Notes to the consolidated balance sheet
Amounts in EUR million, unless otherwise stated
|
5 |
Intangible assets |
|
Net book value |
Goodwill |
VOBA |
Future servicing rights |
Software |
Other |
Total |
|
At January 1, 2006 |
65 |
4,396 |
151 |
60 |
6 |
4,678 |
|
At December 31, 2006 |
221 |
3,959 |
119 |
34 |
5 |
4,338 |
|
At December 31, 2007 |
433 |
3,927 |
441 |
33 |
60 |
4,894 |
|
Cost |
||||||
|
At January 1, 2006 |
65 |
7,645 |
229 |
264 |
8 |
8,211 |
|
Additions |
– |
11 |
– |
10 |
– |
21 |
|
Acquisitions through business combinations |
160 |
114 |
– |
– |
– |
274 |
|
Disposals |
– |
(29) |
– |
(7) |
– |
(36) |
|
Deferred tax |
(1) |
– |
– |
– |
– |
(1) |
|
Net exchange differences |
(3) |
(635) |
(12) |
1 |
– |
(649) |
|
At December 31, 2006 |
221 |
7,106 |
217 |
268 |
8 |
7,820 |
|
Accumulated amortization, depreciation |
||||||
|
At January 1, 2006 |
– |
3,249 |
78 |
204 |
2 |
3,533 |
|
Amortization / depreciation through income statement |
– |
246 |
22 |
35 |
1 |
304 |
|
Shadow accounting adjustments |
– |
(20) |
1 |
– |
– |
(19) |
|
Disposals |
– |
– |
– |
(7) |
– |
(7) |
|
Net exchange differences |
– |
(328) |
(3) |
2 |
– |
(329) |
|
At December 31, 2006 |
– |
3,147 |
98 |
234 |
3 |
3,482 |
|
Cost |
||||||
|
At January 1, 2007 |
221 |
7,106 |
217 |
268 |
8 |
7,820 |
|
Additions |
– |
7 |
– |
10 |
– |
17 |
|
Acquisitions through business combinations |
228 |
526 |
379 |
– |
61 |
1,194 |
|
Disposals |
– |
– |
– |
(1) |
– |
(1) |
|
Deferred tax |
– |
– |
– |
– |
– |
– |
|
Net exchange differences |
(16) |
(620) |
(41) |
(14) |
(5) |
(696) |
|
Other |
– |
5 |
– |
5 |
– |
10 |
|
At December 31, 2007 |
433 |
7,024 |
555 |
268 |
64 |
8,344 |
|
Accumulated amortization, depreciation |
||||||
|
At January 1, 2007 |
– |
3,147 |
98 |
234 |
3 |
3,482 |
|
Amortization / depreciation through income statement |
– |
210 |
27 |
13 |
1 |
251 |
|
Shadow accounting adjustments |
– |
(86) |
(1) |
– |
– |
(87) |
|
Disposals |
– |
– |
– |
(1) |
– |
(1) |
|
Net exchange differences |
– |
(287) |
(10) |
(15) |
– |
(312) |
|
Other |
– |
113 |
– |
4 |
– |
117 |
|
At December 31, 2007 |
– |
3,097 |
114 |
235 |
4 |
3,450 |
In the preparation of the Opening Balance Sheet under IFRS as at January 1, 2004, business combinations prior to that date have not been restated and goodwill previously written off through equity has not been reinstated.
Amortization and depreciation through the income statement is included in ‘Commissions and expenses’.
None of the intangible assets have titles that are restricted or have been pledged as security for liabilities.
Of the additions to goodwill in 2007, an amount of EUR 187 million relates to the acquisitions of Clark and Merrill Lynch by AEGON USA during 2007. The recoverable amount of the acquired goodwill is based upon fair value of the net assets acquired. Please refer to note 48 for further information on the business combinations entered into by AEGON in 2006 and 2007. The initial allocation of goodwill has not been completed for all business combinations included in the financial statements of 2007. The deferred tax in 2006 relates to an adjustment to goodwill resulting from the subsequent recognition of a deferred tax asset for the acquisition of Nationwide Poland, completed in the last quarter of 2005.
