|
|
Notes to the consolidated income statement
Amounts in EUR million, unless otherwise stated
|
29
|
Premium income and premiums to reinsurers
|
|
|
|
|
Total
|
|
|
|
|
|
|
Gross
|
Reinsurance
|
|
2007
|
|
|
|
|
|
|
|
Life
|
|
|
|
|
24,210
|
1,280
|
|
Non-Life
|
|
|
|
|
2,690
|
326
|
|
Total
|
|
|
|
|
26,900
|
1,606
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
Life
|
|
|
|
|
21,768
|
1,333
|
|
Non-Life
|
|
|
|
|
2,802
|
338
|
|
Total
|
|
|
|
|
24,570
|
1,671
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
Life
|
|
|
|
|
16,079
|
1,208
|
|
Non-Life
|
|
|
|
|
2,803
|
346
|
|
Total
|
|
|
|
|
18,882
|
1,554
|
|
|
2007
|
2006
|
2005
|
|
Interest income
|
9,183
|
9,011
|
8,967
|
|
Dividend income
|
1,051
|
1,186
|
868
|
|
Rental income
|
223
|
179
|
102
|
|
Total investment income
|
10,457
|
10,376
|
9,937
|
|
|
|
|
|
|
Investment income related to general account
|
7,496
|
7,467
|
7,031
|
|
Investment income for account of policyholders
|
2,961
|
2,909
|
2,906
|
|
|
10,457
|
10,376
|
9,937
|
|
Investment income from financial assets held for general account
|
2007
|
2006
|
2005
|
|
Available-for-sale
|
5,661
|
5,643
|
5,181
|
|
Loans
|
1,276
|
1,231
|
1,303
|
|
Held-to-maturity
|
48
|
34
|
24
|
|
Financial assets at fair value through profit or loss
|
255
|
305
|
310
|
|
Real estate
|
89
|
90
|
92
|
|
Derivatives
|
85
|
120
|
9
|
|
Other
|
82
|
44
|
112
|
|
Total
|
7,496
|
7,467
|
7,031
|
|
Investment income from:
|
2007
|
2006
|
2005
|
|
Shares
|
1,051
|
1,186
|
868
|
|
Bonds and money market instruments
|
7,708
|
7,591
|
7,522
|
|
Loans
|
1,276
|
1,231
|
1,303
|
|
Real estate
|
223
|
179
|
102
|
|
Other
|
199
|
189
|
142
|
|
Total
|
10,457
|
10,376
|
9,937
|
Included in interest income is EUR 7 million (2006: EUR 28 million) in respect of interest income accrued on impaired financial assets. The interest income accrued on financial assets that are not carried at fair value through profit or loss amounted to EUR 1,324 million (2006: EUR 1,265 million).
|
31
|
Fee and commission income
|
|
|
2007
|
2006
|
2005
|
|
Fee income from asset management
|
700
|
686
|
611
|
|
Sales commissions
|
547
|
440
|
386
|
|
Commissions from intermediary activities
|
313
|
233
|
197
|
|
Other
|
340
|
306
|
250
|
|
Total fee and commission income
|
1,900
|
1,665
|
1,444
|
Included in fee and commission income is EUR 74 million of fees on trust and fiduciary activities (2006: EUR 62 million). EUR 6 million of fees were recognized on financial assets and liabilities that are not carried at fair value with changes in the fair value recognized in the income statement (2006: EUR 14 million).
|
|
2007
|
2006
|
2005
|
|
Other revenues
|
14
|
4
|
73
|
Other revenues relate to non-core activities.
