non-controlling interests, share options and incentive plans not yet exercised 33, SOFP 2) 77 103
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.
Insurance, reinsurance, investment management and banking companies are required to maintain a minimum solvency margin based on applicable local regulations. Aegon’s Insurance Group Directive ratio (IGD ratio) was 220% at the end of 2015 (2014: 208%). The 2015 end of year IGD ratio was the last to be reported and filed as Aegon’s capitalization will be measured on a Solvency II basis as of
January 1, 2016. The calculation of the IGD ratio was based on Solvency I capital requirements for entities within the EU (Pillar 1 for
Association of Insurance Commissioners have adopted risk-based capital (RBC) requirements for insurance companies. RBC calculations measure the ratio of a company's statutory capital, which is measured on a prudent regulatory accounting basis, to a minimum capital amount determined by the risk-based capital formula. The RBC formula measures exposures to investment risk, insurance risk, market risk, and general business risk. The formula, as used for calculating the IGD ratio, applied a covariance calculation to determine the appropriate risk-based capital. Life reinsurance is treated as life insurance. The most pertinent RBC measure is the Company Action
For the insurance and reinsurance undertakings of Aegon in the EU, the European Solvency I directives as implemented in the relevant member states were applicable up to December 31, 2015. Solvency I allowed member states to require solvency standards, exceeding the minimum requirements set by the Solvency I directives. For life insurance companies the Solvency I capital requirement was by and large the sum of 4% of insurance and investment liabilities for general account and 1% of insurance and investment liabilities for account policyholders if no guaranteed investment returns were given. At the end of 2015, Aegon the Netherlands consolidated solvency capital ratio based on IFRS was approximately 240%, excluding Aegon bank.
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 amounted to EUR 13,378 million at December 31, 2015 (2014: EUR 10,129 million).
The ability of the holding company to meet its cash obligations depends on the amount of liquid assets on its balance sheet and on the ability of the subsidiaries to pay dividends to the holding company. In order to ensure the holding company's ability to fulfil its cash obligations, it is the Company's policy that, the holding company holds liquid assets in reserve to fund at least 1.5 years of holding company operating and funding expenses, without having to rely on the receipt of dividends from its subsidiaries.
Optas N.V., an indirect subsidiary of Aegon N.V., held statutory reserves of EUR 1,050 million per December 31, 2014 which were restricted. Aegon announced in April 2014 that it had reached agreement with BPVH - a foundation representing Dutch harbor workers and employers - on removing restrictions on the capital of the harbor's former pension fund Optas pensioenen N.V., thereby ending a long-lasting dispute. After approval by the court, which was granted in January 2015, restrictions were removed three months after the date of the court ruling, when the appeal period expired. As the restrictions were removed, both the statutory reserve of
EUR 1,050 million per December 31, 2014 and the amounts included in the legal reserves were transferred to retained earnings.
were linked to the acquired negative goodwill related to Optas N.V. at acquisition date.
Fair value hierarchy The table below provides an analysis of assets and liabilities recorded at fair value on a recurring basis by level of the fair value hierarchy: Level I Level II Level III Total 2015
Liabilities carried at fair value Investment contracts for account of policyholders 165 3 - 12 (34) - 14 - - (5) - 156 3 1 Includes impairments and movements related to fair value hedges. Gains and losses are recorded in the line item Results from financial transactions of the income statement.
Liabilities carried at fair value Investment contracts for account of policyholders 114 4 - 32 (1) - 16 - - - - 165 4 1 Includes impairments and movements related to fair value hedges. Gains and losses are recorded in the line item Results from financial transactions of the income statement.
Similarly, during 2015, Aegon transferred certain financial instruments from Level III to other levels of the fair value hierarchy.
The change in level was mainly the result of a return of activity in the market for these securities and that for these securities the fair value could be determined using observable market transactions or corroborated broker quotes for the same or similar instruments.
Transfers from Level III amounted to EUR 619 million (2014: EUR 712 million).
Assets carried at fair value Available-for-sale Shares Net asset value n.a. 132 n.a. 134 n.a.
Other investments at fair value Tax credit investments Discounted cash flow Discount rate 785 7.4% 759 8.5%
Fair value through profit or loss Debt securities Other n.a. 6 n.a. 17 n.a.
The table above presents the impact on a fair value measurement of a change in an unobservable input for embedded derivatives in insurance contracts. It is estimated that changing one or more of the unobservable inputs to reflect reasonable possible alternatives in valuation of other Level III financial investments would have no significant impact for the Group. The impact of changes in inputs may not be independent, therefore the descriptions provided below indicate the impact of a change in an input in isolation: a. To determine the fair value of the bifurcated embedded derivatives related to guarantees, a discount rate is used including own credit spread. An increase in own credit spread results in lower valuation, while a decrease results in a higher valuation of the embedded derivatives. Aegon increased or decreased its own credit spread by 20 basis points.
Liabilities Trust pass-through securities - held at amortized cost 157 - 146 - 146
Assets Mortgage loans - held at amortized cost 32,164 - - 36,692 36,692
Shares When available, Aegon uses quoted market prices in active markets to determine the fair value of its investments in shares. Fair values for unquoted shares are estimated using observations of the price/earnings or price/cash flow ratios of quoted companies considered comparable to the companies being valued. Valuations are adjusted to account for company-specific issues and the lack of liquidity inherent in an unquoted investment. Adjustments for lack of liquidity are generally based on available market evidence. In addition, a variety of other factors are reviewed by management, including, but not limited to, current operating performance, changes in market outlook and the third-party financing environment.
Real estate funds, private equity funds and hedge funds The fair values of investments held in non-quoted investment funds are determined by management after taking into consideration information provided by the fund managers. Aegon reviews the valuations each month and performs analytical procedures and trending analyses to ensure the fair values are appropriate.
Aegon’s portfolio of debt securities can be subdivided in Residential mortgage-backed securities (RMBS), Commercial mortgage-backed securities (CMBS), Asset-backed securities (ABS), Corporate bonds and Sovereign debt. Below relevant details in the valuation methodology for these specific types of debt securities are described.
Aegon’s valuation of its euro-denominated derivatives positions in the Netherlands is based on the Overnight Index Swap (OIS) curve.
ISDA master netting agreements for each of the Group’s legal entities to facilitate Aegon’s right to offset credit risk exposure. Changes in the fair value of derivatives attributable to changes in counterparty credit risk were not significant.
Real estate Valuations of both investments in real estate and real estate held for own use are conducted in full by independent external appraisers at least every three to five years and reviewed at least once a year by qualified internal appraisers to ensure the value correctly reflects the fair value at the balance sheet date. Appraisals are different for each specific local market, but are based on market guidelines such as International Valuation Standards, Uniform Standards of Professional Appraisal Practice or guidelines issued by the Investment
Total financial liabilities at fair value through profit or loss 9,852 40,981 24,186 38,791
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 elected to designate these investments at fair value through profit or loss, as a classification of financial assets as available-for-sale would result in accumulation of unrealized gains and losses in a revaluation reserve within equity, while changes to the liability would be reflected in net income
Changes in the fair value of investment contracts for account of policyholders designated at fair value through profit or loss were not attributable to changes in Aegon’s credit spread. There are also no differences between the carrying amounts of these financial liabilities and the contractual amounts payable at maturity (net of surrender penalties).
Aegon N.V. entered into a contingent capital letter for an amount of JPY 7.5 billion (EUR 57 million) to support its joint venture Aegon
Transamerica Corporation at December 31, 2015 amounted to EUR 3,467 million (2014: EUR 3,099 million). As of that date no amounts had been drawn, or were due under letter of credit facilities. The guarantees partly related to debt amounted to
LLC and Commonwealth General Corporation with respect to bonds, capital trust pass-through securities and notes issued under commercial paper programs amounted to EUR 615 million (2014: EUR 552 million); and �� Due and punctual payment of any amounts owed to third parties by the consolidated group company Aegon Derivatives N.V. in connection with derivative transactions. Aegon Derivatives N.V. only enters into derivative transactions with counterparties with which ISDA master netting agreements, including collateral support annex agreements, have been agreed. Net (credit) exposure on derivative transactions with these counterparties was therefore limited as of December 31, 2015.
Certain of the products we sell are complex and involve significant investment risks that may be passed on to Aegon’s customers.
Authority fined Aegon GBP 8.3 million for past sales practices related to accident insurance products sold by an affinity marketing unit that was active in several European countries and as to which Aegon elected to cease writing new business.
Netherlands, two major customer interest groups. In 2012, Aegon accelerated certain product improvements that reduce future costs and that increase policy value for its customers with unit-linked insurance policies. With these measures, Aegon committed to the 'best of class' principles of the Dutch Ministry of Finance for certain existing unit-linked products. These principles were the result of an industry-wide review by the Ministry of the various agreements reached between individual insurance companies and customer interest groups in relation to unit-linked insurance policies. The Ministry made a strong appeal to all industry participants to apply its principles.
EUR 25 million in 2013 in connection therewith. In 2014, Aegon announced that it would voluntarily compensate holders of KoersPlan products that were not plaintiffs in the litigation. The compensation amounts to the difference, if any, between the amount of premium charged by Aegon for a comparable risk in a product providing only death benefit coverage over the same period, and the premium (if
Aegon may take in connection with any such expectations, or demands or claims, due to commercial necessity or future rulings or, for example, at the instigation of regulatory authorities, or the impact that any such actions may have on Aegon’s business, results of operations and financial position.
In April 2015, the European Court of Justice ruled on preliminary questions raised in a court case pending before the District Court in
Dutch law meet those principles. It is possible that a judgment, although it would address a question of legal principle only and would be rendered in a case against another insurer, may ultimately be used by plaintiffs against Aegon or to support potential claims against
Aegon. Future claims based on emerging legal theories could have a material adverse effect on Aegon’s businesses, results of operations and financial condition.