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. The VOBA currently recognized is amortized over an average period of 12 to 15 years, with an average remaining amortization period of 13 years (2006: 13 years). Future Servicing Rights are amortized over an average period up to 35 years, of which 10 remains at December 31, 2007 (2006: 16years). Software is generally depreciated over a period of three to five years. At December 31, 2007, the remaining depreciation period was 2 years (2006: 2 years).
|
VOBA per line of business |
Americas |
The Netherlands |
United Kingdom |
Other countries |
Total |
|
2007 |
|||||
|
Life and protection |
1,739 |
5 |
2 |
22 |
1,768 |
|
Individual savings and retirement products |
317 |
– |
– |
– |
317 |
|
Pensions and asset management |
46 |
65 |
953 |
15 |
1,079 |
|
Institutional products |
54 |
– |
– |
– |
54 |
|
Reinsurance |
607 |
– |
– |
– |
607 |
|
Distribution |
– |
102 |
– |
– |
102 |
|
Total VOBA |
2,763 |
172 |
955 |
37 |
3,927 |
|
2006 |
|||||
|
Life and protection |
1,786 |
6 |
2 |
30 |
1,824 |
|
Individual savings and retirement products |
152 |
– |
– |
– |
152 |
|
Pensions and asset management |
35 |
– |
1,074 |
11 |
1,120 |
|
Institutional products |
42 |
– |
– |
– |
42 |
|
Reinsurance |
710 |
– |
– |
– |
710 |
|
Distribution |
– |
111 |
– |
– |
111 |
|
Total VOBA |
2,725 |
117 |
1,076 |
41 |
3,959 |
|
6 |
Investments |
Investments for general account comprise financial assets, excluding derivatives, as well as investments in real estate and real estate held for own use. Refer to note 7 for investments for which the investment risk is borne by the policyholders and to note 8 for details on general account derivatives.
|
Investments for general account |
Note |
2007 |
2006 |
|
Available-for-sale (AFS) |
98,047 |
101,895 |
|
|
Loans |
22,554 |
20,605 |
|
|
Held-to-maturity (HTM) |
1,876 |
1,527 |
|
|
Financial assets at fair value through profit or loss (FVTPL) 1 |
7,863 |
9,548 |
|
|
Total financial assets, excluding derivatives |
130,340 |
133,575 |
|
|
Investments in real estate |
|
2,522 |
2,243 |
|
Real estate held for own use |
|
329 |
313 |
|
Total investments for general account |
133,191 |
136,131 |
|
|
|||
|
2007 |
2006 |
|||||||||
|
Financial assets, |
AFS |
Loans |
HTM |
FVTPL |
Total |
AFS |
Loans |
HTM |
FVTPL |
Total |
|
Shares |
1,933 |
– |
– |
2,002 |
3,935 |
4,963 |
– |
– |
2,782 |
7,745 |
|
Bonds |
89,967 |
– |
1,846 |
3,119 |
94,932 |
91,637 |
– |
1,502 |
4,415 |
97,554 |
|
Money market and other |
5,280 |
– |
– |
107 |
5,387 |
4,387 |
– |
– |
38 |
4,425 |
|
Mortgages |
– |
17,853 |
– |
– |
17,853 |
– |
16,171 |
– |
– |
16,171 |
|
Private loans |
– |
804 |
– |
– |
804 |
– |
307 |
– |
– |
307 |
|
Deposits with financial institutions |
– |
1,322 |
– |
– |
1,322 |
– |
1,995 |
– |
– |
1,995 |
|
Policy loans |
– |
2,253 |
– |
– |
2,253 |
– |
1,557 |
– |
– |
1,557 |
|
Receivables out of share lease agreements |
– |
137 |
– |
– |
137 |
– |
373 |
– |
– |
373 |
|
Other |
867 |
185 |
30 |
2,635 |
3,717 |
908 |
202 |
25 |
2,313 |
3,448 |
|
At December 31 |
98,047 |
22,554 |
1,876 |
7,863 |
130,340 |
101,895 |
20,605 |
1,527 |
9,548 |
133,575 |
Of the bonds, money market and other short-term investments, mortgages and private loans EUR 11,082 million is current (2006: EUR 11,555 million).
Fair value of investments classified as ‘held to maturity’ amount to EUR 1,845 million at December 31, 2007 (2006: EUR 1,582 million). Fair value of the loans amount to EUR 22,540 million at December 31, 2007 (2006: EUR 20,930 million).