|
33
|
Results from financial transactions
|
|
Results from financial transactions comprise:
|
2007
|
2006
|
2005
|
|
Net fair value change of general account financial investments at fair value through profit or loss, other than derivatives
|
573
|
775
|
445
|
|
Realized gains and losses on financial investments
|
957
|
597
|
704
|
|
Gains and losses on investments in real estate
|
137
|
134
|
222
|
|
Net fair value change of derivatives
|
(926)
|
(255)
|
28
|
|
Net fair value change on for account of policyholder financial assets at fair value through profit or loss
|
4,380
|
7,953
|
11,238
|
|
Net fair value change on investments in real estate for account of policyholders
|
(402)
|
187
|
99
|
|
Net foreign currency gains and (losses)
|
(172)
|
(24)
|
84
|
|
Net fair value change on borrowings and other financial liabilities
|
(2)
|
42
|
–
|
|
Realized gains and (losses) on repurchased debt
|
–
|
(12)
|
–
|
|
Results from financial transactions
|
4,545
|
9,397
|
12,820
|
|
Net fair value change of general account financial investments at fair value through profit or loss, other than derivatives comprise:
|
2007
|
2006
|
2005
|
|
Shares
|
96
|
344
|
269
|
|
Bonds and money market investments
|
86
|
61
|
(56)
|
|
Other
|
391
|
370
|
232
|
|
Total
|
573
|
775
|
445
|
|
Realized gains and losses on financial investments comprise:
|
2007
|
2006
|
2005
|
|
Shares
|
870
|
622
|
389
|
|
Bonds and money market investments
|
96
|
(10)
|
332
|
|
Loans
|
34
|
61
|
115
|
|
Other
|
(43)
|
(76)
|
(132)
|
|
Total
|
957
|
597
|
704
|
|
Realized gains and losses on financial investments relate to:
|
2007
|
2006
|
2005
|
|
Available-for-sale investments
|
923
|
536
|
664
|
|
Loans
|
34
|
61
|
115
|
|
Other
|
–
|
–
|
(75)
|
|
Total
|
957
|
597
|
704
|
|
Net fair value change of derivatives comprise:
|
2007
|
2006
|
2005
|
|
- Net fair value change on derivatives
|
55
|
(74)
|
(204)
|
|
- Ineffective portion of hedge transactions to which hedge accounting is applied
|
16
|
12
|
32
|
|
- Fair value changes on economic hedges for which no hedge accounting is applied
|
(340)
|
(193)
|
200
|
|
- Difference between fair value movements of certain guarantees and the fair value changes derivatives that hedge certain risks of these guarantees 1
|
(657)
|
–
|
–
|
|
Total
|
(926)
|
(255)
|
28
|
- Included in this line are the fair value movements of bifurcated embedded derivatives of AEGON the Netherlands (minimum guarantees on unit linked policies) and the fair value movement of related derivatives that hedge certain risks of these guarantees and of the guarantees included in both group pension contracts and traditional products (refer to note 35).
|
|
The ineffective portion of hedge transactions to which hedge accounting is applied comprises:
|
2007
|
2006
|
2005
|
|
- Fair value change on hedging instruments in a fair value hedge
|
(242)
|
(22)
|
326
|
|
- Fair value change on hedged items in a fair valued hedge
|
253
|
27
|
(294)
|
|
Ineffectiveness fair value hedges
|
11
|
5
|
32
|
|
Ineffectiveness cash flow hedges
|
5
|
7
|
–
|
|
Ineffectiveness net foreign investment hedges
|
–
|
–
|
–
|
|
Total
|
16
|
12
|
32
|
|
Net fair value change on for account of policyholder financial assets at fair value through profit or loss comprise:
|
2007
|
2006
|
2005
|
|
- Shares
|
1,760
|
3,754
|
7,153
|
|
- Bonds and money market investments
|
(884)
|
(1,124)
|
1,628
|
|
- Deposits with financial institutions
|
(1)
|
–
|
–
|
|
- Separate accounts and unconsolidated investment funds
|
3,580
|
5,323
|
2,457
|
|
- Other
|
(75)
|
–
|
–
|
|
Total
|
4,380
|
7,953
|
11,238
|
Investments for account of policyholders comprise of financial assets, investments in real estate and real estate for own use. Refer to note 7 for further information. Financial assets for account of policyholders are classified as at fair value through profit or loss. Investment income on investments for account of policyholders is included in investment income. Refer to note 30 for further information.
|
|
2007
|
2006
|
2005
|
|
Other income
|
214
|
11
|
176
|
Other income in 2007 relates mainly to the acquisition of OPTAS N.V. (‘OPTAS’). The acquired net assets amounted to EUR 1.7 billion, EUR 212 million higher than the acquisition price of EUR 1.5 billion resulting in a one-time gain at acquisition that is reported as part of Other income.
