THE HAGUE, The Netherlands, Aug. 13 /PRNewswire-FirstCall/ --
Capital Position Strengthened - EUR 1.6 billion in capital freed up
in first half 2009, above full year target - Excess capital(a) of
EUR 3.5 billion by end June - Revaluation reserves improve by EUR
3.4 billion, or 40%, a result of narrowing credit spreads - IGD(b)
solvency ratio increases to 202% - No interim dividend payment for
2009 - dividend policy remains unchanged Improved earnings -
Underlying earnings before tax of EUR 404 million, substantial
improvement compared with the past two quarters - Underlying
earnings include lower investment income as result of de-risking
measures - Fair value items of EUR (31) million include EUR 202
million net gain from higher equity markets, offset by a loss on
interest rate hedges - Net loss of EUR 161 million, including
one-time EUR 385 million loss from sale of Taiwanese life
activities - Impairments of EUR 393 million, approximately half
from US housing market related assets - Cost savings well on track
to achieve EUR 150 million target Continued profitable sales,
despite difficult environment - New life sales of EUR 469 million,
helped by an increase in US retail sales - Net deposits(c) of EUR
857 million, due to strong sales of annuities and pensions, and
improved persistency - Value of new business of EUR 181 million,
with overall increase in rates of return Statement Alex Wynaendts,
CEO "Ensuring that AEGON maintains a strong capital position
continues to be front and center in our actions. In the first half
of the year, we have exceeded our full-year capital release target.
We are also pleased with the further improvement, quarter over
quarter, to our underlying earnings, despite the impact of our
de-risking measures on investment income. Our strong capital
position has allowed us to begin reversing in part the impact of
these measures by investing cash in higher yielding, quality
assets. We have not declared an interim dividend, however our
dividend policy remains unchanged. Our decision to pay a full-year
dividend will continue to depend on cash flows and AEGON's capital
position at the end of the year. "We are well on track to achieve
our cost savings target for 2009. At the same time, we are working
to identify additional cost saving measures with the determination
not to undermine the high level of service our customers have come
to expect. We are especially pleased by the continued confidence of
our customers, as demonstrated by solid retail sales in the United
States and net deposits for the quarter. "We remain convinced that
our strategic objectives to strengthen AEGON's capital position,
reduce costs and implement actions to safeguard customer trust are
the right ones in the current environment and for the long term.
AEGON has weathered the turmoil of the past year and is committed
to being in a strong position to maximize the opportunities ahead."
KEY PERFORMANCE INDICATORS Notes Q2 Q1 % Q2 amounts in EUR millions
2009 2009 2008 Underlying earnings before tax 1 404 (22) N.M. 596
Net income 2 (161) (173) 7 276 New life sales 3 469 543 (14) 729
Gross deposits excluding Institutional Guaranteed Products 4 5,647
6,393 (12) 5,650 Value of new business (VNB) 181 201 (10) 212
Return on equity 5 10.3% (3.3%) N.M. 11.2% - TABLE CONTINUED - %
Ytd Ytd % amounts in EUR millions 2009 2008 Underlying earnings
before tax (32) 382 1,254 (70) Net income N.M. (334) 429 N.M. New
life sales (36) 1,012 1,415 (28) Gross deposits excluding
Institutional Guaranteed Products - 12,040 11,037 9 Value of new
business (VNB) (15) 382 398 (4) Return on equity (8) 3.5% 12.2%
(71) a) Excess capital over S&P AA capital adequacy
requirements b) 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 I
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
methodology to calculate the ratio for the Netherlands has been
adjusted to include the excess value above the technical
provisions, calculated according to the local regulatory liability
adequacy test, as of Q2 2009. The comparable IGD ratio as per end
of Q1 2009 would have been 193%. c) Excluding institutional
guaranteed products Last year, AEGON set out three long-term
strategic priorities: 1. To reallocate capital toward businesses
with higher growth and return prospects; 2. To improve growth and
returns from existing businesses; 3. To manage AEGON as an
international company. Subsequently, AEGON identified and announced
three priorities to counter the challenges of the current global
financial crisis and position the company for future growth: -
Focus on capital preservation and accelerate the capital release
program; - EUR 150 million in cost saving measures for 2009; -
Develop contingency plans for possible deterioration in financial
markets. AEGON further aims to reduce its earnings sensitivity to
financial markets to realize more stable earnings. Portfolio review
AEGON is continuing to review its portfolio of businesses to ensure
they meet the criteria outlined in the company's strategy. Recent
developments: - Sale of life business in Taiwan, decreasing AEGON's
long-term interest rate exposure and substantially lowering
required economic capital; - Withdrawal from Group Risk market in
the UK, releasing EUR 55 million in capital over next three years.
