Last checked at 12 May 2011 07:00
AEGON's 2010total embedded value increased 6% toEUR 18.9billion
* Embedded value life insurance increases to EUR 25.8 billion
AEGON's total embedded value at the end of 2010 totalled EUR 18.9 billion, an increase of 6% compared with last year, mainly driven by a higher embedded value life insurance (EVLI).
Embedded value is a key measure of an insurance company's underlying worth, and embedded value life insurance (EVLI) estimates the value of future profits expected from existing insurance contracts. AEGON believes that, along with other publicly disclosed financial data, embedded value provides valuable additional information for analysts and investors.
Embedded value for AEGON's life insurance business increased to EUR 25.8 billion and includes new business worth of approximately EUR 0.6 billion. The figures reflect a positive performance from AEGON's existing in-force business, partly as a result of cost savings measures, as well as improved financial markets and strengthening of currencies against the euro, particularly the US dollar. Changes in operating assumptions had a negative effect and were primarily due to strengthening of persistency in the Americas and assumed increasing longevity in the Netherlands. The negative impact from economic assumption changes, largely caused by the impact of lower interest rates in the Netherlands, were offset by improved long-term investment returns mainly as a result of the positive impact of the interest rate hedging program in the Netherlands.
At the end of 2010, the free surplus on life insurance business increased to EUR 3.3 billion, due mainly to strong earnings on the in-force portfolio and lower capital required for new business. Operating margins on embedded value declined slightly from 5.8% to 5.3%, with stronger in-force performance offsetting a lower level of new business value.
Embedded value Year-end Year-end (amounts in millions unless 2010 2009 stated otherwise, after tax) EUR EUR % Life business Adjusted net worth (ANW) 15,959 13,216 21 Free surplus (FS) 3,261 2,404 36 Required surplus (RS) 12,697 10,811 17 Value of in-force life 9,798 10,081 (3) business (ViF) Present value future profits 13,570 13,035 4 (PVFP) Cost of capital (CoC) (3,772) (2,955) (28) Embedded value life 25,756 23,296 11 insurance (EVLI) - - - - - - Other activities IFRS book value 733 1,137 (36) - - - Total embedded value before 26,489 24,434 8 holding activities Holding activities (7,598) (6,663) (14) Market value of debt, capital (7,098) (6,187) (15) securities & other net liabilities Present value holding expenses (500) (477) (5) Total embedded value (TEV) 18,891 17,770 6 Value of preferred share (1,170) (1,301) 10 capital Total embedded value (TEV) 17,721 16,469 8 attributable to common shareholders TEV attributable to common 10.38 9.65 8 shareholders per share (EUR) Value of new 2010 2009 %business EUR EUR (amounts in millions, after tax) Americas 230 293 (22) The Netherlands 144 184 (22) United Kingdom 65 170 (62) New Markets 116 120 (3) Asia 4 4 0 Central & Eastern 49 46 7Europe Spain & France 51 82 (38) Variable 11 (11) -Annuities Total 555 767 (28) About AEGON
As an international life insurance, pension and asset management company based in
The Hague, AEGON has businesses in over twenty markets in the Americas,
Europe and Asia. AEGON companies employ approximately 27,000 people
and have some 40 million customers across the globe.
