THE HAGUE, Netherlands, February 17, 2012 /PRNewswire/ --
- Earnings affected by business restructuring
- Underlying earnings of EUR 346 million impacted by exceptional items of EUR 40 million in the UK
- Impairments decline to EUR 94 million, continuing downward trend
- Net income of EUR 81 million impacted by restructuring charges
- Return on equity of 5.2%, or 6.2% excluding run-off businesses
- Sales remain robust, demonstrating strength of franchise
- New life sales decline 6% to EUR 498 million, mainly the result of anticipated lower pension sales in the UK
- Accident and health sales increase 4% to EUR 188 million, driven mainly by growth in the Americas
- Deposits of EUR 7.1 billion driven by resilient sales of pensions and variable annuities in the United States
- Strong capital position and cash flows
- IGD solvency ratio increases to 195%; IGD surplus capital of EUR 6.5 billion
- Excess capital of EUR 1.2 billion at the holding and EUR 3.4 billion in total
- Capital base ratio of 73.5% supports aim to surpass minimum of 75% by the end of 2012
- Operational free cash flow of EUR 233 million
- Proposed final dividend over H2 2011 of EUR 0.10 per common share
Statement of Alex Wynaendts, CEO
"The past year was challenging, but also one of considerable progress for AEGON, having delivered on our key strategic priorities. The completion of the repayment to the Dutch State was a singular achievement, allowing us to turn our full attention to pursuing the clear opportunities for our business. In order to strengthen our competitive position, we initiated a broad restructuring program to reduce costs and create a more focused and responsive organization. This had an impact on earnings in the fourth quarter of 2011. We are on track, however, to realize the benefits this program aims to deliver, having achieved our targeted cost reductions in the United Kingdom. A clear indication of the continued strength of our franchise was the very high level of deposits throughout the year relating to our successful variable annuity and pension businesses in the United States. We aim to further leverage our broad capabilities and expertise to serve the growing demand for retirement security while strengthening our position in this core market.
"Reflecting the strength of our capital position, we reiterate our intention to propose a dividend of EUR 0.10 per common share over the second half of 2011. In what has been a year dedicated to transforming our business as well as our prospects for the future, we have strengthened AEGON's position to deliver sustainable earnings growth going forward."
KEY PERFORMANCE INDICATORS
Q4 Q3 Q4 FY FY
amounts in EUR millions b) Notes 2011 2011 % 2010 % 2011 2010 %
Underlying earnings before tax 1 346 361 (4) 452 (23) 1,522 1,833 (17)
Net income 2 81 60 35 318 (75) 872 1,760 (50)
Sales 3 1,409 1,620 (13) 1,506 (6) 5,701 6,018 (5)
Value of new business (VNB) 4 53 58 (9) 129 (59) 332 514 (35)
Return on equity 5 5.2% 6.8% (24) 8.6% (40) 6.7% 8.6% (22)
For notes see below.
STRATEGIC HIGHLIGHTS
- AEGON reaffirmed targets at lower end of target ranges
- UK expense base reduction of 25% achieved and customer redress program in final phase
- AEGON executes innovative transaction to reduce longevity risk in the Netherlands
Sustainable earnings growth with an improved risk-return profile
AEGON continues to implement its transformation program aimed at delivering sustainable earnings growth with an improved risk-return profile. The following targets* have been set by the company:
- Grow underlying earnings before tax on average by 7%-10% per annum between 2010 and 2015.
- Achieve a return on equity of 10%-12% by 2015.
- Increase fee-based earnings to 30%-35% of underlying earnings before tax by 2015.
- Increase normalized operational free cash flow
by 30% by 2015 from 2010 level.
AEGON reaffirmed these targets at its analyst and investor conference last December, albeit at the lower end of the target ranges as the economic slowdown adversely affects the company's growth potential.