Holders of unit-linked policies filed claims in civil court against Aegon in Poland over the fees payable by a customer at the time of the initial purchase for certain products or retrospectively due on surrender for other products. While fees were explicitly disclosed to policyholders in policy documentation at the time of investment, the plaintiffs allege they are too high or that there is no contractual basis to charge fees altogether. In October 2014, the Polish Office of Competition and Consumer Protection fined Aegon for an amount of EUR 6 million in relation to its communication around early surrender fees. While this fine was not directly related to the civil claims, for reasons of commercial necessity as well as at the instigation of the regulatory authorities, Aegon decided to modify the early surrender fee structure. Aegon recorded a charge of EUR 23 million in the fourth quarter of 2014 in connection therewith. In December 2015, Aegon reached a settlement with the Polish Office of Competition and Consumer Protection on reducing the fees payable by a customer at the time of the initial purchase, and took a related charge of EUR 11 million. There can be no assurances that ultimately the exposure to Aegon in connection with allegations such as those underlying the claims in Poland, would not have a material adverse effect on Aegon’s results of operations or financial position.
the type of claims, it is not practicable for Aegon to quantify a range or maximum liability or the timing of the financial impact, if any.
A former subsidiary of Transamerica Corporation was involved in a contractual dispute with a Nigerian travel broker over an alleged contract dispute that arose in 1976. That dispute was resolved in Delaware court for USD 235,000 plus interest. The plaintiff took the Delaware judgment relating to the 1976 dispute to a Nigerian court and alleged that it was entitled to approximately the same damages for 1977 through 1984 despite the absence of any contract relating to those years. The Nigerian court recently issued a judgment in favor of the plaintiff of the alleged actual damages as well as pre-judgment interest of approximately USD 120 million.
Aegon believes the Nigerian court decided the matter incorrectly and intends to appeal the decision in Nigeria as well as to contest any effort by the plaintiff to collect on the judgment. Aegon has no material assets located in Nigeria.
The following disclosures provide details for transferred financial assets that are not derecognized in their entirety, transferred financial asset that are derecognized in their entirety, but where Aegon has a continuing involvement and assets accepted and pledged as collateral.
49.2 Transferred financial assets that are derecognized in their entirety, but where Aegon has continuing involvement Aegon has no transferred financial assets with continuing involvement that are derecognized in their entirely as per year-end 2015 and 2014.
The following tables present the fair value of the assets received in relation to securities lending and reverse repurchase activities: Securities lending 2015 2014
Non-cash collateral that can be sold or repledged in the absence of default 3,462 3,877
As part of Aegon’s mortgage loan funding program in the Netherlands, EUR 6.4 billion (2014: EUR 8.2 billion) has been pledged as security for notes issued (note 39 Borrowings). In addition, in order to trade derivatives on the various exchanges, Aegon posts margin as collateral. The amount of collateral pledged for derivative transactions was EUR 1,166 million (2014: EUR 1,419 million).
La Mondiale for EUR 350 million was announced on November 24, 2014. Proceeds from the sale were added to Aegon’s excess capital buffer, and increased the group's Insurance Group Directive (IGD) solvency ratio by over 4 percentage points at the time of the sale.
On July 31, 2015, Aegon completed the sale of its Canadian life insurance business following regulatory approval. The agreement to sell Aegon’s Canadian life insurance business for an amount of CAD 600 million (EUR 428 million) was announced on October 16, 2014. The transaction resulted in a book loss of CAD 1,054 million (EUR 751 million) recorded and presented as part of 'other charges', please refer to Note 17 Other charges. Aegon used the proceeds of this transaction for the redemption of the USD 500 million 4.625%
(EUR (51) million) release of the net foreign investment hedging reserve and CAD 668 million (EUR 476 million) for the release of the available for sale reserve. The net cash proceeds were CAD 543 million (EUR 387 million) consisting of CAD 600 million
(EUR 428 million) cash received and the cash and cash equivalents included in the sale of CAD 57 million (EUR 41 million). Expenses related to the transaction, including cost of sale, amounted to CAD 11 million (EUR 8 million).
On September 1, 2015, Aegon completed the sale of Clark Consulting following regulatory approval. The agreement to sell Clark
On September 7, 2015, Aegon completed the sale of its 25.1% share in platform provider and discretionary fund manager Seven
Services. The loss on the sale amounted to EUR 22 million. The sale was completed in the third quarter of 2013.
On December 30, 2013, Aegon Czech Republic completed the sale of its local pension business. The consideration amounted to
The Netherlands �� Aegon Bank N.V., Utrecht; �� Aegon Hypotheken B.V., The Hague; �� Aegon Levensverzekering N.V., The Hague; �� Aegon Schadeverzekering N.V., The Hague; �� Aegon Spaarkas N.V., The Hague; �� Optas Pensioenen N.V., Rotterdam; �� TKP Pensioen B.V., Groningen; and �� Unirobe Meeùs Groep B.V., The Hague.
United Kingdom �� Origen Financial Services Ltd., London; and �� Scottish Equitable plc, Edinburgh.
New Markets �� Aegon Life Insurance Company, Mumbai (India), life insurance company, (49%); and �� La Banque Postale Asset Management, Paris (France), (25%).
On May 21, 2015, Vereniging Aegon exercised its options rights to purchase in aggregate 3,686,000 common shares B at fair value of a common share B (being 1/40th of the market value of a common share in the capital of the Company at the time of issuance) to mitigate dilution caused by issuance of shares on May 21, 2015, in connection with the Long Term Incentive Plans for senior management.
On May 29, 2013, Aegon N.V. and Vereniging Aegon entered into a Voting Rights Agreement, which ensures that under normal circumstances, i.e. except in the event of a Special Cause, Vereniging Aegon will no longer be allowed to exercise more votes than is proportionate to the financial rights represented by its shares. This means that in absence of a Special Cause, Vereniging Aegon may cast one vote for every common share it holds and only one vote for every 40 common shares B it holds, (see also the section 'Major
The total remuneration for the members of the Management Board over 2015 was EUR 15.2 million (2014: EUR 14.9 million; 2013: EUR 15.2 million), consisting of EUR 6.3 million (2014: EUR 5.1 million; 2013: EUR 5.0 million) fixed compensation,
EUR 4.9 million variable compensation awards (2014: EUR 5.2 million; 2013: EUR 6.3 million), EUR 1.6 million (2014: EUR 2.0 million; 2013: EUR 1.3 million) other benefits and EUR 2.5 million (2014: EUR 2.6 million; 2013: EUR 1.6 million) pension premiums.
Expenses as recognized under IFRS in the income statement for variable compensation and pensions differ from the variable compensation awards and pension premiums paid due to the accounting treatment under respectively IFRS 2 and IAS 19.
For Mr. Button, the expenses under IFRS with regard to conditionally awarded cash and shares recognized in the income statement during the performance year 2015 for his role as CFO and member of Aegon’s Executive Board amounted to EUR 683 (2014: EUR 466; 2013: EUR 288). In performance year 2013 and previous performance years Mr. Button has been awarded with variable compensation in his role as CFO of Americas and Head of Corporate Financial Center. The related expenses under IFRS for those awards recognized in 2015 for the period that Mr. Button has been part of the Executive Board amount to EUR 312 (2014: EUR 372; 2013: EUR 500).
Mr. Nooitgedagt relate to the conditional variable compensation awards for the performance year 2013 as well as for previous performance years. The vesting conditions and applicable holding periods for the awards of Mr. Nooitgedagt remain nevertheless unchanged. Mr. Nooitgedagt retired on August 1, 2013 and he has been awarded no variable compensation in 2015 or 2014.
The remaining part of variable compensation for the performance year 2015 (60%), for Mr. Wynaendts EUR 277 and 45,330 shares and for Mr. Button EUR 235 and 35,433 shares, is to be paid out in equal portions in 2017, 2018 and 2019, subject to ex-post assessments, which may result in downward adjustments and may be subject to additional conditions being met. Any payout will be split 50/50 in a cash payment and an allocation of shares vesting. The vested shares, with the exception of shares sold to meet income tax obligations, are subject to a three year retention (holding) period, before they are at the disposal of the Executive Board members.
Variable compensation is split 50/50 in a cash payment and an allocation of shares. Of the variable compensation related to performance year 2013, 40% was payable in 2014. Accordingly, Mr. Wynaendts and Mr. Button received a cash payment of EUR 206 and EUR 94 respectively. The number of shares that was made available in 2014 related to performance year 2013 was 41,961 and 19,146 for Mr. Wynaendts and Mr. Button respectively. The vested shares, with the exception of shares sold to meet income tax obligations, are subject to a three year retention (holding) period before they are at the disposal of the Executive Board members.
Variable compensation is split 50/50 in a cash payment and an allocation of shares. Of the variable compensation related to performance year 2013, 40% was payable in 2014. Accordingly, Mr. Nooitgedagt received a cash payment of EUR 87. The number of shares to be made available in 2014 related to performance year 2013 is 17,650. Of the remaining 60%, EUR 130 and 26,478 shares is to be paid out in future years and subject to ex-post assessments, which may result in downward adjustments. In each of the years 2015, 2016 and 2017, equal portions of the deferred variable compensation over 2013 may be made available. Any payout will be split 50/50 in cash payment and an allocation of shares vesting. The vested shares (with the exception of shares sold to meet income tax obligations) are subject to a three year retention (holding) period before they are at the disposal of Mr. Nooitgedagt.
Other benefits include non-monetary benefits (e.g. company car), social security contributions by the employer, and tax expenses borne by the Group. For Mr. Button, these benefits also include expenses related to his expatriation from the United States to the Netherlands, borne by the Group.