Derecognition
As part of the AEGON Levensverzekering N.V. funding program the company regularly enters into securitization contracts for its mortgage loans. At December 31, 2007 a total of five publicly placed and one privately placed securitization contracts were outstanding with a total value of EUR 4.7 billion. Although no new securitizations took place in 2007 there were replenishments of SAECURE 6, the most recent publicly placed securitization. In the last quarter of 2007 the first of the publicly placed securitizations was called by the special purpose vehicle. In 2006, AEGON Levensverzekering N.V. terminated one of the two privately placed securitization transactions reported in prior years. Also, it completed one publicly placed securitization transaction in 2006, whereby the economic ownership of EUR 2.1 billion of aggregate mortgage receivables was conveyed to a special purpose company. The special purpose company funded this purchase with the issuance of mortgage-backed securities. The transfer of ownership title will take place only if the borrowers are duly notified by the special purpose company upon the occurrence of certain pre-defined ‘notification events’. At the same time AEGON entered into a fixed-to-floating swap agreement with the contract parties under which AEGON agreed to pay the floating rate (EURIBOR based) and receive the fixed rate (yield from the mortgage receivables). After a period of seven years, the interest of the notes issued by the special purpose company in respect of this transaction will step-up, together with a similar step-up in the fixed-to-floating swap agreement. At that same time, the special purpose company has the right to call the notes. A deferred purchase arrangement forming part of the contract to sell the mortgage loans to the special purpose company entitles AEGON Levensverzekering N.V. to any specified residual positive value of the special purpose entity at maturity. A 3.3% portion of securitized mortgage loans forming part of SAECURE 4 and amounting to EUR 18 million (2006: EUR 24 million and 2005: EUR 28 million) continues to be recognized as a financial asset on balance, representing the interest rate risk retained by AEGON in respect of the fourth publicly placed securitization contract.
In the year ending December 31, 2006, AEGON USA had sold EUR 105 million of AAA-wrapped municipal debt securities to SPEs. Due to AEGON’s continuing involvement with the assets in these SPEs, it consolidates these entities. The fair value of all such debt securities reflected in investments and also measured at fair value through profit or loss is EUR 592 million as of December 31, 2007 (2006: EUR 678 million). The acquisition of these securities was financed by the SPEs through issuance of floating rate notes at par value to third parties and issuance of a de minimus residual investment to AEGON. Upon early termination of a SPE, up to 10% of the excess of the fair value of the securities over the notes value may be shared with the noteholders, with residual flowing to AEGON. In the event that the fair value of the securities is less than the notes value at early termination and the securities have maintained their investment grade rating, AEGON will reimburse the SPE liquidity provider for this shortfall. AEGON must pledge collateral to support these shortfall agreements. At December 31, 2007, the fair value of the bonds was in excess of the par value of the floating rate notes and no collateral was pledged. The maximum exposure to loss resulting from AEGON’s involvement is the December 31, 2007 unpaid principal and accrued interest on the notes of EUR 578 million (2006: EUR 649 million) reflected in financial liabilities-investment contracts. Management does not anticipate any future funding requirements with respect to these guarantees that would have a material effect on reported financial results.
Measurement
AEGON owns EUR 120 million (2006: EUR 113 million) of shares in the Federal Home Loan Bank of Des Moines, Iowa, that are measured at par. The bank has implicit financial support from the United States government. The redemption value of the shares is fixed at par and can only be redeemed by the bank.
Only other insignificants amounts of unquoted equity instruments are measured at cost. Refer to note 3 for information on the fair value measurement.
Other
Movement on the loan allowance account during the year were as follows:
|
2007 |
2006 |
|
|
At January 1 |
(75) |
(97) |
|
Addition charged to earnings |
(6) |
(15) |
|
Amounts written off and other charges |
10 |
15 |
|
Net exchange differences |
1 |
1 |
|
Other |
12 |
21 |
|
At December 31 |
(58) |
(75) |
Refer to note 47 for a discussion of collateral received and paid.
No financial assets were reclassified during the financial year.
|
6.1 |
Investments in real estate |
|
2007 |
2006 |
|
|
At January 1 |
2,243 |
2,068 |
|
Additions |
254 |
41 |
|
Subsequent expenditure capitalized |
8 |
11 |
|
Transfers from real estate held for own use and mortgage loans |
49 |
140 |
|
Disposals |
(115) |
(140) |
|
Fair value gains/(losses) |
135 |
166 |
|
Net exchange differences |
(52) |
(43) |
|
At December 31 |
2,522 |
2,243 |
97% of all properties were last valued in 2007. More than 91% of these valuations were performed by independent external appraisers.
