Asia. AEGON companies employ approximately 27,500 people and serve some 40 million customers across the globe. AEGON
Latin America and Asia. These investments, particularly in our newer markets, support our strategic objective to achieve a better geographical balance for AEGON, in terms of capital allocation and earnings generation.
Sustainability AEGON believes it makes a valuable contribution to the wider community both as a provider of long-term financial products and services and as a responsible employer and investor. AEGON’s approach to sustainability is based on the responsible management of the company’s resources – financial, human or material – ensuring AEGON is able to meet long-term obligations to its customers and other stakeholders.
Latin America. In these markets, a new and ambitious middle class is emerging, and with it a rise in demand for life insurance, pensions and asset management.
EUR 750 million Market conditions permitting, AEGON has agreed to accelerate repayment of the remaining EUR 750 million. AEGON will repay this amount at a premium of 50%, but without any accrued interest. Repayments must be approved by the Dutch Central Bank.
Cox owns over 160 million shares, representing more than 5% of the issued share capital and voting rights in the company.
Chief Financial Officer, Jan Nooitgedagt, explains how the company’s business performance is a result of its sharpened focus on its core businesses - life insurance, pensions and asset management. He also reflects on AEGON’s commitment to fully repurchase all core capital securities from the Dutch State by the end of June 2011 and outlines the company’s strategy up to 2015.
Will you be able to carry out your plan to repurchase all the remaining core capital securities from the Dutch
At present, though, there is still some uncertainty about some of the wider implications. We believe that the new framework should ensure a level playing field for
United Kingdom and Hungary. The charges were partly offset by a book gain from the sale of AEGON’s funeral insurance business in the Netherlands.
Gross deposits – excluding run-off businesses – increased 18% to EUR 32.6 billion in 2010 as a result of continued strong growth in variable annuity, retail mutual fund and pension deposits in the United States, as well as new mandates for AEGON Asset Management. Evidence of the strategic shift from spread to fee-based businesses.
GBP 58 billion mainly as a result of business growth and higher equity markets.
Europe and higher losses from continued investments in the company’s operations in Asia. Although still negative, net results from AEGON’s Asian operations improved considerably compared to the previous year, which included a charge related to the sale of the company’s activities in Taiwan.
CEE # 2 Life in Hungary # 4 Non-life in Hungary # 5 Unit-linked in Poland
A loss was reported in 2009 due to a one-off charge related to the sale of the company’s life insurance activities in Taiwan. Net income in 2010 included charges related to the Hungarian pension legislation changes of EUR 23 million and EUR 19 million related to bank tax in Hungary.
� In the United Kingdom, increased investment in lower-risk long-term UK government bonds.
has put in place a global project team tasked with implementing the framework across its businesses.
Group equity comprises core capital (including the revaluation reserves), and other equity securities.
The risk management function develops and monitors compliance with risk policies and risk frameworks.
� European Commission approval process of the capital agreement with the Dutch State
1 With the repurchase completed in March 2011, 3/4 of the core capital securities has now been repurchased by AEGON.
During this meeting, management presented three strategic priorities, which they had identified as crucial to achieving AEGON’s ambition. During 2010, the Board also discussed management’s actions and plans to optimize ONE AEGON. In December, the Board reviewed and approved the budget for 2011. The Board approved the 2011 Capital Plan and authorized the Executive Board to provide for AEGON’s funding needs as budgeted.
As in previous years, AEGON’s capital position was a key point of focus for the Supervisory Board and its Risk Committee. In 2010, the company’s capital position continued to be strong, with excess capital at EUR 3.8 billion at December 31, 2010. The Board discussed AEGON’s approach towards sustainability in general throughout the year. It also discussed specific issues relevant to AEGON’s businesses and its stakeholders - for example, customer complaints and employee engagement.
Educational session and Board review In November, the Board extensively discussed the potential implications of Solvency II for AEGON’s business and products during its annual educational session.
The Risk Committee AEGON’s Risk Committee convened five times in 2010, including a combined meeting with the Audit Committee.
AEGON’s risk tolerance, the impact of low interest rates and increased longevity and the investment portfolio update. The Risk Committee had a meeting with the newly appointed Chief Risk Officer of AEGON UK during the full Board strategy meeting in Edinburgh.
He was succeeded as Chairman of the Supervisory Board by Robert J. Routs in April 2010. The current terms of
General Meeting of Shareholders. Their biographies will be provided with the agenda for the 2010 General
Executive Board There were no changes in the composition of AEGON’s
Mr. Burgmans is also Chairman of the Supervisory Board of Intergamma B.V. (not listed).
