Condensed consolidated interim
financial statements
for the periods
ended
September 30, 2022
2.2 Future adoption of new EU-IFRS accounting standards and
amendments
For a complete overview of IFRS standards and amendments issued
before January 1, 2022, which will be applied in future years
and were not early adopted by the Group, please refer to Aegon’s
Integrated Annual Report for 2021.
After January 1, 2022, the IASB issued the following
amendment:
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Lease Liability in a Sale and Leaseback (Amendments to IFRS 16
Leases).
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This amendment was not early adopted by Aegon and are not expected
to have significant impact on Aegon’s financial position or
condensed consolidated interim financial statements.
IFRS 17 - Insurance contracts
Aegon will adopt IFRS 17 ‘Insurance Contracts’, including any
consequential amendments to other standards, with a date of initial
application of January 1, 2023 and a transition date of
January 1, 2022. Aegon will not use the optional exemption
provided under EU-IFRS and will, instead, apply a quarterly cohort
to all groups of contracts that are in scope of IFRS 17.
The Standard represents a fundamental change to current measurement
and presentation of insurance and reinsurance contracts and the
implementation effort is significant. An implementation project is
being executed and finalization of methodology and policy choices
is expected in the second half of 2022 which will also form the
basis of parallel runs. The impact of the initial application on
Aegon’s financial statements is expected to be significant. Aegon
will communicate to the market, once results are reliable, final
methodology and policy choices with related impact. Initial
communication is expected in the fourth quarter of 2022. Aegon has
scheduled an educational webinar on IFRS 17 on December 14,
2022.
2.3 Judgments and critical accounting
estimates
Preparing the condensed consolidated interim financial statements
requires management to make judgments, estimates and assumptions,
including the likelihood, timing or amount of future transactions
or events, that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
These estimates are inherently subject to change and actual results
could differ from those estimates.
Macro-economic context
In the first nine-month period of 2022, the Russian invasion of
Ukraine caused a humanitarian crisis and also impacted global
financial markets and caused significant economic turbulence. Aegon
closely monitors financial and wider economic developments to
understand our exposure to potential shocks in the markets where we
invest, and Aegon work proactively to mitigate related risks. The
inflation rates for the main economies that Aegon is exposed to
increased significantly. As disclosed in our 2021 Integrated Annual
Report, Aegon have implemented an inflation hedge covering
liabilities with conditional indexation rights in the Netherlands
to address the uncertainty around the rise in inflation. In the
United States, the inflation risk within long-term care claims
derives primarily from wage inflation, which Aegon mitigate by
offering customers downgrades of the maximum daily benefit as an
alternative to premium rate increases. In addition, Aegon’s expense
savings program helps to mitigate the impact of rising
inflation.
High inflation has prompted central banks to start raising interest
rates significantly. As a consequence, interest rates have
increased significantly in Aegon’s main markets compared to
December 31, 2021. Equity markets in Aegon’s three main
markets decreased in the first nine months of 2022 compared to an
increase of equity markets in 2021. Additionally, credit spreads
have widened compared to December 31, 2021 and affected
Aegon’s results negatively.
Uncertainty resulting from COVID-19
In the first nine-month period of 2022 the COVID-19 pandemic continued to cause
disruption to business, markets, and the industry. Progress on
vaccinations has reduced the spread of COVID-19 and will likely continue to
reduce the effects of the public health crisis on the economy.
However, the pace of vaccinations has slowed down, and new strains
of the virus and reduced availability of healthcare remain
risks.
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Unaudited
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