Consistent with its strategy to allocate capital to businesses and
geographies that offer attractive growth and higher return
prospects, AEGON completed its acquisition of a 50% stake in
Mongeral, Brazil's sixth largest independent life insurer, and the
acquisition of Banca Transilvania's 50% share in BT AEGON, a
Romanian pension business the two companies set up in 2008. Cost
measures - Cost saving measures well on track to achieve the
full-year EUR150 million target; - Operating expenses down 5% in
the first half of 2009, excluding impact from restructuring
charges, increased employee benefit plan expenses and currency
effects. Capital preservation - A total of EUR 1.6 billion in
capital released from AEGON's businesses in H1, above target of EUR
1.5 billion for full year; - AEGON started to invest cash in higher
yielding quality assets, which will in part reverse earnings impact
from de-risking measures; - AEGON aims to maintain an amount of
excess capital substantially above AA capital adequacy
requirements. Capital management Excess capital - Excess capital at
the end of June 2009 totaled EUR 3.5 billion over AA capital
adequacy requirements, up EUR 0.8 billion from the end of Q1 2009;
- The positive impact from improved capital markets, the company's
capital release program and statutory earnings were partly offset
by impairments and rating migration in the Americas. At the end of
Q2 2009, AEGON had an IGD solvency ratio of 202%; - Because of
uncertain economic conditions, AEGON still expects an elevated
level of asset impairments in its investment portfolio in 2009
compared with its long-term assumptions. Impairments negatively
impacted the company's capital position in Q2 2009, reducing excess
capital by approximately EUR 0.3 billion. In addition, rating
migration in the Americas' asset portfolio was limited to a EUR 0.1
billion increase in capital requirements. IFRS core capital - At
the end of June 2009, core capital, excluding the revaluation
reserves, totaled EUR 15.8 billion, 75% of the total capital base,
well above AEGON's minimum target of 70%7,8). Core capital,
including the revaluation reserves, was EUR 10.6 billion,
consisting of EUR 7.6 billion in shareholders' equity and a further
EUR 3 billion in convertible core capital securities. AEGON's
revaluation reserves improved by 40% during Q2 2009, or EUR 3.4
billion, to a negative EUR 5.1 billion. The improved revaluation
reserves were the main driver behind an increase in shareholders'
equity. The revaluation reserves improved primarily due to the
impact of narrowing credit spreads on bond values. Dividend - AEGON
has not declared an interim dividend to common shareholders for
2009. The company's dividend policy, however, remains unchanged,
i.e. the payment of a dividend depends on the capital position and
cash flows of the company. A decision on a final dividend will be
announced with the Q4 2009 results. Risk management Equity market
sensitivities - During Q2 2009, AEGON implemented a macro hedge
program for equity exposure related to its retail variable annuity
portfolio to reduce the sensitivity of AEGON's capital position to
equity market movements. This program, a combination of
out-of-the-money put options and linear hedge instruments, is in
place for twelve months, but can be extended for a longer period.
The hedge instruments will be carried at fair value through profit
or loss and will be reported under fair value items. FINANCIAL
OVERVIEW EUR millions Q2 2009 Q1 2009 % Q2 2008 Underlying earnings
before tax by line of business Life and protection 266 239 11 252
Individual savings and retirement products 62 (313) N.M. 115
Pensions and asset management 83 42 98 129 Institutional products
29 89 (67) 99 Life reinsurance 13 (23) N.M. - Distribution 1 6 (83)
8 General insurance 12 (1) N.M. 20 Interest charges and other (72)
(63) (14) (38) Share in net results of associates 10 2 N.M. 11
Underlying earnings before tax 404 (22) N.M. 596 Over/(under)
performance of fair value items (31) (197) 84 48 Operating earnings
before tax 373 (219) N.M. 644 Operating earnings before tax by line
of business Life and protection 270 179 51 264 Individual savings
and retirement products 88 (306) N.M. 139 Pensions and asset
management 35 (135) N.M. 97 Institutional products 131 13 N.M. 155
Life reinsurance 61 59 3 3 Distribution 1 6 (83) 8 General
insurance 12 (1) N.M. 20 Interest charges and other (235) (36) N.M.
(53) Share in net results of associates 10 2 N.M. 11 Operating
earnings before tax 373 (219) N.M. 644 Gains/(losses) on
investments 35 173 (80) (212) Impairment charges (393) (386) (2)
(98) Other income/(charges) (353) (23) N.M. 9 Income before tax
(338) (455) 26 343 Income tax 177 282 (37) (67) Net income (161)
(173) 7 276 Net underlying earnings 357 (14) N.M. 437 Net operating
earnings 331 (163) N.M. 479 Underlying earnings geographically
Americas 280 (68) N.M. 441 The Netherlands 129 72 79 116 United
Kingdom 20 7 186 48 Other countries 47 30 57 29 Holding and other
(72) (63) (14) (38) Underlying earnings before tax 404 (22) N.M.
596 Operating earnings geographically Americas 461 (100) N.M. 541
The Netherlands 76 (118) N.M. 79 United Kingdom 22 4 N.M. 48 Other
countries 49 31 58 29 Holding and other (235) (36) N.M. (53)
Operating earnings before tax 373 (219) N.M. 644 Commissions and
expenses 1,504 1,618 (7) 1,515 of which operating expenses 814 842
(3) 772 - TABLE CONTINUED - Ytd Ytd EUR millions % 2009 2008 %
Underlying earnings before tax by line of business Life and
protection 6 505 504 - Individual savings and retirement products
(46) (251) 231 N.M. Pensions and asset management (36) 125 250 (50)
Institutional products (71) 118 207 (43) Life reinsurance N.M. (10)
43 N.M. Distribution (88) 7 17 (59) General insurance (40) 11 37
(70) Interest charges and other (89) (135) (55) (145) Share in net
results of associates (9) 12 20 (40) Underlying earnings before tax
(32) 382 1,254 (70) Over/(under) performance of fair value items
(165) (228) (393) 42 Operating earnings before tax (42) 154 861
(82) Operating earnings before tax by line of business Life and
protection 2 449 477 (6) Individual savings and retirement products
(37) (218) 81 N.M. Pensions and asset management (64) (100) 78 N.M.
Institutional products (15) 144 100 44 Life reinsurance N.M. 120 34
N.M. Distribution (88) 7 17 (59) General insurance (40) 11 37 (70)
Interest charges and other N.M. (271) 17 N.M. Share in net results
of associates (9) 12 20 (40) Operating earnings before tax (42) 154
861 (82) Gains/(losses) on investments N.M. 208 (126) N.M.
Impairment charges N.M. (779) (130) N.M. Other income/(charges)
N.M. (376) (45) N.M. Income before tax N.M. (793) 560 N.M. Income
tax N.M. 459 (131) N.M. Net income N.M. (334) 429 N.M. Net
underlying earnings (18) 343 940 (64) Net operating earnings (31)
168 654 (74) Underlying earnings geographically Americas (37) 212
919 (77) The Netherlands 11 201 229 (12) United Kingdom (58) 27 93
(71) Other countries 62 77 68 13 Holding and other (89) (135)
(55)(145) Underlying earnings before tax (32) 382 1,254 (70)
Operating earnings geographically Americas (15) 361 645 (44) The
Netherlands (4) (42) 38 N.M. United Kingdom (54) 26 93 (72) Other
countries 69 80 68 18 Holding and other N.M. (271) 17 N.M.