AEGON’s AMBITION
To be a leader in all our chosen markets by 2015
AEGON’S STRATEGIC PRIORITIES
o Optimize portfolio
o Enhance customer loyalty
o Deliver operational excellence
o Empower employees
AEGON's ambition
AEGON's aim to be a leader in all of its chosen markets by 2015 is supported by four strategic objectives: Optimize Portfolio, Enhance Customer Loyalty, Deliver Operational Excellence and Empower Employees. These key objectives have been embedded in all AEGON businesses. They provide the strategic framework for the company's ambition to become the most-recommended life insurance and pension provider by customers and distributors, as well as the most-preferred employer in the sector.
Optimize portfolio
In January 2012, AEGON completed an innovative financial transaction to partially offset the risk of future increases in longevity in the Netherlands. As a result of this capital markets transaction, approximately one-third, or EUR 12 billion, of underlying reserves within its Dutch business is now partially covered against future increases in longevity. The transaction reduces required capital at an attractive cost of capital.
Early 2012, AEGON received approval from the Dutch Central Bank (DNB) to set up a premiepensioen-instelling (PPI), a low-cost carrier for individual retirement savings accounts. AEGON's PPI will provide a defined contribution pension solution to larger corporations that highly value quality.
AEGON has launched its AEGON Retirement Choices platform in the United Kingdom. This platform aims to help customers benefit more from their retirement savings. The platform will offer customers a range of products including Self Invested Personal Pension, Individual Savings Accounts and General Investment Accounts. The investment proposition allows access to AEGON insured funds, offshore bonds, collectives and other investment types.
* Main economic assumptions embedded in targets: annual gross equity market return of 9%, 10 year US interest rate of 4.75% in 2016 and EUR/USD rate of 1.35.
AEGON has adopted a phased roll-out approach and will offer its platform to the At Retirement market in the first half of 2012, a platform tailored for the needs of the corporate market will be launched in the second half of the year.
In line with its strategic objective to optimize its portfolio, AEGON has sharpened its strategic focus in Canada by rebalancing its overall product offering with a focus on life and protection products while withdrawing sales and marketing support for investment products.
In Brazil, Mongeral AEGON is partnering with Finsol, a non-governmental microcredit organization, to provide micro-insurance policies. Additionally, the company recently launched an investment service designed for high-end customers. These new initiatives are part of a strategy to further expand the company's product range. During 2011, Mongeral AEGON signed a number of new distribution agreements and increased revenues by 8% to approximately USD 290 million. AEGON has a 50% interest in this joint venture.
Deliver operational excellence
In the United Kingdom, AEGON has implemented its new operating model and reached its target to reduce operating expenses for its Life and Pension businesses by 25% from 2009 levels. The program to restructure the business delivers GBP 80 million in expense savings, the benefits of which are expected in 2012.
In the Netherlands, AEGON is on track with reorganizing its business to be more agile and better positioned to respond to changing conditions and opportunities in the Dutch market. The reorganization program and other initiatives will result in reducing the cost base for AEGON The Netherlands by EUR 100 million, compared to the cost base for 2010. The cost savings aim to offset pressure on underlying earnings from higher mortgage funding costs, increased longevity provisioning and a declining life insurance back-book. The majority of the cost savings is expected to be achieved in 2012.
AEGON adopted a new Responsible Investment Policy. This policy sets out a number of environmental, social and governance standards which will be used to help identify potential risks and opportunities associated with companies in which AEGON invests. The policy is part of broader efforts to incorporate environmental, social and governance factors into AEGON's investment decision-making process and into the on-going management and monitoring of its investment portfolios.
Enhance customer loyalty
AEGON has recently made improvements in how it serves and communicates with its customers around the world: rewriting customer letters and product documentation to enhance clarity and demonstrate empathy, creating dedicated customer experience teams and improving product development processes to reflect customer feedback. These examples emphasize the company's ambition to become the most-recommended life insurance and pension provider by customers and distributors.
Empower employees
AEGON performed its global employee survey late last year. The survey focused on both Engagement and Enablement. The results in both categories were in line with the average results of financial services companies internationally. These are key areas in which the company aspires to make continuous advancements in its goal of strengthening employee empowerment and becoming an employer of choice in the insurance sector.