Mr. Wynaendts upon his reappointment. The 2014 contribution for Mr. Wynaendts to the Aegon pension funds reflects the increase to his fixed salary as well the current low interest rates. Under IFRS, the service cost as recognized in the income statement related to the defined benefit obligation of Mr. Wynaendts amounted to EUR 1,962 (2014: EUR 951; 2013: EUR 736). Service cost for Mr. Button amounted to EUR 215 (2014: EUR 177; 2013: EUR 114) and for Jan J. Nooitgedagt EUR 44 in 2013.
Total The total amount of remuneration for Mr. Wynaendts related to 2015 was EUR 3,446 (2014: EUR 3,947; 2013: EUR 3,282), for
The remuneration of Mr. Button is charged from his home country to The Netherlands. These charges are subject to Dutch VAT, which is an expense for Aegon. The amount of VAT liable over 2015 is EUR 529 (2014: EUR 444, 2013: EUR 329). The special tax-levy
Ben J. Noteboom (as of May 20, 2015) 69,250 - -
Dona D. Young (as of May 15, 2013) 121,000 118,000 77,125
Kornelis J. Storm (up to May 21, 2014) - 33,750 91,000
Aegon’s Supervisory Board members are entitled to the following: �� A base fee for membership of the Supervisory Board. No separate attendance fees are paid to members for attendance at the regular Supervisory Board meetings (2015: 7 meetings; 2014: 7 meetings; 2013: 7 meetings); �� An attendance fee of EUR 3,000 for each extra Board meeting attended, be it in person or by video and/or telephone conference; �� A committee fee for members on each of the Supervisory Board’s Committees; �� An attendance fee for each Committee meeting attended, be it in person or through video and/or telephone conference; and �� An additional fee for attending meetings that require intercontinental travel between the Supervisory Board member's home location and the meeting location.
Not included in the table above is a premium for state health insurance paid on behalf of Dutch Supervisory Board members. There are no outstanding balances such as loans, guarantees or advanced payments. The remuneration for Supervisory Board members is as of 2013 Dutch VAT liability compliant.
Financial statements of Aegon N.V. Income statement of Aegon N.V. Financial statements of Aegon N.V. Income statement of Aegon N.V. Financial statements of Aegon N.V. Income statement of Aegon N.V.
Remeasurement of defined benefit plans of group companies 9 (1,532) (1,611)
At the balance sheet date, monetary assets, monetary liabilities and own equity instruments in foreign currencies are translated to the functional currency at the closing rate of exchange prevailing on that date. Non-monetary items carried at cost are translated using the exchange rate at the date of the transaction, while assets carried at fair value are translated at the exchange rate when the fair value was determined.
Notes to the financial statements Notes to the financial statements Notes to the financial statements Notes to the financial statements of Aegon N.V.
2.6 Cash and cash equivalents Cash comprises cash at banks and in-hand. Cash equivalents are short-term, highly liquid investments generally with original maturities of three months or less that are readily convertible to known cash amounts, are subject to insignificant risks of changes in value and are held for the purpose of meeting short-term cash requirements. Money market investments that are held for investment purposes
Treasury shares are own equity instruments reacquired by the Group. They are deducted from shareholders’ equity, regardless of the objective of the transaction. No gain or loss is recognized in the income statement on the purchase, sale, issue or cancellation of the instruments. If sold, the difference between the carrying amount and the proceeds is reflected in retained earnings.
The consideration paid or received is recognized directly in shareholders’ equity. All treasury shares are eliminated in the calculation of earnings per share and dividend per common share.
2.10 Borrowings A financial instrument issued by the Company is classified as a liability if the contractual obligation must be settled in cash or another financial asset or through the exchange of financial assets and liabilities at potentially unfavorable conditions for the Company.
Notes to the financial statements of Aegon N.V. Note 2 298
Events that are indicative of conditions that arose after the balance sheet date are disclosed, but do not result in an adjustment of the financial statements themselves.
6 Receivables Receivables from group companies and other receivables have a maturity of less than one year. Other receivables include an income tax receivable of EUR 63 million (2014: EUR 93 million).
7 Other assets Other assets include derivatives with positive fair values of EUR 106 million (2014: EUR 377 million).
In 2014, Vereniging Aegon exercised its option rights to purchase in aggregate 2,320,280 common shares B at market value. It did this to prevent dilution caused by Aegon’s issuance of shares on May 21, 2014, in connection with the Long Term Incentive Plans for senior management.
Notes to the financial statements of Aegon N.V. Note 6 300
The following table shows the movement during the year in the number of common shares: Number of common shares 2015 2014
The weighted average number of EUR 0.12 common shares for 2015 was 2,102,813,138 (2014: 2,096,043,713).
The shares repurchased by Aegon N.V. during the share-buy-back programs to undo the dilution caused by the distribution of dividend in stock, although included in the issued and outstanding number of shares, are excluded from the calculation of the weighted average number of shares.
Notes to the financial statements of Aegon N.V. Note 9 302
Included in Aegon N.V.’s legal reserves was an amount of EUR 510 million per December 31, 2014 related to Optas N.V. which represented the increase in statutory reserves since the acquisition of Optas N.V. by Aegon. The statutory reserves of Optas N.V. were linked to the acquired negative goodwill related to Optas N.V. at acquisition date.
EUR 950 million floating DSL rate 3) Quarterly, July 15 2016 950 950 1 The coupon of the USD 250 million junior perpetual capital securities is reset each quarter based on the then prevailing three-month LIBOR yield plus a spread of 87.5 basis points, with a minimum of 4%.
The securities have been issued at par. The securities have subordination provisions, rank junior to all other liabilities and senior to shareholder's equity only. The conditions of the securities contain certain provisions for optional and required coupon payment deferral and mandatory coupon payment events. Although the securities have no stated maturity, Aegon has the right to call the securities for redemption at par for the first time on the coupon date in the years as specified, or on any coupon payment date thereafter.
On March 15, 2014, Aegon redeemed junior perpetual capital securities with a coupon of 6.875% issued in 2006. The junior perpetual capital securities were originally issued at par with a carrying value of EUR 438 million. The principal amount of USD 550 million was repaid with accrued interest. The cumulative foreign currency result at redemption was recorded directly in retained earnings.
Subordinated borrowings include a liability of EUR 65 million (2014: EUR 54 million) relating to the USD 525 million non-cumulative subordinated notes issued on February 7, 2012. The liability component of the non-cumulative subordinated notes is related to the redemption amount. For further information on the non-cumulative subordinated notes and their subordination refer to note 10
Commitments and contingencies Aegon N.V. entered into a contingent capital letter for an amount of JPY 7.5 billion (EUR 57 million) to support its joint venture
At December 31, 2015, the letter of credit arrangements utilized by captives to provide collateral to affiliates amounted to
16 Events after the balance sheet date On January 13, 2016, Aegon announced to repurchase EUR 400 million worth of common shares in 2016, of which a first tranche of
Our opinion In our opinion: �� The consolidated financial statements give a true and fair view of the financial position of Aegon N.V. and its subsidiaries as at
The financial statements include the consolidated financial statements of Aegon N.V. and its subsidiaries (together: 'the Group')
The stand-alone financial statements comprise: �� the statement of financial position as at December 31, 2015; �� the income statement for the year then ended; and �� the notes, comprising a summary of significant accounting policies and other explanatory information.
Audit scope � We conducted audit work in all significant locations. � In order to take responsibility for the entire Group, the Group engagement team performed oversight procedures on the work of component teams for all the significant locations including the Netherlands, the Americas, the United Kingdom, Central and Eastern Europe and Spain.
Key audit matters � Valuation of insurance contracts and insurance contracts for account of policyholders including the design and application of complex valuation models and the economic and actuarial assumptions that support the calculation
� Deferred policy acquisition costs (DPAC) and value of business acquired (VOBA) � Fair value of ‘hard to value’ financial instruments � Uncertainties in policyholder claims and litigation � Disclosure and estimated impact to equity and income before tax as a result of adoption of voluntary changes in accounting policies in 2016
We ensured that the audit teams both at Group and at component levels included the appropriate skills and competencies which are needed for the audit of a complex global financial conglomerate, such as Aegon N.V. This included industry expertise in life and non-life insurance, banking and asset management, as well as specialists including actuaries, IT auditors, treasury, tax, corporate responsibility, remuneration and valuation specialists.
How we determined it Circa 5% of a three year average of income before tax including normalizing 2015 income before tax by excluding the realized loss from the sale of the Canadian operations.
Component materiality To each component in our audit scope based on our judgement, we allocate materiality that is less than our overall group materiality. The range of materiality allocated across components was based on the relative size of the component. The allocated materiality was between EUR 20 million and
(2014: EUR 4 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
The regional units supported by local finance, risk management, actuarial and tax functions, maintain their own accounting records and controls and report to the Group finance team in The Hague, the Netherlands through an integrated consolidation system. In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed at each of the regional units by us, the Group engagement team, or component auditors within PwC Netherlands and from other PwC network firms operating under our instructions.
Where the work was performed by component auditors, we determined the level of Group involvement we needed to have in the audit work at those regional units. This determination was made in order for us to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the Group financial statements as a whole. In addition to issuing written instructions to each of the component teams, we developed an oversight strategy for each regional unit based on its significance and/or risk characteristics to the Group. These strategies included procedures such as regular meetings and discussions with component auditors to challenge and review significant audit matters and judgements within the component team audit files, extensive reporting to the Group team on a quarterly basis and regular site visits to attend closing meetings and/or local board meetings.
By performing the procedures above at components, combined with additional procedures at Group level, we have obtained sufficient and appropriate audit evidence regarding the financial information of the Group as a whole to provide a basis for our opinion on the consolidated financial statements.
Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements. We have communicated the key audit matters to the Audit Committee and Supervisory Board, but they are not a comprehensive reflection of all matters that we discussed.
Valuation of insurance contracts and insurance contracts for account of policyholders including the design and application of complex valuation models and the economic and actuarial assumptions that support the calculation Refer to note 2.19 'Summary of significant accounting policies -
Economic assumptions such as investment return and interest rates and actuarial assumptions such as mortality, morbidity and customer behavior are key inputs used to estimate these long-term liabilities. Significant judgement is applied in setting these assumptions.
During 2015, the Company continued a multi-year review of their actuarial models with continued focus on those considered high risk. These model updates in combination with the Company’s actuarial and economic assumptions update resulted in certain charges being recorded for the year as explained in note 3
We used our own actuarial specialists to assist us in performing our audit procedures. In particular, our audit focused on the models considered more complex and/or requiring significant judgement in the setting of assumptions such as the corporate pension guarantees in the Netherlands and guarantees associated with universal life and annuities along with long term care in the Americas.
We assessed the design and tested the operating effectiveness of internal controls over the actuarial process including management’s determination and approval process for setting of economic and actuarial assumptions. We assessed the Company’s validation of certain models considered higher risk by the Company as a result of complexity and/or magnitude. We also assessed and tested the internal controls over the Company’s actuarial analyses including estimated versus actual results and experience studies.
For the assumption setting process, we assessed the experience analyses performed by the Company. Our assessments also included challenging, as necessary, specified economic and actuarial assumptions considering management’s rationale for the actuarial judgments applied along with comparison to applicable industry experiences.
We also assessed the adequacy of the disclosures regarding these liabilities in the consolidated financial statements to determine they were in accordance with EU-IFRS as well as the change in the Company's segment measurement following the change in treatment to record model validation in other charges for segment reporting purposes.
Intangible assets' and 2.13 'Summary of significant accounting policies - Deferred expenses' and notes 21 'Intangible assets'
EUR 13.3 billion or 3% of total assets and involve significant judgement in the measurement and assessment of recoverability of these assets. They are therefore considered key matters for our audit. The recoverability is based in part on the adequacy of the insurance liabilities and projected future cash flows and, if determined to be insufficient, would trigger a write-down of the asset. The DPAC and VOBA associated with the investment and retirement business in Aegon Americas, which represents 71% of total DPAC and VOBA, involves the greatest judgment in terms of measurement and recoverability. The amortization of the DPAC
Our work in this area included assessing the reasonableness of assumptions such as the projected investment return by comparing against the investment portfolio mix and market data.
Fair value of ‘hard to value’ financial instruments Refer to note 2.7 'Summary of significant accounting policies -
These investments have a higher potential risk to be affected by error or management bias. Therefore these areas are considered a key matter for our audit. Our focus considered both the positions that are presented at fair value on the balance sheet and those positions carried at amortized cost on the balance sheet but for which fair value is required to be disclosed.
The risk was not uniform for all investment types and industries and was considered greatest for derivatives, direct and indirect investments in real estate, mortgage loans, asset backed securities; hedge funds, private equity funds and other alternative investments; and unlisted equity and debt securities.
We evaluated the cash flow and other relevant testing performed by the Group in order to identify any impairment in relation to investments.
Uncertainties in policyholder claims and litigation Refer to note 48 'Commitments and contingencies'.
Americas and DPAC and related amortization in the UK. Due to the magnitude of the change, we considered this a key audit matter.
January 1, 2016 will result in, between a USD 100 million and USD 200 million decrease to equity.
For the UK, the Company is adopting accounting changes to reflect management’s strategy of moving to a digital business platform. One of the policy changes is related to the definition of contract modification which as a result modifying a contract will impact the projected future cash flows. The other policy change relates to the level at which the liability adequacy test is applied for management’s assessment of recoverability of DPAC.
key audit matter above. The retrospective adoption of this accounting change at January 1, 2016 will result in, between a GBP 800 million and GBP 900 million decrease in 2015 income before tax.
We involved technical accounting specialists, ensuring the voluntary change was in accordance with EU-IFRS requirements.
We also assessed the adequacy of the disclosures regarding these voluntary accounting changes in the 2015 consolidated financial statements to determine they were in accordance with EU-IFRS.
For the UK, we used our own actuarial specialists to assist us in performing our audit procedures. We assessed the Company’s updated analysis of the recoverability of DPAC through review of the updated projected future cash flows and assumptions.
As part of the preparation of the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, management should prepare the financial statements using the going concern basis of accounting unless management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. Management should disclose events and circumstances that may cast significant doubt on the Company’s ability to continue as a going concern in the financial statements.
Our responsibilities for the audit of the financial statements Our responsibility is to plan and perform an audit engagement to obtain sufficient and appropriate audit evidence to provide a basis for our opinion. Our audit opinion aims to provide reasonable assurance about whether the financial statements are free from material misstatement. Reasonable assurance is a high but not absolute level of assurance which makes it possible that we may not detect all misstatements. Misstatements may arise due to fraud or error. They are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Civil Code has been annexed. �� We report that the directors’ report, to the extent we can assess, is consistent with the financial statements.
The interpretation of certain accounting and audit requirements under Solvency II is still evolving. On pages 89 and 90 of the
Directors Report management has provided a preliminary analysis of its capital position under Solvency II. Given the potential impact of the uncertain items on the Solvency II capital ratios included in the Directors Report, these ratios have not been subject to audit procedures.
Dutch Standards on Auditing, ethical requirements and independence requirements. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error. Our audit consisted among others of: �� Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the intentional override of internal control. �� Obtaining an understanding of internal control relevant to the audit 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 company’s internal control. �� Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management.
�� Concluding on the appropriateness of the management’s use of the going concern basis of accounting, and based on the audit evidence obtained, concluding whether a material uncertainty exists related to events and/or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report and are made in the context of our opinion on the financial statements as a whole. However, future events or conditions may cause the company to cease to continue as a going concern.
The relevant provisions read as follows: 1. The General Meeting of Shareholders will adopt the Annual Accounts; 2. If the adopted profit and loss account shows a profit, the Supervisory Board may decide, upon the proposal of the Executive Board, to set aside part of the profit to augment and/or form reserves.
At the Annual General Meeting of Shareholders on May 20, 2016, the Executive Board will, absent unforeseen circumstances, propose a final dividend for 2015 of EUR 0.13 per common share and EUR 0.00325 per common share B. The final dividend will be paid in cash or stocks at the election of the shareholder. The value of the stock dividend will be approximately equal to the cash dividend.
Net income attributable to equity holders of Aegon N.V. 619 1,186
Major shareholders General As of December 31, 2015, Aegon’s total authorized share capital consisted of 6,000,000,000 common shares with a par value of
EUR 0.12 per share and 3,000,000,000 common shares B with a par value of EUR 0.12 per share. At the same date, there were 2,147,036,826 common shares and 585,022,160 common shares B issued. Of the issued common shares, 42,997,722 common shares were held by Aegon as treasury shares and 1,533,836 treasury shares were held by its subsidiaries.
The voting rights pertaining to the preferred shares were adjusted accordingly to 25/12 vote per preferred share. However, in May 2003, Aegon N.V. and Vereniging Aegon entered into a Preferred Shares Voting Agreement, pursuant to which Vereniging Aegon agreed to exercise one vote only per preferred share, except in the event of a 'Special Cause', as defined below.
The simplified capital structure entailed, but was not limited to, the amendment of the Articles of Association of Aegon N.V., including the conversion of all outstanding 329,773,000 preferred shares A and B, with a nominal value of EUR 0.25 each, into 120,713,389 common shares and 566,313,695 common shares B, with a nominal value of EUR 0.12 each. The financial rights attached to a common share B were determined at 1/40th of the financial rights attached to a common share.
In the years 2003 through 2012, 118,093,000 class B preferred shares were issued under these option rights. In July 2013, Vereniging
Aegon exercised its option rights to purchase in aggregate 12,691,745 common shares B at fair value of a common share B (being 1/40th of the market value of a common share in the capital of the Company at the time of issuance). It did this to correct dilution caused by Aegon’s issuance of shares on May 1, 2013 and May 16, 2013 in connection with the Long Term Incentive Plans for senior management and the issuance of shares on June 14, 2013, being the final dividend 2012 in the form of stock dividend. On May 22, 2014, and with effect of May 21, 2014, Vereniging Aegon exercised its options rights to purchase in aggregate 2,320,280 common shares B at fair value of a common share B (being 1/40th of the market value of a common share in the capital of the Company at the time of issuance) to mitigate dilution caused by Aegon’s issuance of shares on May 21, 2014, in connection with the Long Term
At December 31, 2015, the General Meeting of Members of Vereniging Aegon consisted of 18 members. The majority of the voting rights is with the 16 members who are not employees or former employees of Aegon N.V. or one of the Aegon Group companies, nor current or former members of the Supervisory Board or the Executive Board of Aegon N.V. The two other members are from the Executive Board of Aegon N.V.
Vereniging Aegon has an Executive Committee consisting of eight members, six of whom are not, nor have ever been, related to Aegon, including the Chairman and the Vice-Chairman. The other two members are also members of the Executive Board of Aegon N.V.
Resolutions of the Executive Committee, other than regarding the amendment of the Articles of Association of Vereniging Aegon, are made with an absolute majority of the votes. When a vote in the Executive Committee results in a tie, the General Meeting of Members has the deciding vote. Regarding the amendment of the Articles of Association of Vereniging Aegon, a special procedure requires a unanimous proposal from the Executive Committee, thereby including the consent of the representatives of Aegon N.V. at the Executive Committee. This requirement does not apply in the event of a hostile change of control at the General Meeting of
Aegon N.V. Furthermore, the two members of the Executive Board of Aegon N.V., who are also members of the Executive Committee, have no voting rights on several decisions that relate to Aegon N.V., as set out in the Articles of Association of Vereniging Aegon.