Operating earnings before tax (42) 154 861 (82) Commissions and
expenses (1) 3,122 2,931 7 of which operating expenses 5 1,656
1,555 6 Overview AEGON reported a net loss of EUR 161 million for
Q2 2009, including a one- time EUR 385 million loss from the sale
of the company's Taiwanese life insurance business. Excluding this
one-time loss, net income was EUR 224 million, a strong improvement
compared with previous quarters. Underlying earnings before tax
amounted to EUR 404 million, a substantial increase from the first
quarter of 2009. Fair value items contributed a negative EUR 31
million to earnings in Q2 2009, again a strong improvement compared
with recent quarters. Net income during the second quarter of 2009
was negatively impacted by impairment charges of EUR 393 million,
associated in part with investments in structured residential
mortgage assets in the Americas. Impairments of EUR 330 million in
the Americas would have amounted EUR 255 million under US GAAP. Net
income in the second quarter of 2009 also included a tax gain of
EUR 228 million related to cross border intercompany reinsurance
transactions between Ireland and the United States. This gain was a
partial reversal of previous tax charges from these internal
transactions during 2008. Underlying earnings before tax In Q2
2009, underlying earnings before tax for the company totaled EUR
404 million, a substantial improvement compared with recent
quarters. Underlying earnings were impacted by a few exceptional
items totaling EUR 36 million. Excluding these exceptional items,
underlying earnings would have been EUR 440 million. Underlying
earnings were also impacted by de-risking measures in the first
half of 2009, which affected earnings by EUR 45 million. The main
exceptional items were: - US employee benefit plan accounting
mismatch of EUR (15) million: - Restructuring charges of EUR (18)
million; - Accelerated amortization of DPAC related to universal
life in Canada of EUR (23) million; - Reserve adjustments of EUR 20
million. Underlying earnings in the Americas improved significantly
compared with Q1 2009 when lower equity markets led to a
strengthening in minimum guarantee reserves and accelerated
amortization of deferred policy acquisition costs (DPAC). Compared
with Q2 2008 however, earnings from the Americas decreased to USD
371 million, a result of lower investment spreads, reduced fees
from lower asset balances, increased employee benefit plan expenses
(USD 60 million), accelerated amortization of DPAC in the Life and
Protection line (USD 30 million), and one-time restructuring costs
(USD 14 million) related to cost saving initiatives. In Q2 2008,
earnings from the Americas had included a one- off reserve
strengthening of USD 49 million in the life reinsurance business.
In the Netherlands, underlying earnings totaled EUR 129 million,
including a one-time EUR 20 million release of provisions.
Underlying earnings in the United Kingdom, meanwhile, totaled GBP
17 million, lower than Q2 2008, due primarily to the impact of
lower equity and corporate bond markets on fund related charges in
the pension business. Underlying earnings from Other countries,
which exclude earnings from the Taiwanese life business this
quarter, amounted to EUR 47 million, up from EUR 29 million in Q2
2008. Earnings for the second quarter 2008 had included a EUR 6
million underlying loss in Taiwan. The increase in earnings in
Other Countries was the result of a strong earnings performance
from AEGON's operations in Central & Eastern Europe and the
company's bancassurance joint ventures in Spain. Net income Net
income for the second quarter of 2009 included a total
underperformance of fair value items of EUR 31 million. Fair value
items primarily include certain (alternative) investment classes,
as well as a number of products containing financial guarantees. In
the Americas, fair value items showed an overperformance of USD 240
million, a result primarily of increased market values for credit
derivatives, as well as a positive contribution from both total
return annuities and the impact of lower implied equity market
volatilities on the fair value of GMWB guarantees. The results of
AEGON's macro equity hedge program are reported under fair value
items and amounted to a gain of USD 26 million in the second
quarter 2009. Alternative assets in the Americas, such as real
estate partnerships and private equity, however, showed an
underperformance. In Q2 2009, fair value items included a EUR 54
million charge related to fair value movements of guarantees and
related hedges in the Netherlands. During the second quarter of
2009, a EUR 186 million gain from higher equity markets, as well as
the benefit from lower equity market volatility, were more than
offset by losses from the company's program for managing guarantee
related interest exposures. Three bonds issued by AEGON N.V. and
their hedge instruments are held at fair value through profit or
loss. In previous quarters, the widening of AEGON's credit spread
had a positive contribution to earnings. In Q2 2009 however,
AEGON's credit spread narrowed substantially, leading to a loss of
EUR 163 million. Gains on investments Gains on investments during
the second quarter of 2009 amounted to EUR 35 million, including
gains on economic hedges. These gains were partly offset by losses
from the revaluation of direct residential real estate investments
in the Netherlands. Impairment charges Impairments during the
second quarter of 2009 totaled EUR 393 million. This included EUR
123 million relating to subprime mortgage asset backed securities
and a further EUR 85 million to residential mortgage backed
securities, both in the Americas. The remainder was mainly related
to corporate credits in the Americas, the United Kingdom and the
Netherlands. Impairments of EUR 330 million in the Americas would
have amounted to EUR 255 million under US GAAP. Tax Net income in
the second quarter of 2009 included a tax gain of EUR 228 million
related to cross border intercompany reinsurance transactions
between Ireland and the United States. These reinsurance
transactions are accounted for at fair value in both tax
jurisdictions. While losses in the United States were taxed at 35%,
gains in Ireland were taxed at 12.5%. The gain was a partial
reversal of previous tax charges on these internal transactions in
2008. The loss from the sale of AEGON's Taiwanese life activities
did not lead to tax relief on earnings for the second quarter of
2009. Commissions and expenses Compared with Q1 2009, commissions
and expenses decreased by 7% to EUR 1.5 billion. Operating expenses
were down 3% to EUR 814 million as a result of cost saving
initiatives, partly offset by restructuring charges and higher
employee benefit plan expenses. Excluding the impact from
restructuring charges, increased employee benefit plan expenses and
currencies, operating expenses were down 5% in the first half of
2009 compared with the same period last year. Compared with Q2
2008, commissions and expenses were down 5% on a constant currency
basis. On the same basis, operating expenses were up 1% as an
increase in employee benefit plan expenses and restructuring
charges offset further cost savings. Operating expenses also
increased as a result of acquisitions in Central & Eastern
Europe in 2008 and the inclusion of new joint ventures in Spain.