Reporting adjustments
From the first quarter of 2012, AEGON will adjust its financial reporting to reflect changes in its organization. A number of businesses in Asia, which were previously managed by and reported to the United States, will be included in the Asia segment within New Markets, and will be managed from AEGON's regional head office in Hong Kong. Comparable full year 2010 and quarterly 2011 numbers will be published on April 12, 2012. Also as of the first quarter of 2012, operating expenses incurred by the holding regarding services provided to business units will be reflected in the results of the business units.
FINANCIAL OVERVIEW c)
EUR millions Notes Q4 2011 Q3 2011 % Q4 2010 %
Underlying earnings before tax
Americas 328 310 6 369 (11)
The Netherlands 75 68 10 87 (14)
United Kingdom (26) 9 - (6) -
New markets 53 43 23 59 (10)
Holding and other (84) (69) (22) (57)(47)
Underlying earnings before tax 346 361 (4) 452 (23)
Fair value items (20) (288) 93 30 -
Realized gains / (losses) on investments 49 102 (52) 255 (81)
Impairment charges (94) (132) 29 (133) 29
Other income / (charges) (194) (54) - (258) 25
Run-off businesses 1 (5) - 9 (89)
Income before tax 88 (16) - 355 (75)
Income tax (7) 76 - (37) 81
Net income 81 60 35 318 (75)
Net income / (loss) attributable to:
Equity holders of AEGON N.V. 79 60 32 318 (75)
Non-controlling interests 2 - - - -
Net underlying earnings 253 308 (18) 348 (27)
Commissions and expenses 1,684 1,575 7 1,659 2
of which operating expenses 11 872 886 (2) 909 (4)
New life sales
Life single premiums 1,876 1,073 75 2,002 (6)
Life recurring premiums annualized 311 298 4 330 (6)
Total recurring plus 1/10 single 498 405 23 530 (6)
New life sales
Americas 12 119 110 8 118 1
The Netherlands 117 32 - 113 4
United Kingdom 189 199 (5) 224 (16)
New markets 12 73 64 14 75 (3)
Total recurring plus 1/10 single 498 405 23 530 (6)
New premium production accident and
health insurance 188 153 23 180 4
New premium production general insurance 13 12 8 15 (13)
Gross deposits (on and off balance)
Americas 12 5,009 7,376 (32) 5,757 (13)
The Netherlands 560 584 (4) 490 14
United Kingdom 9 11 (18) 25 (64)
New markets 12 1,522 2,525 (40) 1,541 (1)
Total gross deposits 7,100 10,496 (32) 7,813 (9)
Net deposits (on and off balance)
Americas 12 (886) 2,840 - (566) (57)
The Netherlands (160) 54 - (260) 38
United Kingdom 1 1 - 12 (92)
New markets 12 108 1,502 (93) 304 (64)
Total net deposits excluding run-off
businesses (937) 4,397 - (510) (84)
Run-off businesses (611) (1,121) 45 (1,436) 57
Total net deposits (1,548) 3,276 - (1,946) 20
TABLE CONTINUES
FINANCIAL OVERVIEW c)
EUR millions Notes FY 2011 FY 2010 %
Underlying earnings before tax
Americas 1,310 1,459 (10)
The Netherlands 298 385 (23)
United Kingdom 5 72 (93)
New markets 212 200 6
Holding and other (303) (283) (7)
Underlying earnings before tax 1,522 1,833 (17)
Fair value items (416) 221 -
Realized gains / (losses) on investments 446 658 (32)
Impairment charges (388) (452) 14
Other income / (charges) (267) (309) 14
Run-off businesses 28 (26) -
Income before tax 925 1,925 (52)
Income tax (53) (165) 68
Net income 872 1,760 (50)
Net income / (loss) attributable to:
Equity holders of AEGON N.V. 869 1,759 (51)
Non-controlling interests 3 1 200
Net underlying earnings 1,233 1,417 (13)
Commissions and expenses 6,272 6,145 2
of which operating expenses 11 3,442 3,397 1
New life sales
Life single premiums 5,864 7,493 (22)
Life recurring premiums annualized 1,249 1,332 (6)
Total recurring plus 1/10 single 1,835 2,081 (12)
New life sales
Americas 12 446 497 (10)
The Netherlands 254 248 2
United Kingdom 852 1,061 (20)
New markets 12 283 275 3
Total recurring plus 1/10 single 1,835 2,081 (12)
New premium production accident and health insurance 645 622 4
