• AEGON WORLDWIDE

AEGON operates in more than 20 countries around the world, serving about 40 million customers. AEGON sharpened its focus on its core businesses – life insurance, pensions and asset management – and turned in a strong performance.

 

 

AEGON Direct Marketing Services (ADMS)

ADMS is present in Australia, Brazil, France, Germany, Hong Kong, India, Italy, Japan, Korea, Mexico, Singapore, Spain, Taiwan, Thailand and the United Kingdom.

 

Overview

During 2010, both AEGON’s underlying earnings and net income improved considerably. The increases were the result of business growth, cost savings, further improvements in financial markets and strengthening of the dollar against the euro. Sales increased in most countries, while gross deposits also increased. AEGON’s capital position improved during the year, with core capital of EUR 18.7 billion at year-end 2010.

Underlying earnings before tax

Underlying earnings before tax increased 66% to EUR 1.97 billion, mainly as a result of a strong recovery in the Americas. The improvement was the result of growth of the business, cost savings, higher fee income as a result of higher account balances driven by net inflows and a recovery in financial markets and the absence of reserve strengthening in the Americas. Earnings in the Netherlands remained strong. AEGON’s operations in the United Kingdom reported higher underlying earnings, while earnings from New Markets increased mainly as a result of the inclusion of AEGON Asset Management, only partly offset by higher claim experience in the non-life business in Hungary.

 

 

 

Net income

AEGON’s net income for 2010 amounted to EUR 1.8 billion, a significant increase compared with net income of EUR 204 million in 2009. The improvement was driven by higher underlying earnings, a turnaround in fair value results, higher realized gains on investments and considerably lower impairments. These positive effects were partly offset by higher losses for the run-off businesses and tax charges, where 2009 had included tax benefits.

 

Results from fair value items amounted to EUR 221 million compared with a loss for the previous year of EUR 544 million. Most of the turnaround was attributable to an improvement in the fair value of guarantees net of related hedges in the Netherlands.

 

Impairments totaled EUR 452 million, a significant improvement in 2010 that reflected better market conditions. This was the lowest level of impairments in three years, but is still above AEGON’s long-term expectations. Impairments were primarily related to US real estate related securities.

 

Other charges amounted to EUR 309 million and included a one-time payment for settlement of a dispute related to a bank-owned life insurance policy in the United States and restructuring charges in the United States, the 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.

 

Income tax amounted to EUR 165 million for 2010, while 2009 had included a tax credit of EUR 658 million.

 

 

 

Operating expenses

Operating expenses increased 3% in 2010 to EUR 3.4 billion. The results of expense savings in AEGON’s main operations in the United States, the Netherlands and the United Kingdom were more than offset by restructuring charges, project related costs (e.g. Solvency II) and investments in growth markets. At constant currency, excluding restructuring charges, operating expenses declined 2% in 2010 compared with the previous year.

 

 

 

Sales and deposits

AEGON’s new life sales in 2010 increased 5% compared with 2009 to EUR 2.2 billion. Sales across the company showed improvements during the year. Spain was an exception, as a consequence of continued weak economic conditions that affected one of AEGON’s joint venture partners.

 

 

 

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.

 

 

 

Value of new business

AEGON’s value of new business declined 28% to EUR 555 million in 2010, mainly as a result of strategic decisions. In the United States, the value of new business was impacted by the decision to de-emphasize the sale of fixed annuities. In the United Kingdom the main reason for the decline was repricing of immediate annuities.

 

 

 

Revenue-generating investments

AEGON’s revenue-generating investments increased 14% to EUR 413 billion during the year. The increase was due to new business growth, stronger financial markets and the positive effects of currency movements.

 

 

 

 

 

 

 

Capital position

At the end of 2010, AEGON’s excess capital above AA capital adequacy requirements totaled EUR 3.8 billion. During the year, AEGON businesses generated EUR 2.7 billion of cash flows, while the company invested EUR 1.3 billion in new business and upstreamed EUR 1.3 billion to the holding company. AEGON’s solvency ratio under the EU Insurance Group Directive remained strong and amounted to 198% * at year-end 2010.

 

AEGON’s core capital position improved considerably during the year to EUR 18.7 billion, as a result of a further increase in the value of the company’s investments and the inclusion of 2010 net income. These positive effects were partly offset by the repayment of EUR 500 million to the Dutch State, as well as coupon, premium and dividend payments on AEGON securities.

 

 

Underlying earnings geographically AEGON worldwide In EUR million	2010	2009
Americas	1,598	817
The Netherlands	385	398
United Kingdom	72	52
New Markets	200	170
Holding and other activities	(283)	(252)
Underlying earnings before tax	1,972	1,185

 

Earnings overview AEGON worldwide In EUR million	2010	2009	%
Life	1,048	931	13
Individual savings and retirement products	500	(10)	–
Pensions	469	395	19
Life reinsurance	79	21	–
Non-life	53	67	(21)
Distribution	10	(2)	–
Asset management	46	–	–
Holding and other	(283)	(252)	(12)
Share in underlying earnings before tax of associates	50	35	43
Underlying earnings before tax	1,972	1,185	66
Fair value items	221	(544)	–
Realized gains / (losses) on investments	658	518	27
Impairment charges	(452)	(1,277)	65
Other income / (charges)	(309)	(323)	4
Run-off businesses	(165)	(13)	–
Income before tax	1,925	(454)	–
Income tax	(165)	658	–
Net income	1,760	204	–
Net underlying earnings	1,553	1,005	55