Sales EUR millions Q2 2009 Q1 2009 % Q2 2008 New life sales Life
single premiums 1,504 2,025 (26) 2,880 Life recurring premiums
annualized 318 341 (7) 441 Total recurring plus 1/10 single 469 543
(14) 729 New premium production accident and health insurance 146
164 (11) 141 New premium production general insurance 11 12 (8) 16
Gross deposits (on and off balance) by line of business Fixed
annuities 928 1,628 (43) 875 Variable annuities 949 714 33 717
Saving deposits 779 580 34 688 Retail mutual funds 671 642 5 908
Pensions and asset management 2,319 2,829 (18) 2,461 Institutional
guaranteed products 1,115 1,848 (40) 3,481 Life reinsurance 1 -
N.M. 1 Total gross deposits 6,762 8,241 (18) 9,131 Total gross
deposits excl. institutional guaranteed products 5,647 6,393 (12)
5,650 Net deposits (on and off balance) by line of business Fixed
annuities 145 688 (79) (24) Variable annuities 412 78 N.M. (102)
Saving deposits 43 (67) N.M. 114 Retail mutual funds 23 (98) N.M.
416 Pensions and asset management 246 506 (51) 180 Institutional
guaranteed products (1,432) (2,354) 39 401 Life reinsurance (12)
(16) 25 (14) Total net deposits (575) (1,263) 54 971 Total net
deposits excl. institutional guaranteed products 857 1,091 (21) 570
- TABLE CONTINUED - Ytd Ytd EUR millions % 2009 2008 % New life
sales Life single premiums (48) 3,529 5,637 (37) Life recurring
premiums annualized (28) 659 851 (23) Total recurring plus 1/10
single (36) 1,012 1,415 (28) New premium production accident and
health insurance 4 310 307 1 New premium production general
insurance (31) 23 32 (28) Gross deposits (on and off balance) by
line of business Fixed annuities 6 2,556 1,181 116 Variable
annuities 32 1,663 1,402 19 Saving deposits 13 1,359 1,336 2 Retail
mutual funds (26) 1,313 1,472 (11) Pensions and asset management
(6) 5,148 5,644 (9) Institutional guaranteed products (68) 2,963
6,730 (56) Life reinsurance - 1 2 (50) Total gross deposits (26)
15,003 17,767 (16) Total gross deposits excl. institutional
guaranteed products - 12,040 11,037 9 Net deposits (on and off
balance) by line of business Fixed annuities N.M. 833 (819) N.M.
Variable annuities N.M. 490 (254) N.M. Saving deposits (62) (24) 42
N.M. Retail mutual funds (94) (75) 587 N.M. Pensions and asset
management 37 752 1,350 (44) Institutional guaranteed products N.M.
(3,786) (794) N.M. Life reinsurance 14 (28) (29) 3 Total net
deposits N.M. (1,838) 83 N.M. Total net deposits excl.
institutional guaranteed products 50 1,948 877 122 REVENUE
GENERATING INVESTMENTS June 30, Mar. 31, 2009 2009 % Revenue
generating investments (total) 341,815 334,280 2 Investments
general account 131,533 133,130 (1) Investments for account of
policyholders 112,107 103,312 9 Off balance sheet investments third
parties 98,175 97,838 - Sales Total new life sales in Q2 2009,
excluding Taiwan, were down 13% compared with Q1 2009. Total new
life sales in the Americas were in line with Q1 2009. Retail life
sales increased 7% from Q1 2009 reflecting expanded distribution,
particularly in the term life insurance market, offset by lower
sales of both BOLI/COLI and life reinsurance. In the Netherlands,
pension sales slowed significantly during the second quarter of
2009 and proved volatile after the standstill in the group pension
market during the third and fourth quarters of last year. The first
quarter of 2009 had seen strong group pension sales. New life sales
in the United Kingdom in the second quarter of the year were down
16% compared with Q1 2009, due primarily to a decline in sales of
annuities. In Other countries new life sales, excluding Taiwan,
increased by 9% compared with Q1 2009. New life sales in Spain rose
to EUR 24 million, a reflection of higher sales at AEGON's
bancassurance joint ventures. Sales through Caja de Ahorros del
Mediterraneo (CAM), AEGON's largest bank partner in Spain, remained
strong at EUR 57 million (on a 100% basis) in Q2 2009. It should be
noted that CAM is an associate of AEGON and its results are
therefore not consolidated. In Central & Eastern Europe, new
life sales totaled EUR 18 million, up 13% compared with Q1 2009,
due to higher recurring premium sales. With the exception of Spain,
all country units showed a decline in sales compared with Q2 2008.
In Other countries, sales were down year-on-year primarily as a
result of the sale of AEGON's Taiwanese life business and lower
unit-linked sales in Central & Eastern Europe. Sales were also
affected by a decline in certain parts of the retail market in the
Americas, as well as lower life reinsurance sales and the impact of
the financial crisis on sales of BOLI/COLI contracts. In the United
Kingdom, sales declined year-on-year across most lines of business.
Q2 2008 had been a record sales quarter in the United Kingdom.