Other income in 2005 relates to the sale of Seguros Generales, the general insurance company in Spain.
|
35
|
Policyholder claims and benefits
|
|
|
2007
|
2006
|
2005
|
|
Claims and benefits paid to policyholders
|
21,133
|
21,197
|
16,025
|
|
Change in valuation of liabilities for insurance and investment contracts
|
13,002
|
14,070
|
18,601
|
|
Total policyholder claims and benefits
|
34,135
|
35,267
|
34,626
|
The change in valuation of liabilities for insurance and investment contracts include EUR 332 million of gains regarding fair value movements of guarantees and EUR 7 million of gains (2006: gains of EUR 75 million, 2005: gains of EUR 104 million) of other charges that for segment reporting are excluded from Operating earnings before tax.
|
36
|
Profit sharing and rebates
|
|
|
2007
|
2006
|
2005
|
|
Amortization of interest rate rebates
|
46
|
48
|
56
|
|
Surplus interest bonuses
|
22
|
16
|
21
|
|
Profit appropriated to policyholders
|
15
|
69
|
94
|
|
Total profit sharing and rebates
|
83
|
133
|
171
|
|
37
|
Commissions and expenses
|
|
|
2007
|
2006
|
2005
|
|
Commissions
|
3,312
|
3,444
|
3,317
|
|
Employee expenses
|
1,903
|
1,821
|
1,662
|
|
Administration expenses
|
1,334
|
1,236
|
1,281
|
|
Deferred expenses
|
(1,891)
|
(1,973)
|
(1,980)
|
|
Amortization of deferred expenses
|
1,062
|
1,286
|
955
|
|
Amortization of VOBA and future servicing rights
|
219
|
271
|
287
|
|
Total commissions and expenses
|
5,939
|
6,085
|
5,522
|
Included in administration expenses above is depreciation amounting to EUR 86 million (2006: EUR 112 million and 2005: EUR 125 million) that relates to equipment, software and real estate held for own use. The direct operating expenses relating to investments in real estate that generated rental income was EUR 62 million (2006: EUR 32 million and 2005: EUR 33 million). Minimum lease payments recognized as expense amounted to EUR 10 million (2006: EUR 6 million). Included in employee expenses is EUR 23 million (2006: EUR 23 million) regarding defined contribution expenses.
Included in the amortization of deferred expenses and VOBA is EUR 1 million (2006: EUR 29 million and 2005: nil) that is classified for segment reporting purposes as non operating earnings as an offset against realized gains and losses on financial investments.
|
Employee expenses
|
2007
|
2006
|
2005
|
|
Salaries
|
1,286
|
1,206
|
1,139
|
|
Post-employment benefit costs
|
168
|
178
|
124
|
|
Social security charges
|
140
|
140
|
185
|
|
Other personnel costs
|
307
|
258
|
171
|
|
Share appreciation rights and share options
|
2
|
39
|
43
|
|
Total employee expenses
|
1,903
|
1,821
|
1,662
|
Share appreciation rights and share options
Senior executives of AEGON companies, as well as other AEGON employees, have been offered both share appreciation rights and share options. These share appreciation rights and share options have been granted at an exercise price equal to the market price of the shares at the date of the grant. The rights and options granted in 2007, 2006, 2005 and 2004 vest after three years and can only be exercised during the four years after the vesting date. The rights and options granted in 2003 and 2002 vest after two years and can only be exercised during the five years after the vesting date. Vesting and exercisability depend on continuing employment of the individual employee to which the rights and options have been granted. Option plans are settled in equity, whilst stock appreciation rights are settled in cash or provide the employee with the choice of settlement.
Plans for share appreciation rights and share options can only be established with prior consent of the annual General Meeting of Shareholders. If, subsequently, the Executive Board decides to implement such plans, that decision has to be approved by the Supervisory Board. Options granted pursuant to the purchase agreement with Providian have various expiration dates. The options granted in 1997 to senior executives of former Providian business units fully vest in three years and the exercise period is up to ten years, with the latest period ending in August 2008.
In compliance with regulations under Dutch law, share appreciation rights and share options cannot be exercised in blackout periods.