New premium production general insurance 52 58 (10)
Gross deposits (on and off balance)
Americas 12 23,028 21,018 10
The Netherlands 2,048 2,382 (14)
United Kingdom 56 96 (42)
New markets 12 6,556 9,082 (28)
Total gross deposits 31,688 32,578 (3)
Net deposits (on and off balance)
Americas 12 2,147 1,272 69
The Netherlands (334) (221) (51)
United Kingdom 18 53 (66)
New markets 12 (2,596) 3,905 -
Total net deposits excluding run-off businesses (765) 5,009 -
Run-off businesses (3,139) (6,586) 52
Total net deposits (3,904) (1,577) (148)
REVENUE-GENERATING INVESTMENTS
Dec. 31, Sept. 30,
2011 2011 %
Revenue-generating investments (total) 423,518 404,254 5
Investments general account 144,079 143,006 1
Investments for account of policyholders 142,529 139,599 2
Off balance sheet investments third parties 136,910 121,649 13
OPERATIONAL HIGHLIGHTS
Underlying earnings before tax
AEGON's underlying earnings before tax amounted to EUR 346 million in the fourth quarter of 2011. The decline compared with the same quarter last year was mainly due to higher exceptional charges and expenses in the United Kingdom related to the customer redress program, the effects of lower equity markets and interest rates and a one-time benefit for the holding in the comparable period last year.
Underlying earnings from the Americas amounted to EUR 328 million. Earnings from the Life & Protection business included a charge of EUR 22 million offsetting a one-time benefit of EUR 23 million for variable annuities. Consistent with AEGON's strategy, earnings from fee-based businesses grew compared with the fourth quarter last year. Earnings from fixed annuities were lower as this line of business is de-emphasized.
In the Netherlands, underlying earnings decreased to EUR 75 million, mainly the result of higher expenses related to the execution of a program for product improvements in the Life business. Additional provisioning for longevity was offset by favorable results on mortality and morbidity.
In the United Kingdom, underlying earnings amounted to a loss of EUR 26 million. This was mainly due to charges related to an ongoing program to correct historical issues within customer policy records and the execution of this program partly offset by the one-time benefit of changes to employee benefit plans. The sale of Guardian during the third quarter of 2011, and the subsequent loss of earnings, also contributed to the decrease.
Underlying earnings from New Markets were affected by unfavorable currency movements on earnings from Central & Eastern Europe and amounted to EUR 53 million during the fourth quarter of 2011. Favorable claim experience in the non-life business was offset by the impact of pension legislation changes in Hungary and Poland.
Total holding costs increased to EUR 84 million as the comparable quarter last year included a one-time benefit of EUR 20 million.
Net income
Net income of EUR 81 million was impacted by the result of lower underlying earnings, less gains on investments compared to the comparable period last year and considerable restructuring charges.
Fair value items
In the fourth quarter, fair value items resulted in a loss of EUR 20 million. Negative results in the Americas and the holding were offset by positive fair value movements in the Netherlands.
Realized gains on investments
In the fourth quarter, realized gains on investments amounted to EUR 49 million and were the result of normal trading in the investment portfolio.
Impairment charges
Impairment charges amounted to EUR 94 million. In the United States, impairments were linked mainly to residential mortgage-backed securities. Impairments in Central & Eastern Europe were largely attributable to new legislation in Hungary, related to Swiss franc denominated mortgages, affecting the mortgage portfolio.