Sales in the Netherlands were also down year-on-year, primarily
because of a slowdown in the Dutch group pension market and lower
demand for unit-linked products, as well as lower annuity sales due
to conservative pricing. Deposits Total gross deposits of EUR 5.6
billion in Q2 2009, both on and off balance, excluding
institutional guaranteed products, were down 12% compared with Q1
2009. The decline was due mainly to lower fixed annuity deposits in
the Americas - the result of a reduction in AEGON's crediting rates
since the end of Q1 2009. Pension deposits in the Americas remained
strong, but were down compared with the previous quarter, a
reflection of seasonal factors. Sales of variable annuities were up
by 33% compared with Q1 2009 due to improved markets. Gross
deposits in Other countries amounted to EUR 653 million, down from
the previous quarter as a result of a decline in sales from AEGON's
asset management joint venture in China. Gross deposits in Central
& Eastern Europe were up 7% compared with Q1 2009. Despite an
adverse economic environment, pension deposits remained strong,
reflecting the overall growth of the business. In Q2 2009, deposits
in Other countries also included sales of European variable
annuities, amounting to EUR 162 million. Net deposits, excluding
institutional guaranteed products, totaled EUR 0.9 billion, an
increase compared with Q2 2008, but a decrease compared with Q1
2009. Compared with the first quarter of 2009, net inflows in fixed
annuities and the pension and asset management business in the
Americas declined. The variable annuities and mutual fund
businesses both saw strong sales and lower outflows, leading to net
inflows during Q2 2009. Net deposits in Other countries declined
compared with Q1 2009, primarily as a result of outflows from
AEGON's Chinese asset management joint venture. Value of new
business Value of new business (VNB) amounted to EUR 181 million in
the Q2 2009. Declines in VNB compared with Q1 2009 in the Americas,
the United Kingdom and Central & Eastern Europe were partly
offset by increases in the Netherlands and Spain. AEGON's internal
rate of return amounted to 21.9%, higher than Q1 2009, a result of
improved returns in most country units, and a change in the
geographical mix of new business. FINANCIAL OVERVIEW, Q2 2009
GEOGRAPHICALLY United Americas Kingdom The USD GBP Americas
Netherlands Underlying earnings before tax by line of business 217
11 Life and protection 159 75 Individual savings and 79 -
retirement products 66 (10) Pensions and asset 17 8 management 13
57 41 - Institutional products 29 - 17 - Life reinsurance 13 - -
(2) Distribution - 3 - - General insurance - 4 Interest charges and
other Share in net results of - - associates - - Underlying
earnings before 371 17 tax 280 129 Over/(under) performance 240 2
of fair value items 181 (53) Operating earnings 611 19 before tax
461 76 Operating earnings before tax by line of business 228 11
Life and protection 167 71 110 - Individual savings and retirement
products 90 (10) 15 10 Pensions and asset management 12 8 174 -
Institutional products 131 - 84 - Life reinsurance 61 - - (2)
Distribution - 3 - - General insurance - 4 Interest charges and
other Share in net results of - - associates - - Operating earnings
before 611 19 tax 461 76 (4) 25 Gains/(losses) on investments (3)
(42) (449) (31) Impairment charges (330) (28) - 30 Other
income/(charges) (1) - 158 43 Income before tax 127 6 214 (25)
Income tax 155 (2) 372 18 Net income 282 4 343 21 Net underlying
earnings 259 93 505 22 Net operating earnings 380 54 - TABLE
CONTINUED - Holding, other United Other activities & Total
Kingdom countries eliminations EUR Underlying earnings before tax
by line of business Life and protection 14 18 - 266 Individual
savings and retirement products - 6 - 62 Pensions and asset
management 8 5 - 83 Institutional products - - - 29 Life
reinsurance - - - 13 Distribution (2) - - 1 General insurance - 8 -
12 Interest charges and other (72) (72) Share in net results of
associates - 10 - 10 Underlying earnings before tax 20 47 (72) 404
Over/(under) performance of fair value items 2 2 (163) (31)
Operating earnings before tax 22 49 (235) 373 Operating earnings
before tax by line of business Life and protection 14 18 - 270
Individual savings and retirement products - 8 - 88 Pensions and
asset management 10 5 - 35 Institutional products - - - 131 Life
reinsurance - - - 61 Distribution (2) - - 1 General insurance - 8 -
12 Interest charges and other (235) (235) Share in net results of
associates - 10 - 10 Operating earnings before tax 22 49 (235) 373
Gains/(losses) on investments 28 2 50 35 Impairment charges (35) -
- (393) Other income/(charges) 33 (385) - (353) Income before tax
48 (334) (185) (338) Income tax (28) (9) 61 177 Net income 20 (343)
(124) (161) Net underlying earnings 24 38 (57) 357 Net operating
earnings 25 40 (168) 331 - Underlying earnings before tax of USD
371 million, a substantial improvement on recent quarters - Net
income includes USD 240 million contribution from fair value items
driven by tightening credit spreads and lower equity market
volatilities - Impairments of USD 449 million, primarily on
mortgage-backed assets and corporate bonds - Retail life sales up
compared to Q1 2009; net deposits of USD 1.0 billion (excluding
institutional guaranteed products) Overview Earnings from the
Americas in Q2 2009 were up significantly compared to Q1 2009 as
financial markets improved during the quarter. Compared with last
year however, earnings from the Americas decreased to USD 371
million, mainly due to lower investment spreads, reduced fees from
lower asset balances, increased employee benefit plan expenses (USD
60 million), accelerated amortization of DPAC in the Life and
Protection line (USD 30 million), and one-time restructuring costs
(USD 14 million) related to cost savings initiatives. In Q2 2008,
earnings from the Americas had included a one-off reserve
strengthening of USD 49 million in the life reinsurance business.