Share appreciation rights
The following tables present the movements in number of share appreciation rights outstanding (SARs), as well as the breakdown by the year in which they were granted.
|
|
Number of SARs
|
Weighted average
exercise price in EUR
|
Weighted average remaining contractual
term in years
|
Aggregate intrinsic
value in EUR million
|
|
Outstanding at January 1, 2006
|
34,252,350
|
19.22
|
3.62
|
79
|
|
Granted
|
244,300
|
14.00
|
|
|
|
Exercised
|
(1,249,899)
|
6.30
|
|
|
|
Forfeited
|
(2,162,563)
|
18.86
|
|
|
|
Expired
|
(7,218,300)
|
34.84
|
|
|
|
Outstanding at January 1, 2007
|
23,865,888
|
15.15
|
3.55
|
77
|
|
|
|
|
|
|
|
Granted
|
309,500
|
14.98
|
|
|
|
Exercised
|
(3,014,100)
|
9.55
|
|
|
|
Forfeited
|
(1,250,426)
|
17.06
|
|
|
|
Expired
|
–
|
–
|
|
|
|
Outstanding at December 31, 2007
|
19,910,862
|
15.87
|
2.59
|
30
|
|
Exercisable at December 31, 2007
|
15,765,492
|
17.08
|
2.11
|
26
|
The weighted average share price at which the share appreciation rights were exercised in 2007 is EUR 15.07 (2006: EUR 14.51).
|
SARs
|
Original number granted
|
Outstanding
January 1, 2007
|
Outstanding
December 31, 2007
|
Exercise price in EUR
|
Exercise period
|
|
2002
|
11,555,700
|
7,655,067
|
7,146,732
|
26.70
|
until March 12, 2009
|
|
2003
|
11,447,300
|
3,761,451
|
2,950,744
|
6.30
|
until March 11, 2010
|
|
2004
|
11,574,850
|
8,212,248
|
5,668,016
|
10.56
|
until March 17, 2011
|
|
2005
|
4,575,600
|
4,010,322
|
3,672,270
|
10.86
|
until March 8, 2012
|
|
2006
|
244,300
|
226,800
|
187,200
|
14.00
|
until March 14, 2013
|
|
2007
|
309,500
|
–
|
285,900
|
14.98
|
until March 13, 2014
|
|
Total
|
39,707,250
|
23,865,888
|
19,910,862
|
|
|
The following assumptions are used in estimating the fair value of share appreciation rights at December 31:
|
|
2007
|
2006
|
2005
|
|
Volatility
|
29.0%
|
26.3%
|
26%
|
|
Expected dividend yield
|
7.18%
|
3.99%
|
3.12%
|
|
Expected term (in years)
|
6.01
|
5.68
|
5.22
|
|
Risk-free rate
|
4.14%
|
3.87%
|
3.36%
|
|
AEGON share price at year end
|
12.09
|
14.44
|
13.75
|
The volatility is derived from quotations from external market sources and the expected dividend yield is derived from quotations from external market sources and the binomial option pricing model. Refer to note 3 for a further description of the method used to estimate the fair value and a description of the significant assumptions.
The liability related to share appreciation rights is valued at fair value at each balance sheet date. Refer to note 27 for details. The costs related to the share appreciation rights amount to EUR (16) million (2006: EUR 26 million and 2005: EUR 40 million) and are recognized in the income statement as part of Commissions and expenses.
Share options
The following tables present the movements in number of share options, as well as the breakdown by the year in which they were granted.
|
|
Number of
share options
|
Weighted average
exercise price in EUR
|
Weighted average remaining contractual
term in years
|
Aggregate intrinsic
value in EUR million
|
|
Outstanding at January 1, 2006
|
6,029,108
|
12.09
|
5.56
|
16
|
|
Granted
|
9,149,500
|
14.00
|
|
|
|
Exercised
|
(211,512)
|
9.84
|
|
|
|
Forfeited
|
(1,047,841)
|
13.78
|
|
|
|
Expired
|
–
|
–
|
|
|
|
Outstanding at January 1, 2007
|
13,919,255
|
13.25
|
5.64
|
21
|
|
Granted
|
9,522,200
|
14.98
|
|
|
|
Exercised
|
(182,352)
|
12.26
|
|
|
|
Forfeited
|
(1,895,491)
|
14.09
|
|
|
|
Expired
|
(95,850)
|
12.39
|
|
|
|
Outstanding at December 31, 2007
|
21,267,762
|
13.91
|
5.38
|
5
|
|
Exercisable at December 31, 2007
|
188,650
|
30.63
|
0.6
|
0
|
The weighted average share price at which the share options were exercised in 2007 is EUR 14.00 (2006: EUR 13.28).