Other major shareholders To Aegon’s knowledge based on the filings made with the Netherlands Authority for Financial Markets, the AFM, the US based investment management firm Dodge & Cox holds a capital and voting interest in Aegon of 3%.
Based on its last filing with the Dutch Autoriteit Financiële Markten on July 1, 2013 the Dodge & Cox International Stock Fund stated to hold 83,320,454 common shares and voting rights which represents 3.0% of the capital issued as at December 31, 2015. On February 12, 2016, Dodge & Cox’s filing with the United States Securities and Exchange Commission (SEC) shows that Dodge & Cox holds 252,801,195 common shares, representing 9.3% of the issued capital, and has voting rights for 246,721,656 shares, representing 9.0% of the votes as at December 31,2015.
Dodge & Cox with the SEC are held by Dodge & Cox on behalf of its other clients, including investment companies registered under the Investment Company Act of 1940 and other managed accounts.
holds 135,002,163 common shares, representing 4.9% of the issued capital as at December 31, 2015. The SEC filing also shows that the commons shares are held by various entities to whom they provide asset management services. Each of these entities hold less than 3% of the issued capital as at December 31, 2015.
Other investments at fair value through profit or loss 2,931 2,938 2,938
Real estate: Investments in real estate 1,990 1,990 1 Cost is defined as original cost for available-for-sale shares and amortized cost for available-for-sale and held-to-maturity bonds
Issuance, repurchase and coupons of non-cumulative subordinated notes (38) (32) (28)
Net increase / (decrease) in cash and cash equivalents (346) 29 (958)
Dividends from and capital contributions to business units Aegon received EUR 1.1 billion of dividends from its business units during 2015, almost all of which from the Americas. Aegon spent
EUR 0.3 billion on capital contributions and acquisitions in New Markets.
EUR 0.5 billion from the Netherlands and EUR 0.1 billion from Aegon Asset Management and Central & Eastern Europe. Capital contributions of EUR 0.5 billion were paid to Aegon’s operating units, including EUR 0.4 billion to the United Kingdom.
The provisions can be analyzed as follows: Schedule V Schedule V Schedule V
Compliance with regulations Iran Threat Reduction and Syria Human Rights Act Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRA), which was signed into law on 10 August 2012, added a new subsection (r) to Section 13 of the Securities Exchange Act of 1934, as amended, which requires Aegon to disclose whether Aegon N.V. or any of its affiliates has engaged during the calendar year in certain Iran-related activities, including any transaction or dealing with the Government of Iran that is not conducted pursuant to a specific authorisation of the U.S. government.
Aegon maintained a limited number of individual personal pensions which were in-force during 2015 where the payer of the pension benefit is a party subject to relevant U.S. sanctions.
GBP 3,432.99 were also received during 2015. At February 10, 2016, the account value was GBP 23,203.21. The related annual net profit arising from this contract, which is difficult to calculate with precision, is estimated to be GBP 2,320.32.
Individual Personal Pension #2 has a current value of GBP 2,482.34 as at February 10, 2016, and regular monthly contributions of
GBP 18.61 (gross) are being received into this policy. Individual Personal Pension #3 has a current value of GBP 135,876.30 as at
Risk factors Aegon faces a number of risks, some of which may arise from internal factors, such as inadequate compliance systems and operational change management. Others, such as movements in interest rates or unexpected changes in longevity or mortality trends, are external in nature. Aegon’s most significant risk is to changes in financial markets, particularly related to movements in interest rates, equity and credit markets. These risks, whether internal or external, may affect the Company´s operations, its earnings, its share price, the value of its investments, or the sale of certain products and services. The next two sections describe risks relating to Aegon’s businesses and risks relating to Aegon’s common shares.
I - Risks relating to Aegon’s businesses The following covers the key risk factors that may affect Aegon’s businesses and operations, as well as other risk factors that are particularly relevant to Aegon in the ongoing period of significant economic uncertainty. Additional risks to which Aegon is subject include, but are not limited to, the factors mentioned under ‘Forward-looking statements’ (page 371 and 372), and the risks of
accounts for insurance and investment contracts (such as variable annuities, unit-linked products and mutual funds) where funds are invested in equities. Although most of the risk remains with the policyholder, lower investment returns can reduce the asset management fee that Aegon earns on the asset balance in these products and prolonged investment under-performance may cause existing customers to withdraw funds and potential customers not to grant investment mandates. Hedging of exposures may change those effects significantly.
During periods of sustained low interest rates, as experienced in recent years, Aegon may not be able to preserve margins as a result of minimum interest rate guarantees and minimum guaranteed crediting rates provided in policies. Also, investment earnings may be lower because the interest earnings on new fixed-income investments are likely to have declined with the market interest rates. A prolonged low interest rate environment may also result in a lengthening of maturities of the policyholder liabilities from initial estimates, primarily due to lower policy lapses.
The profitability of Aegon’s spread-based businesses depends in large part upon the ability to manage interest rate risk, credit spread risk and other risks inherent in the investment portfolio. Aegon may not be able to successfully manage interest rate risk, credit spread risk and other risks in the investment portfolio or the potential negative impact of those risks. Investment income from general account fixed-income investments for the years 2015, 2014 and 2013 was EUR 6.1 billion, EUR 5.6 billion and EUR 5.6 billion respectively.
The value of the related general account fixed-income investment portfolio at the end of the years 2015, 2014 and 2013 was
EUR 157 billion, EUR 151 billion and EUR 132 billion, respectively.
The sensitivity of Aegon’s net income and shareholders’ equity to a change in interest rates is provided in note 4 Financial risks to the consolidated financial statements, section 'Interest rate risk'.
Aegon’s subsidiaries into euro, Aegon’s reporting currency. Aegon holds the remainder of its capital base (capital securities, subordinated and senior debt) in various currencies in amounts that are targeted to correspond to the book value of Aegon’s business units. This balancing is intended to mitigate currency translation impacts on equity and leverage ratios. Aegon may also hedge the expected dividends from its principal business units that maintain their equity in currencies other than the euro.
The exchange rates between Aegon’s primary operating currencies (US dollar, euro and UK pound) continued to fluctuate during 2015.
In 2015, the US dollar ranged by 15% against the euro, finishing around 10% up from 2014. The UK pound fluctuated by around 7%
For Aegon Americas, which primarily conducts its business in US dollars, total revenues and net loss in 2015 amounted to
Some liabilities can be surrendered, while some assets, such as privately placed loans, mortgage loans, real estate and limited partnership interests, are to some degree illiquid. Aegon continued to maintain its reserves of cash and liquid assets in 2015. In depressed markets, Aegon may be unable to sell or buy significant volumes of assets at quoted prices.
In 2015, approximately 39% of Aegon’s general account investments were not highly liquid.
Aegon’s products and establishing the technical liabilities for expected claims. If actual claims experience is less favorable than the underlying assumptions used in establishing such liabilities, Aegon’s income would be reduced. Furthermore, if less favorable claims experience became sustained, Aegon may be required to increase liabilities for other related products, which may reduce Aegon’s income. In addition, certain acquisition costs related to the sale of new policies and the purchase of policies already in force have been recorded as assets on the balance sheet and are being amortized into income over time. If the assumptions relating to the future profitability of these policies (such as future claims, investment income and expenses) are not realized, the amortization of these costs may be accelerated and may require write-offs due to an expectation of unrecoverability. This may have a materially adverse effect on
and expenses. In general, Aegon is at risk if policy lapses increase, as sometimes Aegon is unable to fully recover up-front sales expenses despite the presence of commission recoveries or surrender charges and fees. In addition, some policies have embedded options which at times are more valuable to the client if they stay (lower lapses) or leave (higher lapses), which may result in losses to
(longevity risk). For example, certain current annuity products, as well as products sold in previous years, have seen their profitability deteriorate as longevity assumptions have been revised upward. If the trend toward increased longevity persists, Aegon’s annuity products may continue to experience adverse effects due to longer expected benefit payment periods. Aegon is also at risk if expenses are higher than assumed.
Aegon uses econometric, financial and actuarial models to measure and manage multiple types of risk, to price products and to establish and assess key valuations and report financial results. All these functions are critical to Aegon’s operations. If these models, their underlying methodologies, assumptions and estimates, or their implementation and monitoring prove to be inaccurate, this could have a significant adverse effect on Aegon’s business, financial condition and results. Moreover, these models rely on assumptions, estimates and projections that are inherently uncertain, and actual experience may deviate significantly from modelled results.
There may be increased regulatory requirements, resulting in more stringent supervision of insurers by regulatory authorities in the jurisdictions in which Aegon’s subsidiaries are domiciled and operate. Aegon cannot predict specific proposals that might be adopted, or what impact, if any, such proposals or, if enacted, such laws, may have on its businesses, results of operations, or financial condition. The European Union (which has already adopted Solvency II), the National Association of Insurance Commissioners' (NAIC) in the US or US state regulators may adopt revisions to applicable risk based capital formulas, local regulators in other jurisdictions in which Aegon’s subsidiaries operate may increase their capital requirements, or rating agencies may incorporate higher capital thresholds into their quantitative analyses, thus requiring additional capital for Aegon’s insurance subsidiaries.
An important example of increased regulatory requirements for insurers originates from the European Commission´s Solvency II
Directive, which became effective on January 1, 2016, and which imposes, among other things, substantially greater quantitative and qualitative capital requirements on some of Aegon’s businesses and at the Group level, as well as supervisory and disclosure requirements, and may impact the structure, business strategies, and profitability of Aegon’s insurance subsidiaries and of the Group.