Net impairments amounted to USD 449 million, of which USD 284
million was related to structured residential mortgage asset
impairments. Impairments would have amounted to USD 340 million
under US GAAP. Net income also included a tax gain related to cross
border intercompany reinsurance transactions between Ireland and
the United States (USD 305 million). Retail life sales increased 7%
over Q1 2009 reflecting expanded distribution, particularly in the
term life insurance market. Underlying earnings before tax AEGON
reported underlying earnings before tax in the Americas for Q2 2009
of USD 371 million, a strong improvement compared to an underlying
loss of USD 88 million in Q1 2009. However, underlying earnings
declined compared to Q2 2008; Earnings from Life & Protection
amounted to USD 217 million and included several one-off items; USD
30 million DPAC charge in the Canadian life business, USD 18
million in reserve strengthening in the US life business and USD 8
million of restructuring charges, partially offset by USD 21
million of reserve releases in accident and health. Earnings also
include USD 33 million in increased employee benefit plan expenses
and the impact of lower investment spreads and reduced fee income;
- Individual Savings & Retirement earnings totaled USD 79
million. The decline in earnings compared to Q2 2008 was the result
primarily of lower fee income in the variable annuity and mutual
fund business, as well as a narrowing of spreads. Earnings in Q2
2009 included USD 10 million from increased employee benefit plan
expenses; - Pensions & Asset Management earnings decreased to
USD 17 million from USD 50 million in Q2 2008, a result mainly of
lower fees from reduced asset balances and increased employee
benefit plan expenses (USD 10 million); - Earnings from the
Institutional business amounted to USD 41 million, down from USD
155 million in Q2 2008. Earnings last year had benefited from a
widening in spreads due to a decline in short-term rates. In Q2
2009, earnings were severely impacted by narrowing in spreads as a
result of a higher asset allocation to cash following the decision
to scale down AEGON's institutional spread business; - In the Life
Reinsurance business underlying earnings amounted to USD 17
million. Earnings in Q2 2008 included a USD 49 million reserve
strengthening charge. Earnings in Q2 2009 were affected by adverse
mortality experience (USD 10 million), as well as lower investment
spreads. Net income AEGON reported net income in the Americas for
Q2 2009 of USD 372 million. Fair value items showed an
overperformance of USD 240 million, a result primarily of increased
market values for credit derivatives, as well as a positive
contribution from total return annuities and the positive impact of
lower implied equity market volatilities on the fair value of GMWB
guarantees and GMWB related hedges. The gain from AEGON's macro
equity hedge program amounted to USD 26 million in the second
quarter of 2009. Alternative assets, like real estate partnerships,
as well as private equity, underperformed. Net income in the
Americas included USD 449 million in net impairments, of which the
majority (USD 284 million) was related to structured asset
impairments, including securities backed by subprime mortgages (USD
169 million). Impairments would have amounted to USD 340 million
under US GAAP. Net income included a tax gain related to cross
border intercompany reinsurance transactions (USD 305 million)
between Ireland and the United States. These reinsurance
transactions were accounted for at fair value in both tax
jurisdictions, while losses in the United States were taxed at 35%
and gains in Ireland were taxed at 12.5%. The gain was a partial
reversal of previous tax charges on these internal transactions in
2008. Commissions and expenses Total commissions and expenses were
down 5% in Q2 2009 compared to the same period last year. Q2 2009
operating expenses were up 4% due to an increase in employee
benefit plan expenses of USD 60 million as well as restructuring
expenses of USD 14 million. Sales and deposits Total new life sales
in the Americas were in line with Q1 2009. Retail life sales
increased 7% over Q1 2009 reflecting expanded distribution,
particularly in the term life insurance market, offset by lower
sales of both BOLI/COLI and life reinsurance. Sales of accident and
health products were down 10% compared with Q2 2008, the result
partly of a decision to discontinue the auto credit business. Total
gross deposits, excluding institutional guaranteed products, were
down 14% compared to Q1 2009. Net deposits, excluding institutional
guaranteed products, totaled USD 1.0 billion in Q2 2009. Following
the reduction in AEGON's crediting rates since the end of Q1 2009,
fixed annuities sales were down, in line with expectations. Sales
of variable annuities rose by 37% due to improved market
conditions. Retail mutual fund sales recovered from the low levels
seen during the previous quarters, a result of higher equity
markets. Sales of retirement plans in the pension business
continued to be strong, particularly taking into account the impact
of lower financial markets. Institutional guaranteed products sales
were low, following AEGON's decision early 2009 to scale down its
institutional spread based business. Value of new business Value of
new business in the Americas amounted to USD 90 million, down from
Q1 2009. The internal rate of return (IRR) was 11.1%, an
improvement compared to Q1 2009. The decline in VNB is primarily
the result of lower fixed annuity sales, offset by higher volumes
and a more profitable product mix in the retail life business.
Please refer to page 30 for more detailed information on VNB.
Revenue-generating investments AEGON's total revenue-generating
investments in the Americas at the end of June 2009 totaled USD 295
billion, up 6% from three months earlier. AMERICAS - EARNINGS USD
millions Q2 Q1 % Q2 % Ytd Ytd % 2009 2009 2008 2009 2008 Underlying
earnings before tax by line of business Life 118 153 (23) 214 (45)
271 373 (27) Accident and health 99 68 46 94 5 167 209 (20) Life
and protection 217 221 (2) 308 (30) 438 582 (25) Fixed annuities 60
86 (30) 105 (43) 146 200 (27) Variable annuities 29 (480) N.M. 68
(57) (451) 138 N.M. Retail mutual funds (10) (9) (11) 3 N.M. (19) 7
N.M. Individual savings and retirement products 79 (403) N.M. 176
(55) (324) 345 N.M. Pensions and asset Management 17 10 70 50 (66)
27 95 (72) Institutional guaranteed products 30 105 (71) 141 (79)
135 282 (52) BOLI/COLI 11 12 (8) 14 (21) 23 35 (34) Institutional
products 41 117 (65) 155 (74) 158 317 (50) Life reinsurance 17 (30)
N.M. 1 N.M. (13) 66 N.M. Share in net results of Associates - (3)
N.M. 1 N.M. (3) 2 N.M. Underlying earnings before tax 371 (88) N.M.
691 (46) 283 1,407 (80) Over/(under) performance of fair value
items 240 (42) N.M. 141 70 198 (419) N.M. Operating earnings before
tax 611 (130) N.M. 832 (27) 481 988 (51) Operating earnings before
tax by line of business Life 132 120 10 232 (43) 252 367 (31)
Accident and health 96 56 71 98 (2) 152 207 (27) Life and
protection 228 176 30 330 (31) 404 574 (30) Fixed annuities 81 41
98 133 (39) 122 141 (13) Variable annuities 39 (426) N.M. 69 (43)
(387) (34) N.M. Retail mutual funds (10) (9) (11) 3 N.M. (19) 7
N.M. Individual savings and retirement products 110 (394) N.M. 205
(46) (284) 114 N.M. Pensions and asset Management 15 (3) N.M. 54
(72) 12 92 (87) Institutional 166 8 N.M. 218 (24) 174 119 46
guaranteed products BOLI/COLI 8 10 (20) 17 (53) 18 34 (47)
Institutional products 174 18 N.M. 235 (26) 192 153 25 Life
reinsurance 84 76 11 7 N.M. 160 53 N.M. Share in net results of
Associates - (3) N.M. 1 N.M. (3) 2 N.M. Operating earnings before
tax 611 (130) N.M. 832 (27) 481 988 (51) Gains/(losses) on
Investments (4) 36 N.M. (73) 95 32 (144) N.M. Impairment charges
(449) (370) (21) (126) N.M. (819) (147) N.M. Other income/(charges)
- 1 N.M. - N.M. 1 - N.M. Income before tax 158 (463) N.M. 633 (75)
(305) 697 N.M. Income tax 214 290 (26) (179) N.M. 504 (282) N.M.