Kornelis J. Storm is a former Chairman of the Executive Board of AEGON N.V. He was appointed to AEGON’s Supervisory Board in 2002. His current term will end in 2014.
and Unilever PLC. Mr. Storm also serves as a member of the Board of Directors of
He was appointed to AEGON’s Supervisory Board in 2008. His current term will end in 2012.
The Policy will remain in force until AEGON has fully repurchased the core capital obtained from the
At the end of the year, a comparison is made between the targets and actual performance. Short-term incentive compensation is then calculated accordingly.
Pension arrangements for members of the Executive Board Mr. Wynaendts pension benefits amounted to
At the end of 2010, a total of 1,736,049,139 common shares and 280,710,000 preferred shares had been issued.
AEGON’s Articles of Association, Vereniging AEGON may effectively be in a position to block unfriendly actions by either a hostile bidder or others for a period of six months. In the absence of a special cause, Vereniging
Aggregate tax effect of items recognized in other comprehensive income / (loss)
Dividends paid on common shares – (548) – – – – (548) – (548)
The improvements project did not result in any changes to the classification, measurement or presentation of any items in the financial statements.
Any difference between the net proceeds plus the fair value of any retained interest and the carrying amount of the subsidiary including non-controlling interest is recognized in the income statement.
� Holding and other activities: Includes fi nancing, employee and other administrative expenses of Holding companies.
equity and are released to other comprehensive income over the remaining useful life of the property.
Financial instruments that are issued by the Group are classified as equity if they represent a residual interest in the assets of the Group after deducting all of its liabilities and the
Some profit sharing schemes issued by the Group entitle the policyholder to a bonus which is based on the actual total return on specific assets held. To the extent that the bonus relates to gains or losses on available-for-sale investments for which the unrealized gains or losses are recognized in the revaluation reserve in equity, shadow accounting is applied.
Aggregation levels are set either on geographical jurisdiction or at the level of portfolio of contracts that are subject to broadly similar risks and managed together as a single portfolio.
The Group has issued share-based plans that entitle employees to receive equity instruments issued by the Group or cash payments based on the price of AEGON N.V. common shares.
In the latter case, the anticipated future investment returns are set by management on a countrywide basis, considering available market information and economic indicators.
Similar to embedded derivatives in insurance contracts, certain investment products are not quoted in active markets and their fair values are determined by using valuation techniques.
Additional information is provided in the section headed ‘Effect of changes in significant unobservable assumptions to reasonably possible alternatives’ below.
116 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 3
Other investments at fair value 1,379 (216) – 126 (160) – (41) 95 (103) 1,080 (233)
(2009: EUR 194 million) that are measured at par. The bank has implicit fi nancial support from the United States government. The redemption value of the shares is fi xed at par and can only be redeemed by the bank. Remaining share positions were stressed by 10% up or down.
AEGON’s integrated approach to risk management involves common measurement of risk and scope of risk coverage to allow for aggregation of the Group’s risk position.
Parallel Movement of Yield Curve Estimated approximate effects on net income Estimated approximate effects on shareholders’ equity
Derivatives with positive values 5,722 4,428 1 Further information on equity risk is provided in section ‘equity market and other investment risk.
The Credit Support Agreements that outline the acceptable collateral require high quality instruments to be posted. Nearly all securities received as collateral are US Treasuries or US
Agency bonds. In 2009 and 2010 AEGON did not take possession of collateral or call on other credit enhancements.
Positions are impaired to fair value where loss events have taken place (or are projected to take place on structured securities) that would affect future cash flows. The tables below summarize the credit quality of these securities based on a hierarchy of S&P, Moody's, Fitch, internal and NAIC of the RMBS portfolio.
Other fi nancial assets 522 90 – 6 – 618 1 Common shares in Holdings and other activities refl ect the elimination of treasury shares in the general account.
148 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V. NOTE 5
Impairment charges / (reversals) on non-fi nancial assets and receivables 161 (2) 1 16 – 176
In 2010, 88% of the value of AEGON’s properties, both for general account and for account of policyholders, were appraised (2009: 89%), of which 91% was performed by independent external appraisers (2009: 92%).
Derivatives not designated in a hedge 529 489 401 243 1 Refer to note 47 for a summary of all fi nancial assets and fi nancial liabilities at fair value through profi t or loss.
Costs deferred / rebates granted during the year 1,540 72 24
General account real estate held for own use are mainly held by AEGON USA and AEGON The Netherlands, with relatively smaller holdings in Hungary and Spain and are carried at revalued amounts. The carrying value under a historical cost model amounts to EUR 325 million (2009: EUR 297 million).
Transactions in 2010: Sale: 1 transaction, price EUR 4.75 (52) – –
Accumulated post-employment benefi t obligation for medical cost 18 (16) 14 (13)
The carrying amounts disclosed reasonably approximate the fair values at year end.