Key figures - EUR Q12011 Full year 2010 Underlying earnings 414 million 1.8 billionbefore tax New life sales 501 million 2.1 billion Gross deposits 7.4 billion 33 billion Revenue-generating 400 billion 413 billioninvestments (end of period) Contact informationMedia relations:Greg Tucker+31(0)70 344 8956gcc-ir@aegon.comInvestor relations:Willem van den Berg+31 (0)70 344 8305
877 548 9668 - toll free USA only
ir@aegon.com
www.aegon.com
Cautionary note regarding non-GAAP measures This press release includes certain non-GAAP financial measures: underlying earnings before tax, net underlying earnings, commission and expenses, operating expenses and value of new business (VNB). The reconciliation of underlying earnings before tax to the most comparable IFRS measure is provided in Note 3 "Segment information" of our Condensed consolidated interim financial statements. VNB is not based on IFRS, which are used to report AEGON's primary financial statements, and should not be viewed as a substitute for IFRS financial measures. We may define and calculate VNB differently than other companies. Please see AEGON's Embedded Value Report dated May 12, 2011 for an explanation of how we define and calculate VNB. AEGON believes that these non-GAAP measures, together with the IFRS information, provide meaningful supplemental information that our management uses to run our business as well as useful information for the investment community to evaluate AEGON's business relative to the businesses of our peers. Local currencies and constant currency exchange rates This press release contains certain information about our results and financial condition in USD for the Americas and GBP for the United Kingdom, because those businesses operate and are managed primarily in those currencies. Certain comparative information presented on a constant currency basis eliminates the effects of changes in currency exchange rates. None of this information is a substitute for or superior to financial information about us presented in EUR, which is the currency of our primary financial statements. Forward-looking statements The statements contained in this press release that are not historical facts are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995. The following are words that identify such forward-looking statements: aim, believe, estimate, target, intend, may, expect, anticipate, predict, project, counting on, plan, continue, want, forecast, goal, should, would, is confident, will, and similar expressions as they relate to our company. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. We undertake no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which merely reflect company expectations at the time of writing. Actual results may differ materially from expectations conveyed in forward-looking statements due to changes caused by various risks and uncertainties. Such risks and uncertainties include but are not limited to the following: o Changes in general economic conditions, particularly in the United States, the Netherlands and the United Kingdom; o Changes in the performance of financial markets, including emerging markets, such as with regard to: ï€ The frequency and severity of defaults by issuers in our fixed income investment portfolios; and ï€ The effects of corporate bankruptcies and/or accounting restatements on the financial markets and the resulting decline in the value of equity and debt securities we hold; o The frequency and severity of insured loss events; o Changes affecting mortality, morbidity and other factors that may impact the profitability of our insurance products; o Changes affecting interest rate levels and continuing low or rapidly changing interest rate levels; o Changes affecting currency exchange rates, in particular the EUR/USD and EUR /GBP exchange rates; o Increasing levels of competition in the United States, the Netherlands, the United Kingdom and emerging markets; o Changes in laws and regulations, particularly those affecting our operations, the products we sell, and the attractiveness of certain products to our consumers; o Regulatory changes relating to the insurance industry in the jurisdictions in which we operate; o Acts of God, acts of terrorism, acts of war and pandemics; o Changes in the policies of central banks and/or governments; o Lowering of one or more of our debt ratings issued by recognized rating organizations and the adverse impact such action may have on our ability to raise capital and on our liquidity and financial condition; o Lowering of one or more of insurer financial strength ratings of our insurance subsidiaries and the adverse impact such action may have on premium writings, policy retention, profitablity of its insurance subsidiaries and liquidity; o The effect of the European Union's Solvency II requirements and other regulations in other jurisdictions affecting the capital we are required to maintain; o Litigation or regulatory action that could require us to pay significant damages or change the way we do business; o Customer responsiveness to both new products and distribution channels; o Competitive, legal, regulatory, or tax changes that affect the distribution cost of or demand for our products; o The impact of acquisitions and divestitures, restructerings, product withdrawels and other unusual tems, including our ability to integrate acquisitions and to obtain the anticipated results and synergies from acquisitions; o Our failure to achieve anticipated levels of earnings or operational efficiencies as well as other cost saving initiatives; and o The impact our adoption of the International Financial Reporting Standards may have on our reported financial results and financial condition. Further details of potential risks and uncertainties affecting the company are described in the company's filings with Euronext Amsterdam and the US Securities and Exchange Commission, including the Annual Report on Form 20-F. These forward-looking statements speak only as of the date of this document. Except as required by any applicable law or regulation, the company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Press release
MAY 12, 2011
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