Net income 372 (173) N.M. 454 (18) 199 415 (52) Net underlying
earnings 343 (57) N.M. 502 (32) 286 1,024 (72) Net operating
earnings 505 (90) N.M. 616 (18) 415 727 (43) Commissions and 1,262
1,311 (4) 1,328 (5) 2,573 2,497 3 Expenses of which operating
expenses 577 562 3 555 4 1,139 1,102 3 For the amounts in euro see
the Financial Supplement. AMERICAS - SALES USD millions Q2 2009 Q1
2009 % Q2 % Ytd Ytd % 2008 2009 2008 New life sales Life single
premiums 138 91 52 218 (37) 229 459 (50) Life recurring premiums
annualized 170 173 (2) 240 (29) 343 478 (28) Total recurring plus
1/10 single 184 182 1 262 (30) 366 524 (30) Life 137 128 7 184 (26)
265 371 (29) BOLI/COLI - 2 N.M. 6 N.M. 2 20 (90) Life Reinsurance
47 52 (10) 72 (35) 99 133 (26) Total recurring plus 1/10 single 184
182 1 262 (30) 366 524 (30) New premium production accident and
health insurance 193 203 (5) 215 (10) 396 452 (12) Gross deposits
(on and off balance) by line of business Fixed annuities 1,292
2,120 (39) 1,349 (4) 3,412 1,808 89 Variable annuities 1,071 780 37
1,047 2 1,851 2,021 (8) Retail mutual Funds 513 307 67 886 (42) 820
1,659 (51) Pensions and asset management 2,623 3,169 (17) 3,130
(16) 5,792 7,382 (22) Institutional guaranteed products 1,548 2,407
(36) 5,433 (72) 3,955 10,303 (62) Life Reinsurance 1 - N.M. 1 - 1 3
(67) Total gross 7,048 8,783 (20) 11,846 (41)15,831 23,176 (32)
deposits Total gross deposits excl. institutional guaranteed
products 5,500 6,376 (14) 6,413 (14)11,876 12,873 (8) Net deposits
(on and off balance) by line of business Fixed annuities 216 896
(76) (62) N.M. 1,112 (1,254) N.M. Variable annuities 353 (40) N.M.
(228) N.M. 313 (507) N.M. Retail mutual funds 104 (256) N.M. 474
(78) (152) 721 N.M. Pensions and asset management 331 1,053 (69)
489 (32) 1,384 2,133 (35) Institutional guaranteed products
(1,989)(3,065) 35 576 N.M.(5,054) (1,216) N.M. Life reinsurance
(18) (20) 10 (21) 14 (38) (44) 14 Total net (1,003)(1,432) 30 1,228
N.M.(2,435) (167) N.M. deposits Total net deposits excl.
institutional guaranteed products 986 1,633 (40) 652 51 2,619 1,049
150 REVENUE GENERATING INVESTMENTS June Mar. 30, 31, 2009 2009 %
Revenue generating investments (total) 295,325 279,399 6
Investments general account 123,131 117,934 4 Investments for
account of policyholders 62,000 55,791 11 Off balance sheet
investments third parties 110,194 105,674 4 For the amounts in euro
see the Financial Supplement. - Underlying earnings before tax
increase to EUR 129 million - Life sales of EUR 32 million; decline
from Q1 due to volatility in group pension market - Value of new
business rises to EUR 36 million, a result of high margins on
mortgage sales Overview AEGON reported underlying earnings of EUR
129 million in the Netherlands in Q2 2009. Earnings in Q2 2009
included a one-time EUR 20 million release of provisions. Fair
value items underperformed long-term expectations. Impairments,
primarily on bonds, totaled EUR 28 million, while investment
losses, largely due to the revaluation of investments in
residential real estate in the Netherlands, amounted to EUR 42
million. Underlying earnings before tax - Earnings from Life &
Protection amounted to EUR 75 million, up from Q2 2008 primarily
because of a EUR 20 million one-time release of provisions and
higher investment income in the Life business; - The Savings
business reported a loss of EUR 10 million, due to continued
pressure on margins and volumes from fierce competition in the
savings market; - Earnings from Pensions & Asset Management
amounted to EUR 57 million, slightly down from earnings in Q2 2008,
which had included a one-time release of accruals. Technical
results improved compared to Q2 2008, but lower asset balances
resulted in lower fee income; - Earnings from Distribution amounted
to EUR 3 million, down from Q2 2008 because of a slowdown in the
real estate market; - General insurance earnings totaled EUR 4
million, lower than Q2 2008 due to higher claims. Net income Fair
value items in Q2 2009 included a EUR 54 million charge from the
net impact of movements in the fair value of guarantees and related
hedges. The significant benefits of higher equity markets and lower
equity market volatility were more than offset by losses from the
company's program for managing guarantee-related interest
exposures. Impairments of EUR 28 million were related primarily to
corporate credit investments. Net losses on investments in Q2 2009
amounted to EUR 42 million, mainly the result of a revaluation of
direct residential real estate investments (EUR 29 million). AEGON
has a direct real estate portfolio of EUR 2.1 billion, mainly
invested in residential housing in the Netherlands. Commissions and
expenses Commissions and expenses were down 8%, while operating
expenses decreased by 7%, both compared to Q2 2008. Operating
expenses were down as a result of cost initiatives taken during the
quarter, e.g. a reduction in staff and in project-related expenses.