Other charges
Other charges amounted to EUR 194 million. In the Americas, a charge of EUR 37 million related to increased reserves in connection with the company's use of the U.S. Social Security Administration's death master-file. Restructuring charges in the Netherlands amounted to EUR 12 million and a write-down of intangible assets related to the distribution businesses led to a charge of EUR 75 million. In the United Kingdom, restructuring charges amounted to EUR 48 million. The charge of EUR 18 million for the holding related partly also to restructuring.
Run-off businesses
The results of run-off businesses amounted to EUR 1 million as lower amortization yield paid on internally transferred assets related to the institutional spread-based business was offset by the amortization of the prepaid cost of reinsurance asset related to the divestment of the life reinsurance activities.
Income tax
Net income contained a tax charge of EUR 7 million in the fourth quarter, including a benefit of EUR 15 million in the United States related to utilization of losses for which previously no deferred tax asset was recognized. In the United Kingdom a charge of EUR 29 million related to deferred tax assets.
Return on equity
Higher average shareholders' equity excluding revaluation reserves and lower net underlying earnings resulted in a return on equity of AEGON's ongoing business of 7.9% for the full year 2011. Return on equity including the run-off businesses amounted to 6.7% over the same period.
Operating expenses
In the fourth quarter, operating expenses decreased 4% to EUR 872 million as a result of cost savings and the positive effect of changes to employee benefit plans.
Sales and deposits
AEGON's total sales decreased 6% to EUR 1.4 billion. New life sales declined mainly as a result of lower single premium production in the United Kingdom. Gross deposits of EUR 7.1 billion were supported by continued strong variable annuity deposits offset by lower stable value deposits in the United States. New premium production for accident, health and general insurance increased 3% to
EUR 201 million.
Value of new business
Compared with the fourth quarter of 2010, the value of new business declined considerably to EUR 53 million, reflecting current market circumstances of lower interest rates in the Americas and lower mortgage production in the Netherlands.
Revenue-generating investments
Revenue-generating investments rose 5% compared with the end of the third quarter of 2011 to
EUR 424 billion at year-end, mainly the result of higher equity markets, the effect of lower credit spreads on the value of fixed income securities and a stronger dollar against the euro.
Capital management
AEGON's core capital excluding revaluation reserves amounted to EUR 17.5 billion, equivalent to 73.5%6 of the company's total capital base at year-end 2011. AEGON is on track to reach a capital base ratio of at least 75% by the end of 2012.
Shareholders' equity increased to EUR 21 billion mainly as a result of the appreciation of the US dollar against the euro and an increase in the revaluation reserves to EUR 3.5 billion during the fourth quarter. Shareholders' equity per common share, excluding preference capital, amounted to EUR 10.03 at December 31, 2011.
The revaluation reserves at December 31, 2011 increased to EUR 3.5 billion, mainly the result of a decrease in credit spreads which had a positive effect on the value of fixed income securities. In addition, the foreign currency translation reserves improved, primarily the result of a strengthening of the US dollar against the euro.
AEGON aims to maintain at least 1.5 times holding expenses as a buffer at the holding, in 2011 equivalent to approximately EUR 900 million. At year-end 2011, excess capital in the holding amounted to EUR 1.2 billion.
At December 31, 2011, AEGON's Insurance Group Directive (IGD) ratio amounted to 195%, an increase from the level of 192% at the end of the third quarter. Measured on a local solvency basis, the Risk Based Capital (RBC) ratio in the United States improved to ~450%, the IGD ratio in the Netherlands amounted to ~195%, while the Pillar I ratio in the United Kingdom was ~150% at year-end 2011.
The Dutch Central Bank (DNB) provided an option to use the average fourth quarter 2011 interest rate curves for discounting liabilities, instead of year-end curves. Although opting for the average-method would have increased the IGD ratio in the Netherlands substantially, AEGON has decided to keep to its methodology of discounting liabilities on quarter-end interest rate curves at year-end 2011.