EIOPA on January 27, 2016 regarding the application of a combination of accounting methods for the group solvency calculation has offered important additional guidance to Aegon that has helped to determine its group solvency position under Solvency II. Although
Furthermore, the NAIC Model Regulation entitled 'Valuation of Life Insurance Policies,' commonly known as Regulation XXX, requires insurers in the United States to establish additional statutory reserves for term life insurance policies with long-term premium guarantees. In addition, Actuarial Guideline XXXVIII, commonly known as AG38, intended to clarify the regulation on valuation of life insurance policies, requires insurers to establish additional statutory reserves for certain universal life insurance policies with secondary guarantees. Virtually all of Aegon’s newly issued term and universal life insurance products in the United States are now affected by
(G-SIIs) in the future. As of November 3, 2015 Aegon is classified as a G-SII. This qualification is reviewed by the Financial Stability
Some countries impose restrictions on particular underwriting criteria, such as gender, or use of genetic test results, for determination of premiums and benefits of insurance products. To date, Aegon has not observed negative financial or business impact due to these restrictions. However, future restrictions could adversely impact Aegon’s operations or financial results. Further developments in underwriting, such as automation and use of additional data, may also be affected by future regulatory developments regarding privacy and use of personal data.
(or the potential for such a downgrade) of Aegon or any of its rated insurance subsidiaries may, among other things, materially increase the number of policy surrenders and withdrawals by policyholders of cash values from their policies. These withdrawals may require the sale of invested assets, including illiquid assets, at a price that may result in realized investment losses. These cash payments to policyholders would result in a decrease in total invested assets and a decrease in net income. Among other things, early withdrawals may also cause Aegon to accelerate amortization of deferred policy acquisition costs (DPAC), reducing net income.
Aegon has experienced downgrades and negative changes to its outlook in the past, and may experience downgrades and negative changes in the future. For example, during 2012, Fitch put a negative outlook on its long-term issuer default rating for Aegon N.V. and its insurer financial strength ratings for Aegon USA. Since 2015, Standard and Poor´s put a negative outlook on its insurer financial strength rating for Scottish Equitable (Aegon UK). A downgrade or potential downgrade, including changes in outlook, may result in higher funding costs and/or affect the availability of funding in the capital markets. In addition, a downgrade may adversely affect relationships with broker-dealers, banks, agents, wholesalers and other distributors of Aegon’s products and services, which may negatively impact new sales and adversely affect Aegon’s ability to compete. A downgrade of Aegon’s credit ratings may also further affect our liquidity position through increased collateral requirements for our hedging and derivative transactions, and may affect our ability to obtain reinsurance contracts at reasonable prices or at all. This would have a materially adverse effect on Aegon’s businesses, results of operations and financial condition.
and the products offered. Additionally, the laws or regulations adopted or amended from time to time may be more restrictive or may result in higher costs than currently the case, such as with regard to the calculation of capital needs, treatment of own funds, rules or guidance with respect to the modelling of insurance, investment and other risks. The financial crisis of 2008 has resulted in, and may continue to result in further changes to existing laws, regulations and regulatory frameworks applicable to Aegon’s businesses in the countries in which it operates.
Securities and Exchange Commission and the newly-created Financial Stability Oversight Council) authority to promulgate new financial regulations applicable to bank and non-bank financial institutions. The regulatory changes include or may include capital standards and prudential standards for non-bank companies deemed to be systemically important financial institutions (SIFIs) that are more stringent than the standards applicable to non-SIFIs. Aegon has not been designated a SIFI in the United States. In addition, US State financial services regulators may develop capital, accounting and solvency regulatory standards for internationally active insurance groups (IAIGs).
The exact timing of the transition from BCR to ICS will depend on the adoption of the ICS by the IAIS (currently scheduled October 2018)
An important effect of the Dodd-Frank Act on Aegon USA will be the derivatives reform aspect of the Dodd-Frank Act, which aims to increase transparency of derivatives use and reduce systemic risk. Aegon USA entities are considered to fall into Category 2 under the regulations and are therefore required to clear derivative transactions in accordance with the phase-in regulations. In addition,
Aegon cannot predict how the regulations will affect the financial markets generally or how the regulations will affect Aegon’s business, financial condition or results of operations.
In the United States, the Patient Protection and Affordable Care Act (PPACA) was enacted in 2011 and upheld, with the exception of the Medicaid expansion mandate, by the US Supreme Court in 2012. PPACA significantly changes the regulation of health insurance in the United States, including in certain respects the regulation of supplemental health insurance products. The extent to which employers or individuals may discontinue their purchase of supplemental health insurance products as a result of these changes may significantly impact Aegon USA's supplemental health insurance products business. Given ongoing litigation in the United States with regards to PPACA, the impact to Aegon remains uncertain.
It is possible that the planned UK referendum (to be held on June 23, 2016) results in the UK exiting the European Union.
adversely impacted should a ‘Brexit’ result in the UK moving away from agreed and implemented EU legislation like, but not limited to,
In June 2012, the Dutch Intervention Act (Wet bijzondere maatregelen financiële ondernemingen) came into force in the Netherlands, with retroactive effect from 20 January 2012. The Dutch Intervention Act grants far-reaching new powers to the Dutch Central Bank
(De Nederlandsche Bank N.V., DNB) and the Dutch Minister of Finance to intervene in situations where an institution, including a financial group such as Aegon, faces financial difficulties or where there is a serious and immediate risk to the stability of the Dutch financial system caused by an institution in difficulty. The Dutch Intervention Act has been amended in respect of, inter alia, banks as a result of the entry into force of the EU Directive on the recovery and resolution of credit institutions and investments firms, which was approved by the European Parliament on 15 April 2014 and of which the final text was published in the Official Journal of the European Union on 12 June 2014 (the Bank Recovery and Resolution Directive). The Bank Recovery and Resolution Directive also contains provisions that apply to mixed financial holding companies such as Aegon N.V., including the right of bail-in of creditors. Under the Dutch Intervention Act, substantial powers have been granted to DNB and the Dutch Minister of Finance enabling them to deal with ailing Dutch insurance companies as well as holding companies of insurance companies and financial conglomerates prior to insolvency.
States entered into resolutions with insurance regulators regarding claims settlement practices. While Aegon believes the reserves it has established for these unclaimed property matters are adequate to cover expected obligations, there can be no assurances that actual exposures will not exceed reserve amounts or that additional sources of liability related to these examinations or other unclaimed property-related matters will not arise in the future. For more than a decade there has been an increase in litigation across the industry, together with new legislation, regulations, and regulatory initiatives, all aimed at curbing alleged improper annuity sales to seniors. As many of the estimated 78 million baby boomers in the United States are reaching the age of 60, the industry will likely see an increase in senior issues presented in various legal arenas.
Aegon and other US industry participants have been named in lawsuits alleging, among other things, that asset based fees charged for investment products offered on 401(k) platforms were higher than those generally available in the market. In the Netherlands, certain current and former customers, and groups representing customers have initiated litigation, and certain groups are encouraging others to bring lawsuits against Aegon and other insurers regarding the appropriateness of premiums and policy costs, in respect of certain products including securities leasing products and unit-linked products (so called 'beleggingsverzekeringen', including the KoersPlan product). Since 2005, unit-linked products in particular started to become the subject of public debate. Allegations started to emerge that products and services hadn't been transparent, were too costly or delivered a result different from what was agreed to. Customer interest groups were formed specifically in this context. Also, regulators as well as the Dutch Parliament have paid attention to this matter since, principally aimed at achieving an equitable resolution for customers.
Netherlands, two major customer interest groups. In 2012, Aegon accelerated certain product improvements that reduce future costs and that increase policy value for its customers with unit-linked insurance policies. With these measures, Aegon committed to the 'best of class' principles identified by the Dutch Ministry of Finance for certain existing unit-linked products. These principles were the result of an industry-wide review by the Ministry of the various agreements reached between individual insurance companies and customer interest groups in relation to unit-linked insurance policies. The Ministry made a strong appeal to all industry participants to apply these principles. As a result of this acceleration, Aegon took a one-off charge of EUR 265 million before tax in 2012. In addition, Aegon decided to reduce future policy costs for the large majority of its unit-linked portfolio. At the time of that acceleration, that decision was expected to decrease income before tax over the remaining duration of the policies by approximately EUR 125 million in aggregate,
'AFM') issued a request to the insurance industry to contact certain customers to determine whether unit-linked products sold in the past, actually perform as originally contemplated. Aegon has actively responded to that request by contacting customers to assess the performance of these products in the context of the then current objectives of that customer and to solicit an informed decision by those customers whether or not to continue with, make changes to or terminate these products ('activeren van klanten'). This process is actively monitored by the AFM, including the percentage of customers contacted. Sanctions may be imposed if the AFM determines that an insurer did not conduct this process adequately as well as timely. The Dutch Parliament introduced specific legislation in this respect and closely monitors the process. Any changes in legislation, regulatory requirements or perceptions of commercial necessity may have a materially adverse effect on Aegon’s businesses, results of operations and financial condition.