Sales and deposits Pension sales slowed significantly during the
second quarter of 2009 and proved volatile after the standstill in
the Dutch group pension market during the third and fourth quarters
of last year. The first quarter of 2009 had seen strong group
pension sales. Sales of single premium individual life products
were down compared to Q1 2009, following increased pricing
competition in the immediate annuity market. Net mortgage
production in the second quarter of 2009 amounted to EUR 537
million. AEGON sells mainly mortgages with a national mortgage
guarantee (NHG). Gross deposits were up 42% compared with Q1 2009.
Net deposits in the savings business showed an improvement from the
previous quarter, because of seasonal factors. Value of new
business The value of new business increased to EUR 36 million,
while the internal rate of return improved to 29%. The IRR
benefited from both high margins and low capital requirements on
the mortgage production. Please refer to page 30 for more detailed
information on VNB. Revenue-generating investments By the end of
June 2009, AEGON's revenue-generating investments in the
Netherlands increased 4% to EUR 65.8 billion. THE NETHERLANDS -
EARNINGS EUR millions Q2 Q1 % Q2 % Ytd Ytd % 2009 2009 2008 2009
2008 Underlying earnings before tax by line of business Life 68 44
55 29 134 112 61 84 Accident and health 7 11 (36) 4 75 18 12 50
Life and protection 75 55 36 33 127 130 73 78 Saving products (10)
(9) (11) - N.M. (19) 1 N.M. Individual savings and retirement
products (10) (9) (11) - N.M. (19) 1 N.M. Pensions and asset
management 57 26 119 60 (5) 83 111 (25) Distribution 3 9 (67) 8
(63) 12 19 (37) General insurance 4 (9) N.M. 9 (56) (5) 19 N.M.
Share in net results of associates - - N.M. 6 N.M. - 6 N.M.
Underlying earnings before tax 129 72 79 116 11 201 229 (12)
Over/(under) performance of fair value items (53) (190) 72 (37)
(43) (243) (191) (27) Operating earnings before tax 76 (118) N.M.
79 (4) (42) 38 N.M. Operating earnings before tax by line of
business Life 64 18 N.M. 27 137 82 40 105 Accident and health 7 11
(36) 4 75 18 12 50 Life and protection 71 29 145 31 129 100 52 92
Saving products (10) (9) (11) - N.M. (19) 1 N.M. Individual savings
and retirement products (10) (9) (11) - N.M. (19) 1 N.M. Pensions
and asset Management 8 (138) N.M. 25 (68) (130) (59) (120)
Distribution 3 9 (67) 8 (63) 12 19 (37) General insurance 4 (9)
N.M. 9 (56) (5) 19 N.M. Share in net results of associates - - N.M.
6 N.M. - 6 N.M. Operating earnings 76 (118) N.M. 79 (4) (42) 38
N.M. before tax Gains/(losses) on Investments (42) 110 N.M. (115)
63 68 (39) N.M. Impairment charges (28) (78) 64 (4) N.M. (106) (21)
N.M. Income before tax 6 (86) N.M. (40) N.M. (80) (22) N.M. Income
tax (2) 45 N.M. 45 N.M. 43 46 (7) Net income 4 (41) N.M. 5 (20)
(37) 24 N.M. Net underlying Earnings 93 55 69 92 1 148 184 (20) Net
operating Earnings 54 (87) N.M. 64 (16) (33) 42 N.M. Commissions
and 274 307 (11) 299 (8) 581 609 (5) expenses of which operating
expenses 192 217 (12) 207 (7) 409 426 (4) THE NETHERLANDS - SALES
EUR millions Q2 2009 Q1 2009 % Q2 2008 % New life sales Life single
premiums 145 391 (63) 443 (67) Life recurring premiums annualized
17 23 (26) 24 (29) Total recurring plus 1/10 single 32 62 (48) 68
(53) Life 19 23 (17) 23 (17) Pensions 13 39 (67) 45 (71) Total
recurring plus 1/10 single 32 62 (48) 68 (53) New premium
production accident and health insurance 3 7 (57) 3 - New premium
production general insurance 6 7 (14) 7 (14) Gross deposits (on and
off balance) by line of business Saving deposits 779 580 34 688 13
Pensions and asset management 62 11 N.M. 80 (23) Total gross
deposits 841 591 42 768 10 Net deposits (on and off balance) by
line of business Saving deposits 43 (67) N.M. 114 (62) Pensions and
asset management (73) (113) 35 68 N.M. Total net deposits (30)
(180) 83 182 N.M. - TABLE CONTINUED - EUR millions Ytd 2009 Ytd
2008 % New life sales Life single premiums 536 888 (40) Life
recurring premiums annualized 40 50 (20) Total recurring plus 1/10
single 94 139 (32) Life 42 54 (22) Pensions 52 85 (39) Total
recurring plus 1/10 single 94 139 (32) New premium production
accident and health insurance 10 9 11 New premium production
general insurance 13 15 (13) Gross deposits (on and off balance) by
line of business Saving deposits 1,359 1,336 2 Pensions and asset
management 73 127 (43) Total gross deposits 1,432 1,463 (2) Net
deposits (on and off balance) by line of business Saving deposits
(24) 42 N.M. Pensions and asset management (186) 104 N.M. Total net
deposits (210) 146 N.M. REVENUE GENERATING INVESTMENTS June 30,
Mar. 31, 2009 2009 % Revenue generating investments (total) 65,772
63,427 4 Investments general account 33,907 32,875 3 Investments
for account of policyholders 20,065 19,357 4 Off balance sheet
investments third parties 11,800 11,195 5 - Underlying earnings
before tax of GBP 17 million, down primarily due to lower fund
related charges in the pension business - New life sales decline
16% compared to Q1 2009, driven by annuities - VNB down compared to
Q1 2009 following change in product mix DATASOURCE: AEGON N.V.
CONTACT: Group Corporate Communications & Investor Relations:
Media, +31-(0)70-344-8956, , or Investors: +31-(0)70-344-8305 or
1-877-548-9668 - toll free USA only, Web site:
http://www.aegon.com/
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