In January 2012, AEGON issued USD 500 million of 8% non-cumulative subordinated notes due 2042 in a public offering in the United States. As part of the offering, the underwriters subsequently exercised their option to purchase an additional USD 25 million of notes to cover over-allotments. Following the exercise of this option, the gross proceeds of the offering are USD 525 million. AEGON expects the securities to be eligible as Tier 2 capital under Solvency II and will use the proceeds from the issuance of the notes for general corporate purposes.
AEGON completed a EUR 2 billion syndicated credit facility agreement with a syndicate of international banks in January 2012. The facility has a term of five years with two one-year extension options. The new facility replaced a USD 3 billion facility, which would have expired in September 2012.
Cash flows
AEGON aims to deliver sustainable cash flows and has announced its intention to improve operational free cash flow from its 2010 normalized level of EUR 1.0-1.2 billion per annum by 30% by 2015. AEGON's subsidiaries generated EUR 233 million in operational cash flows during the fourth quarter. For the full year 2011, AEGON's operational free cash flow amounted to EUR 103 million, including a negative market impact of EUR 1,075 million in the third quarter. Operational free cash flows represent distributable earnings generation of the business units. The impact of capital preservation initiatives is not included in the reported operational free cash flows.
Final dividend 2011
At the Annual General Meeting of shareholders on May 16, 2012, the Executive Board will, absent unforeseen circumstances, propose a final dividend for 2011 of EUR 0.10 per common share related to the second half of 2011. 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. When deciding to propose a dividend, AEGON has to balance prudence versus offering an attractive return to shareholders, for example in adverse economic and/or financial market conditions.
If the proposed dividend is approved by shareholders, AEGON shares will be quoted ex-dividend on May 18, 2012. The record date for the dividend will be May 22, 2012. The election period will run from May 23 up to and including June 8, 2012. The stock fraction for the stock dividend will be based on the average price for the AEGON share on the Euronext Amsterdam stock exchange for the five trading days from June 4 through June 8, 2012. The dividend will be payable as of June 15, 2012.
Annual General Meeting
The record date for attending and voting at the Annual General Meeting of shareholders of AEGON N.V. is April 18, 2012. The agenda for this meeting will be published on April 4, 2012.
The full version of this release is available at http://www.aegon.com/en/Home/Investors/Quarterly-results/.
ADDITIONAL INFORMATION
The Hague, February 17, 2012
Media conference call
7:45 a.m. CET: Audio webcast on http://www.aegon.com
Analyst & investor conference call
9:00 a.m. CET: Audio webcast on http://www.aegon.com
Call-in numbers
United States: +1-480-629-9673
United Kingdom: +44-207-153-2027
The Netherlands: +31-45-631-6902
Replay
Two hours after the conference call, a replay will be available on http://www.aegon.com and on the following
phone numbers:
United Kingdom: +44-207-154-2833, access code: 4502160#
United States: +1-303-590-3030, access code: 4502160#
Supplements
AEGON's Q4 2011 Financial Supplement and Condensed Consolidated Interim Financial Statements are
available on http://www.aegon.com.
Notes:
1) "For segment reporting purposes underlying earnings before tax, net underlying earnings, commissions and expenses, operating expenses, income tax including associated companies, income before tax including associated companies and value of new business (VNB) are calculated by consolidating on a proportionate basis the revenues and expenses of certain of our associated companies in Spain, India, Brazil and Mexico. We believe that our non-IFRS measures provide meaningful information about the underlying operating results of our business including insight into the financial measures that our senior management uses in managing our business. Among other things our senior management is compensated based in part on AEGON's results against targets using the non-IFRS measures presented here. While other insurers in our peer group present substantially similar non-IFRS measures, the non-IFRS measures presented in this document may nevertheless differ from the non-IFRS measures presented by other insurers. There is no standardized meaning to these measures under IFRS or any other recognized set of accounting standards and readers are cautioned to consider carefully the different ways in which we and our peers present similar information before comparing them.
AEGON believes the non-IFRS measures shown herein, when read together with our reported IFRS financial statements, provide meaningful supplemental information for the investing public to evaluate AEGON’s business after eliminating the impact of current IFRS accounting policies for financial instruments and insurance contracts, which embed a number of accounting policy alternatives that companies may select in presenting their results (i.e. companies can use different local GAAPs) and that can make the comparability from period to period difficult.