Aegon has issued, sold or advised on approximately 600,000 KoersPlan policies. In 2011, the Court of Appeal had ruled that Aegon should have more clearly informed its customers about the amount of premium which the company charged in relation to the death benefit embedded in those products. Prior to the ruling Aegon had already taken steps to improve its communications with customers as well as adjusting the amounts charged to KoersPlan customers. As a result of the Dutch Supreme Court's denial of appeal, Aegon compensated the approximately 35,000 holders of KoersPlan products who were plaintiffs in the litigation and took a charge of
actually charged by Aegon in connection with the KoersPlan product. This voluntary product improvement was supported by the consumer interest group that initiated the court action over the KoersPlan product, Stichting Koersplandewegkwijt. This improvement was extended to all tontine saving plan products (Spaarkassen). However, another interest group, Stichting
In March 2014, consumer interest group Vereniging Woekerpolis.nl filed a claim against Aegon in court. The claim related to a range of unit-linked products that Aegon sold in the past, including products over which Aegon was involved in litigation in the past, like the KoersPlan product. While the number of products to which the claim may relate was reduced by the court in its interlocutory ruling of October 28, 2015, it still concerns the majority of Aegon’s unit-linked portfolio. The claim challenges a variety of elements of these products, on multiple legal grounds, including allegations made in earlier court cases. There can be no assurance that the claim from
Rotterdam against another insurance company in The Netherlands. The main preliminary question considered by the European Court of
Justice was whether European law permits the application of information requirements based on general principles of Dutch law that potentially extend beyond information requirements as explicitly prescribed by local laws and regulations in force at the time the policy was written. The European Court ruled that member states may impose on insurers obligations of transparency of disclosure in addition to those existing under European law, provided that those additional obligations are sufficiently clear and concrete as well as known to an insurer in advance. The European Court has left it to the national court to decide in specific cases whether the obligations under
Holders of unit-linked policies filed claims in civil court against Aegon in Poland over the fees payable by a customer at the time of the initial purchase for certain products or retrospectively due on surrender for other products. While fees were explicitly disclosed to policyholders in policy documentation at the time of investment, the plaintiffs allege they are too high or that there is no contractual basis to charge fees altogether. In October 2014, the Polish Office of Competition and Consumer Protection fined Aegon for an amount of EUR 5.6 million in relation to its communication around early surrender fees. While this fine was not directly related to the civil claims, for reasons of commercial necessity as well as at the instigation of the regulatory authorities, Aegon decided to modify the early surrender fee structure. Aegon recorded a charge of EUR 23 million in the fourth quarter of 2014 in connection therewith. In
December 2015, Aegon reached a settlement with the Polish Office of Competition and Consumer Protection on reducing the fees payable by a customer at the time of the initial purchase, and took a related charge of EUR 10.5 million. There can be no assurances that ultimately the exposure to Aegon in connection with allegations such as those underlying the claims in Poland, would not have a material adverse effect on Aegon’s results of operations or financial position.
Aegon receives, from time to time, claims from certain current and former customers, and groups representing customers, in respect of certain products. Certain claims remain under review and may lead to disputes in the future. Aegon has in the past agreed to make payments, in some cases substantial, or adjustments to policy terms to settle those claims or disputes if Aegon believed it was appropriate to do so. While Aegon intends to defend itself vigorously against any claims that Aegon does not believe have merit, there can be no assurance that any claims brought against Aegon by its customers will not have a materially adverse effect on Aegon’s businesses, results of operations and financial position.
Since 2005, Aegon’s financial statements have been prepared and presented in accordance with IFRS. Any future changes in these accounting standards may have a significant impact on Aegon’s reported results, financial condition and shareholders’ equity. This includes the level and volatility of reported results and shareholders’ equity. New accounting standards that are likely to have
a significant impact on Aegon’s reported results, financial condition and shareholders' equity include but are not limited to IFRS 9 -
During 2015, the IASB continued deliberations on its Exposure Draft Insurance Contracts that was published by the IASB in June 2013.
before the end of 2016 or beginning of 2017. However, the mandatory date will not become effective before 2021. The proposed changes in the accounting for insurance contracts will have a significant impact on Aegon.
Competition in Aegon’s business segments is based on service, product features, price, commission structure, financial strength, claims paying ability, ratings and name recognition. Aegon faces intense competition from a large number of other insurers, as well as non-insurance financial services companies such as banks, broker-dealers and asset managers, for individual customers, employers, other group customers, agents and other distributors of insurance and investment products. Consolidation in the global financial services industry can enhance the competitive position of some of Aegon’s competitors by broadening the range of their products and services, and increasing their distribution channels and their access to capital. In addition, development of alternative distribution channels for certain types of insurance and securities products, including through the internet, may result in increasing competition as well as pressure on margins for certain types of products. Traditional distribution channels are also challenged by the ban on salesbased commissions in some countries. These competitive pressures may result in increased pricing pressures on a number of products and services, particularly as competitors seek to win market share. This may harm Aegon’s ability to maintain or increase profitability.
The adverse market and economic conditions that began in the second half of 2007 and significantly worsened in 2008 and into 2009, with recovery beginning in late 2009 and in 2010, followed in 2011-2015 by further periods of volatility and weakness, particularly in the eurozone, can be expected to result in changes in the competitive landscape. While many markets have started to recover, interest rates remain at or near all time lows, and have even gone negative in some countries. The financial distress experienced by some financial services industry participants as a result of weak economic conditions and newly imposed regulation may lead to acquisition opportunities. Aegon’s ability or that of Aegon’s competitors to pursue such opportunities may be limited due to lower earnings, reserve increases, capital requirements or a lack of access to debt capital markets and other sources of financing. Such conditions may also lead to changes by Aegon or Aegon’s competitors in product offerings and product pricing that may affect Aegon and Aegon’s relative sales volumes, market shares and profitability. Additionally, the competitive landscape in which Aegon operates may be further affected by government-sponsored programs or actions taken in response to the severe dislocations in financial markets which occurred in 2008 and 2009, as well as the European sovereign debt crisis.
Even the perceived lack of creditworthiness of a sovereign or financial institution (or a default by any such entity) may lead to marketwide liquidity problems and losses or defaults by Aegon or by other institutions. This risk is sometimes referred to as 'systemic risk' and may adversely affect financial intermediaries, such as clearing members or futures commissions merchants, clearing houses, banks, securities firms and exchanges with whom Aegon interacts on a daily basis and financial instruments of sovereigns in which Aegon invests. Systemic risk could have a material adverse effect on our ability to raise new funding and on our business, financial condition, results of operations, liquidity and/or prospects. In addition, such distress or failure could impact future product sales as a potential result of reduced confidence in the financial services industry.
Annual Report for a table showing life insurance in force amounts on a direct, assumed and ceded basis for 2012, 2013 and 2014.
Re, Munich Re and China Re, and Aegon India's major reinsurer is RGA.
Aegon’s various business segments. Market conditions beyond Aegon’s control determine the availability and cost of the reinsurance protection Aegon purchases. Accordingly, Aegon may be forced to incur additional expenses for reinsurance or may not be able to obtain sufficient reinsurance on acceptable terms, which may adversely affect Aegon’s ability to write future business.
Aegon relies on a combination of contractual rights with third parties and copyright, trademark, patent and trade secret laws to establish and protect Aegon’s intellectual property. Third parties may infringe on or misappropriate Aegon’s intellectual property, and it is possible that third parties may claim that Aegon has infringed on or misappropriated their intellectual property rights. Any resulting proceedings in which Aegon would have to enforce and protect its intellectual property, or defend itself against a claim of infringement of a third-party´s intellectual property, may require significant effort and resources and may not prove successful. As a result of any proceeding in which Aegon would have to enforce and protect its intellectual property, Aegon may lose intellectual property protection, which may have a materially adverse effect on Aegon’s businesses, results of operation, financial condition and Aegon’s ability to compete. As a result of any proceeding in which Aegon would have to defend itself against a claim of infringement of a third-party´s intellectual property, Aegon may be required to pay damages and provide injunctive relief, which may have a materially adverse effect on Aegon’s businesses, results of operations and financial condition.
The high and low prices of Aegon’s common shares on Euronext Amsterdam were EUR 7.70 and EUR 4.87 respectively in 2015, and
USD 8.35 and USD 5.41 respectively in 2015, and USD 9.46 and USD 7.27 respectively in 2014. All share prices are closing prices.
Aegon held 292,687,444 common shares and all issued common shares B. All of Aegon’s outstanding common shares are freely tradable, and all shareholders, including large shareholders such as Vereniging Aegon, are free to resell their common shares at any time.
Prior to September 2002, Vereniging Aegon beneficially owned approximately 52% of the voting shares and thus held voting control over Aegon. In September 2002, Vereniging Aegon reduced its beneficial ownership to approximately 33% of the voting shares
Aegon N.V. shares or a proposed business combination by any person or group or persons, whether individually or as a group, other than in a transaction approved by the Executive Board and the Supervisory Board. Accordingly, at December 31, 2015, the voting power of
York are quoted in US dollars, fluctuations in exchange rates between the euro and the US dollar may affect the value of Aegon’s common shares. In addition, Aegon declares cash dividends in euros, but pays cash dividends, if any, on Aegon’s shares of New York registry in US dollars based on an exchange rate set the business day following the shareholder meeting approving the dividend. As a result, fluctuations in exchange rates may affect the US dollar value of any cash dividends paid.
Employees and labor relations At the end of 2015, Aegon had 31,530 employees and 8,433 agents. Approximately 40% are employed in the Americas, 15% in the Netherlands, 7% in the United Kingdom and 37% in New Markets. Note that employees of the Holding are included in the Netherlands.
Holders of common shares historically have been permitted to elect to receive dividends, if any, in cash or in common shares. For dividends, which holders may elect to receive in either cash or common shares, the value of the stock alternative may differ slightly from the value of the cash option. Aegon pays cash dividends on shares of New York registry in US dollars through Citibank, N.A.,
Aegon’s NYSE paying agent, based on the foreign exchange reference rate (as published each working day at 2.15 p.m. (CET) by the European Central Bank) on the business day following the announcement of the interim dividend or on the second business day following the shareholder meeting approving the relevant final dividend.