AEGON USA has entered into commercial property leases on its investment property portfolio, consisting of office, retail and industrial buildings. These non-cancelable leases have remaining lease terms up to 12 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.
AEGON The Netherlands has entered into long-term residential property leases that can be terminated subject to a short-term notice. Under Dutch law, the maximum annual rent increase on residential property rented for less than EUR 622 per month is specified by the Dutch national government and equals the annual inflation rate plus a small margin.
Refer to note 46 for description of non-cancelable lease rights.
Rental income of EUR 89 million (2006: EUR 90 million; 2005: EUR 92 million) is reported as part of investment income in the income statement. Of this amount, nil (2006: EUR 2 million; 2005: EUR 3 million) is attributable to rent on foreclosed real estate. Direct operating expenses (including repairs and maintenance) arising from investment property that generated rental income during the period amounted to EUR 53 million (2006: EUR 28 million; 2005: EUR 33 million). EUR 1 million (2006: EUR 0 million; 2005: EUR 2 million) of direct operating expenses related to investment property that did not generate rental income during the period.
There are no restrictions on the realizability of investment property or the remittance of income and proceeds of disposal.
Refer to note 46 for a summary of contractual obligations to purchase investment property or for repairs, maintenance or enhancements.
|
6.2 |
Real estate held for own use |
|
Net book value |
||
|
At January 1, 2006 |
355 |
|
|
At December 31, 2006 |
313 |
|
|
At December 31, 2007 |
329 |
|
2007 |
2006 |
|
|
Cost |
||
|
At January 1 |
341 |
377 |
|
Additions |
75 |
90 |
|
Acquired through business combinations |
4 |
18 |
|
Capitalized subsequent expenditure |
3 |
5 |
|
Disposals |
(2) |
(3) |
|
Unrealized gains/(losses) through equity |
9 |
16 |
|
Realized gains/(losses) through income statement |
3 |
(5) |
|
Transfers to investments in real estate |
(49) |
(136) |
|
Net exchange differences |
(21) |
(21) |
|
At December 31 |
363 |
341 |
|
Accumulated depreciation and impairment losses |
2007 |
2006 |
|
At January 1 |
28 |
22 |
|
Depreciation through income statement |
8 |
8 |
|
Disposals |
– |
(1) |
|
Net exchange differences |
(2) |
(1) |
|
At December 31 |
34 |
28 |
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 213 million (2006: EUR 169 million).
61% of the real estate held for own use was last revalued in 2007, based on market value appraisals by qualified internal and external appraisers. All of the appraisals in 2007 were performed by independent external appraisers.
Real estate held for own use has not been pledged as security for liabilities, nor are there any restrictions on title. Depreciation expenses are charged in ‘Commissions and expenses’ in the income statement. The useful lives of buildings range between 40 and 50 years.
Refer to note 46 for a summary of contractual commitments for the acquisition of real estate held for own use.
|
7 |
Investments for account of policyholders |
Investments for account of policyholders comprise financial assets at fair value through profit or loss, excluding derivatives, as well as investments in real estate and real estate held for own use. Refer to note 8 for details on derivatives for account of policyholders.
|
Investments for account of policyholders |
Note |
2007 |
2006 |
|
Shares |
|||
|
- Listed |
40,629 |
44,663 |
|
|
- Unlisted |
1,052 |
53 |
|
|
Bonds |
|||
|
- Listed |
28,019 |
30,339 |
|
|
- Unlisted |
1,072 |
35 |
|
|
Money market and other short-term investments |
2,844 |
2,248 |
|
|
Deposits with financial institutions |
3,740 |
2,344 |
|
|
Separate accounts and unconsolidated investment funds |
61,484 |
51,874 |
|
|
Other |
1,036 |
1,504 |
|
|
Total investments for account of policyholders at fair value through profit or loss, excluding derivatives 1 |
139,876 |
133,060 |
|
|
Investments in real estate |
|
2,508 |
2,327 |
|
Real estate held for own use |
141 |
150 |
|
|
Total investments for account of policyholders |