For a definition of underlying earnings and the reconciliation from underlying earnings before tax to income before tax we refer to Note
3 ""Segment information"" of our Condensed consolidated interim financial statements."
2) Net income refers to net income attributable to equity holders of AEGON N.V. and minority interest.
3) Sales is defined as new recurring premiums plus 1/10 of single premiums plus 1/10 of gross deposits plus new premium production accident and health plus new premium production general insurance.
4) The present value of future distributable earnings on the block of business sold in the reporting period. Value of new business is calculated using beginning of year economic assumptions and assumptions outside of management control, and beginning of quarter operating assumptions.
5) Return on equity is calculated by dividing the net underlying earnings after cost of leverage by the average shareholders' equity excluding the preferred shares and the revaluation reserve.
6) Capital securities that are denominated in foreign currencies are, for purposes of calculating the capital base ratio, revalued to the period-end exchange rate. All ratios exclude AEGON's revaluation reserve.
7) Included in other income/(charges) are charges made to policyholders with respect to income tax in the United Kingdom.
8) Includes production on investment contracts without a discretionary participation feature of which the proceeds are not recognized as revenues but are directly added to our investment contract liabilities.
9) APE = recurring premium + 1/10 single premium.
10) PVNBP: Present Value New Business Premium.
11) Reconciliation of operating expenses, used for segment reporting, to our IFRS based operating expenses.
Q4 2011 FY 2011
Employee expenses 502 2,069
Administrative expenses 355 1,315
Operating expenses for IFRS reporting 857 3,384
Operating expenses related to associates 15 58
Operating expenses in earnings release 872 3,442
12) New life sales, gross deposits and net deposits data include results of our associated companies in Spain, India, Brazil and Mexico which are consolidated on a proportionate basis.
13) Operational free cash flow reflect the sum of the return on free surplus, earnings on in-force business, release of required surplus on in-force business reduced by new business first year strain and required surplus on new business. Refer to our Embedded Value 2010 report for further details.
a) "The calculation of the IGD (Insurance Group Directive) capital surplus and ratio are based on Solvency I capital requirements on IFRS for entities within the EU (Pillar 1 for AEGON UK), and local regulatory solvency measurements for non-EU entities.
Specifically, required capital for the life insurance companies in the US is calculated as two times the upper end of the Company Action Level range (200%) as applied by the National Association of Insurance Commissioners in the US. The calculation of the IGD ratio excludes the available and required capital of the UK With-Profit funds. In the UK solvency surplus calculation the local regulator only allows the available capital number of the With-Profit funds included in overall local available capital to be equal to the amount of With-Profit funds' required capital."
b) The results in this release are unaudited.
c) The comparative 2010 earnings and sales information has been revised to reflect the transfer of the Life Reinsurance and BOLI/COLI businesses to the Run-off businesses line to make the information consistent with the current period figures.
About AEGON
As an international life insurance, pension and asset management company based in The Hague, AEGON has businesses in over twenty markets in the Americas, Europe and Asia. AEGON companies employ over 25,000 people and have some 40 million customers across the globe.
Key figures - EUR Full year 2011 Full year 2010 Underlying earnings before tax 1.5 billion 1.8 billion New life sales 1.8 billion 2.1 billion Gross deposits 32 billion 33 billion Revenue-generating investments (end of period) 424 billion 413 billion
DISCLAIMERS
Cautionary note regarding non-GAAP measures
This document includes certain non-GAAP financial measures: underlying earnings before tax and value of new business. The reconciliation of underlying earnings before tax to the most comparable IFRS measure is provided in Note 3 "Segment information" of our Condensed consolidated interim financial statements. Value of new business is not based on IFRS, which are used to report AEGON's primary financial statements and should not be viewed as a substitute for IFRS financial measures. We may define and calculate value of new business differently than other companies. Please see AEGON's Embedded Value Report dated May 12, 2011 for an explanation of how we define and calculate value of new business. AEGON believes that these non-GAAP measures, together with the IFRS information, provide a meaningful measure for the investment community to evaluate AEGON's business relative to the businesses of our peers.