|
Share options
|
Original number granted
|
Outstanding
January 1, 2007
|
Outstanding
December 31, 2007
|
Exercise price in EUR
|
Exercise period
|
|
Providian
|
7,204,384
|
491,852
|
188,650
|
30.63 1
|
until August 6, 2008
|
|
2005
|
5,586,160
|
4,768,060
|
4,370,910
|
10.86
|
until March 8, 2012
|
|
2006
|
9,149,500
|
8,659,343
|
7,903,623
|
14.00
|
until March 14, 2013
|
|
2007
|
9,522,200
|
|
8,804,579
|
14.98
|
until March 13, 2014
|
|
Total
|
31,462,244
|
13,919,255
|
21,267,762
|
|
|
- Weighted average exercise price of the outstanding share options in USD calculated at the closing rate.
|
The following assumptions are used in estimating the fair value of share options at the grant date:
|
|
2007
|
2006
|
2005
|
|
Volatility
|
24.4%
|
28.0%
|
26.3%
|
|
Expected dividend yield
|
4.53%
|
4.23%
|
4.19%
|
|
Expected term (in years)
|
6.57
|
6.46
|
6.57
|
|
Risk-free rate
|
3.84%
|
3.47%
|
3.74%
|
|
Exercise price
|
14.98
|
14.00
|
10.86
|
The costs related to the share options amount to EUR 18 million (2006: EUR 13 million and 2005: EUR 3 million) and are recognized in the income statement as part of Commissions and expenses.
Share appreciation rights and share options
The fair value of a share appreciation right or share option at the grant date in 2007 amounted to EUR 2.87 (2006: EUR 3.14 and 2005: EUR 2.32). These amounts are equal to the weighted average fair value for the respective years. The total intrinsic value of share options exercised and SARs paid during 2007 amounts to EUR 15 million (2006: EUR 11 million and 2005: EUR 17 million).
At December 31, 2007, the total compensation cost related to non-vested awards not yet recognized is estimated at EUR 28 million. The weighted average period over which it is expected to be recognized is 1.3 years. No cash is received from exercise of share options during 2007, 2006 and 2005. Cash used to settle share appreciation rights amounts to EUR 17 million in 2007 (2006: EUR 10 million and 2005: EUR 18 million).
The exposure from the issued share appreciation rights and share options is economically hedged by a position in treasury shares. At December 31, 2007, AEGON N.V. held 34,057,633 of its own common shares with a face value of EUR 0.12 each by virtue of acquisitions for this purpose.
There have been no modifications to the plans during the financial year.
The breakdown of the share appreciation rights and share options granted in 2007 is as follows: Executive Board nil, other senior executives 4,157,500 and other employees 5,674,200 (2006: nil; 4,009,800 and 5,384,000 and 2005: nil; 4,711,960 and 5,449,800).
Refer to note 50 for detailed information about the SARs/share options and the shares and options conditionally granted to the Executive Board.
|
38
|
Impairment charges/(reversals)
|
|
Impairment charges/(reversals) comprise:
|
2007
|
2006
|
2005
|
|
Impairment charges on financial assets, excluding receivables 1
|
135
|
142
|
147
|
|
Impairment reversals on financial assets, excluding receivables 1
|
(64)
|
(118)
|
(160)
|
|
Impact of impairments on the valuation of insurance assets and liabilities 1
|
16
|
–
|
–
|
|
Impairment charges on non-financial assets and receivables
|
30
|
9
|
11
|
|
Total impairment charges/(reversals)
|
117
|
33
|
(2)
|
- Impairment charges/(reversals) on financial assets, excluding receivables are for segment reporting excluded from operating earnings before tax (refer to note 4).
|
|
Impairment charges on financial assets, excluding receivables, from:
|
2007
|
2006
|
2005
|
|
Shares
|
45
|
36
|
20
|
|
Bonds and money market instruments
|
76
|
80
|
91
</ | |