Net fair value change on borrowings and other fi nancial liabilities (2) (138) 105
Fair value changes on economic hedges for which no hedge accounting is applied (119) 152 (46)
Euronext stock exchange in Amsterdam during the period between December 15 preceding a plan year and January 15 of a plan year. The performance indicators apply over a vesting period of three years and consist of financial and non-financial targets set by the Supervisory Board or the local remuneration committees. After the vesting period, the shares are transferred to the individual employees. Members of the Executive Board and the Management Board are not entitled to execute any transactions regarding the shares for a period of two years following vesting.
2 Of Impairment charges on non-fi nancial assets and receivables EUR 169 million is excluded from underlying earnings before tax for segment reporting (refer to note 5) (2008 and 2009: nil)
Impairment charges on fi nancial assets, excluding receivables, from: 2010 2009 2008
EUR 360 million related to an increase in equity markets (2009: EUR 911 million), EUR 80 million related to decreases in equity volatilities (2009: EUR 344 million) and EUR 227 million related to movements in the spread of credit risk (2009: EUR 187 million loss) offset by EUR 1,328 million related to decreases in risk free rates (2009: EUR 1,434 million gain). Hedges related to these guarantee reserves contributed fair value gains of EUR 894 million to income before tax (2009: losses of EUR 2,581 million).
Additionally, AEGON manages capital adequacy at the level of its country units and their operating companies. The goal is to ensure that AEGON companies maintain their financial strength.
measure is the company action level (CAL) RBC. This is the highest regulatory intervention level and is the level at which a
In addition, AEGON’s subsidiaries, principally insurance companies, are subject to restrictions on the amounts of funds they may transfer in the form of cash dividends or otherwise to their parent companies. There can be no assurance that these restrictions will not limit or restrict AEGON in its ability to pay dividends in the future.
AEGON N.V. has guaranteed and is severally liable for the following: � Due and punctual payment of payables due under letter of credit agreements applied for by AEGON N.V. as co-applicant with its subsidiary companies Transamerica Corporation,
AEGON has established litigation policies to deal with the claims defending when the claim is without merit and seeking to settle in certain circumstances. This and any other litigation
Non-cash collateral that can be sold or repledged in the absence of default 4,154 1,797
The companies merged subsequently. Since the acquisition date, the company has attributed EUR 1 million to net income in 2008.
As of December 1, 2010, and on a date no later than June 30, 2011, AEGON has the right to repurchase part or all of the securities at a purchase price equal to EUR 6.00 per security and no interest will be payable. After June 30, 2011 AEGON may at any time repurchase the remaining securities at EUR 6.00 per security, plus interest. Alternatively, and as from December 1, 2011, AEGON may choose to convert these securities into common shares on a one-for-one basis. In this situation, the
Dutch government may opt for repurchase in cash (at the original issue price of EUR 4.00).
2 2008 Performance related cash benefi ts are in respect of 2007 STI plans under the Remuneration Policy for Executive Board members, approved by the shareholders in April 2007. In addition to the STI plan, Mr. Shepard was entitled to individual short-term incentive compensation equal to 0.1% of the net income of AEGON N.V. according to the adopted accounts. The amount included in the table for 2008 is based on net income over 2007 as reported in the 2007 IFRS fi nancial statements.
AEGON employees in the Netherlands and were approved in advance by the Supervisory Board. In accordance with the terms of the mortgage loans, no principal repayments were received on the loans in 2010.
Board itself. No attendance fees are paid to members for the attendance of the seven regular Supervisory Board meetings; (2) An attendance fee of EUR 3,000 for each Supervisory Board meeting, attended in person or by video- or telephone conference, other than one of the seven regular Supervisory
On March 1, 2011 AEGON completed the sale of 173,604,912 new common shares of AEGON N.V. with a nominal value of
December 31, 2010 its result and its cash flows for the year then ended in accordance with International Financial Reporting
USD 6 billion debt issuance program at a price of 98.87.
2. If the adopted profi t and loss account shows a profi t, the Supervisory Board may decide, upon the proposal of the
Actuarial funding enables a life insurance company to reduce the size of the unit reserves it holds for unit linked business to reflect some or all of the unit-linked charges it expects to receive in the future from the units nominally allocated. Actuarial funding is used on those contracts that have surrender penalties and the company will hold a minimum of the surrender value at all times.
Discretionary participation feature is a contractual right to receive, as a supplement to guaranteed benefits, additional benefits: � That are likely to be a signifi cant portion of the total contractual benefi ts; � Whose amount or timing is contractually at the discretion of the issuer; and
Hedge effectiveness is the degree to which changes in the fair value or cash flows of the hedged item that are attributable to a hedged risk are offset by changes in the fair value or cash flows of the hedging instrument.
(directly from another insurance company or as part of a business combination).