Local currencies and constant currency exchange rates
This document contains certain information about our results and financial condition in USD for the Americas and GBP for the United Kingdom, because those businesses operate and are managed primarily in those currencies. Certain comparative information presented on a constant currency basis eliminates the effects of changes in currency exchange rates. None of this information is a substitute for or superior to financial information about us presented in EUR, which is the currency of our primary financial statements.
Forward-looking statements
The statements contained in this document that are not historical facts are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995. The following are words that identify such forward-looking statements: aim, believe, estimate, target, intend, may, expect, anticipate, predict, project, counting on, plan, continue, want, forecast, goal, should, would, is confident, will, and similar expressions as they relate to our company. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. We undertake no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which merely reflect company expectations at the time of writing. Actual results may differ materially from expectations conveyed in forward-looking statements due to changes caused by various risks and uncertainties. Such risks and uncertainties include but are not limited to the following:
- changes in general economic conditions, particularly in the United States, the Netherlands and the United Kingdom;
- changes in the performance of financial markets, including emerging markets, such as with regard to:
- the frequency and severity of defaults by issuers in our fixed income investment portfolios; and
- the effects of corporate bankruptcies and/or accounting restatements on the financial markets and the resulting decline in the value of equity and debt securities we hold;
- the effects of declining creditworthiness of certain private sector securities and the resulting decline in the value of sovereign exposure that we hold;
- changes in the performance of our investment portfolio and decline in ratings of our counterparties;
- consequences of a potential (partial) break-up of the euro;
- the frequency and severity of insured loss events;
- changes affecting mortality, morbidity, persistence and other factors that may impact the profitability of our insurance products;
- reinsurers to whom we have 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 our operations, ability to hire and retain key personnel, the products we sell, and the attractiveness of certain products to our consumers;
- regulatory changes relating to the insurance industry in the jurisdictions in which we operate;
- acts of God, acts of terrorism, acts of war and pandemics;
- changes in the policies of central banks and/or governments;
- lowering of one or more of our debt ratings issued by recognized rating organizations and the adverse impact such action may have on our ability to raise capital and on our liquidity and financial condition;
- lowering of one or more of insurer financial strength ratings of our insurance subsidiaries and the adverse impact such action may have on the premium writings, policy retention, profitability of its insurance subsidiaries and liquidity;
- the effect of the European Union's Solvency II requirements and other regulations in other jurisdictions affecting the capital we are required to maintain;
- litigation or regulatory action that could require us to pay significant damages or change the way we do business;
- as our operations support complex transactions and are highly dependent on the proper functioning of information technology, a computer system failure or security breach may disrupt our business, damage our reputation and adversely affect our results of operations, financial condition and cash flows;
- customer responsiveness to both new products and distribution channels;
- competitive, legal, regulatory, or tax changes that affect profitability, the distribution cost of or demand for our products;
- changes in accounting regulations and policies may affect our reported results and shareholder's equity;
- the impact of acquisitions and divestitures, restructurings, product withdrawals and other unusual items, including our ability to integrate acquisitions and to obtain the anticipated results and synergies from acquisitions;
- catastrophic events, either manmade or by nature, could result in material losses and significantly interrupt our business; and
- our failure to achieve anticipated levels of earnings or operational efficiencies as well as other cost saving initiatives.
Further details of potential risks and uncertainties affecting the company are described in the company's filings with Euronext Amsterdam and the US Securities and Exchange Commission, including the Annual Report on Form 20-F. These forward-looking statements speak only as of the date of this document. Except as required by any applicable law or regulation, the company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Contact information
Media relations:
Greg Tucker
+31(0)70-344-8956
gcc-ir@aegon.com
Investor relations:
Willem van den Berg
+31-(0)70-344-8305
877 548 9668 – toll free USA only
ir@aegon.com
http://www.aegon.com
PRN NLD
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