Additional company information Memorandum and Articles of Association Aegon is registered under number 27076669 in the Commercial Register of the Chamber of Commerce and Industries for Haaglanden,
1 The Voting Rights Agreement is published on Aegon’s corporate website.
Memorandum and Articles of Association Memorandum and Articles of Association Memorandum and Articles of Association
Conditions under which meetings are held Annual General Meetings and extraordinary General Meetings of Shareholders shall be convened by public notice. Notice must be given no later than 42 days prior to the date of the meeting. The notice must contain a summary agenda and indicate the place where the complete agenda together with the documents pertaining to the agenda may be obtained. The agenda is also sent to shareholders registered with the Company Register. New York Registry shareholders or their brokers receive a proxy solicitation notice.
Threshold above which shareholder ownership must be disclosed There are no such provisions in the Articles of Association. Dutch law requires public disclosure to an Authority for Financial Markets with respect to the ownership of listed shares when the following thresholds are met: 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%,
This section is based on tax legislation, published case law, treaties, regulations and published policy, in each case as in force as of the date hereof, and it does not take into account any developments or amendments thereof after that date whether or not such developments or amendments have retroactive effect.
If a holder of Aegon common shares is a resident of a country other than the Netherlands and if a treaty for the avoidance of double taxation with respect to taxes on income is in effect between the Netherlands and that country, and such holder is a resident for the purposes of such treaty, such holder may, depending on the terms of that particular treaty, qualify for full or partial relief at source or for a refund in whole or in part of the Netherlands dividend tax. A refund of the Netherlands dividend tax is available to entities resident in another EU member state, Norway, Iceland, or Liechtenstein if (i) these entities are not subject to corporate income tax there and (ii) these entities would not be subject to Netherlands corporate income tax, if these entities would be tax resident in the Netherlands for corporate income tax purposes and (iii) these entities are not comparable to investment institutions (fiscale beleggingsinstellingen) or exempt investment institutions (vrijgestelde beleggingsinstellingen). Furthermore, a similar refund of
(other than by way of securities) entitled to a share in the profits of an enterprise that is effectively managed in the Netherlands and to which enterprise Aegon common shares are attributable. Income and gains derived from Aegon common shares as specified under (1) and (2) by an individual are subject to individual income tax at up to a maximum rate of 52%. Income derived from a share in the profits of an enterprise as specified under (3) that is not already included under (1) or (2) will be taxed on the basis of a deemed return on income from savings and investments (as described above under 'Residents of the Netherlands'). The fair market value of the share in the profits of the enterprise (which includes Aegon common shares) will be part of the individual's Netherlands yield basis.
Inheritance Tax Act 1956 if he or she has been resident in the Netherlands and dies or makes a gift within ten years after leaving the Netherlands. A holder of any other nationality is deemed to be a resident of the Netherlands for the purposes of the Netherlands
Gift and Inheritance Tax Act 1956 if he or she has been resident in the Netherlands and makes a gift within a twelve months period after leaving the Netherlands. The same twelve-month rule may apply to entities that have transferred their seat of residence out of the Netherlands.
Dividends received by a US holder with respect to common shares will be treated as foreign source income for foreign tax credit limitation purposes. Subject to certain conditions and limitations, any Dutch income tax withheld on dividends may be deducted from taxable income or credited against a US holder’s Federal income tax liability. The limitation on foreign taxes eligible for the US foreign tax credit is calculated separately with respect to "passive category income" and "general category income". Dividends distributed by
The amount of the qualified dividend income paid by Aegon to a US holder that is subject to the reduced dividend income tax rate and that is taken into account for purposes of calculating the US holder's US foreign tax credit limitation must be reduced by the 'rate differential portion' of such dividend (which, assuming a US holder is in the highest income tax bracket, would generally require a reduction of the dividend amount by approximately 49.49% under current law). Each US holder should consult their tax advisor regarding the implications of the rules relating to qualified dividend income on the calculation of US foreign tax credits under their particular circumstances.
In addition, US holders with capital gains may be subject to a NIIT. The NIIT is a 3.8% tax on the lesser of net investment income or the amount of modified adjusted gross income (MAGI) that is over a threshold amount based on filing status (USD 250,000 for married taxpayers filing jointly). Each US holder should consult their tax advisor regarding applicability of the NIIT.
Based on the nature of Aegon’s gross income, the average value of Aegon’s gross assets, and the active conduct of Aegon’s insurance business, Aegon does not believe that it could be classified as a Passive Foreign Investment Company (PFIC). If Aegon were treated as a PFIC in any year during which a US holder owns common shares, certain adverse tax consequences could apply. Investors should consult their tax advisors with respect to any PFIC considerations.
A non-US holder generally will not be subject to US Federal income tax on dividends received on common shares or on any gain realized on the sale or exchange of common shares unless the gain is connected with a trade or business that the non-US holder conducts in the United States or unless the non-US holder is an individual, such holder was present in the United States for at least 183 days during the year in which such holder disposes of the common shares, and certain other conditions are satisfied. Non-US holders should consult their tax advisors with respect to the US Federal income tax consequences of dividends received on, and any gain realized from the sale or exchange of, the common shares.
December 31, 2015 and 2014. For 2013, for which audited financial statements appear in this Annual Report, Ernst & Young
The following table presents the aggregate fees for services rendered by PwC in 2015, 2014 and EY in 2013.
Changes in registrant's certifying accountants As announced at the Annual General Meeting of Shareholders in 2012, the audit of Aegon’s accounts from 2014 was put to tender in 2012. In February 2013, after a thorough process the Audit Committee and the Supervisory Board decided to propose to shareholders to appoint PwC as the Company´s independent auditor for the annual accounts of 2014 through 2016. These proposals were approved at the Annual General Meeting of Shareholders on May 15, 2013.
The reports of EY on the Company's financial statements for 2013, for which audited financial information appear in this Annual
2 On June 17, 2015, a repurchase program to neutralize the dilutive effect of the 2014 final dividend paid in shares was announced. As a consequence approximately 16.3 million shares have been repurchased between June 17 and July 14, 2015. Subsequently, on September 15, 2015, a repurchase program to neutralize the dilutive effect of the 2015 interim dividend paid in shares was announced. As a consequence approximately 20.1 million shares have been repurchased between September 16 and October 13, 2015.
Additional information Purchases of equity securities by the issuer and affiliated purchasers364
Gross deposits (on and off balance sheet) 18,692 16,769 19,394 22,350 77,205 13,475 13,029 15,242 13,684 55,431
Net deposits (on and off balance sheet) 7,305 3,185 4,250 2,823 17,563 (1,502) 6,070 3,532 625 8,724
New premium production general insurance 22 20 18 25 84 17 17 16 22 73
obtains control of the acquiree. In most cases this includes at least the transfer of risks and rewards related to the acquired business or assets/liabilities.
Actuarial gains and losses relate to the accounting for post-employment benefit plans. They comprise the effects of experience adjustments and changes in assumptions used to determine the cost of a plan.
Compound financial instruments are financial instruments that, from the issuer´s perspective, contain both a liability and an equity element.
expenses. This is typically associated with pensions business, asset management business, distribution business, variable annuities and unit linked products.
Financial asset is any asset that is: �� Cash; �� An equity instrument of another entity; �� A contractual right to receive cash or another financial asset from another entity or to exchange financial instruments with another party under conditions that are potentially favorable; or �� A contract that will or may be settled in the entity's own equity instruments; and is �� A non-derivative for which the entity is or may be obliged to receive a variable number of the entity's own equity instruments; or �� A derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity's own equity instruments.
Insurance liability is an insurer´s contractual obligation under an insurance contract.
the carrying amount of an insurance liability needs to be increased (or the carrying amount of related deferred policy acquisition costs or related intangible assets decreased) based on a review of future cash flows.
When the accrued balance of the loan reaches the negative amortization limit (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.
of financial position 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 benefit associated with the item will flow to or from the entity; and �� The item has a cost or value that can be measured with reliability.
These non-IFRS measures are calculated by consolidating on a proportionate basis Aegon’s joint ventures and associated companies.
Aegon believes that these non-IFRS measures, together with the IFRS information, provide meaningful information about the underlying operating results of Aegon’s business including insight into the financial measures that senior management uses in managing the business.
USD for the Americas and GBP for the United Kingdom, because those businesses operate and are managed primarily in those currencies. None of this information is a substitute for or superior to financial information about Aegon presented in EUR, which is the currency of Aegon’s primary financial statements.
�� The effects of declining creditworthiness of certain private sector securities and the resulting decline in the value of sovereign exposure that Aegon holds; �� Changes in the performance of Aegon’s investment portfolio and decline in ratings of Aegon’s counterparties; �� Consequences of a potential (partial) break-up of the euro or the potential exit of the United Kingdom from the European Union; �� The frequency and severity of insured loss events; �� Changes affecting longevity, mortality, morbidity, persistence and other factors that may impact the profitability of Aegon’s insurance products; �� Reinsurers to whom Aegon has ceded significant underwriting risks may fail to meet their obligations; �� Changes affecting interest rate levels and continuing low or rapidly changing interest rate levels; �� Changes affecting currency exchange rates, in particular the EUR/USD and EUR/GBP exchange rates; �� Changes in the availability of, and costs associated with, liquidity sources such as bank and capital markets funding, as well as conditions in the credit markets in general such as changes in borrower and counterparty creditworthiness; �� Increasing levels of competition in the United States, the Netherlands, the United Kingdom and emerging markets; �� Changes in laws and regulations, particularly those affecting Aegon’s operations' ability to hire and retain key personnel, the products Aegon sells, and the attractiveness of certain products to its consumers; �� Regulatory changes relating to the pensions, investment, and insurance industries in the jurisdictions in which Aegon operates; �� Standard setting initiatives of supranational standard setting bodies such as the Financial Stability Board and the International
Association of Insurance Supervisors or changes to such standards that may have an impact on regional (such as EU), national or US
federal or state level financial regulation or the application thereof to Aegon, including the designation of Aegon by the Financial
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